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International Centre

for Settlement of Investments


Disputes
(ICSID)
Significance to the Philippines
Foreign Direct Investments
Concerns of Foreign Investors
Neutral and International Dispute Settlement
Method
ICSID Cases v. RP
* ICSID Case No. ARB 02/6, SGS Societe
Generale de Surveillance S.A. v. Republic of the
Philippines registered on June 6,2002
* ICSID Case No. ARB/03/25, Fraport AG
Frankfurt Airport Services Worldwide v. Republic
of the Philippines registered October 9,2003
Establishment and Purpose
Established by a treaty
Created under Article 1(1) of the Convention on the settlement of
Investment Disputes between States and National of Other States
(commonly called as the Washington Convention)
The Convention came into force in 1966 and has been ratified by
140 states as of November 2003
Article 1(2) of the Convention the purpose of the Centre shall be to
provide facilities for conciliation and arbitration of investment
disputes between contracting states and nationals of other
contracting states
ICSID Secretary General Ibrahim Shihata was quoted on saying that
the primary objective of the ICSID is to promote a climate of mutual
confidence between investors and states so as to increase the flow
of resources to developing countries under reasonable conditions
Organization and Structure
Although formulated under the auspices of the
World Bank, ICSID is an autonomous
international organization.
Taking into account the history of the
organization its immediate endeavor is to relieve
World Bank officials and staff of their personal
involvement in settling investment disputes. The
function of dispute resolution was delegated to
ICSID and it was treated as a subsidiary of the
World Bank.
Organization and Structure
ICSID is composed of an Administrative Council a Secretariat and a
Panel of Conciliators and a Panel of Arbitrators
The Administrative Council composed of one representative of each
contracting state with one vote each is the governing body of the
organization.
* Among its powers and functions are the adoption of the rules
of procedures, regulations and annual budget and the approval of
administrative arrangements and annual report.
*The President of the World Bank is the ex-officio Chairman of
the Administrative Council but has no voting power.
The Secretariat shall consist of a Secretary General, one or more
deputy Secretaries-General and staff.
* The Secretary General who is the legal representative and
principal officer of the ICSID is responsible for its administration and
has the function of registrar and the power to authenticate arbitral
awards and certify copies thereof.
Organization and Structure
Since the purpose of ICSID is to provide facilities for
conciliation and arbitration it maintains a panel of
Concillators and a Panel of Arbitrators who are persons
of high moral character with recognized competence in
the fields of law, commerce, industry and finance and
may be relied upon to exercise independent judgment.
Each contracting State can designate in their respective
panels four conciliators and four arbitrators of any
nationality .
In addition , the Chairman can designate ten persons of
different nationalities to each panel putting due
importance to the proper representation of the principal
legal systems of the world and the main forms of
economic activity
Jurisdiction
Article 25 of the Convention provides for the four criteria
that must exist before ICSID can exercise jurisdiction:
1. There must be a legal dispute
2. Which arises out of an investment
3. between a contracting state (or any subdivision or
agency of a contracting state designated to the Centre
by that state) and a national of another contracting state
and
4. the parties must have given their consent to arbitration
in writing.
Therefore, access to the facilities is not automatic
because of all the important requirement of consent.
Consent
Consent by both parties in writing to the
arbitration by ICSID is jurisdictional
Can be done before or after the dispute arises
Once the parties have given their consent it
cannot be unilaterally withdrawn
* The parties can give their written consent by:
the inclusion of an express ICSID arbitration
clause in the investment agreement
* A state can give its investment laws or
bilateral investment treaties that the investor can
accept in writing
Consent
Mention must be made that ratification,
acceptance or approval of the Convention by a
Contracting State does not operate as consent
to submit a specific dispute to arbitration and a
state can exclude certain classes of disputes
from being submitted to the jurisdiction of ICSID
Once consent is given to arbitration, it shall be
deemed as exclusion to any other remedy but a
contracting state can require the exhaustion of
local remedies as a condition of its consent
Additional Facility Rules
Aside from providing conciliation and arbitration facilities under the
convention ICSID through its Administrative Council adopted the
Additional Facility Rules authorizing its Secretariat to administer
between state and nationals certain categories of proceedings
between State and nationals of other States that fall outside the
scope of the ICSID Convention.
