Our next case summary is Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic. The summary was prepared based on the award rendered on 20 August 2007.
The investor was a French company and its Argentine affiliate who entered into a concession agreement with the Province of Tucuman to provide water and sewage services.
According to the investor, the Tucuman authorities – the legislature, the governor and the province’s regulatory authorities – relentlessly “attacked” the investor and the concession agreement almost from its inception. Investors claimed that these actions were taken with a view to pressuring them to renegotiate the tariffs of the concession.
Among other things, the investor pointed out to the statements made by the government that the water could cause cholera, typhoid and hepatitis and that the customers should not pay their bills. Further, the investor argued that the government used their regulatory powers to impose unilaterally modified tariffs, contrary to the terms of the concession agreement. In the end the investor terminated the concession agreement.
The investor brought the claim under the Argentina – France Bilateral Investment Treaty (BIT).
The tribunal found that there was a violation of fair and equitable treatment standard under the BIT. It noted that while it would have been entirely proper for a new government to seek to renegotiate a concession agreement in a transparent and non-coercive manner, it was unfair and inequitable to bring the investor to renegotiation table through threats of termination based on colourable allegations. The evidence did not show the existence of health risk from the water provided by the investor.
The tribunal further held that the actions of the government against the concession was equivalent to an expropriation as they had a devastating effect on the economic viability of the concession. The investor’s recovery rate declined dramatically over the life of the concession, among others because the government’s public statement asking the customers not to pay their bills. The tribunal reasoned that the investor had the right to expect that the government will not engage in damaging campaign against them. Therefore, according to the tribunal, the investor was radically deprived of the economic use of its investment.