The International Centre for Settlement of Investment Disputes, or the ICSID, was established under the Convention on the Settlement of Investment Disputes between States ad Nationals of the Other States, also called the Washington or the ICSID Convention,[1] adopted on 18 March 1965, which entered into force “30 days after the date of deposit of the twentieth instrument of ratification, acceptance or approval”,[2] on 14 October 1966.

The ICSID Convention is divided into 10 Chapters and 75 Articles, followed by a signature clause:

• International Centre for Settlement of Investment Disputes (Articles 1-24);
• Jurisdiction of the Centre (Articles 25-27);
• Conciliation (Articles 28-35);
• Arbitration (Articles 36-55);
• Replacement and Disqualification of Conciliators and Arbitrators (Articles 56-58);
• Costs of Proceedings (Articles 59-61);
• Place of Proceedings (Articles 62-63);
• Disputes Between Contracting States (Article 64);
• Amendment (Articles 65-66); and
• Final Provisions (Articles 67-75).

The ICSID forms part of the World Bank and its seat is “at the principal office of the International Bank for Reconstruction and Development”.[3] Pursuant to Article 1(2) of the ICSID Convention, the purpose of the ICSID is “to provide facilities for conciliation and arbitration of investment disputes between Contracting States and nationals of the other Contracting States in accordance with the provisions of this Convention.”[4]

Currently, the ICSID Convention counts 162 Signatory and Contracting States, with Djibouti being the latest State for which the ICSID Convention entered into force, on 9 July 2020. Being a Party to the ICSID Convention does not mean that arbitration is automatically possible with a host State in the event of a dispute. The host State must also grant its consent to arbitration, for instance in a bilateral investment treaty.

Background and Negotiations of the ICSID Convention

While the final version of the ICSID Convention was adopted on 18 March 1965, its text had to undergo several rounds of discussions and amendments. The most important milestones are summarized below.

A.    Note on Settlement of Disputes (1961)

On 28 August 1961, the General Counsel of the International Bank for Reconstruction and Development (“IBRD”), Aron Broches, who was general counsel of the World Bank for two decades until his retirement in 1979, transmitted a Note on Settlement of Disputes between Governments and Private Parties to the  Executive Directors of the IBRD whereby he pleaded for the “establishment of international arbitration and/or conciliation machinery”[5] for disputes between foreign investors and host States. In his note, he identified several principal problems, amongst which figured foreign investors’ inability “to proceed with an international claim directly against the host Government”. He made four suggestions to remedy the problem:

• “a recognition by States of the possibility of direct access by private individuals and corporations to an international tribunal in the field of financial and economic disputes with Governments”;[6]
• “a recognition by States that agreements made by them with private individuals and corporations to submit such disputes to arbitration are binding international undertakings”;[7]
• “the provision of international machinery for the conduct of arbitration, including the availability of arbitrators; methods for their selection and rules for the conduct of the arbitral proceedings”;[8]
• “provision for conciliation as an alternative to arbitration”.[9]

The absence of an adequate “machinery for conciliation and arbitration” for disputes between foreign investors and host States was also put forward in the address of the President of the IBRD, Eugene R. Black, to the Annual Meeting of the Board of Governors held on 19 September 1961 in Vienna.[10]

B.    Working Paper on the Draft ICSID Convention (1962)

On 5 June 1962, a Working Paper in the form of a Draft Convention prepared by Aron Broches was submitted to the Executive Directors.[11] The Draft contained 11 Articles. Article I outlined the purpose of the Convention, i.e., “to promote the resolution of disputes arising between Contracting States and nationals of other Contracting States by encouraging and facilitating recourse to international conciliation and arbitration.”[12] Article III also called for the establishment of the “International Conciliation and Arbitration Center”.[13] Article IV dealt with the jurisdiction of the Center, which was limited to “disputes between Contracting States and nationals of other Contracting States and shall be based on consent”,[14] excluding disputes “involving claims of less than the equivalent of [USD 100,000.00] determined as of the time of submission of the dispute.”[15]

C.    First Preliminary Draft of the ICSID Convention (1963)

On 9 August 1963, the First Preliminary Draft of a Convention on the Settlement of Investment Disputes between States and Nationals of Other States, containing 11 Articles, was submitted to the Executive Directors.[16] It is interesting to note that, compared to the Working Paper, the First Preliminary Draft contained a number of novelties and amendments regarding the jurisdiction of the Center. First, Article II abandoned the USD 100,000.00 limitation for claims and provided that, “The jurisdiction of the Center shall be limited to proceedings for conciliation and arbitration with respect to any existing or future dispute of a legal character between a Contracting State and a national of another Contracting State”[17].

