International Centre for Settlement of Investment Disputes (ICSID)
The International Centre for Settlement of Investment Disputes is an autonomous international institution established by international agreement in 1966. After earlier attempts to institute a scheme for settlement of investment disputes had failed, the Executive Directors of the World Bank were asked to draft a convention that would achieve that purpose. This effort resulted in the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID or the Washington Convention) which, as of October 1, 2010, boasts 156 signatory states. The innovation of the Convention was that it allowed foreign investors to enforce claims directly against respondent states without exhausting local or remedies or seeking state permission. Having hosted more than 319 arbitrations and conciliations, ICSID is the leading international arbitration institution devoted to investor-State dispute settlement.
Although the Centre describes its primary purpose as providing facilities for conciliation and arbitration of international investment disputes, its contributions to the development of international investment practice and law over nearly fifty years exceeds the bounds of this singular purpose. The Convention sought to break down barriers to the free flows of cross-border private investment and encourage economic development by removing disputes from political and diplomatic realms. As an impartial forum for investors and for states, the institution, based in Washington, DC, has created a stable legal environment to secure expectations of both parties.
ICSID provides two forms of arbitration. For those states that are parties to the Convention, arbitration under the Centre is available. For those that are not, the World Bank created an Additional Facility which operates under many of the same rules. In both cases, recourse to the ICSID facilities is always subject to the parties’ consent. The Centre is managed by a Secretariat and overseen by an Administrative Council made up of a representative from each of the Contracting States. The Council prepares a list of potential arbitrators to serve on panels. Within a panel, an award is made by a majority vote. The award may then been reviewed by an ad hoc committee where a party moves to have it annulled.
Recent Development: Measures for Increasing Transparency
With new decisions and filings from arbitrants on an almost daily basis, academics and practitioners regularly engage about substantive legal debates emerging from ICSID, most of which are variations on longstanding discussions present in the discourse as early as the Centre’s founding. These debates are centered around critical terms in the Convention that form the basis for most of the investment arbitration cases. These are matters such as defining “investment” under the Convention; defining the scope of diplomatic protection under Article 27; and, examining the role and place for precedent in future ICSID proceedings. Certain issues that have received considerable attention in the past year as a result of developments from the tribunals include: what sort of urgency and necessity are required for provisional measures to be imposed? Can a domestic judicial decision qualify as expropriation under the Convention? And, what place is there for NGOs to intervene in ICSID arbitrations?
Of still greater interest is the institutional evolution ICSID has undergone. At the start of this year, ICSID released for the first time “The ICSID Caseload-Statistics,” a bi-annual publication that consolidates data from the Centre for practitioners and researchers. It provides a useful profile of the ICSID caseload historically and for the current fiscal year, along with a description of the methodology used for each chart so those who follow the Centre may compare data. The analysis then examines: (1) the number of cases registered under both the Convention and the Additional Facility; (2) the number of other cases administered by ICSID; (3) the basis of consent to jurisdiction invoked; (4) the geographic distribution of cases; (5) the economic sectors involved in disputes; (6) the outcomes in proceedings; and (7) the nationality and geographic origins of arbitrators.
This compilation is followed on the heels by another internal move to increase transparency. Unlike commercial arbitration settings, ICSID has published decisions and awards on its website or in its journal, with the consent of the parties involved. It even goes so far as to publish excerpts of the legal reasoning in an award where a party elects not to make its award public. This year for the first time, the Secretariat will seek parties’ authorization to publish decisions, orders and awards not yet published by the Centre.
With no appellate body, the annulment process stands in for all matters which would be appealed, where it is appropriate for an ad hoc committee to be formed. The most commonly invoked grounds for annulment concern the tribunal’s departure from a fundamental rule of procedure, excess of powers, and failure to state reasons for the award. As this process has the potential to substantially limit litigants, many in the field have recommended the creation of an appellate body like that of the World Trade Organization, but so far that has not received full consideration.
Finally, ICSID’s membership is in flux. While it lost members Ecuador and Bolivia, it has gained Kosovo and Haiti, and signatory Qatar. Kosovo and also the possibility of granting the European Union membership – a topic that has entered the discussion among the experts -- raise a question as to what constitutes a state and who is eligible for membership.
These new developments in transparency and statistical research at ICSID will help focus and re-center the productive dialogue among colleagues about the substantive issues highlighted above. They will buttress the ongoing empirical studies in this area. Investigations that take up the outcomes of the work being done are particularly useful to temper the criticisms of ICSID’s work. The data shows the cases break fairly evenly with respect to winning sides. As Michael Reisman points out, given the dynamics among the three persons on the panel, the successful claimant seldomly receives all that he asks for. Furthermore, data has shown just how few cases make it to arbitration at all, or to the award, as many settle far in advance of that stage; however, for those that do make it, and those that proceed to annulment as well, this data will be readily useful. In the same way, the moves toward greater transparency will indeed serve the public interest well. As the gross amount of foreign direct investment continues to grow, and even surpasses the volume of world trade, the investment universe continues to take shape, responsive to changes in the geopolitical and institutional framework.
Yale Law School
Convention on the Settlement of Investment Disputes between States and Nationals of Other States Oct. 17, 1966, 575 U.N.T.S. 159.
 Cases Registered by ICSID, The ICSID Caseload – Statistics, June 2010-2, available at www.icsid.worldbank.org.
 Introduction, The ICSID Caseload – Statistics, June 2010-2, available at www.icsid.worldbank.org.
 See the helpful work by Susan Franck, e.g. Development and Outcomes of Investment Treaty Arbitration, 50 Harv. Int’l L. J. 435 (2009).
 W. Michael Reisman, International Investment Arbitration and ADR: Married but Best Living Apart, ICSID-Rev. Foreign Investment Law Journal (2010).
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