Annulment of ICSID Awards

Christina Knahr

Dr. Christina Knahr, MPA 2

Overview

• Jurisdiction of Annulment Committees

• Grounds for Annulment

• Recent Annulment Decisions

Dr. Christina Knahr, MPA 3

Art. 52 ICSID Convention: Annulment

“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.”

Dr. Christina Knahr, MPA 4

Recent Annulment Decisions

MTD Equity Sdn. Bhd. & MTD Chile S.A. v. Chile, ICSID Case No. ARB/01/7, Decision on Annulment, 21 March 2007

CMS Gas Transmission Company v. The Argentine Republic, ICSID Case No. ARB/01/8, Decision on Annulment, 25 September 2007

Industria Nacional de Alimentos, S.A. and Indalsa Perú, S.A. v. Peru, ICSID Case No. ARB/03/4 (Previously Empresas Lucchetti, S.A. and Lucchetti Perú, S.A. v. Peru), Decision on Annulment, 5 September 2007

Dr. Christina Knahr, MPA 5

Jurisdiction of ad hoc committees

“[…] the task of the Ad hoc Committee is to consider whether the manner in which the Tribunal approached and accomplished that task opened its Award to annulment under the Convention […] or adequately met the requirements of the Convention […]. […] it is no part of the Committee’s functions to review the decision itself which the Tribunal arrived at, still less to substitute its own views for those of the Tribunal, but merely to pass judgment on whether the manner in which the Tribunal carried out its functions met the requirements of the ICSID Convention.”

Industria Nacional de Alimentos, S.A. and Indalsa Perú, S.A. v. Peru, ICSID Case No. ARB/03/4 (Previously Empresas Lucchetti, S.A. and Lucchetti Perú, S.A. v. Peru), Decision on Annulment, 5 September 2007, para. 97

Dr. Christina Knahr, MPA 6

Manifest excess of powers

“An award will not escape annulment if the tribunal, while purporting to apply the relevant law actually applies another, quite different law. But in such a case the error must be ‘manifest’, not arguable, and a misapprehension (still less mere disagreement) as to the content of a particular rule is not enough.”

MTD Equity Sdn. Bhd. & MTD Chile S.A. v. Chile, ICSID Case No. ARB/01/7, Decision on Annulment, 21 March 2007, para. 47

Dr. Christina Knahr, MPA 7

Manifest excess of powers

“Where a tribunal assumes jurisdiction in a matter for which it lacks competence under the relevant BIT, it exceeds its powers. The same is true in the inverse case where a tribunal refuses or fails to exercise jurisdiction in a matter for which it is competent under the BIT.”

Industria Nacional de Alimentos, S.A. and Indalsa Perú, S.A. v. Peru, ICSID Case No. ARB/03/4 (Previously Empresas Lucchetti, S.A. and Lucchetti Perú, S.A. v. Peru), Decision on Annulment, 5 September 2007, para. 99

Dr. Christina Knahr, MPA 8

Failure to state reasons

“[I]t is well accepted […] that Article 52(1)(e) concerns a failure to state any reasons with respect to all or part of an award, not the failure to state correct or convincing reasons […] . Provided that the reasons given by a tribunal can be followed and relate to the issues that were before the tribunal, their correctness is beside the point in terms of Article 52(1)(e). Moreover, reasons may be stated succinctly or at length, and different legal traditions differ in their modes of expressing reasons. Tribunals must be allowed a degree of discretion as to the way in which they express their reasoning. […]

Dr. Christina Knahr, MPA 9

Failure to state reasons

“[…] annulment under Article 52(1)(e) should only occur in a clear case. This entails two conditions: first, the failure to state reasons must leave the decision on a particular point essentially lacking in any expressed rationale; and second, that point must itself be necessary to the tribunal’s decision. […]”

MTD Equity Sdn. Bhd. & MTD Chile S.A. v. Chile, ICSID Case No. ARB/01/7, Decision on Annulment, 21 March 2007, para. 50 (citing Vivendi v. Argentina, paras. 64, 65)

Dr. Christina Knahr, MPA 10

Serious departure from a fundamental rule of procedure

“[Article 52(1)(d)] refers to a set of minimal standards of procedure to be respected as a matter of international law. It is fundamental, as a matter of procedure, that each party is given the right to be heard before an independent and impartial tribunal. This includes the right to state its claim or its defence and to produce all arguments and evidence in support of it. This fundamental right has to be ensured on an equal level, in a way that allows each party to respond adequately to the arguments and evidence presented by the other […].”

MTD Equity Sdn. Bhd. & MTD Chile S.A. v. Chile, ICSID Case No. ARB/01/7, Decision on Annulment, 21 March 2007, para. 49 (citing Wena v. Egypt, para. 57)

Dr. Christina Knahr, MPA 11

Conclusions

• Limited jurisdiction of ad hoc committees

• Most frequently invoked grounds for annulment:

- Failure to state reasons

- Manifest excess of powers

- Serious departure from a fundamental rule of procedure

• Restrictive approach to annulment by recent ad hoc committees