Among them :
a. Fact-finding proceedings
b. conciliation or arbitration proceedings for the settlement of
investment disputes between parties one of which is not a
Contracting State or a national of a Contracting State
c. conciliation and arbitration proceedings between parties at least
one of which is a contracting state or a national of a Contracting
State for the settlement of disputes that do not arise directly out of
an investment provided that the underlying transaction is not an
ordinary commercial transaction.
Arbitral Tribunal
If the dispute is within the jurisdiction of ICSID
upon submission by a party to the Secretary-
General of a request for arbitration and after
notice to the other party, the Secretary General
will register the request.
Thereafter, the Arbitral Tribunal shall be
constituted
There is party autonomy in the constitution and
composition of the tribunal, the applicable law
the conduct of the arbitration proceedings and
even on deciding the dispute based on ex-aequo
et bono.
Arbitration Proceedings
It is only when the parties fail to exercise
such autonomy that the provisions of the
Convention take effect and the ICSID
machinery will come into play.
For instance, if the arbitral tribunal has not
been constituted within ninety days the
Chairman of the Administrative Council will
appoint the arbitrators.
Arbitration Proceedings
In the absence of an agreement on the
applicable law the tribunal will apply the
law of the contracting state party to the
dispute relevant rules of international law
The arbitration proceedings will be
conducted in accordance with the
Convention and the Arbitration Rules
except when parties decide otherwise.
Rendition of Awards
Te tribunal has the power to judge its own
competence rule on the objections as to its
jurisdiction and recommend any provisional
measures
Non-appearance or failure of a party to present
its case will not derail the proceedings and the
party present may request the tribunal to render
an award.
The award must be decided by a majority
addressing every question submitted to it and
stating the reasons thereof in writing.
Recognition and Enforcement of
the Award
As a mode of settling disputes the rendition of the award
by the arbitral tribunal will certainly have two effects.
There will be a winning party and a losing party.
Naturally the winning party will be the one who will seek
for the recognition and enforcement of the award and the
losing party will have to abide by it.
Considering that parties to ICSID cases are Contracting
States and Nationals of other Contracting state and the
award could go either way the obstacles on the
recognition and enforcement mechanisms will depend on
who is the losing party.
Recognition and Enforcement of
the Award
If the foreign investors are the losing party, the
provisions of the Convention regarding
recognition and enforcement can be applied
without much difficulty.
However, in cases where it is the contracting
(host) party state that is the losing party, this is
where some barriers will come into play because
of state sovereignty.
Presume that the contracting state is the losing
party in the award
Article 53
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. Each party shall abide by and
comply with the terms of the award except to the
extent that enforcement shall have been stayed
pursuant to the relevant provisions of this
Convention.
For purposes of this Section awards shall
include any decision interpreting revising or
annulling such award pursuant to Articles
50,51,52
Article 53 Interpretation
The Convention and even other arbitration
statutes and rules such as the NEW York
Convention and Uncitral Model Law and
International Rules does not provide for the
definition of an award.
In the context of arbitration an award can
generally be defined as the decision rendered by
the arbitral tribunal on the merits of the case
Analyzing it on framework of recognition and
enforcement it can be inferred that the term
award as used in Article 53 refers only to final
decisions of the tribunal.
Article 53 Interpretation
However, if the parties file with the Secretary
General the full and signed text of their
settlement and in writing request the Tribunal to
embody such settlement in an award the tribunal
may record the settlement in the form of its
award.
A decision on the tribunals jurisdiction unless it
is joined to the merits of the dispute which forms
part of the award decisions on provisional
measures and procedural orders which the
tribunal makes in the course of the proceedings
are excluded.
