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Arbitration under The International Center for the Settlement of Investment Disputes Convention

Time:2014-03-13 Hit:205


Arbitration under the International Center for the Settlement of Investment Disputes Convention


     The International Centre for Settlement of Investment Disputes (International Center for the Settlement of Investment Disputes) is an international arbitration institution that facilitates arbitration and conciliation of legal disputes between international investors. National investment laws and international treaties make it possible for private investors to initiate International Center for the Settlement of Investment Disputes arbitration against host States even when there is no contractual agreement between them. In 2010, International Center for the Settlement of Investment Disputes reported that 78 percent of the 305 arbitration cases registered by the end of2009 had been brought under an instrument other than an arbitration clause between investor and host State.

     In order for International Center for the Settlement of Investment Disputes arbitration to be invoked, three criteria must first be fulfilled (each criterion is examined in detail elsewhere in this Guide):


     First, the parties must have consented to their dispute being submitted to International Center for the Settlement of Investment Disputes arbitration. Consent must be given in writing. It may encompass either an existing dispute or a defined class of future disputes.

     Second, the dispute must be between a Contracting State and a national of another Contracting State. Contracting States may authorize constituent subdivisions or agencies to become parties to International Center for the Settlement of Investment Disputes proceedings.

     Third, the dispute must be a legal dispute arising directly out of an investment. The term investment' is not defined in the Convention, but has generally been given a broad interpretation by International Center for the Settlement of Investment Disputes tribunals.

Counsel to any corporation making a foreign investment in International Center for the Settlement of Investment Disputes Contracting State should always carefully evaluate the inclusion of International Center for the Settlement of Investment Disputes arbitration clause in its contract with the host State. Likewise, when a dispute has arisen under an investment treaty, counsel should carefully consider using International Center for the Settlement of Investment Disputes arbitration option. However, International Center for the Settlement of Investment Disputes arbitration is not the best option in every situation. There may well be considerations militating in favor of other dispute resolution options, for example, ad hoc arbitration under the United Nations, Commission on International Trade Law (UNCITRAL) Arbitration Rules, or arbitration under institutional rules other than those of International Center for the Settlement of Investment Disputes. We address some of the main advantages of International Center for the Settlement of Investment Disputes arbitration below.

     Article 25 of the Convention defines the scope of International Center for the Settlement of Investment Disputes jurisdiction. In the opening paragraph of that Article, the Contracting States agree:

(I) 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. When the parties have given their consent, no party may withdraw its consent unilaterally.

     Under Article 25 of International Center for the Settlement of Investment Disputes Convention, the parties' consent to submit a dispute to International Center for the Settlement of Investment Disputes arbitration is a threshold requirement to establish International Center for the Settlement of Investment Disputes tribunal's jurisdiction over the matter. The Executive Directors of the World Bank, in their 1965 Report on International Center for the Settlement of Investment Disputes Convention, stated emphatically consent of the parties is the cornerstone of the jurisdiction of the

     Consent is the explicit expression of acceptance of International Center for the Settlement of Investment Disputes arbitration. The investor generally consents to arbitrate disputes that may arise with respect to a specific investment, while the host State may consent to arbitration either specifically or generically, i.e., anticipated classes of disputes. In contractual International Center for the Settlement of Investment Disputes arbitrations, the State consents in a direct written agreement with the investor or in a letter (as addressed in this chapter); in arbitrations "without private, , in comparison, the State consents in its national laws, BITs or other international investment agreements (as addressed in Chapter 3). As is made clear in the Preamble to International Center for the Settlement of Investment Disputes Convention (see Chapter 1), ratification of International Center for the Settlement of Investment Disputes Convention alone does not constitute consent.

If one were striving for brevity and nothing else, one might devise this International Center for the Settlement of Investment Disputes clause for an investment contract: The parties hereto consent to submit to the International Centre for Settlement of Investment Disputes any dispute relating to or arising out of this Agreement for settlement by arbitration pursuant to me Convention on the Settlement of Investment Disputes between States and Nationals of Other States.

Given the inherent complexity of contractual International Center for the Settlement of Investment Disputes arbitration, however, the Centre has published no such succinct multipurpose model clause. The Centre has instead developed 22 highly sophisticated clauses for various uses (the Model Clauses), along with explanatory notes for each. The Model Clauses are tailored to different types of disputes and different circumstances, such as:

(a) Consent in anticipation of subsequent ratification of International Center for the Settlement of Investment Disputes Convention by a non-Contracting State; (b) contracts signed by government agencies or subdivisions; (c) deemed nationality of the investor; (d) preservation of the right of the investor after compensation (including by insurers); and (e) exhaustion of local International Center for the Settlement of Investment Disputes website negligent simply to cut and paste from the Model Clauses. International Center for the Settlement of Investment Disputes arbitration clause must be adapted to the particular parties, the particular investment contract, and the particular investment disputes most likely to arise. Investors and governments alike should insist upon specialist advice before drafting or agreeing to International Center for the Settlement of Investment Disputes arbitration clause. Failure to do so has led to unintended consequences and frustration.


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