2 recent developments at icsid law, justice & development week 2011 november 15, 2011

2

RECENT DEVELOPMENTS AT ICSID

Law, Justice & Development Week 2011

November 15, 2011

OVERVIEW

3 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.


MEMBERSHIP – 147 CONTRACTING STATES & 157

SIGNATORIES

TOTAL CASES REGISTERED - BY CALENDAR YEAR


1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

up to

Oct

. 21,

201

1

0

5

10

15

20

25

30

35

40

14

1 2 1 2 1 24

14

1 2 1 2 3 3

8 8 8 9

14

18

30

2124

21

32

2023

2527

11 1

1

1

1

1

2 3 23

1

6

2

2

4

1

2

1

4

ICSID Convention Arbitration Cases ICSID Convention Conciliation Cases ICSID Additional Facility Arbitration Cases

6

SOURCE OF CONSENT FOR CASES IN FY 2011

© 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

Bilateral Investment Treaty (BIT)

68%

Dominican Republic-United States-Central

America Free Trade Agreement (DR-CAFTA)

3%

Investment Contract be-tween the Investor and

the Host-State14%

Investment Law of the Host-State

11%

Energy Charter Treaty (ECT)5%

STATE PARTIES IN CASES IN FY 2011



DISTRIBUTION OF ALL ICSID CASES BY ECONOMIC SECTOR

Finance7%

Information & Communication6%

Agriculture, Fishing & Forestry5% Oil, Gas & Mining

25%

Electric Power & Other Energy13%

Water, Sanitation & Flood Protection7%

Construction7%Tourism

5%

Other Industry10%

Transportation11%

Services & Trade4%

ARBITRATION PROCEEDINGS CONCLUDED IN FY2011


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Dispute de-cided by Tribunal

62%

Dispute settled or proceeding otherwise dis-

continued38%

AWARDS IN CONCLUDED ARBITRATIONS –

FY2011


Award deciding that the claims are manifestly

without legal merit12%

Award declining jurisdiction19%

Award dismissing all claims

25%

Award upholding claims in part or in full44%

TRANSPARENCY OF THE PROCESS


RELEVANT PROVISIONS

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

Administrative and Financial Regulations, 22-23


TRANSPARENCY v. CONFIDENTIALITY

• Confidentiality is a traditional feature of arbitration

• No presumption of confidentiality in ICSID proceedings


TRANSPARENCY v. CONFIDENTIALITY

• ICSID Rules combine transparency and confidentiality

• Different standards for:

The Centre Tribunal Members Parties


Publish information on registration and termination of cases (Administrative and Financial Regulation 22)

The Centre must maintain registers containing information on the institution, conduct and disposition of the case (Administrative and Financial Regulation 23)

© 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with

acknowledgement.

15

RULES APPLICABLE TO THE CENTRE

RULES APPLICABLE TO THE CENTRE

ICSID needs the consent of both parties to publish records of proceedings (Administrative and Financial Regulation 22)

ICSID needs the consent of both parties to publish full

awards (Article 48(4) of the ICSID Convention and Arbitration Rule 48(4)), but must publish excerpts of the Tribunal’s legal reasoning (Amendment of 2006)

Recent project to seek the parties’ consents to publish procedural orders, decisions and awards in concluded cases


16

INFORMATION PUBLISHED BY THE CENTRE

Website

ICSID Review

Annual Report


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RULES APPLICABLE TO ARBITRATORS

Duty to keep confidential all information coming to their knowledge as a result of their participation in the proceeding, including the contents of the award (Arbitration Rule 6(2))

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


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RULES APPLICABLE TO THE PARTIES

No general requirement of confidentiality or transparency under ICSID Arbitration Rules

However, general requirement under international law not to exacerbate a dispute - Has led to procedural rulings that direct parties not to publicly release case documents – Protection of the integrity of the proceedings© 2011 by International Centre for Settlement of Investment Disputes.

