Proposed Rule Changes at the Leading Institution for the Resolution of International Investment Disputes
By Sara Nadeau-Séguin
On August 3, 2018, the International Centre for Settlement of Investment Disputes (ICSID) published a comprehensive set of proposed changes to modernize its rules for resolving disputes between foreign investors and states. This article highlights the most important changes proposed to the ICSID Arbitration Rules, which are the procedural rules used to settle disputes between an ICSID Contracting State and nationals of another Contracting State.
On August 3, 2018, the International Centre for Settlement of Investment Disputes (ICSID), the leading institution for the resolution of international investment disputes, published a comprehensive set of proposed changes to modernize its rules for resolving disputes between foreign investors and states.
This is the fourth amendment to the ICSID Rules since their enactment in 1967, and according to ICSID, the most comprehensive and far-reaching amendment yet. The ICSID Secretariat has presented the comprehensive reform as intended to modernize the rules for resolving disputes between foreign investors and states, and “make the process increasingly time and cost effective while maintaining due process and a balance between investors and States”. With new rules providing for enhanced transparency in the arbitral process, arbitrator and third-party disclosure, as well as expedited proceedings, the new draft also appears intended to address the current criticisms to the legitimacy of investor-state arbitration, as well as its perceived inefficiencies.
While the proposed reform contemplates changes to different sets of ICSID rules and regulations (including the financial and administrative rules, the institution rules, and the Additional Facility rules for arbitration and conciliation), the following highlights the changes proposed to the ICSID Arbitration Rules, which are the procedural rules used to settle disputes between an ICSID Contracting State and nationals of another Contracting State.
- Obligation to disclose third party funding: The changes to the ICSID arbitration rules would require the parties to disclose, as soon as the case is registered, whether they have third-party funding, as well as the source of that funding. The obligation would apply through the proceeding, and the name of any involved funder would be provided to potential arbitrators prior to their appointment to avoid inadvertent conflicts of interests. Arbitrators would be required to disclose whether they have any relationship to the funder.
- Enhanced Transparency: The ICSID Convention, which is not being amended at this time, requires the consent of both parties to publish an award. This rule stays in place, but a new provision deems that a party has given consent to publish awards, decisions and orders unless it objects in writing within 60 days. If a party does object, the proposed rules permit ICSID to publish excerpts of the legal reasoning of the award, with an established process and timeline to do so.
- Bifurcation: ICSID has proposed an express rule allowing bifurcation, according to which parties are required to make a request for bifurcation of preliminary objections within 30 days of the memorial on the merits or ancillary claim. Preliminary objections would need to be filed as soon as possible, at the latest on the date for filing the counter-memorial if the objection relates to the main claim.
- Security for costs: A new, stand-alone rule would allow a tribunal to order security for costs. The rule states that the Tribunal must consider the relevant party’s ability to comply with an adverse decision on costs and any other relevant circumstances
- Disqualification of Arbitrators: The process for challenging arbitrators has been revised, including the introduction of an expedited schedule for parties filing a challenge. Parties must now file a disqualification motion within 20 days after the basis for the challenge arises, replacing the previous requirement that it be made “promptly”, and a decision must be made 30 days after the parties’ final submissions. Moreover, arbitrations are no longer automatically suspended upon the filing of a challenge. Instead, the proceedings continue with the challenged arbitrator unless the parties agree otherwise. If the challenged arbitrator is ultimately disqualified, either party may request that the newly constituted tribunal reconsider any decision made while the disqualification request was pending. An enhanced declaration of independence and impartiality is also proposed for arbitrators.
- Timing of Awards: New timelines are proposed for issuing awards. Awards must be rendered within 60 days after the last submission on an application for manifest lack of legal merit, 180 days after the last submission on a preliminary objection, and 240 days after the last submission on all other matters. Tribunals are to use their best efforts to meet these deadlines and advise parties if they cannot, with a revised anticipated delivery date.
- Expedited Proceedings: Parties may opt to use newly drafted rules for expedited proceedings featuring additional and shortened timelines. Parties must select the expedited arbitration rules within 30 days from the notice of registration, and must select a tribunal within 30 days of registration. Parties can opt for a sole arbitrator or a three person tribunal. The rules also include provisions for expedited timetables for the filing of memorials, counter-memorials, and replies and for hearings.
- Electronic Filing: Under the proposed rules, all filings are electronic unless there are special reasons for paper filing.
ICSID member states and the public had until 28 December 2018 to submit written comments on the proposed rules. The following ICSID Member States submitted comments on the proposed amendments: Spain, the Netherlands, Italy, Togo, the European Union and its Member States, Indonesia, Qatar, and Austria. Members of the public, including arbitration practitioners and arbitral institutions, also submitted comments. All comments are posted on the ICSID website and can be accessed here: email@example.com
Once finalized, a reform package will be presented to the ICSID Administrative Council for a vote at its annual meeting in 2019 or 2020. The amendments require the approval of two-thirds of ICSID member states.
Sara Nadeau-Séguin is a senior associate in the arbitration team of Woods LLP. Her practice focuses on complex international litigation and arbitration. Before joining Woods, Sara worked for many years in the international arbitration departments of international firms in both London and Paris.