An Introduction to ICSID Process · 2017. 7. 13. · ICSID Proceedings 14 Convention Both disputing...

An Introduction to ICSID Process

Meg Kinnear, ICSID Secretary-GeneralNovember 19, 2015

CIL Investment Law & Practice Conferences Singapore

Unpublished work © 2015 by International Centre for Settlement of Investment Disputes. For Official Use Only – This material may not be reproduced, cited, displayed, shared, transferred or disseminated in any other manner without the prior written permission of ICSID.

Part I:Introduction to ICSID

2© 2015 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

The World Bank Group


ICSIDInternational

Centre for Settlement of Investment Disputes

IBRDInternational

Bank for Reconstruction

and Development

IDAInternational Development Association

IFCInternational

Financial Corporation

MIGAMultilateral Investment Guarantee

Agency

MISSION:

Providesfacilities for conciliation and arbitration of international investment disputes

Lends funds to governmentsof middle and low-income countries

Provides interest-freeloans and grants to governments of poorest countries

Provides loans, equity and technical assistance to stimulate private sector investment in developing countries

Providesguarantees for investors in developing countries against non-commercial risk

50 Years of ICSID

© 2015 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

4

See Annex 1 – “50 Years of ICSID”

151 ICSID Members

See Annex 2 – List of ICSID Member States


5

ICSID Governance Structure

ADMINISTRATIVE COUNCIL SECRETARIAT

One representative of each Member State

One vote per Member State

Chaired by President of the World Bank (has no vote)

Secretary-General

Staff


Functions of the Administrative Council

Adopt ICSID rules on arbitration and conciliation proceedings

Adopt annual budget & Annual Report

Elect the Secretary-General and any Deputy Secretary-General


Functions of the Secretariat Case Administration

Technical Assistance & Training

Publications

8

ICSID Caseload(By Fiscal Year)


9

1 0

4

0 0 13

0 02 1

3 2 2 13 2 1 0 0 1

2 1 25

7 811 12 12

16

26

30

25 26 26

32

2427

32

39

4340

52

0

10

20

30

40

50

60

FY1

97

2

FY1

97

3

FY1

97

4

FY1

97

5

FY1

97

6

FY1

97

7

FY1

97

8

FY1

97

9

FY1

98

0

FY1

98

1

FY1

98

2

FY1

98

3

FY1

98

4

FY1

98

5

FY1

98

6

FY1

98

7

FY1

98

8

FY1

98

9

FY1

99

0

FY1

99

1

FY1

99

2

FY1

99

3

FY1

99

4

FY1

99

5

FY1

99

6

FY1

99

7

FY1

99

8

FY1

99

9

FY2

00

0

FY2

00

1

FY2

00

2

FY2

00

3

FY2

00

4

FY2

00

5

FY2

00

6

FY2

00

7

FY2

00

8

FY2

00

9

FY2

01

0

FY2

01

1

FY2

01

2

FY2

01

3

FY2

01

4

FY2

01

5

Cases Registered under the ICSID Convention and Additional Facility Rules by Fiscal Year

Increase in FDI


10

Source: UNCTAD, FDI/MNE database (www.unctad.org/fdistatistics)

http://www.unctad.org/fdistatistics

More Investment Treaties


11

Source: UNCTAD, IIA database

ICSID Cases by State Party – June 30, 2015


12

South America25%

Central America & the Caribbean

7%

North America (Canada, Mexico & U.S.)

4% Eastern Europe & Central Asia…

Western Europe5%

Sub-Saharan Africa16%

Middle East & North Africa…South & East Asia & the

Pacific…

ICSID Cases by Sector – June 30, 2015


13

Finance7%

Information & Communication

6%

Agriculture, Fishing & Forestry

4% Oil, Gas & Mining26%

Electric Power & Other Energy

15%

Water, Sanitation & Flood Protection

6%Construction

7%Tourism4%

Other Industry13%

Transportation9%

Services & Trade…

ICSID Proceedings

14

ConventionBoth disputing

parties from ICSID Member States

Conciliation

Arbitration

Additional FacilityOne disputing party from Member State

Conciliation

Arbitration

Fact-finding

OtherNeed not be from

Member State

Case administration under other Rules or

Treaties (e.g.: UNCITRAL or other

investment cases; FTA cases; State-to-State

cases)

Other functions on consent of parties

(e.g.: Appointing Authority, Mediation;

act as Registry for other treaties)


• Impartial and delocalized facility

• Cost-effective fee structure

• Access to facilities internationally

• Secretariat expertise

• Transparency

• Only institution that can administer ISDS under the three main set of rules (ICSID Convention, Additional Facility and UNCITRAL)