Article 53 Interpretation
The binding force of arbitration awards is essentially the
basic characteristics of arbitration which separates it
from other modes of alternative dispute settlement. AN
ICSID award is binding on the parties to the
proceedings.
There is a winning party and a losing party . This means
that the winning party has a legal right to demand
compliance and the losing party is under legal obligation
to comply with an award . The obligation to comply with
the award will not be affected by any procedural
impediment that may occur during enforcement. Non-
compliance by a party with an award would be breach of
legal obligation.
Article 53 Interpretation
On the Presumption that the award is issued
against the contracting (host) state, and
although voluntary compliance is the norm, it is
driven by legal and non-legal reasons to comply
with the award.
The contracting (host) state has an obligation
under public international law to comply with an
ICSID award being a Contracting State under
the treaty. It must perform its obligation under
the treaty in good faith and it may not invoke the
provisions of its internal laws as justification for
its failure to perform.
Article 53 Interpretation
Or the non-legal reasons, there are the following four
possibilities:
a) non-compliance of a state may lead to its loss of
credibility in the international business community
b) If a continuing business relationship exists between
the parties it may be the contracting state interests to
perform the award since by failing to do so it risks
losing further business from the foreign investor.
c) Non-compliance may cause fear of jeopardizing the
ability of a contracting state to obtain further World
Bank and IMF Loans.
d) A host state which gains a reputation for ignoring
awards unjustifiably risks a refusal by refutable
international contractors to tender for projects within its
territory.
Article 53 Interpretation
In instances when the party on the contracting
states side is a constituent subdivision or
agency designated by that State, the award is
binding on that entity
The contracting State not being a party to the
proceeding would not be subject to the
obligation of Article 53.
However, by virtue of the designation of such
entity as a party and the approval of the State on
the entitys consent, the contracting (host) State
would be responsible for the compliance of an
award rendered against one of its constituent
subdivisions or agencies.
Article 53 Interpretation
ICSID awards are not subject to any appeal. It
means that such awards are final and once the
award is rendered and the review procedures
under the Convention have been exhausted, it
will operate as res judicata not only in relation to
other arbitration tribunals but domestic courts as
well.
The parties cannot seek a remedy on the same
dispute in another forum It is precluded from
resorting to any national or international judicial
remedy.
Article 53 Interpretation
The losing party may not initate action before a
domestic court to seek the annulment of another
from of review of an ICSID award.
At the same time the winning party dissatisfied
with the award may not turn to another forum for
additional relief based on the same claim. The
court of a State that is a party to the Convention
would be under an obligation to dismiss such an
action.
Article 53 Interpretation
This independence from national
procedures for review of arbitral awards
means that the place of arbitration in ICSID
proceedings is irrelevant for the validity of
the award and enforcement.
In the same manner , national courts
charges with the enforcement of ICSID
award have no power to review that award
for substantive correctness or procedural
irregularities.
Article 53 Interpretation
Therefore, an ICSID award may be used as a
defense against an action in the same matter
before another judicial forum. This would apply
even if a court or tribunal otherwise had
jurisdiction over the matter.
However, this principle of exclusion of other
remedies applies only if the award rendered is a
decision on the merits of the dispute. The
exclusion of another remedy would not apply if
the arbitral tribunal has given an award in which
it finds that the dispute is not within its
jurisdiction.
Article 53 Interpretation
In addition, Article 53 also contemplates on the
exclusion of an appeal to the International Court
of Justice
Although Article 64 of the Convention provides
that a dispute between Contracting Parties
concerning the interpretation or application of
the Convention may be referred to ICJ the
preparatory works to the Convention make it
quite clear that Article 64 does not confer
jurisdiction on the ICJ to review the decision of
an arbitral tribunal.
