On 15 June 2021, the International Centre for the Settlement of Investment Disputes released its latest working paper as part of its Rules Amendment Project. In addition to proposing changes to the ICSID Convention and ICSID Additional Facility arbitration and conciliation, as covered in our earlier blog post, Working Paper 5 also refines the proposed new rules for ICSID fact-finding and mediation. The changes to the Mediation Rules between Working Paper 4 and Working Paper 5 have been minimal, and the ICSID Secretariat has expressed a hope that this will be the final iteration of the rules.
To further promote mediation in investor-State arbitration, in July 2021 ICSID also released a Background Paper on Investment Mediation, which provides an overview of mediation in an investor-State context, as well as an Overview of Investment Treaty Clauses on Mediation, which reviews existing treaty mechanisms that address investor-state mediation and other amicable dispute resolution mechanisms.
This blog post provides an overview of how a mediation would be initiated, conducted, and concluded under the proposed Mediation Rules – highlighting any key changes in the latest iteration of the rules and flagging key takeaways from ICSID’s additional publications.
As noted in the Background Paper, mediation for investor-State disputes can be useful for a number of reasons. For example, mediation may help preserve the relationship between the parties, and lead to more rapid dispute resolution. It can also be helpful where parties are looking for more innovative, tailored solutions, rather than monetary remedies, or where parties are looking to assert more control over the outcome of their dispute. Furthermore, conducting mediation through ICSID allows investors and States to avail themselves of the various support structures that ICSID has put in place – including a dedicated staff team; and handling of the administrative, logistical and financial aspects of the mediation.
Overview of proposed ICSID mediations
Initiating a mediation and appointing mediators
The Background Paper makes clear that parties’ agreement to mediate can be set out in an investment contract, or in an ad hoc agreement. Parties may agree to mediate all, or a part, of the issues in dispute. Additionally, mediation can be used at any time during an investment’s or a dispute’s life cycle, including alongside consultations and/or arbitration. ICSID can administer an investor-State mediation irrespective of whether the treaty calls for ICSID arbitration.
Under the proposed Mediation Rules, a request for mediation can be filed with the ICSID Secretariat either by agreement of the parties, or unilaterally. Where the request is filed jointly, parties must attach their agreement to mediate. If the request is filed unilaterally, it must contain an offer to the other party to mediate. The Secretary-General will then invite the other party to accept the offer, and that party has 60 days in which to accept the offer to mediate. As is made clear in the commentary to Rule 6, if the other party does not consent to the offer to mediate, no steps will be taken on the request.
If the parties do agree to mediate, they can appoint either one or two mediators. If the parties are unable to agree on the mediator, they may request the assistance of the Secretary-General. The only requirement under the Mediation Rules is for the mediator to be impartial and independent, however the parties may also agree that the mediator shall have specific qualifications. The Background Paper sets out some examples of standards and competency criteria that parties may want to consider when appointing a mediator, e.g. experience working with governments, and an understanding of investor-State disputes.
Conducting the mediation
Once a request is transmitted to the mediator, each party must then file an initial written statement with the Secretary-General. This written statement must include a brief description of the issues in dispute, the parties’ views on these issues, and the proposed procedures to be followed during the mediation.
Pursuant to Rule 20 of the Mediation Rules, the first session is held 15 days later, at which point the mediator and the parties determine the protocol for the conduct of the mediation. The protocol will address matters such as language of the mediation, place of meeting, next steps, and the participation of other persons in the mediation. There have been a few changes to Rule 20 in the newest iteration of the ICSID Mediation Rules:
- The previous version of Rule 20(3)(e) provided that the protocol must outline “the treatment of confidential or protected information.” This language has been revised in Working Paper 5 to read “the treatment of information relating to, and documents generated in or obtained during the mediation”. While this seemingly narrows the scope of the confidentiality requirements, it is balanced by Rule 10 of the proposed ICSID Mediation Rules, which provides that all information relating to the mediation and all documents generated in, or obtained during, the mediation shall be confidential unless the parties agree otherwise, the information is independently available, or disclosure is required by law. The fact that the mediation is occurring is also confidential, unless the parties agree otherwise. Accordingly, the amendment to Rule 20(3)(e) serves to specify the overarching presumption of confidentiality for the mediation. This is confirmed by the commentary to Rule 20(3)(e), which states that the language change is indicated to reflect the wording used in Rule 10.
