Disputes (ICSID) Significance to the Philippines Foreign Direct Investments Concerns of Foreign Investors Neutral and International Dispute Settlement Method ICSID Cases v. RP * ICSID Case No. ARB 02/6, SGS Societe Generale de Surveillance S.A. v. Republic of the Philippines registered on June 6,2002 * ICSID Case No. ARB/03/25, Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines registered October 9,2003 Establishment and Purpose Established by a treaty Created under Article 1(1) of the Convention on the settlement of Investment Disputes between States and National of Other States (commonly called as the Washington Convention) The Convention came into force in 1966 and has been ratified by 140 states as of November 2003 Article 1(2) of the Convention the purpose of the Centre shall be to provide facilities for conciliation and arbitration of investment disputes between contracting states and nationals of other contracting states ICSID Secretary General Ibrahim Shihata was quoted on saying that the primary objective of the ICSID is to promote a climate of mutual confidence between investors and states so as to increase the flow of resources to developing countries under reasonable conditions Organization and Structure Although formulated under the auspices of the World Bank, ICSID is an autonomous international organization. Taking into account the history of the organization its immediate endeavor is to relieve World Bank officials and staff of their personal involvement in settling investment disputes. The function of dispute resolution was delegated to ICSID and it was treated as a subsidiary of the World Bank. Organization and Structure ICSID is composed of an Administrative Council a Secretariat and a Panel of Conciliators and a Panel of Arbitrators The Administrative Council composed of one representative of each contracting state with one vote each is the governing body of the organization. * Among its powers and functions are the adoption of the rules of procedures, regulations and annual budget and the approval of administrative arrangements and annual report. *The President of the World Bank is the ex-officio Chairman of the Administrative Council but has no voting power. The Secretariat shall consist of a Secretary General, one or more deputy Secretaries-General and staff. * The Secretary General who is the legal representative and principal officer of the ICSID is responsible for its administration and has the function of registrar and the power to authenticate arbitral awards and certify copies thereof. Organization and Structure Since the purpose of ICSID is to provide facilities for conciliation and arbitration it maintains a panel of Concillators and a Panel of Arbitrators who are persons of high moral character with recognized competence in the fields of law, commerce, industry and finance and may be relied upon to exercise independent judgment. Each contracting State can designate in their respective panels four conciliators and four arbitrators of any nationality . In addition , the Chairman can designate ten persons of different nationalities to each panel putting due importance to the proper representation of the principal legal systems of the world and the main forms of economic activity Jurisdiction Article 25 of the Convention provides for the four criteria that must exist before ICSID can exercise jurisdiction: 1. There must be a legal dispute 2. Which arises out of an investment 3. between a contracting state (or any subdivision or agency of a contracting state designated to the Centre by that state) and a national of another contracting state and 4. the parties must have given their consent to arbitration in writing. Therefore, access to the facilities is not automatic because of all the important requirement of consent. Consent Consent by both parties in writing to the arbitration by ICSID is jurisdictional Can be done before or after the dispute arises Once the parties have given their consent it cannot be unilaterally withdrawn * The parties can give their written consent by: the inclusion of an express ICSID arbitration clause in the investment agreement * A state can give its investment laws or bilateral investment treaties that the investor can accept in writing Consent Mention must be made that ratification, acceptance or approval of the Convention by a Contracting State does not operate as consent to submit a specific dispute to arbitration and a state can exclude certain classes of disputes from being submitted to the jurisdiction of ICSID Once consent is given to arbitration, it shall be deemed as exclusion to any other remedy but a contracting state can require the exhaustion of local remedies as a condition of its consent Additional Facility Rules Aside from providing conciliation and arbitration facilities under the convention ICSID through its Administrative Council adopted the Additional Facility Rules authorizing its Secretariat to administer between state and nationals certain categories of proceedings between State and nationals of other States that fall outside the scope of the ICSID Convention. Among them : a. Fact-finding proceedings b. conciliation or arbitration proceedings for the settlement of investment disputes between parties one of which is not a Contracting State or a national of a Contracting State c. conciliation and arbitration proceedings between parties at least one of which is a contracting state or a national of a Contracting State for the settlement of disputes that do