International investment arbitrations are proceedings brought by foreign investors

against the State in which they invested (the Host State) to settle claims arising directly
out of their investment pursuant to an international investment treaty. Such claims are
based on alleged breaches by the State of its international law obligations towards
foreign investors, as enshrined in bilateral or multilateral investment treaties to which
the Host State is party. 

The legal framework of international investment arbitration is provided by the 1965

Washington Convention on the Settlement of Investment Disputes between States and
Nationals of Other States (ICSID Convention), a vast network of bilateral investment
treaties (BITs) and multilateral treaties (e.g. the Energy Charter Treaty and NAFTA)
concluded between States, and the arbitration rules of the institutions involved in
investment arbitrations (such as the Arbitration Rules of the International Centre for
Settlement of Investment Disputes, more commonly known as the ICSID Rules). 

HISTORICAL BACKGROUND

One of the main impediments to foreign investment in developing countries has been the
investors’ perception that, in the event of a dispute with the Host State, they might find
themselves without an effective remedy. Traditionally, the only solution available to a
foreign investor aggrieved at the treatment which he had received in a Host State was to
seek diplomatic protection. In practice, it was not always easy for foreign investors to
persuade their Home State to intervene on their behalf. 

In order to promote and protect foreign investments, many States entered into BITs, or
became parties to multilateral investment treaties (for example, the North American Free
Trade Agreement (NAFTA), the Association of South East Asian Nations (ASEAN) or the
Energy Charter Treaty (ECI)) pledging to provide foreign investors with certain minimum
standards of treatment for their investments and a related dispute resolution mechanism
involving a direct right of action against the Host State before a competent international
arbitral forum. The State will always be respondent and its actions vis-à-vis the investor
will be judged according to general standards imposed by international law rather than
by reference to any national system of law. 

The first BIT was signed between West Germany and Pakistan in 1959. Since then – and
in particular since the 1990s – the number of BITs has exploded, with the result that
there are currently over 2,500 BITs covering the overwhelming majority of States and
offering investors a reliable international dispute resolution mechanism to enforce their
rights under international investment law against recalcitrant Host States. 

The first reported arbitration in which the jurisdiction of the tribunal was based on a BIT
was registered in 1987. The growth in this form of dispute resolution in the following two
decades has been exponential, with the number of registered cases now totalling over
270. Although a number of international investment arbitration awards have been
handed down, it is important to note that the field of international investment law is still
evolving, and there still appear inconsistencies in the substantive interpretation of
certain concepts enshrined in international investment treaties. 

STANDING TO BRING AN INTERNATIONAL INVESTMENT

ARBITRATION CLAIM

Unlike in international commercial arbitration, the consent of the parties to submit their
disputes to international investment arbitration is not usually contained in a formal
arbitration agreement. Typically, the Host State consents to arbitration by including an
‘offer’ in its national legislation or in an investment treaty and the eligible investor
‘accepts’ the offer by writing to the Host State or filing a request for arbitration against
the Host State. 

Before analysing the scope of the general protections offered to foreign investors under
investment treaties, it is important to understand who is entitled to bring an
international investment arbitration claim and in respect of which types of claims. 

In broad terms, investment treaties offer protection to the “investments” of “foreign

investors”, and empower the latter to commence international investment arbitration
proceedings in respect of any dispute arising out of their investments. So what
constitutes an “investment”, and what is a “foreign investor”? 

“Investment”
Whilst each investment treaty contains its own individually-negotiated definition of the
term “investment”, the following general observations can be made: 

 an “investment” must be distinguished from an ordinary commercial transaction

that is undeserving of protection under an investment treaty. The hallmarks of an
“investment” include contribution of money or other assets of economic value, a
certain temporal duration, an undertaking of risk by the investor, an expectation
of profit and a contribution to the development of the host country (for example,
by building or enhancing its infrastructure or its economy);
 most investment treaties define the term “investment” in a broad, non-
exhaustive way. For example, the Energy Charter Treaty defines energy
investments falling under the scope of the treaty as “every kind of asset, owned or
controlled directly or indirectly by an Investor and includes […]”. The categories of
assets typically listed as constituting investments include movable and immovable
property, tangible and intangible property, shares and stock, bonds and
debentures of, and any other form of participation in, a company or business
enterprise; claims to money and claims to performance under contracts having a
financial value; and intellectual property rights.

