ЎЗБЕКИСТОН ҚОНУНЧИЛИГИ ТАҲЛИЛИ ♦ UZBEK LAW REVIEW ♦ ОБЗОР ЗАКОНОДАТЕЛЬСТВА УЗБЕКИСТАНА
2020
№2 ♦ ЎЗБЕКИСТОН ҚОНУНЧИЛИГИ ТАҲЛИЛИ ♦ UZBEK LAW REVIEW ♦ ОБЗОР ЗАКОНОДАТЕЛЬСТВА УЗБЕКИСТАНА
100
A.Isakulov
Researcher at TSUL
PECULIARITIES OF THE RECOGNITION,
ENFORCEMENT AND ANNULMENT OF ICSID
ARBITRAL AWARDS
Abstract:
This paper will explore the peculiarities ex-
isting in terms of the recognition, enforcement, and an-
nulment of arbitral awards rendered by the ICSID (Interna-
tional Center for Settlement of Disputes) operating based
on the Convention on the Settlement of Investment Dis-
putes between States and nationals of other States
(Washington, 1966). This paper will also touch upon the
specific requirements set for ICSID arbitral awards, pre-
requisites and relevant grounds for challenging the arbitral
award, as well as the case law demonstrating the practice
of ICSID in terms of annulment proceedings. The paper
will also investigate the issue of sovereign immunity
claimed by States in terms of resisting enforcement of
arbitral awards rendered by ICSID.
Keywords:
ICSID, arbitral award, enforcement, recog-
nition, annulment, sovereign immunity, BIT, ad hoc com-
mittee, New York Convention, non-ICSID awards.
Аннотация:
В данной статье изучены особенности,
существующие с точки зрения признания, исполнения
и отмены арбитражных решений, вынесенных ICSID
(Международный центр по урегулированию инвести-
ционных споров), действующий на основе Конвенции
об урегулировании инвестиционных споров между гос-
ударствами и гражданами других государств (Вашинг-
тон, 1966 г.). В статье также затронуты конкретные
требования, установленные для арбитражных реше-
ний МЦУИС, предварительные условия и соответ-
ствующие основания для оспаривания арбитражного
решения, а также прецедентное право, демонстриру-
ющее практику МЦУИС в отношении процедур анну-
лирования. Дополнительно рассмотрены вопросы су-
веренного иммунитета, на который претендуют госу-
дарства в связи с сопротивлением исполнению арбит-
ражных решений, вынесенных МЦУИС.
Ключевые слова:
МЦУИС, арбитражное решение,
приведение в исполнение, признание, аннулирование,
суверенный иммунитет, BIT, специальный комитет,
Нью-Йоркская конвенция, решения, не относящиеся к
МЦУИС.
I. INTRODUCTION
Currently, as of October 2020, 163 Member States
have signed this Convention. Although there is a long-
established rule stating about arbitral awards to be final
and binding on the parties and, such awards are subject to
certain challenges based on various grounds. Among such
arbitral awards, we can particularly highlight the arbitral
awards to be rendered by the ICSID for number of its pe-
culiarities, which makes it different from the awards ren-
dered by the non-ICSID arbitral institutions.
The Convention on the Settlement of Investment Dis-
putes Between States and Nationals of Other States (the
ICSID Convention) establishes a self-contained and au-
tonomous arbitration system. This system includes an
internal procedure for the review of ICSID awards and
limits the role of domestic courts to the recognition and
enforcement of these awards. In recognizing and enforc-
ing ICSID awards, the domestic courts of each contracting
state to the ICSID Convention are required to enforce the
pecuniary obligations imposed by an ICSID award as if it
were a final court judgment of the contracting state.
ICSID arbitration is more attractive than ever (49 ICSID
arbitrations were initiated in 2018) and the ICSID Conven-
tion continues to attract new contracting parties, such as
Mexico in 2018 and Iraq in 2015. Yet, the ICSID annul-
ment and enforcement regime faces a number of chal-
lenges, some new and others that have been grappled
with since inception, spanning the degree of scrutiny of
ICSID awards in the annulment process and the recogni-
tion and enforcement of investment treaty awards within
the European Union.