not arise directly out of an investment provided that the underlying transaction is not an ordinary commercial transaction. Arbitral Tribunal If the dispute is within the jurisdiction of ICSID upon submission by a party to the Secretary- General of a request for arbitration and after notice to the other party, the Secretary General will register the request. Thereafter, the Arbitral Tribunal shall be constituted There is party autonomy in the constitution and composition of the tribunal, the applicable law the conduct of the arbitration proceedings and even on deciding the dispute based on ex-aequo et bono. Arbitration Proceedings It is only when the parties fail to exercise such autonomy that the provisions of the Convention take effect and the ICSID machinery will come into play. For instance, if the arbitral tribunal has not been constituted within ninety days the Chairman of the Administrative Council will appoint the arbitrators. Arbitration Proceedings In the absence of an agreement on the applicable law the tribunal will apply the law of the contracting state party to the dispute relevant rules of international law The arbitration proceedings will be conducted in accordance with the Convention and the Arbitration Rules except when parties decide otherwise. Rendition of Awards Te tribunal has the power to judge its own competence rule on the objections as to its jurisdiction and recommend any provisional measures Non-appearance or failure of a party to present its case will not derail the proceedings and the party present may request the tribunal to render an award. The award must be decided by a majority addressing every question submitted to it and stating the reasons thereof in writing. Recognition and Enforcement of the Award As a mode of settling disputes the rendition of the award by the arbitral tribunal will certainly have two effects. There will be a winning party and a losing party. Naturally the winning party will be the one who will seek for the recognition and enforcement of the award and the losing party will have to abide by it. Considering that parties to ICSID cases are Contracting States and Nationals of other Contracting state and the award could go either way the obstacles on the recognition and enforcement mechanisms will depend on who is the losing party. Recognition and Enforcement of the Award If the foreign investors are the losing party, the provisions of the Convention regarding recognition and enforcement can be applied without much difficulty. However, in cases where it is the contracting (host) party state that is the losing party, this is where some barriers will come into play because of state sovereignty. Presume that the contracting state is the losing party in the award Article 53 The award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this convention. Each party shall abide by and comply with the terms of the award except to the extent that enforcement shall have been stayed pursuant to the relevant provisions of this Convention. For purposes of this Section awards shall include any decision interpreting revising or annulling such award pursuant to Articles 50,51,52 Article 53 Interpretation The Convention and even other arbitration statutes and rules such as the NEW York Convention and Uncitral Model Law and International Rules does not provide for the definition of an award. In the context of arbitration an award can generally be defined as the decision rendered by the arbitral tribunal on the merits of the case Analyzing it on framework of recognition and enforcement it can be inferred that the term award as used in Article 53 refers only to final decisions of the tribunal. Article 53 Interpretation However, if the parties file with the Secretary General the full and signed text of their settlement and in writing request the Tribunal to embody such settlement in an award the tribunal may record the settlement in the form of its award. A decision on the tribunals jurisdiction unless it is joined to the merits of the dispute which forms part of the award decisions on provisional measures and procedural orders which the tribunal makes in the course of the proceedings are excluded. Article 53 Interpretation The binding force of arbitration awards is essentially the basic characteristics of arbitration which separates it from other modes of alternative dispute settlement. AN ICSID award is binding on the parties to the proceedings. There is a winning party and a losing party . This means that the winning party has a legal right to demand compliance and the losing party is under legal obligation to comply with an award . The obligation to comply with the award will not be affected by any procedural impediment that may occur during enforcement. Non- compliance by a party with an award would be breach of legal obligation. Article 53 Interpretation On the Presumption that the award is issued against the contracting (host) state, and although voluntary compliance is the norm, it is driven by legal and non-legal reasons to comply with the award. The contracting (host) state has an obligation under public international law to comply with an ICSID award being a Contracting State under the treaty. It must perform its obligation under the treaty in good faith and it may not invoke the provisions of its internal laws as justification for its failure to perform. Article 53 Interpretation Or the non-legal reasons, there are the following four possibilities: a) non-compliance of a state may lead to its