Article 53 Interpretation
In addition Article 53 also contemplates on the
exclusion of an appeal to the International Court
of Justice
Although Article 64 of the Convention provides
that a dispute between contracting parties
concerning the interpretation or application of
the convention may be referred to ICJ the
preparatory works to the Convention make it
quite clear that Article 64 does not confer
jurisdiction on the ICJ to review the decision of
an arbitral tribunal.
Article 53 Interpretation
Finally, Article 53 can also be read as excluding
the applicability of the doctrine of binding
precedent for subsequent ICSID Cases.
Applying by analogy Article 59 of the Statute of
the International Court of Justice the decision
has no binding force except between the parties
and in respect of that particular case
Although ICSID tribunals and ad hoc committees
have repeatedly referred to and relied on
previous decisions they have also pointed out
that they were not bound by these decisions.
Article 50,51 and 52
These provisions which refer to the interpretation
revision an annulment of an award are significant in
three areas.
First the convention provides for its own exhaustive and
self contained system of review awards. As stated in
Article 53 ICSID awards are not subject to any other
remedy except as provided for in the Convention. Article
50 on interpretation 51 on revision and 52 on annulment
are the only remedies under the Convention that the
parties are allowed to exhaust such review procedures
the finality of the award will set in.
Article 50,51 and 52
Second as earlier mentioned decisions pursuant to these
provisions are considered as awards and hence
recognizable and enforceable. Thus there is an
obligation to abide by and comply with the award as
interpreted or revised. If the award is annulled the
obligation to comply disappears until a new award is
decided upon by another tribunal.
Lastly, enforcement of an award can only be stayed by
the tribunal on the basis of such provisions while
proceedings for interpretation revision or annulment are
pending. Recognition and enforcement is subject of the
condition that there is no stay of enforcement. The duty
to recognize and enforce is suspended while a stay of
enforcement is in force.
Article 50,51 and 52
Either of the parties can request in writing for the
interpretation, revision or annulment of the award.
For interpretation and revision the request shall be
submitted to the Tribunal which rendered the award but if
it is no longer possible a new tribunal shall be
constituted.
In the case of request for annulment, the Chairman will
appoint an ad hoc committed of 3 persons from the
Panel of Arbitrators none of whom shall be members of
the tribunal that rendered the award and such committee
shall have the authority to annul the award
Interpretation can be requested as to the meaning or
scope of the award.
Article 50,51 and 52
Request for revision of an award can only be done on
the ground of discovery of some fact of such a nature as
decisively to affect the ward and that such fact was
unknown and not due to the applicants ignorance when
the award was rendered.
For annulment request can only be made based on the
following grounds a0 that the tribunal was not properly
constituted b) that the tribunal has manifestly exceeded
its powers c) that there was corruption on the part of a
member of the tribunal d) that there has been a serious
departure from a fundamental rule of procedure or c) that
the award has failed to state the reasons on which it is
based.
Article 54
1. Each contracting State shall recognize an award rendered
pursuant to this convention as binding and enforce the pecuniary
obligations imposed by that award within its territories as if it were
a final judgment of a court in that State. A contracting State with a
Federal Constitution may enforce such an award in or through its
federal courts shall treat the award as if it were a final judgment
of the courts of a constituent state.
2. A party seeking recognition or enforcement in the territories of a
Contracting State shall furnish to a competent court or other
authority which such state shall have designated for this purpose
a copy of the award certified by the Secretary General. Each
Contracting State shall notify the Secretary General of the
designation of the competent court or other authority for this
purpose and of any subsequent change in such designation.
3. Execution of the award shall be governed by the laws concerning
the execution of judgments in force in the State in whose
territories such execution is sought.
Article 54 Interpretation
Enforcement of an award has two separate stages: recognition and
execution
Recognition is the official confirmation that the award is authentic
and it has 2 possible effects:
1. it confirms that the award is final and binding
2. it is a step preliminary to execution
The recognition of an award has the effect of rendering res judicata
The restriction to pecuniary obligations contained in Article 54 (1)
only relates to the execution of awards but not their recognition.
