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
Date Written: March 7, 2007
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.
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