loss of credibility in the international business community b) If a continuing business relationship exists between the parties it may be the contracting state interests to perform the award since by failing to do so it risks losing further business from the foreign investor. c) Non-compliance may cause fear of jeopardizing the ability of a contracting state to obtain further World Bank and IMF Loans. d) A host state which gains a reputation for ignoring awards unjustifiably risks a refusal by refutable international contractors to tender for projects within its territory. Article 53 Interpretation In instances when the party on the contracting states side is a constituent subdivision or agency designated by that State, the award is binding on that entity The contracting State not being a party to the proceeding would not be subject to the obligation of Article 53. However, by virtue of the designation of such entity as a party and the approval of the State on the entitys consent, the contracting (host) State would be responsible for the compliance of an award rendered against one of its constituent subdivisions or agencies. Article 53 Interpretation ICSID awards are not subject to any appeal. It means that such awards are final and once the award is rendered and the review procedures under the Convention have been exhausted, it will operate as res judicata not only in relation to other arbitration tribunals but domestic courts as well. The parties cannot seek a remedy on the same dispute in another forum It is precluded from resorting to any national or international judicial remedy. Article 53 Interpretation The losing party may not initate action before a domestic court to seek the annulment of another from of review of an ICSID award. At the same time the winning party dissatisfied with the award may not turn to another forum for additional relief based on the same claim. The court of a State that is a party to the Convention would be under an obligation to dismiss such an action. Article 53 Interpretation This independence from national procedures for review of arbitral awards means that the place of arbitration in ICSID proceedings is irrelevant for the validity of the award and enforcement. In the same manner , national courts charges with the enforcement of ICSID award have no power to review that award for substantive correctness or procedural irregularities. Article 53 Interpretation Therefore, an ICSID award may be used as a defense against an action in the same matter before another judicial forum. This would apply even if a court or tribunal otherwise had jurisdiction over the matter. However, this principle of exclusion of other remedies applies only if the award rendered is a decision on the merits of the dispute. The exclusion of another remedy would not apply if the arbitral tribunal has given an award in which it finds that the dispute is not within its jurisdiction. Article 53 Interpretation In addition, Article 53 also contemplates on the exclusion of an appeal to the International Court of Justice Although Article 64 of the Convention provides that a dispute between Contracting Parties concerning the interpretation or application of the Convention may be referred to ICJ the preparatory works to the Convention make it quite clear that Article 64 does not confer jurisdiction on the ICJ to review the decision of an arbitral tribunal. Article 53 Interpretation In addition Article 53 also contemplates on the exclusion of an appeal to the International Court of Justice Although Article 64 of the Convention provides that a dispute between contracting parties concerning the interpretation or application of the convention may be referred to ICJ the preparatory works to the Convention make it quite clear that Article 64 does not confer jurisdiction on the ICJ to review the decision of an arbitral tribunal. Article 53 Interpretation Finally, Article 53 can also be read as excluding the applicability of the doctrine of binding precedent for subsequent ICSID Cases. Applying by analogy Article 59 of the Statute of the International Court of Justice the decision has no binding force except between the parties and in respect of that particular case Although ICSID tribunals and ad hoc committees have repeatedly referred to and relied on previous decisions they have also pointed out that they were not bound by these decisions. Article 50,51 and 52 These provisions which refer to the interpretation revision an annulment of an award are significant in three areas. First the convention provides for its own exhaustive and self contained system of review awards. As stated in Article 53 ICSID awards are not subject to any other remedy except as provided for in the Convention. Article 50 on interpretation 51 on revision and 52 on annulment are the only remedies under the Convention that the parties are allowed to exhaust such review procedures the finality of the award will set in. Article 50,51 and 52 Second as earlier mentioned decisions pursuant to these provisions are considered as awards and hence recognizable and enforceable. Thus there is an obligation to abide by and comply with the award as interpreted or revised. If the award is annulled the obligation to comply disappears until a new award is decided upon by another tribunal. Lastly, enforcement of an award can only be stayed by the tribunal on the basis of such provisions while proceedings for interpretation revision or annulment are pending. Recognition and enforcement is subject