1
The Rule of Law in Post-Award Remedies: A Critical Analysis of
the Annulment Procedure under ICSID
DENIA ELLUL
STUDENT NUMBER: 11352248
SUPERVISOR: PROF. STEPHAN SCHILL
IN PARTIAL FULFILLMENT OF LL.M. INTERNATIONAL TRADE AND INVESTMENT LAW
2 Abstract
The main objective of this thesis is to identify, explore and reveal the shortcomings, if any, of the annulment mechanism under the ICSID Convention from a normative perspective and whether the rule of law is upheld during post-award stages through a combination of a descriptive and evaluative methodology.
In order to fully understand how the concept shall be utilised as a normative standard in investment treaty arbitration, a definition of the rule of law and elements falling under the umbrella of this concept will be first established. For the purposes of this thesis, the focus shall be on how the rule of law features during the decision-making process in investment treaty arbitration, beyond the law-making process. Thus, for the present purposes, the formal approach shall be undertaken as to the definition of the rule of law, which will enable an assessment on how this standard is employed and abided to by international fora, such as international investment treaty arbitration. An analysis of whether elements embedded in the rule of law have acquired widespread recognition in the international legal order as to constitute general principles of international law shall also be carried out in the first chapter.
The second part of this thesis, gives a comprehensive overview of the ICSID annulment proceedings existing by virtue of Article 52 of the Washington Convention. This will provide the foundations for the third section which will attempt to source procedural elements of the rule of law in ICSID annulment proceedings. The formal principles of procedural due process, independence and impartiality of the judiciary and legal certainty defined in the first chapter shall be subsequently tested against the procedure followed by an ad hoc Committee within the ICSID framework while adjudicating cross-border issues on an international level. The final section of this thesis, shall suggest measures which can be adopted in order to strengthen the rule of law in the post-award stages of ICSID arbitration.
3 Abbreviations
ECHR European Convention on Human Rights ECtHR European Court of Human Rights
EU European Union
IBA International Bar Association
ICC International Chamber of Commerce ICJ International Court of Justice
ICSID International Centre for the Settlement of Investment Disputes ILC International Law Commission
NAFTA North America Free Trade Agreement UN United Nations
UNCITRAL United Nations Commission on International Trade Law WTO World Trade Organisation
4 Table of Contents
Table of Cases ... 5
Introduction ... 8
Chapter I ... 9
1.1 Defining the ‘Rule of Law’ ... 9
1.1.1 Procedural Due Process ... 11
1.1.2 Judicial Independence and Impartiality ... 11
1.1.3 Legal Certainty ... 13
1.2 International Rule of Law ... 14
1.3 The Rule of Law as a General Principle of International Law ... 15
1.4 ICSID Convention Upholding the Rule of Law as a Principle of International Law ... 15
Chapter II ... 17
2.1 Annulment under the ICSID Convention ... 17
2.2 Annulment not Appeal ... 19
2.3 Conduct of Annulment Proceedings ... 20
2.3.1 Filing of an Application for Annulment ... 21
2.3.2 Composition of an ad hoc Committee ... 21
2.3.3 Annulment Proceedings ... 22
2.3.4 Decision rendered by the ad hoc Committee ... 22
Chapter III ... 24
3.1 Procedural Due Process in Annulment Proceedings ... 24
3.1.1 Equality of Arms ... 25
3.1.2 Right to be Heard ... 26
3.1.3 Transparency... 27
3.2 Independence and Impartiality of the ad hoc Committee Members ... 29
3.3 Legal Certainty in Annulment Proceedings ... 32
Conclusion ... 38
5
Table of Cases
- Adem Dogan v Turkmenistan, ICSID Case No. ARB/09/9, Decision on Annulment
(15 January 2016)
- AES Summit Generation Limited and AES-Tisza Erömü Kft v The Republic of Hungary, ICSID Case No. ARB/07/22, Decision of the Ad hoc Committee on the
Application for Annulment (29 June 2012)
- Alapli Elektrik B.V. v Republic of Turkey, ICSID Case No. ARB/08/13, Decision on
Annulment (10 July 2014)
- Amco Asia Corporation and Others v Republic of Indonesia, ICSID Case No.
ARB/81/1, First Decision on Annulment (16 May 1986)
- Amco Asia Corporation and Others v Republic of Indonesia, ICSID Case No.
ARB/81/1, Decision on the Applications for Annulment of the 1990 Award and the 1990 Supplemental Award (17 December 1992)
- Beian v Romania (no 1) (App no 30658/05) Final Judgment (2008) ECHR 2007-V - Belilos v Switzerland (App no 10328/83) (1988) ECRH 4
- Benthem v Netherlands (App no 8848/80) (1985) IHRL 54
- BSG Resources Limited, BSG Resources (Guinea) Limited and BSG Resources (Guinea) SÀRL v Republic of Guinea, ICSID Case No. ARB/14/22, Decision on the
Proposal to Disqualify all Members of the Arbitral Tribunal (28 December 2016)
- Bulut v Austria (App no 17358/90) (1996) 24 EHRR 84
- Burlington Resources Inc. v Republic of Ecuador, ICSID Case No. ARB/08/5,
Decision on the Proposal for Disqualification of Professor Francisco Orrego Vicuña (13 December 2013)
- Caratube International Oil Company LLP v The Republic of Kazakhstan, ICSID Case
No. ARB/08/12, Decision on the Annulment Application of Caratube International Oil Company LLP (21 February 2014)
- CDC Group plc v Republic of Seychelles, ICSID Case No. ARM/02/14, Decision on
Annulment (29 June 2005)
- CMS Gas Transmission Company v The Republic of Argentina, ICSID Case No.
ARB/01/8, Decision of the Ad hoc Committee on the Application for Annulment of the Argentine Republic (25 September 2007)
- Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v Argentine Republic, ICSID Case No. ARB/97/3, Argentine Republic’s Request for Annulment
6
- Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v Argentine Republic, ICISD Case No. ARB/97/3, Decision on the Challenge to the President of
the Committee (03 October 2001)
- Enron Corporation and Ponderosa Assets, L.P. v Argentinian Republic, ICSID Case
No. ARB/01/3, Decision on the Application for Annulment of the Argentine Republic (30 July 2010)
- Fraport AG Frankfurt Airport Services Worldwide v The Republic of the Philippines,
ICSID Case No. ARB/03/25, Decision on the Application for Annulment of Fraport AG Frankfurt Airport Services Worldwide (23 December 2010)
- Helnan International Hotels A/S v Arab Republic of Egypt, ICSID Case No.