II. RECOGNITION AND ENFORCEMENT
As most investment treaties are silent on recognition
and enforcement, the ICSID Convention applies to recog-
nition and enforcement of ICSID arbitral awards, in addi-
tion to enforcement provisions of the law of the place of
enforcement. The Member States’ obligation to recognize
an ICSID award is unconditional under the ICSID Conven-
tion, although enforcement is subject to the law of the
place of enforcement. In turn, in most jurisdictions non-
ICSID awards’ recognition and enforcement are subject to
the New York Convention.
When enforcing an award against States or State enti-
ties, immunity from jurisdiction or immunity from enforce-
ment or execution might be an issue. The main difference
between ICSID awards and non-ICSID awards with re-
spect to immunity is that the question of immunity from
jurisdiction does not arise in the context of the ICSID Con-
vention.
Article 53 (1) of the ICSID Convention provides that the
award shall be binding, not subject to appeal or other
remedy different from those set forth in the Convention.
Because of its binding effect, an award has to be well
drafted, disposing of the relevant matters in a clear way
allowing the reader to follow its reasoning and understand
the relief granted. ICSID awards are subject to certain
mandatory requirements under Article 48 of the ICSID
Convention that cannot be subject to modification by the
parties. Awards have to be rendered by majority but may
contain separate or dissenting opinions as attachments.
Awards also have to be in writing and signed by the
tribunal members, who voted on it. Awards also have to be
exhaustive, dealing with every legal question or claim
submitted by the parties. The exhaustiveness requirement
does not mean that the award has to discuss every argu-
ment of the parties’ pleadings. For example, the tribunal
does not have to discuss alternative arguments when ac-
ceptance of a party’s argument leads to this party’s de-
sired relief.
Moreover, awards also have to state reasons, a re-
quirement that is consistent with contemporary interna-
tional dispute resolution. An award entirely without rea-
sons has never arisen in ICSID arbitration [1, p.817]. The
Klöckner v. Cameroon
[2] ad hoc annulment committee
explained that this requirement means stating reasons
with substance permitting to follow the tribunal’s reason-
ing.
Awards are deemed to be rendered “on the date on
which the certified copies were dispatched” to the parties
[3, art.49(1)]. Within forty-
five days of the award’s dispatch
to the parties, a party may request that the same tribunal
supplement omissions in the award and rectify “clerical,
arithmetical or similar error” under Article 49(2) of the
ICSID Convention, subject to notifying this to the other
party. The tribunal cannot supplement or rectify the award
on its own without a party’s request.
ЎЗБЕКИСТОН ҚОНУНЧИЛИГИ ТАҲЛИЛИ ♦ UZBEK LAW REVIEW ♦ ОБЗОР ЗАКОНОДАТЕЛЬСТВА УЗБЕКИСТАНА
2020
№2 ♦ ЎЗБЕКИСТОН ҚОНУНЧИЛИГИ ТАҲЛИЛИ ♦ UZBEK LAW REVIEW ♦ ОБЗОР ЗАКОНОДАТЕЛЬСТВА УЗБЕКИСТАНА
101
Article 49(2), which applies to awards and to ad hoc
annulment committee decisions, provides as follows:
The Tribunal upon the request of a party made within
45 days after the date on which the award was rendered
may after notice to the other party decide any question
which it had omitted to decide in the award, and shall recti-
fy any clerical, arithmetical or similar error in the award
.
The exp
ression “may” for supplementation requests
and the expression “shall” for rectification requests in Arti-
cle 49(2) above suggests that the tribunal has an obliga-
tion to rectify clerical, arithmetical or similar errors but no
obligation to supplement the award. Supplementing the
award is a limited remedy intended for unintentional omis-
sions rather than “essential” omissions justifying award
annulment under Article 52 [1, p. 860-864].
If the parties have a dispute about the meaning or the
scope of an existing award, either party may at any time
request the award’s interpretation by application to the
ICSID Secretary General under Article 50 of the ICSID
Convention.
