Quantum matters – airline expropriation by Argentina

Harshad Bharakhada Harshad Bharakhada

On 21 July 2017, an ICSID Arbitral Tribunal awarded US$320 million in damages plus interest for the nationalisation of two airlines by Argentina more than a decade ago.


The dispute relates to the Claimants’ allegation that the Respondent had violated the Investment Treaty between Spain and Argentina, International Law, and Argentine Law by unlawfully re-nationalising and taking other measures regarding the Claimants’ investments in two Argentine airlines: Aerolineas Argentinas S.A. (ARSA) and Austral-Cielos del Sur S.A. (AUSA).

On 18 September 2008, the Argentine Congress passed a law which approved the repossession of ARSA and AUSA through purchase of their shares with the compensation to be calculated by the Tribunal de Tasaciones de la Nacion (TTN). The shares were eventually purchased for one Peso in 2009.

During 2008, valuation reports of the airlines were prepared by Credit Suisse, Deloitte, Morgan Stanley, PwC and TTN. The Claimants note that the average valuation for the airlines was US$445 million (AUSA - US$415 million plus ARSA – US$30 million), whereas TTN valued the airlines at a negative value of US$832 million.

Damages calculation

The Respondent argued that valuations not performed for the purpose of the arbitration should not be considered by the Tribunal as they would not be fit for purpose.

Claimants’ Approach

The Claimants requested compensation for the appropriation of its investment in the airlines, being the value of the airlines at the time of the appropriation. They used the Credit Suisse, Deloitte, Morgan Stanley and PwC valuation reports that were prepared during 2008 to determine the value of the airlines. These valuations were performed using a DCF method. The Claimants also instructed an expert who prepared a valuation as a cross check to the previous third party valuations. The expert derived a valuation figure of US$357 million for AUSA (they did not value ARSA), compared to the average contemporaneous valuations for AUSA of US$415 million.

Respondent’s Approach

The Respondent argued that the third party valuations performed were not for the purposes of Arbitration and therefore should not be considered. The Respondent also argued that appropriate compensation should be paid but not full reparation.

Tribunal’s Approach

The Tribunal agreed with the Claimants that full reparation was required and the Tribunal’s award of damages should seek to put the Claimants back in the position they would have been in but for the expropriation. The Tribunal agreed with the Claimants that the third party valuations prepared in 2008 provided a record of the value in 2008. There was no requirement for the Claimants to submit an expert valuation prepared for the arbitration when there was contemporaneous evidence on record as to the fair value. The fact that the valuations were prepared to support an arm’s length transaction makes them sound indicators of the fair market value in 2008. The Tribunal found that Credit Suisse’s valuation was the most reliable expression of the market value in 2008, which provided a minimum value of US$330 million. The Tribunal also considered the Claimants’ expert valuation as a cross check to the Credit Suisse valuation and found that it provided a reasonableness check. The Tribunal therefore issued an award for damages of US$320 million representing the Claimants 97.2% holding in the airlines value of US$330 million.


This case shows the willingness of Tribunals to recognise contemporaneous valuation data performed prior to the arbitration, on the basis that it provides a fair representation of an arm’s length transaction within the market. This was supported by the Claimants’ expert valuation, which was used as a cross check by the Tribunal to ensure that the previous valuations performed were reasonable, therefore showing the need for an expert valuation to support other available contemporaneous evidence.

Case information

Claimant: Teinver S.A., Transportes de Cercanias S.A. and Autobuses Urbanos del Sur S.A.    

Respondent: The Argentine Republic

Case ref: ICSID Case No. ARB/09/1

Arbitrators: Judge Thomas Buergenthal (United States), President

Henri C. Alvarez QC (Canada), Arbitrator

Dr Kamal Hossain (Bangladesh), Arbitrator

Mrs Mercedes Cordido-Freytes de Kurowski, Secretary of the Tribunal


1. International centre for settlement of investment disputes, Washington, D.C., ICSID Case No. ARB/09/1, 2017

For further information, please contact Harshad Bharakhada or James Mackey