ARB/05/19, Decision on Annulment (14 June 2010)
- Hussein Nuaman Soufraki v The United Arab Emirates, ICSID Case No. ARB/02/7,
Decision of the Ad hoc Committee on the Application of Annulment for Mr Soufraki (05 June 2007)
- Iberdrola Energía S.A. v Republic of Guatemala, ICSID Case No. ARB/09/5,
Decision on Annulment (13 January 2015)
- Klöckner Industrie-Anlagen GmbH and others v United Republic of Cameroon and Société Camerounaise des Engrais, ICSID Case No. ARB/81/2, Ad hoc Committee
Decision on Annulment (03 May 1985)
- Korchuganova v Russia (App no 75039/07) Final Judgment (2006)
- Le Compte, Van Leuven and De Meyere v Belgium (App no 6878/75; 7238/75) (1981)
49 EHRR 1
- M.C.I. Power Group L.C. and New Turbine, Inc. v Republic of Ecuador, ICSID Case
No. ARB/03/6, Decision on Annulment (19 October 2009)
- Malicorp Limited v The Arab Republic of Egypt, ICSID Case No. ARB/08/18,
Decision on the Application for Annulment of Malicorp Limited (03 July 2013)
- Maritime International Nominees Establishment v Republic of Guinea, ICSID Case
No. ARB/84/4, Decision of the Ad hoc Annulment Committee (22 December 1989)
- Merrill & Ring Forestry LP v Canada ICSID Case No. UNCT/07/1, Award (31
March 2010)
- Mr. Patrick Mitchell v Democratic Republic of the Congo, ICSID Case No.
ARB/99/7, Decision on the Application for Annulment of the Award (01 November 2006)
- MTD Equity Sdn. Bhd. and MTD Chile S.A. v Republic of Chile, ICSID Case No.
ARB/01/7, Decision on Annulment (21 March 2007)
- Occidental Petroleum Corporation and Occidental Exploration and Production Company v The Republic of Ecuador, ICSID Case No. ARB/06/11, Decision on
7
- Repsol Y.P.F. Ecuador S.A. v Empresa Estatal Petróleos del Ecuador (Petroecuador),
ICSID Case No. ARB/01/10, Decision on the Application for Annulment (08 January 2007)
- Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v Republic of Kazakhstan, ICSID Case No. ARB/05/16, Decision of the ad hoc Committee (25
March 2010)
- Sempra Energy International v The Argentine Republic, ICSID Case No. ARB/02/16,
Decision on the Argentine Republic's Application for Annulment of the Award (29 June 2010)
- SGS Société Générale de Surveillance S.A. v Republic of Paraguay, ICSID Case No.
ARB/07/29, Decision on Annulment (19 May 2014)
- Suez, Sociedad General de Aguas de Barcelona S.A. and Interagua Servicios Integrales de Agua S.A. v Argentina, ICSID Case No ARB/03/17, Decision on
Proposal for Disqualification (22 October 2007)
- TECO Guatemala Holdings, LLC v Republic of Guatemala, ICSID Case No.
ARB/10/23, Decision on Annulment (05 April 2016)
- Tidewater Inc., Tidewater Investment SRL, Tidewater Caribe, C.A., et al. v The Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/5, Decision on
Claimants' Proposal to Disqualify Professor Brigitte Stern, Arbitrator (23 December 2010)
- Togo Electricité and GDF-Suez Energie Services v Republic of Togo, ICSID Case No.
ARB/06/7, Decision on Annulment (06 September 2011)
- Total S.A. v The Argentine Republic, ICSID Case No. ARB/04/01, Decision on
Annulment 2015 (01 February 3016)
- Tulip Real Estate and Development Netherlands B.V. v Republic of Turkey ICSID
Case No. ARB/11/28, Decision on Annulment (30 December 2015)
- Wena Hotels Ltd. v Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision on
8
Introduction
With the precipitate growth of capital exportation, investment treaty arbitration has become one of the most prominent dispute settlement mechanisms on the international plane. Most modern international investment treaties provide a foreign investor with the right to bring a claim against the host State if any of their substantive rights under a treaty are breached. The Convention of the International Centre for the Settlement of Investment Disputes (‘ICSID’) specifically establishes a self-contained regime for the settlement of disputes between foreign investors and States, which system is disassociated from any other adjudicative body, both national and international.
While the ICSID system is insulated from any other adjudication mechanism, it still provides for certain remedies to the parties after an award is rendered, such as annulment. Annulment under the ICSID system was primarily intended to serve as an exceptional remedy. Today however, it has become a routine step for the losing party in ICSID arbitration to attempt the reversal of an unfavourable award through the provisions set out under Article 52 of the ICSID Convention. Based on statistics as at 31 December 2016, 37% of the awards rendered by ICSID Tribunals were subsequently subject to annulment proceedings in the last decade.1
Investor-State dispute settlement under the auspice of the ICSID provides the parties with an attractive alternative to State-court litigation or diplomatic protection. Nevertheless, due to its de-localised nature insulated from any external, the legitimacy an credibility of the system has been questioned in recent years. Credibility and legitimacy of an adjudicative body such as the ICSID Tribunal stem from the promulgation and endorsement of international normative standards embedded in the rule of law principle. The ICSID Convention (the ‘Convention’, ‘Washington Convention’) and ICSID Rules of Procedure for Arbitration Proceedings (‘Arbitration Rules’) promote a fair and rule-based system, for the settlement of disputes also by upholding components attributable to the concept of the rule of law throughout the procedure. While fundamental elements constituting the rule of law are safeguarded during the proceedings before an ICSID Tribunal, certain normative standards seem to fall short during post-award annulment procedures.
1 The ICISD Caseload Statistics, Issue 2017-1 18 <
https://icsid.worldbank.org/en/Documents/resources/ICSID%20Web%20Stats%202017-1%20(English)%20Final.pdf > accessed 27 February 2017
9
Chapter I
This first chapter lays out the foundations of this thesis through an examination of the concept of the rule of law itself. A definition of the rule of law will be first established with the focus being on how this normative standard is exercised, promoted and safeguarded during the decision-making process in investment treaty arbitration, rather than the law-making process. The groundwork of defining the rule of law and three normative standards branching out of the same concept namely, procedural due process, judicial independence and impartiality and legal certainty, will provide the tools to test the procedure followed by an ad
hoc Committee during annulment proceedings in the subsequent chapters of this thesis.
1.1 Defining the ‘Rule of Law’
While the various ideas associated with the expression ‘rule of law’, can be traced back to the political and philosophical writings of Aristotle, Montesquieu and Locke who sought to establish the boundaries of a government’s power, the emergence of the rule of law as a set of values operating within the legal and political arenas is relatively recent. The term itself was first coined over a century ago by the British legal scholar Albert Venn Dicey in his work entitled Introduction to the Study of the Law of the Constitution2 who gave a classical
formulation to the term, one which was embedded in a municipal scenario. The establishment of the rule of law was later referred to by Paul Johnson as ‘the most important political development of the second millennium’.3
While there is no doubt with regards the need for adherence to the rule of law, the concept in itself remains an elusive one short of any universally accepted definition.4 To date, there are
2Albert Venn Dicey, Introduction to the Study of the Law of the Constitution (10th edn, St. Martin's Press 1959) 42: Dicey defined the rule of law as follows: ‘[I]t means in the first place, the absolute supremacy or predominance of regular law as opposed to the influence of arbitrary power, and excludes the existence of arbitrariness, of prerogative, or even of wide discretionary authority on the part of the government [...] It means, again, equality before the law, or the equal subjection of all classes to the ordinary law of the land administered by the ordinary courts ... [and], lastly […] that, in short, the principles of private law have with us been by the action of the courts and Parliament so extended as to determine the position of the Crown and of its servants; thus the constitution is the result of the ordinary law of the land’.
