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2 RECENT DEVELOPMENTS AT ICSID Law, Justice & Development Week 2011 November 15, 2011.

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Presentation on theme: "2 RECENT DEVELOPMENTS AT ICSID Law, Justice & Development Week 2011 November 15, 2011."— Presentation transcript:

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2 2 RECENT DEVELOPMENTS AT ICSID Law, Justice & Development Week 2011 November 15, 2011

3 OVERVIEW 3 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

4 4 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. MEMBERSHIP – 147 CONTRACTING STATES & 157 SIGNATORIES

5 TOTAL CASES REGISTERED - BY CALENDAR YEAR 5 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

6 6 SOURCE OF CONSENT FOR CASES IN FY 2011 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

7 STATE PARTIES IN CASES IN FY © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

8 8 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. DISTRIBUTION OF ALL ICSID CASES BY ECONOMIC SECTOR

9 ARBITRATION PROCEEDINGS CONCLUDED IN FY2011 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 9

10 AWARDS IN CONCLUDED ARBITRATIONS – FY © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

11 TRANSPARENCY OF THE PROCESS 11 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

12 RELEVANT PROVISIONS  ICSID Arbitration Rules 6(2), 15, 37(2), 48(4)  Administrative and Financial Regulations, © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

13 TRANSPARENCY v. CONFIDENTIALITY Confidentiality is a traditional feature of arbitration No presumption of confidentiality in ICSID proceedings 13 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

14 TRANSPARENCY v. CONFIDENTIALITY ICSID Rules combine transparency and confidentiality Different standards for:  The Centre  Tribunal Members  Parties 14 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

15  Publish information on registration and termination of cases (Administrative and Financial Regulation 22)  The Centre must maintain registers containing information on the institution, conduct and disposition of the case (Administrative and Financial Regulation 23) © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 15 RULES APPLICABLE TO THE CENTRE

16  ICSID needs the consent of both parties to publish records of proceedings (Administrative and Financial Regulation 22)  ICSID needs the consent of both parties to publish full awards (Article 48(4) of the ICSID Convention and Arbitration Rule 48(4)), but must publish excerpts of the Tribunal’s legal reasoning (Amendment of 2006)  Recent project to seek the parties’ consents to publish procedural orders, decisions and awards in concluded cases © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 16

17 INFORMATION PUBLISHED BY THE CENTRE  Website  ICSID Review  Annual Report © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 17

18 RULES APPLICABLE TO ARBITRATORS  Duty to keep confidential all information coming to their knowledge as a result of their participation in the proceeding, including the contents of the award (Arbitration Rule 6(2))  Deliberations are to take place in private and remain secret (Arbitration Rule 15) © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 18

19 RULES APPLICABLE TO THE PARTIES  No general requirement of confidentiality or transparency under ICSID Arbitration Rules  However, general requirement under international law not to exacerbate a dispute - Has led to procedural rulings that direct parties not to publicly release case documents – Protection of the integrity of the proceedings © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 19

20 OTHER RULES APPLICABLE TO THE PARTIES  Confidentiality Agreements  The parties designate “confidential” documents  Documents marked as “confidential” can be used only for the arbitration and cannot be made public  If a party objects to any “confidential” designation, it must specify the reasons for its objection  After issuance of the award, each party must return or destroy all such documents © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 20

21  Specific treaty provisions ‒ NAFTA & CAFTA - DR ‒ No general duty of confidentiality ‒ Principle of public access to documents ‒ Publication of orders, award decisions, pleadings and transcripts ‒ Subject to confidential business information and privileged information © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 21 OTHER RULES APPLICABLE TO THE PARTIES

22 NON-DISPUTING PARTY PARTICIPATION  Amicus Curiae Submissions  Open Hearings © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 22

23 CRITERIA - ARBITRATION RULE 37(2) © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 23 (a) would assist the Tribunal in determination of a factual or legal issue by bringing a different perspective, particular knowledge or insight (b) would address a matter within the scope of the dispute (c) non-disputing party has a significant interest in the proceeding

24 CONDITIONS - ARBITRATION RULE 37(2) The non-disputing party submission may not disrupt the proceeding or unduly burden or unfairly prejudice either party Both parties are given an opportunity to present their observations on the non-disputing party submission © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 24

25 WHO ARE NON-DISPUTING PARTIES?  “A person or entity that is not a party to the dispute”  A natural person, a juridical person, an NGO or a State  Distinction between non-disputing parties and non- disputing Parties (NAFTA Article 1128 and CAFTA Article ) They are not parties to the proceeding – instead mere participants © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 25

26 WHO ARE NON-DISPUTING PARTIES? The right to submit amicus briefs does not grant any other procedural rights  not bound by award  do not lead evidence  question of costs  impact of submissions © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 26

