Paper presented at the AfAA 2nd Annual International Arbitration Conference[1], 15th - 16th April 2021 

Introduction

The International Centre for Settlement of Investment Disputes (“ICSID” or the “Centre”) started its operations with the entry into force of the ICSID Convention. Since then, its Rules have effectively served to advance the Centre’s purpose of “provid[ing] facilities for conciliation and arbitration of investment disputes”[3] in the “cause of economic development.”[4] At the same time, ICSID has historically taken the pragmatic approach of always improving and updating its Rules. In keeping with this approach, ICSID launched its latest rule amendment project in 2016 and is collaborating with the UNCITRAL Secretariat on a draft Code of Conduct for Adjudicators in Investor-State Dispute Settlement.[5]

This paper provides 1) a description of the Rule amendment process at ICSID from a historical perspective, 2) a status update on the current amendments, and 3) a discussion of some of the main recommendations made in the current amendments. 

Background on Amendments at ICSID

ICSID’s current rule amendment process is its most ambitious and far reaching.  Questions like how the amendment process works at ICSID and what amendments the Centre has made in the past rightly spark interest.

The ICSID Convention came into force on October 14, 1966.  According to its Article 66, amending the ICSID Convention is a two-step process which requires, first, that two-thirds of the members of the Administrative Council decide to circulate a proposed amendment to all Contracting States, and second, that the Contracting States unanimously adopt the proposed amendment.[6] The stringent nature of these requirements explains why the ICSID Convention has not been amended yet. The task is not impossible, but it is difficult because it requires the totality of the Contracting States—currently 155—to agree.[7] 

The ICSID Arbitration Rules came into force on September 25, 1967.  Article 6(1) of the ICSID Convention tasks the Administrative Council with the adoption of rules of procedure for conciliation and arbitration proceedings and provides that such decisions are to be made by a majority of two-thirds of the members of the Administrative Council. According to Article 4 of the ICSID Convention, the Administrative Council consist of one representative of each Contracting State. Thus, amending the Arbitration Rules is a much simpler process than amending the ICSID Convention and, as the Convention’s drafting history suggests, this was intentional.[8]

The ICSID Additional Facility Rules came into force on September 27, 1978. They were designed to allow the Centre to administer conciliation, arbitration and fact-finding proceedings for certain disputes that did not fulfill the jurisdictional requirements of the ICSID Convention.  Based on Regulation 7(1) of ICSID’s Administrative and Financial Regulations (“AFR”), amending the Additional Facility Rules only requires approval by a majority of the votes cast.[9]

In its 55-year history, ICSID has amended its Rules and Regulations three times: on September 26, 1984; January 1, 2003; and April 1, 2006.[10]  Cumulatively, these amendments have touched the Arbitration Rules and the Administrative and Financial Regulations under the ICSID Convention and Additional Facility and the Institution Rules under the ICSID Convention. While the 1984 and 2003 amendments only addressed a limited number of issues, the 2006 amendments were rather forward-looking.

-        With respect to the Centre’s Administrative and Financial Regulations, the 1984 amendments saw the alignment of the fees paid for lodging different proceedings, made applicants responsible for the payment of advances in annulment proceedings, and removed the requirement that the secretary of the commission, tribunal or ad hoc committee attend all meetings of that body.[11] Regarding the Arbitration Rules, the 1984 amendments touched Rule 21 on holding pre-hearing conferences; introduced Rule 39(5) on seeking provisional measures from local courts; and revised Rule 48(4) on publishing excerpts of the legal reasoning of tribunals.[12] 

-        The 2003 amendments eliminated differences between the Additional Facility Rules and ICSID Rules that “were unnecessary and needlessly complicated the task of the ICSID Secretariat.”[13] Also, the Additional Facility AFRs were dropped and the relevant provisions of the ICSID AFRs were made applicable to Additional Facility proceedings.[14] Other changes concerned Institution Rule 7 reminding parties that the registration of requests is without prejudice to the powers and functions of conciliation commissions and arbitral tribunal with respect to jurisdiction, competence, and the merits; Rule 1(3) and (AF) Rule 7 on the nationality of arbitrators; Institution Rule 2 and (AF) Rule 3 about evidence of the steps taken by juridical entities to authorize the initiation of proceedings; Rules 4 and 9 on adding flexibility to the deadlines on the appointment and disqualification of arbitrators; and Rule 46 on the time limit for the preparation of awards.[15]  

