W19: Challenges, Enforcement & Immunities in IIA

Question 1

Enforcement of Awards

Answer 1

AWARDS:

1. Final - EXCEPT: Ltd. Review (Art. 53: Finality)
2. Binding
3. Create an obligation to comply
4. Res Judicata (Issues decided) - parties may not seek another remedy before another tribunal/domestic court

ENFORCEMENT:
1. Of Non-ICSID and Additional Facility Awards sub: National Laws of Place of Enforcement and NYC

2. ICSID Awards sub: ICSID Convention
   - ICSID, Art. 54: Awards to be recognised as binding, and their PECUNIARY obligations to be enforced same as final domestic judgments in all State parties (to convention) - extends to any type of obligation u/award
   - R and E may be sought NOT only in host state/investor’s state of nationality, BUT in any state party.
   - Prevailing party may select state where enforcement most promising - likely to be determined by the availability of suitable assets

PROCEDURE FOR ENFORCEMENT OF ICSID AWARDS:

i) Governed by law on execution of judgements in each State.
ii) Contracting parties to designate a competent court/authority for the same.
iii) Party seeking enforcement: Furnish copy of award, certified by ICSID’s Secy. Gen.
iv) If a Stay of Enforcement is in force, duty to enforce = SUSPENDED
v) STAY may be granted while proceedings for Interpretation/Revision/Annulment in progress

• NO REVIEW by domestic courts in course of proceedings for R and E. Ltd. to verifying authenticity. No examination of:-
  a) Jurisidiction
  b) Due Process
  c) Substantive Correctness
  d) Conformity with the forum state’s ordre public (public policy)

Question 2

Proceedings for R and E

Answer 2

1. May be initiated simultaneously in several states - necessary to secure Res Judicata effect
   - Apt. steps must be taken to prevent double/multiple discovery
2. Obligation to Enforce Pecuniary Obligations: does not effect any immunity from execution that states enjoy
   - State immunity regulated by customary int’l law (many legislations passed in diff. states), no UN Convention in force.

Question 3

State Immunity from Execution

Answer 3

Merely a procedural bar to enforcement - does NOT affect the obligation of state to comply

• THEREFORE: successful reliance on State Immunity does NOT alter tft non-compliance w/Award = breach of ICSID Convention
• MINE v Guinea: ICSID Art. 27 (Right of DP) where nn-compliance. Alternative and supplement to judicial enforcement u/Art. 54. May be exercised ONLY by aggrieved investor’s state of nationality.

1. Commercial Property: Execution Permitted
2. Non-Commercial Property: Execution NOT permitted if serving official/govt. functions
   - Diplomatic property (incl. Embassy a/c’s held by national central banks) enjoys SPECIAL PROTECTION
   - Waiver of immunity possible but difficult to obtain from host state. Domestic rules… may actually place limits on possibility of agreeing on waivers.

NATIONAL RULES:

i. US Foreign Sovereign Immunities Act 1976 (FSIA):
a) wrt Foreign State’s property in the US used for commercial activity in the US - ONLY IF that property is/was used for the commercial activity on which claim is based.
b) wrt Commercial property taken in VIOLATION of int’l law/which was exchanged for such property
c) SPECIAL EXCEPTION: for purposes of executing arbitral awards.

Question 4

Challenge and Review of Decisions

Answer 4

Awards = Final, NOT sub: any appeals procedures.
- U/ltd. circumstances, review is possible.

REVIEW: Conflicting Principles -

i) Finality: Efficiency wrt expeditious and economic settlement of disputes
ii) Correctness: Elusve goal, takes time and effort, and may involve several layers of control
- In arbitration: Finality > Correctness

Question 5

Review: Non-ICSID Arbitration

Answer 5

Challenge: thru National Courts (Seat/Place of Enforcement)

• NYC Art. V: List of grounds for refusal of R and E:
  i) Invalidity of Agreement
  ii) Lack of Proper Notice of the Proceedings
  iii) Decision exceeding scope of submission
  iv) Improper composition of tribunal
  v) Award = NOT YET Binding/Set Aside
  vi) Non-Arbitrable Subject Matter (in Jurisdiction of place of enforcement)
  vii) Award in conflict w Public Policy of State (place of enforcement)
• Model Law: No. of grounds for setting aside/non-recognition of an ICA award by domestic court (based on NYC Art. V)