It should be noted, however, that some investment treaties apply only to investments
made after the conclusion of the treaty and others require the investment to be made in
accordance with the laws and regulations of the Host State in order to qualify for
protection. 

“Foreign investor”
The definition of “investor” likewise varies from treaty to treaty. Nevertheless, in most
cases, investment treaties draw a distinction between two categories of investing entities
capable of qualifying as “foreign investors”: (a) individuals or natural persons; and (b)
companies and other juridical entities. As regards the former, most investment treaties
define “individuals” and their nationality by reference to the parties’ domestic laws on
citizenship. As to the latter, many investment treaties determine the nationality of a
company by reference to the domestic law concept of incorporation or constitution,
according to which a company is deemed to take its nationality from the State in which it
is incorporated regardless of where it actually carries on its activities. That said, some
investment treaties prefer to determine a company’s nationality by reference to its
actual place of management or the nationality of its dominant shareholders. 

To qualify as an investor deserving of investment treaty protection, it is essential that

the individual or corporate entity in question has the nationality of a State party to the
investment treaty other than the Host State. This can give rise to complex issues when,
for example, the individual concerned has dual nationality, including the nationality of
the Host State. 

Most investment treaties may also be relied upon by: (a) the entity that makes an
investment directly; or (b) where there is a Host State entity, such as a locally
incorporated investment vehicle, by the foreign individual or company that directly or
indirectly controls that entity. Some investment treaties go even further and extend
protection to investment entities, wherever located, that are directly or indirectly
controlled by investors of a State party to the investment treaty. Control, under
international law, is a broad concept that is usually taken to refer not only to the rights
of majority shareholders but also to other reasonable criteria including management
responsibility and voting rights. Conversely, some investment treaties contain what are
known as ‘denial-of-benefits’ clauses. These clauses allow the Host State to deny treaty
protection to those entities that are controlled or owned by investors of a non-party and
that have no substantial business activity in the territory of the party under whose laws
they are constituted (e.g. offshore or so-called ‘mailbox’ companies). 

COMMON PRINCIPLES OF INVESTMENT PROTECTION

Despite the large number of investment treaties – each the product of its own
negotiation – the protections offered to the investments of foreign investors are
substantially similar. Typically, treaties include the following guarantees: 

 no expropriation without compensation;

 fair and equitable treatment;
 full protection and security;
 no arbitrary or discriminatory measures impairing the investment;
 free transfer of funds related to investments; and
 national and most favoured nation (MFN) treatment.

No expropriation without compensation

Perhaps the most important protection offered by investment treaties is the Host State’s
obligation to compensate foreign investors in the event of expropriation. 

It is important to realise, however, that international law does not prohibit expropriation
per se. In fact, the right of a State to expropriate property within its territory is viewed
by international law as an expression of that State’s sovereign powers. To be lawful,
however, international law requires: (a) that the expropriation be for a public purpose;
(b) that the expropriation be non-discriminatory in nature; and (c) that the State pays
adequate, effective and prompt compensation for such expropriation. 

The notion of expropriation is expansive in nature and may result from either: (a) a
direct and deliberate act of taking (e.g. a nationalisation); or (b) from an indirect taking
(commonly referred to in investment treaties as “measures having equivalent effect to or
being tantamount to expropriation”) that substantially deprives the investor of the use or
enjoyment of its investment, even if the investor retains the legal and beneficial
ownership of the asset constituting the investment. As regards (b), tribunals have held
that an indirect taking will not constitute expropriation if it is “merely ephemeral” (i.e.
temporary rather than permanent in nature). 

