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The World Bank Group 101: A Story on International Arbitration


Foreword

This series of articles provides a detailed explanation of the work conducted by the World Bank, a well-known international financial institution, and its importance. The World Bank Group is one of the world’s largest providers of sources, knowledge, and funding for low and middle-income countries. Through issuing loans and grants the World Bank can facilitate the development of struggling nations in their fight to eradicate poverty, inspire prosperity, and promote sustainability. A detailed analysis of the past and present engagement of the five divisions of the World Bank Group will address the respective frameworks of the five organizations. Each article will focus thoroughly on the function and activity of each of the following organizations: The International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID). As an institution dedicated to establishing long-term economic development, the World Bank is an organization whose continuous technical and financial support has successfully implemented projects and reforms on a global level. The World Bank Group 101 series aims to break down the function of the World Bank Group and its five member organizations. Every article in the series aims to offer an overview of the mission of the respective WBG institutions and their never-ending war against poverty and many other global issues concerning the majority of the countries of the world.

The World Bank Group 101 series consists of six articles:

  1. The World Bank Group 101: The Bank of All the World

  2. The World Bank Group 101: A Tale of Reconstruction and Development

  3. The World Bank Group 101: A Narrative on the Association of Development

  4. The World Bank Group 101: Encircling Risk Management and Investment Warranty

  5. The World Bank Group 101: A Story on International Arbitration

  6. The World Bank Group 101: The Global Resolution of Financial Disputes



The International Center for Settlement of Investment Disputes abbreviated as ICSID is an intergovernmental organization established in 1966 by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States referred to as the ICSID Convention (Llc, 2020). The ICSID Convention was opened for signature by States on March 18, 1965, and entered into force on October 14, 1966. This article will offer an overview of the structure, regulations, function, and cases of the ICSID to provide a better understanding to the reader.


Figure 1: An illustration of the logo of the ICSID.

As of December 31, 2015, the Convention has been signed and ratified by 152 States (Llc, 2020). The three official languages of ICSID are English, French, and Spanish. The IBRD, another World Bank Group member organization, is the depositary for the ICSID Convention. It is in charge of keeping custody of the original Convention, receiving signatures and instruments of ratification, as well as performing the necessary performs functions set forth in the Convention (Guide to the ICSID, 2022). ICSID is one of the five member organizations of the World Bank. Similarly, to the other World Bank Group member organizations, each of them serves a different function, yet they all promote the common goals of reducing extreme poverty and boosting shared prosperity. ICSID contributes to these two ultimate goals through an impartial forum for international dispute resolution.


Having administered 70% of all global cases of arbitration and conciliation of disputes between States and foreign investors, the ICSID is the world’s top leading facility in its field of action. All the cases administered arise under contracts, investment laws, or bilateral and multilateral investment treaties negotiated by Member States (Guide to the ICSID, 2022). ICSID provides impartial, cost-effective, and efficient facilities for the proceedings conducted under its auspices. Independent arbitrators and conciliators are appointed in each case and are responsible for analyzing, and judging the evidence, and afterward determining the outcome of the dispute before the parties involved in the conflict.


Figure 2: An illustration of a boardroom meeting at the ICSID headquarters.

Structure of the ICSID

The governing structure of the organization consists of an Administrative Council and a Secretariat (Guide to the ICSID, 2022). The Administrative Council is composed of one representative of each ICSID Member State (Guide to the ICSID, 2022). The Chairman of the Administrative Council is always the President of the World Bank Group. Each representative has one vote on the Administrative Council, however, the Chairman does not have a vote. The Secretariat is in charge of administering the cases. It comprises approximately 65 staff members, each representing a diverse background and nationality (Guide to the ICSID, 2022). ICSID assists the parties and the tribunals throughout the dispute and settlement process and equips expert support in the administration of cases. Through the programs in the fields of foreign investment law and international investment, and dispute settlement, the ICSID maintains an active reach and up-to-date publications. The Secretariat is headed by a Secretary-General, elected by the Administrative Council (Guide to the ICSID, 2022).


ICSID is the world’s leading institution devoted to international investment dispute settlement. It has extensive experience in this field, having administered the majority of all international investment cases. States have agreed on ICSID as a forum for investor-State dispute settlement in most international investment treaties and in numerous investment laws and contracts (SICE - ICSID - Signatories, n.d.). The ICSID Convention is divided into 10 Chapters and 75 Articles, followed by a signature clause (SICE - ICSID - Signatories, n.d.).


Figure 3: A column illustration of the ICSID structure.

There are currently 143 States listed as states who have signed the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States on the dates indicated (SICE - ICSID - Signatories, n.d.). There are 129 States that have deposited their instruments of ratification alongside, and the dates of the deposit and of the attainment of the status of Contracting State by the entry into force of the Convention (SICE - ICSID - Signatories, n.d.).


The Secretary-General serves as the legal representative of ICSID, the registrar of ICSID proceedings, and the principal officer of the Centre (About ICSID | ICSID, n.d.). As a Member of ICSID, each State participates in the Administrative Council (About ICSID | ICSID, n.d.). Through the Administrative Council, Member States determine the general directions of the organization (About ICSID | ICSID, n.d.).


