Annulment Proccess of a an ICSID Award

7/26/2019 Annulment Proccess of a an ICSID Award

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Post-award remedies in ICSID

arbitration- with a focus on ICSID annulment process -

Dan PetrachePhD Candidate - Private International LawFaculty of Law, University of Bucharest


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he award ! ri"unal#s last decision whichdisposes of the case$

he award is rendered when ICSID dispatchescerti%ed copies of the award to the parties&'rticle () of the ICSID Convention, 'r"itration*ule (+&

he award is %nal and "indin. and may "ereco.ni/ed and enforced in any ICSID 0em"erState1

The award


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2o appeal, "ut 3 means of remedy4 *ecti%cation &art1 ()

Supplementary Decision &art1 ()

Interpretation &art1 35

*evision &art1 36

'nnulment &art1 3

Uni7ue feature of ICSID4 autonomous nature &localCourts have no involvement in the ICSID

proceedin.s

!8 2o role of the local courts in what concerns theremedies

Five post-award remedies


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'rt1 () & of the Convention4

The Tribunal upon the request of a party madewithin 45 days after the date on which the award

was rendered may after notice to the other partydecide any question which it had omitted todecide in the award, and shall rectify anyclerical, arithmetical or similar error in theaward.

Supplementary decision orrectifcation (I)


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Conditions to "e ful%lled when su"mittin. are7uest for a supplementary decision 9recti%cation within the (3 days term4identifyin. the award$

indicatin. the date of the re7uest$

detailin. the 7uestion the ri"unal omitted todecide and9or the error that it see:s to rectify$and

payin. a lod.in. fee of US;65,5551

Supplementary decision orrectifcation (II)


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the re7uest is resolved "y the same ri"unalthat rendered the award$

&usually no need for a hearin.$

If a party su"se7uently wishes to resort toother remedies under the Convention, the

time limits for such remedies are measuredfrom the date on which the decision wasissued1

Supplementary decision orrectifcation (III)


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'rt1 35 &6 of the Convention4If any dispute shall arise between the parties asto the meaning or scope of an award, either

party may request interpretation of the award

by an application in writing addressed to theSecretary-General.

Interpretation o the award (I)


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Conditions to "e ful%lled "y the re7uest forinterpretation4identify the award$

indicate the date of the application$

detail the precise points in dispute$ and"e accompanied "y a lod.in. fee of US;65,5551

2o time limit for %lin. an application for

interpretation1

Interpretation o the award (II)


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It would "e ade7uate that the same ri"unal resolvesthe re7uest for interpretation$

If the ri"unal cannot "e reconstituted with the

ori.inal mem"ers, the parties are invited toconstitute a new ri"unal &same num"er ofar"itrators usin. the same method as the ori.inalone$

the conduct of an interpretation proceedin. is similarto the conduct of an ar"itration - the decision oninterpretation "ecomes part o the award!

Interpretation o the award (III)


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'rt1 36 of the Convention4ither party may request re!ision of the award by an

application in writing addressed to the Secretary-General on the ground of discovery of some fact

of such a nature as decisively to aect theaward, pro!ided that when the award was renderedthat fact was un"nown to the Tribunal and to theapplicant and that the applicant#s ignorance of thatfact was not due to negligence.

"evision (I)


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Conditions - the re7uest for revision must4 identify the award$

indicate the date of the application$

detail the chan.e sou.ht in the award$

descri"e the new fact that decisively a


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It would "e ade7uate that the same ri"unalresolves the re7uest for interpretation$

If the ri"unal cannot "e reconstituted with the

ori.inal mem"ers, the parties are invited toconstitute a new ri"unal &same num"er ofar"itrators usin. the same method as the ori.inalone$

the conduct of a revision proceedin. is similar to theconduct of an ar"itration - the decision on revision"ecomes part o the award!

"evision (III)


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'rt1 3 &6 of the Convention4ither party may request annulment of the award byan application in writing addressed to the Secretary-General on one or more of the following grounds$

that the Tribunal was not properly constituted%that the Tribunal has manifestly e&ceeded its powers%

that there was corruption on the part of amember of the Tribunal%

that there has been a serious departure from a

fundamental rule of procedure% orthat the award has failed to state the reasons

on which it is based.