Features of ICSID


See Annex 3 – Special Features of ICSID

Pre-Arbitration Considerations


16

PREVENTION

PREPARATION

Part II: ICSID Jurisdiction


Relevant Provisions

• ICSID Convention, Articles 25 & 36

• ICSID Institution Rules


Conditions for ICSID Jurisdiction -Article 25(1) of the ICSID Convention

• Legal Dispute• Arising Directly out of an Investment• Between a Member State• And National of Another Member State• Consent in Writing


See Annex 4 – Article 25 of the ICSID Convention

Consent is the Cornerstone of Jurisdiction

Sources of Consent:

• Contracts• Investment Laws• Bilateral Investment Treaties• Multilateral Agreements


21

Basis of Jurisdiction Invoked in ICSID Cases –(to June 30, 2015)


ASEAN Agreement for the Promotion and Protection of Investments

0.2%

Bilateral Investment Treaty (BIT)

61.0%

Dominican Republic-United States-Central America Free Trade

Agreement (DR-CAFTA)0.8%

Investment Contract between the Investor and

the Host-State17.7%

Investment Law of the Host-State

9.5%

North American Free Trade Agreement (NAFTA)

2.9%

Energy Charter Treaty (ECT)7.5%

Oman-U.S. Free Trade Agreement (Oman-U.S. FTA)

0.2%

Canada-Peru Free Trade Agreement (Canada-Peru FTA)

0.2% Central America-Panama Free Trade Agreement

0.2%

Scope of Consent

• Parties may limit the scope of consent – e.g.:

o Requirement to exhaust local remedies

o Types of dispute covered

o Investors covered (denial of benefits)

o Time limitations


What is a “Legal Dispute”?

• Concerns the existence or scope of a legal right or obligation

• Cannot be a mere conflict of interest


What is an “Investment”?

24

Significant undertakingDurationRiskRegularity of profits Contribution to development of

host State

Apply the definition in the instrument of

consent


Objective Approach Subjective Approach

CSOB v. Slovak Republic (ARB/97/4)Decision on Jurisdiction dated May 24, 1999

“[…] A two-fold test must therefore be applied indetermining whether this Tribunal has the competence toconsider the merits of the claim: whether the dispute arisesout of an investment within the meaning of theConvention, and, if so, whether the dispute relates to aninvestment as defined in the Parties’ consent to ICSIDarbitration, in their reference to the BIT and the pertinentdefinitions contained in Article 1 of the BIT.”


25

Philip Morris Brands Sàrl v. Uruguay (ARB/10/7)

Decision on Jurisdiction dated July 2, 2013

“…the four constitutive elements of the Salini list do notconstitute jurisdictional requirements to the effect that theabsence of one or the other of these elements would imply alack of jurisdiction…[T]hey may assist in identifying orexcluding in extreme cases the presence of an investment butthey cannot defeat the broad and flexible concept ofinvestment under the ICSID Convention to the extent it is notlimited by the relevant treaty…”


26

Examples of Investments

• Exploration and exploitation of natural resources (mining, oil and gas)

• Rights under concession agreements• Building and operation of infrastructure

projects • Shareholding in a local subsidiary


A Member State

• Must have ratified the ICSID Convention• A subdivision or agency of a Member State

may be a party if:o It has been designated to ICSID (Article

25(1)), ando The State has approved its consent to

arbitration (Article 25(3))


See Annex 5 – ICSID/8

A National of Another Member State -Article 25(2)(a) of the ICSID Convention

• An individual:

o must be a national of another Member State at the time of consent and at the date of registration of the Request, and

o cannot have the same nationality as the host State


A National of Another Member State -Article 25(2)(b) of the ICSID Convention

• A company must be a national of another Member State at the date of consent

• Exception: a company may have the same nationality as the host State if:o it is under foreign control, and o the parties agree to treat it as a foreign

national


Corporate Nationality Rule Example


31

Host State: SenegalHome State: USA

Example of ICSID JurisdictionTokios Tokeles v. Ukraine (ICSID Case No. ARB/02/18)

National of Another

Member StateClaimant was a Lithuanian publishing company

Contracting State

Respondent was Ukraine

Investment The investment was the Claimant’s subsidiary company in Ukraine, a publishing enterprise

Legal DisputeThe dispute concerned an alleged political repression campaign by Ukrainian authorities claimed to have breached the investment protection provisions of the BIT

Consent Consent to ICSID arbitration was found in the Lithuania-Ukraine BIT


Tokios Tokelés v. Ukraine (2004)


33

Home State: Lithuania Host State: Ukraine

Tokios

Tokelés

Taki

Spravy

(1994)

