Republic of Argentina v. AWG Grp. Ltd., Civil Action No. 15-1057 (BAH)

• Decision Date: 30 September 2016
• Docket Number: Civil Action No. 15-1057 (BAH)
• Citation: 211 F.Supp.3d 335
• Parties: REPUBLIC OF ARGENTINA, Petitioner, v. AWG GROUP LTD., Respondent.
• Court: U.S. District Court — District of Columbia

211 F.Supp.3d 335

REPUBLIC OF ARGENTINA, Petitioner,

v.AWG GROUP LTD., Respondent.

Civil Action No. 15-1057 (BAH)

United States District Court, District of Columbia.

Signed September 30, 2016

Matthew David Slater, Cleary, Gottlieb, Steen & Hamilton LLP, Washington, DC, for Petitioner.

Elliot Friedman, Carlos Ramos-Mrosovsky, Marshall H. Fishman, Freshfields Bruckhaus Deringer US LLP, New York, NY, for Respondent.

MEMORANDUM OPINION

BERYL A. HOWELL, Chief Judge

The Republic of Argentina ("Argentina") filed this lawsuit seeking vacatur of an international arbitration award against the country in the amount of $20,957,809, plus interest, in favor of the respondent AWG Group Ltd. ("AWG"). Pet. to Vacate Arbitration Award ("Pet."), ECF No. 1. AWG, for its part, seeks confirmation, recognition, and enforcement of that same award. Cross-Pet. for Confirmation, Recognition and Enforcement of Award ("Resp.'s Cross-Pet."), ECF No. 12.¹ Argentina's instant petition is not the only effort by the country to avoid unfavorable arbitration awards arising out of disputes between Argentina and private consortia that contracted with Argentina to provide infrastructure and public services in the country. See, e.g. , BG Grp. , PLC v. Republic of Argentina , ––– U.S. ––––, 134 S.Ct. 1198, 188 L.Ed.2d 220 (2014) (reversing the D.C. Circuit's vacatur of a $185 million dollar arbitration award against Argentina in favor of British firm that was part of consortium with a majority interest in an Argentine entity holding "exclusive license to distribute natural gas in Buenos Aires"); Argentine Republic v. Nat'l Grid PLC , 637 F.3d 365 (D.C. Cir. 2011) (affirming denial of Argentina's petition to vacate a $53 million dollar arbitration award and grant of respondent National Grid's cross-motion to confirm the same).

The arbitration award at issue in this case arises from a now-terminated thirty-year contract between Argentina and a private consortium, which included AWG, "to operate the water distribution and treatment systems serving the city of Buenos Aires." Resp.'s Mem. in Opp'n Pet. to Vacate Arbitration Award and in Supp. of Cross-Pet. for Confirmation, Recognition and Enforcement of Award ("Resp.'s Mem.") at 1, ECF No. 12.² AWG alleges that fewer than ten years into the contract, Argentina altered the investment framework, refused to authorize tariff adjustments, attempted to force a renegotiation of the contract, and ultimately terminated the contract, thereby breaching "Argentina's obligation to grant foreign investments ‘fair and equitable treatment’ " and "Argentina's obligation to provide foreign investments ‘full protection and security’ " under the governing bilateral investment treaty between the United Kingdom and Argentina, the Agreement Between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Argentina for the Promotion and Protection of Investments, Arg.-U.K. ("UK-BIT"). Id. at 7–9. The UK-BIT provides for binding international arbitration arising out of an investment, Resp.'s Cross-Pet., Ex. 6 to Decl. of Elliot Friedman ("Friedman Decl."), Agreement Between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Argentina for the Promotion and Protection of Investments, Arg.-U.K., Dec. 11, 1990 ("UK-BIT"), ECF No. 12-7, available at 1765 U.N.T.S. 33, 38, and when the country where the award is made is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention"), codified by reference at 9 U.S.C. §§ 201 et seq ., that convention governs enforcement of the award, see New York Convention, arts. I, III.

In accordance with the terms of the UK-BIT, the parties' dispute was submitted to binding international arbitration before an expert tribunal (the "Tribunal"), which confirmed its jurisdiction, see Pet., Ex. B to Decl. of Matthew Slater ("Slater Decl."), AWG Grp. Ltd. v. The Argentine Republic , Decision on Jurisdiction (Aug. 3, 2006) ("Decision on Jurisdiction"), ECF No. 1-5, and after twelve years of proceedings entered a final award in favor of AWG in April 2015. Resp.'s Mem. at 1, 4, 11–12. Argentina now seeks to vacate the Tribunal's award under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 10, arguing that one of the arbitrators acted with "evident partiality," and that the Tribunal exceeded its powers, Pet. ¶¶ 2–3.³ For the reasons explained below, Argentina's request to vacate the Tribunal's award is denied and AWG's cross-petition to confirm the award is granted.⁴

I. BACKGROUND

Summarized below is the factual and procedural background pertinent to the resolution of the pending motions.⁵

