Siemens A.G. v. Argentine Republic

In 1996, the government of Argentina (Argentina) (defendant) asked for bids to develop a system to support immigration control, national identity cards, and electoral processes. Siemens A.G. (plaintiff) bid through a wholly owned, special-purpose Argentine company, Siemens IT Services, S.A. (SITS). SITS’s bid was selected and approved by Argentine decree. A contract between Argentina and SITS was executed (contract). SITS was not to be paid until the system was operational. Nationwide operation was scheduled for August 1999, but this required Argentina to negotiate agreements with its provinces that were never made because of political issues. In August, Argentina asked SITS to delay production until October, when a new president and administration would take office. In February 2000, Argentina shut down the immigration subsystem because it lacked a necessary state authorization. Argentina suspended the identity-card system because of a thumbprint issue it would not allow SITS to correct. Argentina told SITS it wanted to renegotiate the contract price. In November 2000, Argentina passed the Economic-Financial Emergency Law, allowing Argentina to renegotiate public-sector contracts. Meanwhile, Siemens and Argentina’s ministry of the interior agreed on a new Contract Restatement Proposal (CRP), but it was not approved as Siemens expected in December 2000. In April 2001, the new ministry of the interior denied knowledge of the CRP and sent Siemens a new proposal. In May 2001, Argentina terminated the contract by decree. SITS was not paid. Siemens’s administrative appeal was rejected. Siemens brought claims under an investment treaty to which Argentina was a signatory. Under the treaty, states were not permitted to expropriate foreign investments and were required to treat investors fairly and equitably, not arbitrarily. Under the treaty, a state’s actions could amount to expropriation only if the state exercised its public authority. Argentina argued that its actions were commercial in nature and amounted only to breach of contract, not expropriation.