Arbitration Insights: Jacob Mutevedzi
Arbitration is based on an agreement to arbitrate between the parties. Arbitration under the International Centre for Resolution of Investment Disputes (ICSID) also emanates from a prior agreement to arbitrate between the foreign investor and the host state. Article 25 (1) of the ICSID Convention states as follows:
“The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre.”
It is clear from Article 25 (1) of the Convention that the parties furnishing consent comprise a State party to the ICSID Convention (or a designated constituent subdivision or agency) and a national of a State party to the ICSID Convention. Further to such consent, there must be a legal dispute arising directly out of an investment. The mere participation by a State in the Convention does not necessarily entail consent to jurisdiction. A Contracting State has the latitude to determine the extent to which it wishes to give its consent. It is mandatory, under the Convention, that the consent be in writing, however there is no particular form which this consent must assume.
Written consent will ordinarily be exchanged between the parties but there is no obligation for the parties to notify ICSID at the time of consent. There are plenty of consent clauses covering various investments between multitudes of parties which ICSID has no knowledge of. However, when a request for arbitration is made proof of consent is a mandatory requirement. The written consent must be explicit and not merely construed. In Cable TV v. St Kitts and Nevis, award, January 13, 1997, 13 ICSID Review–Foreign Investment Law Journal 328, 354-361 (1998) the Respondent, St Kitts and Nevis, was not party to the agreement encapsulating the consent clause. The Claimant argued that consent by the Respondent could be construed from the institution of proceedings by the Attorney-General of St Kitts and Nevis against the Claimants in a domestic court of the Respondent. The purpose of the domestic court proceedings was to secure an interdict to restrain the Claimant from raising its rates prior to the resolution of the dispute through ICSID arbitration. The Tribunal held that the references in the court documentation to the ICSID clause in the agreement were merely statements of fact and did not amount to consent by any person to ICSID jurisdiction.
In practice, consent to ICSID arbitration is usually rendered in one of three ways. The most common way is a consent clause contained in a direct agreement between the parties. Dispute resolution clauses referring to ICSID are very popular in agreements between host States and foreign investors. A set of Model Clauses to facilitate the drafting of these agreements has been prepared and published by ICSID. Consent to ICSID arbitration may be achieved through a compromissory clause in an investment agreement between the host State and the investor submitting future disputes arising from the investment operation to ICSID. Similarly, parties can also submit a dispute that has already arisen through consent expressed in a compromise. Consent may, therefore be furnished with regard to existing or future disputes. Most of the cases that end up in ICSID arbitration emanate from agreements containing a consent clause for resolution of future disputes. Agreements to submit disputes that have already arisen are unusual.
The second method of furnishing consent to ICSID dispute resolution is a provision in the national legislation of the host State, usually contained in its investment statutes or code. A provision of that nature avails ICSID dispute resolution to foreign investors in general terms. Some national investment laws provide in clear terms for dispute settlement by ICSID. A good example is Article 8 (2) of the Albanian Law on Foreign Investment of 1993 which states that:
“…the foreign investor may submit the dispute for resolution and the Republic of Albania hereby consents to the submission thereof, to the International Centre for Settlement of Investment Disputes.”
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The mere existence of such a provision in the laws of a host state does not necessarily found consent. Consent to jurisdiction emanates from agreement; therefore, the investor may accept the offer in writing at any time while the legislation is in effect.
The third method of consenting to ICSID jurisdiction is by way of conclusion of a treaty between the host state and the investor’s state of origin. The vast majority of bilateral investment treaties (BITs) contain clauses offering access to ICSID to the nationals of one of the parties to the treaty against the other party to the treaty. A similar method is employed by a number of regional multilateral treaties such as the NAFTA and the Energy Charter Treaty. Efforts to create a global Multilateral Agreement on Investment that would include a similar dispute settlement clause have failed. An offer of consent contained in a treaty requires to be perfected through acceptance by the investor. The treaty between the United Kingdom and Sri Lanka of 1980 is a good example of a simple ICSID clause. Article 8 (1) states that:
“Each Contracting Party hereby consents to submit to the International Centre for the Settlement of Investment Disputes (herein referred to as “the Centre”) for settlement by conciliation or arbitration under the Convention … any legal disputes arising between that Contracting Party and a national or company of the other Contracting Party concerning an investment of the latter in the territory of the former.”
On its own the treaty cannot constitute consent to ICSID’s jurisdiction by the parties to the dispute, since ICSID arbitration is always between a host State and a foreign investor. Thus the treaty may encapsulate the host state’s offer which offer may then be taken up by a national of the other State party to the treaty.