History of the Convention

The history of the ICSID Convention serves as a unique source of preparatory documents concerning the origin and formulation of the ICSID Convention (The History of the ICSID Convention | ICSID, n.d.). It contains original texts of reports of committees, records of meetings, working papers, notes, and other documents in the three official languages of ICSID which as mentioned previously are English, French, and Spanish (The History of the ICSID Convention | ICSID, n.d.). Based on the historical document of the Convention, it entitles each Member State to designate up to four persons to the Panel of Arbitrators and up to four persons to the Panel of Conciliators (as derived from Articles 12 to 16 of the ICSID Convention) (The History of the ICSID Convention | ICSID, n.d.). As explained by the title itself, the Panel of Arbitrators is a committee of people who are selected to serve and act as arbitrators, while the Panel of Conciliators is a committee of people selected to offer reconciliatory aid. In addition, the Chairman of the Administrative Council of ICSID may designate up to ten persons to each Panel (The History of the ICSID Convention | ICSID, n.d.).


Figure 4: An illustration of an ICSID meeting in the three official languages.

The ICSID Convention in all of its 10 Chapters, provides the basic procedural framework for conciliation and arbitration of investment disputes arising between all ICSID Member States and investors that qualify as nationals of other Member States (LibGuides: International Commercial Arbitration: Home, n.d.). The Convention is in itself a treaty among Member States establishing an independent, impartial and self-contained system (LibGuides: International Commercial Arbitration: Home, n.d.). ICSID proceedings are delocalized from domestic procedures (LibGuides: International Commercial Arbitration: Home, n.d.). Meaning that not only that local courts do not intervene in the ICSID process but are forbidden to do so. Some implications of the self-contained system and other main features include:

  • Decisions in ICSID Convention arbitrations are final and binding and may not be set aside by the courts of any Member State based on Article 53 of the Convention (International Centre for Settlement of Investment Disputes , n.d.) .

  • The limited post-award remedies available are set out in the Convention itself based on Articles 49 to 52 of the Convention. (:: International Centre for Settlement of Investment Disputes ::, n.d.)

  • All Members States, whether or not parties to the dispute, recognize and enforce ICSID Convention monetary awards as final judgments in any Member State, based on Article 54 of the Convention. (International Centre for Settlement of Investment Disputes , n.d.)

  • Once disputing parties consent to ICSID arbitration and unless they agree otherwise, they accept ICSID arbitration as the exclusive solution based on Article 26 of the Convention. (International Centre for Settlement of Investment Disputes , n.d.)

  • A Member State cannot give diplomatic protection to any of its nationals who have previously consented to arbitration under the Convention, except in limited or predetermined circumstances based on Article 27 of the Convention. (International Centre for Settlement of Investment Disputes , n.d.)

  • Participants enjoy immunity from legal process in the conduct of the proceedings based on Articles 21 and 22 of the Convention. (International Centre for Settlement of Investment Disputes , n.d.)


Figure 5: An illustration of the establishment of the ICSID Convention.

Services

ICSID's key services offered to its members are those for the resolution of international disputes, primarily between investors and States, but also in State-to-State disputes (Services | ICSID, n.d.). In addition, the organization offers fact-finding proceedings to examine and report on facts before a dispute arises between parties (Services | ICSID, n.d.).


ICSID provides comprehensive case administration services to arbitrations under the ICSID Convention, ICSID Additional Facility Rules, and UNCITRAL Arbitration Rules. The Additional Facility Rules authorize the Secretariat of ICSID to administer certain categories of proceedings between States and nationals of other States that fall outside the scope of the ICSID Convention (Additional Facility Rules and Regulations, 2022). The UNCITRAL Arbitration Rules are model laws prepared by UNCITRAL and adopted by the United Nations Commission on International Trade Law on 21 June 1985 (UNCITRAL Arbitration Rules | United Nations Commission on International Trade Law, n.d.). They provide a comprehensive set of procedural rules upon which parties may agree for the conduct of arbitral proceedings arising out of their commercial relationship and are widely used in ad hoc arbitrations as well as administered arbitrations (UNCITRAL Arbitration Rules | United Nations Commission on International Trade Law, n.d.). The Rules cover all aspects of the arbitral process, providing a model arbitration clause, setting out procedural rules regarding the appointment of arbitrators and the conduct of arbitral proceedings, and establishing rules in relation to the form, effect, and interpretation of the award (UNCITRAL Arbitration Rules | United Nations Commission on International Trade Law, n.d.).


Figure 6: An illustration of the entrance of the UN offices in Geneva.

ICSID's Secretary-General is available to be designated as Appointing Authority to appoint arbitrators, conciliators, and mediators, and to decide a proposal to disqualify an arbitrator in proceedings not conducted under the ICSID Convention or the ICSID Additional Facility Rules. (Services | ICSID, n.d. ICSID offers fully-equipped, state-of-the-art hearing rooms and preparation/breakout rooms in Washington, D.C., and Paris. ICSID can also organize hearings in over 130 World Bank country offices and through institutions with which it has cooperation agreements. (Services | ICSID, n.d.)