It is important to note that government measures (e.g. tax increases, environmental

regulations or the revocation of a licence) may amount to expropriation regardless of
their form or purpose. An expropriation may also be “creeping” (i.e. the expropriation
need not be immediate, but may unfold through a series of acts, the cumulative effect of
which is substantial deprivation of the use or value of the investment). 

However, not every regulatory or administrative act that renders an investment less
profitable, or even completely uneconomical, amounts to an expropriation. Expropriation
must be distinguished from other governmental measures affecting property rights. In
Too v. Greater Modesto Insurance Associates, the tribunal emphasised that: “the State is
not responsible for loss of property or for other economic disadvantage resulting from
bona fide general taxation or any other action that is commonly accepted as within the
police power of States, provided it is not discriminatory and is not designed to cause the
alien to abandon the property to the State or to sell it at a distress price… .” 

As regards the Host State’s obligation to provide “adequate, effective and prompt”
compensation to foreign investors in the event of expropriation, many investment
treaties interpret such obligation as requiring the Host State to pay the equivalent of the
fair market value of the expropriated investment immediately before the expropriation or
before the impending expropriation became public knowledge, whichever is earlier, plus
interest at a commercially reasonable rate from the date of expropriation. The
overarching principle when it comes to calculating compensation, however, is that
derived from the Chorzow Factory case, namely: “that reparation must, so far as
possible, wipe out all consequences of the illegal act and re-establish the situation which
would, in all probability, have existed if that act had not been committed.” 

When calculating a fair level of compensation in the context of unlawful expropriations,

tribunals can also take into account factors such as loss of future earnings. 

Fair and equitable treatment

Nearly all investment treaties require that investments receive “fair and equitable
treatment”, but there is no general agreement on the precise meaning of this phrase.
The principle leaves considerable room for tribunals to appreciate the “fairness” and
“equity” of the Host State’s actions in the light of all the circumstances of the case and
without necessarily embarking upon an analysis of either domestic or international law.
The growing body of arbitral awards seem to interpret the principle of fair and equitable
treatment as requiring States to maintain a stable and predictable investment
environment consistent with reasonable investor expectations. Tribunals have also
consistently held that the investor does not need to prove bad faith or malicious intent
on the part of the Host State in order to establish a breach of this principle. 

Full protection and security

As with “fair and equitable treatment”, the notion of “full protection and security” is
difficult to define in the abstract. The typical situation in which tribunals have found the
Host State to be in breach of the full protection and security obligation is where the Host
State failed to take reasonably expected protective measures to prevent the physical
destruction of the investor’s property, in particular measures that fell within the normal
exercise of governmental functions. Recent awards have extended the definition of the
principle of full protection and security so that it applies not only to physical
interferences, but also to any act or measure that deprives an investor’s investment of
protection and full security (for example, the revocation of a government authorisation
vital for the operation of the investment). The investor is not required to prove either
negligence or bad faith on the part of the Host State to establish a breach of this
principle.

No arbitrary or discriminatory measures impairing the investment

Investment treaties frequently contain an obligation incumbent upon the host state not
to impair the management, operation, maintenance, use, enjoyment, acquisition,
expansion or disposal of investments by arbitrary and/or discriminatory measures. Some
treaties employ the word “unreasonable” in lieu of “arbitrary”. What constitutes an
“arbitrary” measure is not defined in treaties and must be appreciated by the tribunal in
the exercise of its discretion on the facts of each particular case. The International Court
of Justice has, however, provided the following widely-quoted test of arbitrariness:
“Arbitrariness is not so much something opposed to a rule of law, as something opposed
to the rule of law…It is a wilful disregard of due process of law, an act which shocks, or
at least surprises, a sense of juridical propriety.” 

Generally, a measure that is discriminatory in nature is one that results in the treatment
of an investor that is different from that accorded to other investors in similar
circumstances. Again, what does and does not constitute a discriminatory measure is
generally a matter for the tribunal to determine in the light of the circumstances of each
case. 

