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 Vienna - Faculty of Law

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 Vienna - Faculty of Law ( email )

Schottenbastei 10-16
Vienna, A-1010
Austria

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