-       The 2006 amendments concerned Rule 6 and (AF) Rule 13(2) on expanding the scope of arbitrator disclosures; Rule 32(2) and (AF) Rule 39(2) on opening hearings to the public; Rule 37(2) and (AF) Rule 41(3) introducing submissions by non-disputing parties; Rule 39 providing for the expedited filing of requests for provisional measures; Rule 41(5) and (AF) Rule 45(6) introducing the manifest lack of legal merit objection; and Rule 48(4) and (AF) Rule 53(3) making mandatory the prompt release of excerpts of the legal reasoning of tribunals. The amendments also concerned AFR 14 clarifying that requests for increases in the rates applicable to commission, tribunal and ad hoc committee members could only be made in exceptional circumstances and submitted through the Centre.[16]

The Current ICSID Rule Amendment: Process and Scope

On October 7, 2016, at the 50th Annual Meeting of its Administrative Council, ICSID advised its Member States that it would commence a consultation process to consider potential amendments to its Rules.[17]  ICSID also invited its Member States to suggest amendment topics.[18]  On January 25, 2017, ICSID invited members of the public to file suggestions for Rule amendment.[19] Accompanying these invitations, ICSID published a list of topics for potential amendment.[20]  Subsequently, ICSID produced a first working paper (“Working Paper # 1” or “WP#1”) in August 2018, integrating numerous comments received from States and the public. The purpose of WP#1 was “explain the basis for a proposed change, note relevant considerations, and suggest the potential wording or structure of amendments.”[21]  ICSID held a Consultation Meeting with States in September 2018 and, subsequently, received further comments from States and the public on WP#1.  ICSID compiled these and published them on the website in March 2019.

Since March 2019, ICSID has produced three additional working papers,[22] held two more Consultation Meetings with States, and published three further compendia of State and public comments. A detailed timeline of the amendments is provided in the table below. With the publication of WP#4 in February 2020, ICSID invited comments on the latest proposals and planned an in-person Consultation Meeting with States.  The Consultation Meeting was cancelled, however, due to the COVID-19 pandemic. The number of outstanding issues to be addressed has narrowed considerably, and the ICSID Secretariat is currently preparing WP#5 that addresses these issues, to be published in the late Spring of 2021. 

Timeline of the amendments[23]

Date |  Step in the process

Oct. 2016 | Contracting States invited to suggest topics for rule amendment

Jan. 2017    | Public invited to suggest topics for rule amendment
Aug. 3, 2018    | Working Paper #1
Sept. 27–28, 2018     | First Consultation Meeting with States
Oct. 2018          | Further online and in-person consultations
Mar. 15, 2019      | Compendium of State and public comments on WP#1
Mar. 15, 2019      | Working Paper #2
Apr. 7-10, 2019  | Second Consultation Meeting with States 
June 28, 2019    | Compendium of State and public comments on WP#2
Aug. 16, 2019    | Working Paper #3
Nov. 2019            | Third Consultation Meeting with States
Feb. 27, 2020    | Compendium of State and public comments on WP#3
Feb. 28, 2020    | Working Paper #4
Sept. 17, 2020  | Compendium of State and public comments on WP#4
Mar. 23, 2021    | Compendium of State comments on proposed amendments to ICSID Rules

As depicted in the table below, the current amendments cover the AFRs, Conciliation Rules and Arbitration Rules both under the ICSID Convention and the Additional Facility. Moreover, they cover the Institution Rules under the ICSID Convention and Fact-Finding Rules under the Additional Facility. Finally, they introduce new Mediation Rules under the Additional Facility.[24]

