Opinion: crisis, emergency measures and failure of the ISDS system: the case of Argentina
In this column, Federico Lavopa, Professor, University of San Andrés and University of Buenos Aires, argues that the way in which the investor-state dispute settlement (ISDS) system was used to handle a spate of claims from foreign investors against Argentina following its economic and financial crisis of 2001/2002 has shown up flaws in the system and the need for its reform.
The investor-state dispute settlement (ISDS) system has come under increasing criticism in recent years.
Inconsistent decisions, poorly reasoned awards, lack of transparency, parallel proceedings, serious doubts about arbitrator’s impartiality and the sheer size of the compensations sought by investors and awarded by arbitration tribunals are just some examples of the flaws that have been pointed out by detractors of the system.
The dozens of cases that were initiated against Argentina as a result of the outburst of one of its worst economic and financial crises in late 2001 became an often-quoted sad illustration of many of these shortcomings of the ISDS system.
Apart from the tragic consequences entailed by the economic and political crisis which was faced by Argentina, in particular in 2001/2002, which included a fall in gross domestic product (GDP) per capita of 50 percent, an unemployment rate of over 20 percent, a poverty rate of 50 percent, strikes, demonstrations, violent clashes with the police, dozens of civil casualties and a succession of five presidents in 10 days, Argentina received a flood of claims from foreign investors that were filed under different ISDS mechanisms and, in particular, before the International Centre for Settlement of Investment Disputes (ICSID).