Ukrainian

nationals99%

100%

BIT

Part III: Institution of Arbitration

Proceedings


Procedural FrameworkICSID Convention

Framework

Provisions of the applicableinvestment treaty,

contract or law

Provisions of the ICSID Convention

ICSID Arbitration Rules in effect at the time of consent to

arbitration


35

The Request for Arbitration

• The process of filing a request is governed bythe Institution Rules

• May be filed by the investor or the State (or insome circumstances, a subdivision or agency ofa State)

• A non-refundable lodging fee of 25,000 USD ispaid by the requesting party (claimant)


See Annex 6 – How to file a Request for Arbitration

Review of the Request

38

• ICSID reviews the request in light of the Convention and the instrument of consent

• The request is registered unless it is “manifestly outside the jurisdiction of the Centre” (Article 36(3) ICSID Convention)


Examples of Requests Manifestly Outside Jurisdiction

• Investor has the same nationality as host State• A State agency was not designated to ICSID by

the Member State• Investor is not a national of an ICSID Member

State• The BIT has not entered into force


39

Registration of a Request

• The Secretary-General must issue a notice of registration or refuse to register

• Registration process takes 18 days on average

• No appeal against the registration decision


See Annex 7 – Notice of Registration

Part IV:Constitution

of the Tribunal


Relevant Provisions

• ICSID Convention, Articles 12-16, 37- 40, 56-58

• ICSID Arbitration Rules 1-12


Constitution of the Tribunal - Process


43

Step 1• Determination of the number of arbitrators

and the method of their appointment

Step 2• Selection and appointment of Tribunal

members

Step 3• Acceptance of appointment and

constitution of the Tribunal

How Many Arbitrators

on a Tribunal?

• A sole arbitrator or any uneven number of arbitrators if the parties so agree (Art. 37)


Method of Appointment of Tribunal

45

Parties do not agree on a method -

Art. 37(2)(b)

Parties agree on a method -Art. 37(2)(a)


Parties Agree on a Method

46

Subsequent agreement of

the parties

Agreement exists at the time

of request(see treaty, law or

contract)

OR


Example of Agreement on Method

“Each party appoints one co-arbitrator, and the co-arbitrators appoint the third arbitrator, the President of the Tribunal. If the co-arbitrators fail to agree on a presiding arbitrator within 30 days, the Secretary-General of ICSID appoints the President.”


47

Parties Do Not Agree On a Method

• If no agreement on a method within 60 days of registration, either party may select the “Default Mechanism” under Article 37(2)(b) of the ICSID Convention– One arbitrator appointed by each Party– President of Tribunal appointed by agreement

of the parties


48

49

Party A• appoints an arbitrator, and • proposes a President

Party B• appoints an arbitrator, and • concurs in A’s proposal of President OR proposes a different President

Party A• concurs in B’s proposal of President OR refuses to concur on President

If no President in 90 days...• Either party may request that ICSID appoint under Article 38© 2015 by International Centre for Settlement of Investment Disputes.

Content may be reproduced for educational use with acknowledgement.

No Agreement (“Default Mechanism”)Article 37(2)(b) of the ICSID Convention

Selection and Appointment of Tribunal Members

• Parties are free to select anyone who meets the requirements under the ICSID Convention

• ICSID Chairman must appoint from the Panel of Arbitrators unless the parties agree otherwise


50

Requirements for Appointees

Qualifications:(Art. 14)

• Majority shall be nationals of States other than the State party to dispute and State of investors’ nationality

• Where the Tribunal consists of 3 members, a national of either of these States may not be appointed as an arbitrator by a party without the agreement of the other party to the dispute


51

Nationality:(Art. 39, Rule 1(3))

• High moral character• Recognized competence• Independent judgment

Cannot have:

2 Czech arbitrators2 Japanese arbitrators1 Czech arbitrator & 1 Japanese arbitrator

…unless parties agree Can have:

2 or 3 Swiss arbitrators (or any nationality other than Czech or Japanese)


Example: Dispute between a Czech company and Japan

Nationality of Arbitrators Article 39 of the ICSID Convention

53

Ballot (5 or more candidates)

If ballot is unsuccessful, appointment is made under

Article 38 of the ICSID Convention from the Panel of

Arbitrators


Appointment of Missing Arbitrators

If parties agree on a ballot candidate the

appointment is made by agreement of the parties

See Annex 8 – Sample ballot

ICSID Panel of Arbitrators

• Each Member State may designate 4 persons to the Panel

• The Chairman may designate 10 persons to the Panel

• Panel members serve for renewable, 6 year terms

• Most relevant to appointment under Articles 38 and 52 of the ICSID Convention


Acceptance of Appointment & Declaration – Constitution of the Tribunal

• ICSID seeks acceptance from each appointee (Arbitration Rule 5(2))

• Declaration of Arbitrator (Arbitration Rule 6):o To keep information confidential o To judge fairly as between the partieso Statement of relationship with parties or other

circumstance if neededo Continuing obligation to disclose any such relationship

or circumstance that arises subsequently


See Annex 9 – Declaration – Arb. Rule 6(2)

Constitution of Tribunal

The Tribunal is constituted when all arbitrators have accepted their

appointments


56

Arbitrators, Conciliators and ad hoc CommitteeMembers Appointed in ICSID Cases – June 30, 2015


57 5222 28 21

72

14

223

316

127

1645

16

101

17

596

0

100

200

300

400

500

600

700

North America(Canada, Mexico &

U.S.)