- An additional change to Rule 20 is the inclusion of language providing for parties to agree whether a meeting will be held in person or remotely – reflecting the changes in practice brought about by the COVID pandemic.
- Finally, amendments to Rule 20(4) now make clear that at the first session, parties must both indicate who, on behalf of both parties, is authorised to negotiate and settle issues being mediated; and to describe the process for each party to conclude and implement a binding settlement agreement. This is reflective of the need for the party representatives – i.e. the lawyers as well as investor’s and State’s authorized representatives – to be empowered to engage in the mediation on behalf of the party they are representing. This is key to the finality and sustainability of the mediation’s outcome.
Beyond this first session, the Mediation Rules do not prescribe how the mediation is to be conducted – with this being up to the parties to determine in the first session. The Mediation Rules simply state that the mediator is to conduct the mediation in accordance with the protocol determined by the parties in the first session. Furthermore, mediators are entitled to request that the parties provide additional information, and to make written recommendations for the resolution of issues, if requested by all parties. As the Background Paper makes clear, parties can maintain ownership of the conduct of the mediation, e.g. by choosing to retain experts, or seeking the input of non-disputing parties.
Conclusion of the mediation
Under the proposed Mediation Rules, the mediation comes to an end when the parties either sign a settlement agreement; jointly or unilaterally decide to terminate; or where the mediator determines that there is no likelihood of resolution. The mediator must then issue a notice of termination that contains a brief summary of the procedural steps, and the basis for termination of the mediation. A new requirement was also added in the latest iteration of the Mediation Rules, requiring the mediator to refer to any confidentiality agreement the parties came to in the notice of termination. As noted in the commentary to this rule, this is intended to bring the Mediation Rules in line with the ICSID Conciliation Rules.
Current state of mediation in investment disputes
The extent to which mediation is taken up within the investment dispute community will depend, in large part, on whether the underlying investment treaty provides for mediation – noting however that parties may nevertheless agree to ad hoc mediation. In its Treaty Overview, ICSID has helpfully conducted a review of over 900 treaties, and identified 350 clauses that provide for amicable dispute resolution generally, or mediation. These clauses have been grouped into five categories: clauses with an amicable settlement period prior to the institution of arbitration; clauses that expressly permit mediation or another amicable dispute resolution method prior to arbitration; clauses affirmatively encouraging the use of mediation or other amicable dispute resolution mechanism in the ‘cooling off’ period; clauses mandating mediation or another amicable dispute resolution mechanism prior to arbitration; and clauses permitting mediation at any time. Typically, these clauses provide little prescription regarding the procedures for mediation. The study also draws out other similarities and differences across various mediation clauses, including e.g. whether written notice is required, the inclusion of without prejudice or confidentiality provisions, and the relationship between mediation and other proceedings.
In undertaking this exercise, the study makes clear that though the uptake of mediation in investor-State disputes has been slow, the concept of mediation is not foreign to investor-State disputes. Accordingly, the formalisation of mediation through the ICSID Mediation Rules, as well as the ICSID support facilities, provides the institutional framework that is sometimes needed for States to consider mediation as a viable option. As such, it is a welcome addition and may increase usage of mediation in investor-State disputes.
ICSID has invited Member States to send any final written comments on Working Paper 5 to the Secretariat by the end of August 2021. It is hoped that the Secretariat will be able to place the proposed rules in Working Paper 5 before the ICSID Member States by the end of 2021 for a vote. If adopted, the Secretariat hopes to have these amended rules in place by early 2022.
The ICSID Rules Amendment process is a comprehensive exercise that has involved more than 125 public consultations, extensive written comments, and in-person consultations with States. To support public awareness and understanding of the Mediation Rules, ICSID has also been offering capacity-building for States and investment dispute practitioners on the use of mediation.
For more information please contact Amal Bouchenaki, Florencia Villaggi, or Alisha Mathew.