3 Paul Johnson, ‘Laying Down the Law: Britain and America Led the Way in Establishing Legal Regimes Based on Universal Principles’ [1999] Wall Street Journal A22.
4 Brian Z. Tamanaha, On the Rule of Law: History, Politics Theory (Cambridge University Press, 2004) 114: Tamanaha gives a caveat on its elusive nature when he says that ‘disagreement exists about what the rule of law means amongst casual users of the phrase, among government officials and among theorists. The danger of this
10 divergent opinions regarding the practical meaning of the rule of law and the scope of this concept remains subject to debate between legal scholars and jurists across the globe.
A dichotomy in the current understanding of the rule of law is evidenced by the two divergent theories reflecting what the concept actually entails, which may be divided into formal and substantive meanings.5 On the one hand, formal conceptions of the rule of law overlook the content of the law itself and shift their focus on instrumental limitations, which are at the core of the ‘thin’ theory. The ‘thick’ theory on the other hand, can be distinguished from the latter due to its wide scope, incorporating also substantive notions of justice.6 Due to its narrow scope and objective application, the ‘thin’ theory gained greater acceptance when compared to the ‘thick’ theory which is often questioned due to its broader meaning, which encompass a myriad of substantive questions touching on the protection of human rights, democracy and legitimacy of governmental actions amongst others.7
Despite the conceptual ambiguity and division in academia, universal consensus has been reached with regards to the ‘thin’ theories which focus in the formal and procedural elements of the rule of law. The set of minimalistic requirements established by the ‘thin’ theory constitute the core definition of the rule of law. This core definition sets a de minimis standard whereby the law must be set forth in advance, be made accessible to the public, be general, be clear, stable and certain in nature and be applied in a uniform and according to its terms.8
The different definitions given to the rule of law is an analysis which goes beyond the scope of this thesis. However, a representative definition procedural perspective may be adopted for the present purposes. Thus, the rule of law is a concept which calls for a fair-decision making process, which process is based on the provision of adequate notice and an opportunity for
rampant uncertainty is that rule of law might devolve into an empty phrase, so lacking in meaning that it can be proclaimed with impunity by malevolent governments’.
5 Paul P. Craig, ‘Formal and Substantive Conceptions of the Rule of Law: An Analytical Framework’[1997] PL 467 1.
6 Simon Chesterman, ‘An International Rule of Law?’ [2008] 56(2) American Journal of Comparative Law 343-45.
7 Gus Van Harten, ‘Investment Treaty Arbitration, Procedural Fairness, and the Rule of Law’ in Stephan W. Shill (ed) International Investment Law and Comparative Public Law (OUP 2010) 635-636.
8 Brian Z. Tamanaha, ‘A Concise Guide to the Rule of Law’ (2007) St. John’s University Legal Studies Research Paper 07-0082 3.
11 reply, and which coherent and consistent decision is rendered by an independent and impartial decision-maker in a transparent manner.9
1.1.1 Procedural Due Process
Notwithstanding the divergent meanings given to the rule of law, there is a wide consensus that this concept calls for a fair decision making process on a procedural level.10 Procedural due process, requires that a party to a dispute whose obligations and interests are to be affected by a decision, receives a fair and unbiased hearing before the decision is rendered.11 It therefore necessitates that each party to the dispute is given notice of proceedings, treated equally and given an opportunity to be heard before a lawfully constituted decision maker.12 While it promotes an element of legitimacy, it is connected to the fairness employed in reaching a decision regarding a dispute rather than the fairness of the outcome itself. Nevertheless, there is a correlation between the two, since it is highly probable that if a fair procedure is adhered to by the decision-maker, a fair and correct outcome will follow. Thus, procedural fairness, guarantees an effective legal proceeding, while increasing the perceived legitimacy of the outcome, signalling its accuracy and acceptability.
1.1.2 Judicial Independence and Impartiality
Independence and impartiality of the judiciary from the parties, their counsel and the subject matter of the dispute is a pre-requisite to the rule of law.13 As held in preamble of the Bangalore Principles of Judicial Conduct, ‘a competent, independent and impartial judiciary is […] essential if the courts are to fulfil their role in upholding constitutionalism and the rule of law’.14 The paramount importance of an impartial adjudicative body for the functioning and legitimacy of the judicial process was also highlighted on several occasions by the European Court of Human Rights (‘ECtHR’) in its interpretation of Articles 5 and 6 of the European Convention on Human Rights (‘ECHR’). According ECtRH jurisprudence, before
9 Van Harten (n 7) 629.
10 ibid.
11 Victorian Government Solicitor’s Office, ‘Procedural Fairness – The Hearing Rule’ (VGSO 03 December 2007) <http://www.vgso.vic.gov.au/content/procedural-fairness-hearing-rule> accessed 05 April 2017.
12 Fabrico Fortese and Lotta Hemmi, 'Procedural Fairness and Efficiency in International Arbitration' [2015] 30(1) Groningen Journal of International Law 111.
13 Consultative Council of the European Judges, ‘Opinion No.1 for the Attention of the Committee of the Council of Europe on the Standards Concerning the Independence of the Judiciary and the Irremovability of Judges’ CCJE (2001) OP No.1.
14 Judicial Group on Strengthening Judicial Integrity, ‘The Bangalore Principles of Judicial Conduct 2002’ (25-26 November 2002) UN Doc. E/CN.4/2003/65.
12 the requirement of independence is fulfilled, a judicial body cannot be regarded as a ‘court’ or ‘tribunal’.15
In theory, there is a marked difference between independence and impartiality. Judicial independence is an objective standard which obliges the judge or arbitrator to settle a dispute in a fair manner on the basis of facts and the law, insulated from any external pressure or influence and without the fear of interference from anyone.16 The concept of independence stems from the principle nemo judex sua causa, ‘no one shall judge his own cause’, and is related to the personal connection or relationship the arbitrator has with the parties or their counsel.17
Impartiality on the other hand, is an inherently subjective concept which relates to a state of mind of the decision-maker having an impact on the conduct of the arbitrator, which is essentially proven through facts. Impartiality is the absence of any prejudice, favouritism or bias in the mind of the arbitrator towards a party or the matter in dispute.18 Despite its abstract nature, the test to determine the existence of ‘partiality’ is an objective one whereby an external element must be identified, which would make a considerable person think that a state of mind constitutes partiality, or would have reasonable grounds to believe that it is so.
It is of utmost importance to highlight that an arbitrator must not only be independent and impartial, but must also be perceived as independent in the eyes of a neutral third party.19 Furthermore, it is crucial that the independence and impartiality of the adjudicative body are not only present upon the constitution of a tribunal, but on the contrary they must subsist along the entire adjudicative process including during the post-award remedy phase under the relevant rules.
