On 21 March 2022, the International Centre for Settlement of Investment Disputes ("ICSID") announced that its Member States had approved "a comprehensive set of amendments" for ICSID and ICSID (Additional Facility) proceedings. The product of a five-year working paper process, the 2022 ICSID Convention Rules and Regulations took effect from 1 July 2022, marking a material development for investor-State dispute resolution.
ICSID in a nutshell
ICSID is an international institution created to resolve disputes between investors (whether individuals or companies) and the foreign States in which they invest. There are currently 163 Member States to the 1965 ICSID Convention, including the UK, the USA, China, Australia and the vast majority of countries in Europe. However, there are also some notable omissions, such as India, Russia (which has signed the ICSID Convention but never ratified it), as well as countries that have recently withdrawn from the ICSID Convention, such as Bolivia.
For a dispute to be submitted to ICSID, it must satisfy the following criteria (set out at Article 25 of the ICSID Convention):
- Parties: One party must be a Contracting State and the other party must be a national of another Contracting State. That said, ICSID's Additional Facility allows for disputes between parties where either the State party to the dispute or the State whose national is a party to the dispute is not a Contracting State.
- Consent: Both the investor and the State must have consented to resolve disputes through ICSID. In practice, the State's consent typically manifests itself by way of a bilateral or multilateral investment treaty agreed with one or more other States to facilitate foreign investment. The treaty is interpreted as an offer to consent to the jurisdiction of ICSID, which the investor accepts by initiating ICSID proceedings.
- Dispute: There must be a legal dispute between the investor and the State – legal remedies must be sought and legal rights invoked. A mere conflict of interest or divergence will not suffice.
- Investment: The legal dispute must arise directly out of an investment. "Investment" is not defined in the ICSID Convention, although a definition has come about through ICSID case law. In general, tribunals will test whether there has been (i) a contribution; (ii) of a certain duration; and (iii) an element of risk. A fourth criterion as to the economic development of the host State remains somewhat controversial.
Continued modernisation of the ICSID Rules
Following their adoption in 1967, the ICSID Convention Rules and Regulations were amended in 1984, 2003 and 2006. Reflecting the public interest in investment treaty arbitration, the 2006 amendments notably increased the transparency of proceedings, permitting non-disputing parties with an interest in the case to submit briefs and even – with the parties' consent – to attend hearings. The new 2022 Rules will continue this trend towards increased transparency, providing:
- A clearer process for the publication of awards, orders, decisions (including decisions on annulment) and submissions – whether in full, in excerpt, or with redactions (Arbitration Rules 62-64); and
- An ongoing obligation on disputing parties to disclose the identity of any third-party funding source(s) where funds are received for the pursuit or defence of the proceedings (Arbitration Rule 14).
Time and cost of proceedings
The 2022 Rules also seek to reduce the time and cost of investor-State proceedings by providing for:
- Expedited arbitration proceedings by consent, with a fixed schedule and page limit for written submissions (Arbitration Rules, Chapter XII);
- Case management conferences to identify uncontested facts, narrow the issues in dispute and address any procedural or substantive issues (Arbitration Rule 31); and
- Deadlines for the timing of the award, being as soon as possible and in any event within 60 days (where the Tribunal decides that all claims are manifestly without legal merit); 180 days (where the Tribunal decides to address a preliminary objection in a separate phase); or 240 days after the last submission in all other cases.
Additional Facility: Mediation and Fact-Finding Rules
In response to increasing demands for mediation and the inclusion of mediation provisions in bilateral and multilateral investment treaties, the 2022 Rules will introduce the first set of mediation rules designed for investment treaty disputes. ICSID's Fact-Finding (Additional Facility) Rules have also been overhauled; both mediation and fact-finding can be used separately to, or in conjunction with, arbitration or conciliation proceedings.
The perennial issue of transparency in investor-State disputes has been sensibly accommodated in ICSID's 2022 amendments. Concerning the publication of awards, ICSID's adoption of deemed consent (with opt-out provisions) brings its Arbitration Rules in line with those of the International Chamber of Commerce ("ICC") (which may publish awards, orders, and dissenting/concurring opinions made as of 1 January 2019). Concerning the parties' obligation to disclose the identities of any third-party funders, ICSID's latest amendments seek to preclude conflicts of interest and thereby negate the risk of proceedings suffering delay due to challenges.
Cases submitted to ICSID's new expedited arbitration procedure will be followed with keen interest. ICSID's introduction of this procedure takes its lead from the commercial arbitration model – that of the ICC or the Stockholm Chamber of Commerce, for example – and follows on from the United Nations Commission On International Trade Law ("UNCITRAL")'s adoption of its own expedited arbitration rules in July 2021. The prospect of cutting in half the time and concomitant cost of a three-year dispute (or more) is without doubt an attractive one to investors and States alike; moreover, expedited procedures are (to the authors' knowledge) as-yet untested in the investor-State context.
ICSID's (Additional Facility) Mediation Rules are a timely addition to the dispute resolution mechanisms available through the Centre, not least given the entry into force of the United Nations Convention on International Settlement Agreements Resulting from Mediation (the "Singapore Convention") in September 2020. It will be interesting to see the extent to which the increased inclusion of mediation provisions in investment treaties – coupled with the enforcement regime provided by virtue of the Singapore Convention – translates into an active caseload under ICSID's new Mediation Rules. Separately, the (Additional Facility) Fact-Finding Rules have existed in some form or another since 1978 but have never been invoked – their 2022 overhaul may well prompt an increased uptake.
In summary, the 2022 Rules represent a comprehensive review and restructuring of ICSID's leading procedural rules and regulations. These modernising amendments have been agreed following a thorough consultation with a vast number of stakeholders and will be received as a welcome development for the international arbitration community.
If you require any advice or assistance regarding ICSID arbitration or would like any further information, please contact Gordon Bell, Tom Price or Patrick Fox.