What is the ICSID?
The International Centre for Settlement of Investment Disputes (ICSID), based in Washington D.C., was established in 1966 under Article 1(1) of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention).
The ICSID Convention is a multilateral treaty formulated by the executive directors of the World Bank to promote international investment. ICSID functions as an independent, neutral, and effective dispute settlement institution. Its availability to investors and states enhances confidence in the dispute resolution process and promotes cross-border investment.
ICSID also serves as a forum for state-to-state disputes under investment treaties and free trade agreements, and as an administrative registry.
It provides for the settlement of disputes by conciliation, arbitration, or fact-finding. The ICSID process is designed to accommodate the unique characteristics of international investment disputes, maintaining a balance between the interests of investors and host states.
Each case is considered by an independent conciliation commission or arbitral tribunal after hearing evidence and legal arguments from the parties. A dedicated ICSID case team is assigned to each case to provide expert assistance throughout the process.
To date, ICSID has administered more than 600 cases and remains the world’s leading institution for international investment disputes. States have recognised ICSID as a forum for investor-state dispute settlement in most international investment treaties, as well as in numerous investment laws and contracts.(1)
Who Uses ICSID Arbitration?
The purpose of ICSID is to provide facilities for the conciliation and arbitration of investment disputes between contracting states and nationals of other contracting states, in accordance with Article 1(2) of the ICSID Convention.
ICSID’s jurisdiction extends to any legal dispute arising out of an investment between:
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A contracting state (or any designated constituent subdivision or agency of that state), and
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A national of another contracting state,
where both parties have consented in writing to submit the dispute to ICSID (Article 25(1)).
What is the ICSID Arbitration Process?
Any contracting state or its national wishing to institute arbitration proceedings must submit a written request to the ICSID Secretary-General. A copy of this request is then sent to the other party, outlining the facts and legal issues in dispute. The case will be registered unless it is manifestly outside ICSID’s jurisdiction (Article 36).
Once registered, an arbitral tribunal is constituted and a first session is held to address preliminary procedural matters. The proceedings generally comprise two main phases:
- A written phase, followed by
- In-person hearings.
After both parties present their case, the tribunal deliberates and issues its award in writing (Article 48(2)).
ICSID proceedings may be held in any agreed location. Hearings and sessions may also be conducted via phone or video conference where appropriate, to reduce costs and improve efficiency (Articles 37–43).
How Are ICSID Awards Enforced?
An ICSID award is binding on the parties and is not subject to appeal or any remedy other than those provided for in the ICSID Convention. Each party must comply with the award unless enforcement has been stayed under the Convention (Article 53(1)).
Each contracting state must recognise the award as binding and enforce its pecuniary obligations as if it were a final judgment of its own courts (Article 54(1)).
For states with a federal constitution, enforcement may be carried out through the federal courts, which must treat the award as a final judgment of the courts of a constituent state (Article 54(1)).
A party seeking recognition or enforcement must submit a certified copy of the award (issued by the Secretary-General) to the competent court or authority designated by the contracting state (Article 54(2)). Each state must notify ICSID of its designated enforcement authority.
The execution of an ICSID award is governed by the laws concerning the execution of judgments in the state where enforcement is sought (Article 54(3)).
Authored by
Lee Xin Div
Senior Associate, Gan Partnership
xindiv@ganlaw.my
Endnote
(1) Further information is available here.
