AES Corporation v. The Argentine Republic

Case summary

At a glance

Parties: The AES Corporation (Delaware, United States) v. the Argentine Republic
Case no.: ICSID Case No. ARB/02/17
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules in force since 26 September 1984
Treaty: US–Argentina BIT of 14 November 1991 (in force 20 October 1994)
Tribunal: Award: Prof. Ricardo Ramírez Hernández (President), Mr. Stephen L. Drymer, Prof. Domingo Bello Janeiro. Decision on Jurisdiction: Prof. Pierre-Marie Dupuy (President), Prof. Karl-Heinz Böckstiegel, Prof. Domingo Bello Janeiro
Sector: Electricity generation
Outcome: Claims largely upheld (Award dispatched 30 May 2025). Argentina breached fair and equitable treatment and the non-impairment clause; its necessity and Article XI defences failed. Bello Janeiro dissented on costs.
Amount: Claimed: "US$ 1.814 million" as printed in the Award, as of 31 December 2020. Awarded: US$715.9 million (US$312.9 million for measures affecting dispatch and prices; US$403 million for withheld revenues), with simple interest at the 1-year US Treasury Bills rate from 31 December 2020. Costs: Argentina bears all arbitration costs (US$2,372,687.61) and pays US$15,807,955.3, which is 80% of the Claimant's legal fees and expenses, excluding those of the suspension period.

The dispute

AES, a US company, invested in electricity generation in Argentina from 1993. Its plants included San Nicolás, Cabra Corral and El Tunal, Ullum and Sarmiento, Alicurá, Paraná and TermoAndes. The original 2002 request also covered the distributors EDEN, EDES and EDELAP; those claims were later dropped. From 2002 Argentina pesified the electricity framework and capped spot prices at AR$120/MWh. It excluded non-gas plants from setting the spot price, froze capacity payments, and withheld generators' receivables, turning them into the FONINVEMEM investment programs. Resolution SE 95/2013 then replaced market pricing with a cost-plus scheme and barred new power purchase agreements. AES claimed breaches of fair and equitable treatment, full protection and security, the minimum standard of treatment and the bar on arbitrary measures in the BIT. Argentina argued that AES had waived its claims or was estopped or was abusing its rights, invoked Article XI of the BIT and the customary defence of necessity, and denied any damage, pointing to AES's profits.

Key holdings

Jurisdiction upheld. The Tribunal rejected all five objections: that there was no legal dispute, that the dispute did not arise directly out of an investment, that the claim was not ripe, that AES was not the investor, and that forum selection clauses in the concession contracts applied. Those clauses bind only within the Argentine legal order and do not bar treaty claims. Decision on Jurisdiction ¶¶ 47, 61, 74, 89, 94–100
The claims are admissible. The waivers in the 2008-2011 Agreement and in the 31 May 2013 letter under Resolution SE 95/2013 were given by AES Argentina Generación S.A., not by The AES Corporation. They were not clear waivers of treaty arbitration. The parties' joint suspension letters also referred to "pending claims". The estoppel and abuse-of-rights objections also failed. Award ¶¶ 161–188
Argentina breached the fair and equitable treatment clause (Article II.2.a) through the spot price cap and gas-only price setting, the capacity payments, the withholding of receivables and the FONINVEMEM I–III programs, and the cost-plus system with its ban on PPAs. The same measures impaired the management and operation of the investment, in breach of Article II.2.b). The full protection and security claim was dismissed. The Tribunal did not rule on the minimum standard claim (judicial economy). Award ¶¶ 373, 392, 395, 399, 402, 602
Necessity under Article 25 of the ILC Articles fails. The crisis ended around mid-2003, but the measures continued and new ones were added. Argentina did not show that they were the only way to protect an essential interest. Argentina also contributed to the crisis. The Article XI defence was likewise dismissed. Award ¶¶ 417–428
Compensation follows the principle of full reparation, not the BIT's fair-market-value standard for expropriation. Because the breaches were cumulative, the valuation date is the date of the award. The Tribunal accepted the Claimant's but-for model as reasonable but applied a 1.25% uncertainty adjustment, giving US$312.9 million for the dispatch and price measures. Withheld revenues, valued at AES's WACC, give US$403 million. Award ¶¶ 434, 439–442, 545–548, 556
Interest runs at a short-term risk-free rate (1-year US Treasury Bills), including for the 13-year suspension period. Interest is simple, because Argentine law (section 770 of the Civil and Commercial Code) allows compound interest only in judicial proceedings or where expressly agreed. Award ¶¶ 573, 576, 582–584
Costs: Argentina bears all arbitration costs and 80% of the Claimant's legal costs, excluding the suspension period, which amounts to US$15,807,955.3. Bello Janeiro dissented on this point. He would have shared the arbitration costs equally and limited the Claimant's recoverable fees to the level of Argentina's spending. Award ¶¶ 598–601; Bello Janeiro dissent

Procedural history

5 November 2002Request for Arbitration received by ICSID; registered on 19 December 2002.
3 June 2003Tribunal constituted: Dupuy (President), Böckstiegel and Bello Janeiro.
26 April 2005Decision on Jurisdiction: all of Argentina's objections are rejected.
20 December 2005The parties agree to suspend the arbitration. The proceeding remains suspended from 23 January 2006 through 11 December 2018.
January 2019AES requests that the arbitration resume (11 January 2019). Dupuy resigns on 27 January 2019 and Böckstiegel on 28 January 2019.
12 December 2019Tribunal reconstituted: Ramírez Hernández (President), Drymer and Bello Janeiro. The proceeding resumes.
6 April 2022The Chair of the ICSID Administrative Council rejects Argentina's proposal of 3 November 2021 to disqualify all three members of the Tribunal.
6–16 February 2023Hearing on the merits in Washington, D.C.
15 May 2025Dissenting opinion of Domingo Bello Janeiro on costs.
30 May 2025Award dispatched: Argentina is ordered to pay US$715.9 million plus interest and costs.

Tribunal, counsel and experts

Decided by: Pierre-Marie Dupuy President — appointed by the institution (resigned on 27 January 2019)
Karl-Heinz Böckstiegel Co-arbitrator — appointed by the claimant (resigned on 28 January 2019)
Domingo Bello Janeiro Co-arbitrator — appointed by the respondent (challenge rejected; dissented on costs)
Stephen L. Drymer Co-arbitrator — appointed by the claimant (replaced Karl-Heinz Böckstiegel on 5 July 2019; challenge rejected)
Ricardo Ramírez Hernández President — appointed by the institution (replaced Pierre-Marie Dupuy on 2 December 2019; challenge rejected)
David Malpass Chair of the ICSID Administrative Council, Chair of the ICSID Administrative Council (decided the disqualification proposal)
For the claimant: Clifford Chance · Chaffetz Lindsey LLP · Freshfields Bruckhaus Deringer · Bruchou & Funes de Rioja (formerly Bruchou, Fernandez, Madero & Lombardi) · AES Corporation (in-house)
For the respondent: Procuración del Tesoro de la Nación · Dechert LLP · Wordstone Dispute Resolution AARPI
Experts: Daniel Flores (respondent) · Nouriel Roubini (respondent)