South America Central America &the Caribbean

Middle East &North Africa

Sub-Saharan Africa South & East Asia &the Pacific

Eastern Europe &Central Asia

Western Europe

Appointments by ICSID Appointments by the Parties (or Party-appointed Arbitrators)


58

Relevant Provisions

• ICSID Convention, Articles 57 & 58• ICSID Arbitration Rules 8 - 12

Disqualification of Arbitrators

Grounds for Disqualification - Article 57

• Manifest lack of the qualities in Article 14(1)o High moral charactero Recognized competence in law,

commerce, industry or financeo Reliability to exercise independent

judgment

• Nationality requirements not met


Who Decides the Proposal for Disqualification? Article 58 of the ICSID Convention

• The other members of the Tribunal in the absence of the arbitrator concerned (Arbitration Rule 9(4))

• The Chairman of the Administrative Council decides wheno Members are equally divided o Proposal to disqualify a sole arbitratoro Proposal to disqualify majority of arbitrators


See Annex 10 – Decisions on Disqualification


Challenge – Procedure TRIBUNAL IS CONSTITUTED

PROPOSAL TO DISQUALIFY FILED WITH ICSID SECRETARY-GENERAL

PROCEEDING SUSPENDED

PARTIES AND ARBITRATOR(S) CHALLENGED SUBMIT OBSERVATIONS

DECISION TAKEN

- By other Tribunal members in challenge to a minority of the Tribunal

- By Chairman of ICSID Administrative Council if Tribunal members are equally divided, or if challenge is to a sole arbitrator or majority of Tribunal

REJECT PROPOSAL

- Resume proceeding immediately

DISQUALIFY ARBITRATOR(S)

- Vacancy filled by same method as original appointment

- Resume proceeding after new arbitrator(s) accept their appointment


62

Part V:Commencement of Proceedings, First Session and

Procedural Order No. 1

Commencement of Arbitration

ICSID notifies parties of

arbitrators’ acceptance

Once Tribunal is constituted:

First advance payment

First Session held within 60 days

30-day limit to file Preliminary Objection

under Rule 41(5)

Tribunal is constituted

and proceeding

begins


Requests for Advances

• Advance payments requested periodically o Initial advance payment to be paid before

the First Session• Each party normally pays ½ of each advance

(Admin. & Fin. Reg. 14 (3)(d))• Put in a separate case fund• Used to pay the arbitrators fees and

expenses, ICSID Administrative fee, and other costs


Non-Payment of Advances Admin. & Fin. Reg. 14 (3)(d)


Either party should make required payment

within 30 days after request

After 15 more days: Secretary-General may move that Tribunal stay

the proceeding

6 months after stay: Secretary-General may

move that Tribunal discontinue the

proceeding

First Session of the Tribunal -Practical Considerations

To be held within 60 days from Tribunal constitution (unless otherwise agreed)

Date fixed by Tribunal in consultation with the parties and Secretary-General

Held in venue agreed by parties – (Washington, D.C. as default)

ICSID encourages parties to consider video or teleconference to reduce costs


First Session Considers Procedural Matters

• Parties are provided agenda and draft Procedural Order No. 1 for comments ahead of the session

• Main items discussed include: o Applicable arbitration ruleso Place of proceedingo Procedural calendaro Details concerning the written process


67

See Annex 11 - Draft Agenda and Annex 12 – Draft P.O.

Written Pleadings

• Normally two rounds of pleadings:Claimant’s MemorialRespondent’s Counter-memorial

Claimant’s ReplyRespondent’s Rejoinder

• Same structure for jurisdiction, merits and quantum phases



69

MERITS JURISDICTION

Possible Sequences

Memorial• Statement of the relevant facts• Statement of the law• Argument• All evidence a party plans to rely upon:

o Exhibitso Legal Authorities


Procedural Order No. 1

• Contains the parties’ agreements and the Tribunal’s decisions

• Point of reference throughout the proceeding

• May also include provisions on transparency and non-disputing party submissions


71

See Annex 12 - Draft Procedural Order No. 1

Transparency

Relevant Provisions

• ICSID Arbitration Rules 6(2), 15, 32(2), 37(2), 48(4)