15 See for example Le Compte, Van Leuven and De Meyere v Belgium (App no 6878/75; 7238/75) (1981) 49 EHRR 1 para 55; Benthem v Netherlands (App no 8848/80) (1985) IHRL 54 para 43; Belilos v Switzerland (App no 10328/83) (1988) ECRH 4 para 64.
16 Bangalore Principles (n 14) app 1.1,1.2.
17 Alan Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration (Sweet & Maxwell 2003) 212-13.
18 Bruno Manzanares Bastida, ‘The Independence and Impartiality of Arbitrators in International Commercial Arbitration’ [2007] 6(1) Revista e-Mercatoria 4.
19 Helena Jung, ‘The Standard of Independence and Impartiality for Arbitrators in International Arbitration’ (Master’s thesis, Faculty of Law Uppsala University 2008) 7.
13 1.1.3 Legal Certainty
Legal certainty is a formal element which contributes towards the realisation of the rule of law,20 in so far as it allows those subject to the law to regulate their conduct in advance and foresee the repercussions of their actions. 21 The principle of legal certainty is also recognised as a general principle of EU Law. The maxim of legal certainty in the EU context requires that (1) laws and decisions are made public; (2) laws and decisions are definite and clear; (3) decisions of courts are binding; (4) limitations on retroactivity of laws and decisions are imposed; and (5) legitimate expectations are protected.22
The concept of consistency plays a vital role in legal certainly as an element of the rule of law, one which safeguards equality and fairness, in that similar cases ought to be settled in a similar manner and promotes predictability, where parties are in a position to evaluate their chances of success in arbitration.23 From a decision-making process perspective, it is possible to attain a degree of legal certainty, coherence and consistency through the doctrine of precedent, or stare decisis whereby the courts and tribunals are bound to abide by the precedents established by prior judgements. Alternatively, a judicial body may honour the value of legal certainty though the principle of jurisprudence constante which provides for a more flexible approach than the doctrine of stare decisis. In the latter case, the desired level of coherence and consistency is achieved by the adjudicative body using pervious decisions dealing with similar or identical issues of law and applying the same rationale behind the decisions rendered to the case at hand. In addition to this, a second-layer of adjudication appointed to check and review a decision rendered for any legal flaws also promulgates the principle of legal certainty, which tends to ease concerns regarding correctness and ensures then integrity of the judicial process.
20 Beian v Romania (no 1) (App no 30658/05) (Final 2008) ECHR 2007-V para 39: ‘The practice which developed within the country’s highest judicial authority is in itself contrary to the principle of legal certainty, a principle which is implicit in all the Articles of the Convention and constitutes one of the basic elements of the rule of law’.
21 Korchuganova v Russia (App no 75039/07) (Final 2006) para 47: the Court held that legal certainty ‘requires that all law be sufficiently precise to allow the person—if need be, with appropriate advice—to foresee, to a degree that is reasonable in the circumstances, the consequences which a given action may entail’.
22 Takis Tridimas, The General Principles of EU Law (2nd edn, Oxford University Press 2006) 242-57.
23 Christian J. Tams, ‘An Appealing Option? The Debate about an ICSID Appellate Structure’ [2009] 57 Essays in Transactional Economic Law 18.
14 1.2 International Rule of Law
The concept of the rule of law constitutes a strong ideal on a domestic level. Nonetheless, in recent developments the paramount importance of the rule of law was also endorsed on an international level, during the UN World Summit in 2005, where Member States affirmed the ‘need for universal adherence to and implementation of the rule of law at both national and international levels while asserting their commitment to promulgating ‘an international order based on the rule of law and international law, which is essential for peaceful coexistence and cooperation among State’.24
Traditionally, the elements constituting the rule of law have been distilled from a national legal context. The principal aim of the rule of law has been to establish a set of standards used to control the powers of a sovereign State, thus eradicating the concept of the ‘rule of man’ or ‘rule by law from any given legal system.25 The biggest challenge for the international rule of law lies in the absence of effective institution creating, interpreting and enforcing international law.26
However, despite the lack of legislature, authoritative legal texts and hierarchy of sources in case of conflict, the emergence of international organisations and courts such as the International Court of Justice (‘ICJ’) have been implementing and interpreting the rule of law in the international arena consequently transposing this principle outside the domestic legal order. In the report entitled ‘Rule of Law: A guide of Politicians’, the Raoul Wallenberg Institute of Human Rights and Humanitarian Law and the Hague Institute for the Internationalisation of the Law affirmed that the core meaning of the rule of law at the national and international level is the same.27 The straightforward interpretation given to the rule of law in the report is ‘that the law should be respected’.28 While acknowledging certain fundamental differences between the national and international frameworks,29 the report
24 UNGA Res 60/1 ‘2005 World Summit Outcome Document’ UN Doc A/RES/60/1 (16 September 2005), para 134.
25 Chesterman (n 6) 334-43.
26 Charles Sampford and Mela Luwis, ‘Introduction’ in Charles Sampford and Ramesh Thakur (eds), Institutional Supports for the International Rule of Law (Routledge 2015) 4.
27 Raoul Wallenberg Institute of Human Rights and Humanitarian Law and the Hague Institute for the Internationalisation of the Law, ‘Rule of Law: A Guide for Politicians’ (2012) 25.
28 ibid.
29 The report outlines the following differences between national and international legal orders: (1) the hierarchical relation between the State and its citizens and the horizontal composition of States and international organisations on an international level; (2) the law-making process by a legislative body in a domestic context, and the absence of such legislative centre on an international level where the two main sources of law are customary international law and treaty law; and (3) enforcement, while the national framework has a system in
15 states that said differences do not alter the crux of the meaning of the rule of law principle once transposed outside the municipal arena. The rise of globalisation and the interdependence between States has softened the boundaries between them, while harmonising internal and external understandings of certain principles, including the rule of law.
1.3 The Rule of Law as a General Principle of International Law
While there is a variety of opinions as to what general principles of international law entail, some scholars and commentators hold that general principles of international law, in the context of Article 38(1)(c) of the ICJ Statute, are primarily expressions of domestic legal systems and secondary expressions of the sources of international law, namely conventions, custom, academic writings a and decisions rendered by international judicial bodies.30 If one had to apply the concept of the rule of law to this definition, both requirements would be fulfilled. Firstly, the rule of law stems from the national framework and it has gained wide recognition in the individual municipal legal systems, being its root of origin. Secondly, we have witnessed the transposition of the rule of law from the domestic to the international regime through the promulgation of the concept by international bodies such as the UN and the ICJ, as outlined above. Thus, one can strongly argue that the rule of law, constitutes a general principle of international law, as ‘recognised by civil nations’.
1.4 ICSID Convention Upholding the Rule of Law as a Principle of International Law The ICSID Convention and Arbitration Rules promote a fair and rule-based system for the settlement of disputes between alien investors and host States, which system is anchored in public international law. The legitimacy of an award rendered by an ICSID Tribunal and credibility of the institution are upheld through the endorsement of international normative standards which stem from the rule of law.
