The Sovereign Debtor's Prison: Analysis of the Argentine Crisis Arbitrations and the Implications for Investment Treaty Law

Over the last six years, several arbitration panels have released opinions in a series of disputes raised by investors against Argentina. In each case, foreign investors claim that Argentina's use of price controls and currency devaluation following the 2002 economic crisis constituted a violation of bilateral investment treaty obligations. Despite the fact that most claimants make identical allegations, many of these decisions are highly contradictory. In some cases Argentina is absolved of liability, while in others Argentina is held liable for hundreds of millions in damages. In aggregate, the claimants seek enough money to bankrupt the Argentine Republic. Arbitral decisions that hold Argentina liable misinterpret both investment treaty law and customary international law. In essence, BITs are designed to resolve ad hoc disputes in which a state has taken improper action towards a particular investor. They are not designed to serve as an insurance policy when a macroeconomic crisis and the necessary state intervention that follows adversely affects foreign investors as a class. Instead, customary international law indicates that the parties should renegotiate in light of current economic realities.