ICSID Part 1 – PROCEEDINGS EXPLAINED AND ANALYZED

To begin with, I will give you an overview of the main steps involved in an ICSID Convention Arbitration

The main steps involved in an ICSID Convention Arbitration

3.1.0-Chart-ICSID-Convention-Arbitration-LP.png

PREPARATIONS – About Screening and Registration at the ICSID

As soon as a party has filed a request for arbitration with the prescribed lodging fee, ICSID sends the request to the other party and reviews the request to determine whether it can be registered.

  • The Screening Process

The Secretary-General of ICSID must determine whether the dispute is manifestly outside the jurisdiction of the Centre as soon as possible after the filing of the request for arbitration. This determination is made on the basis of the information contained in the request.

If one of the requirements in Article 25 of the ICSID Convention is manifestly lacking, the Secretary-General must refuse to register the request. Otherwise the dispute must be registered and the Tribunal can address objections.
The screening process takes on average three weeks, depending on whether ICSID needs clarifications, additional information or documentation from the requesting party.

  • Registration

The notice of registration is sent to the parties and basic case details are posted on ICSID’s website. All significant steps in the proceeding are subsequently made publicly available under “Procedural Details” of that case.

STEP 1 – NUMBER OF ARBITRATORS AND METHOD OF THEIR APPOINTMENT

Parties should agree on the number of arbitrators on a Tribunal and the method of their appointment. If they cannot agree, ICSID’s default mechanism will apply.

The images below visualize the proceedings

To Agree or Not to Agree
3.1.3-Chart2-Number-of-Arbitrators-and-Method-of-Their-Appointment-LP.png
Proceedings if disagreement regarding Arbitrators

 

Party Agreement

The parties refer to the existing contract, treaty or law containing the consent to ICSID arbitration. Hence, this refers to a prior agreement the parties on the number of arbitrators and/or the method of their appointment.

MY ANALYSIS

APCL has continuously claimed that they shall utilize the dispute mechanism in the contract. So we should assume that there is a prior contract between APCL and Gambia that regulates this aspect concerning arbitrators and the method of appointment.  

If no prior agreement exist, ICSID invites the parties to agree on the number of arbitrators and the method of their appointment when ICSID registers the request for arbitration. 

Party disagreement (Default Mechanism)

If no agreement on the number of arbitrators and the method of their appointment is reached, either party may request the application of the default formula under Article 37(2)(b) of the ICSID Convention. The formula provides that:

  • The Tribunal consists of three arbitrators.
  • Each party appoints one co-arbitrator.
  • The parties attempt to agree on the third arbitrator, the President of the Tribunal.

In cases where the default formula applies, Arbitration Rule 3 sets forth the process by which the parties appoint the members of the Tribunal:

  • The first party to appoint an arbitrator also proposes a candidate to serve as President of the Tribunal.
  • The other party then appoints an arbitrator and either agrees to the appointment of the arbitrator proposed for President or proposes another candidate.
  • If a counter-proposal is made, the party making the first appointment then indicates whether it agrees to the new proposal for President.
  • The parties are not limited in the number of proposals or counter-proposals that can be made.

The parties may agree on a different method of constituting the Tribunal even after a party has raised the ICSID default formula.

The Tribunal

A Tribunal must always consist of a sole arbitrator or any uneven number of arbitrators. The parties are otherwise free to adopt any workable method of appointment that suits their needs, including provisions on time limits and special procedures. The parties do not need to appoint arbitrators from the ICSID Panel of Arbitrators.The most common agreements for three-member Tribunals are:

  • Each party appoints one co-arbitrator, and the parties attempt to agree on the third arbitrator, the President of the Tribunal. If the parties fail to agree, the Secretary-General (or the Chairman of the Administrative Council) of ICSID appoints the President.
  • Each party appoints one co-arbitrator, and the co-arbitrators attempt to agree on the third arbitrator, the President of the Tribunal. If the co-arbitrators fail to agree, the Secretary-General (or the Chairman of the Administrative Council) of ICSID appoints the President.