Free transfer of funds related to investments

Investment treaties almost invariably provide that the Host State shall permit all
transfers related to an investment to be made freely and without any delay into or out of
its territory. Such transfers usually cover any amounts derived from or associated with
an investment, such as profits, dividends, interest, capital gains, royalty payments,
initial and additional capital for the maintenance and development of an investment,
management, technical assistance or other fees, or returns in kind. Some treaties
reserve the Host State’s right to restrict transfers of funds during periods of limited
availability of foreign exchange or due to balance of payments problems. Limitations are
often subject to some objective standard, such as the equitable, non-discriminatory and
good faith application of domestic laws and regulations. Foreign investors may seek
compensation if they are affected by currency control regulations or other measures of
the Host State that effectively freeze the funds of the investor in the Host State. 

National and MFN treatment

Investment treaties commonly define the standard of treatment to which an investment
is entitled by reference to the treatment afforded to investments made by nationals of
the Host State or other foreign investors. The “national treatment” standard requires the
Host State to treat foreign investments no less favourably than the investments of its
own nationals and companies. The MFN standard prohibits the Host State from treating
one foreigner’s investment less favourably than that of another investor from another
foreign country. 

The inclusion of MFN clauses in investment treaties promotes convergence in treaty

drafting, as each State strives to ensure that the benefits which it is extending to the
nationals of one State are consistent with obligations already assumed under earlier
treaties. 

Whilst foreign investors have traditionally tended to rely on MFN clauses in the context of
substantive rights (e.g. if the Host State grants tax concessions to French investors in
the processed food industry, it should confer the same concessions to German investors
in the same industry), some tribunals have allowed claims to extend MFN treatment to
certain procedural rights (e.g. entitling investors from one foreign country to invoke
more favourable dispute resolution procedures available to investors from another
foreign country under the terms of their investment treaty). 

“Umbrella” clauses
A final (quasi-) ‘protection’ offered to investors under the terms of some investment
treaties is the so-called “umbrella clause”. Essentially, this clause requires the Host State
to respect any ‘obligation’ it may have assumed in relation to an investment. This
‘obligation’ may be contractual or statutory, express or implied, in writing or oral,
provided it is clearly ascertainable as an obligation of the State or an emanation of the
State (including companies of which the State is the sole shareholder) towards a specific
investment. 

The controversial issue with which tribunals have been confronted is whether a Host
State’s breach of a commercial contract entered into between that State and a foreign
investor may be sufficient to entitle an investor to found a claim for breach of an
investment treaty. Tribunals have proved to be generally unwilling to assume jurisdiction
over a claim that is essentially contractual in nature on the basis that: “[a] treaty cause
of action is not the same as a contractual cause of action; it requires a clear showing of
conduct which is in the circumstances contrary to the relevant treaty standard.” That
said, whether or not the tribunal can entertain a breach of treaty claim founded on an
underlying breach of contract depends, strictly speaking, upon the precise wording of the
relevant “umbrella clause”. It is submitted that a tribunal may, in principle, entertain a
treaty-based claim founded on an underlying claim for breach of contract if the language
of the relevant investment treaty expressly and unambiguously deems a breach of
contract to constitute a breach of that investment treaty. 

Enforcement of rights under investment treaties

Assuming that the investor can establish a breach of one or more of the abovementioned
substantive protections, he must then check the terms of the relevant treaty to ascertain
how and when he can enforce his rights through international investment arbitration. 

Investment treaties usually require the partners to enter into settlement negotiation for
a period of three to six months (known as a “cooling off” period) before any formal
arbitration claim can be brought by an investor against the Host State. The purpose of
this “cooling off” period is to give the parties an opportunity to resolve their dispute
amicably and privately. As a matter of practice, foreign investors typically serve a
“trigger letter” on the Host State outlining their complaints and officially starting the
“cooling off” period. Tribunals generally consider, however, that the failure of a party to
respect these “cooling off” periods does not prevent them from accepting jurisdiction to
hear an investment dispute. 