Question 6

Annulment: u/ICSID

Answer 6

1. Not sub: annulment/scrutiny by domestic courts
2. Self-contained system for review

Annulment differs from Appeal:
i. Concerned only w legitimacy of the process of the decision, but NOT w substantive correctness

ii. Merely removed original decision, w/out replacing it [ICSID Art. 52(1)]

iii. POST Annulment, dispute can be resubmitted to a new tribunal [Art. 52(6)]
- Any determinations of fact and law by Ad Hoc Committee NOT binding on tribunal hearing re-submitted case (ONLY annulment, NOT reasoning is binding)
- Parties may NOT introduce new claims not presented to the original tribunal (of first instance)

iv. If Partial Annulment, ONLY annulled portion re-arbitrated; while un-annulled portion remains Res Judicata.
* CDC v Seychelles: Function of annulment - Pacta Sunt Servanda (agreements must be kept) and Res Judicata

Question 7

ICSID Annulment: Procedure

Answer 7

ICSID Art 52(3): Ad Hoc Committee may annul an award upon request of a party

• ONLY on grounds u/Art. 52(1)
• Has discretion: NOT obligated to annul even if grounds exist. Has to decide whether fault is sufficiently grave to warrant annulment, esp. whether it has made a MATERIAL DIFF. to the position of one of the parties.
• Vivendi case

i. Consists of 3 persons - appointed by ICSID’s Chairman of Admin Council.
ii. Request has to be submitted w/in 120 days of award’s dispatch to parties
iii. NO Ex Officio Annulment
iv. Request for Partial Annulment and Annulment of Parts of Awards are possible
v. ICSID Art 52(2): Stay enforcement while annulment proceedings pending (automatic if requested in application for annulment, before constitution of committee)
vi. SOME Committees - require bank guarantee/security from Award Debtor for eventual payment of award, as condition for Stay of enforcement
- Operative if annulment is rejected and award = enforceable
vii. DO NOT have power to render decisions on merits

Question 8

ICSID Annulment: Grounds

Answer 8

ICSID Art. 52(1):

a) Tribunal not properly constituted
b) *Tribunal manifestly exceeded powers
c) Corruption on the part of a Tribunal Member
d) *Serious departure from a fundamental rule of procedure
e) *Award has failed to state reasons

(b, d, e - role in practice)

• Review Process ltd. to a few fundamental procedural standards.
• Annulment requests must be brought u/one or several of these grounds
• Party may NOT present new arguments on fact/law if it failed to put forward in original arbitral proceedings

Question 9

Grounds for Annulment: Excess of Powers

Answer 9

Where tribunal deviates from parties’ agreement to arbitrate:

1. Decision on merits w/out jurisdiction
2. Exceeds jurisdiction

ICSID Art. 25: Jurisdiction

EXCESS OF POWERS:

• Must be manifest/obvious
  i. No legal dispute
• Mitchell v Congo

ii. Nationality requirements not met
iii. Absence of valid consent to arbitration

iv. Failure to exercise existing jurisdiction
* Vivendi case

v. Failure to apply proper law - provisions on applicable law are essential elements of arbitration agreement
- ERROR in application of proper law leading to incorrect decision is NOT grounds for annulment
* Wena v Egypt: BIT compensation @ market value > applicable law; because int’l & ICSID law offer variety of alternatives, incl. compounding of interest.

Question 10

Grounds for Annulment: Serious Departure from a Fundamental Rule of Procedure

Answer 10

ONLY IF:
1. Departure = Serious; i.e., more than minimal, material effect on a party (minor/inconsequential NOT grounds)

2. Rule = Fundamental; i.e., effects the fairness of the proceedings
   E.g.’s:
   i. Right to be heard
   *Klöckner v Cameroon: Ad Hoc committees have rejected the idea that tribunals, in drafting awards, are restricted to arguments presented to them by the parties
   ii. Impartiality and Equal Treatment of Parties
   iii. Issues of Evidence

• A party aware of violation of rule of procedure by tribunal must react IMMEDIATELY stating its objection and demanding compliance.
• Arbitration Rule 27: Failure to object = waiver to object at later stage

Question 11

Grounds for Annulment: Failure to State Reasons

Answer 11

Purpose of Statement of Reasons: To explain to the reader of the award, esp. the parties, how and why the tribunal reached its decision.

ICSID Art. 48(3): Clear obligation to state reasons for the award
- Total absence is unlikely, but possible on particular points

i. Insufficient and inadequate reasons: Ad Hoc Committee may reconstruct the committed reasons
- Implicit Reasoning: Sufficient as long as it can be inferred reasonably from the terms and conclusions of award. Not a grounds for annulment.
* Vivendi case

ii. Contradictory reasons: may amount to failure to state reasons since they will not enable the reader to understand Tribunal’s motives. Genuinely contradictory reasons cancel each other out.

iii. Failure to deal w every Q. before the tribunal
- ICSID Art. 48(3): Tribunal’s obligation to deal w every Q. submitted to it
- ONLY a Crucial/Decisive Argument would affect tribunal’s decision, not every single argument.