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Modernising the ICSID Convention Rules: latest amendments and changes

Posted on 22 March 2022

Since it was established in 1966, the ICSID Convention has become an invaluable tool for the resolution of investor/state disputes. With over 160 signatories, a high proportion of claims between states and foreign investors are heard by tribunals established under the ICSID Rules. Last year, a record 70 new ICSID cases were registered. Although ICSID administers cases under a variety of rules, the majority that fall under its auspices are governed by the ICSID Convention Institution and Arbitration Rules or the ICSID Additional Facility Rules, which provide a clear and comprehensive framework for the commencement and management of any case.

However, the Rules were last updated in 2006. In the period since then, other sets of arbitration rules have gone through significant changes – in a number of cases, multiple changes – to keep up with developments in practice and the wishes of parties. In October 2016, ICSID began a process to amend the ICSID Rules. On 21 March 2022, that process resulted in the approval by ICSID's Administrative Council, of a new set of Rules.

In short, ICSID's aims in introducing these amendments were to modernise the rules based on experience in previous cases; improve time and cost efficiencies whilst maintaining due process; and increase the use of technology.  Below we summarise some of the key changes, which will come into effect on 1 July 2022.  

Significant Amendments

  • Expedited Arbitration: The new rules introduce an opt-in expedited arbitration procedure, which sets out a shorter and more streamlined timetable for the establishment of the Tribunal, filing of submissions and rendering of the award, together with page limits for memorials, replies and rejoinders. It is hoped that this new procedure will increase access to investor/state arbitration for small to medium sized investors.
  • Security for Costs: Noting that previously, in order to obtain security for costs, parties were required to meet the legal standard for provisional measures, which was often difficult to do in practice, Rule 53 now expressly allows a Tribunal to order security for costs. The Tribunal will consider the party's ability and willingness to comply with an adverse decision on costs, the effect of providing security on their ability to claim or counterclaim, the conduct of the parties and any other relevant circumstance, including the existence of third party funding. Where a party fails to comply with an order for security, the Tribunal may suspend the proceedings, and if the proceedings are suspended for more than 90 days they may be discontinued.
  • Disclosure of Third Party Funding: Third party funding is playing an increasingly important role in investor-state disputes, but concerns have been expressed that an undisclosed funding arrangement may lead to a conflict of interest. Rule 14 now requires a funded party to disclose the name and address of any non-party from whom they have directly or indirectly received funds for the pursuit or defence of the proceedings (including the names of the beneficial owners and controllers of the funder). The Tribunal may also order disclosure of further information regarding the funding arrangement.
  • Non-disputing parties: The new rules also expand on the circumstances the Tribunal may consider when determining whether to permit a "non-disputing party" (i.e. a party not involved in the arbitration) to make submissions in the proceedings, including considering the non-disputing party's activities and whether they have a direct or indirect affiliation with one of the parties to the dispute.  A party to the same Treaty that forms the basis of the dispute but which is not party to the dispute (a "non-disputing Treaty party") may also be permitted or invited to make submissions on the interpretation of the Treaty at issue. The Tribunal will provide non-disputing parties and non-disputing Treaty parties with relevant documents filed in the proceedings unless the parties object. 
  • Use of technology: As in many other jurisdictions, the COVID-19 pandemic has increased the adoption of electronic filing in ISCID proceedings. The new rules now expressly provide that all filings must be made electronically, although in special circumstances the Tribunal may order documents to be filed in a different format. 
  • Disqualification of arbitrators: Applications to disqualify an arbitrator must now be made within 21 days of the constitution of the Tribunal or, if later, the date the applicant first knew of the basis for the challenge (replacing the former requirement that an application be filed "promptly").  Although a decision should be issued within 30 days of submissions, in order to avoid delay the parties may agree to continue proceedings whilst a disqualification application is pending. 
  • Bifurcation: Pursuant to Rule 42, a party may now expressly request that proceedings be bifurcated so as to allow an issue in the case to be addressed separately.  Such a request should be filed as soon as possible, and in deciding whether to bifurcate, the Tribunal will consider all relevant circumstances, including whether bifurcation will materially reduce the time and cost of proceedings, and whether the questions to be addressed are so intertwined as to make bifurcation impractical. Where a request for bifurcation relates to a preliminary objection to the Tribunal's jurisdiction, the request must normally be filed within 45 days of the memorial on the merits or ancillary claim. The Tribunal may also order bifurcation on its own initiative.
  • Greater transparency: Transparency in investor/state disputes continues to be an important and contentious topic.  While the requirement in the ICSID Convention that all parties consent to publication of an award remains, the new Rules now provide that a party is deemed to have consented to publication of awards, unless it has objected in writing within 60 days after despatch of the document. Further, the rules now provide for decisions and orders to be published with redactions agreed to by the parties or decided by the Tribunal.
  • Timing of awards: Under the new rules the Tribunal is obliged to render an award as soon as possible, and in any event no later than 60 days after submissions where a party contends that the claim is manifestly without legal merit; 180 days after submissions where there is a preliminary objection; or otherwise within 240 days.
  • Expansion of Additional Facility Rules: The Additional Facility Rules, which are designed to enable investor/state proceedings to proceed where the jurisdictional requirements of the Convention have not been met, can now be invoked where neither the claimant nor the respondent are an ICSID Contracting State or national of a Contracting State. This effectively means that all investor/state disputes (including those involving Regional Economic Integration Organisations, or REIOs) can be administered by ICSID. 
  • Mediation Rules: A new set of rules have been developed in response to requests for greater mediation capacity. The ICSID Mediation Rules have a broad scope, and allow ICSID to administer any mediation proceeding that relates to an investment and involves a State or REIO, where the parties have given their consent.
  • Fact-finding Rules: ICSID has introduced a new set of rules providing for parties to agree on the establishment of a fact-finding Committee to review and consider issues put to it by the parties. The Report that is produced will not be an arbitration award, but may, if the parties so agree, contain recommendations.   

Conclusion

These changes represent the most extensive review of ICSID's Rules to date, have been a long time in the making. They address a number of topics that have attracted significant debate and discussion in recent years. As well as addressing transparency concerns and the greater availability and use of third party funding, and instituting changes to promote efficiency and reduce costs, the new rules also embrace modern, gender-neutral language and resolve inconsistencies between the French, Spanish and English language versions. Time will tell how some of the new provisions fare in practice, and it will be interesting to see how much take-up there is from parties of expedited proceedings and fact-finding committees. 

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