#nnulment o the award


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he application must4 identify the award to which it relates$

Indicate the date of the application$

state in detail the .rounds on which it is "ased

pursuant to 'rticle 3&6 of the ICSID Convention$and

"e accompanied "y a ;3555 fee for lod.in. theapplication1

Conditions or the annulmentre$uest


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he re7uest for annulment must "e %ledwithin 65 days after the date on which theaward &or any supplementary decision orcorrection was rendered1

=>ception4 in the case of corruption on thepart of a ri"unal mem"er, the applicationmay "e %led within 65 days after discovery

of the corruption, and in any event withinthree years after the date on which theaward was rendered1

Timerame constraints


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'ould a party submit an application forannulment concerning a decision issued priorto the award, e.g. a decision on a challenge,a pro!isional measure, or a decisionupholding (urisdiction)

%&'STI


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'ppointed "y the Chairman of the'dministrative Council$

'lways composed of three ar"itrators$

*d hoc Committee mem"ers are appointedonly from the ICSID Panel of 'r"itrators$

#ppointment o theAd-HocCommittee


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he function of an ad hoc Committee4 tore?ect the application for annulment or toannul the award or a part thereof on the"asis of the .rounds enumerated in 'rticle31

Its function is not to rule on the merits of

the parties# dispute &even if it decides toannul the award1

Function o theAd-HocCommittee


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he mem"er cannot have "een a mem"erof the ri"unal that rendered the award$

he mem"er cannot have the samenationality as any of the ri"unal#s mem"ers

he mem"er cannot have the same

nationality as the disputin. parties andcannot have "een desi.nated to the Panel"y the host state or "y investor#s State1

Specifc re$uirements on themembers o the ad hoc Committee


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Before the name of the candidate is proposedto the parties, the Centre4researches whether there are any con@icts of interest

and, &if none are found

's:s the candidate to con%rm that he9she is free ofany con@icts, has time to dedicate to the proceedin.,and is willin. to act as a mem"er of the ad hocCommittee

It ta:es A- wee:s since the annulmentapplication to appoint the ad-hoc Committee1

#ppointment the ad hocCommittee


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'pplicant vs1 *espondent &*espondent on'nnulment

he 'r"itration *ules apply, mutatis mutandis,to the proceedin. "efore the ad hocCommittee1

'ssumption that the parties# procedurala.reements in the ori.inal proceedin. willremain the same in the annulment proceedin.

Procedure


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2onetheless, the ad hoc Committee usually convenes a %rstsession with the parties to discuss procedural matters &it is notuncommon to a.ree on diampleconcernin. the applica"le rules, procedural lan.ua.e and place

of proceedin.s1 In most cases, the parties a.ree on a timeta"le involvin. two

rounds of pleadin.s on the application for annulment &0emorial,Counter-0emorial, *eply and *e?oinder and an oral hearin.1

he time allowed for written pleadin.s rarely e>ceeded ( monthsper party for the %rst round and months per party for thesecond round1

Procedure (II)


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Unli:e the ri"unal proceedin.s, the'pplicant is solely responsi"le for ma:in. alladvance payments re7uested "y ICSID in anannulment proceedin., unless the partiesa.ree otherwise1

he Costs of Proceedin. for annulments

avera.e US;35,555 (55,5551

Costs


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'n 'pplicant may in its application for annulment, or eitherparty may at any time durin. the proceedin., re7uest astay of enforcement of all or part of the ri"unal award1

' Committee may terminate a stay if the party re7uestin.

the stay of enforcement has failed to ful%ll a condition forthe stay ordered "y the Committee &e1.1, the provision ofade7uate %nancial security in respect of the amount dueunder the award1

If a stay is not terminated durin. the proceedin., itterminates automatically upon the issuance of the ad hocCommittee#s %nal decision on annulment

Stay o enorcement o theaward


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he hearin. lasts 6- days$

It is usually limited to the parties# oral

ar.uments and, in some cases, toe>amination of le.al e>perts whose opinionswere su"mitted "y the parties in theannulment proceedin.1

factual witnesses do not usually have anyrole in the process

*earin+ and post-hearin+ phase


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he ad hoc Committee invites the parties to %lesu"missions on costs and sometimes also to %lepost-hearin. "riefs1

he ad hoc Committee closes the proceedin.once the presentation of the annulment case isconcluded and the Committee has madepro.ress in the deli"erations1