Scope of ICSID’s proposed amendments

ICSID Convention Proceedings	Additional Facility Proceedings
AFR	(Additional Facility) Rules
Institution Rules	(Additional Facility) AFR
Conciliation Rules	(Additional Facility) Conciliation Rules
Arbitration Rules	(Additional Facility) Arbitration Rules
	Fact-Finding Rules
	(Fact-Finding) AFR
	Fact-Finding) AFR
	Mediation Rules
	(Mediation) AFR

Main Recommendations

According to the ICSID Secretariat:

The overarching goals of the rule amendments are to modernize, simplify, and streamline the rules, while also leveraging information technology to reduce the environmental footprint of ICSID proceedings. The process draws on the lessons learned from hundreds of ICSID cases.[25]

The core objectives of the current amendments have been described as to: 1) reduce the time and cost of proceedings at ICSID, 2) expand the range of dispute settlement options offered by ICSID, and 3) continue to balance the interests of States and investors at ICSID.[26] What follows is a discussion of a selection of proposed rules exemplifying each of the core objectives. 

Reduce the time and cost of proceedings

Expedited arbitration

Expedited arbitration (“EA”) is one of the proposals made in response to comments received from various stakeholders that “investment arbitrations are too long and too costly.”[27] The proposal focuses on reducing the length of time taken by the three phases of the proceeding that last the longest: the constitution of tribunals, exchange of written pleadings, and preparation of the award.[28] ICSID’s EA is an opt-in model that will be available for arbitration and post-award remedy proceedings both under the ICSID Convention and Additional Facility. EA may be especially practical in facilitating the access of small and medium enterprises (“SMEs”) to international arbitration, especially in cases involving smaller scale claims. It may also be an attractive option in cases involving fewer factual or legal disputed issues.[29] 

As stated by ICSID, EA “provides less flexibility to change time frames, but more certainty as to the timing of the process.”[30] Thus, in terms of time frames, the process is designed to take 18 months or less from the registration of the request for arbitration until the issuance of the award. Proposed Rule 77 provides for a sole arbitrator to be appointed by default if the parties fail to notify the ICSID Secretary-General in writing of their election for a three-member tribunal within 30 days of consenting to the expedited process. Whether the tribunal is to consist of one or three arbitrators, there is a 60-day time frame from the date of consent to EA for concluding the tribunal constitution process. Proposed Rule 80 cuts in half (from 60 days in the normal process to 30 days) the time frame within which a first session is to be held from the constitution of the tribunal and makes holding it by telephone or other electronic means of communication the default, with an in-person meeting being an option if both parties and the tribunal agree. Proposed Rule 81 provides deadlines for the filing of all written submissions (60 days for the memorial and counter-memorial each and 40 days for the reply and rejoinder each) and page limits for these submissions (200 pages for the first round and 100 for the second round). The hearing is to be held within 60 days of the last written pleading and statements of costs submitted 10 days thereafter. The tribunal must render its award no later than 120 days from the date of the hearing.            

In terms of process, the expedited nature of the proceeding requires a few “compromises”[31] in order “to strike a balance between an expedited procedure under commercial arbitration rules and a realistic schedule for investment disputes.”[32] For example, jurisdictional objections can be raised but for consideration with the merits and not examined in a separate, bifurcated phase. It is possible to file various applications, such as provisional measures, but their consideration runs in parallel with the procedural calendar without suspension. The parties’ consent to EA extends to the post-award remedy phase, such that for an award rendered under the EA process, any post-award remedy proceedings will fall under that process. Parties can opt out of EA by agreement or a decision of the tribunal at the request of either party. The schema below illustrates the steps and time frames of EA.    

Click to view EA procedural steps and timelines[33]

Time Limits

With the amendments, ICSID has made concrete proposals to reduce the time frames taken to accomplish various steps in a proceeding, starting with a new general duties provision. This provision makes it a shared burden for tribunal and parties to ensure that the process is timely and cost-effective,[34] as shown in the box below. ICSID proposes a similar provision in conciliation proceedings under the ICSID Convention (Conciliation Rule 25) and in arbitration, conciliation, and fact-finding proceedings under the Additional Facility (Arbitration (AF) Rule 11, Conciliation (AF) Rule 33, and Fact-Finding Rule 13, respectively).