The ICSID Tribunals, have on multiple occasion highlighted the importance of general principles of international law in the sense of Article 38(1)(c) of the ICJ Statute in
place for the prosecution and punishment of law violations, the same cannot be said for the international arena which does not have a police force, nor a comprehensive system of sanctions, or the equivalent of a domestic prosecuting office.
30 M. Cherif Bassiouni, ‘A Functional Approach to “General Principles of International Law”’ 11 MICH. J. INT’L. L. 768.
16 State arbitration.31 General principles of international law, are a fundamental source for arbitrators, especially in the case of any lacunae in the text of the treaties and in the interpretation of its wording.32 Elements of the rule of law embedded in the general principles of international law have been relied on by ICSID Tribunals in settlement of claims brought forward by investors, which inter alia include the right to be heard,33 independence and impartiality of the adjudicative body34 and equality of arms.35 In light of the endorsement of these principles by the organs of the ICSID and by the Washington Convention itself together with the nature of investment-State arbitration as a creature of public international law, one may argue that an ICSID adjudicative body is bound by its sources, including principles rooted in procedural rule of law. In addition to this the Vienna Convention on the Law of Treaties (‘VCLT’), which is an important source for ICSID Tribunals, holds that ‘international disputes’ ought to be settled ‘in conformity with the principles of justice and international law’.36
31 Merrill & Ring Forestry LP v Canada ICSID Case No. UNCT/07/1, Award (31 March 2010) para 187. 32 Dolzer, Schreuer, (n Error! Bookmark not defined.) 18.
33 See for example, Amco Asia Corporation and Others v Republic of Indonesia, ICSID Case No. ARB/81/1, Decision on the Applications for Annulment of the 1990 Award and the 1990 Supplemental Award (17 December 1992) para 9.10; Fraport AG Frankfurt Airport Services Worldwide v The Republic of the Philippines, ICSID Case No. ARB/03/25, Decision on the Application for Annulment of Fraport AG Frankfurt Airport Services Worldwide (23 December 2010) paras 197-208, 218-47; Caratube International Oil Company LLP v The Republic of Kazakhstan, ICSID Case No. ARB/08/12, Decision on the Annulment Application of Caratube International Oil Company LLP (21 February 2014) para 87.
34 See for example, Suez, Sociedad General de Aguas de Barcelona S.A. and Interagua Servicios Integrales de Agua S.A. v Argentina, ICSID Case No ARB/03/17, Decision on Proposal for Disqualification (22 October 2007) paras 28 – 30; Tidewater Inc., Tidewater Investment SRL, Tidewater Caribe, C.A., et al. v The Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/5, Decision on Claimants' Proposal to Disqualify Professor Brigitte Stern, Arbitrator (23 December 2010) para 36; Burlington Resources Inc. v Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on the Proposal for Disqualification of Professor Francisco Orrego Vicuña (13 December 2013) para 65; BSG Resources Limited, BSG Resources (Guinea) Limited and BSG Resources (Guinea) SÀRL v Republic of Guinea, ICSID Case No. ARB/14/22, Decision on the Proposal to Disqualify all Members of the Arbitral Tribunal (28 December 2016) para 57.
35 See for example, Amco Asia Corporation and Others v Republic of Indonesia, ICSID Case No. ARB/81/1, First Decision on Annulment (16 May 1986) paras 87,88; Malicorp Limited v The Arab Republic of Egypt, ICSID Case No. ARB/08/18, Decision on the Application for Annulment of Malicorp Limited (03 July 2013) para 36; Iberdrola Energía S.A. v Republic of Guatemala, ICSID Case No. ARB/09/5, Decision on Annulment (13 January 2015) para 105; Tulip Real Estate and Development Netherlands B.V. v Republic of Turkey ICSID Case No. ARB/11/28, Decision on Annulment (30 December 2015) paras 72, 84, 145; Total S.A. v The Argentine Republic, ICSID Case No. ARB/04/01, Decision on Annulment 2015 (01 February 3016) paras 309, 314.
36 Vienna Convention on the Law of Treaties (‘VCLT’) (adopted on 22 May 1969, opened for signature 23 May 1969) 1155 UNTS 331 pmbl.
17
Chapter II
This second chapter gives a comprehensive overview of the ICSID annulment proceedings existing by virtue of Article 52 of the Washington Convention. This provides a fundamental understanding of said post-award remedy for the purposes of the third chapter which attempts to source procedural elements of the rule of law in ICSID annulment proceedings.
2.1 Annulment under the ICSID Convention
Annulment under the ICSID Convention originated from the 1953 United Nations International Law Commission (‘ILC’) Draft Convention on Arbitral Procedure which was primarily intended to codify international law on arbitral procedure in inter-State arbitration.37 The ILC recognised that the finality of an award is a fundamental element in arbitral practice, but at the same time it acknowledged the fact that there was a requirement for ‘exceptional remedies calculated to uphold the judicial character of the award as well as the will of the parties as the source of the jurisdiction of the tribunal’.38 Thus, the ILC sought to find a medium between the finality of the arbitral award and the need to safeguard parties from cases of excess of injustice.39
One of the unique features of the ICSID system, is that the awards rendered by the tribunals are insulated from any external scrutiny by domestic courts. It was a deliberate choice of the drafters of the Washington Convention to safeguard the principle of finality, whereby the only remedies available to the party wanting to oppose an unfavourable award are limited to those which can be brought within the ICSID’s framework.40 Once an award is annulled, it enjoys absolute immunity as any further challenge is barred, meaning that following
37 See, ILC, ‘Documents of the Fifth Session Including the Report of the Commission to the General Assembly’ (1 June – 14 August 1953) 2 Yearbook of the International Law Commission U.N. Doc. A/CN.4/SER.A/1953/Add.1.
38 ibid 202.
39 Aron Broches, ‘Observations on the Finality of ICSID Awards. In: Selected Essays: World Bank, ICSID and Other Subjects of Public and Private International Law (Martinus Nijhoff Publishers 1995) 298.
40 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (opened for signature 18 March 1965, entered into force 14 October 1966) (‘ICSID Convention’) art 53(1): ‘The award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention’.
18 annulment the only option is to re-submitted the dispute to a new tribunal and have the arbitral proceedings start afresh.41
On the contrary, in territorialised arbitration, a party may challenge an award through a domestic judicial body. A losing party in this case has two options, by either attacking the award at its core by resorting to the courts of the country in which the tribunal has its seat or alternatively block the execution of the award before the court where enforcement is sought by the winning party. The first option, namely of setting aside the award, heavily depends on the law of the seat of the tribunal which would lay down the grounds upon which an award may be challenged. The UNCITRAL Model Law on International Commercial Arbitration, lists a number of instances for the setting aside of an award by national court,42 which grounds are incorporated in many domestic arbitral laws. The second post award remedy following the conclusion of non-ICSID arbitration, is through Article V of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which provides for the grounds upon which enforcement of a non-national arbitral award may be rejected at the request of a party.