It must issue the decision on annulment within65 days from the date of closure1

*earin+ and post-hearin+ phase


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he proceedin. ends with the ad hocCommittee#s decision on annulment1

he Committee may4 re?ect all .rounds for annulment, meanin. that the award

remains intact$

uphold one or more .rounds for annulment in respect of a

part of the award, leadin. to a partial annulment$

uphold one or more .rounds for annulment in respect of

the entire award, meanin. that the whole of the award isannulled$ or

e>ercise their discretion not to annul notwithstandin. thatan error has "een identi%ed1

The decision on #nnulment(I)


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he proceedin. may also "e discontinued"efore the Committee issues a %naldecision1

*easons for discontinuance4the parties a.ree on a settlement$

a party does not o"?ect to the other party#sre7uest for discontinuance, due to nonpayment ofthe advances re7uested "y ICSID to cover the

Costs of Proceedin.$the parties fail to ta:e any steps in the

proceedin. durin. si> consecutive months1

The decision on annulment(II)


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Is not an award !8 not su"?ect to anyfurther annulment proceedin.$

it is e7uated to an award for purposes of its"indin. force, reco.nition and enforcement$

he decision must contain the elements

re7uired in an award

Decision on annulment vs!award


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Should the ad-hoc Committee deal with allthe 7uestions raised in the applicationEone ad hoc Committee has opined that, once an

award is annulled in full on any .round, it is

unnecessary to e>amine whether other .rounds mayalso lead to annulment &Sempra Case, para1 +

ther ad hoc Committees e>amined all .roundsraised, even where one of these .rounds warrantedfull annulment &*mco I, para1 6A$ +lc"ner I, para1

+

%uestion


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the award or a part thereof "ecomes a nullity, meanin.that the "indin. force of the annulled portion of theaward is terminated$

the decision on annulment does not replace the awardor su"stitute any of the reasonin. in the award$

' party is entitled to re7uest resu"mission of thedispute "y a newly constituted ri"unal to o"tain a new

award concernin. the same dispute followin.annulment of the ori.inal award &re7uest forresu"mission

'ects o annulment


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annulment was desi.ned purposefully toconfer a limited scope of review whichwould safe.uard a.ainst violation of thefundamental principles of law .overnin. the

ri"unal#s proceedin.s1

he remedy has thus "een characteri/ed as

one concernin. Gprocedural errors in thedecisional processH rather than an in7uiryinto the su"stance of the award1

Scope o the annulmentmechanism


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he .rounds listed in 'rticle 3&6 are the only .rounds onwhich an award may "e annulled$

G'laimants and espondent agree that an ad hoc 'ommitteeis not a court of appeal and that its competence e&tends

only to annulment based on one or other of the groundse&pressly set out in *rticle 5 of the I'SI/ 'on!ention.H -0i!endi I, para1 A1

The role of the 'ommittee is con1ned to the grounds of

annulment in *rticle 5 of the I'SI/ 'on!ention, and asnoted abo!e, even if the Tribunal erred in law, thiswould not be a ground for annulment.2 - nron 'ase,para1 1

,imited +rounds orannulment


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'nnulment is an e>ceptional and narrowlycircumscri"ed remedy and the role of an ad hocCommittee is limited1

3It is not contested by the parties that theannulment re!iew, although ob!iously important,is a limited e&ercise, and does not pro!ide for anappeal of the initial award.2 - ussein 2uaman

Soufra:i v1 United 'ra" =mirates, Decision of thead hoc Committee on the 'pplication for'nnulment of 0r1 Soufra:i, para1 51

,imited role o theCommittee


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o appeal no review on the merits.

3The law applied by the Tribunal will be e&aminedby the ad hoc 'ommittee, not for the purpose of

scrutiniing whether the Tribunal committederrors in the interpretation of the requirements ofapplicable law or in the ascertainment ore!aluation of the rele!ant facts to which such law

has been applied. Such scrutiny is properly thetas" of a court of appeals, which the ad hoc'ommittee is not.2 - 'mco Case, para1 1

The Committee is no court oappeal


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GIt is a.reed "y all that 'rticle 3 does notintroduce an appeal facility "ut only a facilitymeant to uphold and stren.then the inte.rity ofthe ICSID process1 In the reaty, the possi"ility of

annulment is in this connection "ased on speci%cand limited .rounds1H 0i!endi II 'ase, para. 41

G'ven the most evident error o act in an

award is not in itsel a +round orannulment1H - 'onsortium .6.'.'. !. +ingdomof 7orocco,para. .

