New Rules and Regulations for the World Bank’s International Centre for Settlement of Investment Disputes (“ICSID”) take effect from tomorrow, July 1, 2022. This is the fourth round of amendments since the ICSID Convention Rules and Regulations were first adopted in 1967 and the first update since 2006. The new rules will apply to ICSID arbitrations to which consent is perfected from tomorrow (in the case of investment treaties, consent is typically perfected when the investor submits the dispute to ICSID in accordance with the State’s standing offer to arbitrate in the treaty). The new rules represent the culmination of a five-year process involving extensive consultation between ICSID Member States and the public. They aim to improve the time- and cost-effectiveness of ICSID’s procedures for investors and States alike, and to this end establish a range of new procedures to facilitate a more customised and efficient resolution of investor-State disputes. We discuss some of the most notable developments below.
1. New procedure for claims manifestly lacking in merit (Rule 41)
Respondents can now follow a clearer procedure to object that a claim is manifestly without legal merit. Although the procedure was available under the previous ICSID Arbitration Rules, there was a lack of clarity as to its scope and some tribunals had questioned whether the rule permitted objections on the basis that a claim manifestly lacked a jurisdictional basis.1 The new rules expressly provide that an objection that a claim is manifestly without legal merit may be made based on a lack of ICSID jurisdiction, a lack of competence on the part of the tribunal, or a lack of substance to the claim. The rules also specify new time limits: the objection must be made to the tribunal within 45 days of its constitution, and the tribunal must render its decision within 60 days after the later of the constitution of the tribunal or the last submission on the objection.
2. Requirement to disclose the identity of third-party funders (Rule 14)
The new rules require parties to disclose to ICSID the name and address of any non-party from which they have received funding, directly or indirectly, including (where applicable) the names of the persons and entities that own and control the funder. This disclosure must be made by written notice upon registration of the request for arbitration, or immediately upon concluding a third-party funding arrangement if after registration. ICSID has explained in its working papers that the key purpose of the rule is to prevent inadvertent conflicts of interest arising between a funder and arbitrator. The new rule also follows a wider trend towards increased transparency in arbitration, with the 2021 International Chamber of Commerce (“ICC”) Rules requiring disclosure of the existence and identity of third-party funders and UNCITRAL’s Secretariat having proposed that a similar provision be included in future investment treaties.2
3. Clarification that security for costs may be ordered (Rule 53)
Previously, the rules contained no express provision granting tribunals the power to order security for costs. However, ICSID tribunals have occasionally granted security for costs pursuant to their general power to grant provisional measures under Article 47 of the ICSID Convention and Rule 39 of the ICSID Arbitration Rules. This required the party applying for security to demonstrate “exceptional circumstances”3 – a threshold which ICSID acknowledged was difficult to satisfy in practice.4 The new rules state that tribunals shall consider all relevant circumstances in assessing such an application, including the opposing party’s ability and willingness to comply with an adverse costs decision, the effect on that party’s ability to pursue its claim, and the conduct of the parties. In assessing these circumstances, the tribunal will also consider the existence of any third-party funding.
The inclusion of specific criteria for the granting of security for costs is a notable development. Whilst most other institutional rules permit orders for security for costs, such rules are typically silent as to the relevant criteria to satisfy such order.5 In the investor-State context, this lack of transparency has been regarded as particularly dissatisfactory, with the UNCITRAL Secretariat having highlighted the need to provide a more predictable framework for security for costs, including greater clarity as to the relevant conditions a party must satisfy.6
4. Improved transparency (Rule 62)
The ICSID Convention provides that ICSID shall not publish an award without the consent of both parties. This general principle remains unchanged under the new rules, but its application has been switched from “opt in” to “opt out”. The new rules provide that a party will be deemed to have given its consent to publish an award unless it objects in writing within 60 days of the dispatch of the award. Arbitrating parties should be aware of this important change, or else they may lose their right to object to the publication of an award. Even if a party does object, the new rules preserve ICSID’s right to publish excerpts from the award, and now specify a clear timeline for this process and for parties to provide submissions as to any confidential or protected information. This shift towards greater transparency follows the trend set by the 2014 UNCITRAL Rules on Transparency for Treaty-based Investor-State Arbitration (the “UNCITRAL Transparency Rules”). However, unlike the UNCITRAL Transparency Rules, the ICSID Rules, being limited to the scope of the ICSID Convention, do not go so far as to provide that awards must be made available to the public subject to the protection of confidential information.7
5. Expedited Proceedings (Rules 75–86)
Parties may now opt for an expedited arbitration proceeding by consenting to procedural rules which could cut case times in half—potentially allowing an arbitration to conclude within around sixteen months from the date of registration of the request for arbitration. The availability of this fast track is a welcome development: parties to ICSID proceedings have expressed frustration at the often lengthy lifespan of proceedings and the associated cost of participating in such proceedings. ICSID has introduced the expedited procedure to address these concerns, and has observed that it may prove particularly helpful in making investment arbitration accessible to small- and medium-sized companies. However, given the condensed timelines—which provide, for example, just 40 days for the filing of reply submissions and require the hearing to be held within 60 days of the filing of the last submission—the new procedure may not be suitable for more factually and legally complex claims. The new rules therefore allow a tribunal to decide, at the request of a party, that an arbitration proceeding shall no longer be expedited.
6. Expanded Access to ICSID Additional Facility
Finally, where previously the ICSID Additional Facility Arbitration and Conciliation Rules applied to investment disputes where either the host State or the investor’s home State was an ICSID Member State, the new rules allow such cases to be heard, with the consent of the parties, where neither the claimant’s home State nor the respondent State is an ICSID Member State. This includes disputes arising between a Regional Economic Integration Organisation, such as the European Union, and a national of a non-constituent State. This is a particularly significant development: as the EU itself submitted in its submission on the rule amendments, the EU is becoming much more active in its international investment policy and has now concluded a number of international investment agreements between itself and third States.8 This typifies a wider trend in which States are increasingly negotiating investment agreements as regional entities. As a result of this amendment, all investor disputes with the EU will effectively now be eligible for administration by ICSID, so long as the parties consent.
The new rules signal a welcome shift away from a “one-size-fits-all” approach to investor- State disputes. Building on past experience (having now administered some 700 investment disputes), ICSID has responded to parties’ desire for greater certainty and choice as to the procedures available to them. The success of global foreign investment depends on parties having access to a transparent and effective dispute-resolution regime, and the new rules aim to further this goal by making ICSID’s processes more robust and cost-effective. It is to be hoped that the new rules will thereby advance parties’ goal in opting for arbitration in the first place: to obtain resolution of their disputes in a neutral forum that is both flexible and reliable.
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