Is ICSID losing its appeal ... again?

Position:International Centre for Settlement of Investment Disputes - Proceedings of the One Hundred Fifth Annual Meeting of the American Society of International Law - Discussion

This panel was convened at 3:00 p.m., Thursday, March 24, by its moderator, Andrea Menaker of White & Case LLP, who introduced the panelists: Stanimir A. Alexandrov of Sidley Austin LLP; Andreas F. Lowenfeld of New York University School of Law; and Christoph Schreuer of the University of Vienna.


In today's session we are going to be talking with a very renowned panel about ICSID annulment, so I'll just launch right into it and introduce our panel members. I'm sure each of them is well known to all of you.

Starting at the very end of the table, we have Andreas Lowenfeld who is the Herbert and Rose Rubin Professor of International Law at NYU where he has taught for several decades. He is also the recipient of the Manley Hudson Medal given by ASIL in 2007 and has acted as an arbitrator in numerous investment arbitrations.

Next to him is Stanimir Alexandrov who is a partner at Sidley Austin. He is a co-chair of the firm's international arbitration practice. He practices international arbitration, investment arbitration, as well as WTO dispute resolution. Prior to joining Sidley Austin, he was Vice Minister of Foreign Affairs for Bulgaria and also was Deputy Chief of Mission in Bulgaria's embassy here in Washington, D.C.

To my immediate right is Christoph Schreuer who is currently counsel at Wolf Theiss in Vienna and prior to that was a professor of international law, most recently at the University of Vienna where he taught for many years. Before that, he also taught at the University of Salzburg and at SAIS, right here in the region. Perhaps most well know to you is the fact that Professor Schreuer has written what has become known as really the quintessential book on ICSID arbitration, and that is The ICSID Convention: A Commentary, in which he discusses in great detail all of the articles and rules, the ICSID Convention, and arbitration rules.

Rather than having each of our speakers make prepared remarks, what we thought we would do is have each speaker briefly discuss his views on the recent history of ICSID annulments. Then I will pose a number of questions to each of the panelists, so they will each have an opportunity to comment on those questions.

Of course, we welcome comments and questions from the audience at any time, so you need not wait until the end of the session. If you do want to jump in with a comment, please just raise your hand, and I will call upon you, and you can go to the microphone.

So, without further ado, I think that I will just hand it over to the panelists, so each of them can provide some opening remarks. I'd like to start with Professor Lowenfeld.


Maybe I should take advantage of the fact that I was there at the creation, as Dean Acheson said about Bretton Woods, and as many other people have said about other events. How do we get to annulment?

Well, in 1964 the United Nations had spent several years and gotten through this resolution of a permanent sovereignty, which wasn't quite as anti-investment as it sounded. It was kind of a compromise, but the world wanted to start the other way, with a view that if you encourage investment, you may encourage development, and if you rely only on government aid, you never really get development because governments may give money and maybe they can build a dam or an electric power plant, but for industrial development, you need management, technology, marketing, and all that. And you want to at least get rid of the disincentives of, well, this wave of expropriation that had come really with the liberation of the last colonies in the early 1960s, plus the perception that the Soviet Union and its satellites were doing very well. Later, it turns out that wasn't such a good perception, but that was common.

So the world clearly wanted to move in the opposite direction, and arbitration seemed like a good thing, but the New York Convention on Arbitration had not been approved by either the United States or the United Kingdom. In fact, the State Department delegation wrote a very negative report on the New York Convention. I read that report. I thought it was a very stupid report, but it was the report of the State Department. So the New York Convention wasn't really such a good model. Besides, it called for essentially a second level of enforcement if you got an award, and the idea of direct enforcement--this was really, I think, the preface-was that you have a self-contained system. Arbitrators selected the provisions, and then the award should be immediately enforceable, like a judgment.

