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

Published online by Cambridge University Press:  30 August 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 the fact that necessity is ill-suited to financial crises. The state of necessity is at best a crude defence, appropriate as long as international law in this area remains underdeveloped. Lack of payment capacity will strike a better balance between host country and investor interests in future sovereign debt crises. This defence is also more amenable to adjudication by national courts and international tribunals.

Type
CURRENT LEGAL DEVELOPMENTS
Copyright
© 2007 Foundation of the Leiden Journal of International Law

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