The Committee is no court oappeal (II)


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'd hoc Committees should e>ercise their discretion not todefeat the o"?ect and purpose of the remedy or erode the"indin. force and %nality of awards

3*n ad hoc 'ommittee retains a measure of discretion in

ruling on applications for annulment. To be sure, itsdiscretion is not unlimited and should not be e&ercised tothe point of defeating the ob(ect and purpose of the remedyof annulment. It may, howe!er, refuse to e&ercise itsauthority to annul an award where annulment is clearly not

required to remedy procedural in(ustice and annulmentwould un(usti1ably erode the binding force and 1nality ofI'SI/ awards.2 - 0aritime International 2ominees=sta"lishment v1 *epu"lic of Juinea, para1 (165

The Committee should protectthe e/ects o the award


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Gan ad hoc committee has a certain measure ofdiscretion as to whether to annul an award, e!en if anannullable error is found... *mong other things, it isnecessary for an ad hoc committee to consider thesigni1cance of the error relati!e to the legal rights of

the partiesH &Kivendi I, para1 AA1

G*n ad hoc 'ommittee should not decide to annul anaward unless it is con!inced that there has been a

substantial !iolation of a rule protected by *rticle 5.2Patric: 0itchell v1 Democratic *epu"lic of the Con.o,para1 6)1

The Committee should protectthe e/ects o the award


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'rticle 3 should "e interpreted in accordancewith its ob0ect and purpose neither narrowlynor broadly

3application of the paragraph demands neither anarrow interpretation, nor a broad interpretation,but an appropriate interpretation, ta"ing intoaccount the legitimate concern to surround thee&ercise of the remedy to the ma&imum e&tent

possible with guarantees in order to achie!e aharmonious balance between the !ariousob(ecti!es of the 'on!ention.2 -loc:ner, para1 1

Interpretation o the annulmentmechanism (I)


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an ad hoc Committee has discretion withrespect to the e1tent o an annulment i!e!either ull or partial!

38here a ground for annulment is established, it isfor the ad hoc committee, and not the requestingparty, to determine the e&tent of the annulment. Inma"ing this determination, the committee is notbound by the applicant#s characterisation of its

request, whether in the original application orotherwise, as requiring either complete or partialannulment of the award.2- 0i!endi I, para1 A)1

'1tent o the annulment


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a Improper Constitution of the ri"unal$" 0anifest e>cess of powers$

c Corruption$

d Serious departure from a fundamental ruleof procedure$

e Failure to state reasons$

)0ost invo:ed4 ", d and e1

2rounds or annulment


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Situations envisa.ed4 a departure from the parties#a.reement on the method of constitutin. the ri"unal or anar"itrator#s failure to meet the nationality or otherre7uirements for "ecomin. a mem"er of the ri"unal$

ri"unals as: the parties whether they have any o"?ection tothe constitution of the ri"unal or to any individual mem"erdurin. the ri"unal#s %rst session dealin. with proceduralmatters$

If a ri"unal decides that it has "een properly constitutedfollowin. an o"?ection "y a party, that party must await theri"unal#s award "efore %lin. an application for annulmenton this .round1

Improper Constitution o theTribunal


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he tri"unal went "eyond the scope of theparties# ar"itration a.reement, decidedpoints which had not "een su"mitted to it,or failed to apply the law a.reed to "y the

parties1

0ethodolo.ical approaches4a two-step analysis determinin. whether there was an e>cess of

powers and, if so, whether the e>cess was GmanifestHa prima facie test, consistin. of a summary e>amination to

determine whether any of the alle.ed e>cesses of power could"e viewed as Gmanifest1H

3aniest e1cess o powers

3 i


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wo interpretations of the concept4 an e>cess that is o"vious, clear or self-evident,

and which is discerna"le without the need for anela"orate analysis of the award &ma?ority#s

interpretation$some ad hoc Committees have interpreted the

meanin. of GmanifestH to re7uire that the e>cess"e serious or material to the outcome of the case1