And we talked about that. I was on the American delegation at the time. To enforce an award, say, in New York, you would enforce it the same way as a judgment of, say, Pennsylvania. Well, then there wouldn't be any control. We said, well, we have to have some control, and that leads to Article 52, and the hope was that it would be as little as possible, just if the arbitrators call wrong.

If you look at the analogy in the WTO, for 30 or 40 years, the GATT had no appeals procedure, but the awards were only recommended and had to be approved by the whole council. When in the Uruguay Round the WTO said, "No, we want finality," then you had an appeal procedure, but there's a big difference between that and what we have here. It was essentially a 90-day procedure. It ends up being a little longer but a quick procedure.

So we are left with this annulment, which I don't think was really very well-developed. There are five grounds, two of which hardly matter. I suppose it would matter if you had corruption, but that really doesn't matter, and it usually ends up with a battle about excess of powers. Does that mean if you decided something that you shouldn't have or you failed to decide something that you should have? We'll hear from the other colleagues.

But I think what has happened is that you get a second arbitration, and I hope we can do some way to remove it, make it quicker, have only those issues that really matter decided, not every conceivable issue, and maybe--I don't know if we could do it--but maybe have some kind of a professional appellate committee. I'm not sure you could do that without amendment, but I'm not sure that you couldn't either.

So maybe I'll just stop there, and we'll come back.


Professor Lowenfeld's remarks triggered something that I want to share, which is that the opposition to the ICSID Convention and the ICSID system is neither recent nor limited to a certain part of the world. I have read with interest the transcript of the meeting of the Senate Foreign Relations Committee in 1966, which was attended by Professor Lowenfeld, then from the Department of State, and his colleague from Treasury. I often offer that to my students, and it is very instructive because they presented the ICSID Convention for Senate approval, and members of the Foreign Relations Committee asked questions.

Some of the questions are about, "What is this thing called 'c-e-n-t-r-e'? We've never heard about that." Professor Lowenfeld answers, "Well, this is the way it is in the Oxford Dictionary, and then the question is, "Well, what is this thing, the Oxford Dictionary, and why should we consult it?"


The answer given is, "Well, the general counsel of the World Bank happens to be Dutch, and he probably studied English at an English school," and so the dialogue continues in that vein, which, to me, at least shows that there were at least some members of the Foreign Relations Committee who are adamantly opposed to the ICSID Convention in different ways, so it's neither new nor unusual.

I think what we'll talk about today is whether annulment committees overstep their authority in annulling where they shouldn't be, and whether they overstep their authority by criticizing or commenting on the words or issues that are not subject to annulment, and whether there are flaws in the system. But let me offer you the other side of the argument, just for the purposes of a debate.

First, I am looking at ICSID material that is published from the website which contains statistics of the ICSID caseload, and there is a chart of cases filed and cases annulled. Of course, we have to take into account the timeline because the cases annulled today were probably filed years ago, and we don't necessarily have to look at this at one particular point in time.

But what I find interesting here is that, for example, between 1981 and 1990 the ratio between filed cases and annulled cases was 3:1. Between 2001 and 2010 that ratio was 12:1. Of course, the exponential growth of cases filed shows that annulment is not necessarily a big percentage of the cases filed.

The second point I wanted to offer was that, to the extent that there are problems with annulment, they are not necessarily limited to the annulments of the past couple of years or to annulments in relation to cases against Argentina. One of the annulment decisions that I find particularly objectionable is Mitchell v. Congo, which is neither a case against Argentina nor an annulment that happened in the last two or three years.

This leads me to the next point. There are issues, and those issues to a large extent relate to what I call the "subjective factor." Different people, different decisionmakers, will decide differently. Consistency is an admirable goal, but this subobjective factor will always be there, and it exists in all systems, national or international. Let me just say that some would argue that if the Supreme Court of the United States had a different composition in the year 2000, we might have had an eight-year presidency of A1 Gore, so the subjective factor does matter. It does not necessarily mean on that basis alone that there is a problem with the system, so we need to take that factor into account in our discussion today to the extent to which it indicates a problem with the system.

Finally, one...

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