of the condition that there is no stay of enforcement. The duty to recognize and enforce is suspended while a stay of enforcement is in force. Article 50,51 and 52 Either of the parties can request in writing for the interpretation, revision or annulment of the award. For interpretation and revision the request shall be submitted to the Tribunal which rendered the award but if it is no longer possible a new tribunal shall be constituted. In the case of request for annulment, the Chairman will appoint an ad hoc committed of 3 persons from the Panel of Arbitrators none of whom shall be members of the tribunal that rendered the award and such committee shall have the authority to annul the award Interpretation can be requested as to the meaning or scope of the award. Article 50,51 and 52 Request for revision of an award can only be done on the ground of discovery of some fact of such a nature as decisively to affect the ward and that such fact was unknown and not due to the applicants ignorance when the award was rendered. For annulment request can only be made based on the following grounds a0 that the tribunal was not properly constituted b) that the tribunal has manifestly exceeded its powers c) that there was corruption on the part of a member of the tribunal d) that there has been a serious departure from a fundamental rule of procedure or c) that the award has failed to state the reasons on which it is based. Article 54 1. Each contracting State shall recognize an award rendered pursuant to this convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State. A contracting State with a Federal Constitution may enforce such an award in or through its federal courts shall treat the award as if it were a final judgment of the courts of a constituent state. 2. A party seeking recognition or enforcement in the territories of a Contracting State shall furnish to a competent court or other authority which such state shall have designated for this purpose a copy of the award certified by the Secretary General. Each Contracting State shall notify the Secretary General of the designation of the competent court or other authority for this purpose and of any subsequent change in such designation. 3. Execution of the award shall be governed by the laws concerning the execution of judgments in force in the State in whose territories such execution is sought. Article 54 Interpretation Enforcement of an award has two separate stages: recognition and execution Recognition is the official confirmation that the award is authentic and it has 2 possible effects: 1. it confirms that the award is final and binding 2. it is a step preliminary to execution The recognition of an award has the effect of rendering res judicata The restriction to pecuniary obligations contained in Article 54 (1) only relates to the execution of awards but not their recognition. Therefore, a non-pecuniary obligation of specific performance like restitution or an obligation to desist from certain course of action that is spelled out in an award, once recognized will enjoy the effect of res judicata even though it is not subject to enforcement. A holder of a recognized ICSID award only has an executory title especially if the losing party is the contracting state. Article 54 Interpretation As a rule recognition is a preliminary step leading to execution. Hence it is useful to have an award recognized even if there are no immediate prospects of an execution because there are no available assets in the State where recognition is sought. Once recognition has been obtained execution will be easier should assets become available at a later stage Article 54 Interpretation Provides for an obligation to each contracting state to recognize and enforce an ICSID award as if it were a final judgment of a court in that state Failure of a Contracting State to recognize and enforce an award would be a breach of a treaty obligation and would carry the usual consequences of State responsibility Thus recognition and enforcement may be sought in any Contracting State and not just in the State party to the arbitration proceedings and the State of nationality of the investor who was a party to the proceedings. Therefore, the winning party has the discretion to select the forum that would be most favorable and such can be determined primarily by the availability of suitable assets of the losing party. Article 54 Interpretation The reference to a final judgment of a domestic court puts ICSID awards on the same footing with any domestic judgments that are not subject to review. A final court decision is one against which nor ordinary remedy is available. Even a judgment of a lower court may be final if it is not subject to review or if the time limit for an appeal or another remedy has expired. While there is a mandatory obligation to recognize the award, the Contracting State have the discretion to designate which competent court will recognize the award. The judgments of such courts designated are the ones equal to an ICSID awards. Article 54 Interpretation In the process of such recognition and enforcement of the award, the competent court or authority designated by the Contracting State may not review the tribunals jurisdiction, the fairness and propriety of the proceedings and the merits of the case even on the ground that the award may have violated Stated public policy. A party must furnish a copy of the award certified by the Secretary General in order to obtain recognition or enforcement by the