• Administrative and Financial Regulations 22-23


Transparency

• Different provisions apply to:

oThe Centre

oTribunal Members

oParties


• Publish information on cases (Administrative and Financial Regulations 22 & 23)

• Must publish excerpts of awards (Article 48, ICSID Convention)

• Seek consent of the parties to publish records of proceedings, decisions, and the full award of concluded cases

74

Rules Applicable to the Centre


Snapshot of Case Details – ProceedingPoštová banka, a.s. and ISTROKAPITAL SE v. Hellenic Republic (ICSID Case No. ARB/13/8)

75

Snapshot of Case Details – MaterialsPoštová banka, a.s. and ISTROKAPITAL SE v. Hellenic Republic (ICSID Case No. ARB/13/8)


76

Snapshot of Case Details – Procedural DetailsPoštová banka, a.s. and ISTROKAPITAL SE v. Hellenic Republic (ICSID Case No. ARB/13/8)


77

Rules Applicable to Arbitrators

• Duty to keep all information confidential, including the contents of the award (Arbitration Rule 6(2))

• Deliberations take place in private and remain secret (Arbitration Rule 15)


Rules Applicable to the Parties

• No general requirement of confidentiality or transparency under ICSID Convention and Rules

• Release of case documents must not exacerbate the dispute

• Parties sometimes conclude confidentiality agreements


Open Hearings – Arbitration Rule 32(2)

• Unless either party objects, the Tribunal may allow third parties to attend or observe all or part of the hearings

• Subject to appropriate logistical arrangements

• The Tribunal establishes procedures for the protection of proprietary or privileged information


Non-disputing Parties


Relevant Provisions

• ICSID Arbitration Rule 37(2)

Who Can Be a Non-disputing Party?

• A person or entity that is not a party to thedispute – can include:

o A natural or juridical person

o An NGO

o REIO

o A State


Criteria to Allow a Non-disputing Party Submission (ICSID Arbitration Rule 37(2))

• In discretion of Tribunal which considers whether:

o The submission will assist in determination of a factual or legal issue by bringing a different perspective, particular knowledge or insight

o The submission addresses a matter within the scope of the dispute

o The non-disputing party has a significant interest in the proceeding


Procedure

• No timing specified in rules

• Tribunal must consult the parties on whether to allow non-disputing party submissions

• Parties may present their observations on the non-disputing party submission


What Are the Rights of a Non-disputing Party?

• To file a written submission on a matter within the scope of the dispute

• Submission may not disrupt the proceeding or unduly burden or unfairly prejudice either party

• No access to non-public documents/case records without consent of both parties

• Cannot attend closed hearing without party consent – Arbitration Rule 32(2)


Example of Non-Disputing Party Admission Philip Morris v. Uruguay (ARB/10/7)

Procedural Order No. 4 dated March 24, 2015

NDP Applicant: Pan American Health Organization (PAHO)

“The Tribunal believes that the Submission may be beneficial toits decision-making process in this case considering thecontribution of the particular knowledge and expertise of aqualified entity, such as PAHO, regarding the matters in dispute.It considers that in view of the public interest involved in thiscase, granting the Request would support the transparency ofthe proceeding and its acceptability by users at large.”

See Annex 13 – NDP decisions


86

Part VI:Other Procedures



88

ICSID Arbitration Rule 41(5)

Expedited Preliminary Objections -Manifest Lack of Legal Merit

Relevant Provisions

Manifest Lack of Legal Merit

• Allows early dismissal of claims that manifestly lack legal merit

• Applies to jurisdiction and merits

• Standard is high – the lack of legal merit must be obvious


89

See Annex 14– Decisions on Manifest Lack of Legal Merit


90

Procedure – Rule 41(5)

Tribunal is Constituted

Objection that a Claim is Manifestly Without Legal Merit

Written [and Oral] Submissions on the Objection

Tribunal Decides at the First Session or Shortly Thereafter

Decision Rejecting Objection or Partially Upholding

Objection

Proceeding Continues to Hear Claims That Were Not

Dismissed

Award- Case is Dismissed for Manifest Lack of Legal Merit

60 days or Other Period Agreed by

the Parties

30 Days

Example of Decision on Manifest Lack of Legal MeritMOL Hungarian Oil and Gas Company PLC v Croatia

(ARB/13/32) – Decision dated December 2, 2014

“Whatever the merits or demerits of the Respondent’ssubmissions […] it [is] impossible for the Tribunal to regardthe Respondent’s objections as sufficiently ‘clear andcertain’ to justify passing summary judgment on them now,at this preliminary stage, without full opportunity to assessthe treaty, contractual and other legal arguments, therelationship between this arbitration and the UNCITRALRules arbitration, or to establish in full the facts that arerelevant to a proper understanding of the acquisition andoperation of the Claimant’s investments in Croatia.”© 2015 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 91