In addition to rectification,43 revision,44 and interpretation,45 the Washington Convention permits for an additional post-award remedy. ICSID Convention has adopted an annulment procedure whereby an ad hoc Committee is vested with the power to annul an award, in whole or in part on any of the grounds listed exhaustively under Article 52(1) of the ICSID Convention. The losing party may contest an award’s procedural defect before an ad hoc Committee, based on any or all of the following specific grounds:
41 ibid art 52(3).
42 UNCITRAL Model Law on International Commercial Arbitration (21 June 1985, with amendments as adopted in 2006) art 34(2): ‘An arbitral award may be set aside by the court […]only if: (a) the party making the application furnishes proof that: (i) a party to the arbitration agreement […] was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State; or (ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration,[…]; or (iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Law; or (b) the court finds that: (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or (ii) the award is in conflict with the public policy of this State.
43 ICSID Convention art 49(2). 44 ibid art 51.
19 (1) the Tribunal was not properly constituted;
(2) the Tribunal manifestly exceeded its powers;
(3) there was corruption on the part of the member of the Tribunal;
(4) there has been a serious departure from the fundamental rule of procedure; or (5) the award has failed to state the reasons on which it is based.
2.2 Annulment not Appeal
The distinction between appeal and annulment can be traced back to the travaux
préparatoires of the Washington Convention. The working papers set out the current
position, in that annulment ‘is not a procedure by way of appeal requiring consideration of the merits of the case, but one that merely calls for an affirmative or negative ruling based upon one [of the grounds for annulment]’.46
Furthermore, ICSID jurisprudence demonstrates that there is a uniform understanding amongst ad hoc Committees with regards to need to establish a clear-cut distinction between appeal and annulment. They have, on multiple occasions, highlighted the fact that an ad hoc Committee constituted to preside over annulment procedures under ICSID does not have the same role or powers as those vested in a court of appeal and that the functions of an appeals mechanism are explicitly excluded from the ICSID system.47 This distinction was articulated
46 ICSID, ‘History of the ICSID Convention: Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States’ (1970) Vol. II, 218 & 219, Vol. I, 2-10.
47 Klöckner Industrie-Anlagen GmbH and others v United Republic of Cameroon and Société Camerounaise des Engrais, ICSID Case No. ARB/81/2, Ad hoc Committee Decision on Annulment (03 May 1985) para 61; Amco I (n 35) paras 23, 38-44; Maritime International Nominees Establishment (MINE) v Republic of Guinea, ICSID Case No. ARB/84/4, Decision of the Ad hoc Annulment Committee (22 December 1989) para 5.08; Wena Hotels Ltd. v Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision on Annulment (05 February 2002) para 18; Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v Argentine Republic, ICSID Case No. ARB/97/3, Decision on Annulment (03 July 2002) paras 62, 64; CDC Group plc v Republic of Seychelles, ICSID Case No. ARM/02/14, Decision on Annulment (29 June 2005) para 34; Mr. Patrick Mitchell v Democratic Republic of the Congo, ICSID Case No. ARB/99/7, Decision on the Application for Annulment of the Award (01 November 2006) para 19; Hussein Nuaman Soufraki v The United Arab Emirates, ICSID Case No. ARB/02/7, Decision of the Ad hoc Committee on the Application of Annulment for Mr Soufraki (05 June 2007) paras 20, 24; Repsol Y.P.F. Ecuador S.A. v Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No. ARB/01/10, Decision on the Application for Annulment (08 January 2007) para 38; MTD Equity Sdn. Bhd. and MTD Chile S.A. v Republic of Chile, ICSID Case No. ARB/01/7, Decision on Annulment (21 March 2007) para 31; CMS Gas Transmission Company v The Republic of Argentina, ICSID Case No. ARB/01/8, Decision of the Ad hoc Committee on the Application for Annulment of the Argentine Republic (25 September 2007) paras 43, 44, 135, 136, 158; Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v Republic of Kazakhstan, ICSID Case No. ARB/05/16, Decision of the ad hoc Committee (25
20 by the ad hoc Committee in Amco v. Indonesia, which outlined the boundaries of its powers, as follows:
[T]he law applied by the Tribunal will be examined by the ad hoc Committee, not for the purpose of scrutinising whether the Tribunal committed errors in the interpretation of the requirements of applicable law or in the ascertainment or evaluation of the relevant facts to which such law has been applied. Such scrutiny is properly the task of a court of appeals, which the ad hoc Committee is not.48
Schreuer argues that the key distinction between the role of the two adjudicative bodies is that ad hoc Committees are limited to rule upon the ‘legitimacy of the process of decision’ while the powers of an appellate body extend further in allowing review of ‘substantive correctness’.49 Therefore, while appeal may result in the modification or replacement of a decision due to a substantive error of law or fact, a successful application for annulment would lead to the legal destruction of the original decision rendered by the Tribunal.
2.3 Conduct of Annulment Proceedings
In order to source any inconsistencies of the annulment mechanism under the ICSID Convention with the rule of law, it is useful to provide a comprehensive overview of the procedure followed after an annulment action is launched. While Article 52 of the ICSID Convention lays down the grounds for the annulment of the award, Chapter VII of the ICSID Arbitration Rules govern the conduct of post-award remedies. ICSID Arbitration Rules 50 and 52 through 55 specifically relate to the establishment of the annulment process under the
March 2010) para 70; Sempra Energy International v The Argentine Republic, ICSID Case No. ARB/02/16, Decision on the Argentine Republic's Application for Annulment of the Award (29 June 2010) paras 73, 74; Enron Corporation and Ponderosa Assets, L.P. v Argentinian Republic, ICSID Case No. ARB/01/3, Decision on the Application for Annulment of the Argentine Republic (30 July 2010) paras 63-65; Fraport (n 33) para 76; AES Summit Generation Limited and AES-Tisza Erömü Kft v The Republic of Hungary, ICSID Case No. ARB/07/22, Decision of the Ad hoc Committee on the Application for Annulment (29 June 2012) paras 15, 17; SGS Société Générale de Surveillance S.A. v Republic of Paraguay, ICSID Case No. ARB/07/29, Decision on Annulment (19 May 2014) paras 104, 105, 130; Alapli Elektrik B.V. v Republic of Turkey, ICSID Case No. ARB/08/13, Decision on Annulment (10 July 2014) paras 197, 210, 235; Occidental Petroleum Corporation and Occidental Exploration and Production Company v The Republic of Ecuador, ICSID Case No. ARB/06/11, Decision on Annulment of the Award (02 November 2015) paras 47, 55, 56, 66; Adem Dogan v Turkmenistan, ICSID Case No. ARB/09/9, Decision on Annulment (15 January 2016) paras 129, 130; Tidewater (n 34) paras 128, 166, 172.
48 Amco I (n 35) para 23.
21 Convention, which include the initiation of annulment process, the appointment of the members forming the ad hoc Committee and the course of action to be followed leading to the final ruling.
2.3.1 Filing of an Application for Annulment
Either of the parties to the dispute may launch annulment proceedings following an award rendered by a Tribunal, by lodging an application with the ICSID Secretary-General, which application must: (i) identify the award to which it relates; (ii) indicate the date of the application; (iii) state the grounds on which recourse to annulment is based, pursuant to Article 52(1) of the ICSID Convention; and (iv) include the payment of a fee for filing of the application.50 Save for circumstances of alleged corruption on part of a member of the Tribunal, an application for annulment must be filed within 120 days which start running from the date on which the award was rendered.51 It is important to note that such application must relate to a final decision pronounced by the Tribunal which concludes the case at hand.52 Thus, an application for a post-award remedy concerning a decision rendered prior to the final award, such as a provisional measure or a decision regarding jurisdiction, cannot be challenged before it is integrated in the eventual award. A party will still be barred from opposing an interim decision, even if it constitutes a basis for an annulment application in itself.53
2.3.2 Composition of an ad hoc Committee
Once the application is filed with the ICSID Secretary-General and has been duly registered, an ad hoc Committee of three members is appointed by the Chairman of Administrative Council.54 Members presiding over annulment proceedings are selected exclusively from the ICSID Panel of Arbitrators. Article 52(3) of the ICSID Convention sets out the limitations for the members chosen by the Chairman of the Administrative Council aimed at maintaining a level of independence and impartiality throughout the proceedings. First, no member of the
ad hoc Committee can have the same nationality as the disputing parties and secondly,
members forming part of the panel of the Tribunal which rendered the award in question, are not eligible ad hoc Committee members. In addition to this, the requirement of independence and high moral character extends to all Panel designees, including members appointed to
50 ICSID Rules of Procedure for Arbitration Proceedings (‘ICSID Arbitration Rules’) (10 April 2006) r 50(1). 51 ibid r 50(3)(b); ICSID Convention art 52(2).
52 ICSID Convention art 49(3): ‘The award shall deal with every question submitted to the Tribunal […]’. 53 Broches (n 39) 302.
22 decide on annulment applications.55 Contrary to the process of selecting arbitrators of Tribunals, the Chairman is not obliged to consult with the parties regarding the appointment of ad hoc Committee members. Having said this however, parties are informed by ICSID of the designated ad hoc Committee members prior to their actual appointment.56
2.3.3 Annulment Proceedings
The provisions contained under the ICSID Arbitration Rules, apply, mutatis mutandis, to annulment proceedings, meaning that the same regulations are in place, with the required amendments accounting for fact that it is a post-award process.57 Furthermore, Article 52(4) of the ICSID Convention cites specific articles of the Convention which also apply before the
ad hoc Committee.58 Thus, the procedure before an ad hoc Committee highly resembles that followed by a Tribunal hearing the dispute for the first time. The similarity in the two proceedings however is not absolute. Contrary to Tribunal proceedings for example, all advance payments required for annulment proceedings are borne by the Applicant.59 Moreover, while the annulment proceedings allow for written and oral submissions, the hearing is in this case is comprised solely of the parties’ oral arguments and in some exceptional circumstances the examination of legal experts. The facts of the dispute or factual witnesses are generally disregarded during an annulment hearing.60
2.3.4 Decision rendered by the ad hoc Committee
Under the ICSID Convention, an ad hoc Committee cannot alter or replace an award rendered by a Tribunal by its own decision, but is empowered to (i) reject all the grounds for annulment, this leaving the original award intact; (ii) partially annul the award by upholding one or more grounds for annulment in respect of a part of the award; (iii) fully annul the award in its entirety by upholding one or more grounds indicated in the application for annulment; or (iv) exercise its discretion to confirm the original award notwithstanding that
55 ICSID Convention art 14(1): ‘Persons designated to serve on the Panels shall be persons of high moral character and recognized competence in the fields of law, commerce, industry or finance, who may be relied upon to exercise independent judgment’.
56 ICSID, ‘Updated Background Paper on Annulment for the Administrative Council of ICSID’ (‘Background Paper’) (05 May 2016) 14 <http://documents.worldbank.org/curated/en/705861489478820495/Updated-background-paper-on-annulment-for-the-administrative-council-of-ICSID> accessed 07 January 2017.
57 ICSID Arbitration Rules r 53.
58 ICSID Convention art 52(4): ‘The provisions of Articles 41-45, 48, 49, 53 and 54, and of Chapters VI and VII shall apply mutatis mutandis to proceedings before the Committee’.
59 ICSID Background Paper (n 56) 17. 60 ibid 22.
23 an error has been identified.61 Notably however, the decision pronounced by the Committee, must contain the same elements as those required in an award,62 including the reasons upon which the decision is founded on.63
Through the analysis of the conduct of the annulment proceedings, one can conclude that despite the fact that an award enjoys absolute immunity from the scrutiny of national courts, the drafters of the Washington Convention devised a detailed procedure on which a losing party may fully rely on. From the above breakdown of the proceedings, it is clear that the annulment mechanism strives towards securing an efficient and economical settlement of disputes, which is at the core of arbitration.
61 ICSID Convention art 52(3).
62 ICSID Convention art 52(4); ICSID Arbitration Rules r 47, 53.
24
Chapter III
This section shall attempt to source the rule of law under Article 52 of the ICSID Convention. The formal principles of due process, independence and impartiality of the judiciary and legal certainty as defined in the first chapter, shall be tested against the procedure followed by the
ad hoc Committee within the ICSID framework.
3.1 Procedural Due Process in Annulment Proceedings
A balance must be struck between the expeditious and economical settlement of disputes on one hand and the adherence to due process and procedural fairness on the other, even in post-award stages of arbitral proceedings. In ad hoc arbitration, the law of the seat of arbitration establishes the procedural rules to be followed during the proceedings. On the contrary, de-localised institutional arbitration, such as ICSID provide for the rules by which the parties and arbitrators are to abide by during the process.
Most applicable provisions which regulate the annulment process guaranteeing a fair procedure to the parties correspond to the same rights afforded during the original proceedings before a Tribunal. The preamble of the ICSID Arbitration Rules clearly state that said rules ‘cover the period of time from the dispatch of the notice of registration of a request for arbitration until an award is rendered and all challenges [emphasis added] possible to it under the Convention have been exhausted’. Furthermore, the Arbitration Rules apply,
mutatis mutandis, to the annulment proceedings before the ad hoc Committee.64 While creating homogeneity and consistency between the original procedure and the post-award remedy, the drafters of the ICSID convention ensured that the same level of procedural fairness would be afforded in the annulment stage, safeguarding the correctness and legitimacy of the deliberation by the Committee.
The basic principles governing the arbitral procedure, as normative standards of procedural fairness which will be analysed in this section are as follows: (i) equality of arms; (ii) right to be heard; and (iii) transparency.
