Compass Lexecon Experts Opinions Prevail in Arbitration Awarding Claimants More Than $320 Million in Damages for the 2008 Expropriation of Two Argentine Airlines

Compass Lexecon experts Dr. Manuel A. Abdala and Professor Pablo T. Spiller were retained by Teinver S.A., Transportes de Cercanías S.A., and Autobuses Urbanos del Sur S.A. (“Claimants”) as regulatory and quantum experts in an ICSID arbitration against the Argentine Republic. The dispute centered on two principal claims: the takeover and expropriation by Argentina of Claimant’s airlines (Aerolíneas Argentinas and Austral) in 2008 and the prior price regulation (‘airfare squeeze’) that prevented Claimants’ airlines from proper cost recovery from 2002 to 2008.

On the expropriation claim, the Tribunal awarded Claimants expropriation damages in excess of $320 million as of December 30, 2008, plus interest and costs, based on Claimant’s 97.2% stake of a contemporaneous valuation made by Credit Suisse, confirmed with Dr. Abdala and Professor Spiller’s valuation of the two airlines at $357 million, as of January 2008. The Tribunal also acknowledged that between January and December 2008 airline market conditions worsened in Argentina, explaining the difference between Compass Lexecon and Credit Suisse’s valuation estimates.

On the airfare squeeze claim, the Tribunal sided with Dr. Abdala and Professor Spiller’s testimony on key contested economic issues; mainly that the domestic market was subject to restrictive maximum airfare caps and bands which did not allow for proper cost recovery or earning a reasonable return during 2002-2008. While the Tribunal concluded that the airlines’ historical losses prior to the expropriation were mainly attributable to the airfare squeeze, it determined that such regulatory policy did not constitute a Treaty breach.

Dr. Abdala and Professor Spiller were supported by Gustavo De Marco, Carla Chavich, and Daniela Bambaci. Compass Lexecon worked with a legal team led by R. Doak Bishop, Roberto J. Aguirre Luzi, Craig S. Miles, Silvia Marchili and Isabel Fernández de la Cuesta of King & Spalding LLP.