On 21 March 2022, the member states of the International Centre for the Settlement of Investment Disputes (ICSID) approved wide-ranging amendments to the ICSID Regulations and Rules, which will come into effect on 1 July 2022. The approved amendments are the product of a rule amendment project which commenced in October 2016, pursuant to which the ICSID Secretariat has published six working papers (WPs) detailing successive changes to the amendments proposed (see our previous PIL Notes post on WP 5). The stated goals of the amendments are to “modernise, simplify and streamline the rules, while also leveraging information technology to reduce the environmental footprint of ICSID proceedings“.
The approved amendments include amendments to the ICSID Arbitration Rules (Rules), which govern the procedure applicable to investment arbitration proceedings under the ICSID Convention. The amendments introduce significant changes to the Rules, which were last updated in 2006, and which seek to reflect the current practice of the ICSID Secretariat, ICSID tribunals and other arbitral institutions. This (non-exhaustive) article outlines some of the key amendments which feature in the amended 2022 Rules, in particular relating to
- Provisional measures.
- Costs and security for costs.
- Special procedures.
Parties to ICSID arbitrations may request provisional measures from tribunals that seek to preserve their rights for the duration of the proceedings. Amended Rule 47(1) is an expanded version of the prior Rule 39 and provides greater clarity concerning the circumstances in which provisional measures may be requested, and the factors to be considered in a tribunal’s decision. For example, it clarifies that parties may request measures to “prevent action that is likely to cause current or imminent harm to that party or prejudice to the arbitral process“, “maintain or restore the status quo pending determination of the dispute” or “preserve evidence that may be relevant to the resolution of the dispute“. Rule 47(3) also codifies that a tribunal shall “consider all relevant circumstances” in deciding whether to recommend provisional measures, including:
- “Whether the measures are urgent and necessary” (amended rule 47(3)(a)); and
- “The effect that the measures may have on each party” (amended rule 47(3)(b)).
The first and second WPs describe this language as codifying the “consistent practice” of ICSID tribunals on provisional measures and the elements “uniformly required” in cases to date.
Publication of awards and decisions
Chapter X of the amended Rules is entitled “Publication, Access to Proceedings and Non-Disputing Party Submissions“.
The extent to which the ICSID Secretariat may publish documents from ICSID arbitrations will depend on the type of document in question. In relation to awards, article 48(5) of the ICSID Convention already provides that awards can only be published by the ICSID Secretariat with party consent. As was noted in WP 2, mandatory publication of awards not contingent on party consent was therefore not an option. The originally proposed amendment to the Rules on this point was to introduce a notion of deemed consent. This proved controversial. The relevant drafting was removed between WP 1 and WP 2, but was revived again in WP 3 on the understanding that only a “bare objection” to publication would be required to avoid deemed consent. Consequently, amended rule 62(3) now provides that the parties are deemed to consent to publication if no written objection is made within 60 days after dispatch of the award.
If such an objection is made, the amended Rules restate the present position that the ICSID Secretariat shall publish excerpts of the tribunal’s legal reasoning. Newly added however is amended rule 62(4), which sets out a process for the parties to comment on the excerpts proposed prior to publication. This codified process reflects the current practice of the ICSID Secretariat.
As for tribunal orders and decisions, the amended Rules state that the ICSID Secretariat “shall” publish them. While the rule amendment working group considered adding a requirement of party consent for publication similar to that in place for awards, this approach was not finally adopted. The ICSID Convention was said to draw a clear distinction between awards on the one hand, and orders and decisions on the other.
However, in order to balance the interests of the parties, amended rule 63 prescribes that the parties are to agree redactions, and that any disagreement is to be resolved via tribunal decision. Amended rule 63(3) obliges tribunals to “ensure that publication does not disclose confidential information“, as defined in rule 66. A similar redaction procedure is set out by amended rule 64 for party filings, but their publication is dependent on the parties’ consent.