64 ICSID Arbitration Rules r 53.
25 3.1.1 Equality of Arms
Equality of arms is an established normative standard and a part of the overarching right to a fair trial enshrined under Article 6 of the ECHR. In addition, it has been recognised as a paramount principle in investment arbitration65 and held to constitute a fundamental rule of procedure by several ICSID ad hoc Committees.66 In the context of Article 6 ECHR, the ECtHR has defined the concept as ‘everyone who is a party to [such] proceedings shall have reasonable opportunity of presenting his case to the court under conditions which do not place him at a substantial disadvantage vis-à-vis his opponent’.67
Apart from the ICSID Arbitration rules governing the original proceedings which apply
mutatis mutandis to the proceeding before an ad hoc Committee,68 Article 52 of the Convention outlines the general procedural framework for annulment proceedings. The ICSID post-award remedies vest in the Applicant and Respondent certain rights and obligations which can be used during annulment proceedings. In light of the principle of equality of arms, it follows that both parties to annulment proceedings are at an equal footing and are given the same rights to present their case.
When testing this principle against the rights granted in the several steps leading the final decision rendered by the ad hoc Committee, one can note that a substantial level of procedural fairness is maintained. For example, either of the parties may initiate an annulment proceeding,69 both parties are excluded from the process of appointing the Committee members,70 the right to stay enforcement of all or part of the original award is granted to both parties71 and both the Applicant and the Respondent are given identical rights as to the filing of written pleadings and oral hearings.72
However, one of the rules which puts the Applicant in a disadvantageous position, is the obligation to fulfil advances to the ICSID institution upon filing the application for
65 Thomas W. Wälde, ‘Equality of Arms in Investment Arbitration: Procedural Challenges’ in Katia Yannaca-small (ed), Arbitration Under International Investment Agreements: A Guide to the Key Issues (Oxford University Press USA 2010) 161.
66 Amco I (n 47) paras 87, 88; Malicorp (n 35) para 36; Iberdrola Energía S.A. v Republic of Guatemala, ICSID Case No. ARB/09/5, Decision on Annulment, 13 January 2015, para. 105; Tulip (n 35) paras 72, 84, 145; Total (n 35) paras 309, 314.
67 Bulut v Austria (App no 17358/90) (1996) 24 EHRR 84 para 47. 68 ICSIS Arbitration Rules r 53.
69 ICSID Convention art 52(1). 70 ibid, art 52(3).
71 ibid, art 52(5), ICSID Arbitration Rules r 54(2). 72 ICSID Background Paper (n 56) 22.
26 annulment. Unless the parties agree otherwise, the Applicant is solely responsible for making all advance payments, which cover the hearing expenses and fees of the ad hoc Committee.73 The average costs of annulment proceedings concluded since July 2010 amount to US$388,000.74 A party handed an unfavourable award may find this cost burdensome, especially if the investor is relatively small or the State party is an underdeveloped host State. Under the Administrative and Financial Regulation, if an applicant fails to make the required advance payment, the Secretary-General informs both parties of the default and invites either party to settle the outstanding payment. Nevertheless, if payment is not settled within 15 days, proceedings may be suspended and discontinued after six months.75
3.1.2 Right to be Heard
According to Schreuer ‘[t]he principle that both sides must be heard on all issues affecting their legal position is one of the most basic concepts of fairness in adversarial proceedings. It is expressed in the Latin maxim of audiatur et altera pars’.76 Procedural fairness demands that both parties to the dispute have a fair opportunity to present their case before the adjudicative body and to rebut the opponent’s submissions in a meaningful manner. The ad
hoc Committee in Fraport also highlighted the importance of this principle describing it as
‘an essential element of the requirement to afford a fair hearing accorded in the principal human rights instruments’.77
The right to be heard is reflected throughout the ICSID Convention and Arbitration Rules in several instances. In annulment proceedings, the parties file written pleadings, the factual and legal evidence from the original proceeding they wish to utilise during the post-award stage, followed by an oral hearing.78 The hearing usually deals with solely the parties’ written submissions and oral arguments, and in some exceptional cases include the opinion of legal experts submitted by the parties in the annulment proceedings. However, the right to be heard is somewhat limited, since an ad hoc Committee does not entertain factual witnesses to the case since it does not re-examine the facts of the dispute. Thus, the parties are barred from submitting any submissions relating to factual evidence, due to the limited mandate of the ad
73 ICSID Convention, art 52(4); ICSID Administrative and Financial Regulation r 14(3)(e); 74 ICSID Background Paper (n 56) 18.
75 ICSID Administrative and Financial Regulation r 14(3)(d) and (e).
76 Christoph Schreuer et al., The ICSID Convention: A Commentary (2nd edn, Cambridge University Press 2009) 987.
77 Fraport (n 33) para 202.
27
hoc Committee which is confined solely to the procedural legitimacy of the award and not its
substantial correctness.
This limitation to the right to be head, was justified in Fraport, whereby it was held that such right ‘require[s] the tribunal to afford both parties the opportunity to make submissions where new evidence is received and considered by the tribunal to be relevant to its final
deliberations [emphasis added]’.79 Thus, if one follows the reasoning in Fraport, the parties’ right to be heard would not be breached if the ad hoc Committee adopts a narrow interpretation to Article 52, since factual submissions would not be ‘relevant to its final deliberations’. Nevertheless, if the ad hoc Committee exceeds its power by re-examining the merits of the case without allowing the submission of factual evidence, one could argue that it is a breach of procedural fairness and of the right to be heard.
3.1.3 Transparency
In the words of the 18th century philosopher and jurists Jeremy Bentham, ‘where there is no publicity, there is no justice. Publicity is the very soul of justice’,80 meaning that justice must not only be done, but it must also be seen to be done. Judicial transparency is another procedural characteristic of the rule of law embraced by most democratic countries, which essentially guarantees a system clean from any form of corruption while instilling public confidence in an adjudicative body. The principle promotes elements of openness and visibility in the administration of justice, which is part and parcel of the right to a fair trial.81
Despite the fact that deliberations amongst members of the ad hoc Committee are held in secret,82 ICSID Convention guarantees a fair level of transparency through Article 48(3). Members of the Tribunal are bound to state the reasons upon which the decision is founded on, under pain of nullity.83 Thus, if a Tribunal fails to indicate the reasons inducing its decision, it may constitute a ground for annulment under Article 52. This obligation extends to the post-award stages, since members of the ad hoc Committee are also bound to provide
79 Fraport (n 33) para 202.
80 As quoted by Lord Shaw of Dunfermline in the case Scott v Scott [1931] AC 417 (UKHL 2).
81 EU Charter of Fundamental Rights (entered into force 01 December 2009) art 47: ‘Everyone is entitled to a fair and public [emphasis added] hearing within a reasonable time by an independent and impartial tribunal previously established by law’; European Convention on Human Rights (‘ECHR’) (entered into force 01 January 1990) art 6(1): ‘In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public [emphasis added] hearing within a reasonable time by an independent and impartial tribunal established by law’.
82 ICSID Arbitration Rules r 15. 83 ICSID Convention art 52(e).
