Two Worlds of Necessity in ICSID Arbitration: CMS and LG&E

Leiden Journal of International Law, Vol. 20, pp. 637-648, 2007

11 Pages Posted: 8 Mar 2010 Last revised: 2 Jan 2011

See all articles by Michael Waibel

Michael Waibel

University of Cambridge - Faculty of Law; Lauterpacht Centre for International Law; University of Cambridge - Jesus College

Date Written: March 7, 2007

Abstract

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 that necessity is ill-suited to financial crises. The state of Necessity is at best a crude defence appropriate so long as international law in this area remains underdeveloped. Lack of payment capacity will strike a better balance of host country and investor interests in future sovereign debt crises. This defence is also more amenable to adjudication by national courts and international tribunals.

Suggested Citation

Waibel, Michael, Two Worlds of Necessity in ICSID Arbitration: CMS and LG&E (March 7, 2007). Leiden Journal of International Law, Vol. 20, pp. 637-648, 2007 . Available at SSRN: https://ssrn.com/abstract=1566488

Michael Waibel (Contact Author)

University of Cambridge - Faculty of Law ( email )

10 West Road
Cambridge, CB3 9DZ
United Kingdom

Lauterpacht Centre for International Law ( email )

5 Cranmer Road
Cambridge, CB3 9BL
United Kingdom

University of Cambridge - Jesus College ( email )

Jesus Lane
Cambridge, CB5 8BL
United Kingdom

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