INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES WASHINGTON, D.C. IN THE PROCEEDING BETWEEN Hochtief AG (CLAIMANT) and The Argentine Republic (RESPONDENT) (ICSID Case No. ARB/07/31) ___________________________ DECISION ON JURISDICTION ___________________________ Members of the Tribunal Professor Vaughan Lowe Q.C, President Judge Charles N. Brower, Arbitrator Mr. J. Christopher Thomas, Q.C., Arbitrator Secretary of the Tribunal Mrs. Mercedes Cordido-Freytes de Kurowski Representing the Claimant Representing the Respondent Hochtief Aktiengesellschaft c/o Dra. Angelina María Esther Abbona Opernplatz 2, 45128 Essen Procuradora del Tesoro de la Nación Germany Procuración del Tesoro de la c/o Messrs. Paul F. Doyle and Nación Argentina Philip D. Robben Posadas 1641 Kelley Drye & Warren LLP C1112ADC, Buenos Aires 101 Park Avenue Argentina New York, NY 10178, USA Date of Decision: October 24, 2011 TABLE OF CONTENTS I THE PARTIES’ SUBMISSIONS .................................................................................... 4 II THE FIRST OBJECTION: BIT ARTICLE 10 ............................................................. 5 III THE TRIBUNAL’S ANALYSIS ..................................................................................... 8 IV THE INTERPRETATION OF BIT ARTICLE 10 ........................................................ 9 V THE MFN PROVISION ................................................................................................ 15 VI DOES THE MFN PROVISION APPLY TO DISPUTE SETTLEMENT? .............. 16 VII MFN AND JURISDICTIONAL LIMITS ................................................................. 19 VIII IS ARTICLE 10(3) ‘LESS FAVOURABLE’? ......................................................... 26 IX OTHER ISSUES: THE LOCATION OF THE ‘TREATMENT’ .............................. 26 X THE SECOND OBJECTION: HOCHTIEF’S STANDING ...................................... 28 XI JURISDICTION OF THE CENTRE ........................................................................... 30 XII THE CONTRACT CLAIMS AND DOUBLE RECOVERY ..................................... 30 XIII COSTS ......................................................................................................................... 31 XIV CONCLUSION ........................................................................................................... 31 2 1. This claim is brought by Hochtief Aktiengesellschaft, a company incorporated in the Federal Republic of Germany (“Hochtief”), against the Argentine Republic (‘Argentina’), under the Treaty between the Federal Republic of Germany and the Republic of Argentina for the Promotion and Reciprocal Protection of Investments, dated 9 April 1991 (‘the BIT’). 2. Hochtief and Argentina, the parties to the dispute and to this case, are referred to in this Decision as the (lower-case) ‘parties’. Argentina and Germany, as the States Parties to the BIT, are referred to as the (capitalized) ‘Parties’. 3. The authentic German and Spanish texts of the BIT, together with the English translation published in the United Nations Treaty Series1, are set out in Appendix I to this Decision. This Decision will refer to the English-language translation. The Tribunal has, however, taken full account of the fact that the authentic languages of the BIT are German and Spanish, and as will be seen it has at various stages reverted to the authentic texts where the translation is unsatisfactory. 4. The claim arises from a dispute concerning a 25-year concession awarded to Hochtief and a consortium of construction companies in 1997 for the construction, maintenance and operation of a toll road and several bridges in Argentina between the cities of Rosario and Victoria. Hochtief and other members of the consortium incorporated a company, Puentes del Litoral SA (‘PdL’), in Argentina in order to implement the concession. Hochtief owns 26% of the shares in PdL. Hochtief claims that it was injured by actions taken by Argentina in breach of its obligations under the BIT and under customary international law. 5. The claim was initiated by the Request for Arbitration dated 5 November 2007, addressed by the Claimant to the Secretary-General of ICSID (‘the Centre’). The Claimant appointed the Hon. Charles Brower, and the Respondent appointed J Christopher Thomas QC, to the Tribunal. Judge Brower and Mr Thomas agreed to invite Professor Vaughan Lowe QC to chair the Tribunal. The Tribunal was constituted on 30 April 2009. 1 UNTS Vol. 1910, 171 (1996). 3 6. By agreement of the parties the First Procedural Meeting of the Tribunal, held by telephone conference, was begun on 19 June 2009, and resumed on 16 April 2010 at the seat of ICSID in Washington, D.C. with the President of the Tribunal, prevented from flying by a volcanic ash cloud, participating by video link. 7. The Claimant’s Memorial on the Merits was submitted on 29 April 2010, and the Respondent submitted its Memorial on Objections to the Jurisdiction of the Centre and the Competence of the Tribunal (including, as agreed, a brief outline of its defences on the merits) on 30 July 2010. The Claimant’s Counter-Memorial on Objections to Jurisdiction was submitted on 15 October 2010, and the Respondent’s Reply and Claimant’s Rejoinder on 22 December 2010 and 10 February 2011 respectively. 