Therefore, a non-pecuniary obligation of specific performance like
restitution or an obligation to desist from certain course of action that
is spelled out in an award, once recognized will enjoy the effect of
res judicata even though it is not subject to enforcement.
A holder of a recognized ICSID award only has an executory title
especially if the losing party is the contracting state.
Article 54 Interpretation
As a rule recognition is a preliminary step
leading to execution. Hence it is useful to
have an award recognized even if there
are no immediate prospects of an
execution because there are no available
assets in the State where recognition is
sought. Once recognition has been
obtained execution will be easier should
assets become available at a later stage
Article 54 Interpretation
Provides for an obligation to each contracting state to recognize and
enforce an ICSID award as if it were a final judgment of a court in
that state
Failure of a Contracting State to recognize and enforce an award
would be a breach of a treaty obligation and would carry the usual
consequences of State responsibility
Thus recognition and enforcement may be sought in any Contracting
State and not just in the State party to the arbitration proceedings
and the State of nationality of the investor who was a party to the
proceedings.
Therefore, the winning party has the discretion to select the forum
that would be most favorable and such can be determined primarily
by the availability of suitable assets of the losing party.
Article 54 Interpretation
The reference to a final judgment of a domestic court
puts ICSID awards on the same footing with any
domestic judgments that are not subject to review. A
final court decision is one against which nor ordinary
remedy is available. Even a judgment of a lower court
may be final if it is not subject to review or if the time limit
for an appeal or another remedy has expired.
While there is a mandatory obligation to recognize the
award, the Contracting State have the discretion to
designate which competent court will recognize the
award. The judgments of such courts designated are the
ones equal to an ICSID awards.
Article 54 Interpretation
In the process of such recognition and enforcement of
the award, the competent court or authority designated
by the Contracting State may not review the tribunals
jurisdiction, the fairness and propriety of the proceedings
and the merits of the case even on the ground that the
award may have violated Stated public policy.
A party must furnish a copy of the award certified by the
Secretary General in order to obtain recognition or
enforcement by the competent court or authority. An
award can only be submitted for recognition and
enforcement by a party to the arbitration proceeding and
an interested third party is not entitled to do so.
Article 54 Interpretation
Only awards that are not subject to a stay of
enforcement may be furnished. Upon
submission of the copy of the award, the tasks of
the court or authority designated are limited to
verifying the authenticity of the ICSID awards
and upon such verification automatically
translate the award into judgment
Execution refers to the actual attachment of
funds to satisfy the award without regard to
national law, the execution of ICSID AWARD
subject to the law of the country where the
execution takes place.
Article 54 Interpretation
Therefore, only procedures and remedies that
are available under the domestic law will be
applied to ICSID awards. Obstacles to the
enforcement of an ICSID award under the law
where execution is sought will in no way affect
the obligation of the party to abide by and
comply the award.
Failure of the contracting state to fulfill the award
amounts to a violation of its international law
obligations and hence can be subjected to state
responsibility
Article 54 Interpretation
There is also no reason why proceedings for
recognition and enforcement of an ICSID award
could not be initiated in several States
simultaneously.
Recognition of an award in several states may
be necessary to secure its res judicata effect. If
execution of the award is sought in several
States, the courts and competent authorities in
these States will have to coordinate their steps
to make sure that payment is not made more
than once.
Article 55
Article 55 does not grant State immunity
but simply refers to the prevailing situation
under the law of the State where execution
is sought.
The principle of immunity which is inherent
to the very nature of states may seek to
invoke their sovereignty as a shield
against an arbitral tribunals authority
Article 55 Interpretation
In recent years the question of immunity has
evolved significantly notably with respect to the
issue of whether an immunity of a state may be
waived. For instance, it is widely accepted to day
that when a state enters into an arbitration
agreement immunity from jurisdiction is
presumed to have been waived, thus precluding
the state from seeking to remove itself from the
arbitral process by invoking its sovereign status
Article 55 Interpretation
Article 55 applies only to immunity from execution. It
does not apply to immunity from jurisdiction . Jurisdiction
is governed by Article 25 of the Convention and in
accordance with Article 41 is determined by the Tribunal.