Rule 3 General Duties

(1) The Tribunal and the parties shall conduct the proceeding in good faith and in an expeditious and cost-effective manner.[35]

In addition, numerous rules now specify exact and/or reduced times for procedural steps. Generally, time limits may be extended, but both parties must agree, or the tribunal must find that the extension is justified by special circumstances. In particular, time limits prescribed by the Convention or the Rules may be extended, but only by agreement of the parties or decision of the tribunal that special circumstances exist that justify the failure to meet a time limit. Otherwise, procedural steps taken after the expiry of a time limit shall be disregarded (proposed Rule 11(2)).  Time limits fixed by the tribunal or the ICSID Secretary-General may be extended, but only by agreement of the parties or by a decision of the tribunal or Secretary-General based upon a reasoned application submitted by either party before the expiry of the time limit. Otherwise, a procedural step taken after the expiry of the time limit shall be disregarded, unless the parties agree otherwise or the tribunal (or Secretary-General) finds that special circumstances exist that justify the failure to meet a time limit (proposed Rule 11(3)). 

The call for heightened efforts to reduce the time and costs of proceedings is also made to tribunals. Under proposed Rule 12(1), the tribunal must make best efforts to meet time limits. If the tribunal cannot meet a time limit due to special circumstances, it must so advise the parties before the expiry of the time limit and provide the reason for it and anticipated length of the delay (proposed Rule 12(2)). ICSID also proposes Rule 31 (corresponding to proposed Arbitration (AF) Rule 40) to allow tribunals to convene case management conferences “[w]ith a view to conducting an expeditious and cost-effective proceeding” to identify uncontested fact, narrow issues in dispute, or address other issues relating to the resolution of the dispute.[36]  

Arbitration Rule 38 on the closure of proceedings is eliminated along with the 120-day time limit for issuing awards. This is because tribunals have developed a practice of not closing the proceeding until the award is ready, which means that Rule 38 does not perform the function it was meant to of reducing the time it takes to issue awards.[37] Instead, ICSID proposes Rule 58 which, in a more impactful way, provides actual time limits that are pegged to specific procedural steps for the issuance of the award:

• 60 days after the latest of the constitution of the tribunal, last written or oral submission for award rendered based on a manifest lack of legal merit;  
• 180 days after the filing of the last written or oral submission for award rendered on a preliminary objection in a bifurcated proceeding; and
• 240 days after the last written or oral submission in other matters.

Expand ICSID’s range of dispute settlement options

The dispute settlement options offered by ICSID consist of arbitration, conciliation and fact-finding.  The amendments propose to expand the current options and add new ones.

Additional Facility

Currently, Article 2 of the Additional Facility Rules authorizes ICSID to administer conciliation and arbitration proceedings where either the dispute arises out of an investment but the State party to the dispute or the State whose national is a party to the dispute is not an ICSID Contracting State, or the dispute does not arise out of an investment but the State party to the dispute or the State whose national is a party to the dispute is an ICSID Contracting State.  Article 2 also authorizes ICSID to administer fact-finding proceedings.  

Proposed Article 2, whose text is provided in the box below, now only focuses on arbitration and conciliation. ICSID proposes to continue to administer fact-finding proceedings under the Additional Facility but under a new set of stand-alone Rules.