Some investment treaties also require that foreign investors first present their disputes
to the local courts of the Host State before commencing international investment
arbitration proceedings. If the investor is unhappy with the decision of the local courts,
or if such courts fail to issue a decision within a specified period of time, he can
commence international investment arbitration proceedings. 

Other investment treaties contain what is known as a “fork-in-the-road” clause. This

clause applies when the investment treaty presents the foreign investor with a choice
between certain dispute resolution options, for example between international
investment arbitration and litigation before the local courts of the Host State. Effectively,
the “fork-in-the-road” clause provides that if the investor chooses to submit a dispute to
the local courts of the Host State (or, for example, to another dispute resolution
procedure provided for in any contract between the parties) the investor loses forever
the right to pursue those claims in international investment arbitration. 

Assuming that the foreign investor has satisfied any prior requirement to
negotiate/consult/submit the dispute to the local courts, he is then free to pursue
international investment arbitration. Most investment treaties allow the investor to
choose between ad hoc arbitration and institutional arbitration under the rules of certain
well-known arbitration institutions. Typically, an investor might have the option of
submitting the dispute either: (a) to international investment arbitration pursuant to the
ICSID Rules; (b) to ad hoc international investment arbitration conducted pursuant to
the UNCITRAL Rules; or (c) to international investment arbitration pursuant to the Rules
of the Arbitration Institute of the Stockholm Chamber of Commerce. The most common
option is (a). The International Centre for Settlement of Investment Disputes (ICSID)
was established under the terms of the ICSID Convention, and is one of the five
international organisations that make up the World Bank Group. It is located at the
World Bank headquarters in Washington, D.C., and its primary purpose is to provide
facilities for and administer international investment arbitrations that function
independently of local courts and local procedural law. One of the principal advantages of
selecting ICSID arbitration is that the awards rendered by tribunals constituted under
the ICSID Rules are excluded from any form of national court review and – if pecuniary
in nature – are enforceable in the courts of more than 140 signatory States as if they
were national court judgments. 

For the purposes of the remaining sections of this chapter, the authors have assumed
that the parties have elected to resolve their dispute by way of international investment
arbitration under the ICSID Rules. 

THE CONDUCT OF INTERNATIONAL INVESTMENT ARBITRATION

PROCEEDINGS

Commencement of arbitration
Rule 1 of the ICSID Rules for the Institution of Conciliation and Arbitration Proceedings
provides that a party wishing to commence arbitration proceedings must send a written
Request for Arbitration to the Secretary-General at ICSID headquarters in Washington,
D.C., together with five additional signed copies. The Request for Arbitration must be in
one of ICSID’s official languages (i.e. English, French or Spanish), signed by the claimant
or his duly authorised representative, and dated. Article 59 of the ICSID Convention also
requires the claimant to pay a non-refundable “lodging fee” of USD 7,000. 

ICSID staff typically review the Request for Arbitration and accompanying documentation
and send a copy of the Request to the respondent government for its review prior to
registration. In normal circumstances, it will take between two weeks and two months to
register the Request for Arbitration from the date of its receipt by the Secretary-
General. 

Constitution of the tribunal

Articles 37–40 of the ICSID Convention (and ICSID Rules 1–10) deal with the
constitution of the tribunal. The parties are free to choose the number and identity of the
arbitrators, subject only to a requirement to appoint an uneven number of arbitrators.
Pursuant to Article 39 of the ICSID Convention (and ICSID Rule 1 (3)), the tribunal may
not consist of a majority of arbitrators with the same nationality as either party, unless
the parties have appointed the arbitrators by agreement. Accordingly, in a three-
member tribunal, one party may not appoint a national of either State involved unless
the other party agrees. 

