Arbitration ProcedureTHE INTERNATIONAL CENTER FOR THE RESOLUTION OF INVESTMENT DISPUTES AND THE WORLD INTELLECTUAL PROPERTY ORGANIZATION

Solving ProblemsPeacefully

People, Governments, Companies

The International Center for the Settlement of Investment Disputes (ICSID)

The ICSID was created in 1965 at a conference held in Washington, D. C. Sponsored by the World Bank

The World Bank drafted the ICISD Convention to calm fears of both individuals and companies that investments in developing countries would be expropriated

The Convention was designed to provide a reliable mechanism for impartially resolving disputes between an investor and the country of investment

THE ICSID ORGANIZATION

Administrative Council – made up of representatives of the states parties to the Washington Convention; chaired by the President of the World Bank; adopts the organization’s rules regarding arbitration and conciliation; chooses the Panel of Arbitrators and the Panel of Conciliators the Panel of Conciliators

Secretariat – made up of a secretary-general (elected by the Council for a six-year term)

Administrative Staff– act as the organization’s registrar.

ICSID RULES The Administrative Council has enacted rules that regulate how

conciliations and arbitrations are begun (these are called Institutional Rules)as well as rules for conducting conciliations (Conciliation Rules) as well as arbitral hearings (Arbitration Rules)

Litigants (i.e., the investor or private party and the host state or state party) may agree to the rules of law governing a particular arbitration.

If the litigants cannot agree, then both international law and the state parties law (including the state parties rules for deciding conflicts about the applicable ability of particular laws) are to apply.

The Most Important RuleThird party states, including

the state of the investor involved in the dispute, are

not allowed to intervene

Constituting an ICSID Arbitration Tribunal

First– the state in which the investment is being made (the host state) and the state of which the investor is a national (the home state) must both be parties to the Washington Convention

Second– the investor and the host state must both consent to ICSID jurisdiction

Neither of these steps can be waived– the consent to jurisdiction must be in writing

The ICSID arbitration agreement should be included in every contractual arrangement between the investor and the home state

What is Considered an Investment?

The ICSID Convention – Article 25 does not define “investment” – it merely says “jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment.”

The drafters of the ICSID convention could not agree on a definition of this term so they left it out.

Most commentators have said that the drafters meant for the term to be given broad scope.

UNILATERAL WITHDRAWAL

Article 25 of the ICSID Convention colds that if proper consent has been given to establish an ICSID tribunal, then the tribunal can be set up even when the host state or the investor refuses to participate

Once consent has been given it cannot be unilaterally withdrawn – according to Article72, a state party cannot withdraw by filing a later reservation to the Convention or even by denouncing the Convention

Generally, a reservation to the convention will apply only to agreements made after the reservation was filed with the ICSID

SELECTING THE

ARBITRATORS• The litigants may agree to any number but if

they want more than one, the number must be odd

• The arbitrators may be any persons agreeable to the litigants but the majority of them must be nationals of states other than the state party to the dispute

Arbitration LocationNormally arbitration takes place at ICSID’s headquarters in Washington, D. C.

By Agreement the Litigants Can Elect

to Have the Arbitration Elsewhere

This can be at any institution with which the ICSID has Made Arrangements – Permanent Court of Arbitration at the Hague, Regional Office of the Asian-African Consultive Committee and several others

EXLCUSIVE REMEDY

Giving consent to ICSID arbitration is deemed to exclude all other remedies

The case cannot be tried in a municipal or other international tribunal

The investor cannot turn to the home state for diplomatic protection

Any dispute about the power of an ICSID tribunal to hear the matter is for the tribunal itself to decide

For a Tribunal to have Personal Jurisdiction

The parties appearing before it must be a state party and a national of another contracting State

A state party includes the state itself, its agencies, and its subdivisions (subdivisions include the states or provinces of a federal state, semi-autonomous dependencies, and municipalities) the state party and either the agency or subdivision must have consented to ICSID jurisdiction

National of another state can be either a natural or a juridical person – a natural person is a human being who has the nationality of a home state (the home state must be a contracting party to the convention and not itself a party to the dispute; the natural person must have a home state nationality at two critical times: (1) on the date the parties consented to arbitration and (2) on the date that a request for the arbitration is registered with the ICSID

JURIDICAL PERSON

Juridical person is a legal entity, other than a natural person, that has sufficient existence in the eyes of the law to function legally, sue and be sued, and make decisions through agents (e.g., a business firm).

In order for a juridical person to be a party to an ICSID arbitration, it must have had the nationality of a home state on the date the parties consented to arbitration.

Companies under the control of foreign nationals will also be treated as nationals of another contracting state if the contracting parties agree that they should be treated as such.

The Tribunal must have Subject Matter Jurisdiction:

Tribunals can only decide matters that are (1) disputes that (2) arise out of an investment

This means that tribunals will not decide collusive actions (i.e., test cases)

Tribunals will not give advisory opinions

There is no definition in the convention of a legal dispute– this sometimes turns on a statement made by the executive director of the World Bank at the time the convention was opened for signature that defined a legal dispute as a conflict over rights rather than interests