Overview
A. Introduction
1. In this advisory we provide an overview of the structure of arbitration at the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID). Arbitrations conducted under the UNCITRAL Arbitration Rules or other ad hoc arbitrations follow a similar structure; for some of the key differences between ICSID and UNCITRAL Arbitrations, see our previous advisory. These advisories are part of a series that outlines key aspects of the investor-state arbitral process and the rights and defences that are frequently raised in this context.
B. Stage 1 – Request for Arbitration and Registration
2. An ICSID Arbitration is commenced by the claimant filing a “Request for Arbitration” (in English, French or Spanish) with the Secretary-General of ICSID, together with a non-refundable US$25,000 lodging fee. The purpose of the Request for Arbitration is to identify the parties, the investment, the nature of the dispute and the manner by which the parties have consented to submit the dispute to ICSID Arbitration.
3. The Secretary-General of ICSID will register the Request for Arbitration on the basis of the information contained therein, unless the Secretary-General finds that the dispute is “manifestly outside of the jurisdiction of [ICSID]”. However, registration is without prejudice to the tribunal’s right to determine whether or not it has jurisdiction, whether on its own motion or on the motion of a party.
4. It should be noted that many investment treaties include a “cooling off period” that prevents the commencement of arbitral proceedings for a fixed period (usually between three and six months), during which time the parties are encouraged to negotiate a resolution of the dispute.
C. Stage 2 – Constitution of the Tribunal
5. The ICSID Convention and the ICSID Arbitration Rules provide a procedure for the constitution of the tribunal. However, this is subordinate to any agreement the parties may have made. Tribunals are usually composed of three arbitrators, with each party selecting one arbitrator and the president being appointed by the agreement of the parties (or, in the absence of agreement, by ICSID or some other independent body).
6. The parties’ selection of their arbitrator appointment is a matter of significant importance. The ICSID Convention has two requirements that parties must abide by; the first relates to the nationality of the arbitrator and the second is ensuring that the arbitrator has the necessary qualifications. Once these two requirements are met, careful attention should be given to ensure that an arbitrator is selected who is known to support interpretations of investment law that are consistent with that party’s case theory, and/or who possesses any other characteristics that the party considers to be important (for example, absence of conflict of interest, language proficiency, experience as an arbitrator and availability of arbitrator/manageability of current caseload).
7. Once the tribunal has been constituted, the proceedings are deemed to have begun.
D. Stage 3 – Summary Dismissal Procedure
8. A state may file an application that the claim is “manifestly without legal merit”, and seek its dismissal under Rule 41(5) of the ICSID Arbitration Rules, no later than thirty days after the constitution of the tribunal, and in any event before the first session of the tribunal (Stage 4). The tribunal will request that the parties make submissions on the application. Thereafter, the tribunal shall at the first session or promptly thereafter, notify the parties of its decision on the application.
9. The summary procedure under Rule 41(5) was introduced in 2006. The tribunal will only rule that a claim is “manifestly without legal merit” if it is clear and obvious that this is the case. A tribunal will not make an order for dismissal of the claim under Rule 41(5) if it considers that the relevant facts may not be available until a later stage of the proceedings, for example, through cross-examination of witnesses.
E. Stage 4 – First Session of the Tribunal
10. Unless the parties otherwise agree, a procedural hearing will be held within sixty days of the tribunal’s constitution, known as the “first session”, which sets a procedural timetable for the conduct of the proceedings. Apart from in exceptional circumstances, the first session is usually completed within half a day, and rarely lasts more than a day. It can be held in person, via telephone or by video-conference.
F. Stage 5 – The Parties’ Written Submissions
(i) Document disclosure
11. Disclosure in ICSID Arbitration tends to be somewhat more limited than it is in the domestic court proceedings of many states. However, it is not unusual for the parties to agree, or the tribunal to order, that each party may make a request for documents during the period that it prepares its pleadings. Disclosure may also be ordered during any jurisdiction phase (see below). Failure to cooperate with a document disclosure order by the tribunals may lead to an adverse inference being drawn against the party or even an adverse costs order.
12. During the disclosure exercise, respondent states will often seek to obtain all documents relating to: (i) the claimant’s ownership and its connection to its investments in the respondent state; (ii) the initial investments approvals (if any) granted by the respondent state’s government; and (iii) the Joint Venture documentation (if applicable). Such information may be relevant to jurisdictional arguments that could be raised against the investor.