A significant change in the amended Rules is the introduction of a requirement for parties to provide written notice of third-party funding. This was one of the most challenging provisions in the amended Rules to finalise. The amendments proposed evolved through each WP, with the extent of disclosure and of the definition of a “funder” giving rise to considerable debate.
The final version of amended rules 14(1)-(2) adopts a very broad definition of “funder“. Parties are required to provide written notice identifying the names and addresses of any “non-party” from which the party “directly or indirectly” received funds “for the pursuit or defense of the proceeding“, “through a donation or grant, or in return for remuneration dependent on the [proceeding’s] outcome“. A change added to rule 14(1) in the final round of amendments highlighted in WP 6 provides that where a third-party funder is a “juridical person“, the written notice provided must include the names of the persons and entities which “own and control” the funder. This new disclosure requirement is intended to provide greater transparency regarding the identity of the funder and allow arbitrators to identify any conflict of interest.
The obligation to provide notice arises upon registration of the request for arbitration, or immediately after the conclusion of any post-registration third-party funding arrangements. Although the amended Rules do not require the disclosure of the funding agreement itself, amended rule 14(4) empowers tribunals to order the disclosure of further information on funding arrangements. Non-compliance with the requirement to give notice of third-party funding is dealt with through the Rules’ general provisions on costs, discussed below.
The amended Rules expand on the existing framework introduced into the 2006 Rules (rule 37(2)) for the consideration of written submissions from non-disputing parties (NDPs), which may include, for example, interested civil society organisations. The Rules already require tribunals to consider various factors when deciding whether to permit a submission from a given NDP. These include whether the NDP has a “significant interest” in the proceedings, as well as whether they would address a matter within the dispute’s scope and “bring a perspective, particular knowledge or insight” different to that of the parties. Based on the practice and experience of ICSID tribunals to date, amended rules 67(d) and (e) list two new criteria for consideration, namely:
- “The identity, activities, organisation and ownership of the [NDP], including any direct or indirect affiliation between the [NDP], a party or [a NDP which is party to a treaty at issue upon which consent to arbitration is based]”.
- “Whether any person or entity will provide the [NDP] with financial or other assistance to file the submission“.
Tribunals have previously addressed issues relating to the independence of NDPs. For example, in Aguas Provinciales v Argentina (ICSID Case No. ARB/03/17) (Order in Response to a Petition for Participation as Amicus Curiae), the tribunal rejected applications from NDPs to make submissions because it had insufficient evidence as to their independence. Decisions such as this may provide some indication as to how the newly codified criteria will be applied.
Other changes have also sought to respond to the practical experience of NDP participation in past ICSID cases. These include empowering tribunals to impose conditions on NDP participation to avoid disruption to the proceedings or undue burdens on the parties (amended rule 67(4), building on the existing language in rule 37(2)) and codifying a right of NDP access to relevant documents subject to party objection (amended rule 67(5)). The latter change seeks to resolve inconsistent approaches among tribunals on this issue.
Observation of hearings
While current rule 32(2) includes provision for the observation of hearings by third parties, amended rule 65 simplifies and clarifies these provisions. The involvement of the Secretary-General has been removed, and tribunals “shall” rather than “may” allow third parties (including NDPs) to observe hearings, unless either party objects. While current rule 32(2) obliges the tribunal to protect “proprietary or privileged” information from disclosure to third party observers, the new drafting formulates the obligation as covering “confidential” information.
Costs and Security for Costs
Article 61(2) of the ICSID Convention specifically addresses cost allocation and provides tribunals with considerable discretion to decide “how and by whom” costs should be paid. However, neither the ICSID Convention nor the unamended Rules (rules 19 and 28) provided any guidance on how to exercise that discretion. Amended rule 52 has sought to introduce this guidance, stating that when allocating the costs of proceedings between the parties, tribunals shall consider circumstances including the outcome of the proceedings, the conduct of the parties, the complexity of the issues, and the reasonableness of costs claimed.