Article 2 Additional Facility Proceedings

(1) The Secretariat is authorized to administer arbitration and conciliation proceedings for the settlement of legal disputes arising out of an investment between a State or an REIO on the one hand, and a national of another State on the other hand, which the parties consent in writing to submit to the Centre if:

(a) none of the parties to the dispute is a Contracting State or a national of a Contracting State;

(b) either the State party to the dispute, or the State whose national is a party to the dispute, but not both, is a Contracting State; or

(c) an REIO is a party to the dispute.[38]

Proposed Article 2 expands the scope of current Article 2 with respect to arbitration and conciliation in two ways. First, Proposed Article 2 makes it possible for any State and the national of any other State to be parties to conciliation and arbitration proceedings under the Additional Facility, regardless of whether either State is an ICSID Contracting State. This inclusion accommodates some trends already observed in certain BITs[39] that allow disputes to be brought under the Additional Facility if both parties agree, where neither party is/comes from an ICSID Contracting State.[40] The requirement that the dispute arise out of an investment is kept because in the Centre’s experience, no disputes have been filed that did not arise out of an investment.[41]

Second, the disputants in conciliation and arbitration proceedings under the Additional Facility are no longer restricted to being a State and a national of another State. A Regional Economic Integration Organization (“REIO”) can be a party as a claimant or a respondent, and the proceeding can be between a State or REIO on the one hand and a national of another State on the other. The inclusion of REIOs in Additional Facility proceedings as parties is driven by the fact more and more REIOs, such as the European Union, are concluding in their own names international investment agreements (“IIAs”) that contain with dispute settlement provisions.[42] In addition, this sets the stage for an amendment of the ICSID Convention to include REIOs as ICSID Contracting Parties.[43] The fact that an REIOs can be parties to Additional Facility proceedings extends to the fact-finding and mediation rules. Rule 2(1) of the Fact-Finding Proceedings provides “[t]he Secretariat is authorized to administer fact-finding proceedings that relate to an investment, involve a State or an REIO, and which the parties consent in writing to submit to the Centre.” There is a similar provision at Rule 2(1) of the proposed Mediation Rules.

Mediation

As indicated above, ICSID is proposing a new set of stand-alone Mediation Rules under the Additional Facility as part of the amendment process. According to the ICSID Secretariat, the impetus for the Mediation Rules is that “[t]hey respond to the requests of stakeholders to provide greater mediation capacity. They complement new bilateral and multilateral treaties providing for mediation and more generally, the objective of the Centre to provide parties with a greater breadth of dispute resolution tools.”[44] Mediation, as a dispute settlement mechanism, is party-driven, informal, flexible, confidential, and cost-effective.

Under the ICSID Mediation Rules, the dispute would need to pertain to an investment but, as indicated above, the proceeding would be open to any State or REIO on the one hand and the national of any other State on the other hand, regardless of whether the relevant States are ICSID Contracting States.[45] Parties can undertake mediation on the basis of a pre-existing agreement or on an ad-hoc basis, and they can end the process anytime, by agreement of the parties or withdrawal of a party.[46] The process starts upon the filing of a request for mediation. Upon registration of the request by the ICSID Secretary-General, the parties can agree on the appointment of a mediator or co-mediators. Failing an agreement, the ICSID Secretary-General can make the appointment.[47] The parties have 15 days from the appointment of the mediator(s) to file their respective initial statements, and the mediator has 15 days thereafter to hold the first session for the determination of the mediation protocol.[48]  During the mediation, the mediator can meet with each party alone or with both parties together. The process can accommodate a hearing or exchange of documents akin to document production in arbitration. Information or documents exchanged cannot be used outside of the mediation process.[49] The process can end upon the withdrawal of a party, if the mediator(s) determine that it is unlikely to succeed, or if a settlement agreement is reached. If a settlement is reached, it can call for enforcement under the Singapore Convention on the enforcement of settlement agreements.[50]  The steps in the mediation process are depicted in the schema below.          

