The International Centre for Settlement of Investment Disputes (ICSID) as the principal global forum for investor-State arbitrations recently amended its procedural rules. Arbitrations that begin before ICSID after July 1, 2022, will be heard under the new set of arbitration rules for resolving disputes between foreign investors and their host States. This is the first amendment to the ICSID rules since 16 years (2006), and the most comprehensive update modernization of the ICSID’s rules. The previous 56 rules have now grown into 86 rules.
The goal of the revised rules is to make ICSID cases more efficient for parties, to broaden access to ICSID’s facilities and services, and to ensure greater public transparency in the conduct and outcome of proceedings. In more detail:
1. Improving time and cost efficiency of proceedings
- Special procedure to dispose of a claim that is "manifestly without legal merit". In an effort to flush out manifestly unmeritorious claims earlier in the process, the 2022 Rules now make it explicitly clear that the objection may relate not only to the substance of the claim, but also to ICSID's jurisdiction or the competence of the tribunal (Rule 41). Rule 41 requires such objections to be raised within 45 days of the constitution of the tribunal and the tribunal would have to render its decision within 60 days after the later of the constitution of the tribunal or the last submission on the objection.
- New opt-in expedited arbitration rules (Rules 75 to 86). These amendments should contribute to reducing the length of proceedings considerably. The parties can now jointly elect either a sole arbitrator or a three-member tribunal (a sole arbitrator is the default). Among other benefits, the expedited arbitration procedure could promote investment and access to dispute settlement by small and medium enterprises, especially those with limited financial resources.
- Case management conference. There is a new requirement under Rule 31 that tribunals convene at least one case management conference after the first session to clarify/narrow the issues in dispute, identify uncontested facts or address other procedural/substantive issues.
- Consolidation. Rule 46 provides for the consolidation or coordination of related cases.
- Mandatory Award deadline. 240 days after the last submission (Rule 58).
- Good faith duty. New duty for the tribunal and the parties to conduct the proceedings in good faith and in an expeditious and cost-effective manner (Rule 3).
- Applications for arbitrator disqualifications. The old Rule 9 required proposal to be made promptly. New Rule 22 imposes a clear time limit of 21 days.
- Bifurcation of proceedings. There was no express provision dealing with bifurcation under the previous rules and such requests are left to the tribunal’s broad discretion. Currently, the new Rule 42 specifies factors that the tribunal shall consider in exercising its powers.
2. Increasing transparency
- While the consent of both parties is still required for the publication of awards and annulment decisions, Rule 62(3) now provides for the deemed consent of a party who does not object within 60 days. Likewise, procedural orders and decisions will be published, with redactions as agreed to by the parties (or by the tribunal if the parties disagree) (Rule 63). The publication of procedural orders may facilitate the development of consistent jurisprudence with regard to procedural issues in ICSID arbitrations.
- New requirement for parties to set out the description of an investment and its ownership and control in their Request for Arbitration, which will require greater transparency for complex claims that were previously able to rely on generalized descriptions of the relevant assets.
- Public hearings: There is now also a presumption in favour of public hearings, unless either party objects (Rule 65(1)).
3. Enhancing Disclosures – third party financing
- For the first time, the disclosure of third-party funding is required throughout the life of a case to avoid conflicts of interest that may arise out of such financing arrangements. Under Rule 14, funded parties are required to file a written notice disclosing the name and address of any non-party that funds the proceedings through a donation, grant or in return for remuneration dependent on the outcome of the proceedings. Disclosure of further information regarding the arrangements may be ordered by the tribunal.
4. Increased party access to ICSID’s specialized rules and services
Arbitration and conciliation under the ICSID Convention remain available only to Member States and their nationals. But the ICSID Additional Facility—originally established in 1978—is now available for arbitration and conciliation proceedings where one or both disputing parties are not an ICSID Member State or a national of one.
Regional Economic Integration Organizations (REIOs) as new parties to proceedings REIO’s (e.g. the European Union, ASEAN) may now also be a party to proceedings under the amended Additional Facility Rules. This accommodates international investment agreements that are signed by an REIO on behalf of regional entities.
This significant lowering of the jurisdictional requirements is likely to promote wider use of the ICSID Additional Facility Rules.
5. Cost Allocation and Security for Costs
- The “old” ICSID rules did not provide guidance as to how tribunals should exercise their discretion with regard to the allocation costs. Rule 52 now addresses these factors, i.e. the outcome of the proceeding or any part of it, the complexity of the issues and the parties' conduct, including the extent to which they acted in an expeditious and cost-effective manner. Further, in addition to submitting a statement of costs, each party must also file a written submission on the allocation of costs.
- Rule 53 also empowers tribunals to award security in relation to both claims and counterclaims and sets out the procedure and the relevant circumstances that the tribunal shall consider and also what happens if a party fails to comply with an order to provide security for costs.
The above changes should ensure not only that the somewhat dated previous ICSID Rules correspond to current arbitration requirements, but also that proceedings under the revised rules will be conducted more (cost-)effectively and transparently.