International Centre for Settlement of Investment Disputes (ICSID) Rules,Procedure, and India’s approach

First let us see why ICSID was formed and here we will see Practice, Rules and Jurisdiction of ICSID. With growing economy and globalization some forum was felt necessary to resolve dispute between investor and Host State.

ICSID  was established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention), is a multilateral international treaty. The ICSID Convention came into force on October 14, 1966. As of May 2016, 153 contracting member states agreed to enforce and uphold arbitral awards in accordance with the ICSID Convention. The primary purpose of ICSID is to provide facilities and services to support conciliation and arbitration of international investment disputes.

The ICSID is part of and funded by the World Bank Group, and its headquarter is in Washington, D.C., in the United States of America. It is an autonomous, multilateral specialized institution to encourage international investment and ease non-commercial risks by a treaty drafted by the International Bank for Reconstruction and Development’s( IBRD)  executive directors and signed by member countries.

The seat may be moved to another place by decision of the Administrative Council adopted by a majority of two-thirds of its members.

The Center has an Administrative Council and a Secretariat and maintains a Panel of Conciliators and a Panel of Arbitrators.

Unique Features of ICSID

 Arbitration and conciliation under the Convention is  voluntary and require consent of both the investor and State concerned ( Host State)  Once such consent is given, it cannot be withdrawn unilaterally and it becomes a binding undertaking. ICSID is an impartial facility, and it does not decide the cases. The independent arbitrators and conciliators appointed to each case and pass award.

Organization Structure

The President of the Bank is ex officio Chairman of the Administrative Council (hereinafter called the Chairman) but shall have no right to vote. During his absence or inability to act and during any vacancy in the office of President of the Bank, the person for the time being acting as President shall act as Chairman of the Administrative Council.

Jurisdiction:

Jurisdiction of the ICSID is in Article 25

The term “jurisdiction of the Centre” is used in the Convention as a convenient expression to shall deemed to mean that, the limits within which the provisions of the Convention will apply. The facilities of the Centre will be available for conciliation and arbitration proceedings when its within jurisdiction of ICSID to its members.

The jurisdiction of the ICSID extends to any legal dispute arising directly out of an investment, between a Contracting State / Host Sate and an investor/national of another Contracting State, which the parties to the dispute consent in writing to submit to the ICSID.

It may be noted that, consent alone doesn’t bring a dispute within its jurisdiction. The jurisdiction of the Centre is further governed by

Article 25(1). Article 25 (1)  provides that the jurisdiction of ICSID applies to legal disputes arising out of investments. So two basic preconditions which will give ICSID Jurisdiction.

The expression “legal dispute” has been used to make clear that while conflicts of rights are within the jurisdiction of the Centre, mere conflicts of interests are not. The dispute must concern the existence or scope of a legal right or obligation, or the nature or extent of the reparation to be made for breach of a legal obligation.

Term “investment” not defined but essential requirement of consent by the parties, and the mechanism through which Contracting States can make known in advance, if they so desire, the classes of disputes which they would or would not consider submitting to the ICSID.

No  conciliation or arbitration proceedings can be initiated against  Contracting State without its consent. No Contracting State is under any obligation to give its consent to arbitration proceedings.

When a host State consents to the submission of a dispute with an investor to the ICSID, it gives the investor direct access to an international jurisdiction, the investor ought not ask his State to adopt his case and the State is not permitted to do so. Article 27 explicitly prohibits a Contracting State from giving diplomatic protection, or bringing an international claim, in respect of a dispute which one of its nationals and another Contracting State have consented to submit, or have submitted, to arbitration under the Convention, unless the State party to the dispute fails to honor the award rendered in that dispute.

How to register dispute with ICSID?

Any member State or any investor of member State wants to institute and initiate arbitration proceedings shall address a request to in writing to the Secretary-General, who shall send a copy of the request to the other party. The request shall contain information regarding the issues in dispute, the identity of the parties and their consent to arbitration in accordance with the rules of procedure for the institution of conciliation and arbitration proceedings. The Secretary-General shall register the request unless he finds, on the basis of the information contained in the request, that the dispute is outside the jurisdiction of the ICSID. He shall forthwith notify the parties of registration or refusal to register.

