MARKET VIEW – ARBITRATION
ICSID secretary general Meg Kinnear talks annulment, case administration and the globalisation of treaty arbitration with Baker & McKenzie partners Grant Hanessian and Teddy Baldwin
That more cases were filed at the International Centre for Settlement of Investment Disputes (ICSID) in 2013 than during the first 24 years of its existence reflects the extent to which treaty arbitration is now arguably the fastest-growing area of international dispute resolution. Notwithstanding criticism from some NGOs that treaty arbitration is biased in favour of investors, the fact is that governments prevail in more than half of all treaty cases, and it is clear that a host state’s ability to attract foreign direct investment is diminished substantially unless it offers a system under which to enforce investors’ rights. Arbitration under the ICSID rules remains by far the most popular for investment treaty disputes because its awards may be enforced without recourse to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) and because of the strength of the ICSID secretariat and the quality of the arbitrators it appoints. Some users do criticise the length of time it takes ICSID tribunals to render awards – at least 20 of which have been issued five or more years after the filing request.
Grant Hanessian, Baker & McKenzie: As is the case with respect to proceedings before many international arbitration institutions, there has been concern voiced in some quarters regarding the time and cost of ICSID arbitration. I’d like to start by asking if ICSID has made efforts to expedite the arbitration process in its cases?
Meg Kinnear, ICSID: We have adopted a number of practices whose cumulative effect will address concerns over the length of time taken to conduct cases. For example, when ICSID appoints an arbitrator, we now ask candidates to provide a calendar of their commitments in the next 18 to 24 months. If they do not have the requisite availability – in particular, to conduct the first procedural hearing within 60 days – we stand down on the appointment. We have also been encouraging arbitrators at the first session to think about longer-term scheduling. Things can of course change if you bifurcate or split merits and damages. However, our experience has been that if you only schedule for the next step after the previous step has been completed, you risk pushing out the entire timetable.
‘We have put a number of systems in place to track when a decision or an order is taking longer than it should.’
Meg Kinnear, ICSID
Grant Hanessian: Does ICSID track the time it takes for proceedings to be completed, or for an award or order to be issued?
Meg Kinnear: We have put a number of systems in place to track when a decision or an order is taking longer than it should. As a rough estimate, we expect that an interim decision will be issued in three months or less, and that a final decision will be delivered in eight to ten months. Decisions or orders can be delayed – for example, when the parties are having trouble obtaining a piece of evidence, or there is an issue with an arbitrator’s schedule.
Teddy Baldwin, Baker & McKenzie: Are you reaching the eight to ten month standard more often than not?
Meg Kinnear: Yes. We have about ten cases that are really complicated and take much longer, but most of the others meet that standard. We have also put great effort into reducing the length of time between receiving the request for arbitration and registering the case, which used to be one of parties’ biggest complaints, given that some registrations took up to six months. About three years ago, we got that number down to an average of 27 days; for the fiscal year ending on 30 June 2014, that has been reduced to an average of 21 days. The average time from the registration of the request to the constitution of the tribunal is 5.4 months, with an average of 39 months to conclude the case. The latter number is, as I said, skewed by some of the mega cases.
Many of the ICSID cases are of course resolved more quickly – in CDC v Seychelles the sole arbitrator, former Australian chief justice Sir Anthony Mason, issued his award 482 days after the request for arbitration. Similarly, the tribunals in Pantechniki v Albania, AGIP v Congo and Maffezini v Spain rendered their respective awards 72 days, 92 days and 120 days after the hearing on the merits, significantly faster than the ICSID average. At the other end of the spectrum, Pey Casado v Chile remains a live matter 16 years after the claimant’s request for arbitration, making it the longest-running case in ICSID history.
The Pey Casado award is currently subject to annulment proceedings, a feature which has in recent years occasionally been subject to criticism for ‘judicialising’ the investment arbitration system and delaying its effective operation.
Grant Hanessian: As you know, the annulment process is distinctive to ICSID arbitration and has been the subject of some attention in recent years. Have you done anything recently to manage requests for annulment?
Meg Kinnear: I know there has been a lot of discussion around annulment, mostly concerning the standard to be applied. But, relatively speaking, there are not many instances of annulment. Out of a total of 420 ICSID Convention cases, which are the only ones that can be annulled, there were 73 annulments instituted; of that number, only six full annulments and seven partial annulments were made. While annulment is meant to be an extraordinary and limited remedy, there are going to be cases when there should be an annulment, and that is entirely the decision of the ad hoc committee constituted to hear the application.
Spreading the word
Teddy Baldwin: Are there things that ICSID can do to build international arbitration capability in developing countries?
Meg Kinnear: As part of the World Bank, whose mission is to further international development, we are very aware of this aspect of our remit. It is one of the lenses through which the World Bank looks at us, and we work with units at the International Finance Corporation who are mandated to help with justice issues in developing countries – whether that be through establishing national arbitration centres or advising states on what they can do to encourage and retain foreign investments. In terms of ICSID-specific initiatives, providing technical assistance is key. We make it clear that it is not appropriate for us to be telling governments about how to write their treaty obligations or standards. Where we can help is with procedure.
Teddy Baldwin: Could you give us examples of these initiatives?
