What is the role of the International Centre for Settlement of Investment Disputes (ICSID)?

Introduction

The International Centre for Settlement of Investment Disputes has, therefore, been involved in quite a few disputes concerning investments of foreign nationals, and this is why it is now so proficient in such investment disputes. It mainly deals with disputes that emanate between the patterns of state-investor relations established by investment policy. 

About ICSID

ICSID was established in 1966 under the Convention on the Settlement of Investment Disputes between States and Nationals of other States multilateral treaty brought into being by the initiative of the Executive Directors of the World Bank to propagate or promote foreign direct investment. It thus provides an even-handed non-political efficient forum specifically inscribed for handling disputes merely between investors and states.[1]

Features of the ICSID Convention

The mandates for the conciliation and arbitration of disputes between ICSID contracting member state parties and foreign investors from one other member state under the Conventions are to construct a multilateral treaty which establishes an impartial, autonomous, and self-sufficient system of rules for the protection of foreign investments.  

Domestic processes are delocalized from ICSID proceedings. This indicates that the ICSID process is not influenced by local courts. The self-contained system's consequences and other key features include:[2]

• According to Article 53 of the ICSID Convention, arbitration awards are final and legally binding, and no Member State's courts have the authority to overturn them.
• According to Articles 49 to 52 of the Convention, the Convention itself outlines the few post-award remedies that are available.
• According to Article 54 of the Convention, the money awards under the ICSID Convention are recognized and enforced as final judgments in any Member State by all Member States, regardless of whether they are parties to the dispute.
• According to Article 26 of the Convention, disputing parties accept ICSID arbitration as the sole remedy once they agree to it, unless they agree otherwise.
• Except in some specific situations, a Member State is not permitted to grant diplomatic protection to any of its citizens who have agreed to arbitration under Article 27 of the Convention.
• According to Articles 62 to 63 of the Convention, the location of procedures, or the location of hearings, is legally meaningless in Member States.
• According to Articles 21 to 22 of the Convention, participants are immune from the judicial system during the procedures.

Mandate and Functions of ICSID

The role of ICSID was to settle disputes in connection with investments between an investor and the state.  In such a case, these may be resolved through:

• Arbitration: Any proceedings where an independent or impartial adjudicator binds the parties' conduct by making a ruling on the issue.
• Conciliation: Non-compulsory process that offers assistance to the parties to achieve amicable settlement to which they could all agree.[3]

There exists an elaborate set of rules and procedures that govern these proceedings to ensure disputes are heard and, therefore, resolved in an efficient and transparent manner. Very few cases have been handled to date. Such a showcase should put emphasis on the essentially supportive position of ICSID in that region.

Role of International Centre for Settlement of Investment Disputes

ICSID provides neutral and impartial procedures under which disputes between states and investors may be resolved. Its importance in the context of global investment is complex:

• Depoliticization of Disputes: ICSID helps keep friendly international relations by offering a neutral forum that keeps disagreements from turning into diplomatic confrontations.[4]
• Enforceability of Awards: Arbitral awards made under ICSID have the same legal force and effect as final court decisions in any member state. The rules of the Convention, which mandate that member nations acknowledge and uphold ICSID awards, make this possible and give investors peace of mind over the safety of their capital.
• Consistency and Predictability: ICSID ensures the development of fair laws on international investments by following its methods and precedents, giving a high degree of predictability to states and investors alike.[5]

ICSID's Function in Resolving Disputes Between Investors and States

The International Centre for Settlement of Investment Disputes is put in the loop about the entire process concerning the resolution of disputes between investors and states. Some of the generic functions are herewith categorized as:[6]

• Arbitration and Conciliation Services: ICSID engages in arbitration and conciliation facilities to settle, inter alia, disputes between governments and foreign investors.
• Neutral Forum: It provides you with neutral and non-political ground, assuring impartiality in the settlement of all disputes.
• Enforcement of Awards: An award given under the ICSID Convention is binding upon the parties and enforceable in any member State, much like that of a judgment of the final court of that State.
• Expert Administration: ICSID administers arbitration, ensuring its observance of those rules and procedures, which provides uniformity and fairness.
• Capacity Building and Research: The Centre conducts advisory missions, research, and publishing to genuine international investment law development.

