Argentina Loses Million-Dollar Lawsuit Over AFJP Nationalization: A Case Study in World Bank Arbitration

2024-04-11 15:39:33
Argentina lost a million-dollar lawsuit in an international court for the nationalization of the AFJP Getty Images

The splinters of the decisions of the past never end in Argentina. The Argentine Government lost an arbitration trial against an international company for the nationalization of retirement funds during the presidency of Cristina Kirchner.

The case was processed by the World Bank arbitration tribunal after the Metlife company demanded the nationalization of one of the retirement and pension fund administrators (AFJP).

Qualified sources involved in the case confirmed to Infobae the news of the case, which concluded with a ruling this week by this organization dependent on the World Bank.

The compensation granted was much less than what Metlife originally claimed, due to the arduous task of proving the specific damages caused by that political decision that shattered Met and other administrators.

The lawsuit, from 2017, was based on the violation of the 1991 United States investment protection treaty (BIT) with Argentina with the decision to expropriate the AFJP when the fiscal surplus was in decline at the beginning of the presidential term. by Cristina Kirchner. The treaty was ratified by Law No. 24,124 of Congress in 1992 and the AFJP were created by Law 24,241 in 1993.

The announcement of nationalization of the AFJP by Cristina Kirchner

Although Kirchnerism promoted a consultation in society that culminated in a clear rejection of the possibility of nationalizing the retirement system again, it later adopted this path of ending the AFJP to postpone the appearance of red in public accounts temporarily. In the President’s second term, this fiscal deficit trend was consolidated, with its reflection on growing inflation and poverty, despite the brutal increase in public spending.

It was the 54th case presented to this International Center for Settlement of Investment Disputes (ICSID) dependent on the World Bank that the country received among the files derived from the decisions of the 2001 crisis and others due to measures adopted during Kirchnerism.

The company was legally advised by a firm known in Argentina for controversies related to sovereign debt, White & Case LLP, while the Treasury Attorney General’s Office was assisted by the firm Curtis, Mallet-Prevost, Colt & Mosle in the United States and in Argentina.

Amado Boudou, one of the promoters of the nationalization of the AFJP in the government of Cristina Kirchner

Metlife, which has operated in Argentina since 1994 and sells life and savings, property and accident insurance, only chose to file the lawsuit when Mauricio Macri was in power, as there were no statutes of limitations for this type of case.

The tribunal was composed of Ian Binnie (Canada) as president and arbitrators Klaus Reichert (Germany) Campbell Alan MC Lachlan (New Zealand) and issued its ruling on April 5 of this year According to an article by Lisa Bohmer of IAReporter, one year After the presentation of this powerful company, the ICSID court rejected the Argentine request not to deal with the case; The article recalled that although the arbitration was initially filed by the two plaintiffs together with a third entity (MetLife Seguros de Retiro), in 2020, the court took note of the interruption of the procedure with respect to that entity.

“A virtual hearing on jurisdiction and merits was held in May 2021. This led to an (unpublished) decision of September 26, 2022 on Jurisdiction, Liability, Quantum Principles and Interests, in which – IAReporter has learned – the tribunal confirmed jurisdiction, determined that Argentina had violated the BIT and decided that the State should compensate the plaintiffs for the amount of the fair market value of the expropriated MetLife business.”

Then, he specified, “the plaintiffs submitted a request for clarification and rectification regarding certain quantum issues, which the court addressed in a decision of June 30, 2023.”

The Argentine cases before the ICSID

“IAReporter has confirmed that this decision awarded plaintiffs approximately $6.8 million in damages, plus an additional $1.5 million in pre-award interest, which represents only a small fraction.” of the damages that MetLife had claimed,” he said.

In reality, the lawsuit was for “hundreds of millions of dollars,” sources linked to the controversy indicated.

Bohmer recalled that “Argentina had argued that the court lacked jurisdiction because: the claim had prescribed due to the principle of extinctive prescription; the three original claimants did not qualify as investors protected by the BIT; there was no prima facie violation of the BIT; The claims should have been submitted to the Argentine courts; and certain issues would have to be excluded in a possible phase on the merits.”

These requests were not heard, although at least the Argentine State received a much smaller penalty than originally claimed.

With its cases, between concluded and pending, Argentina has been the most requested country in the ICSID, followed closely by Venezuela, with 49. They are followed by a group of countries including Spain, Egypt, Peru and Mexico, and another, more lagging and tight and made up of Hungary, Ecuador, Kazakhstan and Croatia. In the case of Argentina, apparently, the damned inheritance never ends.

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