In addition, State immunity does not apply to
proceedings for the recognition of an award because
Article 55 only refers to exectution but not to recognition.
Thus, State immunity does not affect res judicata effect
of an award once it has been recognized since it only
comes into play when concrete measures of execution
are taken to enforce the awards pecuniary obligations.
Immunity from Execution
Traditional distinction between sovereign
and commercial acts and had limited the
enforcement of an arbitral award against
properties used or intended for use for
commercial activities or purposes as
opposed to sovereign or public purposes.
Properties designated for public purposes
are accordingly protected from
enforcement actions.
Immunity from Execution
The test for immunity from execution is
usually the purpose of the property in
question. Although the origin of the
property in question is also sometimes
taken into account and if the property in
question is not clearly designated it is
often difficult to determine its intended use
or purpose.
Immunity from Execution
Overall it will depend on the governing law
on immunity of the state where execution
is being sought and how the domestic
courts in those states interpret them. The
implication of which is that the execution of
ICSID awards will be subjected to different
interpretations depending on the
Contracting State where the execution is
being sought.
Immunity from Execution
Under such circumstances it is possible
that an ICSID award can be capable of
execution against the property of the State
party to the dispute in certain Contracting
States but not in other contracting State.
Case Examples
Cases relating to the enforcement of ICSID
awards have only so far risen in the United
States and France .
In each case, the enforcing courts displayed
some confusion regarding the automatic
recognition provision and attempted to introduce
their national laws into recognition process. The
courts eventually recognized the awards but
there are cases wherein the foreign investors
were unable to receive payment of their award.
Buenvenuti & Bonfant v. Congo
Government of Congo entered into an agreement with
an Italian company for the creation of a semi-public
company manufacturing plastic bottles.
When a dispute arose, arbitration under ICSID was held
pursuant to a clause in their contract. The Italian
company had succeeded in obtaining an award from the
arbitral tribunal against Congo.
The company commenced enforcement proceedings in
France against funds held by a French bank on behalf of
the Banque Commerciale Congolaise allegedly
controlled by the Congolose government.
Lower court granted recognition but barred execution
because of sovereign immunity.
Buenvenuti & Bonfant v. Congo
Court of Appeal ruled that the lower court
exceeded its authority by prematurely dealing
with the question of sovereign immunity from
execution.
Buenvenuti & Bonfant obtained an attachment,
not against the assets of the Congolese
government directly but indirectly against funds
held by French bank on behalf of the Banque
Commerciale Congolaise allegedly controlled by
the Congolese government.
Buenvenuti & Bonfant v. Congo
The French Supreme Court held that the
attachement was void because the
Congolese bank was not itself indebted to
Buenvenuti & Bonfant and had a separate
legal identity from the Congolese
government. Thus the bank could not be
held responsible for the governments
debts.
SOABI ( SEUTIN) v. Senegal
Senegal terminated its agreement with SOABI
relating to the construction of low income
housing in DAKAR.
Upon rendition of the award in favor of SOABI, a
company controlled by largely Belgian interests
it sought enforcement of the award in France
against Senegal.
Lower court granted recognition of the award but
the Court of Appeal vacated the recognition
order.
SOABI ( SEUTIN) v. Senegal
The French Supreme Court annulled the Court
of Appeals decision.
First it held that the ICSID excludes recourse to
the French rules on the recognition of foreign
arbitral awards.
Second it clarified the distinction between
immunity from recognition and execution should
not be considered until after the award is
recognized and funds have been attached to
satisfy the award. THUS, immunity from
execution should not be considered during
recognition stage.