27 CRITERIA FOR AMICUS SUBMISSIONS Tribunal decides after consultation with the parties (a) “the non-disputing party submission would assist the Tribunal in the determination of a factual or legal issue related to the proceeding by bringing a perspective, particular knowledge or insight that is different from that of the disputing parties” © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 27

28 CRITERIA FOR AMICUS SUBMISSIONS  “(b) the non-disputing party submission would address a matter within the scope of the dispute” → Debate regarding whether amici can make submissions on jurisdictional issues Example in AES v. Hungary: Tribunal granted the European Commission leave to file a submission, but decided it could not address jurisdictional issues as no such objections had been raised by Hungary © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 28

29  The petitioner needs to show that it has more than a “general” interest in the proceeding “(c) the non-disputing party has a significant interest in the proceeding.”  For example: Glamis v. USA  Quechan Indian Nation had a significant interest in the protection of its sacred sites  National Mining Association interest in the protection of the mining industry © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 29

30  Other Criteria may be relevant – e.g.:  Whether the non-disputing party has any affiliation with any of the disputing parties  Whether any government, person or organization has provided financial or other assistance in preparing the submission © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 30

31 PRACTICAL CONSIDERATIONS “The Tribunal shall ensure that the non-disputing party submission does not disrupt the proceeding or unduly burden or unfairly prejudice either party”  Timing of the application and submission: usually but not necessarily after the first exchange of pleadings on the merits  Address modalities as soon as possible (Piero Foresti, Pac Rim Cayman v. El Salvador, Commerce Group v. El Salvador) © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 31

32  Parties can present their observations on the applications to become an amicus, as well as on the modalities of amici participation  Parties’ comments on submissions are scheduled separately or may be part of the pleadings - Tribunal may define modalities for the parties’ observations © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 32

33 AMICUS ACCESS TO DOCUMENTS  No provision allowing publication of case records without the consent of both parties  In Suez, Aguas and Biwater: no access to documents granted  In 3 more recent cases, Tribunals asked the parties to provide the amici with redacted version of their pleadings © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 33

34 OPEN HEARINGS – ARBITRATION RULE 32(2)  “Unless either party objects, the Tribunal, after consultation with the Secretary-General, may allow other persons, besides the parties, their agents, counsel and advocates, witnesses and experts during their testimony, and officers of the Tribunal, to attend or observe all or part of the hearings, subject to appropriate logistical arrangements. The Tribunal shall for such cases establish procedures for the protection of proprietary or privileged information.”  Consent of both parties required © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 34

35 APPLICATION OF ARBITRATION RULE 32(2)  Only one case where both disputing parties agreed that amicus could attend part of the hearing to clarify its submission at the hearing  No such consent has been given by both disputing parties in other ICSID cases © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 35

36 SOVEREIGN DEBT 36 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

37 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 37  “In , Argentina experienced one of the worst economic crises in its history. Output fell by about 20 percent over 3 years, inflation reignited, the government defaulted on its debt, the banking system was largely paralyzed, and the Argentine peso, which used to be pegged at par with the U.S. dollar, reached lows of Arg$3.90 per U.S. dollar (in June 2002).”  IMF – Lessons from the Crisis in Argentina (October 8, 2003)

38 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement : Continuing economic crisis  low economic growth  large fiscal deficit and foreign debt;  high inflation rates; and  a progressive decline in the quality of its public infrastructure.

39 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 39  1989 Economic Emergency Law - deregulated different sectors of the economy  1989 State Reform Law - permitted the reorganization of State-owned companies and privatization of State-owned assets generally  1991 Convertibility Law - pegged the Argentine currency to the U.S. Dollar and limited the printing of additional currency  Investment promotions treaties – granted foreign investors minimum standards of protection and access to dispute settlement through international arbitration  Issuance of Sovereign Bonds, which allowed Argentina to raise capital to refinance its external debt

40 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 40  2001: a new crisis  Run on private sector deposits  Controls on banking and foreign exchange transactions (corralito)  Social unrest  President De la Rua resigns on December 20, 2001  Five Presidents in three weeks

41 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 41  Emergency Measures tried to stem the economic crisis  Declaring a moratorium on all public debt  Ending the ARP and USD convertibility  Suspending tariffs adjustment in accordance with international indexes  Nullifying provisions according to which public services tariffs would be fixed in US$  Restricting transfers of funds abroad  But these measures led to a different crisis…

42 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 42  Multiple foreign investors suing Argentina for changes in the economic and legal framework  42 ICSID proceedings instituted in connection with the economic crisis  Similar facts and legal issues in dispute

43 ARTICLE 25 (1) © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 43  The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre.