In the absence of agreement between the parties as to the procedure for appointing the
arbitrators, either party may invoke the default formula for a three-member tribunal set
out in Article 37 (2) (b) of the ICSID Convention whereby each party names one
arbitrator and the two parties then agree on the third arbitrator who becomes the
president of the tribunal. The ICSID Rules also provide a fallback appointment
mechanism: if the parties fail to constitute the tribunal within 90 days of receiving notice
of the registration of the Request for Arbitration, or within such further time as they
have agreed, either party may request ICSID’s assistance in appointing the remaining
arbitrator(s). In practice, the constitution of an ICSID tribunal very seldom takes less
than three months. 

Once all arbitrators have accepted their appointment, the Secretary-General sends a
formal notice to the parties and the tribunal is deemed constituted. The date of the
constitution of the tribunal is a reference point for subsequent procedural milestones. 
Challenging arbitrators
Articles 14 (1) and 40 (2) of the ICSID Convention provide that all arbitrators must be:
“persons of high moral character and recognised competence in the fields of law,
commerce, industry or finance, who may be relied upon to exercise independent
judgment.” Either before or at the tribunal’s first session, each arbitrator must sign a
declaration affirming his independence and agreement to respect the confidentiality of
the proceedings. 

Article 57 of the ICSID Convention sets a high bar for challenging an arbitrator. The
challenge application must establish that the arbitrator demonstrated a “manifest lack of
the qualities required by Paragraph 1 of Article 14 [of the ICSID Convention].” Under
Article 58 of the ICSID Convention, a party must make a proposal to disqualify an
arbitrator “promptly, and in any event before the proceeding is closed.” A challenge to a
single member of a tribunal will be determined by the other members of the tribunal. If
they cannot agree, or if the challenge relates to the entire tribunal, the Chairman of the
Administrative Council will use his best efforts to make a decision on the application
within 30 days. 

If a vacancy appears on the tribunal as a result of a disqualification (or the death,

incapacity or resignation of an arbitrator), the vacant position is usually filled via the
same process used to appoint the original arbitrator(s). 

Provisional measures
Pursuant to Article 47 of the ICSD Convention and ICSID Rule 39, provisional measures
for the preservation of a party’s rights may be recommended by the tribunal of its own
motion or at the request of a party. Such requests for provisional measures may be filed
by a party at any time during the proceedings, even before the tribunal has been
constituted. If the parties so agree, they can also seek provisional measures from any
judicial or other authority prior to or during the arbitration proceedings. The tribunal can
only recommend, modify or revoke its recommendations after giving each party an
opportunity of presenting its observations. Although the tribunal is only entitled to
“recommend” provisional measures, it is widely accepted in the jurisprudence that such
recommendations are binding on the parties in the same way as “orders”, and are issued
with the expectation that they will be complied with by the parties. 

The preconditions to granting provisional measures are as follows: the measures granted
must be necessary to preserve the rights of the parties; the “recommendation” must be
urgent so as to avoid irreparable harm; and each party must have had the opportunity
to present observations. 

Despite the fact that there is no explicit legal sanction for disobeying a decision on
provisional measures, there is authority suggesting that the tribunal can take a party’s
failure to comply with provisional measures into consideration when rendering the final
award, for example by adjusting the amount of damages or imposing other forms of
permanent injunctive relief. 

Jurisdiction and preliminary objections

The tribunal is competent to rule on its own jurisdiction and determines any challenge to
its jurisdiction either as a preliminary matter or as part of the award on the merits
(Article 4 of the ICSID Convention). Pursuant to Rule 41 (1) of the ICSID Rules, any
objection to the tribunal’s jurisdiction should be filed with the Secretary-General no later
than at the expiration of the time limit fixed for the filing of the counter-memorial or, if
the objection relates to an ancillary claim, for the filing of the rejoinder. 

In addition, pursuant to Rule 41 (5) of the ICSID Rules, a party can file an objection that
a claim is “manifestly without legal merit” no later than 30 days after the constitution of
the tribunal. In Trans-Global Petroleum Inc. v. Jordan, the tribunal found that such
objection may be accepted only in a “clear” and “obvious” case in which the claims made
are “patently unmeritorious”. 