LETCO v. LIBERIA
The dispute arose from grant of a
concession by Liberia to LETCO to
harvest and exploit Liberian timber. Bases
on alleged shortcomings of LETCO and
concern over conservation and proper
utilization of its timber resources Liberia
reduced LETCOs consession and later
on entirely terminated it.
LETCO v. LIBERIA
LETCO commenced ICSID arbitration pursuant
to the consession agreement but Liberia refused
to participate in the arbitration. Nonetheless, the
arbitration panel proceeded and rendered an
award for LETCO.
Upon application for enforcement in the United
State District for the Southern District of New
York, the judge issued an ex parte order
directing the enforcement of the arbitral award.
LETCO sought to execute its judgment against
certain tonnage and registration fees collected in
the United States from ship owners flying the
Liberian flag
LETCO v. LIBERIA
LIBERIA however claimed the fees were
designed to raise revenue for the Republic
of Liberia and its collection should be
viewed as sovereign and not commercial
in nature and therefore immune from
execution under the principle of sovereign
immunity as codified in the Foreign
Sovereign Immunities Act. (FSIA)
LETCO v. LIBERIA
The Court agreed with Liberia and granted
the injunction blocking execution against
the ship owners fees. In reaching this
decision the court relied on Article 55 of
the Convention which surrenders to
domestic law all determinations of
sovereign immunity with respect to
execution of judgment.
LETCO v. LIBERIA
After failing to secure execution in New York, LETCO
sought enforcement in the US District Court for the
District of Columbia for bank accounts of the Liberian
Embassy.
The court decided that (1) bank accounts were immune
from attachment under the Vienna Convention on
Diplomatic Relations which requires hosts states to
accord each foreign state full facilities for the
performance of the functions of that states mission and
(2) that the accounts were likewise immune from
attachment under the FSIA because they did not meet
the requirements of the commercial activity exception.
LETCO v. LIBERIA
The court cited the rule of the thumb that if the activity is
one in which a private person could engage it is not
entitled to immunity. Applying these principles to the
bank accounts at issue the court found that although
some portion of the funds might be used for commercial
activities in connection with running the Liberian
Embassy such uses were incidental or auxillary and
hence did not alter the essentially public or governmental
character of the accounts . The result for the Liberian
Embassy if creditors were allowed to freeze its bank
accounts even if only to permit discovery as to the
portion of the bank account used for commercial
activities.
Problems Illustrated in the Case
Examples
The preceeding case illustrate some of the
difficulties that courts have had in recognizing
ICSID awards automatically.
Although eventually the courts all recognized the
ICSID awards they attempted to verify whether
the awards complied with their national laws.
Additionally they attempted to introduce the
issue of sovereign immunity into the recognition
proceedings rather than waiting until the
execution of the award. Then even after the
courts recognized the award execution was not
Problems Illustrated in the Case
Examples
Possible in two of the cases because of national
laws relating to sovereign immunity from
execution.
Clearly the restraints placed on the execution of
the award undermined the force of the
recognized award.
The foreign investor will be in position wherein it
may not be able to find assets which both belong
to the contracting state and are not immune from
execution under national law.
Remedies in Case of Non-
enforcement of the Award
First it can resort to forum shopping and seek
enforcement in other courts in the state where
execution was sought or in other Contracting
States where the host state has assets.
Due to the difficulties of determining at the
outset whether an asset will be immune from
execution or not, it may not be advisable to
commence proceedings for recognition and
enforcement of an ICSID award in several states
simultaneouly.
Remedies in Case of Non-
enforcement of the Award
Partial payment in different states is both
possible and legitimate. In such circumstances
competent authorities in these states must
coordinate their steps to ensure payment is only
made once.
However, the problems with this are that first
there is no overarching authority that can
coordinate the efforts of the state involved let
alone compel compliance directly in their
territories and second bringing parallel
proceedings is costly.
