* This document was reproduced and reformatted from the text appearing at the ICSID website (visited March 28, 2001) <http://www.worldbank.org/icsid>.

* Foreign Counsel, Powell Goldstein Frazer & Murphy LLP. Powell Goldstein represented Lanco International Inc. in the Lanco arbitration

* This document was reproduced and reformatted from the hard copy provided by Powell, Goldstein, Frazer & Murphy LLP.

1 Signed on July 3, 1991, approved Argentine Law No. 24.100, Boletin Official, July 14,1992.

2 Opened for signature on March 18,1965, entered into force on October 14,1966, reprinted in ICSID Basic Documents, Doc. ICSID/15 (available at http://www.worldbank.org/icsid/basicdoc>); entered into force for Argentina, November 18,1994; entered into force for France, September 20,1967.

3 The English translation of the text of Articles 3 and 5 is set forth in Appendix 1 to this Award.

4 The English translation of the text of Article 8 is set forth in Appendix 1 to this Award.

5 The text of Article 16.4 of the Concession Contract in Spanish and as translated by the parties into English is set forth in Appendix 1 to this Award.

6 At the time of the Concession Contract, CGE held 36 percent of the equity capital of CAA; a Spanish company, Dragados y Construcciones Argentina S.A. (Dycasa), and an Argentine Company, Benito Roggio e Hijos S.A. (Roggio), each held 27 percent of the equity capital of CAA. In June 1996, CGE acquired ownership of a total of 68.33 percent of the total equity capital of CAA and acquired beneficial ownership of an additional 16.67 percent of the equity capital of CAA. (Cls. Obs. Jur. at 22-23.) Respondent argued that CAA should not be treated as a French investor because this acquisition occurred after disputes had arisen between CGE and Tucumán (Resp. Mem. at App. B, Note relating to CGE's Acquisition.) CGE responded that the critical date for purposes of determining control under Article 25(2)(b) and under precedent interpreting the ICSID Convention is the date for consent to arbitration and that is the date in late 1996 when CGE submitted the dispute to arbitration. All parties agree that by late 1996 CGE had acquired the Dycasa shares (Cls. Reply at 90-91.) Further, Claimants argue that the French company CGE controlled CAA from the time of the takeover of the Tucuman water and sewage concession under the Concession Contract and maintain that it is sufficient for satisfying the test under Article 25(2)(b). For purposes of resolving the issues addressed by this Award, the Tribunal has determined that CGE controlled CAA and that CAA should be considered a French investor from the effective date of the Concession Contract. Accordingly, the Award uses the terms “CGE” and “Claimants” when referring to CGE and CAA collectively in their capacity as operators of the water and sewage concession.

7 The original reads as follows in Spanish: A los efectos de la interpretación y aplicación de este Contrato las partes se someten a la jurisdicción exclusiva de los Tribunales en lo Contencioso Administrative de la Provincia de Tucumán.

8 The letter of March 5, 1996, also referred to the bilateral investment treaty between Spain and the Argentine Republic in view of the involvement, as noted above, of a Spanish company in the original CGE Consortium.

9 The ICSID Convention had entered into force for France during 1967; the Argentine Republic became a party to the ICSID Convention after its signature of the BIT, i.e., in November 1994.

10 See Appendix 1 for the full text of each of these provisions.

11 Respondent also contended that Claimants had submitted to the national jurisdictions of Argentina under Article 8 of the BIT by pursuing their administrative remedies before the administrative authorities of Tucuman (see, e.g., Res. Rep. Jur. at 7 (“They referred the matter to the administrative for [i.e., Tucuman administrative agencies] specified in the Contract…. They cannot change course now they are committed [under Article 8 of the BIT]…Claimants have promised they would have recourse to the local agencies and tribunals. They had recourse to those local agencies.“)) The Argentine Republic abandoned this argument in subsequent phases of the proceedings, presumably because Article 8 of the BIT refers to “national jurisdictions,” meaning courts, including contentious administrative tribunals of the type mentioned in Article 16.4, and not administrative agencies. (See, Mean. Resp. at 126-27 (referring only to Tucumán tribunals) and Resp. Post-Hrg. Mem. at 30 (Concession Contract “committed the parties to remit all disputes relating to the interpretation or application of the Concession Agreement to the local administrative courts in the first instance.“) (emphasis added).)

12 See, e.g., Condorelli, Luigi, L'imputation à l'état d'unfait internationalement illicite: solutions classiques etnouvelles tendances, 189 Recueil des Cours 66(1984)Google Scholar (“sont attribués à 1'Etat, d'après le droit international, tous les comportements de tous ceux qui, dans l'ordre interne de l'Etat concerné, exercent effectivement les prérogatives de la puissance publique“); see also Antonio Brotóns et al., Derecho Internacional 418 (1997) and de Velasco Vallejo, Manual Diez, La Responsabilidad Internacional, Instituciones de Derecho Internacional Público 688 (11 ed. 1997)Google Scholar (discussing the consensus regarding the responsibility in international law of the central government for actions of states in a federal state).