Finally, a newly discovered fact decisively affecting the
award can serve as a ground for an award revision appli-
cation to the ICSID Secretary General under Article 51 of
the ICSID Convention. Article 51(1) requires that this new-
ly discovered fact be
“unknown to the Tribunal and to the
applicant and that the applicant’s ignorance of that fact
was not
due to negligence”
. The revision application has
to be made within ninety days after discovering the new
fact, subject to a three-year limitation counting from the
award’s issuance. If the same tribunal is no longer availa-
ble, a new ICSID tribunal will be constituted to rule on this
application.
Article 54(1) of the ICSID Convention sets forth the
Member States’ unconditional obligation to “recognize” the
award as a “final judgment” of their courts, as follows:
Each Contracting State shall recognize an award ren-
dered 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.
The recognition obligation under Article 54(1) extends
to the whole award leading to res judicata effect of the
entire award in the State where recognition is sought. The
enforcement obligation under the same provision extends
only to pecuniary obligations. It does not extend to other
obligations under the award such as restitution and specif-
ic performance
1
.
Although the recognition obligation is unconditional,
the enforcement obligation under Article 54 is subject to
the law of the forum State under Article 54(3). The UK
High Court decision in
Micula et al. v. Romania and Euro-
pean
Commission
illustrates the distinction between the
recognition and enforcement obligations under Article 54
of the ICSID Convention.
Relying on tax incentives, the claimants in
Micula et al.
v. Romania [4]
heavily invested in a food production oper-
ation in the Şeti-Nucet-Drăgăneşti region, Romania, in the
2000s. In 2004, Romania passed legislation repealing
1
Professor Schreuer explains that the restriction to pecuniary
relief sought to ensure that every legal system could enforce it
(for instance, in some States “courts may not have the power to
order specific performance”). He also states that a party could
rely on the New York Convention to enforce non-pecuniary obli-
gations. See Christoph H. Schreuer et al., The ICSID Convention:
A Commentary, 1137
–1139 (2nd ed., Cambridge University Press
2014).
most tax incentives because of EU State aid regulation,
leading to an ICSID arbitration instituted in 2005 under the
Sweden- Romania BIT [5].
In the same year, the claimants registered the ICSID
award with the High Court, the UK’s “designated authority”
under Article 54(2). Romania, supported by the European
Commission, applied for refusal of registration or of en-
forcement of the ICSID award. Among other things, Ro-
mania argued that the UK proceedings be stayed because
whether State courts could give res judicata effect to an
award circumventing EU State aid law had been raised
before the CJEU in the annulment proceedings. The CJEU
annulment proceedings sought to annul a European
Commission’s decision [8] finding that payment of com-
pensation awarded to the claimants in the arbitration was
State aid breaching EU law.
According to the High Court, the European Commis-
sion’s decision only prohibits the award’s payment by Ro-
mania; hence, simple award registration or recognition
does not create a risk of conflict between decisions of do-
mestic and EU institutions. Yet, the High Court favored
staying enforcement to prevent conflicting decisions in-
consistent with Article 351 of the Treaty on the Functioning
of the EU (TFEU). Therefore, the court dismissed Roma-
nia’s application for setting aside the registration order and
stayed the award’s enforcement pending the resolution of
the claimants’ CJEU proceedings seeking annulment of
the European Commission’s decision.
III. ANNULMENT PROCEEDINGS
Appeals are generally not accepted in international ar-
bitration, including investment arbitration. As discussed
above, in ICSID and non-ICSID arbitration parties can
apply for correction of minor deficiencies and award inter-
pretation. But these applications are not sufficient to cor-
rect egregious errors threatening arbitration’s legitimacy
[6], errors which due to their gravity are subject to annul-
ment proceedings.
Annulment
proceedings are part of the ICSID’s self-
contained nature pursuant to the exclusive-remedy rule of
Article 26 of the ICSID Convention. Pursuant to Article 52
of the ICSID Convention, the Centre constitutes an ad hoc
committee on a case-by-case basis to rule on annulment
applications.