Meg Kinnear: We run a primer on ICSID for members of national Bars who may be interested, as well as for government officials who may be facing treaty cases in the future. We were in Cameroon, Nigeria and Senegal last year and, over the next few months, will be presenting the course in six jurisdictions across Asia. We’ve also entered into facilities collaboration agreements with arbitration institutions around the world and are able to use any of the World Bank’s 122 global offices to administer international arbitrations.
Grant Hanessian: Do you provide substantive training with respect to treaty obligations?
Meg Kinnear: No. We want to be very careful that no party feels that ICSID is anything other than completely impartial. That said, there is clearly a need to provide training on treaty obligations, and one looks to organisations such as the United Nations Conference on Trade and Development to do that.
Teddy Baldwin: Thinking of that balance in another context, what do you do to ensure the quality of arbitral awards rendered by ICSID tribunals?
Meg Kinnear: ICSID is well known for having tribunal secretaries who work actively with the tribunal throughout the hearing process, which helps at the very least to pick up on any procedural errors. Our secretaries also review draft awards, with the mission being to ensure that awards will not be annulled. If we identify obvious errors, these will be raised with the tribunal, who can decide whether or not to address them. The tribunal is the ultimate decision-maker; we are not trying to usurp that role. Yet raising errors where we see them helps to ensure the quality of awards.
Grant Hanessian: ICSID counsel and staff are certainly very highly regarded by participants in the process. The ICSID secretariat is very experienced and ‘present’ in the administration of the cases, which of course is not always the case with respect to the secretariats of the commercial arbitration institutions, and which can make a real difference.
Meg Kinnear: I think so too, and keeping that standard is really important. We have been able to bring down the number of cases each lawyer works on so that they can do more of the work that really adds value to users – and, indeed, to our tribunals. If we have an arbitrator who hasn’t worked at ICSID before, and doesn’t understand the way things are done, we are able to help them. In those cases, our tribunal secretaries may sit in on a deliberation. They aren’t part of the deliberation, of course; rather, they are there to ensure that the documents are present, to answer any procedural questions and to otherwise provide assistance. A new arbitrator may not have experienced that approach, but once they get used to it they appreciate that it is a valuable thing.
The chosen ones
Teddy Baldwin: What factors does ICSID take into account when appointing arbitrators?
Meg Kinnear: The ICSID rules stipulate that an arbitrator cannot be the same nationality as one of the parties, and ad hoc committee members cannot be the same nationality as any of the arbitrators on the previous tribunal. Beyond that, we look for language ability, timeliness and experience in public international law, international investment and arbitration. An overriding consideration is the need to avoid conflicts of interest, or even the perception of a conflict. Where counsel A is pleading before arbitrator B, we likely wouldn’t appoint that counsel as arbitrator in another ICSID case involving that arbitrator, even though many people would not consider that to be technically a conflict. We try to avoid those situations so there isn’t the need to even raise the discussion.
Challenges to arbitrator appointments are an often-criticised feature of investment arbitration, given the regularity with which those appointments are now contested. Indeed, most of the published decisions on challenges at ICSID have been issued in the last few years. The basis for challenges has also become increasingly broader. In response, parties are casting their nets ever wider when appointing arbitrators. That may be no bad thing, however, if only to address concerns that the field is dominated by an exclusive group of arbitrators.
Meg Kinnear: We always keep our eyes and ears open to people that are moving into the stage of their careers where they are taking on arbitrator appointments. Bringing new people into the system is important, and is one of the things we look for when appointing arbitrators. We are also aware from the numbers – both ours and, I think it is fair to say, those of every other institution – that there are relatively few females sitting as arbitrators, even though there are a lot of good candidates who are interested in doing so and would do a good job. We look at what you might call the diversity issues when appointing – whether that diversity relates to nationality and regionality, gender or age.
About the authors
Grant Hanessian serves as co-chairman of Baker & McKenzie’s international arbitration practice group. He chaired the litigation/dispute resolution department of the firm’s New York office from 2003 to 2012. He is vice chairman of the arbitration committee of the US Council for International Business (US national committee of the International Chamber of Commerce Court of Arbitration), a member of the Commission on Arbitration of the ICC and the ICC Task Force on Arbitration Involving States and State Entities. He has acted in matters involving states and state entities for more than 25 years, including cases arbitrated under the rules of the Iran-US Claims Tribunal, the UN Compensation Commission, ICSID, the ICC, the ICDR, the Stockholm Chamber of Commerce and UNCITRAL.
Edward ‘Teddy’ Baldwin is a partner in Baker & McKenzie’s Washington DC office who regularly represents multinational clients in international arbitration proceedings and in matters before US federal and state courts. He has extensive experience in investor-state arbitrations before the ICSID and ad hoc tribunals, commercial arbitrations under various rules and institutions, and US litigation. Teddy advises and has worked with companies all over the world, including China, Japan, South Korea, the Philippines, Indonesia, Brazil, Venezuela, Argentina, Germany, France and South Africa.
Meg Kinnear is the secretary general of the ICSID at the World Bank. She was formerly the senior general counsel and director general of the Trade Law Bureau of Canada, where she was responsible for the conduct of all international investment and trade litigation involving Canada. Prior to this, Meg was executive assistant to the deputy minister of justice of Canada and counsel at the civil litigation section of the Canadian Department of Justice.
About Baker & McKenzie
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