Proceedings Under Convention:

the Convention does not restrict the appointment of conciliators with reference to nationality, Article 39 lays down the rule that the majority of the members of an Arbitral Tribunal should not be nationals of the State party to the dispute or of the State whose national is a party to the dispute. This rule is likely to have the effect of excluding persons having these nationalities from serving on a Tribunal composed of not more than three members. However, the rule will not apply where each and every arbitrator on the Tribunal has been appointed by agreement of the parties.

 The power of the Secretary-General to refuse registration of a request for conciliation or arbitration if he finds that, it is patently outside the jurisdiction of the ICSID. He should inform the parties accordingly.

What happens after dispute is filed?

After dispute is registered  Tribunal shall consist of a sole arbitrator or any uneven number of arbitrators appointed as the parties shall agree. Where the parties do not agree upon the number of arbitrators and the method of their appointment, the Tribunal shall consist of three arbitrators, one arbitrator appointed by each party and the third, who shall be the president of the Tribunal, appointed by agreement of the parties.

What if no consensus on appointment of Arbitrators?

If the Tribunal is not  constituted within 90 days after notice of registration of the request has been dispatched by the Secretary-General in accordance with paragraph (3) of Article 36, or such other period as the parties have agreed upon, the Chairman shall, at the request of either party and after consulting both parties as far as possible, appoint the arbitrator, where arbitrators not appointed, Arbitrators shall be appointed by the Chairman as provided in Article 38 shall not be nationals of the Contracting State party to the dispute or of the Contracting State whose national is a party to the dispute.

The majority of the arbitrators shall be nationals of States other than the State which is  party to the dispute and the State whose national is a party to the dispute; provided, however, that the provisions of this Article shall not apply if the sole arbitrator or each individual member of the Tribunal is appointed by agreement of the parties.

Arbitrators may also be appointed from outside the Panel of Arbitrators, except in the case of appointments by the Chairman pursuant to Article 38.

What if one party remains absent in proceedings?

Failure of a party to appear shall not be deemed an admission of the other party’s assertions. If a party fails to appear or to present his case at any stage of the proceedings the other party may request the Tribunal to deal with the questions submitted to it and to render an award. Before rendering an award, the Tribunal shall notify, and grant a period of grace to, the party failing to appear or to present its case, unless it is satisfied that that party does not intend to do so.

Award

  • The Tribunal shall decide issues in dispute by a majority of the votes of all its members.
  • The award of the Tribunal shall be in writing
  •  Award shall be signed by the members of the Tribunal who voted for it.
  • The award shall deal with every question submitted to the Tribunal,
  • Award shall be a reasoned award
  • Any member of the Tribunal may attach his individual opinion to the award, whether he dissents from the majority or not, or a statement of his dissent.
  • The ICSID Centre shall not publish the award without the consent of the parties.

What if any issue is left for consideration in award ?

Any party can apply to the Tribunal within 45 days after the date on which the award was rendered may after notice to the other party decide any question which it had omitted to decide in the award, and shall rectify any clerical, arithmetical or similar error in the award. Its decision shall become part of the award and shall be notified to the parties in the same manner as the award.

Annulment of Award

Grounds :

  • that the Tribunal was not properly constituted;
  • that the Tribunal has manifestly exceeded its powers;
  • that there was corruption on the part of a member of the Tribunal;
  • that there has been a serious departure from a fundamental rule of procedure; or
  • that the award has failed to state the reasons on which it is based.

Finality of Award:

  • The award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in the Convention.
  • Each party shall abide by and comply with the terms of the award except to the extent that enforcement shall have been stayed pursuant to the relevant provisions of this Convention.
  • “award” shall include any decision interpreting, revising or annulling such award.

India and ICSID

India is a member of four of the five constituents of the World Bank Group (www.worldbank.org.in) viz., International Bank for Reconstruction and Development (IBRD), International Development Association (IDA), International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA). India is not a member of ICSID (International Centre for Settlement of Investment Disputes). India has been accessing funds from the World Bank (mainly through IBRD and IDA) for various development projects.

Shruti Desai

1st August,2020

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