Two recent ICSID cases, CMS v. Argentina and LG&E v. Argentina, diverge on the application of necessity under customary international law. The LG&E tribunal affirmed that Argentina's financial crisis amounted to a state of necessity. On virtually identical facts, CMS had reached the opposite conclusion 18 months earlier. This unhealthy split of opinion highlights the fact that necessity is ill-suited to financial crises. The state of necessity is at best a crude defence, appropriate as long as international law in this area remains underdeveloped. Lack of payment capacity will strike a better balance between host country and investor interests in future sovereign debt crises. This defence is also more amenable to adjudication by national courts and international tribunals.
