On 21 March 2022, the Member States of the International Centre for Settlement of Investment Disputes (ICSID) adopted a comprehensive set of amendments to ICSID arbitration and conciliation rules (“ICSID Arbitration and Conciliation Rules”) and a new set of rules prepared on mediation and fact-finding (together, the “ICSID Rules”). The amended ICSID Rules will come into force on 1 July 2022. It is hoped that the ICSID Rules will increase access to the ICSID system, make the arbitral process significantly more time and cost effective, bring greater transparency to the process, offer clearer guidance on key issues, such as allocation of costs and disclosure of third-party funding and facilitate more consistent decision making.
Established in 1966, ICSID is an international arbitration institution, which provides a settlement mechanism for investor-State disputes. A part of the World Bank Group, ICSID offers rules of procedure that are specifically designed for disputes between a host state and a foreign investor. ICSID Arbitration and Conciliation Rules were amended with a view of simplifying and streamlining the arbitral procedure. The amendments arrive following 5 years of consultations with the member states and Administrative Council and are the product of the institution’s experience of hundreds of arbitrations.
Amendments and innovations to the ICSID Rules
Time and Cost Efficiencies
- Expedited arbitration: Parties will be able to reduce the time of their proceedings by choosing to have their cases heard in shorter time within the framework of the new expedited arbitration rules.
- A more detailed request for arbitration: Pursuant to the amended ICSID Arbitration Rules, a description of the investment and of its ownership and control must be included in the request for arbitration. It is also recommended that the request for arbitration include additional information such as the number and method of appointment of arbitrators, the procedural language, the use of the expedited arbitration and the names of the persons and entities that own or control a requesting party that is a legal person.
- Electronic submission of documents and online hearings: In line with the green arbitration concept, the amended ICSID Arbitration Rules prescribes that all documents should be submitted electronically, unless special circumstances require paper filings. In addition, the amended ICSID Rules expressly provide for a remote first session hearing and leaves it to the discretion to the tribunal to hold the substantial hearing remotely as well.
- Clearer guidance on cost allocation: Under the previous ICSID rules, the arbitral tribunal had broad discretion to decide on cost allocation. The amended ICSID Arbitration Rules, however, provide clear guidance on how and when to allocate costs. The arbitral tribunal is expected to take in to account various factors such as the complexity of the case, the extent to which the parties acted in an expeditious and cost-effective manner and complied with the orders of the arbitral tribunal. In addition, the arbitral tribunal is encouraged to award costs at key stages throughout the proceedings so that the parties have visibility as to costs early on, rather than having to wait until the end of the proceedings.
- Security for costs: The amended ICSID Arbitration Rules prescribe that upon the request of a party, the arbitral tribunal may order any party asserting a claim or counterclaim to provide security for costs. In addition, the factors that the arbitral tribunal should consider when giving a security order are clearly stated, including the parties’ ability and willingness to comply with an adverse decision on costs and the existence of third-party funding.
- Bifurcation: The amended ICSID Arbitration Rules provide clearer guidance on the timing and procedure of bifurcation requests and lay out the factors that the arbitral tribunal must consider when exercising its powers, including whether the bifurcation will significantly reduce the time and cost of the proceedings.
Bringing greater transparency to the process
- Disclosure of third-party funding: The amended ICSID Rules dictate that parties utilising third-party funding disclose the identity and the address of any non-party from which they receive funding. If the third-party in question is a legal entity, the requirement of disclosure extends to any person/entity controlling the said third-party company. Third-party funding disclosure requirements are expected to increase transparency in the proceedings and eliminate conflicts of interest that may arise out of financing arrangements, thus avoiding challenges based on conflict of interest at the enforcement stage.
- Deemed consent to the publication of arbitral awards: The amended ICSID Arbitration Rules prescribe that if none of the parties object in writing within 60 days after the arbitral award is shared with them, the parties will be deemed to have given their consent to the publication of these arbitral award. Even if the parties do not consent, the ICSID may publish excerpts from these arbitral awards and the parties will have the opportunity to agree on redactions prior to the publication.
- Opportunity for third parties to attend hearings: If there is no objection from the parties, the arbitral tribunal could choose to open the hearings to third parties, witnesses and experts. In that case, the arbitral tribunal will also take necessary procedural measures to prevent the disclosure of any confidential or protected information. In addition, the ICSID will publish the records and transcripts of the hearings at the request of one of the parties unless the other party objects.
- Reasoned decisions on costs: As per the amended ICSID Arbitration Rules, all decisions on costs must provide reasons and include a statement regarding costs, including the fees and expenses of the arbitral tribunal.
- Provisional measures: The amended ICSID Arbitration Rules clarifies the circumstances in which the arbitral tribunal could grant provisional measures, taking into account the requirements of urgency and necessity, and the effect that the measures may have on the parties.
New rules prepared with respect to mediation and fact-finding
In addition to the amendments to the existing ICSID Arbitration and Conciliation Rules, a new set of procedural rules has been adopted in relation to mediation and fact-finding. Mediation rules provide a process for the negotiation and settlement of an investment dispute between the parties, and the fact-finding rules provide an impartial and target-oriented assessment of the dispute. Both sets of rules can be used in an existing arbitration or on a standalone basis.
Expanding access to the ICSID Rules
The current Additional Facility Rules allow for arbitration of investment disputes between parties where one is not a Contracting State or a national of a Contracting State. The amendments will allow access to the Additional Facility Rules even if neither party is a Contracting State or a national of a Contracting State, providing wider access to ICSID.
In fact, regional economic integration organisations such as the EU could be a party to the proceedings under the ICSID Additional Facility Rules. There is no doubt this amendment will expand the use of ICSID arbitration around the world.
The ICSID Rules were amended for the fourth time in their history with an aim to modernise, simplify and streamline their content, and significantly improve transparency and accountability while providing necessary measures to prevent the disclosure of confidential and sensitive information.
For more information on the comprehensive amendments made to the ICSID Rules and investment arbitration, contact us through our following e-mail addresses: [email protected], [email protected] and [email protected].