The amended Rules also contain a new stand-alone rule 53 dedicated to the issue of security for costs. Amended rule 53(3) sets out that when considering whether to order a party to provide security for costs, tribunals must consider all relevant circumstances, including:
- “That party’s ability to comply with an adverse decision on costs“.
- “That party’s willingness to comply with an adverse decision on costs“.
- “The effect that providing security for costs may have on that party’s ability to pursue its claim or counterclaim“.
- “The conduct of the parties“.
Amended rule 53(4) specifies that the existence of third-party funding is relevant to whether providing security for costs would affect a party’s ability to pursue its claim or counterclaim.
“Special procedures”: preliminary objections, bifurcation and claim being “manifestly without legal merit”
Rule 41 of the unamended Rules governed three processes which could take place within an arbitration:
- Preliminary objections (rule 41(1)).
- Bifurcation (rule 41(4)).
- Where a claim was manifestly without legal merit (rule 41(5)).
Under the amended Rules, these processes have been separated out into different rules, which include specific provisions for preliminary objections where raised with or without a bifurcation request (amended rules 41-45). Each of the new Rules contain amendments to bring the ICSID framework in line with current arbitral practice.
For example, the provisions of amended rule 41 (Manifest Lack of Legal Merit) seek to clarify the process’ scope of application, including in relation to the procedure and time limit for submitting an objection and the timing of the tribunal’s ruling. Amended rule 42 (Bifurcation) also provides more guidance on timing, procedure and the factors to be considered by a tribunal in reaching its decision. Amended rule 42(6) introduces a power for a tribunal to bifurcate proceedings on its own initiative rather than solely at party request.
Other noteworthy amendments
Reflecting the lengthy research and consultation which was involved in the amendment project, there are numerous other changes which seek to bring the Rules in line with current arbitral practice and procedure. These include revisions which have been introduced in other institutional rules or which reflect standard practice. For example:
- Introducing a new general duty on the parties and tribunal to act in an expeditious and cost-effective manner (amended rule 3);
- Providing for electronic filings as the default (amended rule 4(2));
- Updating the procedure for witnesses and experts to reflect established practice (amended rule 38) and the introduction of a new provision for tribunal-appointed experts (amended rule 39);
- Introducing a maximum time limit of 240 days after the last submission (excluding cost submissions) for the tribunal to render the award, applicable unless it is ruling on a preliminary objection or on an objection that all claims are manifestly without legal merit (amended rule 58);
- Allowing for the consolidation of pending arbitrations with party consent (amended rule 46(1)); and
- Introducing a process for expedited arbitration with party consent (amended rule 75(1)). These proceedings are subject to limits on the length of submissions and shorter timelines; a 120-day period between the hearing and the award is prescribed.
The 2022 amendments to the ICSID Arbitration Rules mark the end of a long consultative process that has spanned over five years. These changes form part of a wider project which has encompassed the Additional Facility Rules and also introduced a new ICSID Mediation process. The new Rules incorporate and codify experience gained through ICSID’s administration of hundreds of cases, with the aim of modernising and improving the efficiency of ICSID arbitrations. The amendments, which are wide-ranging and substantive, are a welcome development for parties and their counsel.
While the approval of these amendments heralds the end of the ICSID rule amendment project, the Code of Conduct project remains ongoing (see our earlier blog post here). The Secretariats of ICSID and UNCITRAL continue to collaborate on the creation of a draft Code of Conduct for Adjudicators in International Investment Disputes. Currently in its third draft, the outcome of this project has the potential to bring about significant changes to who is eligible to sit as arbitrator in investment treaty cases going forward.
For more information, please contact Andrew Cannon, Partner, Vanessa Naish, Professional Support Consultant, or your usual Herbert Smith Freehills contact.
The authors would like to thank Jefferi Hamzah Sendut for their assistance in preparing this blog post.