Introduction
The International Centre for the Settlement of Investment Disputes, or ICSID for short, was established by the World Bank on October 14, 1966, under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (usually referred as the "ICSID Convention" or "Convention"). Its primary purpose is to provide a facility for arbitration and conciliation over investment disputes between States and nationals of other States. The ICSID is located in the World Bank headquarters in Washington, DC.
The main purpose to the creation of the Convention was to encourage investment worldwide by private investors into States by removing one of the major stumbling blocks, the lack of protection of investments, by balancing the interests of the investors and the host State. The other purpose of the Convention was to standardize the procedure to arbitration and conciliation, previously done - and still done, in many cases - on an ad-hoc basis. The ICSID itself is a framework for arbitration and conciliation; it is not a tribunal in and of itself, such as the Iran-US Claims Tribunal.
Structure
The ICSID contains an Administrative Council and a Secretariat, led by a Chairman and a Secretary-General respectively. Together, they maintain two "Panels" (lists) of conciliators and arbitrators. Members of these panels are "of high moral character and recognized competence in the fields of law, industry or finance, who may be relied upon to exercise independent judgment"; these lists serve as a starting point for the selection of arbitrators and conciliators (Article 14). While parties in dispute are not limited to these lists, the Chairman and the Secretary-General, however, are.
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Administrative Council
Led by the Chairman of the Administrative Council (who is always the President of the World Bank), the Administrative Council is responsible for the adoption of (a) "administrative and financial regulations" of ICSID; (b) rules of procedure for the "institution of conciliation and arbitration proceedings" and (c) the rules of procedure for conciliation and arbitration (Article 6).
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Secretariat
The Secretariat consists of a Secretary-General and one or more Deputy Secretaries-General. The Secretary-General of ICSID is the legal representative of ICSID. As its principle officer, the Secretary-General is responsible for ICSID's administration (Article 11).
ICSID Jurisdiction
Article 25 of the Convention outlines ICSID's jurisdiction:
25(1) The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. When the parties have given their consent, no party may withdraw its consent unilaterally.
25(2) "National of another Contracting State" means:
(a) any natural person who had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration as well as on the date on which the request was registered pursuant to paragraph (3) of Article 28 or paragraph (3) of Article 36, but does not include any person who on either date also had the nationality of the Contracting State party to the dispute; and
(b) any juridical person which had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration and any juridical person which had the nationality of the Contracting State party to the dispute on that date and which, because of foreign control, the parties have agreed should be treated as a national of another Contracting State for the purposes of this Convention.
25(3) Consent by a constituent subdivision or agency of a Contracting State shall require the approval of that State unless that State notifies the Centre that no such approval is required.
25(4) Any Contracting State may, at the time of ratification, acceptance or approval of this Convention or at any time thereafter, notify the Centre of the class or classes of disputes which it would or would not consider submitting to the jurisdiction of the Centre. The Secretary-General shall forthwith transmit such notification to all Contracting States. Such notification shall not constitute the consent required by paragraph (1).
ICSID's jurisdiction is extremely narrow. In terms of subject matter, ICSID will only cover disputes over investments and nothing else. While the Convention has not defined "investment" explicitly, there hasn't really been much controversy over this. Basically, ICSID will permit proceedings if both parties request it; the assumption is that the parties, at least, know an investment dispute when they see it.
Secondly, ICSID will only cover disputes between States and nationals of other States; ICSID will not normally arbitrate disputes between a State and a company that is a national of the same State (e.g., a company incorporated in the same State). There are some exceptions, however, particularly with companies that are foreign-controlled (i.e., controlled by a company of another State and incorporated in the host State because of law and/or convenience), so this isn't the hard and fast rule.
ICSID's jurisdiction, however, is made extremely narrow by the level of consent needed. There are two levels of consent required before proceedings can occur: consent of the States and consent between the parties in the dispute; without either, ICSID simply has no jurisdiction.
State Ratification
The first level of consent required before a dispute can be submitted to ICSID's jurisdiction is consent between the States through ratification of the Convention. States that have not ratified the Convention cannot submit any disputes to the ICSID. However, explicit consent must be obtained from each State with every new dispute, as notice of ratification is not considered sufficient permission. Typically, consent without notice is obtained through the form of separate bilateral investment treaties between States; e.g., the NAFTA (North American Free Trade Agreement) contains clauses that refer investment disputes to ICSID arbitration.
As of 2005, there are 155 countries which have ratified the Convention.
Party Ratification
After State consent is obtained, there must additionally be consent by the parties to submit the investment dispute to ICSID. This consent must be obtained in written form; these are typically found in concession agreements made between the parties during the initial formation of a contract. If there are bilateral investment treaties between the States involved that specify the use of ICSID arbitration in investment disputes, then consent between the parties in dispute is not necessarily needed.
The real snag that comes up are with companies that are locally incorporated but are foreign-controlled; this happens most often within States that require incorporation within its State in order to award contracts. A hypothetical example: Venezuela requires government contracts to be awarded only to companies that are incorporated in Venezuela and a British company incorporates its subsidiary in Venezuela in order to win the contract). Holiday Inns SA, Occidental Petroleum et al. v. Government of Morocco (most commonly abbreviated to Holiday Inns v. Morocco) established within ICSID that locally incorporated companies under foreign control may be considered a company of the controlling State in limited and specific circumstances. This is known as the "foreign-control" clause.
In a trait peculiar to ICSID and not to other international tribunals, a dual national, whether a company or person, may not bring a dispute to ICSID.
