72662 Background Paper on Annulment For the Administrative Council of ICSID* August 10, 2012 *This paper does not constitute legal advice. The information in this paper is current to June 30, 2012. TABLE OF CONTENTS I. Purpose of Background Paper ................................................................................................ 1 A. Request by the Philippines ............................................................................................ 1 B. Presentations at 2011 Meeting of the Administrative Council ..................................... 2 II. Introduction to the Annulment Mechanism in the ICSID Convention .................................. 3 III. The Drafting History of the Annulment Provisions in the ICSID Convention...................... 4 A. The Origin of the Annulment Provision ....................................................................... 5 B. Preliminary Draft ICSID Convention – 1963 ............................................................... 6 C. Regional Consultative Meetings – 1964 ....................................................................... 7 D. First Draft Convention – September 1964 .................................................................... 8 E. Legal Committee Meetings – 1964 ............................................................................... 9 F. Revised Draft Convention – December 1964 ............................................................. 11 IV. The Conduct of an Annulment Proceeding .......................................................................... 11 A. Filing an Application for Annulment .......................................................................... 12 B. Constitution of an ad hoc Committee ......................................................................... 15 C. The Proceeding ........................................................................................................... 18 (i) Applicable Provisions ....................................................................................... 18 (ii) The First Session ............................................................................................... 18 (iii) Advances to ICSID............................................................................................ 19 (iv) Stay of Enforcement .......................................................................................... 20 (v) Hearing and Post-Hearing Phase ....................................................................... 22 D. The Decision on Annulment ....................................................................................... 23 E. Resubmission Proceedings.......................................................................................... 28 V. Interpretation of the Annulment Mechanism, the Role of the ad hoc Committee, and the Individual Grounds for Annulment ..................................................................................... 29 A. The General Standards Identified in the Drafting History and ICSID Cases ............. 29 B. The Interpretation of Specific Grounds ...................................................................... 40 (i) Improper Constitution of the Tribunal .............................................................. 41 (ii) Manifest Excess of Powers ............................................................................... 42 (a) Manifest Excess of Powers Relating to Jurisdiction ....................................... 43 (b) Manifest Excess of Powers Relating to the Applicable Law........................... 45 (iii) Corruption on the Part of a Tribunal Member................................................... 46 (iv) Serious Departure from a Fundamental Rule of Procedure .............................. 46 (v) Failure to State the Reasons on which the Award is Based .............................. 47 VI. Conclusion ........................................................................................................................... 49 i ANNEXES Annex 1: Pending and Concluded Annulment Proceedings Annex 2: Letter from Mr. Jose Anselmo I. Cadiz, Solicitor General, Republic of the Philippines, to the ICSID Administrative Council (June 27, 2011) Annex 3: The Philippines’ Proposal to Analyze the Potential for Establishing Guidelines on the Implementation of Article 52 of the ICSID Convention (September 23, 2011) (Power Point Presentation) Annex 4: Summary record of the proceedings of the 45th Annual Meeting of the ICSID Administrative Council (September 23, 2011), Washington D.C. Annex 5: ICSID FY 2011: An Overview, Report to the ICSID Administrative Council by the Secretary-General of ICSID (September 23, 2011) (Power Point Presentation) Annex 6: Annulment Grounds in Concluded Proceedings Annex 7: Bibliography on ICSID Annulment ii I. Purpose of Background Paper 1. The ICSID Secretariat has prepared this paper to assist Contracting States with a matter raised by the delegation of the Republic of the Philippines (“the Philippines�) at the 45th Annual Meeting of the ICSID Administrative Council on September 23, 2011, as promised at that meeting. 1 A. Request by the Philippines 2. By letter dated June 27, 2011, 2 the Solicitor General of the Philippines wrote to the ICSID Administrative Council concerning a decision on annulment in Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines. 3 In that case, the ICSID Tribunal award in favor of the Philippines was annulled by an ICSID ad hoc Committee on the ground that there had been a serious departure from a fundamental rule of procedure. 4 The ad hoc Committee found that the Tribunal had not given the parties an opportunity to address certain evidence submitted by the Philippines, which failure constituted a serious departure from the right to be heard and materially affected the outcome of the dispute. 5 3. In the view of the Philippines, the Fraport Annulment Decision “was taken in excess of the ad hoc Committee’s limited power under Article 52 of the ICSID Convention� and provided “further evidence of a systemic problem of ICSID ad hoc committees failing to adhere to the mandate established in Article 52 of the ICSID Convention.� 6 The Philippines urged the Administrative Council to consider seriously the need to issue guidelines for use by ad hoc Committees to ensure fair and effective annulment proceedings. 1 The ICSID Secretariat takes no position in this paper as to whether a specific decision of an ICSID ad hoc Committee is correct or is within the proper scope of review allowed by Article 52 of the ICSID Convention. Annex 1, which is attached to this paper, lists all annulment cases, including the full and short form citations, members of the Tribunals and ad hoc Committees, and the outcome in each case. 2 Letter from Mr. Jose Anselmo I. Cadiz, Solicitor General, Republic of the Philippines, to ICSID Administrative Council (June 27, 2011). The letter was distributed to the Administrative Council by the ICSID Secretariat at the 2011 Annual Meeting of the Administrative Council on September 23, 2011. For convenience, it is attached to this document as Annex 2. 3 Fraport. Issued by an ad hoc Committee consisting of Judge Peter Tomka (President), Judge Dominique Hascher, and Professor Campbell McLachlan, Q.C. The Committee annulled the Award of August 16, 2007, available at http://italaw.com/documents/FraportAward.pdf, rendered by a Tribunal composed of Mr. L. Yves Fortier, C.C., Q.C. (President), Dr. Bernardo M. Cremades, and Professor W. Michael Reisman. 4 Fraport, para. 218. See Article 52(1)(d) of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, March 18, 1965 (“ICSID Convention�). 5 Fraport, paras. 235 & 246. Following the annulment decision, ICSID registered a request for arbitration submitted by Fraport against the Philippines: Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines, ICSID Case No. ARB/11/12. For the current status of the proceeding, see ICSID’s website at http://icsid.worldbank.org. 6 Annex 2, supra note 2, at 1. 1 4. The Philippines recommended the following guidelines: (1) Reaffirm the extraordinary and limited scope of Article 52 annulment. (2) Reaffirm that an ad hoc committee’s authority is limited to the application of the Article 52 standards. (3) Reaffirm that as such, annulment is limited to the most serious and egregious cases, providing a specific definition of Article 52 standards. (4) Confirm that it is not within the mandate of an ad hoc committee to offer critical or corrective commentary on decisions of the tribunal for which there is no basis to annul. (5) In view of the importance of consent to the role of ICSID in the resolution of disputes, confirm that the mandate of an ad hoc committee under Article 52 of the Convention is limited to addressing the application for annulment presented. (6) Confirm that ad hoc committees must accord the parties the same right to present their case as the parties enjoy in the arbitration and thus must be permitted to present observations on the issues to be decided by the ad hoc committee. (7) Ad hoc committees should be composed of members with substantial experience with ICSID arbitrations either as an advocate or tribunal member. In addition, where one of the parties is from a developing country, at least one committee member should represent the developing country perspective either by virtue of nationality or experience. 