An ICSID arbitration tribunal has ordered Argentina to pay more than USD 700 million in damages to US energy company AES, finding that the measures imposed in Argentina’s electricity sector breached the US-Argentina bilateral investment treaty (“<span class="news-text_medium">BIT</span>”). The award, issued in <span class="news-text_italic-underline">The AES Corporation v The Argentine Republic (ICSID Case No ARB/02/17, 30 May 2025)</span>, is one of the most significant rulings against Argentina in the context of its early-2000s economic crisis.
AES had invested heavily in Argentina’s electricity generation sector in the 1990s. During the 2001–2003 financial crisis, Argentina introduced a range of regulations, including capping spot prices, restricting new power purchase agreements, withholding payments to generators and forcing reinvestment of withheld funds into new capacity. AES argued these measures undermined its investments and violated treaty protections.
The tribunal held that Argentina’s measures were arbitrary and breached the fair and equitable treatment (“<span class="news-text_medium">FET</span>”) standard, noting the basis for the pricing and regulatory framework was unclear and inconsistently applied. It also found that the measures impaired AES’ ability to manage and enjoy its investments, in breach of Article II(2)(b) of the BIT. However, the tribunal rejected AES’ claim that the FET standard guaranteed a stable regulatory framework and dismissed its full protection and security (“<span class="news-text_medium">FPS</span>”) claim.
Argentina’s reliance on the BIT’s essential security exception and the customary international law defence of necessity was also rejected. The tribunal found that the measures extended well beyond the period of crisis and continued into Argentina’s recovery, serving to control profitability and compel reinvestment rather than address immediate security needs.
Damages were calculated on the basis of lost gross margins, adjusted for macroeconomic and legal uncertainties. The tribunal awarded AES over USD 715 million, setting the valuation date at the time of the award.
<span class="news-text_medium">Case</span>: <span class="news-text_italic-underline">The AES Corporation v The Argentine Republic (ICSID Case No ARB/02/17) (Award) (30 May 2025)</span> (Tribunal: Professor Ricardo Ramírez Hernández (president), Stephen L Drymer (claimant) and Professor Domingo Bello Janeiro (respondent)).