Remedies in Case of Non-
enforcement of the Award
Second it may seek diplomatic protection from
the state of which it is considered to be a
national and such could seek compliance to the
host state on behalf of the foreign investor thus
lending additional weight to its claims.
However the remedy of diplomatic protection
has notable deficiencies from the foreign
investors perspective.
First, it may be the case that a foreign investor
cannot bring the claim unless it has already
exhausted local remedies.
Remedies in Case of Non-
enforcement of the Award
Second, it is the state that has the right to
protect and not the foreign investor that
has the right to be protected. Whether a
state exercises this right depends on
consideration of interstate relations and
thus the right may be subordinated to
other more political goals pursued by
home state.
Remedies in Case of Non-
enforcement of the Award
Third, if the host state noncompliance is found to
raise a question of interpretation or application
of the Convention the home state would have
the right under Article 64 of the Convention to
submit the question to the International Court of
Justice.
Again this is the prerogative of the home state
and thus subject to the same circumstances as
that of diplomatic protection.
Assessment
Looking back at the goals that prompted
the establishment of the ICSID which is to
create an international mechanism to
promote the free flow of investment
resources from one country to another
taken as a hole the record of ICSID in
providing facilities for dispute resolution
between hosts states and foreign investors
is quite positive.
Assessment
The Convention reflected in several
provisions the autonomy of the arbitration
mechanism and the simple process of
recognition of awards. However, the
effectiveness of international arbitration
ultimately depends on whether the arbitral
award can be enforced against the losing
party and it is at the enforcement state that
the ICSID system loses its independence.
Assessment
Like all other international bodies, ICSID
lacks enforcement powers. It must depend
on the national courts to enforce its
awards. National courts ability to do so
may in turn be restricted by national
legislatures. Thus , while the locus of
arbitration is legally irrelevant to the extent
that it does not trigger the application of
the national arbitration laws the place of
enforcement is crucial.
Assessment
In comparison even with the drawbacks at the execution
stage the ICSID mechanisms is still a considerable
improvement over the New York Convention (NYC)
mechanism for several reasons.
* First with respect to sovereign immunity, this doctrine is
only activated at the execution stage in ICSID while
under the NYC, it may depending upon the legal seat of
arbitration operate to prevent a court from assuming
jurisdiction. Furthermore national laws on sovereign
immunity only operate to bar execution in that jurisdiction
and such laws have no impact on the award itself which
therefore can be enforced in another jurisdiction whose
sovereign immunity laws are more lenient.
Assessment
Second as a member of the World Bank family
ICSID enjoys a distinct advantage over the NYC
mechanisms. Withdrawal of official air will bear
heavily on the risks calculus of a rational state
deciding whether to comply or not.
Despite its lack of an institutional remedy for non
compliance there has been an increasing
frequency with which foreign investors and host
states cite ICSID preferred mechanism of
dispute resolution.
Assessment
The use of ICSID clauses has become
widespread in bilateral investment treaties
national investment laws and codes and
individual agreements. It serves both as a
prevention of disputes and as a vehicle for
settlement.
Although the success of the Convention cannot
be judge solely on the number of arbitrations
which have been brought as of November 2004
there were 87 concluded case and 83 pending
cases. Awards were rendered to almost half of
the concluded by settlement of the parties.
Recommendations

Reformulate the rules on the execution of


awards and review the delegation of the
powers of execution to national courts.
Such tasks can be accomplished by the
insertion of a waiver of immunity from
execution in the Convention. However it
means that amendment to the Convention
would be necessary
Recommendations

Take advantage of party autonomy to the


fullest extent to remove all possible
obstacles to the execution of the award.
The negotiations and drafting of the
agreement between parties would be
crucial and it is at this point that an
express waiver of immunity from execution
should be included.
Recommendations

If all else fails the last resort for foreign


investors failing to enforce its awards
against a host state is to make a claim
towards their political risks insurance
which all those doing business with States
are advised to have.
Thank you