Procedural hearings
In the absence of any preliminary objections, the tribunal must hold its first session
within 60 days of its constitution or within such other time period as agreed by the
parties (Rule 13 of the ICSID Rules). Such session is typically a preliminary procedural
consultation in which the tribunal ascertains the parties’ views on the procedural aspects
of the case (for example, the language of the proceedings; the number, sequence and
timing of written pleadings; and the need for an oral hearing). A second pre-hearing
conference is envisaged by Rule 21 of the ICSID Rules to allow an exchange of
information and a stipulation of uncontested facts among the parties, with a view to
reaching an amicable settlement. In practice, such session is often held by conference
call or video conference. 

Place of arbitration
The ICSID proceedings are conducted at ICSID headquarters in Washington, D.C., unless
the parties and the tribunal have agreed to an alternative location. Hearing facilities are
offered for ICSID arbitrations, for instance, by the Frankfurt International Arbitration
Centre and the World Bank Office in Paris. In contrast to commercial arbitration
proceedings, the place of arbitration has no legal significance in investment arbitration
proceedings, since it has no impact on the applicable procedural law or on the
enforceability of the award. 

Applicable law
Article 42 of the ICSID Convention requires the tribunal to decide the dispute in
accordance with the rules of law chosen by the parties or, in the absence of such choice,
in accordance with the law of the State party to the dispute and such rules of
international law as may be applicable. Many bilateral and multilateral investment
treaties contain an express agreement by the parties that the tribunal should resolve any
dispute in accordance with the provisions of the treaty and the rules and principles of
international law. 

Written and oral procedure

In addition to the Request for Arbitration, the claimant will normally file a written
“memorial” and the respondent will file a “counter-memorial”, which can include a
counterclaim (Rules 31 and 40 of the ICSID Rules). If the parties so agree, or if the
tribunal deems it necessary, the claimant can then file a “reply” to which the respondent
can respond in a “rejoinder”. 

The ICSID oral procedure is similar to that followed in international commercial

arbitration. All hearings – whether on jurisdiction or on the merits – are in principle held
in private unless the parties and the tribunal agree otherwise. In addition to oral
argument, the parties may present fact witnesses and experts for examination at the
hearing, although counsel should not expect to conduct extensive direct examination or
overly aggressive cross-examination. 

Evidence
Supporting documentation, witness statements and expert reports are normally filed
with the written pleading to which they relate. 
As regards disclosure, Article 43 of the ICSID Convention provides for voluntary
disclosure unless the parties agree otherwise. Any disclosure of evidence beyond
voluntary disclosure is in the hands of the tribunal. In practice, it is highly unlikely that a
tribunal will order US-style document discovery and a claimant investor should not
expect to obtain the information necessary to prove his case from the respondent State. 
Rule 34 of the ICSID Rules gives the tribunal discretion to decide on both the
admissibility and probative value of evidence. 
Closure of the proceedings
Assuming that an ICSID arbitration has progressed through the merits phase, the
tribunal will declare the proceedings closed as soon as the parties have finished
presenting their cases. This may either be at the end of the hearing on the merits or on
the date on which post-hearing memorials are filed. Closure of the proceedings triggers
the 120-day period set in ICSID Rule 46 for the tribunal’s rendering of the award. 

THE AWARD

Time limits
Awards in ICSID arbitrations are usually rendered approximately two to three years after
the registration of the Request for Arbitration. It is not uncommon, however, for
arbitration to take longer due to extensions agreed by the parties, suspension of
proceedings to explore settlement opportunities or other particulars of the case. Most of
the time is dedicated to the written and oral procedures rather than the drafting of the
award, which must in principle be signed within 120 days of the closure of the
proceedings, subject to the possibility of a 60-day extension (Rule 46 of the ICSID
Rules). The Secretary-General must promptly authenticate the original text of the award
and dispatch a certified copy to each party. The award is deemed rendered on the date
the Secretary-General dispatches the certified copies to the parties. 

