An Introduction to ICSID - World Bankpubdocs.worldbank.org/pubdocs/publicdoc/2016/1/... · An Introduction to ICSID Meg Kinnear, ICSID Secretary-General Tuesday, February 3, 2016

An Introduction to ICSID

Meg Kinnear, ICSID Secretary-GeneralTuesday, February 3, 2016

World BankTokyo, Japan

What is ISDS?

ISDS is investor-State dispute settlement

• resolves disputes between a foreign investor and the host State before an international tribunal

• offered by States in their treaties, contracts and foreign investment laws

• may be arbitration, conciliation, mediation or fact-finding

2© 2016 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

What is ISDS?

• ISDS provisions are mostly found in international investment treaties (IIAs)

• IIAs contain substantive rules for protecting investments, mainly:

Non-discrimination compared to domestic and third-country investors (National and Most-Favoured-Nation Treatment) Fair and Equitable Treatment (FET) Prohibition of expropriation without compensation Free transfer of funds

© 2016 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

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What is ICSID?

• Created in 1966 • Only institution established by States to

administer international investment arbitration• World leader in the field

– has administered 70% of all cases


• Self-contained & delocalized process• Impartial case administration• Expertise• Cost-effective fee structure • Binding & enforceable awards

Special Features of ICSID


International Membership: 152 States


Structure of ICSID

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ADMINISTRATIVE COUNCIL

• One representative of each Contracting State

• One vote per State

• Chair: President of the World Bank (no vote)

FUNCTIONS

• Adopt ICSID arbitration and conciliation rules

• Adopt annual Budget

• Determine conditions of service of Secretary-General and Deputy Secretary-General

SECRETARIAT

• Secretary-General

• Deputy Secretary-General

• Staff

FUNCTIONS

• Support proceedings

• Training and publications


ICSID Caseload (to December 30, 2015)


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14

1 2 1 2 2 3 41

41 2 1

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10 11 1012

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27 27

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Cases Registered under the ICSID Convention and Additional Facility Rules

Increase in Global FDI


9Source: UNCTAD, FDI/MNE database (www.unctad.org/fdistatistics)

http://www.unctad.org/fdistatistics

More Investment Treaties


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Source: UNCTAD, IIA database

ICSID Cases by State Party


South America24%

Central America & the

Caribbean6%

North America (Canada, Mexico

& U.S.)4%

Eastern Europe & Central Asia

25%

Western Europe7%

Sub-Saharan Africa16%

Middle East & North Africa10%

South & East Asia & the Pacific

8%

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ICSID Proceedings

12

Convention

Both disputing parties from ICSID

Member States

Conciliation

Arbitration

Additional Facility

One disputing party from Member States

Conciliation

Arbitration

Fact-finding

Other

Need 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,

Registry)


Consent is the Cornerstone of Jurisdiction

Sources of Consent:

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


Source of Consent


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ASEAN Agreement for the Promotion and Protection

of Investments0.2%

Bilateral Investment Treaty (BIT)

60.3%

Dominican Republic-United States-Central America Free

Trade Agreement (DR-CAFTA)

0.8%

Investment Contract between the Investor and

the Host-State17.3%

Investment Law of the Host-State

9.3%

North American Free Trade Agreement

(NAFTA)2.9%

Energy Charter Treaty (ECT)8.8%

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%

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


What is an “Investment”?

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Significant undertakingDurationRiskRegularity of profits Contribution to development of

host State

Apply the definition in the instrument of

consent


Objective Approach Subjective Approach

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


Corporate Nationality Rule Example


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Host State: SenegalHome State: USA

Who are the Investors in Cases?

• Nationality– To date: 2 cases with Japanese investors – no

cases against Japan– About 56% of claimants are from EU member

States – many are “inter-EU cases”

• Profile– About 18-22% are small & medium-sized

enterprises and individuals © 2016 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

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Conduct of an ICSID Arbitration


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Transparency

• Different provisions apply to:

o The Centre

o Tribunal Members

o Parties


• 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

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Rules Applicable to the Centre


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


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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 Banko Services of the Tribunal Secretary and case

teamo Financial Administration of the case

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ICSID Administrative Charges



30

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

ICSID 1818 H Street, N.W.

Washington, D.C. 20433USA

Tel: + 1 (202) 458-1534Fax: + 1 (202) 522-2615 or 522-2027Website: www.worldbank.org/icsid

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http://icsid.worldbank.org/ICSID/Index.jsp

Documents

An Introduction to ICSID - World Bankpubdocs.worldbank.org/pubdocs/publicdoc/2016/1/... · An Introduction to ICSID Meg Kinnear, ICSID Secretary-General Tuesday, February 3, 2016