Reuters | Mon Aug 8, 2011
US firm eyes trade case to force Argentina payment
Firm wants Argentina to pay $165 million, plus interest
Will ask U.S. to oppose Argentine debt restructuring
Also wants U.S. to block World Bank loans to Argentina
By Doug Palmer
WASHINGTON, Aug 8 (Reuters) — A U.S. company plans to ask the Obama administration for help in recovering more than $230 million it says it is owned by the government of Argentina, an attorney for the company said on Monday.
Stephen Kho, a lawyer with the Akin Gump law firm, said it would be the first time a U.S. company has used the "Section 301" trade law to pressure a foreign government to pay an award decided by an arbitrator in an investment dispute.
"I know there’s other bigger fish to fry, but this is something I think is the beginning of a slippery slope," Kho said, referring to the possibility of other countries refusing to pay awards in investment spats unless the United States takes a hard line on Argentina.
The case involves Azurix Corp., a Houston-based water services and investment company which was granted a 30-year water concession in Argentina in 1999.
"As a result of unwarranted political interference, the company was forced to terminate the contract in 2002," Representative John Culberson said in a July 15 letter urging U.S. Treasury Secretary Timothy Geithner to take action.
Azurix filed an arbitration case under the U.S.-Argentina Bilateral Investment Treaty to recoup its losses.
The case was heard by the World Bank’s International Center for Settlement of Investment Disputes (ICSID), which "rejected every argument put forth by Argentina and awarded Azurix over $165 million, plus interest," Culberson said.
Argentina appealed but lost again. It has refused to pay, telling Azurix it must go through Argentina’s domestic court system to collect the award, Kho said.
Azurix’s decision to file a Section 301 petition follows an earlier attempt to pressure Argentina by asking the office of the U.S. Trade Representative to withdraw the country’s benefits under the Generalized System of Preferences (GSP), which lets developing countries export many goods to the United States without paying duties.
That effort looked promising but stalled when the entire GSP program lapsed in February as a result of political wrangling in Congress, Kho said.
The Section 301 petition would go further by asking the U.S. government to withhold support for Argentina’s request to restructure about $7 billion in international debt in the Paris Club of creditor nations, Kho said.
It would also urge the Obama administration to block disbursements of credit and loan facilities to Argentina at the World Bank and the Inter-American Development Bank.
Both of those actions would be within the purview of the U.S. Treasury Department, rather than USTR.
That breaks legal ground and could increase the chance the petition would be rejected, Kho said.
But working with Culberson and others in Congress, the company has also been pursuing a legislative solution that would bar the use of U.S. funds for Argentina through World Bank and Inter-American Development Bank programs, he said. (Reporting by Doug Palmer; editing by Todd Eastham)