competent court or authority. An award can only be submitted for recognition and enforcement by a party to the arbitration proceeding and an interested third party is not entitled to do so. Article 54 Interpretation Only awards that are not subject to a stay of enforcement may be furnished. Upon submission of the copy of the award, the tasks of the court or authority designated are limited to verifying the authenticity of the ICSID awards and upon such verification automatically translate the award into judgment Execution refers to the actual attachment of funds to satisfy the award without regard to national law, the execution of ICSID AWARD subject to the law of the country where the execution takes place. Article 54 Interpretation Therefore, only procedures and remedies that are available under the domestic law will be applied to ICSID awards. Obstacles to the enforcement of an ICSID award under the law where execution is sought will in no way affect the obligation of the party to abide by and comply the award. Failure of the contracting state to fulfill the award amounts to a violation of its international law obligations and hence can be subjected to state responsibility Article 54 Interpretation There is also no reason why proceedings for recognition and enforcement of an ICSID award could not be initiated in several States simultaneously. Recognition of an award in several states may be necessary to secure its res judicata effect. If execution of the award is sought in several States, the courts and competent authorities in these States will have to coordinate their steps to make sure that payment is not made more than once. Article 55 Article 55 does not grant State immunity but simply refers to the prevailing situation under the law of the State where execution is sought. The principle of immunity which is inherent to the very nature of states may seek to invoke their sovereignty as a shield against an arbitral tribunals authority Article 55 Interpretation In recent years the question of immunity has evolved significantly notably with respect to the issue of whether an immunity of a state may be waived. For instance, it is widely accepted to day that when a state enters into an arbitration agreement immunity from jurisdiction is presumed to have been waived, thus precluding the state from seeking to remove itself from the arbitral process by invoking its sovereign status Article 55 Interpretation Article 55 applies only to immunity from execution. It does not apply to immunity from jurisdiction . Jurisdiction is governed by Article 25 of the Convention and in accordance with Article 41 is determined by the Tribunal. In addition, State immunity does not apply to proceedings for the recognition of an award because Article 55 only refers to exectution but not to recognition. Thus, State immunity does not affect res judicata effect of an award once it has been recognized since it only comes into play when concrete measures of execution are taken to enforce the awards pecuniary obligations. Immunity from Execution Traditional distinction between sovereign and commercial acts and had limited the enforcement of an arbitral award against properties used or intended for use for commercial activities or purposes as opposed to sovereign or public purposes. Properties designated for public purposes are accordingly protected from enforcement actions. Immunity from Execution The test for immunity from execution is usually the purpose of the property in question. Although the origin of the property in question is also sometimes taken into account and if the property in question is not clearly designated it is often difficult to determine its intended use or purpose. Immunity from Execution Overall it will depend on the governing law on immunity of the state where execution is being sought and how the domestic courts in those states interpret them. The implication of which is that the execution of ICSID awards will be subjected to different interpretations depending on the Contracting State where the execution is being sought. Immunity from Execution Under such circumstances it is possible that an ICSID award can be capable of execution against the property of the State party to the dispute in certain Contracting States but not in other contracting State. Case Examples Cases relating to the enforcement of ICSID awards have only so far risen in the United States and France . In each case, the enforcing courts displayed some confusion regarding the automatic recognition provision and attempted to introduce their national laws into recognition process. The courts eventually recognized the awards but there are cases wherein the foreign investors were unable to receive payment of their award. Buenvenuti & Bonfant v. Congo Government of Congo entered into an agreement with an Italian company for the creation of a semi-public company manufacturing plastic bottles. When a dispute arose, arbitration under ICSID was held pursuant to a clause in their contract. The Italian company had succeeded in obtaining an award from the arbitral tribunal against Congo. The company commenced enforcement proceedings in France against funds held by a French bank on behalf of the Banque Commerciale Congolaise allegedly controlled by the Congolose government. Lower court granted recognition but barred execution because of sovereign immunity. Buenvenuti & Bonfant v. Congo Court of Appeal ruled that the lower court exceeded its authority by prematurely dealing with the question