(ii) The memorial
13. The claimant will file a document containing its legal and factual arguments, which is called a “memorial.” The preparation time for the memorial is usually three to six months after the first session.
(iii) The counter-memorial
14. Thereafter, the respondent will file a document containing its legal and factual arguments in defence, which is called a “counter-memorial.” The respondent will have the same amount of time to prepare its counter-memorial as the claimant had to prepare its memorial.
(iv) The reply
15. The claimant will file a “reply” in response to the respondent’s counter-memorial. The claimant will typically have half of the amount of time to prepare the reply that it had to prepare its memorial.
(v) The rejoinder
16. The respondent will file a “rejoinder” to the claimant’s reply. The respondent will have the same amount of time to prepare its rejoinder as the claimant had to prepare its reply.
(vi) Evidence
17. Supporting witness statements (including expert evidence, if required) and documents must be filed with each pleading.
G. Stage 6 – The Oral Phase
(i) Pre-hearing telephone conference
18. A telephone conference between the parties, the tribunal (or just its president) and the ICSID Secretariat is usually held one month before the evidential hearing, to discuss procedural and logistical matters related to the hearing. The parties may also take this opportunity to exchange information and stipulate uncontested facts, so as to expedite the proceeding.
(ii) The evidential hearing
19. The evidential hearing is where the parties present their respective witnesses, cross-examine each other’s witnesses and make oral legal arguments, which by and large summarise the legal arguments in the pleadings that they have filed prior to the evidential hearing.
H. Stage 7 – The Parties’ Closing Submissions
(i) Post-hearing submissions
20. In some instances, tribunals ask for written post hearing submissions in lieu of, or in addition to, closing arguments at the evidential hearing. They will typically be filed within three months of the completion of the hearing and may include a right to reply to the other party’s submission.
(ii) Costs submissions
21. Unless the apportionment of costs has been agreed, the parties will typically file submissions on costs after the completion of post-hearing submissions.
I. Challenges to Jurisdiction
22. As has already been noted, the registration of the Request for Arbitration by the Secretary-General of ICSID (i.e. Stage 1) is without prejudice to the respondent’s right to challenge the jurisdiction of the tribunal to hear the claim. The tribunal also has the right to consider whether or not it has jurisdiction on its own initiative.
23. Jurisdictional challenges may take place either before or after the claimant files its memorial, but must generally be made no later than the deadline for filing the counter-memorial.
24. A challenge to jurisdiction adds further complexity to proceedings and increases both their length and cost. If such a challenge is made, the tribunal may consider such matters either: (i) as a separate stage in the proceedings; or (ii) at the same time that it hears the substantive claim.
25. If the tribunal decides to hear the challenge to jurisdiction as a separate stage in the proceedings, the arbitration will first go through Stages 1 to 4. The parties will then argue the case on jurisdiction, and will generally do so in the sequence set out in Stages 5 to 7. The tribunal will then issue its decision on jurisdiction; generally this takes a minimum of one year from the time when the challenge to jurisdiction was made. If the claimant is successful in proving jurisdiction, the parties will then argue the substantive issues of the case; this will run through the Stages 5 to 7 sequence (i.e., a second time).
26. If the tribunal decides to hear the challenge to jurisdiction at the same time that it hears the substantive claim, the arbitration will run through Stages 1 to 7 once only. However, the length of the written phase and the evidential hearing is likely to be increased.
J. Enforcement of Awards
27. The award is binding on all parties to the ICSID proceeding and each party must comply with its terms. If a party fails to comply with the award, the other party can seek to have the award enforced in the courts of any ICSID Member State, as though it were a final judgement of that state’s courts.
28. Enforcing awards will be covered in further detail in a forthcoming advisory (expected to be published in Spring 2016).
K. Annulment Proceedings
29. A party may file an application to partially or fully annul an award, within 120 days of the award being rendered. There are five grounds on which a party may seek an annulment:
29.1 the tribunal was not properly constituted;
29.2 the tribunal has manifestly exceeded its powers;
29.3 there was corruption on the part of a member of the tribunal;
29.4 there has been a serious departure from a fundamental rule of procedure; or
29.5 the award has failed to state the reasons on which it is based.
30. Annulment of ICSID awards will be covered in further detail in a forthcoming advisory (expected to be published in Spring 2016).