Annulment differs from appeal because annulment
concerns the legitimacy of decision-making not its merits
[1, p.901], unless the annulment is based on
the incompatibility of the award with international public
policy. Moreover,
annulment leads to “invalidation of the
original decision” not to its modification.
The 2017 ICSID Annual Report [7] states that of 555
registered arbitrations leading to 261 awards, only five
awards were annulled in full and another twelve were par-
tially annulled. This shows an annulment rate of approxi-
mately 6.5% for awards and of approximately 3% for regis-
tered arbitrations. Article 52 (1) of the ICSID Convention
sets forth the limited annulment powers of ad hoc commit-
tees:
Either party may request annulment of the award by an
application in writing addressed to the Secretary-General
on one or more of the following grounds:
-
that the Tribunal was not properly constituted;
-
that the Tribunal has manifestly exceeded its pow-
ers;
-
that there was corruption on the part of a member
of the Tribunal;
-
that there has been a serious departure from a
fundamental rule of procedure; or
ЎЗБЕКИСТОН ҚОНУНЧИЛИГИ ТАҲЛИЛИ ♦ UZBEK LAW REVIEW ♦ ОБЗОР ЗАКОНОДАТЕЛЬСТВА УЗБЕКИСТАНА
2020
№2 ♦ ЎЗБЕКИСТОН ҚОНУНЧИЛИГИ ТАҲЛИЛИ ♦ UZBEK LAW REVIEW ♦ ОБЗОР ЗАКОНОДАТЕЛЬСТВА УЗБЕКИСТАНА
102
-
that the award has failed to state the reasons on
which it is based.
The annulment ground under Article 52(1) (a) on im-
proper constitution of the tribunal has been interpreted to
include the party’s confidence in the independence and
impartiality of arbitrators under Article 14 (1) of the ICSID
Convention. The ad hoc committee in
Suez et al. v. Argen-
tina
held that:
“
The Committee agrees with Respondent that the par-
ties’ confidence in the independence and impartiality of the
arbitrators deciding their case is essential for ensuring the
integrity of the proceedings and the dispute resolution
mechanism as such; thus, in principle, a lack of the quali-
ties in Article 14(1) may serve as ground for annulment
under Article 52(1 (a)”.
This conclusion is in line with the finding made by the
ad hoc committee in
EDF v. Argentina
and also with the
apparent intention of the drafters of the ICSID Convention.
Article 52(1) (b) on manifest excess of powers is a re-
current ground than Article 52(1) (a) above. Parties have
relied on Article 52 (1) (b) to argue that the tribunal (a)
lacked or exceeded jurisdiction; (b) failed to exercise juris-
diction; and/or (c) failed to apply the proper law [1, p.908].
For example, in
Occidental v. Ecuador
the ad hoc
committee found that the tribunal exceeded jurisdiction
compensating an investor for an expropriated investment
that was 40% beneficially owned and controlled by a Chi-
nese non-protected investor under the US-Ecuador BIT
[9].
Moreover, in
Venezuela Holdings et al. v. Venezuela
the ad hoc committee partially annulled the award for
manifest excess of powers for failure to apply the proper
law. In the ad hoc committee
’s view, the tribunal made a
mistake when holding that customary international law
governed compensation for investment expropriation in
the Cerro Negro Project [10]. The ad hoc committee con-
cluded that the tribunal should have applied the relevant
BIT compensation standard on expropriation, not custom-
ary international law.
Parties have seldom relied on corruption of a tribunal
member under Article 52 (1) (c) to challenge ICSID
awards. For example, in
Aguas del Aconquija and Vivendi
Argentina
withdrew the Article 52 (1) (c) challenge before
the ad hoc committee could rule on it [11].
On Article 52 (1) (d), the ad hoc committee in
TECO v.
Guatemala
noted that
“a departure from a rule of proce-
dure may lead to the annulment of an award only if the
departure is serious and the rule of procedure that was not
complied with is fundamental” [12]
. Applying this standard,
the committee found that the tribunal erred when denying
TECO’s claim for interest on historical damages on unjust
enrichment grounds. In the commit
tee’s view, the tribunal
surprised the parties when relying on unjust enrichment,
which was never alluded by the parties or the tribunal.