Content may be reproduced for educational use with acknowledgement. 19

OTHER RULES APPLICABLE TO THE PARTIES

Confidentiality Agreements

The parties designate “confidential” documents

Documents marked as “confidential” can be used only for the arbitration and cannot be made public

If a party objects to any “confidential” designation, it must specify the reasons for its objection

After issuance of the award, each party must return or destroy all such documents


20

Specific treaty provisions‒ NAFTA & CAFTA - DR‒ No general duty of confidentiality‒ Principle of public access to documents‒ Publication of orders, award decisions, pleadings and

transcripts

‒ Subject to confidential business information and privileged information


21

OTHER RULES APPLICABLE TO THE PARTIES

NON-DISPUTING PARTY PARTICIPATION

Amicus Curiae Submissions

Open Hearings


22

CRITERIA - ARBITRATION RULE 37(2)

© 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 23

(a) would assist the Tribunal in determination of a factual or legal issue by bringing a different perspective, particular knowledge or insight

(b) would address a matter within the scope of the dispute

(c) non-disputing party has a significant interest in the proceeding

CONDITIONS - ARBITRATION RULE 37(2)

• The non-disputing party submission may not disrupt the proceeding or unduly burden or unfairly prejudice either party

• Both parties are given an opportunity to present their observations on the non-disputing party submission


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WHO ARE NON-DISPUTING PARTIES?

“A person or entity that is not a party to the dispute”

A natural person, a juridical person, an NGO or a State

Distinction between non-disputing parties and non-disputing Parties (NAFTA Article 1128 and CAFTA Article 10.20.2)

• They are not parties to the proceeding – instead mere participants


25

WHO ARE NON-DISPUTING PARTIES?

The right to submit amicus briefs does not grant any other procedural rights

not bound by award do not lead evidence question of costs impact of submissions


26

CRITERIA FOR AMICUS SUBMISSIONS

Tribunal decides after consultation with the parties

(a) “the non-disputing party submission would assist the Tribunal in the determination of a factual or legal issue related to the proceeding by bringing a perspective, particular knowledge or insight that is different from that of the disputing parties”© 2011 by International Centre for Settlement of Investment Disputes.


CRITERIA FOR AMICUS SUBMISSIONS

“(b) the non-disputing party submission would address a matter within the scope of the dispute”→ Debate regarding whether amici can make submissions on jurisdictional issues

Example in AES v. Hungary: Tribunal granted the European Commission leave to file a submission, but decided it could not address jurisdictional issues as no such objections had been raised by Hungary


28

The petitioner needs to show that it has more than a “general” interest in the proceeding

“(c) the non-disputing party has a significant interest in the proceeding.”

For example: Glamis v. USA Quechan Indian Nation had a significant

interest in the protection of its sacred sites National Mining Association interest in

the protection of the mining industry© 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

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Other Criteria may be relevant – e.g.:

Whether the non-disputing party has any affiliation with any of the disputing parties

Whether any government, person or organization has provided financial or other assistance in preparing the submission


30

PRACTICAL CONSIDERATIONS“The Tribunal shall ensure that the non-disputing party submission does not disrupt the proceeding or unduly burden or unfairly prejudice either party”

Timing of the application and submission: usually but not necessarily after the first exchange of pleadings on the merits

Address modalities as soon as possible (Piero Foresti, Pac Rim Cayman v. El Salvador, Commerce Group v. El Salvador)


31

Parties can present their observations on the applications to become an amicus, as well as on the modalities of amici participation

Parties’ comments on submissions are scheduled separately or may be part of the pleadings - Tribunal may define modalities for the parties’ observations


32

AMICUS ACCESS TO DOCUMENTS No provision allowing publication of case

records without the consent of both parties In Suez, Aguas and Biwater: no access to

documents granted In 3 more recent cases, Tribunals asked the

parties to provide the amici with redacted version of their pleadings


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OPEN HEARINGS – ARBITRATION RULE 32(2)

“Unless either party objects, the Tribunal, after consultation with the Secretary-General, may allow other persons, besides the parties, their agents, counsel and advocates, witnesses and experts during their testimony, and officers of the Tribunal, to attend or observe all or part of the hearings, subject to appropriate logistical arrangements. The Tribunal shall for such cases establish procedures for the protection of proprietary or privileged information.”