of sovereign immunity from execution. Buenvenuti & Bonfant obtained an attachment, not against the assets of the Congolese government directly but indirectly against funds held by French bank on behalf of the Banque Commerciale Congolaise allegedly controlled by the Congolese government. Buenvenuti & Bonfant v. Congo The French Supreme Court held that the attachement was void because the Congolese bank was not itself indebted to Buenvenuti & Bonfant and had a separate legal identity from the Congolese government. Thus the bank could not be held responsible for the governments debts. SOABI ( SEUTIN) v. Senegal Senegal terminated its agreement with SOABI relating to the construction of low income housing in DAKAR. Upon rendition of the award in favor of SOABI, a company controlled by largely Belgian interests it sought enforcement of the award in France against Senegal. Lower court granted recognition of the award but the Court of Appeal vacated the recognition order. SOABI ( SEUTIN) v. Senegal The French Supreme Court annulled the Court of Appeals decision. First it held that the ICSID excludes recourse to the French rules on the recognition of foreign arbitral awards. Second it clarified the distinction between immunity from recognition and execution should not be considered until after the award is recognized and funds have been attached to satisfy the award. THUS, immunity from execution should not be considered during recognition stage. LETCO v. LIBERIA The dispute arose from grant of a concession by Liberia to LETCO to harvest and exploit Liberian timber. Bases on alleged shortcomings of LETCO and concern over conservation and proper utilization of its timber resources Liberia reduced LETCOs consession and later on entirely terminated it. LETCO v. LIBERIA LETCO commenced ICSID arbitration pursuant to the consession agreement but Liberia refused to participate in the arbitration. Nonetheless, the arbitration panel proceeded and rendered an award for LETCO. Upon application for enforcement in the United State District for the Southern District of New York, the judge issued an ex parte order directing the enforcement of the arbitral award. LETCO sought to execute its judgment against certain tonnage and registration fees collected in the United States from ship owners flying the Liberian flag LETCO v. LIBERIA LIBERIA however claimed the fees were designed to raise revenue for the Republic of Liberia and its collection should be viewed as sovereign and not commercial in nature and therefore immune from execution under the principle of sovereign immunity as codified in the Foreign Sovereign Immunities Act. (FSIA) LETCO v. LIBERIA The Court agreed with Liberia and granted the injunction blocking execution against the ship owners fees. In reaching this decision the court relied on Article 55 of the Convention which surrenders to domestic law all determinations of sovereign immunity with respect to execution of judgment. LETCO v. LIBERIA After failing to secure execution in New York, LETCO sought enforcement in the US District Court for the District of Columbia for bank accounts of the Liberian Embassy. The court decided that (1) bank accounts were immune from attachment under the Vienna Convention on Diplomatic Relations which requires hosts states to accord each foreign state full facilities for the performance of the functions of that states mission and (2) that the accounts were likewise immune from attachment under the FSIA because they did not meet the requirements of the commercial activity exception. LETCO v. LIBERIA The court cited the rule of the thumb that if the activity is one in which a private person could engage it is not entitled to immunity. Applying these principles to the bank accounts at issue the court found that although some portion of the funds might be used for commercial activities in connection with running the Liberian Embassy such uses were incidental or auxillary and hence did not alter the essentially public or governmental character of the accounts . The result for the Liberian Embassy if creditors were allowed to freeze its bank accounts even if only to permit discovery as to the portion of the bank account used for commercial activities. Problems Illustrated in the Case Examples The preceeding case illustrate some of the difficulties that courts have had in recognizing ICSID awards automatically. Although eventually the courts all recognized the ICSID awards they attempted to verify whether the awards complied with their national laws. Additionally they attempted to introduce the issue of sovereign immunity into the recognition proceedings rather than waiting until the execution of the award. Then even after the courts recognized the award execution was not Problems Illustrated in the Case Examples Possible in two of the cases because of national laws relating to sovereign immunity from execution. Clearly the restraints placed on the execution of the award undermined the force of the recognized award. The foreign investor will be in position wherein it may not be able to find assets which both belong to the contracting state and are not immune from execution under national law. Remedies in Case of Non- enforcement of the Award First it can resort to forum shopping and seek enforcement in other courts in the state where execution was sought or in other Contracting States where the host state has assets. Due to the difficulties of determining at the outset whether an asset will be immune from execution or