Consequently, the tribunal breached the parties’ “right to
be heard” on unjust enrichment.
Finally, when seeking annulment under Article
52(1)(e), parties have made arguments on (a) the absence
of reasons; (b) insufficient and inadequate reasons; (c)
contradictory reasons; or (d) the tribunal’s failure to deal
with questions [1, p.908]. Noting that ad hoc committees
do not have authority to review the merits [13], the
Tide-
water et al. v. Venezuela
committee held that stating rea-
sons is a crucial duty of tribunals:
“The statement of reasons is one of the central duties
of arbitral tribunals. An award is not a discretionary fiat but
the result of the process of weighing evidence and apply-
ing and interpreting the law and subsuming the facts thus
established under the law as interpreted by the Tribunal.
The legitimacy of the process depends on its intelligibility
and transparency. The statement of reasons allows the
Parties to understand the process through which the tribu-
nal makes its findings…”
Applying this standard, the
Tidewater
committee an-
nulled part of an award quantifying reparation for expropri-
ation on Article 52(1) (e) grounds. According to the ad hoc
committee, the tribunal’s contradictory reasoning when
calculating reparation cancelled out the tribunal’s previous
reasoning about the same reparation. Also, the ad hoc
committee in
TECO v. Guatemala
annulled part of an
award for the tribunal’s failure to deal with evidence on the
loss of value claim pursuant to Article 52 (1) (e).
It is noteworthy mentioning that when an annulment
application is made before the Secretary General under
Article 52 (1), the Chairman of the Administrative Council
will “appoint from the Panel of Arbitrators an ad hoc Com-
mittee of three persons” pursuant to Article 52 (3). None of
the ad hoc committee appointed members can be a na-
tional of the State party to the dispute or by the State of
the
investor’s nationality or be designated to the Panel of
Arbitrators by these States. The ad hoc members cannot
have acted as an arbitrator or a conciliator in the same
dispute.
The annulment application must be made within 120
days of the award’s dispatch to the parties. This is so,
except when the annulment application alleges corruption
of an arbitrator; then, the 120-day time limit counts from
discovery of corruption under Article 52(2).
IV. SOVEREIGN IMMUNITY
An important question about enforcement against
States is whether they are subject to immunity from juris-
diction or immunity from enforcement or execution. The
main difference between ICSID awards and non-ICSID
awards with respect to immunity is that the question of
immunity from jurisdiction does not arise in the context of
the ICSID Convention.
Immunity from jurisdiction is a non-issue in ICSID arbi-
tration because Member States have given their consent
to ICSID jurisdiction under Article 25(1), and have as-
sumed the unconditional obligation to recognize ICSID
awards under Article 54(1). Nevertheless, immunity from
execution is subject to the law of the forum State under
Article 55, which provides that: “
Nothing in Article 54 shall
be construed as derogating from the law in force in any
Contracting State relating to immunity of that State or of
any foreign State from execution”.
Article 55 provides a clarification to Article 54(3) on ex-
ecution being subject to the law of the State where execu-
tion is sought. Article 55 only applies to immunity from
execution. It does not apply to immunity from jurisdiction,
because the obligation to recognize the award as binding
is unconditional. State immunity law does not therefore
affect the res judicata effect of an ICSID award, once it is
recognized [1, p.1153].
Irresp
ective of the forum State’s
law on immunity from execution, ICSID Member States
have the obligation to comply with the award under Article
53 (1) of the ICSID Convention. Alternatively, a party
seeking payment can seek diplomatic protection under
Article 27 (1), and a Member State can resort to the ICJ
under Article 64 of the ICSID Convention if there is a dis-
pute with another Member State about award execution.