The form and content of the award

The form of the award does not materially differ from awards rendered in international
commercial arbitrations. In summary, an award must: (a) be in writing; (b) be signed by
the members of the tribunal who support it; (c) deal with every question submitted to
the tribunal; and (d) state the reasons upon which it is based (Articles 48 (2) and 48 (3)
of the ICSID Convention). 

Awards are rendered by majority vote and individual (dissenting or concurring) opinions
may be attached to the award. The ICSID awards may only be published with the
consent of both parties. In practice, most ICSID awards (unlike awards rendered in
private international commercial arbitrations) are published either by consent or by one
of the parties acting unilaterally. 

Under Article 49 of the ICSID Convention, either party may file with the Secretary-
General, within 45 days of the rendering of the award, a request that the tribunal decide
an issue it omitted or “rectify” the award by correcting a “clerical, arithmetical or similar
error”. It is important to note that rectification of the award serves only to provide the
parties with an opportunity to correct obvious (minor) mistakes in the award; it is not a
means of re-opening the merits of the case. 

Costs
The costs of ICSID arbitration include the administrative fees of ICSID, the fees of the
arbitrators and lawyers’ fees. Whilst such costs vary from case to case, it is generally
agreed that the administrative fees and the fees charged by arbitrators are lower in
ICSID arbitration than in international commercial arbitration proceedings. The
complexity of the legal and factual issues in investor-state arbitration can, however,
result in the incurrence of significant lawyers’ fees. 

Article 61 (2) of the ICSID Convention empowers the tribunal to assess the parties’ costs
in its final award and allocate such costs between the parties. To this end, the parties
are usually required to submit an account of their costs to the tribunal immediately
following the closure of the proceedings. Whilst ICSID tribunals have wide discretion in
allocating such costs between the parties, most published awards have required the
parties to share the administrative and arbitrators’ fees equally, and to bear their own
lawyers’ fees. Some recent awards indicate a shift towards the allocation of costs based
 on the outcome of the arbitration. 

Challenging awards
Article 53 (1) of the ICSID Convention provides that 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 the ICSID Convention. 

The only mechanisms provided in the ICSID Convention for challenging the award are:
(a) an application for the ‘interpretation’ of the award (Article 50 of the ICSID
Convention); (b) an application for the ‘revision’ of the award on the ground of the
discovery of a fact of such a nature as to affect decisively the award (Article 51 of the
ICSID Convention); and (c) an application for the ‘annulment’ of the award (Article 52 of
the ICSID Convention). Any request for the annulment of an award must be considered
by an ad hoc committee of three members, which is only empowered to annul the award
on the following limited grounds: 

 the tribunal was not properly constituted;

 the tribunal manifestly exceeded its powers;
 there was corruption on the part of a member of the tribunal;
 there has been a serious departure from a fundamental rule of procedure; or
 the award failed to state the reasons on which it was based.

Pending resolution of an application for interpretation, revision or annulment, the

enforcement of an award may be stayed (Article 53 (1) of the ICSID Convention). 

Recognition and enforcement of awards

A distinctive feature of investment treaty arbitration under the auspices of ICSID is the
automatic enforcement regime. Unlike in the case of awards rendered pursuant to the
rules of other arbitral institutions (where recognition and enforcement may be refused on
certain grounds, for example, in accordance with the provisions of the New York
Convention 1958), Article 54 of the ICSID Convention requires Contracting States
automatically to recognise and enforce pecuniary awards as if they were final judgments
of a court in that State. 

The provisions of the ICSID Convention do not extend, however, to the execution of
awards, which is governed by the laws concerning the execution of judgments in force in
the State in whose territories such execution is sought. 

If – despite the obligation for each party to “abide by and comply with the terms of the
award” – a State refuses to recognise and enforce an award, an investor must rely on his
Home State to institute proceedings on his behalf (e.g. by bringing a claim for breach of
treaty obligations before the International Court of Justice). In practice, however, such
recourse is rarely necessary: State parties to the ICSID Convention generally comply
voluntarily with ICSID awards, not least for fear of losing credibility with the World
Bank. 

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