Consent of both parties required© 2011 by International Centre for Settlement of Investment Disputes.


APPLICATION OF ARBITRATION RULE 32(2)

Only one case where both disputing parties agreed that amicus could attend part of the hearing to clarify its submission at the hearing

No such consent has been given by both disputing parties in other ICSID cases


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SOVEREIGN DEBT



“In 2001-02, Argentina experienced one of the worst economic crises in its history. Output fell by about 20 percent over 3 years, inflation reignited, the government defaulted on its debt, the banking system was largely paralyzed, and the Argentine peso, which used to be pegged at par with the U.S. dollar, reached lows of Arg$3.90 per U.S. dollar (in June 2002).”

IMF – Lessons from the Crisis in Argentina (October 8, 2003)


1940-1980: Continuing economic crisis

low economic growth large fiscal deficit and foreign debt; high inflation rates; and a progressive decline in the quality of its

public infrastructure.


1989 Economic Emergency Law - deregulated different sectors of the economy

1989 State Reform Law - permitted the reorganization of State-owned companies and privatization of State-owned assets generally

1991 Convertibility Law - pegged the Argentine currency to the U.S. Dollar and limited the printing of additional currency

Investment promotions treaties – granted foreign investors minimum standards of protection and access to dispute settlement through international arbitration

Issuance of Sovereign Bonds, which allowed Argentina to raise capital to refinance its external debt


2001: a new crisis

Run on private sector deposits

Controls on banking and foreign exchange transactions (corralito)

Social unrest

President De la Rua resigns on December 20, 2001

Five Presidents in three weeks


Emergency Measures tried to stem the economic crisis

Declaring a moratorium on all public debt Ending the ARP and USD convertibility Suspending tariffs adjustment in accordance

with international indexes Nullifying provisions according to which public

services tariffs would be fixed in US$ Restricting transfers of funds abroad But these measures led to a different crisis…


Multiple foreign investors suing Argentina for changes in the economic and legal framework

42 ICSID proceedings instituted in connection with the economic crisis

Similar facts and legal issues in dispute

ARTICLE 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.

ANNULMENT


ANNULMENT


A post-award remedy

Provided by Article 52 ICSID Convention

Process may lead to full or partial annulment of an ICSID Award


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“Annulment is an essential but exceptional remedy” - Aron Broches

EXCEPTIONAL REMEDY


ICSID Awards are final, binding and non-appealable

Annulment is an exception to the principle of finality of Awards

Annulment is not an appeal

ANNULMENT - GROUNDS


1. Tribunal was not properly constituted;2. Tribunal manifestly exceeded its powers;3. Corruption on the part of a member of the

Tribunal;4. A serious departure from a fundamental rule

of procedure; or 5. Award failed to state the reasons on which it

is based.

THE MOST FREQUENTLY USED GROUNDS


The Tribunal has manifestly exceeded its powers

- Exceeding jurisdiction- Failure to exercise jurisdiction- Failure to apply proper law



A serious departure from a fundamental rule of procedure

- Impartiality- Right to be heard- Deliberation- Evidence and Proof



The award failed to state the reasons on which it is based

- Absence of reasons- Contradictory reasons- Failure to deal with every question

ANNULMENT OUTCOMES – BY DECADE


1971-1980 1981-1990 1991-2000 2001-2010 2011 -0

20

40

60

80

100

120

49

18

96

12

0 1 1

13

30 3 0

8

00 0 15 3

Number of Convention awards rendered Number of decisions rejecting the application for annulment

Number of decisions annulling the award in part or in full Number of annulment proceedings discontinued


53

320 Convention arbitration cases registered

139 Convention awards rendered

47 annulment proceedings registered

18 decisions rejecting the application

9 proceedings discontinued

6 awards annulled in full

5 awards annulled in part

ANNULMENT - OVERALL


“It is not surprising that parties to ICSID proceedings may seek to exhaust their procedural remedies.”