V. CONCLUSION
Despite the fact that awards are final and binding on
the parties, the issuance of an investment award is only
ЎЗБЕКИСТОН ҚОНУНЧИЛИГИ ТАҲЛИЛИ ♦ UZBEK LAW REVIEW ♦ ОБЗОР ЗАКОНОДАТЕЛЬСТВА УЗБЕКИСТАНА
2020
№2 ♦ ЎЗБЕКИСТОН ҚОНУНЧИЛИГИ ТАҲЛИЛИ ♦ UZBEK LAW REVIEW ♦ ОБЗОР ЗАКОНОДАТЕЛЬСТВА УЗБЕКИСТАНА
103
the first step to obtaining satisfaction on your claim. After
its issuance, the award is subject to recognition and en-
forcement.
Most investment treaties are silent on recognition and
enforcement, the ICSID Convention governs recognition
and enforcement of ICSID arbitral awards, in addition to
the laws on enforcement of the forum State. Under the
ICSID Convention the recognition obligation is uncondi-
tional, although ICSID award enforcement is conditional
on the law of the place of enforcement. In contrast, non-
ICSID awards’ recognition and enforcement are subject to
the New York Convention in most jurisdictions.
The ICSID Convention provides for a self-contained
annulment mechanism. Non-ICSID awards are subject to
annulment proceedi
ngs before arbitral seat’s State courts.
When enforcing an award against States or State enti-
ties immunity from jurisdiction and/or immunity from exe-
cution might be an issue (though in relation to ICSID
awards immunity from jurisdiction is a non-issue). The
success rate for a State’s alleging State immunity from
execution of investment awards is high. Nevertheless,
immunity from execution can be waived contractually in
certain situations.
References
1.
Christoph H. Schreuer et al., The ICSID Convention: A
Commentary, 817 (2nd ed., Cambridge University Press 2014)
2.
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’s Decision on
Annulment (3 May 1985), para. 119, in Emmanuel Gaillard, La
Jurisprudence du CIRDI 163, 284–285 (2nd ed., Global Arbitra-
tion Review 2018.
3.
ICSID Convention.
4.
Ioan Micula, Viorel Micula, S.C. European Food S.A,
S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania,
ICSID Case No. ARB/05/20, Award (11 Dec. 2013).
5.
Agreement between the Government of the Kingdom of
Sweden and the Government of Romania on the Promotion and
Reciprocal Protection of Investments (29 May 2002).
6.
Veijo Heiskanen & Laura Halonen, Post Award Reme-
dies, in Litigating Investment Disputes, A Practitioner’s Guide,
497 (Chiara Giorgetti, Brill Nijhoff 2014); Sundra Rajoo, An-
nulment of Investment Arbitration Awards, in The Investment
Treaty Arbitration Review, 211 (2nd ed., Barton Legum, Law
Business Research 2017).
7.
ICSID 2017 Annual Report (6 Sep. 2017), pp. 38–39,
available
at
https://icsid.worldbank.org/en/Documents/icsiddocs/ICSID%20
AR%20EN.pdf
8.
Commission Decision (EU) 2015/1470 of 30 Mar. 2015
on State aid SA.38517 (2014/C) (ex 2014/NN) implemented by
Romania — Arbitral award Micula v. Romania of 11 December
2013, OJ L 232, 4 Sep. 2015, p. 69.
9.
Occidental Petroleum Corporation and Occidental Ex-
ploration and Production Company v. Republic of Ecuador,
ICSID Case No. ARB/06/11, Decision on Annulment (2 Nov.
2015), paras 257 et seq.
10.
Venezuela Holdings B.V. and others (formerly Mobil
Corporation and others) v. Bolivarian Republic of Venezuela,
ICSID Case No. ARB/07/27, Decision on Annulment (9 Mar.
2017), para. 188(a).
11.
Compañía de Aguas del Aconquija S.A. and Vivendi
Universal S.A. v. Argentine Republic, ICSID Case No.
ARB/97/3, Decision on Annulment (10 Aug. 2010), para. 201.
12.
TECO Guatemala Holdings, LLC v. Republic of Gua-
temala, ICSID Case No. ARB/10/23, Decision on Annulment (5
Apr. 2016), para. 81.
13.
Tidewater Investment SRL and Tidewater Caribe, C.A.
v. Bolivarian Republic of Venezuela, ICSID Case No.
ARB/10/5, Decision on Annulment (27 Dec. 2016), para. 167.