As part of their agreement on the method for constituting the Tribunal, the parties may agree to adopt a list procedure concerning proposed candidates. List procedures can be used for a sole arbitrator, the President of the Tribunal or all members of the Tribunal. Commonly used list procedures include:

  • The parties exchange a list of candidates; each party informs the other party of the candidate(s) whom it accepts or rejects.
  • The parties request that ICSID provide them with a list of candidates. Each party can strike a certain number of candidates and rank the remaining candidates. The candidate with the best ranking is appointed or, if two or more candidates have the same ranking, ICSID selects one of them.
ICSID supports parties’ efforts to agree on the method of appointment and will follow the agreed method and facilitate the process to the fullest extent possible.If the parties are unable to appoint all members of the Tribunal under the established method, either party may invoke the ICSID default mechanism for appointing the missing arbitrator(s).

Public access

The notice of registration is sent to the parties and basic case details are posted on ICSID’s website. All significant steps in the proceeding are subsequently made publicly available under “Procedural Details” of that case.

Time Limits

The date of registration triggers time limits (Of course, the parties are encouraged to inform ICSID of any agreement as to the number of arbitrators and the method of their appointment and to constitute a Tribunal as soon as possible).

60 days

The time limit concering the method to constitute the Tribunal is 60 days from the date of registration.

90 days 

The time limit to appoint the members of a Tribunal is 90 days.

MY ANALYSIS

A conclusion of the above mentioned is that neither party can delay the proceedings in this regard. A maximum of 60 days is allowed. If no agreement is reached within this period, ICSID has established rules in case of disagreement between the parties concerning the arbitrators and the method of appointment. See Default Mechanism above.

STEP 2 – FIRST SESSION

The purpose of the first session of the Tribunal is to ascertain the parties’ agreements or separate views on procedural questions such as the applicable arbitration rules, language(s) to be used, place of proceedings, and the procedural calendar. The session enables the Tribunal to set a schedule and establish specific rules for each case in a procedural order.

Time Limits

The first session should be held within 60 days after the constitution of the Tribunal, unless the parties agree otherwise (Arbitration Rule 13(1)). When each arbitrator is appointed, ICSID ascertains their availability to ensure a timely first session. Once the Tribunal is constituted, the Secretary of the Tribunal contacts the parties with proposed date(s) and venue (or a proposal for a telephone or videoconference) for the first session.

If the parties and the Tribunal cannot meet within the 60-day period and cannot agree on an extension of this time limit, the Tribunal will proceed without the parties but will take their written submissions into account.

The When and Where of the First Session

The first session can be held in person, by telephone or by videoconference.

The parties may agree on any location for the first session, provided that the Tribunal approves such venue and there are suitable facilities. The Tribunal often proposes a venue for the parties’ consideration.

If there is no agreement, an in-person meeting will take place by default at the seat of the Centre in Washington, D.C. (Article 63 of the ICSID Convention and Arbitration Rule 13(3)).

An increasing number of first sessions are held by telephone or videoconference to reduce costs and travel time. This decision is taken by the Tribunal and the parties considering factors such as the number of outstanding issues.

Issues to be Discussed

The first session addresses any matters of procedure that the parties and the Tribunal wish to establish at the outset of the proceeding.

The Secretary of the Tribunal circulates a draft agenda approved by the Tribunal to the parties for their comments well in advance of a first session. The draft agenda has been developed by the Centre taking into account standard procedural items, such as the procedural calendar (see Image below for an example). The agenda is often accompanied by a draft procedural order to guide the parties in reaching agreements on specific issues.

The first session sometimes includes oral submissions on a party’s request for bifurcation of the proceeding, request for provisional measures or a request to dispose of the matter because the claim is manifestly without legal merit.

The agreements reached and the procedural decisions taken by the Tribunal are included in a procedural order which is signed by the President of the Tribunal and circulated to the parties by the Secretary of the Tribunal promptly after the first session.