7 B. Presentations at 2011 Meeting of the Administrative Council 5. At the afternoon session of the September 23, 2011 Administrative Council meeting, the Secretary-General of ICSID reported to members concerning the operation of ICSID, including the ICSID annulment mechanism. 8 Thereafter, The Honorable Cesar V. Purisima, Secretary of Finance of the Republic of the Philippines, and Mr. Jose Anselmo Cadiz, Solicitor General of the Republic of the Philippines, explained to ICSID members the concerns of the Philippines about the application of the annulment mechanism. Solicitor General Cadiz 7 The Philippines’ Proposal to Analyze the Potential for Establishing Guidelines on the Implementation of Article 52 of the ICSID Convention (September 23, 2011), distributed to the Administrative Council on October 19, 2011, Annex 3, at 10 & 11. At the request of the Philippines, ICSID transmitted a previous version of Annex 3, in English, French and Spanish, to the Administrative Council by letter of September 16, 2011. 8 Summary record of the proceedings of the 45th Annual Meeting of the ICSID Administrative Council (September 23, 2011), Washington D.C., distributed to the Administrative Council on October 19, 2011, Annex 4, paras. 28-30. See also ICSID FY 2011: An Overview, Report to the ICSID Administrative Council by the Secretary-General of ICSID (September 23, 2011), Annex 5, at 22-26. 2 requested that the Secretary-General conduct a thorough review of all annulment decisions and convene an exploratory task force of legal experts to assess the implementation of Article 52 of the ICSID Convention. Solicitor General Cadiz noted that such a task force could propose guidelines, if warranted, to assist future ad hoc Committees, and that any such guidelines should be submitted for approval and adoption by the Administrative Council at a subsequent Annual Meeting. 9 Solicitor General Cadiz also presented guidelines recommended by the Philippines (outlined above) that a task force might wish to consider. The presentation of the Philippines was accompanied by a PowerPoint document, which was distributed to ICSID Contracting States. 10 6. The Secretary-General undertook for the ICSID Secretariat to prepare a background paper on annulment for consideration by the Administrative Council, and, if requested by Contracting States, to facilitate a meeting of representatives to look further into this subject. 11 No other Contracting State commented on the presentation of the Philippines or the undertaking of the Secretary-General to prepare this background paper. All information and statistics in this paper are current as of June 30, 2012. II. Introduction to the Annulment Mechanism in the ICSID Convention 7. One of the unique features of the ICSID system is its autonomous nature. ICSID arbitration is known as self-contained, or de-localized, arbitration because local courts in any particular State have no role in the ICSID proceeding. Instead, the ICSID Convention and rules contain all provisions necessary for the arbitration of disputes, including provisions addressing the institution of proceedings, jurisdiction, procedure, the award to be rendered by the Tribunal, post-award remedies, and recognition and enforcement of the award. 12 8. An important aspect of the self-contained nature of the system is the remedies available to the parties after an award has been rendered. ICSID awards are binding on the disputing parties, may not be appealed, and are not subject to any remedies except those provided for in the Convention. 13 As a result, unlike other international arbitral awards, ICSID awards cannot be challenged before national courts. Challenges to ICSID awards must be brought within the framework of the Convention and pursuant to its provisions. 9. The choice of remedies offered by the ICSID Convention reflects a deliberate election by the drafters of the Convention to ensure finality of awards. The only way to review an award is pursuant to the five specific remedies provided by the Convention. These remedies are: 9 Annex 3, supra note 7, at 8 & 9. 10 Id.; see also Annex 4, supra note 8, at paras. 35-52. 11 Annex 4, supra note 8, at para. 53. 12 In accordance with Article 54 of the ICSID Convention, an award must be recognized by all ICSID Contracting States and pecuniary obligations imposed by an award are enforceable as a final judgment of the courts of a Contracting State. 13 ICSID Convention Article 53. 3 • rectification (Article 49) – the Tribunal can rectify any clerical, arithmetical or similar error in its award; • supplementary decision (Article 49) – the Tribunal may decide any question it omitted to decide in its award; • interpretation (Article 50) – the Tribunal may interpret its award where there is a dispute between the parties as to the meaning or scope of the award rendered; • revision (Article 51) – the Tribunal may revise its award on the basis of a newly discovered fact of such a nature as to decisively affect the award; and • annulment (Article 52) – an ad hoc Committee may fully or partially annul an award on the basis one or more of the following grounds: (a) the Tribunal was not properly constituted; (b) the Tribunal manifestly exceeded its powers; (c) there was corruption on the part of a Tribunal member; (d) there was a serious departure from a fundamental rule of procedure; or (e) the award failed to state the reasons on which it is based. 10. The following sections focus on the annulment remedy. Section III describes the drafting history of the annulment provisions in the Convention, Section IV outlines the conduct of an annulment proceeding before ICSID, and Section V describes the general standards and the grounds for annulment invoked in ICSID case law. III. The Drafting History of the Annulment Provisions in the ICSID Convention 11. The approval of the ICSID Convention by the Executive Directors of the World Bank in 1965 was preceded by five years of negotiation and consultation among government officials and international legal experts. It involved preparatory work by World Bank staff and Executive Directors in 1961 and 1962, a series of Regional Consultative Meetings of Experts convened by the World Bank in 1963 and 1964, and meetings of a Legal Committee consisting of representatives of all interested States, held at the end of 1964. The final text was approved by the Executive Directors on March 18, 1965 and came into force on October 14, 1966. 14 As of August 10, 2012, there are 147 Contracting States to ICSID. 14 For a summary of steps in drafting the Convention, see ICSID, 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 Vol. I-IV(1970) (“History�), Vol. I, 2-10. 4 A. The Origin of the Annulment Provision 12. The grounds for annulment in the ICSID Convention derive from the 1953 United Nations International Law Commission Draft Convention on Arbitral Procedure (“ILC Draft�), which was an effort to codify existing international law on arbitral procedure in State-to-State arbitration. 15 The ILC recognized that the finality of an award is an essential feature of arbitral practice, but also recognized that there was a need for “exceptional remedies calculated to uphold the judicial character of the award as well as the will of the parties as a source of the jurisdiction of the tribunal.� 16 It thus “sought to reconcile finality of the award with the need to prevent flagrant cases of excess of jurisdiction and injustice.� 17 During its deliberations, the ILC decided that no appeal against an arbitral award should be allowed, but that the validity of an award might be challenged “within rigidly fixed limits.�18 An independent body, the International Court of Justice, would rule on whether a challenge should lead to the annulment of the award. 19 13. The provision in the ILC Draft read as follows: (1) The validity of an award may be challenged by either party on one or more of the following grounds: (a) That the tribunal has exceeded its powers; (b) That there was corruption on the part of a member of the tribunal; (c) That there has been a serious departure from a fundamental rule of procedure, including failure to state the reasons for the award. 20 14. During its deliberations, the ILC debated the scope of specific grounds, including whether an excess of jurisdiction might warrant annulment, while misapplication of the law 15 See Documents of the Fifth Session Including the Report of the Commission to the General Assembly, [1953] 2 Yearbook of the International Law Commission 211, U.N. Doc. A/CN.4/SER.A/1953/Add.1 (“1953 ILC Yearbook II�) (Article 30 of the Draft Convention on Arbitral Procedure); Aron Broches, “Observations on the Finality of ICSID Awards� in Selected Essays: World Bank, ICSID, and Other Subjects of Public and Private International Law 299 (1995). 16 1953 ILC Yearbook II, supra note 15, at 202. 17 Broches, supra note 15, at 298; see also comments by the ILC’s special rapporteur, Mr. Georges Scelles, Summary Records of the Fifth Session, [1953] 1 Yearbook of the International Law Commission 46, U.N. Doc. A/CN.4/SER.A/1953 (“1953 ILC Yearbook I�). 18 1953 ILC Yearbook II, supra note 15, at 205. 19 Id. at 211 (Article 31 of the Draft Convention on Arbitral Procedure). 20 The ILC adopted the Model Rules on Arbitral Procedure in 1958. The provision on annulment, Article 35, remained the same as to grounds (a) and (b), but ground (c) was phrased “failure to state the reasons for the award or a serious departure from a fundamental rule of procedure� and an additional ground was added: “(d) that the undertaking to arbitrate or the compromis is a nullity.� Documents of the Tenth Session Including the Report of the Commission to the General Assembly, [1958] 2 Yearbook of the International Law Commission 86, U.N. Doc. A/CN.4/SER.A/1958/Add.1. Interestingly, the drafters of the ICSID Convention chose to model the ICSID annulment provision on the 1953 ILC Draft and not on the final provision adopted by the ILC in 1958. 5 would not. 21 Ultimately, the ILC Draft made no attempt to define what conduct each ground would cover, with the exception of the express reference to the “failure to state the reasons for the award� as an example of a serious departure from a fundamental rule of procedure. 22 The accompanying Report to the General Assembly stated that “[a]fter considerable discussion [the ILC] decided, having regard to the paramount requirement of finality, not to amplify - - subject to one apparent exception [the failure to state the reasons for the award] - - the grounds on which the annulment of the award may be sought.� 23 B. Preliminary Draft ICSID Convention – 1963 15. The ICSID Convention’s earliest draft, an internal World Bank document entitled “Working Paper in the Form of a Draft Convention� of June 5, 1962, made no provision for annulment. 24 However, a text on annulment identical to the 1953 ILC Draft was included in the Preliminary Draft of a Convention on the Settlement of Investment Disputes between States and Nationals of other States (“Preliminary Draft�) in 1963. 25 The Preliminary Draft was a second working paper prepared by World Bank staff for consideration at the regional consultative meetings of experts. Section 13(1) read as follows: (1) The validity of an award may be challenged by either party on one or more of the following grounds: (a) that the Tribunal has exceeded its powers; (b) that there was corruption on the part of a member of the Tribunal; or (c) that there has been a serious departure from a fundamental rule of procedure, including failure to state the reasons for the award. 26 16. The comment accompanying Section 13 explained the purpose of the provision: […] As a general rule the award of the Tribunal is final, and there is no provision for appeal. Sections 11 and 12, however, provide for interpretation and revision of the award, respectively. In addition, where there has been some violation of the fundamental principles of law governing the Tribunal’s proceedings such as are listed in Section 13, the aggrieved party may apply to the Chairman [of the Administrative Council 21 Summary Records of the Fourth Session, [1952] 1 Yearbook of the International Law Commission 84, U.N. Doc. A/CN.4/SER.A/1952; 1953 ILC Yearbook I, supra note 17, at 44. 22 Documents of the Fourth Session Including the Report of the Commission to the General Assembly, [1952] 2 Yearbook of the International Law Commission 66, U.N. Doc. A/CN.4/SER.A/1952/Add.1; 1953 ILC Yearbook II, supra note 15, at 205. 23 1953 ILC Yearbook II, supra note 15, at 205. 24 History, supra note 14, at Vol. II, 19. 25 Id. at 184 (October 15, 1963). 26 Id. at 217 (Article IV, Section 13 of Preliminary Draft of a Convention on the Settlement of Investment Disputes between States and Nationals of Other States). 6 of ICSID] for a declaration that the award is invalid. Under that section the Chairman is required to refer the matter to a Committee of three persons which shall be competent to declare the nullity of the award. It may be noted that this is not a procedure by way of appeal requiring consideration of the merits of the case, but one that merely calls for an affirmative or negative ruling based upon one or other of the three grounds listed in Section 13(1). 27 C. Regional Consultative Meetings – 1964 17. The inclusion of a provision on annulment in the ICSID Convention does not appear to have been questioned or debated, nor is there any account of discussion concerning the general purpose and scope of annulment in the drafting history of the Convention. Indeed, a summary report of the meetings by the General Counsel of the World Bank concluded that no controversial issues of policy were raised by the draft annulment provision, but that a considerable number of detailed suggestions of a technical character had been raised. 28 The specific grounds for annulment were discussed at a series of Regional Consultative Meetings. 18. During the first set of Regional Consultative Meetings, legal experts from various countries made suggestions for changes to the Preliminary Draft. 29 Among other things, a proposal was made that the grounds for annulment be set out in greater detail and modeled on commercial arbitration laws. 30 However, Aron Broches, General Counsel of the World Bank at the time, who chaired the Regional Consultative Meetings and the subsequent meetings of the Legal Committee, discouraged the comparison with commercial arbitration. 31 He recalled that “it had been fully recognized that only limited recourse had been provided and that acceptance of the binding character of the award went beyond what was normally expected in respect of an arbitral tribunal.� 32 19. A concern was raised by a legal expert from Germany that annulment posed a risk of frustrating awards and therefore the annulment provision should be made more restrictive. To that effect, this expert proposed a requirement that an excess of powers be “manifest� to warrant annulment. 33 In the context of the discussions on the meaning of “excess of powers,� Chairman 27 Id. at 218 & 219. 28 Id. at 573 & 574. 29 These meetings were held in the period December 1963 through May 1964 in Addis Ababa, Santiago, Geneva and Bangkok. Id. at 236-584. 30 Id. at 423. 31 Id. 32 Id. 33 Id.; Broches, supra note 15, at 303. 7 Broches confirmed that the intention was to cover the situation where a decision of the Tribunal went beyond the terms of the parties’ arbitration agreement. 34 20. Other suggestions were to add the words “a serious misapplication of the law� or “including the failure to apply the proper law� to the ground concerning excess of powers. 35 In this connection, Chairman Broches remarked that “a mistake in the application of the law would not be a valid ground for annulment of the award,� stating that “[a] mistake of law as well as a mistake of fact constituted an inherent risk in judicial or arbitral decision for which appeal was not provided.� 36 However, the legal expert from Lebanon observed that if the parties had agreed to apply a particular law and the Tribunal in fact applied a different law, the award would violate the parties’ arbitration agreement and could be annulled. 37 21. A further suggestion sought to clarify that “departure from a fundamental rule of procedure� excluded challenges on the basis of inobservance of ordinary arbitration rules, as opposed to “breaches of procedural rules which would constitute a violation of the rules of natural justice.� 38 One proposal was to add the phrase “a serious departure from the principles of natural justice.� 39 Another proposal was to replace the term by “fundamental principles of justice.� 40 Chairman Broches subsequently explained that “fundamental rule of procedure� was to be understood to have a wider connotation, and to include under its ambit the so-called principles of natural justice. As an example, he mentioned the parties’ right to be heard. 41 D. First Draft Convention – September 1964 22. In light of the discussions at the Regional Consultative Meetings, World Bank staff prepared a further Draft of a Convention on the Settlement of Investment Disputes between States and Nationals of other States (the “First Draft�), 42 for consideration by the Legal Committee. This Committee was composed of experts representing member governments of the World Bank. The annulment provision in the First Draft read as follows: (1) Either party may request annulment of the award by an application in writing addressed to the Secretary-General on one or more of the following grounds: (a) that the Tribunal was not properly constituted; 34 History, supra note 14, at Vol. II, 517. 35 Id. at 423 & 517. 36 Id. at 518. 37 Id. 38 Id. at 517. 39 Id. at 271 & 423. 40 Id. at 480. 41 Id. 42 Id. at 610 (September 11, 1964). 8 (b) that the Tribunal has manifestly exceeded its powers; (c) that there was corruption on the part of a member of the Tribunal; (d) that there has been a serious departure from a fundamental rule of procedure; or (e) failure to state the reasons for the award, unless the parties have agreed that reasons need not be stated. 43 E. Legal Committee Meetings – 1964 23. The Legal Committee held a series of meetings in November and December 1964, chaired by Broches. At the meetings, clarification was sought by an Ethiopian Committee member regarding the meaning of the additional ground of improper constitution of the Tribunal. 44 It was explained that this expression was “intended to cover a variety of situations such as, for instance, absence of agreement or invalid agreement between the parties, the fact that the investor was not a national of a Contracting State, that a member of the Tribunal was not entitled to be an arbitrator, etc.� 45 Two experts were in favor of deleting the ground of improper constitution but the majority of the Legal Committee decided to retain this ground. 46 24. The Ethiopian Committee member also asked whether there was a contradiction in providing that a Tribunal is the sole judge of its competence and at the same time providing for excess of power as a ground of annulment. 47 Chairman Broches replied that: …the expression ‘manifestly exceeded its powers’ concerned the cases […] where the Tribunal would have gone beyond the scope of agreement of the parties or would have thus decided points which had not been submitted to it or had been improperly submitted to it. […] the ad hoc Committee would limit itself to cases of manifest excess of those powers. 48 25. Suggestions that the word “manifestly� be omitted were defeated by a majority of 23 to 11 votes. 49 A proposal to include as a ground of annulment that the Tribunal had made a decision beyond the scope of the submissions was also defeated on a vote. 50 43 Id. at 635 (Article 55(1)). 44 Id. at 850. 45 Id. 46 Id. at 852 & 853. 47 Id. at 850. 48 Id. 49 Id. at 851 & 852. 50 Id. at 853. 9 26. Chairman Broches confirmed during the meetings that failure to apply the proper law could amount to an excess of power if the parties had agreed on an applicable law. 51 One proposal suggested adding the “manifestly incorrect application of the law� by the Tribunal as a ground of annulment, but it was defeated by a vote of 17 to 8. 52 27. In regard to the ground concerning corruption on the part of a member of the Tribunal, there were suggestions by various legal experts to replace “corruption� with “misconduct,� 53 “lack of integrity� 54 or “a defect in moral character.� 55 There were further suggestions that the ground be limited to cases where the corruption was evidenced by a judgment of a court, or in instances where there was “reasonable proof that corruption might exist.� 56 These proposals were put to a vote and defeated by a large majority. 57 28. The ground for annulment relating to a serious departure from a fundamental rule of procedure had become a stand-alone ground under the First Draft. A discussion was held about whether to add the words “or substance� after the words “rule of procedure,� but the proposal was seen as confusing. 58 A further suggestion to replace the word “rule� by “principle� was also rejected because the reference to “fundamental� rules of procedure was considered to be a clear reference to principles. 59 Likewise, a specific reference noting that both parties must have a fair hearing was defeated. 60 29. The last ground, failure to state reasons, also became a stand-alone ground in the First Draft. The possibility of raising this ground of annulment was subject to the parties’ agreement on whether reasons for the award would have to be stated. The rationale for this discretion was to reconcile it with another provision which allowed the parties to agree that the award need not state the reasons. 61 However, during one of the Legal Committee’s meetings, it was decided to remove the parties’ discretion in this regard and, as a consequence, the discretion was also removed from the ground for annulment. 62 51 Id. at 851. 52 Id. at 851, 853 & 854. 53 Id. at 851. 54 Id. at 852. 55 Id. 56 Id. at 851. 57 Id. at 852. 58 Id. at 853 & 854. 59 Id. at 854. 60 Id. at 853. 61 Id. at 633. Article 51(3) of the First Draft provided: “Except as the parties otherwise agree: (a) the award shall state the reasons upon which it is based.� 62 Id. at 816. 10 F. Revised Draft Convention – December 1964 30. Following the Legal Committee’s meetings, a Revised Draft Convention on the Settlement of Investment Disputes (“Revised Draft) was prepared. 63 Article 52 of the Revised Draft read as follows: (1) Either party may request annulment of the award by an application in writing addressed to the Secretary-General on one or more of the following grounds: (a) that the Tribunal was not properly constituted; (b) that the Tribunal has manifestly exceeded its powers; (c) that there was corruption on the part of a member of the Tribunal; (d) that there has been a serious departure from a fundamental rule of procedure; or (e) that the award has failed to state the reasons on which it is based. 64 31. Since the First Draft, the only modification made to the provision was to subsection (1)(e). 65 As explained above, the ground was no longer subject to the parties’ agreement that reasons need not be stated and, therefore, the words “unless the parties have agreed that reasons need not be stated� were deleted. 32. The Revised Draft was submitted for consideration by the Executive Directors of the World Bank. While further changes were subsequently made to other provisions of the Revised Draft, Article 52 remained the same and thus became the text of the ICSID Convention. IV. The Conduct of an Annulment Proceeding 33. In addition to stipulating the grounds for annulment, Article 52 of the ICSID Convention sets out the general procedural framework for an annulment proceeding. It is implemented by the ICSID Arbitration Rules, which apply to all ICSID Convention arbitration proceedings and govern ICSID post-award remedy proceedings. ICSID Arbitration Rules 50 and 52 through 55 implement the annulment remedy in the Convention, including the institution of annulment proceedings, the appointment of an ad hoc Committee to decide the application, and stays of enforcement of the award while the annulment application is pending. The various steps in an annulment proceeding are described below. 63 Id. at 911 (December 11, 1964). 64 Id. at 926 & 927. 65 As to ground (d), in the French version of the Revised Draft, the word “dérogation� was replaced by “inobservation� and in the Spanish version the words “grave apartamiento� were replaced by “quebrantamiento.� 11 A. Filing an Application for Annulment 34. Either disputing party may initiate an annulment proceeding by filing an application for annulment with the ICSID Secretary-General. The application must: (i) identify the award to which it relates; (ii) indicate the date of the application; (iii) state in detail the grounds on which it is based pursuant to Article 52(1) of the ICSID Convention; and (iv) be accompanied by the payment of a fee for lodging the application. 66 It must be filed within 120 days after the date on which the award (or any subsequent decision or correction) was rendered, except that, in the case of corruption on the part of a Tribunal member, the application may be filed within 120 days after discovery of the corruption, and in any event within three years after the date on which the award was rendered. 67 The Secretary-General must refuse registration of an application for annulment that is not filed within the prescribed time limits. 68 35. The application for annulment must concern an ICSID award, which is the final decision concluding a case. Since there can be only one award in the ICSID system, the parties must wait until that award is rendered before initiating any post-award remedies. 69 An application for annulment concerning a decision issued prior to the award (e.g. a decision on a challenge, a provisional measure, or a decision upholding jurisdiction) cannot be challenged before it becomes part of the eventual award, even if it raises issues that may constitute the basis for an annulment application. 70 36. Since the entry into force of the ICSID Convention in 1966, annulment proceedings have been instituted in 50 cases. 71 In 3 of those cases, annulment proceedings were instituted a second time after a resubmission proceeding, meaning 53 annulment proceedings have been instituted in total. 66 See Rules of Procedure for Arbitration Proceedings (“Arbitration Rules�), Arbitration Rule 50(1). The fee for lodging an application for annulment is currently US$10,000. 67 Arbitration Rule 50(3)(b); ICSID Convention Article 52(2). 68 Id. 69 See in particular ICSID Convention Articles 48-49 (addressing “the award�). Under the same principle, only the award is capable of enforcement under ICSID Convention Article 54. For enforcement purposes, ICSID Convention Article 53(2) provides that an “award� includes any decision interpreting, revising or annulling such award. 70 Annulment applications in respect of decisions on jurisdiction in pending cases have consistently been refused registration. See Broches, supra note 15, at 302. 71 See Annex 1. 12 Pending and Concluded Annulment Proceedings Convention Arbitrations Registered 344 Convention Arbitrations Concluded 230 Convention Awards Rendered 150 Annulment Proceedings Instituted 53 Annulment Proceedings Concluded 42 Annulment Proceedings Pending 11 0 50 100 150 200 250 300 350 400 37. A greater number of annulment applications have been registered since 2001 than in prior years. This reflects the increased number of awards issued, and not an increased rate of annulment. 72 The rate of annulment for 2001 – present is 7 percent, while the rate of annulment for 1971 – 2000 is 13 percent. Annulment Proceedings under the ICSID Convention - Outcomes by Decade 120 100 96 80 60 40 23 18 20 13 9 8 6 4 3 5 4 0 0 0 1 0 0 1 1 0 0 1971-1980 1981-1990 1991-2000 2001-2010 2011 - Number of Convention awards rendered Number of decisions rejecting the application for annulment Number of decisions annulling the award in part or in full Number of annulment proceedings discontinued 72 See infra para. 69. 13 38. Sixty-eight percent of all annulment applications have been registered in the last 5 years, at about an even level per year. Annulment Applications Registered by ICSID Fiscal Years 2008-2012 10 9 9 8 8 8 8 7 6 5 4 3 3 2 1 0 FY2008 FY2009 FY2010 FY2011 FY2012 39. The annulment remedy has been pursued by both claimants and respondents to ICSID proceedings. Approximately 57 percent of annulment proceedings were initiated by respondents (in all instances States) while 36 percent of the proceedings were initiated by claimants. In 4 cases (approximately 7 percent of all annulment proceedings), both parties filed an application for annulment. 73 Annulment by Instituting Party 7% (4) 36% (19) 57% (30) Annulment Applications filed by State Party Annulment Applications filed by National of Another State Annulment Applications filed by both Parties 73 Five of these were applications for the partial annulment of the award. As noted below, applicant-Nationals of Another State and applicant-States have had a similar rate of success in annulment applications. 14 B. Constitution of an ad hoc Committee 40. Once an application for annulment is registered, the Chairman of the Administrative Council must appoint an ad hoc Committee of three persons to decide the application. 74 The function of an ad hoc Committee is either to reject the application for annulment or to annul the award or a part thereof on the basis of the grounds enumerated in Article 52. 75 Its function is not to rule on the merits of the parties’ dispute if it decides to annul, which would be the task of a new Tribunal should either party resubmit the dispute following annulment of the award. 76 41. Ad hoc Committee members are appointed from the ICSID Panel of Arbitrators, which consists of persons designated by ICSID Contracting States and ten designees named by the Chairman of the Administrative Council. 77 The ICSID Convention requires that Panel designees be “persons of high moral character and recognized competence in the fields of law, commerce, industry or finance, who may be relied upon to exercise independent judgment.� 78 Both arbitrators and ad hoc Committee members are expected to be independent and impartial, and to decide the case solely on the basis of the facts before them and the applicable law. 42. Unlike the Centre’s appointment of Tribunal members, which may in certain circumstances be made outside of the Panel of Arbitrators with the parties’ consent, 79 the Chairman of the Administrative Council is restricted to appointing ad hoc Committee members from persons on the Panel of Arbitrators. 80 Many persons on the Panel of Arbitrators have served as members of both Tribunals and Committees. 43. The Panel of Arbitrators currently consists of 380 persons designated by 108 of the 147 Member States and the Chairman of the Administrative Council of ICSID. 81 As of June 30, 2012, ICSID appointed 159 ad hoc Committee members from the Panel, 35 of whom were appointed since 2011. 74 Arbitration Rule 52(1); ICSID Convention Article 52(3). 75 ICSID Convention Article 52(3). 76 Id. at Article 52(6). 77 See id. at Articles 12-16. Each Contracting State may designate up to four persons of any nationality to the Panel of Arbitrators, for renewable periods of six years. 78 Id. at Article 14(1). 79 ICSID appoints Tribunal members either by agreement of the parties or under the default rule in ICSID Convention Article 38, which can be invoked by either party if the Tribunal has not been constituted within 90 days from registration of the case. Id. at Article 38; see also Arbitration Rule 4. 80 ICSID Convention Article 52(3); Arbitration Rule 52(1). 81 Members of the Panels of Conciliators and Arbitrators, July 2012, Doc. ICSID/10, available at http://icsid.worldbank.org. 15 Appointments to ICSID ad hoc Committees by Decade 120 106 100 80 60 40 35 20 12 6 0 0 1971-1980 1981-1990 1991-2000 2001-2010 2011- Number of Appointments 44. In addition to the general qualifications required for designation to the Panel of Arbitrators (see above, paragraph 41), a member of an ad hoc Committee must meet specific requirements prescribed by the ICSID Convention. First, the member of the ad hoc Committee cannot have been a member of the Tribunal which rendered the award or be of the same nationality as any of that Tribunal’s members. 82 Second, the member cannot have the same nationality as the disputing parties (State and National of Another State) and cannot have been designated to the Panel of Arbitrators either by the State party to the dispute or the State whose national is a party to the dispute. 83 Third, the member cannot have acted as a conciliator in the same dispute. 84 As a result, in each annulment proceeding there are usually 5 or more excluded nationalities. 85 45. A number of case-specific factors are considered, in addition to the formal requirements for appointment to an ad hoc Committee established by the ICSID Convention. For example, the languages used in the Tribunal proceeding and likely to be used before the ad hoc Committee are relevant, as is the experience of each candidate, including their past and current appointments. Before the name of the candidate is proposed to the parties, the Centre researches whether there are any conflicts of interest and, if none are found, the candidate is asked to confirm that he/she is free of any conflicts, has time to dedicate to the proceeding, and is willing to act as a member of the ad hoc Committee. 82 ICSID Convention Article 52(3). 83 Id. 84 Id. 85 These requirements cannot be modified by agreement of the parties in annulment proceedings. This contrasts with Tribunal proceedings, where an arbitrator of an excluded nationality may be appointed, in accordance with Arbitration Rule 1(3). 16 46. Unlike the process for appointment of Tribunal members, 86 the ICSID Convention imposes no obligation on the Chairman to consult the parties about ad hoc Committee appointments. Nonetheless, before ad hoc Committee members are appointed, ICSID informs the parties of the proposed appointees and circulates their curricula vitae. This gives the parties an opportunity to submit comments indicating that there might be a manifest lack of the qualities required for serving as a Committee member, 87 for example that there is a conflict of interest which the Centre or the candidate was unaware of. In exceptional circumstances, a proposed candidate is withdrawn and replaced by another person. 47. The Centre makes its best effort to complete the appointment process as soon as possible after registration of the annulment application. While the historic average to complete the process is 10 weeks, this delay has been significantly reduced during the past 3 years to 6.5 weeks. This includes the time spent corresponding with the parties. 48. Approximately 40 percent of all Committee member appointments have been nationals of States which are classified by the World Bank Group as developing countries. 88 This corresponds to slightly more than one developing country national per case. 89 The number of women appointed to ad hoc Committees has historically been low (only 6 women have been appointed to ad hoc Committees to date). This reflects the few women designated to the Panel of Arbitrators (approximately 10 percent of the members on the Panel of Arbitrators are women). 90 Appointments to ICSID ad hoc Committees - Origin of Appointees 40% (63) Appointments of nationals from developing countries 60% (96) Appointments of nationals from other countries 86 ICSID Convention Articles 37-40. 87 Id. at Articles 14(1) & 57. 88 See the World Bank Group’s country classifications, available at http://data.worldbank.org/about/country- classifications/country-and-lending-groups. The classifications are set each year on July 1. 89 For the nationality of the members of ad hoc Committees and its classification at the time of appointment, see Annex 1. 90 In September 2011 the Chairman designated 3 women and 6 developing country nationals out of 10 designees to the Chairman’s list. 17 C. The Proceeding 49. Once the ad hoc Committee members have accepted their appointments, 91 the Secretary-General of ICSID notifies the parties of the constitution of the Committee. The party requesting annulment of the award is usually referred to as the “Applicant,� and the other party is usually the “Respondent� or “Respondent on Annulment.� A claimant in the Tribunal proceeding may thus become the respondent in the annulment proceeding. A Secretary to the ad hoc Committee is appointed from among ICSID staff to assist the Committee and the parties. (i) Applicable Provisions 50. The Arbitration Rules apply, mutatis mutandis, to the proceeding before the ad hoc Committee. 92 This means that the Rules will apply with the changes necessary to take into account the fact that the proceeding is an annulment proceeding. 51. In addition, Article 52(4) of the ICSID Convention provides that Articles 41-45, 48, 49, 53 and 54 apply mutatis mutandis before the ad hoc Committee. By citing specific articles of the Convention, Article 52(4) implies that other provisions of the Convention do not apply to annulment. As a result, for example, it has been disputed whether Article 47 of the ICSID Convention concerning a Tribunal’s power to recommend provisional measures applies to annulment proceedings. 93 Similarly, it has been argued that Article 52(4) does not allow a member of an ad hoc Committee to be challenged for a manifest lack of the qualities required by Article 14(1) of the Convention, suggesting that an ad hoc Committee member could not be disqualified. 94 However, this interpretation has been rejected in two annulment proceedings in which the ad hoc Committees found that they had the power to rule on disqualification but dismissed the requests. 95 (ii) The First Session 52. The procedure before an ad hoc Committee normally corresponds to the procedure before a Tribunal. Ad hoc Committees must afford both parties the right to be heard 91 The members of the ad hoc Committee must sign a declaration in a form analogous to that specified in Arbitration Rule 6(2) for Tribunal members. 92 Arbitration Rule 53. 93 See Libananco Holdings Co. Limited v. Republic of Turkey, ICSID Case No. ARB/06/8, Decision on Applicant’s Request for Provisional Measures (May 7, 2012), available at http://www.icsid.worldbank.org. The ad hoc Committee expressed doubts about its power to recommend provisional measures but rejected the request on other grounds. 94 See ICSID Convention Articles 57 & 58. 95 Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic (Vivendi I), ICSID Case No. ARB/97/3, Decision on the Challenge to the President of the Committee (October 3, 2001), available at http://icsid.worldbank.org; Nations Energy, Inc. and others v. Republic of Panama, ICSID Case No. ARB/06/19, Decisión sobre la Propuesta de Recusación del Dr. Stanimir A. Alexandrov (September 7, 2011), available at http://italaw.com/sites/default/files/case-documents/ita0561.pdf. In Nations, the parties did not dispute the power of the ad hoc Committee to rule on the request for disqualification. 18 and must respect the equality of the parties. There is an assumption that the parties’ procedural agreements in the original proceeding will remain the same in the annulment proceeding, for example with respect to the choice of procedural language, the number and sequence of written pleadings, and the parties’ representatives. 96 Nonetheless, the ad hoc Committee usually convenes a first session with the parties to discuss procedural matters, and it is not uncommon to agree on different arrangements, for example concerning the applicable rules, procedural language and place of proceedings. In most cases, the parties agree on a timetable involving two rounds of pleadings on the application for annulment (Memorial, Counter-Memorial, Reply and Rejoinder) and an oral hearing. In recent years, the time allowed for written pleadings rarely exceeded 4 months per party for the first round and 2 months per party for the second round. 53. The parties typically file with their written pleadings the factual and legal evidence from the original proceeding that they wish to rely on in the annulment proceeding. The record before the ad hoc Committee is usually limited to the factual evidence before the original Tribunal. However, new factual evidence could potentially be admitted. 97 (iii) Advances to ICSID 54. Unlike the Tribunal proceedings, the Applicant is solely responsible for making all advance payments requested by ICSID in an annulment proceeding, unless the parties agree otherwise. These advances cover the hearing expenses such as transcription, translation and interpretation, the administrative fee of ICSID as well as fees and expenses of the ad hoc Committee (“Costs of Proceeding�). The payments are made without prejudice to the right of the ad hoc Committee to decide how and by whom the costs ultimately should be paid. 98 Consequently, an Applicant must be prepared to fund the entire proceeding subject to the Committee’s ultimate decision on costs. 55. The Costs of Proceeding for annulments concluded in the past 5 years have averaged US$364,000. 99 The fees and expenses of ad hoc Committee members represented 78.5 percent of these costs, while the hearing costs and ICSID administrative fee accounted for the other 21.5 percent of these costs. 96 See Note B to Arbitration Rule 53 of the annotated notes to the ICSID Regulations and Rules, 1968, Doc. ICSID/4/Rev. 1. 97 See e.g., Sempra, para. 74; see also Pierre Mayer, “To What Extent Can an Ad Hoc Committee Review the Factual Findings of an Arbitral Tribunal,� in Annulment of ICSID Awards 243 (Emmanuel Gaillard & Yas Banifatemi eds., 2004); Peter D. Trooboff, “To What Extent May an Ad Hoc Committee Review the Factual Findings of an Arbitral Tribunal Based on a Procedural Error,� in Annulment of ICSID Awards 251 (Emmanuel Gaillard & Yas Banifatemi eds., 2004). 98 Administrative and Financial Regulation 14(3)(e); ICSID Convention Article 52(4). 99 This includes one case in which such cost exceeded US$1.1 million. Excluding this case, the average cost of an annulment proceeding amounts to approximately US$330,000. 19 (iv) Stay of Enforcement 56. An Applicant may in its application for annulment, or either party may at any time during the proceeding, request a stay of enforcement of all or part of the Tribunal award. 100 The stay of enforcement could concern an award of damages, award of costs or some other form of relief ordered by the original Tribunal. If the request for stay is made in the application for annulment, the Secretary-General of ICSID must inform the parties of the provisional stay of enforcement when the application is registered. 101 57. The provisional stay remains in place until the ad hoc Committee, on a priority basis, rules on the request after having given each party an opportunity to present its observations. 102 58. If a stay is granted, the ad hoc Committee may modify or terminate the stay at the request of either party. 103 A Committee may terminate a stay if the party requesting the stay of enforcement has failed to fulfill a condition for the stay ordered by the Committee (e.g., the provision of adequate financial security in respect of the amount due under the award). If a stay is not terminated during the proceeding, it terminates automatically upon the issuance of the ad hoc Committee’s final decision on annulment. 104 59. There have been a total of 24 requests for the stay of enforcement in the 53 registered annulments, 22 of which have led to Committee decisions. 105 All 22 decisions granted the stay of enforcement. In 13 of these instances where a stay was granted, it was conditioned upon the issuance of some type of security or written undertaking. In 4 of those 13 cases, the stay was terminated because the condition had not been satisfied. 100 ICSID Convention Article 52(5); Arbitration Rule 54(1). 101 ICSID Convention Article 52(5); Arbitration Rule 54(2). 102 Arbitration Rule 54(1) & (4). An expedited ruling may be requested, requiring the ad hoc Committee to decide within 30 days whether to continue the stay. The stay is automatically terminated if either party has requested an expedited ruling and the Committee does not continue the stay within 30 days of the request. See Arbitration Rule 54(2) and its explanatory note in ICSID Regulations and Rules, 1968, Doc. ICSID/4/Rev. 1. 103 Arbitration Rule 54(3). 104 Id. If an ad hoc Committee annuls part of an award, it may at its discretion “order the temporary stay� of the unannulled part. This enables the Committee to consider any advantage that the partial annulment may confer given that the annulled portion might be reconsidered by a new tribunal under ICSID Convention Article 52(6). If a Tribunal is reconstituted following a partial annulment, a party may request the stay of enforcement of the unannulled portion of the award until the date of the new tribunal’s award. See Arbitration Rule 55(3). Although there have been several partial annulments with resubmissions, this situation has not yet occurred. 105 The Decision of the ad hoc Committee on the Stay of Enforcement of the Award in Ioannis Kardassopoulos v. Georgia, ICSID Case No. ARB/05/18 and Ron Fuchs v. Georgia, ICSID Case No. ARB/07/15 (November 12, 2012) has been counted as one Decision for these purposes. 20 Stay of Enforcement - Outcomes Annulment Proceedings Instituted 53 Stay of Enforcement Requests 24 Requests Granted* 22 Conditional Stay Granted 13 Unconditional Stay Granted 9 Stay Terminated during Proceedings 4 0 10 20 30 40 50 60 *Excludes provisional stays Decisions on the Stay of Enforcement of an Award Case Stay of Enforcement Condition for Stay Decision on Stay 1. Amco v. Indonesia I Granted Security May 17, 1985; Noted in 1 ICSID Rep. 509 (1993) 2. Amco v. Indonesia II Granted Security March 2, 1991; Available at 9 ICSID Rep. 59 (2006) 3. SPP v. Egypt Stay agreed by the Parties Security agreed by September 29, 1992; Noted in 8 ICSID REV. – FILJ the Parties 264 (1993) 4. MINE v. Guinea Granted No condition August 12, 1988; Available at 4 ICSID Rep. 111 (1997) 5. Vivendi v. Argentina II Granted Written Undertaking November 4, 2008; Available at http://italaw.com 6. Pey Casado v. Chile Granted No Condition August 5, 2008; Available at http://italaw.com 7. Wena Hotels v. Egypt Granted Security April 5, 2001; Available at 18 (10) MEALEY’S INT'L ARB. REP. 33 (2003) 8. Mitchell v. DRC Granted No condition November 30, 2004; Available at http://icsid.worldbank.org 9. Enron v. Argentina Granted No condition October 07, 2008; Available at http://icsid.worldbank.org 10. MTD Equity v. Chile Granted No condition June 1, 2005; Available at http://icsid.worldbank.org 11. CMS Gas v. Argentina Granted Written Undertaking September 1, 2006; Available at http://icsid.worldbank.org 12. Repsol v. Petroecuador Granted Security December 22, 2005; Available at http://icsid.worldbank.org 13. Azurix Corp. v. Granted No condition December 28, 2007; Available at Argentina http://icsid.worldbank.org 14. Siemens A.G. v. Provisional Stay granted by N/A Discontinued (Rule 43(1)) Argentina Secretary-General 15. CDC Group v. Granted Security July 14, 2004; Available at 11 ICSID Rep. 225 Seychelles (2007) 21 Case Stay of Enforcement Condition for Stay Decision on Stay 16. Sempra Energy v. Granted Security March 5, 2009; Available at Argentina http://icsid.worldbank.org 17. Continental Casualty Granted No condition October 23, 2009; Available at v. Argentina http://icsid.worldbank.org 18. Duke Energy v. Peru Granted Written Undertaking June 23, 2009; Noted in Decision on Annulment 19. Transgabonais v. Granted Written Undertaking March 13, 2009; Noted in Decision on Annulment Gabon 20. Rumeli v. Kazakhstan Granted Written Undertaking March 19, 2009; Noted in Decision on Annulment 21. Kardassopoulos Granted Security November 12, 2010; Available at http://italaw.com /Fuchs v. Georgia 22. Togo Electricité v. Granted No Condition January 31, 2011; Noted in Decision on Annulment Togo 23. Libananco v. Turkey Granted No Condition May 7, 2012; Available at http://icsid.worldbank.org 24. Lemire v. Ukraine Granted Security February 14, 2012; Noted in http://globalarbitrationreview.com (v) Hearing and Post-Hearing Phase 60. The filing of written pleadings is followed by an oral hearing which most often lasts one to two days. The hearing is usually limited to the parties’ oral arguments and, in some cases, to examination of legal experts whose opinions were submitted by the parties in the annulment proceeding. Because an ad hoc Committee does not reexamine the facts of the dispute, factual witnesses do not usually have any role in the process. 106 61. At the hearing or shortly thereafter, the ad hoc Committee invites the parties to file submissions on costs and sometimes also to file post-hearing briefs. The ad hoc Committee closes the proceeding once the presentation of the annulment case is concluded and the Committee has made progress in the deliberations. It must issue the decision on annulment within 120 days from the date of closure. 107 62. Of the 19 decisions on annulment issued in the past 5 years, 16 have been rendered within one year of the hearing. The average time from the hearing to issuance of these 16 decisions was 6 months. Over the same period, the average time for an annulment proceeding from the registration of the application for annulment until the issuance of the decision was 26 months. 108 The overall average duration of all concluded annulment proceedings has decreased during the past year to 17 months from the date of registration (15 months from the date of constitution of the ad hoc Committee). 106 But see supra, para. 53 & note 97. 107 See Arbitration Rules 38(1) & 46. 108 This average excludes discontinued proceedings. 22 Average Duration of Annulment Proceedings (Fiscal Years 2010 – 2012) 30 24 25 25 23 20 20 17 15 Months 15 10 5 0 FY2010 FY2011 FY2012 Average Duration - Registration to Conclusion Average Duration - Constitution of ad hoc Committee to Conclusion D. The Decision on Annulment 63. The proceeding ends with the ad hoc Committee’s decision on annulment. The Committee may (i) reject all grounds for annulment, meaning that the award remains intact; (ii) uphold one or more grounds for annulment in respect of a part of the award, leading to a partial annulment; (iii) uphold one or more grounds for annulment in respect of the entire award, meaning that the whole of the award is annulled; or (iv) exercise their discretion not to annul notwithstanding that an error has been identified. 109 The proceeding may also be discontinued before the Committee issues a final decision, because the parties agree on a settlement, a party does not object to the other party’s request for discontinuance, due to nonpayment of the advances requested by ICSID to cover the Costs of Proceeding, or because the parties fail to take any steps in the proceeding during six consecutive months. 110 In recent years, several annulment proceedings have been discontinued due to an Applicant’s failure to pay the advances and the other party’s unwillingness to make the outstanding payment. 111 109 ICSID Convention Article 52(3), see infra, para. 75(4). 110 Arbitration Rules 43-45; Administrative and Financial Regulation 14(3)(d) & (e). 111 See Annex 1. As noted above, the Applicant is solely responsible for the advance payments to ICSID in annulment proceedings. Under Administrative and Financial Regulation 14(3)(d) and (e), if an Applicant fails to make an advance, the Secretary-General informs both parties of the default and gives an opportunity to either of them to make the outstanding payment within 15 days. If neither party makes the payment, the proceeding may, after consultation with the Committee, be suspended and eventually discontinued after six months. 23 Annulment Proceedings - Outcomes Annulment Proceedings Instituted 53 Annulment Proceedings Concluded 42 Annulment Proceedings Discontinued (Rules 43-45) 8 Annulment Proceedings Discontinued (Non-Payment) 4 Decisions Refusing Annulment 18 Decisions Annulling Award in Part 6 Decisions Annulling Award in Full 6 0 10 20 30 40 50 60 64. The ad hoc Committee’s decision on annulment is not an award and is not subject to any further annulment proceeding, although it is equated to an award for purposes of its binding force, recognition and enforcement. 112 Likewise, the decision must contain the elements required in an award. 113 Notably, the decision must include the reasons upon which it is based. 114 As to the requirement to deal with every question, one ad hoc Committee has opined that, once an award is annulled in full on any ground, it is unnecessary to examine whether other grounds may also lead to annulment. 115 Similarly, some ad hoc Committees which partially annulled an award based on one ground did not see the need to examine alternative grounds for annulment of the same portion of the award that had been annulled. 