It is to be noted that the definition of what constitutes an investment was not included in the First Preliminary Draft. The reason was that any specific definition would “open the door to frequent disagreements as to the applicability of the Convention to a particular undertaking, thus undermining the primary objective of this Article [,i.e.,] to give confidence that undertakings to have recourse to conciliation or arbitration will be carried out.”[18]

However, Article X of the First Preliminary Draft did contain a definition of who would qualify as national:

• National of a Contracting State: “a person natural or juridical possessing the nationality of any Contracting State on the effective date of an undertaking within the meaning of Section 2 of Article II, and includes (a) any company which under the domestic law of that State is its national, and (b) any company in which the nationals of that State have a controlling interest. ‘Company’ includes any association of natural or juridical persons, whether or not such association is recognized by the domestic law of the Contracting State concerned as having juridical personality.”
• National of Another Contracting State: “national of a Contracting State other than the State party to the dispute, notwithstanding that such person may possess concurrently the nationality of a State not party to this Convention or of the State party to the dispute.”

The definition of a national of another Contracting State is particularly interesting in the sense that it encompassed dual nationals possessing the nationality of the host State (NB. claims of dual nationals are expressly excluded in the final and current version of the ICSID Convention from the scope of its application).

The First Preliminary Draft of the ICSID Convention was discussed during several Consultative Meetings of Legal Experts held in Addis Ababa,[19] Santiago,[20] Geneva[21] and Bangkok,[22] after which the General Counsel of the IBRD established an overall report.[23] The report was then assessed by the Executive Directors[24] and submitted to the Board of Governors who adopted it during an Annual Meeting in Tokyo in September 1964.[25]

D.    Draft of the ICSID Convention (September 1964)

On 11 September 1964, a Draft Convention on the Settlement of Investment Disputes between States and Nationals of Other States was released for consultation.[26] It contained 78 Articles. Article 30 on the jurisdiction of the Centre is particularly noteworthy as it included new definitions.

First, contrary to the First Preliminary Draft, Article 30 of the Draft ICSID Convention proposed the following definition of an investment: “any contribution of money or other asset of economic value for an indefinite period or, if the period be defined, for not less than five years.”[27]

Second, the definition of a national of another Contracting State was amended to “(a) any natural person who possessed the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to jurisdiction of the Center in respect of that dispute as well as on the date on which proceedings were instituted pursuant to this Convention; and (b) any juridical person which possessed the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to the jurisdiction of the Center in respect of that dispute, and any juridical person which the parties have agreed shall be treated as a ‘national of another Contracting State’.”[28] In other terms, the Draft ICSID Convention already excluded from its application claims of dual nationals possessing the nationality of the host State.

E.    Revised Draft of the ICSID Convention (December 1964)

Between September and December 1964, the content of the Draft ICSID Convention was discussed during a series of meetings of the Legal Committee and received several comments and amendments from States.[29] On 11 December 1964, the Revised Draft of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States was released.[30]

Following discussions on the Draft ICSID Convention, the main changes related, again, to the jurisdiction of the Centre. The definition of what constitutes an investment was abandoned. In addition, the notion of a national of another Contracting State was amended. Article 28 explicitly maintained the exclusion of dual nationals possessing the nationality of the host State from the scope of the Convention.[31] In addition, the same Article also added the criterion of foreign control in the definition and included in the scope of the Convention “any juridical person which had the nationality of the Contracting State party to the dispute on that date and which, because of foreign control, the parties have agreed should be treated as a national of another Contracting State for the purposes of this Convention.”[32]

The Organization of the ICSID

A.    The Administrative Council

The Administrative Council is the governing body of the ICSID composed of “one representative of each Contracting State.”[33] It is presided by the President of the World Bank who exercises his/her mandate ex officio, i.e., he/she has no vote on the issues presented to the Administrative Council.[34] The Chairman and the Members of the Administrative Council serve “without remuneration from the Centre”[35] and they enjoy immunity  from legal process regarding their functions.[36]

• Under Article 6 of the ICSID Convention, the Administrative Council has the following principal functions:
• Adopting the administrative and financial regulations of the Centre;
• Adopting the rules of procedure for the institution of conciliation and arbitration proceedings;
• Adopting the rules of procedure for conciliation and arbitration proceedings;
• Approving arrangement with the World Bank for the use of the Bank’s administrative facilities and services;
• Determining the conditions of service of the Secretary-General and of any Deputy Secretary-General;
• Adopting the annual budget of revenues and expenditures of the Centre; and
• Approving the annual report of the operation of the Centre.

B.    The ICSID Secretariat

The ICSID Secretariat ensures the management of day-to-day activities of the ICSID. The Secretariat is currently composed of the Secretary-General, Ms. Meg Kinnear, two Deputy Secretaries-General, Mr. Gonzalo Flores and Ms. Martina Polasek, several legal counsel, legal advisers, legal assistants, paralegals, finance and general administration and front office staff.

The Secretary-General and Deputy Secretaries-General are elected by the Administrative Council “by a majority of two-thirds of its members upon the nomination of the Chairman”[37] for a renewable six-year term. Pursuant to Article 11 of the ICSID Convention, the Secretary-General is the “legal representative and the principal officer of the Centre and shall be responsible for its administration”.[38] The Secretary-General also acts as registrar of the Centre.[39]

C.    The Panels

The ICSID comprises two panels[40] – the Panel of Arbitrators and the Panel of Conciliators – composed of qualified individuals for a renewable six-year mandate.[41]

In conformity with Article 13 of the ICSID Convention, each Member State can designate four persons to the Panel of Conciliators or the Panel of Arbitrators. The individuals designated by the Member States may, but need not, be their nationals.[42] In turn, the Chairman may designate in total ten persons with different nationalities to each panel.[43]

The members of the Panels are also available for nomination to arbitral tribunals, conciliation commissions or ad hoc committees.

ICSID Arbitration Rules

ICSID Arbitration Rules and the ICSID Additional Facility Rules have undergone several amendments (see the ICSID Arbitration Rules).

However, additional observations regarding the current amendments proposed to the ICSID Arbitration Rules are worth making. The amendment process started in October 2016. During the 50^th Annual Meeting of the Administrative Council, Member States were invited to “consider potential rule amendments.”[44] Consequently, four rounds of Working Papers followed on 3 August 2018,[45] 15 March 2019,[46] 16 August 2019[47] and 28 February 2020,[48] with public comments

The current amendment proposal puts an emphasis, inter alia, on the cost-effectiveness of proceedings, electronic methods of filing documents and an obligation to disclose the existence of third-party funding in order to prevent conflict of interest (see Third-Party Funding under ICSID Amendments).

• Zuzana Vysudilova, Aceris Law LLC

[1] ICSID Convention, Article 1(1).

[2] ICSID Convention, Article 68(2).

[3] ICSID Convention, Article 2.

[4] ICSID Convention, Article 1(2).

[5] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 1, para. 1.

[6] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 1, para. 3(a).

[7] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 1, para. 3(b).

[8] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 1, para. 3(c).

[9] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 1, para. 3(d).

[10] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 2, p. 3.

[11] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 6, pp. 19-46.

[12] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 6, p. 21.

[13] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 6, p. 25.

[14] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 6, p. 33.

[15] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 6, p. 34.

[16] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 21, pp. 133-174.

[17] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 21, p. 148.

[18] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 21, Comment (Category of Disputes), p. 149.

[19] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Docs Nos. 25-26, pp. 236-298.

[20] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Docs Nos. 27-28, pp. 298-367.

[21] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Docs Nos. 29-30, pp. 367-458.

[22] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 31, pp. 458-554.

[23] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 33, pp. 557-585.

[24] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 37, p. 605.

[25] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 41, p. 608.

[26] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 43, pp. 610-645.

[27] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 43, p. 623.

[28] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-1, Doc No. 43, pp. 623-624.

[29] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-2, Docs Nos. 44-122, pp. 647-910.

[30] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-2, Doc No. 123, pp. 911-934.

[31] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-2, Doc No. 123, p. 919.

[32] History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Volume II-2, Doc No. 123, p. 919.

[33] ICSID Convention, Article 4(1).

[34] ICSID Convention, Article 5.

[35] ICSID Convention, Article 8.

[36] ICSID Convention, Article 21(a).

[37] ICSID Convention, Article 10 (1).

[38] ICSID Convention, Article 11.

[39] ICSID Convention, Article 11.

[40] ICSID Convention, Article 12.

[41] ICSID Convention, Article 15.

[42] ICSID Convention, Article 13.

[43] ICSID Convention, Article 13.

[44] 50^th Annual Meeting of ICSID’s Administrative Council, press release dated 7 October 2016.

[45] Rule Amendment Project – Member State & Public Comments on Working Paper # 1 dated 3 August 2018.

[46] Rule Amendment Project – Member State & Public Comments on Working Paper # 2 dated 15 March 2019.

[47] Proposals for Amendment of the ICSID Rules, August 2019.

[48] Proposals for Amendment of the ICSID Rules, February 2020.