By Elizabeth Whitsitt
January 13, 2010
An ad hoc committee composed of Dr. Gavan Griffith Q.C., Judge Patrick L. Robinson, and Judge Per Tresselt has decided to continue to stay the enforcement of an award rendered against the Argentine Republic in favour of the Enron Corporation. According to the committee, the stay will remain in force until annulment proceedings have been concluded and without any requirement for Argentina to post security.
In May 2008, the committee was formed after Argentina requested the annulment of an arbitral award granting Enron damages in the amount of US$106 million.
Since that annulment request was made, the parties have been enmeshed in a procedural tussle. Argentina has argued for the continued stay of enforcement of the award until a decision regarding annulment has been made. Enron, however, has asked that the stay be lifted, or that Argentina post security, so that if the award is not annulled, Enron is guaranteed payment of the damages to which it would be entitled.
In its first decision* on this issue, the committee focused on a fundamental disagreement between Enron and Argentina regarding the procedures for enforcing awards. In that decision the committee rejected Argentina’s position that foreign investors must go to an Argentine court in order to obtain enforcement of their ICSID awards and gave the Argentine government 60 days (commencing October 7, 2008) to reconsider its position.
Subsequently, Enron made its second request to lift the provisional stay of enforcement of the award, or in the alternative, to condition such a stay on Argentina’s provision of adequate financial security in the form of a bank guarantee or its monetary equivalent. In support of its position, Enron reiterated its concern that Argentina was unlikely to comply with its obligations to pay the award (pending the outcome of the annulment proceedings).
For its part, Argentina maintained its position that foreign investors must go to an Argentine court in order to obtain enforcement of their ICSID awards. Argentina also argued that: (i) the cost of providing financial security in this case was prohibitive, (ii) given Enron’s bankruptcy any security provided by Argentina may be subject to attachment claims made by Enron’s creditors, and (iii) providing financial security created unacceptable risks of claims made by other creditors of Argentina. With respect to the last two arguments, Argentina raised concerns about its ability to recover any security it provided should it succeed in having Enron’s ICSID award annulled. Specifically, Argentina argued that creditors in other disputes involving either Enron or Argentina might have the right to receive the security posted by Argentina.
In a decision rendered in May 2009, but only recently made available to the public, the committee sided with Argentina. Specifically, the committee reasoned that the ICSID system would be undermined if an award subject to annulment proceedings could be used by strangers to the arbitration proceedings as a means through which to secure enforcement of their own unrelated claims against the respondent.
Acknowledging that it may be impossible in all situations to remove all risks regarding irrecoverability, the committee held that where that risk is very high, as it is in this case, that fact will militate strongly against lifting a stay or against requiring security to be provided as a condition of any continuation of a stay.
* Decision on the Argentine Republic’s request for a Continued Stay of Enforcement of the Award in Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic is available here:
Decision on the Claimant’s second request to Lift Provisional Stay of Enforcement of the Award in Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic is available here:
“Argentina ordered to reconsider its position on payment of ICSID awards,” By Damon Vis-Dunbar, Investment Treaty News, 14 October 2008, available here: