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ICSID Arbitration and the Courts

Published online by Cambridge University Press:  27 February 2017

Georges R. Delaume
Georges R. Delaume*
Affiliation:
International Bank for Reconstruction and Development
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Extract

The Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (the Convention) provides for a truly international arbitration machinery, operating under the auspices of the International Centre for Settlement of Investment Disputes (ICSID).

Type
Research Article
Information
American Journal of International Law , Volume 77 , Issue 4 , October 1983 , pp. 784 - 803
Copyright
Copyright © American Society of International Law 1983

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References

1 17 UST 1270, TIAS No. 6090, 575 UNTS 159.

2 The Convention also provides for conciliation of investment disputes. The first request for conciliation was registered by the ICSID Secretariat on Oct. 5, 1982. However, because this article exclusively concerns issues arising in the context of ICSID arbitration, no more will be said about ICSID conciliation facilities.

3 Pursuant to the second sentence of Article 26, the rule formulated in that provision is subject to one exception: as a condition of its consent to ICSID arbitration, a contracting state may require the exhaustion of local administrative or judicial remedies.

So far, this exception has had little practical significance. None of the ICSID clauses known to the secretariat requires exhaustion of local remedies. Nor do investment laws referring to ICSID as a means of settling investment disputes and the overwhelming majority of bilateral investment protection treaties, with the exception of those concluded by Romania. The Romanian treaties all provide that consent to ICSID arbitration is limited to issues of compensation following preliminary adjudication by the Romanian courts. G. Delaume, Transnational Contracts, para. 15.18 (1982 updating).

4 The parties enjoy the same freedom of choice in the selection of the substantive rules applicable to their relationship. See Art. 42 of the Convention. For concrete illustrations, see G. Delaume, note 3 supra, para. 15.24.

5 See notes 21 to 23 infra and accompanying text.

6 The rule of abstention was clearly advocated in the Brief for the United States as Intervenor and Suggestion of Interest in MINE v. Guinea (see note 8 infra for references): “To prevent United States courts from improperly asserting jurisdiction over ICSID cases, and to accord the necessary deference to ICSID’s jurisdictional autonomy, the United States submits that a rule of abstention should be followed in U.S. courts.” Brief No. 81–1073, at 48–49 (Oct. 1981).

This argument is consistent with that made by the United States in regard to claims that might fall within the jurisdiction of the Iran-United States Claims Tribunal. See Statement of Interest of the United States, Crocker Nat’l Bank v. The Government of Iran, No. 79 Civ. 6493 (S.D.N.Y., Statement filed Feb. 26, 1981), reprinted in 20 ILM 363, 374 (1981).

7 See part II of this paper.

8 693 F.2d 1094 (D.C. Cir. 1982), reprinted in 21 ILM 1355 (1982), as amended, 22 ILM 86 (1983). For the decision of the district court, see 505 F. Supp. 141 (D.D.C. 1981), reprinted in 20 ILM 669 (1981).

9 S.A.R.L. Benvenutti [sic] & Bonfant v. Gouvernement de la république du Congo (Cour d’appel Paris, June 26, 1981), 20 ILM 878 (1981) (in English translation), and 108 J. Droit Int’l 843 (1981) (original French).

10 The reference should have been to the “Chairman” of the Administrative Council of ICSID.

11 See the amended decision of the court of appeals, 22 ILM at 88–89, nn. 11 & 12 and accompanying text.

12 A typical illustration is found in the provisions consistently stipulated in guarantee agreements between Brazil and foreign lenders relating to loans made to Brazilian public entities. Brazil is not yet a member of ICSID and there is therefore no possibility of bringing potential disputes between the lenders and Brazil within the scope of the Convention. However, the parties have found a way to place such disputes under the aegis of ICSID: they provide for ad hoc arbitration and stipulate that if one arbitrator is not appointed within certain time limits, the appointment will be made by the Secretary-General of ICSID at the request of the most diligent party.

Other stipulations requesting that the Secretary-General of ICSID act as appointing authority are submitted from time to time to ICSID.

13 The consent clause read as follows:

Submission of Dispute to the International Center for the Settlement of Investment Disputes

The Government of the Republic of Guinea (hereinafter called “the Host State”) and Maritime International Nominees Establishment (hereinafter called “the Investor”) hereby agree to submit to the International Center for the Settlement of Investment Disputes (hereinafter called “the Center”) in order to settle by arbitration by virtue of the Convention for the Settlement of Investment Disputes between States and Nationals of other States the following disputes: All disputes existing between the “A” and “B” shareholders of SOTRAMAR deriving from the Convention of August 19, 1971 between the Host State and the Investor. The parties hereby precise [sic] that the investor is Swiss. Any Court of arbitration constituted on the occasion of a dispute submitted to the Center by virtue of the present agreement shall be composed of one arbitrator nominated by each party and one arbitrator nominated by the President of the Board of Directors of the Center who will assume the [chairmanship of the Court.

14 9U.S.C. §4(1976).

15 28 U.S.C. §§1330, 1602–1611 (1976).

16 505 F. Supp. 141 (D.D.C. 1981), 20 ILM 669 (1981). See Shifman, Maritime International Nominees Establishment v. Republic of Guinea: Effect on U.S. Jurisdiction of an Agreement by a Foreign Sovereign to Arbitrate before the International Centre for Settlement of Investment Disputes, 16 Geo. Wash.. J. Int’l L. & Econ. 451 (1982).

17 In practice, ICSID proceedings have taken place in the following locations:

First Meeting of the Tribunal Hearings
Proceedings No.
(1) The Hague Paris
(2) Geneva Geneva and Lausanne
(3) Washington, D.C. Washington, D.C.
(4) Washington, D.C. Washington, D.C.
(5) Washington, D.C. Washington, D.C.
(6) No meeting None
(7) Paris Paris
(8) Paris Paris
(9) The Hague The Hague
(10) Washington, D.C. Paris
(11) New York City Paris

18 Pursuant to § 1605(a)(1) of the FSIA, a state is not immune when it has waived its immunity “either explicitly or by implication.” The legislative history mentions as an example of implicit waiver the case “where a foreign state has agreed to arbitration in another country.” H. Rep. No. 1487, 94th Cong., 2d Sess. 18 (1976).

There has been some divergence of opinion on the question whether by referring to “another country,” the authors of the FSIA had in mind the United States or considered that so long as the situs of arbitration was outside the territory of the state involved, submission to arbitration constituted an implicit waiver of immunity. See Ipitrade Int’l S.A. v. Federal Republic of Nigeria, 465 F. Supp 824 (D.D.C. 1978); Verlinden B.V. v. Central Bank of Nigeria, 488 F. Supp 1284 (S.D.N.Y. 1980), aff’d, 647 F.2d 320 (2d Cir. 1981), rev’d and remanded, 103 S. Ct. 1962 (1983); Libyan American Oil Co. v. Socialist People’s Libyan Arab Jamahirya, 482 F. Supp. 1175 (D.D.C. 1980), and the U.S. amicus curiae brief reproduced in 20 ILM 161 (1981).

19 693 F.2d at 1102–03 (footnote omitted).

20 Id. at 1103. Since this article is limited to that part of the decision concerning ICSID, it will not discuss the jurisdictional aspects of the case under §1605(a)(2) of the FSIA. See in this respect G. Delaume, note 3 supra, para. 11.10.

21 So far, the Secretary-General has never refused to register a request for ICSID arbitration. However, before agreeing to register a request, the Secretary-General has on occasion sought supplementary information to make sure that, prima facie, the conditions set forth in the Convention were satisfied.

22 Alcoa Minerals of Jamaica, Inc./Kaiser Bauxite Co./Reynolds Jamaica Mines Ltd. and Reynolds Metals Co. v. Government of Jamaica, Decision of July 5–6, 1975, as summarized in Schmidt, Arbitration under the Auspices of the International Centre for Settlement of Investment Disputes (ICSID): Implications of the Decision on Jurisdiction in Alcoa Minerals of Jamaica Inc. v. Government of Jamaica, 17 Harv. Int’l L.J. 90, 96 et seq. (1976); Société Ltd. Benvenuti & Bonfant srl v. Government of the People’s Republic of the Congo, Decision of Jan. 17–19, 1978, summarized in ICSID, Fifteenth Annual Report 1980/1981, at 41.

23 Holiday Inns/Occidental Petroleum v. Government of Morocco, Decision of the arbitral tribunal of July 1, 1973, as summarized by Lalive, , The First “World Bank” Arbitration (Holiday Inns v. Morocco)—Some Legal Problems, 51 Brit. Y.B. Int’l L. 123, 137 et seq. (1980)Google Scholar.

24 See notes 37 to 39 infra and accompanying text.

25 693 F.2d at 1102.

26 Ibid.

27 Art. 27 of the Convention. The effect of this provision is limited to the period starting from the date of consent to the rendition of an award. If, after an award is rendered, the contracting state party to the dispute refuses to comply with the award, the right of diplomatic protection will revive. See note 61 infra and accompanying text.

28 See Shifman, note 16 supra, at 454–55.

29 505 F. Supp. at 142 n.2. See also the amended opinion of the court of appeals, 22 ILM at 88, according to which: “Because exhibits filed by MINE itself in connection with its motion to confirm demand this very conclusion, we cannot say that the District Court’s factual finding was clearly erroneous” (footnote omitted).

30 G. Delaume, note 3 supra, paras. 15.07–15.08. See also Broches, Bilateral Investment Protection Treaties and Arbitration of Investment Disputes, in The Art of Arbitration—Liber Amicorum Pieters Sanders 63 (1982); Mann, , British Treaties for the Promotion and Protection of Investments, 52 Brit. Y.B. Int’l L. 241 (1982)Google Scholar.

31 The procedural history of these cases is recorded in ICSID, supra note 22, at 34–39. See also Schmidt, note 22 supra.

32 Regarding the right of a contracting state to notify ICSID of the classes of disputes that it would or would not submit to ICSID, see notes 43 to 45 infra and accompanying text.

33 Schmidt, note 22 supra, at 103.

34 Compare in the case of a non-ICSID arbitration the facts involved in Revere Copper & Brass Inc. v. Overseas Private Inv. Corp. (OPIC), 17 ILM 1321 (1978).

35 Under Article 25(1) of the Convention, each contracting state is free to designate to ICSID the particular public entities that it considers eligible to become parties to ICSID proceedings. Such a designation is not enough, however, to authorize a subdivision or agency to consent to ICSID arbitration. Under Article 25(3) of the Convention, such consent also requires the approval of the contracting state involved unless that state notifies ICSID that its approval is not required. Doc. ICSID/8/Rev.9 (Dec. 31, 1981) refers to the designations that have been made.

36 See the Holiday Inns case mentioned in the text at note 23 supra.

37 Art. 25(2)(b) of the Convention.

38 Brief for Appellee and Addenda thereto, at 57, 61–66 (D.C. Cir. filed May 22, 1981).

39 2 ICSID, Legislative History of the Convention on the Settlement of in Vestment Disputes Between States and Nationals of Other States 260, 359, 447–50, 851–52 (1970).

40 These clauses are found in arrangements concerning the industrial or agricultural development of a particular state or the development of its touristic or port facilities, as well as in turnkey contracts and contracts for the transfer of technology, especially in matters of electronics and air transportation.

41 See ICSID Model Clauses, Doc. ICSID/5/Rev. 1, sec. 2 (1981).

42 Ibid.

43 Doc. ICSID/8/Rev.9, supra note 35 (this document is being revised and updated).

44 Ibid.

45 Ibid.

46 The procedural history of this case is summarized in ICSID, supra note 22, at 40–42.

47 The text of the award in English translation appears in 21 ILM 740 (1982), with a correction in id. at 1478.

48 Benvenuti & Bonfant S.A.R.L. v. Gouvernement de la Republique du Congo (Trib. gr. inst. Paris, Jan, 13, 1981), 108 J. Droit Int’l 365 (1981).

49 See G. Delaume, note 3 supra, paras. 12.02–12.04.

50 Englander v. Statni Banka Ceskoslovenska (Cass. ch. Ire, Feb. 11, 1969), 96 J. Droit Int’l 923 (1969); Clerget v. Représentation commerciale de la République démocratique du Viet-Nam (Cass. ch. Ire, Nov. 2, 1971), 99 id. at 267 (1972); Caisse algérienne d’assurance vieillesse des nonsalariés v. Caisse nationale des barreaux français (Cass. ch. Ire, Dec. 7, 1977), 67 Rev. Critique Droit Int’l Privé 532 (1978). See also G. Delaume, note 3 supra, para. 12.03.

51 République islamique d’Iran, OIAEFI and OEAI v. Société EURODIF and SOFIDIF (Cour d’appel Paris, Apr. 21, 1982), 1982 Rev. Arbitrage 204, 110 J. Droit Int’l 145 (1983). See also Bourel, , Arbitrage international et immunités des Etats étrangers, 1982 Rev. Arbitrage 119 Google Scholar.

52 Libyan American Oil Co. (LIAMCO) v. Government of the Libyan Arab Republic, 20 ILM 1 (1981), 62 ILR 140 (1982).

53 Proceedings took place also in the United States, Sweden, and Switzerland. See G. Delaume, note 3 supra, para. 12.03.

54 Procureur de la République v. Société LIAMCO (Trib. gr. inst. Paris, March 5, 1979), 106 J. Droit Int’l 857 (1979).

55 For references, see note 9 supra.

56 The ICSID Secretariat keeps a current list of the judicial and other authorities designated by contracting states.

57 20 ILM at 881.

58 Such as the United States, the United Kingdom, Canada, and Western European countries. See G. Delaume, note 3 supra, ch. XII.

59 Diminco Agreement (1970), Ratification Act, 1970, approving an Agreement between the Government of Sierra Leone and Sierra Leone Selection Trust Limited, CI Sierra Leone Gazette, No. 89, Supp., Schedule E, para. 2 (Dec. 17, 1970).

60 G. Delaume, note 3 supra, para. 12.05.

61 Certain bilateral investment treaties parallel Article 27(1) of the Convention by providing for the suspension of diplomatic protection unless the dispute is held not to fall within the scope of the ICSID Convention or one of the contracting parties does not comply with an ICSID award. Two examples follow.

(1) The United Kingdom and Bangladesh, Treaty of June 19, 1980, CMND. 8013, Art. 8(2):

Neither Contracting Party shall pursue through diplomatic channels any dispute referred to the Centre unless

(a) The Secretary General of the Centre, or a conciliation commission or an arbitral tribunal constituted by it, decides that the dispute is not within the jurisdiction of the Centre, or

(b) the other Contracting Party should fail to abide by or to comply with any award rendered by an arbitral tribunal.

(2) The Belgo/Luxembourg Economic Union and Singapore Treaty of Nov. 17, 1978, Moniteur (Belgium), March 10, 1981, at 2722, Art. 9(4):

Aucune des Parties Contractantes ne poursuivra la solution d’un différend par la voie diplomatique, lorsque celui-ci se trouve soumis au Centre, à moins que:

(a) le Secrétaire Général du Centre estime que le différend dépasse manifestement la competence du Centre conformément à PArticle 36(3) de la Convention ou que le Tribunal d’arbitrage constitué selon l’Accord décide que le différend n’est pas de la compétence du Centre;

(b) l’autre Partie Contractante omette de respecter ou de se soumettre aux termes de la decision du tribunal d’arbitrage.

62 See text at note 6 supra.

63 (1) Amco Asia Corp., Pan American Development Ltd. and P.T. Amco Indonesia v. Government of Indonesia; (2) Klöckner Industrie-Anlagen GmbH, Klöckner Beige, S. A. and Klockner Handelsmaatschappij B.V. v. United Republic of Cameroun and Société Camerounaise des Engrais (SOCAME) S.A.; (3) Société Ouest Africaine des Betons Industriels (SOABI) v. Government of Senegal; (4) Swiss Aluminium Ltd. (ALUSUISSE) and Icelandic Aluminium Co. Ltd. (ISAL) v. Government of Iceland; (5) The Liberian Eastern Timber Corp. (LETCO) v. Government of The Republic of Liberia; Tesoro Petroleum Corp. v. Government of Trinidad and Tobago.

64 Holiday Inns/Occidental Petroleum v. Government of Morocco; Alcoa Minerals of Jamaica, Inc./Kaiser Bauxite Co./Reynolds Jamaica Mines Ltd. and Reynolds Metals Co. v. Government of Jamaica (three separate cases); Guadalupe Gas Products Corp. v. Federal Military Government of Nigeria; SEDITEX Engineering Beratungsgesellschaft fur die Textilindustrie .m.b.H. v. Government of the Democratic Republic of Madagascar.

65 Adriano Gardella Spa. v. Government of Ivory Coast (unpub.); AGIP s.p.a. v. Government of the People’s Republic of the Congo, 64 Rivista Diritto Internazionale 863 (1981) (original French), 21 ILM 726 (1982) (English translation); Ltd. Benvenuti & Bonfant srl. v. Government of the People’s Republic of the Congo, note 47 supra.

66 Another encouraging factor concerns ICSID membership. Until recently, ICSID membership was unevenly distributed. It included only limited Arab participation and no participation at all from Latin American countries. The situation has dramatically changed.

Aside from Egypt, Morocco, Sudan, and Tunisia, who were among the first countries to ratify the Convention, Kuwait, Saudi Arabia, and the United Arab Emirates became contracting states in 1979, 1980, and 1981, respectively. This phenomenon is significant; it shows that these countries, which are great importers of technology and investments, are themselves engaged in huge investments abroad with regard to which ICSID may be, and should increasingly become, particularly attractive.

Even more spectacular is the fact that Paraguay ratified the Convention on Jan. 7, 1982, and that the Convention has been signed by Costa Rica and El Salvador. The adhesion of these Latin American countries to ICSID is an event of historical importance. It shows an awareness of the changes that have recently taken place in the investment climate. It is well known that the financing of economic development projects from public, national or international, sources is becoming increasingly difficult. Under the circumstances, countries seeking outside financial assistance for the development of their economy must seek new ways of attracting foreign private capital. ICSID membership is one of the ways that this can be accomplished because it gives both investors and the host state means for settling possible investment disputes under the auspices of a specialized international organization whose impartiality is assured.