Many people do not realize that investment arbitration is often based on an investment contract or a foreign investment law, and is not exclusively based on investment treaties. In fact, a significant portion of ICSID’s caseload is based on contractual disputes, with about seven new contract-based cases registered each year over the last decade.
This brief article surveys some of the data ICSID has collected on contract-based cases, and highlights the advantages that ICSID offers to parties involved in a contractual investment dispute.
As with ICSID’s overall caseload, contract-based cases concern a wide range of economic sectors. The largest share historically—both for all ICSID cases and those under contracts—have involved investments in the oil, gas, mining and energy sectors.
The geographic distribution of ICSID cases is also diverse; however, there are notable differences amongst cases based on contracts and ICSID’s caseload overall. For example, as of January 31, 2019, States in Eastern Europe and Central Asia had been involved in the largest share of ICSID cases generally (26%), but featured in a small number of contract-based cases (5%). Conversely, Sub-Saharan African countries were the most active in contract-based cases (50%), while their participation in ICSID cases overall is a smaller share (15%).
Those who are familiar with ICSID caseload statistics will know that a significant share of cases are settled or discontinued before reaching an Award. This is also true of cases based on contracts. However, a smaller portion of contract-based arbitrations are ultimately decided by a tribunal: 55% of contract-based cases, versus 64% of all ICSID arbitration cases.
Zeroing in on the outcomes of tribunal rulings, differences also emerge. Contract-based arbitrations have led to more cases upholding the claimants’ claims in part or in full—with 66% of Awards falling into this category. In comparison, tribunals have upheld claims in 48% of ICSID arbitrations overall.
There are several prominent advantages to resolving investment contract-based disputes at ICSID.
One is that the parties gain access to ICSID’s procedural rules. These are unique in that they account for the special characteristics of international investment disputes and carefully balance the interests of investors and States.
Investors of ICSID Member States and another Member State can also agree contractually to arbitrate under the ICSID Convention, and thereby benefit from its special features. For example, participants in cases governed by the ICSID Convention enjoy immunity from legal process in the conduct of the proceedings. The ICSID Convention also has a strong enforcement mechanism: the Award is binding on all parties to the proceeding, and all Contracting States must recognize and enforce it.
Finally, the ICSID Secretariat provides unparalleled administrative and legal support, and has a global network of hearing facilities—allowing parties to hold hearings in virtually any country in the world.
Disputes under contracts come in all forms and sizes—and less complex cases can often be resolved relatively quickly and inexpensively. ICSID is developing a new set of expedited arbitration rules, which would be ideally suited for these types of disputes. Like ICSID’s regular arbitration rules, the expedited rules are specially tailored for investment disputes. But through simplified processes and shorter timelines, they would result in an Award in about 18 months. This is half the duration of a typical ICSID arbitration cases. Once the expedited rules are approved, they could be referred to specifically in arbitration clauses in contracts and would carry the same advantages of ICISD arbitration described above. ICSID is also in the process of updating its model arbitration clauses to ensure that they are as user-friendly as possible.