13 Sørensen, Max, Manual of Public International Law 557 (1968)CrossRefGoogle Scholar (referring to the “obvious principle” and “generally accepted principle of international law that a federal state is responsible for the conduct of its political sub-divisions and cannot evade that responsibility by alleging that its constitutional powers of control over them are insufficient for it to enforce compliance with international obligations.“). See also Dinh, Nguyen Quoc, Droit International Public 752 (eds. Dallier, and Pellet, , 6^th ed. 1999)Google Scholar (referring to the well-established international jurisprudence that “[l]'État fédéral ne peut s'abriter derrière une constitution qui organise l'autonomie de ses éléments composants pour dégager sa responsiblé internationale.“)

14 First Report on State Responsibility 14-15, UNDOC A/CN.4/490 and Add. 5 (1998).

15 For statements of delegations from developing countries to the negotiation of the ICSID Convention pointing out the significant role of their state agencies and other sub-federal institutions in entering into investment agreements and, therefore, the importance to these states in attracting foreign investment of expanding the jurisdiction of the Centre to hear disputes involving foreign investor claims against state agencies and political subdivisions, provided that the government of the relevant Contracting Party approved, see, e.g., II History ICSID Convention at 297 and 366; see also Christoph Schreuer, “Commentary on the ICSID Convention,” 11 ICSID Rev. 318, 380 (Fall 1996) (explaining that the provision “open[s] the possibility, in principle, that such entities may become parties in ICSID proceedings instead of or in addition to the host State itself;” and referring to the designation under the parenthetical in Article 25(1) as relating to “jurisdiction ratione personae” to give “the entities described locus standi, if the Convention's requirements have been met” and to Article 25(3) as relating to “the modalities of consent.“

16 The BIT refers as well to the Arbitration Rules of the United Nations Commission on International Trade Law which include no provision comparable to Articles 25(1) and (3). Since the two sets of arbitral rules are alternatives under the BIT, there is a strong inference that no limitation of the type asserted by Respondent was intended on the subject matter for arbitration if the ICSID Convention is invoked.

17 Lanco Int'l, Inc. v. Argentine Republic (ICSID Case No. ARB/97/6) (Prelim. Decision on Jurisdiction) (Dec. 8, 1998).

18 Id. at Paras. 28-30. It is true that the forum-selection clause in Lanco was agreed to before entry into force of the relevant Argentine-U.S. BIT referring to ICSID while Article 16.4 of the CGE Concession Contract with the Province of Tucuman was signed three years after the Argentine-French BIT entered into force and after the Argentine Republic had become a party to the ICSID Convention. It is also true, that, unlike the Concession Agreement in this case, the forum-selection clause in the Lanco investment contract did not use the term “exclusive” in referring to the domestic courts of Argentina as did the Concession Agreement in the instant case. Neither of these distinctions alters the key point that for jurisdictional purposes Lanco, in addition to resolving the pre-existing agreement issue, also upholds the investor's option for ICSID arbitration despite the presence of a forum-selection clause in the investor-state contract at issue.

19 .See, also, Cls. Post-Hrg. Answers at 1-3. The Tribunal does not accept the position of Respondent that Tucuman courts would have had jurisdiction over a claim against the Argentine Republic based on the BIT because “an allegation of breach of the BIT by Argentina depends on a prior determination that the Concession Contract was breached by Tucumán” and that CGE did not violate the Contract. (Resp. Post-Hrg. Answers at 4.) It is clear that the Argentine Republic could have engaged in conduct or failed to act in violation of its obligations under the BIT even if Tucumán were not in violation of the Concession Contract. Moreover, the suit that the Respondent hypothesizes would not be against the Argentine Republic ratione personae became, as the responses of both parties to the Tribunal's questions indicate, the Tucuman courts do not have jurisdiction over such a suit absent consent by Respondent. Nor does the Tribunal agree with Respondent that the choice of the law of Tucuman by the parties to the Concession Contract, “raises a presumption” against finding ICSID jurisdiction and in favor of deference to the Tucuman courts. (Resp. Mem. at 127.) That argument is not apposite when the parities to the Concession Contract and their governments have entered into agreements expressly addressing the jurisdiction of the Tucumán courts and ICSID.

20 The Tribunal does not accept Claimants’ argument that Article 16.4 of the Concession Contract is without effect in this matter because Article 10 of the BIT, which refers to rights under a special agreement between a Contracting Party and an investor, “supersedes the forum selection clause in the Concession Agreement.” (Cls. Mem. at 86.) Article 10 protects rights granted to an investor under a special agreement if such rights are more favorable to the investor than those granted under the BIT. The question here is not whether one or the Other is more favorable, but whether the Tribunal is in a position, on the facts of this case, to separate the breach of contract issues from violations of the BIT, considering that the parties to the Concession Contract have agreed to an exclusive remedy in the Tucumán courts for the determination of the disputed contractual issues which are not governed by the BIT.

21 For a recent comprehensive survey of the practice of ICSID and other international arbitral tribunals see Gotanda, J., Awarding Costs and Attorney's Fees in International Commercial Arbitrations, 21 Mich. J. Int'l L. 1, 25 (1999)Google Scholar (discussing the varied practice of ICSID tribunals in several cases and concluding that “there is no consensus on the amount of coats and fees that should be paid to the prevailing party“); see also Redfern, A. ' Hunter, M., Law and Practice of International Commercial Arbitration 407 (2d ed. 1991)Google Scholar (“It is impossible to identify any general practice as to the treatment of costs in international commercial arbitrations.