Landmark Cases on Role of the International Centre for Settlement of Investment Disputes

1. Suez and Vivendi v. Argentina:[7] 

The International Centre for Settlement of Investment Disputes (ICSID) played an incredibly big role in the case of Suez and others v. Argentina which was born from Argentinian measures that stemmed from the economic crisis of the early 2000s and had an impact on foreign investors, and particularly on public utilities. On the basis of the ICSID, various European companies, including Suez, Vivendi, and Aguas de Barcelona, advanced their claims against Argentina for alleged violations of obligations from one or more investment protection treaties, which provided for fair and equitable treatment and expropriation.

2. Chevron v. Ecuador:[8] 

While the dispute itself was certainly not about ICSID arbitration, the International Centre for Settlement of Investment Disputes served as a significant indirect participant in the Chevron v. Ecuador dispute. The case highlighted some of the key imperfections in enforcing ICSID awards along with broader discussions surrounding investment arbitration, jurisdictional conflicts, and environmental claims.

Drawbacks of ICSID

ICSID does not have a structured appeals process and functions as an ad hoc arbitration panel rather than a court with permanent judges. Rather, there is a review committee that has no authority to reverse the original panel's decisions. There is no definition of "investment" in the Convention. The Convention delegates were shown two drafts of the phrase "investment," but neither one received any support. The vast majority of the legal committee members accepted a British proposal that did not define the term "investment."[9]

Conclusion

The ICSID aims to provide access to international dispute resolution and a role for private parties in international economic interactions. The host countries are guaranteed that there won't be any foreign politics involved in their business interactions with private investors, and private investors can feel secure doing business with them. Nevertheless, with the increasing flow of foreign investment and the general reference to ICSID in investment treaties regarding arbitration of claims or disputes, it is pertinent to examine the Convention closely.

Indeed, it must be noted that the International Centre for Settlement of Investment Disputes is the head in international investment law. The ability to create an impartial, effective, and legally binding forum for dispute resolution enhance the international economic stability and assures investors about the maintenance of an element of confidence.[10]

ICSID is still a reliable option for settling investment disputes in spite of certain obstacles. ICSID is expected to continue to play a significant role in determining the direction of international investment law with continued reforms and growing global engagement.

[1] JUS CONNECT, https://jusconnect.com/en/d/profile/institution/en-icsid-international-centre-for-settlement-of-investment-disputes#about (last visited Feb, 01, 2025).

[2] PENCE LAW LIBRARY, International Commercial Arbitration: International Centre for Settlement of Investment Disputes (Feb. 02, 2025, 9:45 PM) https://wcl.american.libguides.com/c.php?g=599758&p=4229077

[3] International Centre for Settlement of Investment Disputes, https://icsid.worldbank.org/procedures (last visited Feb, 02, 2025).

[4] Gautam Mohanty & Alexandros Bakos, The Depoliticization of Investment Disputes- How Deep Does the “Rabbit Hole” Go? (Feb. 02, 2025, 9:45 PM), https://www.wti.org/media/filer_public/93/35/9335ff8e-2fc1-4eb8-81a5-104cece806bd/wti_wp_09_2023.pdf

[5] International Centre for Settlement of Investment Disputes, https://icsid.worldbank.org/About/ICSID (last visited Feb, 02, 2025).

[6] Christoph Schreuer, International Centre for Settlement of Investment Disputes (ICSID) (Feb. 02, 2025, 10:45 PM), https://investmentlaw.univie.ac.at/fileadmin/user_upload/p_investmentlaw/Writings/A033.pdf

[7] Suez, Sociedad General de Aguas de Barcelona, S.A.and Vivendi Universal, S.A. v. Argentine Republic, ICSID Case No. ARB/03/19

[8] Chevron Corporation and Texaco Petroleum Corporation v. Ecuador (II), PCA Case No. 2009-23

[9] Dominique Grisay, “International Arbitration: The ICSID Convention” The Bulletin, Volume 6 Issue 1 http://www.imakenews. com/iln/e_article000763642.cfm?x=b11,0,w> ( last visited Feb, 02, 2025).

[10]   International Centre for Settlement of Investment Disputes, https://icsid.worldbank.org/About/ICSID (last visited Feb, 02, 2025). 

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