Example of a Procedural Calendar
3.1.6.1-Chart1-Procedural-Calendar-LP.png
Example of Procedural Calendar (ICSID Convention Arbitration)

FINAL STEP – AWARD (i.e. ruling or outcome)

The award (or ruling/outcome) of the ICSID is final and binding and can be recognized and enforced in any ICSID Member State. There is no appeal against an award, but there are limited post-award remedies available under the Convention.

Once the presentation of the case is completed, the proceeding is declared closed and the award must be signed in the next 120 days, with the possibility of an extension of 60 days (Arbitration Rule 38 and 46).  Usually, the closure of the proceeding occurs after the Tribunal has deliberated and concluded that it has no further questions for the parties.

The questions before the Tribunal must be decided by a majority vote of the Tribunal members, but any member may attach an individual opinion (concurring, dissenting or other). The award must be signed by the Tribunal members who voted for it.

The award is rendered when ICSID dispatches certified copies of the award to the parties (Article 49 of the ICSID Convention, Arbitration Rule 48(2)). Additional certified copies of the award may be requested by the parties.

The parties may agree to publish the award on ICSID’s website.  When an award is not made public by the parties, the Centre will publish excerpts of the award’s legal reasoning (Arbitration Rule 48(4)). ICSID also publishes other material in the case with the parties’ consent.

FINAL FACTS AND ANALYSIS

In what circumstances can arbitrators be challenged?

Arbitrators can be challenged if it can be shown that they manifestly lack: (i) high moral character; (ii) recognised competence in the fields of law, commerce, industry or finance; or (iii) independent judgement. The decision to disqualify an arbitrator is made by the remaining members of the tribunal, and if it is divided, by the chairman of the tribunal. Challenges are typically advanced on the basis that an arbitrator is not independent and cannot, for some reason, exercise independent judgement.

MY ANALYSIS

I can only see this as advantageous APCL. Any arbitrator proposed by the Gambia will be disqualified if they lack either one of the above mentioned criteria. In my view, the most central to Apcl’s advantage is the second and third criteria. And since it is the chairman of the tribunal who has the final vote in case the remaining members of the tribunal are divided. Hence, I really can’t see how this procedure can be anything other than advantageous to Apcl. And the chairmen of ICSID tribunals are no amateurs susceptible to leverave, bribes etc. On the contrary. Indeed. Make no mistake about it. Have a look at the chairman of the last arbitration tribunal between APCL and Gambia. His experience speaks for itself. Oh, and he’s from Sweden. 

https://www.threecrownsllp.com/team/jan-paulsson/

The participating parts (the claimant and the respondent) both gets to nominate a member of the tribunal. Here are Apcl’s and Gambia’s accepted nominations last time in 2014. You be the judge of whose most merited.

APCL: Alexis Mourre.

http://www.leadersleague.com/en/news/alexis-mourre-new-head-of-icc-international-court-of-arbitration

Gambia: Loretta Malintoppi.

https://www.linkedin.com/in/loretta-malintoppi-993a9a10

How does a party go about enforcing an ICSID arbitration award?

Enforcement under the ICSID Convention is confined to the enforcement of pecuniary obligations, not other remedies such as specific performance. Enforcement is possible in any ICSID Contracting State, not just the Respondent Contracting State. In addition, it is possible to seek enforcement of monetary or non-monetary awards under the New York Convention. However, in practice, enforcement may not always be necessary. Following an ICSID award the host state will be subject to pressure from other states, and inter-governmental organisations such as the IBRD and the IMF, to comply. In practice, this means settlement is often achieved.

MY ANALYSIS

It seems clear to me that Gambia, in case of a negative outcome from their perspective, will not have much choice other than accepting it. As I’ve mentioned elsewhere before, the Gambia is dependent on international loans from the likes of IMF and the World Bank itself. They simply can’t afford not to comply. President Barrow has time and again both in actions and words proven that he is putting the Gambia back on the International Agenda and seeks approval and acceptance of international institutions. Furthermore, Gambia has under president Barrow’s command been granted credits.