Preliminary Objections Relevant Provisions

• ICSID Convention Article 41• ICSID Arbitration Rule 41


92

Preliminary Objections

• Objection to the jurisdiction of the Tribunal• Must be made as early as possible, but in any

event before the date of filing the Respondent’s Counter-Memorial

• Can be made even if the same objection was dismissed under Arbitration Rule 41(5)

• If the Tribunal finds that there is no jurisdiction, it renders an award


93

Example of an Award on JurisdictionPing An v. Belgium (ARB/12/29)

Award dated April 30, 2015• Two successive BITs between Belgium and China: 1986

BIT and 2009 BIT• Dispute crystallized while 1986 BIT was in force• Tribunal constituted under 2009 BIT• 2009 BIT did not deal with disputes arising before its

entry into force and notified under 1986 BIT• No express or implied inference could be made from

2009 BIT that it applied to pre-existing disputes– No Jurisdiction Ratione Temporis

© 2015 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 94


95

• ICSID Convention, Article 41• ICSID Arbitration Rule 41(3)

BifurcationRelevant Provisions

Bifurcation of Proceedings

• Tribunal decides whether to deal with a jurisdictional objection:

oas a preliminary question, or

o joined to the merits of the dispute


Criteria for Bifurcation

• Tribunal considers whether:

o The objection has substance (not frivolous)

o Bifurcation would materially reduce time & cost

o Bifurcation is impractical because jurisdiction and merits are so intertwined


Example of BifurcationTulip v. Turkey (ARB/11/28)

Decision on Bifurcation of November 2, 2012

Objection 3: The mandatory negotiation period was not respected“a. Objection 3 is not intimately linked to the merits and is capable of preliminary determination;b. if Objection 3 were successful, it could have the effect of disrupting the entire case […]; andc. procedural economy would be served by dealing with this objection prior to the merits, avoiding the possibility that the entire case is heard and the Tribunal then finding that a pre-condition to arbitration was not satisfied.”


A Bifurcated Proceeding is Often Included as an Alternative in the Procedural Calendar


99


100

• ICSID Convention, Article 47• ICSID Arbitration Rule 39

Provisional MeasuresRelevant Provisions

What Measures Can Be Requested?

• Measures to preserve the rights of a party• Conditions for granting measures:

oUrgencyoNecessity – Irreparable harmo Rights are in dispute (can be procedural

rights)


Who Can Request Provisional Measures?

• Either party or the Tribunal on its own initiative (Article 47 of ICSID Convention)

• Tribunal gives priority to consideration of request (Arbitration Rule 39(2))

• Each party is entitled to present its observations (Arbitration Rule 39(4))


When to Request Provisional Measures?

• Any time after the institution of the proceeding (Arbitration Rule 39(1))

• If request precedes tribunal constitution, the Secretary-General fixes time limits for party observations on the request, which are considered promptly by the Tribunal once constituted (Arbitration Rule 39(5))


Examples of Measures Granted

• Release of confidential information • Obtaining/preserving evidence• Securing financial guarantees• Stay of parallel domestic or arbitral

proceedings• Stay of execution of an administrative decision• Preventing prejudicial interference by one

party • Security for Costs



Production of Documents

Relevant Provisions

• ICSID Arbitration Rule 34

Timing• The Parties can request documents from each

other o Tribunal decides on contested requests for

documents

• Timing usually decided in Procedural Order No. 1

• The Tribunal may ask the parties to produce documents or other evidence at any stage of the case


How to Request Documents

• Include:o description of documents or categories of

documents requested o relevance and materiality to the caseo indication that the requesting party does

not possess the documents requestedo the basis on which to assert that the

other party has the documents


Examples of Objections to Production of Documents

• The category of documents sought is too broad

• Document is not relevant to the dispute• Document is protected by attorney-client

privilege• Document is in possession of third party

See Annex 15- IBA Rules on Taking of Evidence


108

Part VII:Oral Process


109

Oral ProcessRelevant Provisions


110

• ICSID Convention, Articles 62,63


Before the Hearing• Pre-hearing organizational meeting deals with

e.g.:o Daily Schedule, Order of proceedings and allocation

of timeo Procedure for open hearingso Sequestration of witnesses and experts

• Checklist of Preparation for Hearing, e.g.Request interpretation Request travel certificate from ICSID in support of visa

applicationsPrepare hearing bundles

See Annex 16 - Checklist for Hearing Preparation © 2015 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 111

The Hearing


112

Opening by moving party

Examination of witnesses and experts:

- Direct- Cross- Re-direct

Opening by responding party

Moving party leads its witnesses

Responding party leads its witnesses

Closing by moving party

Closing by responding party

Commerce Group Corp. and San Sebastian Gold Mines Inc. v. Republic of El Salvador (ARB/09/17), Hearing on Jurisdiction (CAFTA)

Preliminary Matters

113

The Renco Group, Inc. v. Republic of Peru (ICSID Case No. UNCT/13/1), Hearing on Preliminary

Objection (US-Peru FTA), September 2015Respondent’s Opening

114


Objection (US-Peru FTA), September 2015Claimant’s Opening


115


Objection (US-Peru FTA), September 2015Question from the Tribunal


116

Pac Rim Cayman LLC v. Republic of El Salvador (ARB/09/12), Hearing on Jurisdiction (CAFTA), May 2011

Example of Procedural Issue


117

Spence International et al. v. Republic of Costa Rica, (ARB/13/2), Hearing on Merits (CAFTA), April 2015

Direct Examination of Claimant’s Witness


118


Cross-Examination of Claimant’s Witness


119


Non-Disputing Party Presentation (El Salvador)


120


Claimant’s Closing


121


Respondent’s Closing


122

Part VIII: The Award or

Termination of the Proceedings-Settlement/Discontinuance



124

The Award

Relevant Provisions

• ICSID Convention, Article 48


Awards

• Three possible type of Awards:o Award declining jurisdictiono Award on the meritso Award embodying settlement of parties

• No partial award in the ICSID system


Preparation of the AwardArbitration Rules 46-47

• Rendered within 120 days after closing of the proceeding

o Possible 60-day extension • In writing • Signed by the members of the Tribunal who

voted for it• Any member may attach a concurring or

dissenting opinion to award


Content of the Award Arbitration Rule 47

• The dates and place of the sittings of the Tribunal• A summary of the proceeding• A statement of the facts as found by the Tribunal• The submissions of the parties• The decision of the Tribunal on every question

submitted to it, together with the reasons upon which the decision is based

• Any decision of the Tribunal regarding the cost of the proceeding


Rendering the Award Arbitration Rule 48

Upon signature by the last arbitrator, the Secretary-General:

• Authenticates the original text of the award and deposits it in the archives of the Centre

• Dispatches a certified copy of the award, indicating the date of dispatch


• Awards are final and binding

• Annulment – no appeal in local courts

• Member States must recognize monetary awards without further process

• Monetary award enforceable as a final judgment in any Member State

129

Features of ICSID Awards


Outcomes of Tribunal Awards –June 30, 2015


130

Award deciding that the claims are

manifestly without legal merit*

1%

Award declining jurisdiction

25%

Award dismissing all claims29%

Award upholding claims in part or in full

45%

Disputes Decided By Tribunals – June 30, 2015


131

Dispute decided by Tribunal

64%Dispute settled or

proceeding otherwise

discontinued36%

Discontinuance of the Proceeding -Grounds and Relevant Provisions


132

• On settlement or agreement on discontinuance by the parties

Arbitration Rule 43

• On request of a party if there is no objection by the other party

Arbitration Rule 44

• For failure of the parties to actArbitration Rule

45

• For failure of the parties to pay advances

Regulation 14(3)(d) and (e)

Legal Effect of Discontinuance Order

• An order noting discontinuance is not an “award”

• The proceeding is no longer pending and cannot be “resumed”

• No res judicata effect on the subject of the dispute

• Claimant may resubmit its claims to ICSID



134

Part IX:Costs of Arbitration

Costs of ArbitrationRelevant Provisions

• ICSID Convention, Article 61

• ICSID Arbitration Rule 28

• Administrative and Financial Regulation 14

• ICSID Schedule of Fees


136

Costs of Arbitration 3 Components


Parties’ expenses

Arbitrators’ fees and expenses

Centre’s administrative

charges

Parties’ Expenses

• Costs of legal representation

• Witnesses

• Experts

• Any other cost relating to the presentation of a party’s case


Arbitrator Fees and Expenses

• Arbitrator fees: 3,000 USD per day of meeting or other work performed in connection with proceeding

• Arbitrators also reimbursed for:o Direct expenses reasonably incurredo Travel expenseso Subsistence allowances (when traveling)


• Administrative fee of 32,000 USD, charged on annual basis and usually shared by parties (16,000 USD each)

• Includes:oHearing Facilities at the World BankoServices of the Tribunal Secretary and

case teamoFinancial Administration of the case

139

ICSID Administrative Charges



140

Tribunal has Discretion to Allocate Costs

24%

24%

52%

Costs Awards since 2009

Cost Awards in favor ofClaimant(s)

Cost Awards in favor ofRespondent

Each Party Bears Own Costs

Part X:Post-Award Remedies


ICSID System is Self-Contained

• No domestic court review of decisions or awards

• Post-award remedies under the ICSID Convention:


Article 49(2)

Rectification/ Supplementary

Decision

Article 50

Interpretation

Article 51

Revision

Article 52

Annulment

Rectification/Supplementary Decision of AwardsArticle 49(2) of the ICSID Convention

143

• The Tribunal has omitted to decide a question• To rectify clerical or arithmetic error

When?