The ICSID Secretariat is available to serve as the Administrative Registry or Secretariat for dispute settlement mechanisms under international investment agreements and broader economic cooperation agreements (Services | ICSID, n.d.).


ICSID Rules and Regulations

ICSID offers specialized rules of procedure for arbitration, conciliation, fact-finding, and mediation to guarantee the integrity of the settlement process. These are the most commonly used procedural rules in investor-State dispute settlement (ICSID Rules and Regulations | ICSID, n.d.).


The procedural rules for arbitration and conciliation under the ICSID Convention may be used to settle disputes between an ICSID Contracting State—the term given to States that have ratified the ICSID Convention—and nationals of another Contracting State (ICSID Rules and Regulations | ICSID, n.d.). The arbitration rules benefit from a robust enforcement structure, as Contracting States agree that an ICSID Convention award will be treated as a final judgment of their courts(ICSID Rules and Regulations | ICSID, n.d.).


Figure 7: An illustration of the cover of the ICSID Convention, Rules and Regulations.

The Additional Facility Rules for arbitration and conciliation are similar in many ways to the regulations stated in the ICSID Convention however, their jurisdictional requirements differ (ICSID Rules and Regulations | ICSID, n.d.). The Rules may be used when neither the State nor the investor party is an ICSID Contracting State or a national/citizen of an ICSID Contracting State (ICSID Rules and Regulations | ICSID, n.d.). The Rules are available for use to all organizations in need of them for improvement or establishment of regional economic integration (ICSID Rules and Regulations | ICSID, n.d.).


Mediation is offered by the ICSID as a party-driven approach to dispute settlement for those who require it (ICSID Rules and Regulations | ICSID, n.d.). The role of the mediator is to facilitate negotiations by identifying interests, overcoming barriers, and developing settlement options for both parties. Mediation is voluntary and based or invoked on the written mediation agreement between the disputing parties.


ICSID Fact-Finding Rules

In 2022, ICSID released an entirely new set of Fact-Finding Rules. The Fact-Finding Rules offer parties the opportunity to constitute a Committee to investigate and report circumstances in the pre-dispute phase (Fact Finding | ICSID, n.d.). Their intent is to avoid legal disputes by providing an impartial assessment of documented facts in a contractual or other business dispute between the parties. Any State or any national of any other State may agree to use the Fact-Finding Rules (Fact Finding | ICSID, n.d.).


Figure 8: An illustration of the cover of the ICSID Fact Finding Rules.

Cases

The primary mandate of ICSID is to provide facilities and services to support the resolution of international investment disputes (Cases Overview | ICSID, n.d.). ICSID administers cases under the ICSID Convention, the ICSID Additional Facility, and other rules such as the Arbitration Rules of the United Nations Commission on International Trade Law known as UNCITRAL Arbitration Rules (Cases Overview | ICSID, n.d.).


Figure 9: A pie chart of the fields that the parties of the ICSID cases represent.

The ICSID Caseload - Statistics contains a profile of the ICSID caseload from the first case registered in 1972 to the latest case registered today (Cases Overview | ICSID, n.d.). A complete listing of pending cases listed in chronological order from the most recently registered is available on the website's profile (Cases Overview | ICSID, n.d.).


The Secretariat has developed tables of decisions in ICSID cases on various procedural and substantive topics (Cases Overview | ICSID, n.d.). These tables are regularly and precisely updated and they also provide links to published decisions taken by the bodies in charge of the mediation settlement or dispute process (Cases Overview | ICSID, n.d.). The decisions taken are published to serve as a source of education and transparency.


Figure 10: An illustration of the headquarters of the ICSID in Washington D.C in the USA.

In conclusion, the ICSID is a World Bank Group member organization specializing in disputes, settlement, and mediation for its member States but not only. The cases of the ICSID are administered under the ICSID Convention, the ICSID Additional Facility, and other rules and regulations. Besides settlement, the ICSID shares the World Bank Group's goals of ending poverty and promoting stable, prosperous, sustainable, and innovative growth.



Bibliography

About ICSID | ICSID. (n.d.). https://icsid.worldbank.org/about


Additional Facility Rules and Regulations. (2022). icsid.worldbank.org. Retrieved December 23, 2022, https://icsid.worldbank.org/sites/default/files/documents/ICSID_Additional_Facility.pdf


Cases Overview | ICSID. (n.d.). https://icsid.worldbank.org/cases


Fact Finding | ICSID. (n.d.). https://icsid.worldbank.org/rules-regulations/fact-finding


Guide to the ICSID. (2022). inside.worldbank.org. Retrieved December 23, 2022, from https://icsid.worldbank.org/sites/default/files/publications/Guide_to_Membership_ICSID_Convention_EN.pdf


ICSID Rules and Regulations | ICSID. (n.d.).