- Aron Broches

19 Annulment Applications filed by Claimants

28 Annulment Applications filed by Respondents

CHALLENGES


Appointing ad hoc Committees

Addressing ICSID facility user concerns

COST OF ARBITRATION


RECENT DEVELOPMENTS – COSTS

Two Main Issues:

Recent Trends in the Allocation of Costs Measures for Controlling Costs


ICSID Convention, Articles 59 – 61

ICSID Arbitration Rules 28, 34(4), 47(1)(j)

Administrative and Financial Regulation 14

RELEVANT PROVISIONS

58© 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

STRUCTURE OF THE ARBITRATION COSTS

Costs of ICSID proceedings include: Parties’ expenses Arbitrators’ fees and expenses Centre’s administrative

charges


Advance payments requested periodically: Following the Tribunal’s constitution Further payments during the

proceedings Allocation of Advance Payments by:

Parties’ Agreement Tribunal Default

FUNDING OF ICSID PROCEEDINGS


Arbitrators’ Fees: US$3,000 per meeting day; or 8-hour day of

other workor travel day

Arbitrators’ Expenses: any direct expenses reasonably incurred travel expenses in relation to the proceeding subsistence allowances at the time of travel

PAYMENTS TO THE ARBITRATORS


Lodging Fee US$25,000 for requests for arbitration US$10,000 for post-award proceedings

and for Secretary-General acting as appointing authority

ICSID Administrative Charges Annual US$20,000 Reimbursement of expenses

CURRENT ICSID FEES AND CHARGES


COSTS INCURRED BY THE PARTIES

The parties’ costs of legal representation Other direct expenses Typically represent the most significant

financial costs of a proceeding


AVERAGE COSTS INCURRED IN INTERNATIONAL ARBITRATION


Costs borne by the parties to present their cases 82%

Arbitrators’ fees and expenses 16%

Administrative Expenses 2%

* Statistics from Report from the ICC Commission on Arbitration on Techniques for Controlling Time and Costs in Arbitration

ICSID Convention Article 61(2) Unless parties otherwise agree, a

tribunal assesses the costs incurred in a proceeding and decides who pays

Award must contain decision about costs

COST AWARDS IN ICSID PROCEEDINGS

65© 2011 by International Centre for Settlement of Investment Disputes.

Content may be reproduced for educational use with acknowledgement.

ALLOCATION OF COSTS

Decisions about allocation of costs must be reasoned

No default principle regarding allocation of costs

In over 50 percent of cases, tribunals have ordered cost sharing


RECENT TRENDS

Shift towards taking certain factors into account in

cost allocation

Factors include: Result of the arbitration Conduct of the parties throughout the

proceeding67 © 2011 by International Centre for Settlement of Investment Disputes.


MEASURES FOR MANAGING COSTS

Efficient management of proceedings can produce substantial cost savings

ICSID has taken several steps to encourage efficient proceedings and reduce costs

Emphasizing the need for arbitrators with time Advising on efficient and proactive case

management Encouraging use of technology, e.g., telephone and

video conferencing68 © 2011 by International Centre for Settlement of Investment Disputes.


MEASURES FOR MANAGING COSTS

Tribunals and parties encouraged to consider procedural efficiency

Early case management conference (“first session”)

Proactive case management Considering the potential for bifurcation

of proceedings Encouraging targeted submissions


ICSID 1818 H Street, N.W.

Washington, D.C. 20433USA

Tel: (202) 458-1534Fax:(202) 522-2615 or 522-2027

Website: www.worldbank.org/icsid

2 recent developments at icsid law, justice & development week 2011 november 15, 2011

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