This one is particularly interesting from African Petroleum’s Perspective.

http://www.worldbank.org/en/news/press-release/2017/05/31/world-bank-to-help-senegal-negotiate-complex-oil-gas-projects

Will ICSID assume jurisdiction on the dispute claimed by African Petroleum?

The applicable ICSID rules are found in the: (i) ICSID Convention of 1965; (ii) the ICSID Arbitration Rules; (iii) ICSID’s Administrative and Financial Regulations; and (iv) ICSID’s Institution Rules. This scattered approach is a result of the difficulty in amending the ICSID Convention; it is far easier to amend the ancillary rules permissible with two-thirds of the majority of ICSID’s Administrative Council. In addition, if an investor is relying on a bilateral or multilateral investment treaty (BIT or MIT) as the source of ICSID’s jurisdiction it is necessary also to consult the rules in the relevant treaty. If jurisdiction is founded on a contract or legislation, this instrument should also be checked. Ultimately, the tribunal has discretion as to the specific procedure applied, in accordance with the applicable ICSID rules.

The tribunal can determine its own jurisdiction. Jurisdiction will exist when there is a legal dispute arising directly out of an investment between a Contracting State and a national of another Contracting State. There must also be written consent to submit the dispute to ICSID, which may be found in legislation, a contract, or an investment treaty. The most common basis of consent is the existence of a BIT, this being used in 63 per cent of registered cases. By comparison, an investment contract between the host state and investor historically accounts for 19 per cent of cases.

Jurisdictional challenges are common in investment disputes. According to ICSID, tribunals decline jurisdiction in one in four disputes. Often a jurisdictional challenge will be determined separately. Only if the tribunal concludes that it has jurisdiction, will it proceed to hear the substantive claims.

MY ANALYSIS

APCL and the Gambia has an a bilateral investment treaty (BIT). This is an agreement establishing the terms and conditions for private investment by nationals and companies of one state in another state. Most BITs grant investments made by an investor of one Contracting State in the territory of the other a number of guarantees, which typically include fair and equitable treatment, protection from expropriation, free transfer of means and full protection and security. 

The distinctive feature of many BITs is that they allow for an alternative dispute resolution mechanism, whereby an investor whose rights under the BIT have been violated could have recourse to international arbitration, often under the auspices of the ICSID (International Center for the Settlement of Investment Disputes), rather than suing the host State in its own courts.This process is called investor-state dispute settlement.

So it is fairly certain that ICSID will assume jurisdiction of the dispute between APCL and Gambia. 

FINAL THOUGHTS

I strongly believe that African Petroleum Corporation without a doubt is the part that benefits most on the proceedings of the International Centre for the Settlement of Investment Disputes. The most important of the above mentioned arguments for that is the legal expertise and the highly skilled people of ICSID.

I believe that a positive outcome for APCL is likely.

APCL themselves have highly skilled judicial expertise.

APCL also have great experience both within the petroleum industry and its legal framework.

APCL has won a similar dispute before. They will likely win again.

But here it comes. It is completely depending on what the contract of the Oil licenses A1 and A4 contains and stipulates. Of that we know nothing. However, I would put my trust in the CEO of African Petroleum Coroporation Jens Pace and the rest of the management in APCL, and not in the very inexperienced State of Gambia. I leave you with quoting Jens Pace.

 

“[…] we, after taking external legal advice, are very confident of our legal position in terms of these licenses […]” 

21 august 2017

“[…] we are confident in our legal position and have made great efforts to proactively engage in sensible dialogue with the relevant authorities […]

4 september 2017.

 

Thanks for reading my blog.

Best regards,

RobertVERITAS

 

Sources:

https://icsid.worldbank.org/en/Pages/process/Arbitration.aspx

https://www.ashurst.com/en/news-and-insights/legal-updates/icsid-arbitration-what-actually-happens-in-icsid-proceedings/

 

UPCOMING POST

Part 2 of this story will soon be published.

It will present statistics of previous outcomes in ICSID arbitration proceedings between African Nations and foreign investors (like APCL).

 

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