3aniest e1cess o powers(II)


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'd hoc Committees have held that there may"e an e>cess of powers if a ri"unal incorrectlyconcludes that it has 0urisdiction when inact 0urisdiction is lac4in+, or when the

ri"unal e1ceeds the scope o its0urisdiction1

It has "een reco.ni/ed, in the inverse case,

that a ri"unal#s re?ection of ?urisdiction when?urisdiction e>ists also amounts to an e>cessof powers1 0i!endi I, para1 +A1

3'P "elatin+ to 5urisdiction


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a ri"unal#s failure to apply the proper lawcould constitute a manifest e>cess ofpowers, "ut that erroneous application ofthe law could not amount to an annulla"le

error, even if it is manifest1

there is no "asis for an annulment due to an

incorrect decision "y a ri"unal, a principlethat has "een e>pressly reco.ni/ed "ymany ad hoc Committees1

3'P "elatin+ to the #pplicable,aw


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Some ad hoc Committees have concluded that.ross misapplication or misinterpretation of thelaw may lead to annulment Sempra Case,para1 6A(1

thers have found that such an approachcomes too close to an appeal1 7I9 Case,paras1 315 and 315(1

there is a %ne line "etween failure to apply theproper law and erroneous application of the law

3'P "elatin+ to the #pplicable,aw


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the ar"itrator is re7uired to si.n adeclaration that he or she Gshall not acceptany instruction or compensation with regardto the proceeding from any source e&cept

as pro!ided in the I'SI/ 'on!ention1H

'n ar"itrator#s conduct in "reach of that

declaration can thus lead to annulment ofan award1

Corruption o a Tribunal 3ember


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Mide connotation &however, it e>cludesri"unal#s failure to o"serve ordinaryar"itration rule$

Fundamental rule of procedure ! principleof procedure$

his .round is concerned with theinte+rity and airness o the arbitralprocess1

Serious Departure rom aFundamental "ule o Procedure


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=>amples of fundamental rules of procedureidenti%ed "y ad hoc Committees4 the e7ual treatment of the parties$

the ri.ht to "e heard$

an independent and impartial ri"unal the treatment of evidence and "urden of proof$

deli"erations amon. mem"ers of ri"unal1

Some ad hoc Committees have re7uired that thedeparture have a material impact on the outcomeof the award for the annulment to succeed1

Serious Departure rom aFundamental "ule o Procedure (II)


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he re7uirement to state reasons is intended toensure that parties can understand the reasonin. ofthe ri"unal ! the reader can understand the factsand law applied "y the ri"unal in comin. to itsconclusion1

GinsuNcientH and Ginade7uateH reasons could result inannulment Soufra"i Case, paras1 6-6A1

GfrivolousH and GcontradictoryH reasons are e7uivalentto no reasons and could ?ustify an annulment *7':Case, para1 ), +locner I, para1 66A1

Failure to State the "easons onwhich the #ward is 6ased


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Should a ri"unal fail to address a 7uestion,is this .round of annulment &seriousdeparture from a fundamental rule ofprocedure applica"leE

%uestion


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'ron Broches &drafted the ICSID Convention andserved as Secretary-Jeneral of ICSID for thirteenyears4;; *nnulment is an essential but e&ceptional remedy. It

is well understood that the grounds listed in *rticle 5

are the only grounds on which an award may beannulled. ?owe!er, the application of that paragraphplaces a hea!y responsibility on the ad hoc committeeswhich must rule on requests for annulment. 6or e&ample,in relation to a Tribunal#s alleged 3e&cess of powers2 they

may ha!e to ma"e 1ne distinctions between failure toapply the applicable law, which is a ground forannulment, and incorrect interpretation of that law, whichis not.

Conclusion


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8ith respect to allegations that a tribunal#s failure todeal with questions submitted to it constitutes aserious departure from a fundamental rule of

procedure, or failure to state the reasons on which theaward is based, they will ha!e to assess their

nature and potential eAect, had they been dealt with,on the tribunal#s award. They are also li"ely to becalled on to gi!e speci1c meaning to such terms as3manifest,2 3serious departure2 and 3fundamentalrule of procedure2 in (udging the admissibility ofclaims for annulment.BB

Conclusion

Annulment Proccess of a an ICSID Award

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