ICSID Procedures
Either party in an investment dispute may request for arbitration or conciliation; the Secretary-General must register the request unless the dispute falls outside ICSID jurisdiction. Of the two, arbitration has been most often requested. The ICSID is unique as being a delocalized forum; typically consent to ICSID arbitration is presumed to exclude all other remedies, including those by local courts. The Convention binds all ratifying States to treat ICSID decisions as if coming from a State's highest court of law.
A particularly unique factor to the ICSID is its determination of competence. The Convention binds the parties submitting their dispute into accepting ICSID's competence and any question otherwise will be judged/determined from within; i.e., the Conciliation Commissions and Arbitration Tribunals determine whether or not they themselves are competent to conciliate/arbitrate. This is primarily to effect ICSID's independence from any national court of law.
With no appeal and no way to interfere the process, there is a strong presumption toward quick results and binding settlements. Which is generally what most private parties like in such matters.
Conciliation
There have been very few conciliation requests made to ICSID; only a handful have made it as far as the creation of a Conciliation Commission. A Conciliation Commission is made up of either one commissioner or an odd number (usually three) as agreed upon by the parties. The choice of commissioners fall upon the parties as well; typically one commissioner is chosen by each party and the third commissioner is chosen by the two commissioners, or through another method to ensure impartiality. Should either party fail to appoint a commissioner or cannot decide upon the third commissioner, the decision is left to the Chairman of ICSID, who may select a commissioner or commissioners from their Panel.
Arbitration
The majority of dispute settlement requests to ICSID are in the form of arbitration. At the request of either party, an Arbitration Tribunal may be established, typically made up of three arbitrators (though this may vary depending on the agreement between the parties). Like the Conciliation Commissions, typically an arbitrator is chosen by each party and the third is chosen by either by agreement of both selected arbitrators, the agreement of both parties, or by ICSID. In addition, the Chairman of the Administrative Council is empowered to appoint additional arbitrators so that the tribunal does not contain a majority of arbitrators that are nationals of either State in the dispute.
The Arbitration Tribunal's powers are limited in determining on which law can be applied to the dispute. They are bound to Article 45 of the Convention:
45(1) The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable.
45(2) The Tribunal may not bring in a finding of non liquet on the ground of silence or obscurity of the law.
45(3) The provisions of paragraphs (1) and (2) shall not prejudice the power of the Tribunal to decide a dispute ex aequo et bono if the parties so agree.
Briefly put, they are bound to follow the law that the parties agree upon, and in the absence of such agreement (very rare), they are bound to follow the law of the Contracting State. Typically the parties will hash out an agreement on what law to use, either a combination of a specific State's law with international law principles thrown in, or use a law from another State entirely.
Awards
Awards are "binding on the parties and shall not be subject to any other appeal or to any other remedy" (Article 53). The Convention binds ratifying States to enforce the award "as if it were a final judgment of a court in that State" (Article 54). In plain words, any award declared by ICSID must be respected by ratifying State governments as if it came out of their highest courts. This is to prevent an award from being disputed or appealed in local court. However, there are means within the Convention to question/revise the award or annul it altogether. Articles 49-51 of the Convention outline the means to adjust an award, while 52 outlines annulment proceedings.
- Omission. Article 49
outlines revision of an award when a question has been omitted or there is a minor error in the original award:
49(2) The Tribunal upon the request of a party made within 45 days after the date on which award was rendered may after notice to the other party decide any question which it had omitted to decide in the award, and shall rectify any clerical, arithmetical or similar error in the award. Its decision shall become part of the award and shall be notified to the parties in the same manner as the award. The periods of time provided for under paragraph (2) of Article 51 and paragraph (2) of Article 52 shall run from the date on which the decision was rendered.
- Interpretation. Article 50 outlines the means in which an ambiguous award may be interpreted by the parties should a dispute arise from interpretation:
50(1) If any dispute shall arise between the parties as to the meaning or scope of an award, either party may request interpretation of the award by an application in writing addressed to the Secretary-General.
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Revision. Article 51 outlines the means in which an award can be revised when new facts are brought forward (and its lack in the original proceedings was not due to negligence) that could significantly affect the award:
51(1) Either party may request revision 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 affect the award, provided that when the award was rendered that fact was unknown to the Tribunal and to the applicant and that the applicant's ignorance of the fact was not due to negligence.
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Annulment. The procedures for annulment are outlined in Article 52 of the Convention. In it, five grounds are laid out to annul an award:
52(1) Either party may request annulment of the award by an application in writing addressed to the Secretary-General on one or more of the following grounds:
- (a) that the Tribunal was not properly constituted;
- (b) that the Tribunal has manifestly exceeded its powers;
- (c) that there was corruption on the part of a member of the Tribunal;
- (d) that there has been a serious departure from a fundamental rule of procedure; or
- (e) that the award has failed to state the reasons on which it is based.
52(2) The application shall be made within 120 days after the date on which the award was rendered except that when annulment is requested on ground of corruption such application may be made within 120 days after discovery of the corruption and in any event within three years after the date on which the award was rendered.
There has been some controversy over the means to annul an award; ICSID's tribunals have interpreted it broadly at first, causing a severe backlash (particularly as to 52(1)(d); what rule of procedure is considered "fundamental" and how serious must the departure be for an award to be annulled?).
And if Nobody's Happy Anyway
If, after all this, the parties to the dispute are still not happy or have problems with ICSID's methods, means, judgments, or what have you, the Convention throws up its hands and says, look, you can go away and quibble in the International Court of Justice instead (Article 64).
Sources
- Collier, John; Lowe, Vaughan. The Settlement of Disputes in International Law: Institutions and Procedures, Oxford University Press, 2000.
- http://www.worldbank.org/icsid/. ICSID's main website.
- Convention on the Settlement of Investment Disputes Between States and Nationals of Other States