not, it may not be advisable to commence proceedings for recognition and enforcement of an ICSID award in several states simultaneouly. Remedies in Case of Non- enforcement of the Award Partial payment in different states is both possible and legitimate. In such circumstances competent authorities in these states must coordinate their steps to ensure payment is only made once. However, the problems with this are that first there is no overarching authority that can coordinate the efforts of the state involved let alone compel compliance directly in their territories and second bringing parallel proceedings is costly. Remedies in Case of Non- enforcement of the Award Second it may seek diplomatic protection from the state of which it is considered to be a national and such could seek compliance to the host state on behalf of the foreign investor thus lending additional weight to its claims. However the remedy of diplomatic protection has notable deficiencies from the foreign investors perspective. First, it may be the case that a foreign investor cannot bring the claim unless it has already exhausted local remedies. Remedies in Case of Non- enforcement of the Award Second, it is the state that has the right to protect and not the foreign investor that has the right to be protected. Whether a state exercises this right depends on consideration of interstate relations and thus the right may be subordinated to other more political goals pursued by home state. Remedies in Case of Non- enforcement of the Award Third, if the host state noncompliance is found to raise a question of interpretation or application of the Convention the home state would have the right under Article 64 of the Convention to submit the question to the International Court of Justice. Again this is the prerogative of the home state and thus subject to the same circumstances as that of diplomatic protection. Assessment Looking back at the goals that prompted the establishment of the ICSID which is to create an international mechanism to promote the free flow of investment resources from one country to another taken as a hole the record of ICSID in providing facilities for dispute resolution between hosts states and foreign investors is quite positive. Assessment The Convention reflected in several provisions the autonomy of the arbitration mechanism and the simple process of recognition of awards. However, the effectiveness of international arbitration ultimately depends on whether the arbitral award can be enforced against the losing party and it is at the enforcement state that the ICSID system loses its independence. Assessment Like all other international bodies, ICSID lacks enforcement powers. It must depend on the national courts to enforce its awards. National courts ability to do so may in turn be restricted by national legislatures. Thus , while the locus of arbitration is legally irrelevant to the extent that it does not trigger the application of the national arbitration laws the place of enforcement is crucial. Assessment In comparison even with the drawbacks at the execution stage the ICSID mechanisms is still a considerable improvement over the New York Convention (NYC) mechanism for several reasons. * First with respect to sovereign immunity, this doctrine is only activated at the execution stage in ICSID while under the NYC, it may depending upon the legal seat of arbitration operate to prevent a court from assuming jurisdiction. Furthermore national laws on sovereign immunity only operate to bar execution in that jurisdiction and such laws have no impact on the award itself which therefore can be enforced in another jurisdiction whose sovereign immunity laws are more lenient. Assessment Second as a member of the World Bank family ICSID enjoys a distinct advantage over the NYC mechanisms. Withdrawal of official air will bear heavily on the risks calculus of a rational state deciding whether to comply or not. Despite its lack of an institutional remedy for non compliance there has been an increasing frequency with which foreign investors and host states cite ICSID preferred mechanism of dispute resolution. Assessment The use of ICSID clauses has become widespread in bilateral investment treaties national investment laws and codes and individual agreements. It serves both as a prevention of disputes and as a vehicle for settlement. Although the success of the Convention cannot be judge solely on the number of arbitrations which have been brought as of November 2004 there were 87 concluded case and 83 pending cases. Awards were rendered to almost half of the concluded by settlement of the parties. Recommendations
Reformulate the rules on the execution of
awards and review the delegation of the powers of execution to national courts. Such tasks can be accomplished by the insertion of a waiver of immunity from execution in the Convention. However it means that amendment to the Convention would be necessary Recommendations
Take advantage of party autonomy to the
fullest extent to remove all possible obstacles to the execution of the award. The negotiations and drafting of the agreement between parties would be crucial and it is at this point that an express waiver of immunity from execution should be included. Recommendations
If all else fails the last resort for foreign
investors failing to enforce its awards against a host state is to make a claim towards their political risks insurance which all those doing business with States are advised to have. Thank you