8. The hearing on Jurisdiction was held at the World Bank’s premises in Paris on 4-5 March 2011.The Claimant was represented by Mr Paul F Doyle, Mr Philip D Robben, Ms Mellisa E Byroade, and Ms Julia A Garza Benítez of Kelley Drye & Warren LLP; and the Respondent was represented by Dr Angelina Abbona, Dr Gabriel Bottini, Dr Romina de los Ángeles Mercado, Dr Verónica Lavista, Dr Matías Osvaldo Bietti, Dr Ariel Martins, and Mr Julián Santiago Negro, of the Procuración del Tesoro de la Nación. Ms Mercedes Cordido-Freytes de Kurowski acted as the Secretary of the Tribunal. I The Parties’ Submissions 9. The submissions of the parties are set out in detail in their written pleadings and were developed in their oral submissions at the hearing, a verbatim record of which was kept and made available to the parties and the Tribunal shortly after the end of the hearing on Jurisdiction. All of these submissions were taken into account, and the main points are summarized here in so far as is necessary for the purposes of this Decision. 10. The Respondent raises two main objections to jurisdiction. The First Objection is that the Claimant has failed to meet the requirements set forth in Article 10 of the BIT, and that the Tribunal is consequently without jurisdiction in this case. The Second 4 Objection is that Hochtief is attempting in this case to bring a claim to enforce the rights of another person and has no legal standing to do so. 11. It is well established that the Tribunal has the competence to decide upon challenges to its jurisdiction. If it finds that it has jurisdiction, the position is unproblematic. If it finds that it lacks jurisdiction, a pedant might object that it had no right to determine even that question; but the Law has chosen to side with pragmatism rather than pedantry and Kompetenz-Kompetenz is a firmly established principle, adopted in Article 41(1) of the ICSID Convention. The Tribunal proceeds accordingly. II The First Objection: BIT Article 10 12. In translation, Article 10 of the BIT reads as follows: Article 10 “ (1) Disputes concerning investments within the meaning of this Treaty between one of the Contracting Parties and a national or company of the other Contracting Party shall as far as possible be settled amicably between the parties to the dispute. (2) If a dispute within the meaning of paragraph 1 cannot be settled within six months from the date on which one of the parties concerned gave notice of the dispute, it shall, at the request of either party, be submitted to the competent courts of the Contracting Party in whose territory the investment was made. (3) The dispute may be submitted to an international arbitral tribunal in any of the following circumstances: (a) At the request of one of the parties to the dispute where, after a period of 18 months has elapsed from the moment when the judicial process provided for by paragraph 2 of this article was initiated, no final decision has been given or where a decision has been made but the Parties are still in dispute; (b) Where both parties to the dispute have so agreed. (4) In the cases provided for by paragraph 3 above, disputes between the Parties within the meaning of this article shall be referred by mutual agreement, when the parties to the dispute have not agreed otherwise, either to arbitral proceedings under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 18 March 1965 or to an ad hoc arbitral tribunal established under the Arbitration Rules of the United Nations Commission on International Trade Law. If there is no agreement after a period of three months has elapsed from the moment when one of the Parties requested the initiation of the arbitration procedures, the dispute shall be submitted to arbitration procedures under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 18 March 1965 provided that both Contracting Parties are parties to the said Convention. Otherwise, the dispute shall be submitted to the above-mentioned ad hoc arbitral tribunal. (5) The arbitral tribunal shall issue its ruling in accordance with the provisions of this Treaty, with those of other treaties existing between the Parties, with the laws in force in the Contracting Party in which the investments were made, including its rules of private international law, and with the general principles of international law. 5 (6) The arbitration decision shall be binding and both Parties shall implement it in accordance with their legislation.” 13. The Respondent says that paragraphs 10(2) and 10(3)(a) of Article 10 impose a mandatory period of 18 months, for the duration of which the dispute must be submitted to the Respondent’s courts, before the Claimant is entitled to submit the dispute to arbitration. It says that Article 10 thus establishes a mandatory condition upon which the jurisdiction of the Tribunal depends, and that the Claimant has not fulfilled that condition. 14. The Respondent makes no jurisdictional challenge based upon the requirement in Article 10(2) that six months must elapse after notice of the dispute is given, before the dispute may be submitted to the courts at the instance of either party. 