Click to view steps in an ICSID mediation proceeding[51]

Continue to balance the interests of States and investors

Third-party funding

Proposed Rule 14 on third-party funding (“TPF”) is new in arbitration proceedings under the ICSID Convention.  It is also proposed in arbitration under the Additional Facility (Arbitration (AF) Rule 23), conciliation under the ICSID Convention (Conciliation Rule 12), and conciliation under the Additional Facility (Conciliation (AF) Rule 21.  The Rule states, in part:

Rule 14 Notice of Third-Party Finding

(1) A party shall file a written notice disclosing the name and address of any non-party from which the party, directly or indirectly, has received funds for the pursuit or defense of the proceeding through a donation or grant, or in return for remuneration dependent on the outcome of the proceeding (“third-party funding”). [52]

First, the Rule provides a definition of TPF as ‘the direct or indirect receipt of funds to pursue or defend a proceeding, where such funds are provided by donation, grant or in return for remuneration that hinges on the outcome of the proceeding.’ The main obligation that arises under the Rule is one of disclosure which is satisfied by a party filing a written notice indicating whether it receives TPF and, if so, the name and address of the funder. The notice must be filed with the ICSID Secretary-General upon the registration of the request or, if the arrangement is made at a later date, immediately upon its conclusion. The party receiving TPF has a continuing obligation to notify the Secretary-General of any subsequent changes to the information contained in the notice.  This information is then provided to prospective or appointed arbitrators.  Finally, Rule 14 allows the tribunal to order the disclosure of information beyond what is contained in the notice of TPF at any stage of the proceeding if it deems necessary.

TPF is more and more commonly used in international dispute settlement not only by claimants to prosecute claims but also by respondents to defend them. The main reason for regulating TFP in ICSID proceedings is to avoid conflicts of interest between funders and arbitrators which, in turn, reinforces the legitimacy of the process. Correspondingly, the arbitrator and conciliator declarations of independence and impartiality contain an express requirement to disclose any relationship with a third-party funder.[53] 

Security for costs

Proposed Rule 53 is also new in arbitration proceedings under the ICSID Convention, and it is also proposed in arbitration under the Additional Facility (Arbitration (AF) Rule 63).  Rule 53 states, in part:   

Rule 53 Security for Costs

(1) Upon request of a party, the Tribunal may order any party asserting a claim or counterclaim to provide security for costs.

[…]

(6) If a party fails to comply with an order to provide security for costs, the Tribunal may suspend the proceeding. If the proceeding is suspended for more than 90 days, the Tribunal may, after consulting with the parties, order the discontinuance of the proceeding. [54]

As explained by ICSID, a security for costs “is intended to cover the costs that one party incurs in defending a claim asserted by the other party.”[55]  Under proposed Rule 53, any party asserting a claim or a counterclaim has the possibility to request, and the tribunal has the authority to order, security for costs.[56] The Rule lays out the applicable procedure, including a calendar for making submissions on a request for security for costs. The Rule also specifies relevant circumstances that a tribunal must consider when deciding the request. These include a party’s ability and willingness to comply with an adverse decision on costs, the effect that providing security for costs may have on the party’s access to justice, and the parties’ conduct (e.g., any abuse of procedure, the assertion of frivolous claims, or the non-payment of advances on costs).[57] The list is non-exhaustive, but the factors in it represent common practice.[58] The fact that a party may be impecunious or has TPF alone is not enough for the tribunal to order that that party provide a security for costs, although this consideration may be taken into account by the tribunal. The tribunal’s decision is rendered in the form of an order and not a recommendation. Compliance is mandatory, and non-compliance can result in the suspension of the proceeding until security is provided or a discontinuance if security is not provided within 90 days. The tribunal has the power to modify or revoke its order on its own initiative or at the request of a party.

Conclusion

This paper has provided a cross section of the ICSID amendment process and proposals, based on the wealth of materials, in particular the working papers, prepared by the Staff of the ICSID Secretariat from the launch of the amendments in 2016 until today.

As discussed above, ICSID amends its Rules in order to improve and update them and, ultimately, to continue to effectively serve its purpose. The extensiveness of the current amendments is, in a way, a testimony to the Centre’s success in this regard.  The explosion of its caseload has allowed ICSID to test its rules and, drawing from its rich experience and working with its Member States and members of the public, make the proposals currently under consideration. Given the experience with the on-going amendments, it is entirely foreseeable that future amendments might finally take on the ICSID Convention.

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