Originally published in Argentine Business Law Watch1 on September 20, 2002

New Decrees

On September 17th the Argentine executive branch released two decrees that affect stakeholders (creditors, shareholders, and employees) of Argentine public utilities and concessions.

Decree 1839/2002 extends the term to renegotiate licenses and concession contracts. The government had previously committed to renegotiate tariffs, royalties, and other economic terms by August 15th. The decree postpones this term 120 business days, pushing back the deadline to February 15, 2003, and builds in a 60-day extension if the government wishes to delay further negotiation. Thus, the decree effectively extends the deadline to April. Decree 1839 further authorizes "temporary measures" during the renegotiation period.

Decree 1834/2002 proclaims that, until December 10, 2003, neither the filing of a voluntary petition for reorganization or bankruptcy by a licensee or concession holder nor the filing of an involuntary petition for bankruptcy by a creditor will terminate a license or concession, regardless of the terms of the license or concession.


These decrees strongly suggest the current administration’s unwillingness to tackle renegotiation of licenses and concessions affecting public services that range from toll roads to power generation, transportation, and distribution. In the aftermath of devaluation, most public service providers found themselves caught between peso revenues and dollar-denominated debt. Even placing aside the devastating financial effects of deflation on these companies, the acute economic recession has cut revenues, as Argentines have been forced to reduce consumption. Decree 1839 leaves the daunting task of negotiating economically attractive terms that do not price services beyond the public reach to the next administration scheduled to assume office in May 2003.

Decree 1834 reflects the current administration’s awareness that, absent renegotiation of terms, the current economic context will force many licensees and concession holders to reorganize in response to creditors’ petitions for bankruptcy. The decree trumps the card held by creditors of many utilities that a reorganization or non-dismissed bankruptcy petition forces forfeiture of the license or concession. By executive fiat, the licensee or concession holder must continue to operate, whether or not the business is profitable.

Local media have reported the government’s unofficial acquiescence to an approximately 10% tariff increase in December, following public hearings. If true, it would explain the ambiguous reference to "temporary measures" included in decree 1839/2002.

The decrees effectively compel investors in various public services to continue operating at a loss. Already as a result of the sea change of Argentine economic policy, certain of our foreign investor clients have considered filing arbitration claims in the International Center for Settlement of Investment Disputes (ICSID) against the Argentine government under Bilateral Investment Treaties. The government’s virtual punt this week of a critical issue is likely to push clients to choose litigation.


In prior editions of Argentine Business Law Watch we advised you of several pending reorganization proceedings in which the debtor, with varying degrees of success, had argued for the conversion of foreign dollar-denominated claims to pesos at a one-to-one rate.

This month two unpublished court orders issued in large reorganization proceedings upheld foreign law dollar-denominated claims over the debtors’ objections. The court orders both rely on Decree 410/2002 issued earlier this year, which exempts foreign law claims from conversion. In one of the orders, the court added further weight to creditors’ claims by expressly rejecting the debtor’s argument that a creditor’s submission to the jurisdiction of an Argentine bankruptcy proceeding waived the benefits of a foreign law claim.

If you have any questions or comments concerning public service licensees and concession holders and insolvency matters, please do not hesitate to contact Juan Javier Negri or Mariela Caparrós at Negri Teijeiro & Incera.


In a landmark decision, the Argentine Supreme Court recently enjoined the Province of Chubut from regulating labeling of products shipped between provinces.2 The court, acting in an original action over a claim asserted against the province of Chubut, upholds federal supremacy and preemption in matters of inter-provincial commerce. The court’s decision comforts manufacturers with the knowledge that federal labeling standards (specified in the Código Alimentario Argentino) will control and products shipped to other provinces need not be relabeled to conform to local law.

1 In re Gatic s/ concurso preventivo and In re Productos Sudamericanos s/ concurso preventivo.

2 Kraft Foods Argentina v. Provincia del Chubut, CS, 2002/03/12.

This article is provided as a service to clients and friends of Negri, Teijeiro & Incera. It is not intended to impart legal advice on any matter.