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The First ICSID Flagship Amendments

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Hodgson Matthew
Matthew Hodgson

Partner

Hong Kong

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Raimanova Lucia
Lucia Raimanova

Partner

Bratislava

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06 April 2022

The first amendments to the ICSID Rules since 2006 will be available for use from July 2022 onward, bringing greater transparency to the process and offering clearer guidance on key issues such as allocation of costs and disclosure of third-party funding.

The International Centre for Settlement of Investment Disputes (ICSID) is a part of the World Bank Group and the principal global forum for investor-State arbitrations. Long-running consultations on reforms to the ICSID Rules, which were last updated in 2006, came to a close in 2021. The package of amendments were put to a vote in early 2022 and were approved on 21 March 2022 by the ICSID Member States. Of particular note are the amendments to the ICSID Arbitration Rules and the Arbitration (Additional Facility) Rules, which are commonly used in investment arbitration. The 2022 ICSID Regulations and Rules will enter into force on 1 July 2022 and ICSID will be publishing guidance notes in due course to assist users in applying the updated rules.

The amendment process represents a significant effort by the ICSID Secretariat and Member States to do two things. First, there was a need to update the arbitration rules to reflect matters that have become commonplace in modern arbitration practice in the 16 years since the last update in 2006. These issues include requests for bifurcation, applications for security for costs and third-party funding. Secondly, the changes are designed to address some criticisms of the ISDS system, including a perceived lack of transparency, a lack of guidance surrounding cost allocation and excessive delays in the arbitration process.

Seeking to level the playing field with specialised arbitration rules for investment disputes issued by a number of arbitral institutions, the package of amendments expands the scope of the Arbitration (Additional Facility) Rules to make them available to Regional Economic Integration Organisations (e.g. the EU and ASEAN) and in circumstances where neither the respondent State nor the investor’s home State is an ICSID Member State.

Users of the 2022 Arbitration Rules can expect the following key changes:

Greater transparency in the conduct and outcome of proceedings

Possibly the most significant change relates to increased transparency, including new rules providing for the publication of a final award by default, absent objection by any party within 60 days (Rule 62); publication of orders and decisions with redactions agreed upon by the parties (Rule 63); publication of written submissions or supporting documents upon parties’ consent, with redactions to be agreed upon by the parties (Rule 64); and observation of hearings by third parties, unless either party objects (Rule 65).

A new rule on the bifurcation of proceedings

Under the previous version of the rules, there was no express provision dealing with bifurcation and such requests were left to the tribunal’s broad discretion. The newly adopted Rule 42 specifies factors (broadly reflective of existing arbitral best practice) that the tribunal shall consider in exercising its powers.

A new rule on security for costs

Again, there was previously no provision dealing with security for costs applications. These applications were instead typically made under the old Rule 39 on provisional measures but they were rarely granted and there was some debate as to whether the old Rule 39 was broad enough to allow them at all. The newly adopted Rule 53 codifies a party’s right to request security for costs and sets out factors that the tribunal shall consider in determining the application, including the existence of third-party funding.

A standalone rule on objections to claims that manifestly lack legal merit

The old Rule 41(5) dealt with such preliminary objections. In an effort to flush out manifestly unmeritorious claims earlier in the process, the newly adopted Rule 41 would require such objections to be raised within 45 days of the constitution of the tribunal and the tribunal would have to render its decision within 60 days after the later of the constitution of the tribunal or the last submission.

Required disclosure of third-party funding

Under the newly adopted Rule 14, funded parties are required to file a written notice disclosing the name and address of any non-party that funds the proceedings through a donation, grant or in return for remuneration dependent on the outcome of the proceedings. Disclosure of further information regarding the arrangements may be ordered by the tribunal.

Clearer guidance on the tribunal’s discretion in cost allocation

The old Rule 28 gave the tribunal a broad discretion to decide on cost allocation but most of the feedback received during consultation indicated that it was desirable for there to be clearer guidance on how and when to allocate costs. The newly adopted Rule 52 addresses this, with the outcome of the proceedings, parties’ conduct, the complexity of the issues and the reasonableness of the costs claimed among the factors to be considered.

The option to fast-track proceedings through the new expedited arbitration rules

The newly adopted Rules 75–86 set out an expedited process, which applies on an opt-in basis and is suitable for lower value claims and/or cases where the dispute is not factually complex. It remains to be seen what level of uptake this expedited procedure gets in practice.