15. The Claimant, for its part, invokes Article 3 of the BIT, which reads as follows:2 Article 3 “ (1) Neither Contracting Party shall subject investments in its territory by or with the participation of nationals or companies of the other Contracting Party to treatment less favourable than it accords to investments of its own nationals or companies or to investments of nationals or companies of any third State. (2) Neither Contracting Party shall subject nationals or companies of the other Contracting Party, as regards their activity in connection with investments in its territory, to treatment less favourable than it accords to its own nationals or companies or to nationals or companies of any third State. (3) Such treatment shall not include privileges which may be extended by either Contracting Party to nationals or companies of third States on account of its membership in a customs or economic union, common market or free trade area. (4) The treatment under this article shall not extend to privileges accorded by a Contracting Party to nationals or companies of a third State by virtue of an agreement for the avoidance of double taxation or other tax agreements.” 16. Article 3 must be read together with the Protocol to the BIT, which reads in material part as follows: “With the signing of the Treaty between the Federal Republic of Germany and the Argentine Republic on the Encouragement and Reciprocal Protection of Investments, the undersigned plenipotentiaries have agreed on the following provisions, which shall be regarded as an integral part of the said Treaty: 2 See paragraphs 63 ff and 104 ff below for certain problems with this translation. 6 ….. (2) Ad article 3: (a) The following shall more particularly, though not exclusively, be deemed "activity" within the meaning of article 3, paragraph 2: the management, utilization, use and enjoyment of an investment. The following shall more particularly, though not exclusively, be deemed "treatment less favourable" within the meaning of article 3: less favourable measures that affect the purchase of raw materials and other inputs, energy or fuel, or means of production or operation of any kind or the marketing of products inside or outside the country. Measures that are adopted for reasons of internal or external security or public order, public health or morality shall not be deemed "treatment less favourable" within the meaning of article 3. (b) The provisions of article 3 do not obligate a Contracting Party to extend tax privileges, exemptions and relief accorded only to natural persons and companies resident in its territory," in accordance with its tax laws, to natural persons and companies resident in the territory of the other Contracting Party. (c) The Contracting Parties shall within the framework of their national legislation give favourable consideration to applications for the entry and sojourn of persons of either Contracting Party who wish to enter the territory of the other Contracting Party in connection with an investment; the same shall apply to nationals of either Contracting Party who, in connection with an investment, wish to enter the territory of the other Contracting Party and sojourn there to take up employment. Applications for work permits shall also be given favourable consideration.” 17. The Claimant submits that the effect of this MFN provision is to permit it to rely upon what it says is the more favourable provision in Article 10 of the Argentina-Chile Bilateral Investment Treaty dated 2 August 1991. That treaty, in its authentic language and in the English translation submitted in these proceedings, is set out in Appendix II. 18. Article 10 of the Argentina-Chile BIT reads as follows: “ARTICLE 10 Settlement of disputes regarding investments 1. Any dispute related to the investments under this Treaty, between a Party and a national or company of the other Party shall, as far as possible, be settled by friendly negotiations between the two parties to the dispute. 2. If the dispute shall not have been settled within the term of six months as from the time it has been raised by either party, it may be submitted upon request of the national or company: - to the national jurisdictions of the Party involved in the dispute; - or to international arbitration in the conditions described in paragraph (3). Once a national or company has submitted the dispute to the jurisdiction of the Party involved or to international arbitration, the election of either procedure shall be final. 3. In case of election of international arbitration, the dispute may be submitted, at the election of the national or company, to one of the arbitration entities mentioned below: 7 To the International Center (sic) for the Settlement of Investment Disputes (ICSID) created under the "Convention on the Settlement of Investment Disputes between States and Nationals of other States", opened to the signature in Washington on March 18, 1965, when each Member State which is a party to this Agreement has signed the said Convention. While this condition is not met, each Party may give its consent for the dispute to be submitted to arbitration pursuant to the Rules of the supplementary Mechanism of ICSID for the management of conciliation, arbitration or investigation proceedings; To an "ad hoc" arbitration panel organized pursuant to the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL). 4. The arbitration panel shall render an award on the basis of this Treaty, the right of the Party that is a party to the dispute, including the rules regarding conflicts of laws and the terms and conditions of occasional private agreements reached in connection with the investment and also the principles of international law in that respect. 5. Arbitration awards shall be final and binding upon the parties to the dispute. 6. The Parties shall refrain from trying, through the diplomatic channels, arguments regarding arbitration or a judicial proceeding already pending until the relevant proceedings shall have been completed, unless the parties to the dispute shall have not discharged the arbitration award or the judgment rendered by the common court, pursuant to the terms for the discharge laid down in the award or the judgment.” 