Decrying past “contradictory” rulings, Argentina challenges arbitrator, By Luke Eric Peterson

Among the grounds upon which Argentina is seeking to vacate a $185+ Million
arbitration award in favour of British Gas (see previous item) is one which criticizes the
International Chamber of Commerce for failing to disqualify one of the three arbitrators
presiding in the BG v. Argentina arbitration.

Argentina had moved in June of 2007 to challenge the impartiality of Prof. Albert van
den Berg, on the basis of what it characterizes as “contradictory” rulings signed by Prof.
van den Berg in his capacity as arbitrator in other ICSID cases involving Argentina.
Although the disqualification bid was one of a growing list of challenges filed by the
Argentine Government in relation to the dozens of investment treaty arbitrations that it
faces, the grounds for the challenge were novel.

In the BG case, the Argentine Attorney General’s Office contended that it had “justifiable
doubts” as to the independence and impartiality of Prof. van den Berg due to the fact that
he had signed earlier arbitration awards – in the LG&E v. Argentina and Enron v.
Argentina cases – which Argentina says run “contrary” to one another on key points of
law.

A particular concern for Argentina is the different disposition of a central question in the
LG&E and Enron cases: whether Argentina can claim that it acted out of a “state of
necessity” due to its recent financial crisis, thus absolving the country of liability for
treaty breaches suffered by foreign investors.

Whereas the tribunal in the LG&E v. Argentina case accepted Argentina’s necessity
arguments – at least for a 17 month window of time when the financial crisis was at it
peak – the tribunal in the Enron case rejected the necessity defence.

Argentina maintains that the LG&E and Enron disputes involve similar investments (in
Argentina’s natural gas sector) and raise similar allegations of breach of the USArgentina
bilateral investment treaty. Yet, Argentina contends that Prof. van den Berg
endorsed “contradictory” conclusions in those two cases, without issuing a dissenting
opinion or offering some explanation for this “drastic change of mind”.

As part of its challenge-bid, the Attorney General’s Office argued that the only
explanation for this sharp divergence can be “arbitrariness or caprice” on the part of Prof.
van den Berg, thus raising doubts as to his capacity for impartiality and independence in
the ongoing BG v. Argentina arbitration.

ITN understands that Prof. van den Berg – who as an arbitrator cannot comment on the
BG case – rejected Argentina’s charge that he lacks the requisite impartiality or
independence to sit in the case. Prof. van den Berg declined to withdraw from the BG
tribunal, and informed the parties to that proceeding that he was unable to discuss the
deliberations in the Enron and LG&E cases. Further, it is understood that he informed the
parties that he takes the view that collegiality demands that arbitrators sitting on threemember
tribunals reach a common view as to how the case should be resolved. (Prof. van
den Berg is not known to have authored a dissenting opinion in any case where he has sat
as arbitrator.)

In the face of Prof. van den Berg’s decision to remain on the tribunal, Argentina
proceeded with its challenge-bid by referring the matter to the Appointing Authority in
the case: the Court of Arbitration of the International Chamber of Commerce (ICC).
In the course of so doing, Argentina also criticized the view that an arbitrator sitting on a
three-person tribunal should reach a conclusion as a “collegial” body. Indeed, the
Attorney General’s Office argued that such a posture is antithetical to the requirement for
arbitrators to exercise “independent” judgment.

Argentina had requested that the ICC provide reasons for any decision taken on its
challenge-bid; as noted in past ITN reporting, Argentina has bristled at the practice of
certain arbitration institutions which provide no reasons for decisions taken in relation to
challenges to arbitrators.*

In a subsequent ruling by the ICC Court of Arbitration Argentina’s challenge to Prof. van
den Berg was rejected. However, the ICC did not offer any reasons for this decision.
In papers filed in the D.C. District Court, Argentina has decried the failure by the ICC to
provide reasons for the rejection of its challenge, and characterized this failure as an
excess of powers contrary to the U.S. Federal Arbitration Act. At the same time,
Argentina has also argued in its filings before the DC Court that the BG arbitration was
not resolved in an impartial fashion.

* See “Argentina and UK firm send arbitrator-challenge to venue where reasons are
provided”, By Luke Eric Peterson, Investment Treaty News, October 30, 2007, available
on-line at: http://www.IISD.org/pdf/2007/itn_oct30_2007.pdf