• No later than 45 days after the award is renderedTime Limit

• The Tribunal that rendered the awardWho decides?

• No stay of enforcement during the rectification periodStay of enforcement

• Rectified decision becomes part of the awardDecision


InterpretationArticle 50 of the ICSID Convention

144

• When there is a dispute between the parties as to the meaning or scope of the awardWhen?

• NoneTime Limits

• The Tribunal that rendered the award (or new Tribunal if it cannot be reconstituted)Who decides?

• Stay of enforcement may be granted during the proceedingStay of enforcement

• Interpretation decision becomes part of the awardDecision


Revision Article 51 of the ICSID Convention

145

• On discovery of fact of such a nature as to decisively affect the award, if it was unknown to the Tribunal and the applicant (who was not negligent)

When?

• 90 days after the discovery of the fact• Must be within 3 years after rendering the award

Time limits

• The Tribunal that rendered the award (or new Tribunal if it cannot be reconstituted)Who decides?

• Stay of enforcement may be granted during the proceedingStay of enforcement

• Revision decision becomes part of the awardDecision


Annulment Article 52 of the ICSID Convention

146

• 5 grounds for annulment, Article 52(1)(a) to (e)When?

• 120 days after the award is rendered• In case of corruption of a Tribunal member, 120 days after

discovery and within 3 years of awardTime limits

• Ad hoc Committee of 3 members appointed from Panel of Arbitrators

Who decides?

• Stay of enforcement may be granted during proceedingStay of enforcement

• Decision on annulment can annul award in full or in partDecision


See Annex 17 – Decisions on Annulment

Annulment - Grounds

• The Tribunal was not properly constituted

• The Tribunal has manifestly exceeded its powers

• Corruption on the part of a Tribunal member

• A serious departure from a fundamental rule ofprocedure

• The award fails to state the reasons on which it isbased


Annulment – Ad hoc Committee

• The Chairman of the Administrative Council appoints an ad hoc Committee of 3 persons from the Panel of Arbitrators

• Nationality restrictions apply


Stay of Enforcement in Annulment ProceedingsArticle 52(5) of the ICSID Convention

149

• When a party wishes to stay the enforcement of an obligation in the awardWhen?

• The Secretary General provisionally before ad hoc Committee is constituted and ad hoc Committee during the proceeding

Who may stay enforcement?

• May be requested in Application or at any time during the proceeding

Time limits

• Request must specify the circumstances that require the stay of enforcement

• Each party is given the opportunity to file observationsProcedure

• Stay of enforcement may be subject to bond or other securityCondition


Annulment is not AppealArticle 53 of the ICSID Convention

• Limited & extraordinary remedy

• Maintains integrity of the process

• Can annul the original award in its entirety orin part

• Either party may resubmit the dispute to a newTribunal


See Annex 18 – Background Paper on Annulment

Annulment Outcomes (June 30, 2015)


Part XI: Recognition and

Enforcement of Awards


Recognition and Enforcement of Awards Articles 53 and 54 of the ICSID Convention

• ICSID Awards are binding and parties must comply with them

• Awards are treated as final judgments of national courts of Member States

• Pecuniary obligations can be enforced in any Member State

• National courts proceed on the basis of a certified copy of the award and cannot review the award

• Limitation: Rules on State immunity from execution apply


Compliance with ICSID Awards

• Compliance is important to maintain confidence in the process

• Could be considered by providers of political risk insurance

• Non-compliance is a breach of ICSID Convention and could lead to a State-to-State dispute for treaty violation before the ICJ


Features of the ICSID website www.worldbank.org/icsid


http://www.worldbank.org/icsid

Search ICSID Cases Database


Search ICSID Arbitrators, Conciliators and Committee Members (with curricula vitae)


View Feature Videos of Arbitrators and Public Hearing Videos


View Other Resources, e.g. ICSID Caseload Statistics


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ICSID 1818 H Street, NW

Washington, DC 20433Tel: (202) 458-1534Fax: (202) 522-2615

Email: [email protected]/icsid

161
mailto:[email protected]://www.worldbank.org/icsid

An Introduction to ICSID Process · 2017. 7. 13. · ICSID Proceedings 14 Convention Both disputing...

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