The filing of a Request for Arbitration before the World Bank’s International Centre for Settlement of Investment Dispute (the “Centre” or the “ICSID”) is a crucial and relatively straightforward step. In 2019, the ICSID Secretary-General received 39 requests for arbitration.[1]
Almost all arbitration rules, including the ICSID Arbitral Rules,[2] provide that a party wishing to commence an arbitration shall submit to the institution a written notice or Request for Arbitration (see our blog: “How to Initiate International Arbitration”). Today, the majority of arbitral institutions allow requests to be communicated by electronic means.
According to Article 36 of the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States that established the Centre (the “ICSID Convention”), the Request for Arbitration must be submitted in writing to the Secretary-General, who will send a copy of the request to the other party.
The Secretary-General will register the Request for Arbitration based on the information contained therein. However, if the dispute is manifestly outside jurisdiction of the Centre, on the basis of the party’s submission, the Secretary-General shall refuse the registration and notify the requesting party.
The date of receipt of the Request for Arbitration by the ICSID is deemed to be the date of commencement of the arbitration. This date is relevant for the constitution of the arbitral tribunal (Article 37 of the ICSID Convention) and for the purpose of ICSID jurisdiction (Article 25 of the ICSID Convention).
1) Mandatory Requirements of the ICSID Request for Arbitration
Like other arbitral institutions, the filing of an ICSID Request for Arbitration must comply with mandatory provisions.
First, the Request for Arbitration must be written in one of the three official languages of the Centre, i.e., English, Spanish or French (Article 34 of the ICSID Administrative and Financial Regulations).
It must also be dated and signed by the requesting party or its representative (the Request for Arbitration must enclose a power of attorney or a letter of engagement).
In addition, the Request for Arbitration must identify the parties and their consent to resort to ICSID arbitration. For Respondent-States, the consent may be expressed in three different ways:
- via contract;
- by means of domestic legislation; or
- by treaty.
If consent is by treaty or law, the Request for Arbitration must be accompanied by copies of such instruments and evidence of their entry into force. In case of a contract, a copy of the agreement shall be submitted with the effective date.
The foreign investor’s consent, in turn, can be expressed:
- by way of a written communication addressed to the State;
- by filing a Request for Arbitration before the Centre. For instance, in Tradex v. Albania, the tribunal underlined that the investor’s consent “become[s] effective at the latest if and when the foreign investor files its claim with ICSID making use of the respective national law”.[3]
(For more information on parties’ consent, see: “Consent in Investment Arbitration”).
If the requesting party is a natural person, the Request for Arbitration must state his/her nationality on the date of consent, as well as on the date on which the Request for Arbitration is submitted. Natural persons must also prove that he/she is not a national of the Respondent-State party before the ICSID.
If a requesting party is a company, it must also prove its nationality on the date of consent. If the nationality is the same as that of the Respondent-State to the dispute, the request must enclose an agreement with the State stating that the company shall be treated as a foreign company for purposes of the ICSID Convention. (Article 25 of the ICSID Convention).
Finally, the ICSID Request for Arbitration must provide basic information regarding the legal dispute arising directly out of an investment.
2) Lodging Fees to Be Paid with the Request for Arbitration and Advances on Costs
A non-refundable registration fee of USD 25,000 must be paid to the Secretary-General before registration by wire transfer. The requesting party shall submit a copy of the wire transfer order with the Request for Arbitration.
An Annual administrative fee of USD 42,000 is also due for administration services, including a case team and financial management, provided by the Centre, soon after the filing of the Request for Arbitration. Such a fee is usually equally divided by the parties.
In addition to the non-refundable and administrative fees, parties are required, from time to time, to pay advances on costs. These advances include the anticipated fees and expenses of the arbitration tribunal itself. According to the ICSID Administrative and Financial Regulations 14(3), advance payments are estimated with the tribunal’s chairman, who takes into account the costs to be incurred by the tribunal within the next three to six months.
From the advances on costs of each party, each member of the arbitral tribunal is entitled to receive:
- a fee of USD 3,000 for works performed in connection with the proceedings (which corresponds to USD 375 per hour for an eight-hour day); and
- the reimbursement of any expenses reasonably incurred in connection with the proceedings, including per diem and travel expenses.
The first tranche of the advance on costs is payable upon the constitution of the arbitral tribunal and is usually between USD 100,000 to USD 150,000 for each party. For more information, see: « Advance on Costs in ICSID Arbitration« .
Ultimately, ICSID arbitration can be expensive for both foreign investors and States. However, in the vast majority of cases, overall costs incurred with arbitral institutions are less expensive than the costs incurred for legal fees, which remain the largest single cost element. For more information on investment arbitration costs, see: “How to Reduce the Overall Cost of Investment Treaty Arbitration to Less than USD 1 Million”.
3) The « Cooling Off » Period Prior to the ICSID Request for Arbitration
Many bilateral investment treaties (“BIT’s”) provide for a “cooling off” period that must be respected before the filing of an ICSID Request for Arbitration. Generally, this period is three or six months from the date the dispute arises or the investor notifies the host State of a dispute.
For example, the representative Article IX(5) of the UK-Colombia BIT provides:[4]
If after a period of three (3) months from the Notification of Intent to submit the dispute to international arbitration there is no agreement to one of the above alternative procedures, the dispute shall at the request in writing of the investor concerned (“Request for Arbitration”) be submitted to arbitration under the arbitration rules of the International Centre for the Settlement of Investment Disputes (having regard to the provisions, where applicable, of the Convention on the Settlement of Investment Disputes between States and Nationals of other States, opened for signature at Washington DC on 18 March 1965 and the Additional Facility for the Administration of Conciliation, Arbitration and Fact Finding Proceedings).
Cooling off periods are intended to encourage settlement prior to arbitration. Investors must send a formal letter to a representative of the State (known as a “notice of dispute”) notifying the existence of a dispute. This notice of dispute briefly describes the background of the dispute with a request for negotiation. Investors may of course send other notices of dispute within the cooling off period until it expires.
ICSID tribunals have generally accepted cooling off periods as a mandatory procedural step when properly construed.
For instance, in Goetz v. Burundi, the tribunal declined to decide on points and claims that have not been raised by the claimant during the cooling off period.[5] In Western NIS Enterprise Fund v Ukraine, the tribunal underlined that “proper notice is an important element of the State’s consent to arbitration, as it allows the State, acting through its competent organs, to examine and possibly resolve the dispute by negotiations”.[6]
Therefore, before filing an ICSID Request for Arbitration, investors must review the procedural steps thoroughly and in advance, while determining with adequate precision the claims they will bring.
[1] Including Cases Registered under the ICSID Convention and Additional Facility Rules
[2] The Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings of ICSID (“ICSID Arbitration Rules”) were adopted by the Administrative Council of the Centre pursuant to Article 6(1)(b) of the ICSID Convention.
[3] Tradex Hellas S.A. v. Republic of Albania, ICSID Case No. ARB/94/2, Decision on Jurisdiction, 24 December 1996, ¶ 63.
[4] Bilateral Agreement for the Promotion and Protection of Investments between the Government of the United Kingdom of Great Britain and Northern Ireland and Republic of Colombia dated 17 March 2010.
[5] Antoine Goetz and others v. Republic of Burundi, ICSID Case No. ARB/95/3, Award, 10 February 1999, ¶ 93.
[6] Western NIS Enterprise Fund v. Ukraine, ICSID Case No. ARB/04/2, Order, 16 March 2006, Tribunal’s Order (5).