A. The Concession Contract

On December 28, 1992, Argentina awarded a concession for the "provi[sion of] water and sewage services to Buenos Aires and surrounding municipalities" to a private consortium, which included AWG, a British corporation. Pet. ¶¶ 5, 13–14; Pet., Ex. C to Slater Decl., AWG Grp. v. The Argentine Republic , Decision on Liability (July 30, 2010) ("Decision on Liability") ¶¶ 1, 33, ECF No. 1-6. Prior to this award, Argentina had declared its public services to be in "a state of emergency" and had taken steps to establish "a regulatory framework to privatize certain public services." Pet. ¶¶ 10–11; Decision on Liability ¶¶ 28–31. Under this scheme, concessionaires would provide services, new capital, and technology, and in turn, "would be entitled to the payment of tariffs." Pet. ¶¶ 11–12; Decision on Liability ¶¶ 30–32. To attract "the necessary long-term private and foreign capital," the new regulatory framework: (1) pegged the Argentine peso to the United States dollar at a ratio of 1:1; and (2) permitted tariff adjustments "to take account of changing and unexpected circumstances." Resp.'s Mem. at 5–6; Decision on Liability ¶¶ 29, 124. Argentina also entered into more than fifty bilateral investment treaties, including the UK-BIT,⁶ through which the countries sought to "encourage cross-border private investment." Resp.'s Mem. at 4; Decision on Liability ¶¶ 29, 124.

The Buenos Aires water and sewage concession was granted to a consortium comprised of AWG and other foreign and Argentine companies, which together formed and operated as an Argentine company named Aguas Argentinas S.A. ("AASA").⁷ Pet. ¶ 13; Decision on Liability ¶¶ 32–33. On April 28, 1993, AASA entered into a thirty-year contract with Argentina (the "Concession Contract"). Pet. ¶ 14; Decision on Liability ¶ 34. In accordance with the requirement in the Concession Contract to provide an "upfront investment to improve and expand the system," AASA obtained loans from multilateral lending agencies, payable in United States dollars, while AASA had agreed to receive tariff payments in Argentine pesos, which were pegged under the terms of the Concession Contract to the United States dollar at a ratio of 1:1. Pet. ¶ 15; Decision on Liability ¶ 35. The Concession Contract included a termination clause "allowing termination under specified circumstances, including termination for the concessionaire's fault." Pet. ¶ 16; Decision on Liability ¶ 114.

By 2001, AASA had invested $1.7 billion in the Concession Contract, "yield[ing] substantial improvements in the water distribution and sewage system serving Buenos Aires." Resp.'s Mem. at 6; Decision on Liability ¶¶ 35–36. Around this time, however, Argentina "began to experience significant economic difficulties that would eventually lead to a financial crisis having serious consequences for the country, its people, and its investors, both foreign and national." Decision on Liability ¶ 41; Pet. ¶ 18. "[T]o return stability to the country," Argentina adopted "a series of policies and measures," including, in 2002, Emergency Law No. 25,561. Pet. ¶ 19; Decision on Liability ¶ 44. This measure, inter alia : (1) "abolished the currency board that linked the Argentine peso to the U.S. dollar, which was followed by a significant depreciation of the Argentine peso;" (2) "abolished the adjustment of public service contracts according to the agreed-upon indexations;" and (3) "authorized the Executive branch of the government to renegotiate all public service contracts." Pet. ¶ 19; Decision on Liability ¶ 44. The Emergency Law "also forbade concessionaires from suspending or altering their contractual performance." Resp.'s Mem. at 7; Decision on Liability ¶ 44. These policies and measures, particularly the unpegging of the Argentine peso from the United States dollar, "had a ruinous effect on AASA's cash flows, because AASA's tariffs were calculated in Argentine pesos while its debt obligations were necessarily denominated in U.S. dollars." Resp.'s Mem. at 7; Decision on Liability ¶ 50.

Starting in March 2002, Argentina and AASA engaged in negotiations "to adjust the terms of the Concession Contract," but were unable to come to an agreement. Pet. ¶ 20; Decision on Liability ¶¶ 46–47, 49–50. Argentina ignored or rejected AASA's requested "tariff adjustments and modifications to its operation conditions" and, instead, "demanded that AASA provide water and sewage services to areas outside the scope of [the Concession Contract]" and "insisted that AASA continue to comply fully with its investment obligations." Resp.'s Mem. at 7; Decision on Liability ¶¶ 44–51. Argentina also "alerted AASA to several significant performance failures in violation of the Concession Contract." Pet. ¶ 20; Decision on Liability ¶ 52.

In September 2005, the AASA requested termination of the Concession Contract, which Argentina refused. Resp.'s Mem. at 7; Decision on Liability ¶ 53. Several months later, in March 2006, Argentina terminated the Concession Contract for fault by AASA. Pet. ¶ 21; Decision on Liability ¶ 56.

B. The Arbitration

On April 17, 2003, after passage of the Emergency Law, but prior to the termination of the Concession Contract, the foreign investors in AASA requested...