19. The important point in the Argentina-Chile BIT is that it permits unilateral reference of a dispute to arbitration six months after the dispute has been raised. There is no equivalent of the ‘18-month litigation period’ in Article 10(3) of the Argentina- Germany BIT. 20. The Respondent submits that the MFN provision in Article 3 of the Argentina- Germany BIT applies only to substantive protections under the BIT, which do not include the clauses on dispute resolution in Article 10. 21. Each party referred to principles of treaty interpretation, decisions of other arbitral tribunals, and the writings of jurists in support of its position. III The Tribunal’s analysis 22. The Tribunal’s jurisdiction depends upon the existence of an agreement between the two parties to the dispute – Hochtief and the Republic of Argentina. That agreement is not contained in a single document. The agreement of Argentina to accept the jurisdiction of the arbitral Tribunal in respect of a certain category of disputes is contained in the Argentina-Germany BIT. Article 10 of the BIT is, in effect, an offer to submit disputes to arbitration, which investors may accept. 8 23. Hochtief considers that its agreement is contained in the Request for Arbitration which is intended, in effect, to be an acceptance of Argentina’s offer contained in Article 10 and Article 3 of the Argentina-Germany BIT. 24. The question is whether the ‘offer’ and the ‘acceptance’ have resulted in an agreement which provides the basis for the jurisdiction of the Tribunal. 25. Both parties approached this question on the basis that is necessary to establish a consensus: i.e., that it is necessary to demonstrate that Hochtief’s Request for Arbitration was an acceptance of the offer to arbitrate on the terms on which the offer was made, and not a counter-offer on different terms. The Tribunal shares this view. 26. The offer to arbitrate being contained in a treaty, it follows that the interpretation and analysis of its terms must be conducted in accordance with the law of treaties. The exercise is, accordingly, to be performed according to the principles set out in the Vienna Convention on the Law of Treaties (‘VCLT’), to which both Argentina and Germany are Parties (and to which Article 11 of the BIT refers), and in particular in Articles 31-33 of the VCLT, which are familiar to all involved in investment arbitration. 27. The ‘acceptance’ is contained in the Request for Arbitration. There is no doubt as to the interpretation of the ‘acceptance’: it purports to accept the offer to arbitrate made in the BIT. IV The interpretation of BIT Article 10 28. The task of interpreting the BIT must be approached initially by giving the terms of the treaty their ordinary meaning in their context and in the light of the BIT’s object and purpose. On this basis it is apparent that Article 10 of the BIT provides for a number of possible steps and for alternative procedures in the event of a dispute arising. 29. Article 10(1) provides that disputes shall as far as possible be settled amicably between the parties to the dispute. There is no suggestion by the Respondent of any failure by the Claimant to comply with Article 10(1), which could affect the 9 jurisdiction of the Tribunal; and the Tribunal sees no reason to suppose that the obligation imposed by Article 10(1) has not been fulfilled. 30. Paragraph (2) of Article 10 entitles either party – here, either Hochtief or Argentina – to require the submission of the dispute to the host State’s courts: “If a dispute within the meaning of paragraph 1 cannot be settled within six months from the date on which one of the parties concerned gave notice of the dispute, it shall, at the request of either party, be submitted to the competent courts of the Contracting Party in whose territory the investment was made.” Paragraph (2) refers to a ‘request’, but the request triggers an obligation (‘shall … be submitted’) to submit the dispute to the courts. 31. Neither party takes any point concerning the six-month period to which Article 10(2) refers, and the Tribunal sees no reason to suppose that this obligation imposed by Article 10(2) has not been fulfilled. 32. The words “shall … be submitted” are the only words in Article 10 paragraph 2 that are capable of imposing a legal obligation. The precise nature of the obligation set out in paragraph (2) is obscured by the phrasing of the provision. Instead of stipulating that ‘one or other party shall submit the dispute’ to the courts, it sets out the stipulation in the passive voice: the dispute shall be submitted to the courts. 33. The Respondent reads Article 10(2) as saying that in every case one or other party must submit the dispute to the domestic courts.3 The Respondent submits that “the verbal expression ‘shall be submitted’ [makes] clear that it is an order”4, so that one of the parties must submit the dispute to the domestic courts.5 34. The Claimant, on the other hand, reads Article 10(2) as giving to each party a right to have recourse to the courts, but not as imposing upon either party a duty to do so. 35. It was not suggested that either party had made a request under Article 10(2) for the reference of the dispute to the courts in Argentina. This is a matter of some 3 Memorial, paragraph 25. 4 Memorial, paragraph 24. 5 Memorial, paragraph 25. 10