44 ANNULMENT 44 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

45 ANNULMENT © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 45  A post-award remedy  Provided by Article 52 ICSID Convention  Process may lead to full or partial annulment of an ICSID Award

46 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 46 “Annulment is an essential but exceptional remedy” - Aron Broches

47 EXCEPTIONAL REMEDY © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 47  ICSID Awards are final, binding and non-appealable  Annulment is an exception to the principle of finality of Awards  Annulment is not an appeal

48 ANNULMENT - GROUNDS © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement Tribunal was not properly constituted; 2. Tribunal manifestly exceeded its powers; 3. Corruption on the part of a member of the Tribunal; 4. A serious departure from a fundamental rule of procedure; or 5. Award failed to state the reasons on which it is based.

49 THE MOST FREQUENTLY USED GROUNDS © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 49  The Tribunal has manifestly exceeded its powers - Exceeding jurisdiction - Failure to exercise jurisdiction - Failure to apply proper law

50 THE MOST FREQUENTLY USED GROUNDS © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 50  A serious departure from a fundamental rule of procedure - Impartiality - Right to be heard - Deliberation - Evidence and Proof

51 THE MOST FREQUENTLY USED GROUNDS © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 51  The award failed to state the reasons on which it is based - Absence of reasons - Contradictory reasons - Failure to deal with every question

52 ANNULMENT OUTCOMES – BY DECADE © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 52

53 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement Convention arbitration cases registered 139 Convention awards rendered 47 annulment proceedings registered 18 decisions rejecting the application 9 proceedings discontinued 6 awards annulled in full 5 awards annulled in part ANNULMENT - OVERALL

54 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 54  “It is not surprising that parties to ICSID proceedings may seek to exhaust their procedural remedies.” - Aron Broches  19 Annulment Applications filed by Claimants  28 Annulment Applications filed by Respondents

55 CHALLENGES © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. 55  Appointing ad hoc Committees  Addressing ICSID facility user concerns

56 COST OF ARBITRATION 56 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

57 RECENT DEVELOPMENTS – COSTS Two Main Issues:  Recent Trends in the Allocation of Costs  Measures for Controlling Costs 57 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

58  ICSID Convention, Articles 59 – 61  ICSID Arbitration Rules 28, 34(4), 47(1)(j)  Administrative and Financial Regulation 14 RELEVANT PROVISIONS 58 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

59 STRUCTURE OF THE ARBITRATION COSTS Costs of ICSID proceedings include:  Parties’ expenses  Arbitrators’ fees and expenses  Centre’s administrative charges 59 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

60 Advance payments requested periodically:  Following the Tribunal’s constitution  Further payments during the proceedings  Allocation of Advance Payments by:  Parties’ Agreement  Tribunal  Default FUNDING OF ICSID PROCEEDINGS 60 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

61 Arbitrators’ Fees:  US$3,000 per meeting day; or 8-hour day of other work or travel day Arbitrators’ Expenses:  any direct expenses reasonably incurred  travel expenses in relation to the proceeding  subsistence allowances at the time of travel PAYMENTS TO THE ARBITRATORS 61 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

62 Lodging Fee  US$25,000 for requests for arbitration  US$10,000 for post-award proceedings and for Secretary-General acting as appointing authority ICSID Administrative Charges  Annual US$20,000  Reimbursement of expenses CURRENT ICSID FEES AND CHARGES 62 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

63 COSTS INCURRED BY THE PARTIES  The parties’ costs of legal representation  Other direct expenses  Typically represent the most significant financial costs of a proceeding 63 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

64 AVERAGE COSTS INCURRED IN INTERNATIONAL ARBITRATION 64 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement. Costs borne by the parties to present their cases 82% Arbitrators’ fees and expenses 16% Administrative Expenses 2% * Statistics from Report from the ICC Commission on Arbitration on Techniques for Controlling Time and Costs in Arbitration

65  ICSID Convention Article 61(2)  Unless parties otherwise agree, a tribunal assesses the costs incurred in a proceeding and decides who pays  Award must contain decision about costs COST AWARDS IN ICSID PROCEEDINGS 65 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

66 ALLOCATION OF COSTS  Decisions about allocation of costs must be reasoned  No default principle regarding allocation of costs  In over 50 percent of cases, tribunals have ordered cost sharing 66 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

67 RECENT TRENDS Shift towards taking certain factors into account in cost allocation Factors include:  Result of the arbitration  Conduct of the parties throughout the proceeding 67 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

68 MEASURES FOR MANAGING COSTS Efficient management of proceedings can produce substantial cost savings ICSID has taken several steps to encourage efficient proceedings and reduce costs  Emphasizing the need for arbitrators with time  Advising on efficient and proactive case management  Encouraging use of technology, e.g., telephone and video conferencing 68 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

69 MEASURES FOR MANAGING COSTS Tribunals and parties encouraged to consider procedural efficiency  Early case management conference (“first session”)  Proactive case management  Considering the potential for bifurcation of proceedings  Encouraging targeted submissions 69 © 2011 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.

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