Arbitration is only possible when both the claimant and the respondent have consented to it. In Investment Treaty Arbitration specifically, an investor can “perfect consent” by accepting an offer to arbitrate in an investment treaty.
This article explores the significance of ICSID Denunciation in light of Fábrica de Vidrios Los Andes, C.A. & Owens-Illinois de Venezuela, C.A. v. Bolivarian Republic of Venezuela (“Favianca”), in which the arbitral tribunal held that consent could not be established because the investor had brought its claim after the host State had denounced the ICSID Convention.
The ICSID Convention contains two provisions that regulate the denunciation of the ICSID Convention, Article 71 and Article 72.
Article 71 prevents the immediate effect of a notification of denunciation:
“[D]enunciation shall take place six months after receipt of such notice.”
Article 72 restricts the effect of denunciation:
“Notice by a Contracting State pursuant to Articles 70 or 71 shall not affect the rights or obligations under this Convention of that State or of any of its constituent subdivisions or agencies or of any national of that State arising out of consent to the jurisdiction of the Centre given by one of them before such notice was received by the depositary.”
Interpretation of Article 71 and 72
The Venoklim, Blue Bank, and Tenaris II  tribunals found that investors could perfect consent during the six-month period envisioned in Article 71.
For example, the Venoklim tribunal reasoned that Article 71 is there as a safety measure for investors. It also opined that the purpose of the two articles is different: Article 71 deals with the prospective effect of ICSID denunciation, being that it comes into effect 6 months after notice, while Article 72 stipulates the non-retroactive effect of denunciation.
The Favianca tribunal, however, interpreted Articles 71 and 72 as pertaining to entirely different matters. It opined that Article 71 pertains to the obligations a State party retains as a Contracting State to the ICSID Convention, while Article 72 pertains to the obligations a party retains as a party or potential party in ICSID arbitrations.
Additionally, the tribunal did not agree with the Venoklim tribunal which held that “consent” in Article 72 referred to a unilateral offer to arbitrate, not “perfected consent.” It reasoned that the term could not refer to unilateral consent, otherwise the words “any nationals of the Contracting State” would be devoid of meaning. Such consent is provided only by a Contracting State through an investment treaty or domestic legislation.
The tribunal therefore concluded that the Convention’s procedural rights and obligations are applicable only when consent is perfected before ICSID denunciation takes place.
Was the Favianca Decision Egregious?
The investor in the Favianca case filed an application for annulment. The ICSID annulment process is not an appeal, and it only allows annulment in limited and extraordinary circumstances.
In this annulment application, the investor is requesting the annulment committee to invalidate the award due to an incorrect interpretation of the law. An annulment would indeed remove the inconsistency in decisions on this issue, as Favianca is the only outlier.
However, the annulment committee is not in a position to second guess the tribunal. As the CMS ad hoc committee stated, “The Committee cannot simply substitute its own view of the law”.
Furthermore, the decision of the Favianca decision has scholarly support. Christoph Schreuer argues that “the date of consent is of decisive importance for the operation of Article 72. That Article will apply only if consent was given before the date of the denunciation”. Moreover, he argues that “only a consent agreement between the host state and the investor amounts to consent for purposes of the ICSID Convention”
What Should Investors Do ?
The Favianca decision highlights the unpredictability of investment arbitration decisions. Although it might influence future arbitrators, the annulment decision will not solve the ambiguity created by Articles 71 and 72, as it will not create a binding precedent.
An investor should therefore perfect the consent provided in their host State’s applicable investment treaty or domestic legislation as soon as possible, if there is a risk that the ICSID Convention will be denounced . Thereby, in the event of ICSID denunciation, the investor can initiate ICSID arbitration against the host State while avoiding the interpretative issues outlined above.
 Convention on the Settlement of Investment Disputes between States and Nationals of Other States(1966
 Venoklim Holding B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/12/22,
 Blue Bank International & Trust (Barbados) Ltd. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB 12/20
 Tenaris S.A. and Talta – Trading e Marketing Sociedade Unipessoal Lda. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/26
 Ibid, Para. 63
 Ibid, Para. 64
 Fábrica de Vidrios Los Andes, C.A. and Owens-Illinois de Venezuela, C.A. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/12/21, para 269.
 Supra n1, Para. 65
 Supra n7, Para. 274
 Ibid, Para 282
 ICSID Convention, Article 52; read more about the history of annulment decisisons at https://www.lexology.com/library/detail.aspx?g=7218cb56-7a64-426f-8cc0-8475303444e6
 Denunciation of the ICSID Convention and Consent to Arbitration, Christoph Schreuer,http://www.univie.ac.at/intlaw/wordpress/pdf/denunciation_icsid.pdf, p355
 Ibid, p355-356