116 Other ad hoc Committees examined all grounds raised, even where one of these grounds warranted full annulment. 117 65. Nothing in the ICSID Convention or rules expressly prohibits an ad hoc Committee from stating its opinion on any issue addressed by the Tribunal award. However, some decisions have stated that an ad hoc Committee should not pronounce upon aspects of the Tribunal award that are not essential to its decision. 118 112 ICSID Convention Article 53(2). 113 Id. at Articles 48 & 52(4); Arbitration Rules 47 & 53. 114 ICSID Convention Articles 48(3) & 52(4); Arbitration Rules 47(1)(i) & 53. 115 See e.g., Sempra, para 78. 116 See e.g., MINE, para. 6.109; Vivendi I, paras. 115 & 116. 117 See e.g., Amco I, para. 16; Klöckner I, para. 82. 118 See, e.g., Enron, para. 340; Azurix, para. 362; CDC, para. 70; Lucchetti, para. 112; AES, para. 15. 24 66. The decision on annulment must also contain the ad hoc Committee’s determination on the allocation of costs incurred by the parties in connection with the proceeding. 119 The Committee has discretion to decide how and by whom these costs should be paid, including each party’s legal fees and expenses. 120 Most ad hoc Committees have divided the Costs of Proceeding 121 equally between the parties and ruled that each party must bear its own legal fees and expenses. However, in recent years some Committees have decided that the losing party should bear the Costs of Proceeding as well as the legal fees and expenses of the successful party, in most instances the defending party. 122 Decisions on Allocation of Costs Who bears the Costs of Who bears the Legal Fees and Case Outcome Proceeding Expenses 1. Amco v. Indonesia I Annulled in full Divided equally Each Party bears its own costs Annulment 2. Amco v. Indonesia II Divided equally Each Party bears its own costs rejected 3. Klöckner v. Cameroon I Annulled in full Divided equally Each Party bears its own costs Annulment 4. Klöckner v. Cameroon II Divided equally Each Party bears its own costs rejected 5. SPP v. Egypt Discontinued Information not publicly available Information not publicly available 6. MINE v. Guinea Annulled in part Divided equally Each Party bears its own costs 7. Vivendi v. Argentina I Annulled in part Divided equally Each Party bears its own costs Annulment 8. Vivendi v. Argentina II Divided equally Each Party bears its own costs rejected Annulment 9. Wena Hotels v. Egypt Divided equally Each Party bears its own costs rejected 10. Gruslin v. Malaysia Discontinued No order on costs No order on costs 11. Mitchell v. DRC Annulled in full Divided equally Each Party bears its own costs Annulment 12. RFCC v. Morocco Applicant Each Party bears its own costs rejected 13. Enron v. Argentina Annulled in part Divided equally Each Party bears its own costs Annulment 14. MTD Equity v. Chile Divided equally Each Party bears its own costs rejected 15. CMS Gas v. Argentina Annulled in part Divided equally Each Party bears its own costs Annulment 16. Repsol v. Petroecuador Applicant Applicant rejected 119 ICSID Convention Articles 52(4) & 61(2); Arbitration Rules 47(1)(j) & 53; Administrative and Financial Regulation 14(3)(e). 120 Id. 121 See supra, para. 54. 122 As noted above, a decision on the allocation of costs in a decision on annulment is enforceable in the same manner as an ICSID award. ICSID Convention Article 53(2). 25 Who bears the Costs of Who bears the Legal Fees and Case Outcome Proceeding Expenses Annulment 17. Azurix Corp. v. Argentina Applicant Each Party bears its own costs rejected Annulment 18. Soufraki v. UAE Divided equally Each Party bears its own costs rejected 19. Siemens A.G. v. Argentina Discontinued Divided equally Each Party bears its own costs Annulment 20. CDC Group v. Seychelles Applicant Applicant rejected 21. Ahmonseto v. Egypt Discontinued Applicant Each Party bears its own costs 22. Sempra Energy v. Argentina Annulled in full Respondent on Annulment Each Party bears its own costs Annulment 23. Lucchetti v. Peru Divided equally Each Party bears its own costs rejected Annulment 24. MCI Power v. Ecuador Divided equally Each Party bears its own costs rejected 25. Continental Casualty v. Annulment Divided equally Each Party bears its own costs Argentina rejected 26. Joy Mining v. Egypt Discontinued Settlement - no order on costs Settlement – no order on costs 27. Fraport v. Philippines Annulled in full Divided equally Each Party bears its own costs Annulment 28. Duke Energy v. Peru Applicant Each Party bears its own costs rejected Annulment 29. Transgabonais v. Gabon Applicant Applicant rejected Annulment 30. Vieira v. Chile Applicant Applicant rejected 31. MHS v. Malaysia Annulled in full Respondent on Annulment Each Party bears its own costs 32. RSM v. Grenada Discontinued Applicant Applicant 33. Siag v. Egypt Discontinued Applicant Each Party bears its own costs Annulment 34. Rumeli v. Kazakhstan Divided equally Each Party bears its own costs rejected 35. Kardassopoulos / Fuchs v. Discontinued Settlement - no order on costs Settlement – no order on costs Georgia 36. Helnan v. Egypt Annulled in part Divided equally Each Party bears its own costs Annulment 37. Togo Electricité v. Togo Applicant Applicant rejected 38. Nations v. Panama Discontinued Information not publicly available Information not publicly available Annulment 39. AES Summit v. Hungary Applicant Applicant rejected 40. Astaldi v. Honduras Discontinued Settlement - no order on costs Settlement - no order on costs 41. ATA Construction v. Jordan Discontinued Respondent on Annulment Respondent on Annulment 26 Allocation of Costs of Proceeding/ Legal Fees and Expenses Costs Decisions Issued* 35 Costs of Proceeding divided equally; each 21 Party bears own Legal Fees & Expenses Applicant bears all or some of other Party's 12 Costs of Proceeding Applicant bears all or some of other Party's 7 Legal Fees & Expenses Respondent on Annulment bears all or some 3 of the other Party's Costs of Proceeding Respondent on Annulment bears all or some 1 of other Party's Legal Fees & Expenses 0 10 20 30 40 *Including 5 Orders of Discontinuance which contained orders on costs 67. Similar to a Tribunal award, the ad hoc Committee’s decision on annulment may be accompanied by the individual opinion of a member of the Committee. 123 In practice, only 4 Committee members have partially or fully dissented from the majority’s decision. 124 68. Where an award has been partially or wholly annulled, the prevailing Applicant was roughly evenly divided between claimants and respondents in the Tribunal proceeding. Full and Partial Annulment - By Party Full and Partial Annulments 12 Annulment in Favor of Applicant-State 7 Annulment in Favor of Applicant-National of Another 5 State 0 2 4 6 8 10 12 14 69. The rate of annulment is low, with 4 percent of registered cases (8 percent of all awards) ending in full or partial annulment. The ratio of annulments to awards fluctuates 123 ICSID Convention Articles 48(4) & 52(4); Arbitration Rules 47(3) & 53. 124 See Vivendi II; Soufraki; Lucchetti; MHS. 27 historically, but has been lower for 2001 – present (7 percent) than in the period 1971 – 2000 (13 percent). Annulment Proceedings under the ICSID Convention - Outcomes by Decade 120 100 96 80 60 40 23 18 20 13 9 8 6 4 3 5 4 0 0 0 1 0 0 1 1 0 0 1971-1980 1981-1990 1991-2000 2001-2010 2011 - Number of Convention awards rendered Number of decisions rejecting the application for annulment Number of decisions annulling the award in part or in full Number of annulment proceedings discontinued E. Resubmission Proceedings 70. The effect of annulment is that the award or a part thereof becomes a nullity, meaning that the binding force of the annulled portion of the award is terminated. However, the decision on annulment does not replace the award or substitute any of the reasoning in the award. A party is entitled to request resubmission of the dispute by a newly constituted Tribunal to obtain a new award concerning the same dispute following annulment of the original award. 125 Either party may start this process by filing a request for resubmission of the dispute, identifying the original award, and explaining in detail which aspects of the dispute are to be submitted to the new Tribunal. 126 The new Tribunal is constituted by the same method as the original Tribunal 127 and is not bound by the reasoning of the ad hoc Committee. It is, however, bound by the unannulled portions of the original award in cases of partial annulment. 128 125 ICSID Convention Article 52(6); Arbitration Rule 55(1). The new Tribunal could reach the same conclusion as the original Tribunal whose award was annulled. 126 Arbitration Rule 55(1). The Secretary-General is not given any authority to refuse registration of a resubmitted dispute. Arbitration Rule 55(2). 127 Arbitration Rule 55(2)(d). 128 Arbitration Rule 55(3). A partial annulment means that only those portions of the award that have been annulled may be resubmitted, whereas the remainder will be res judicata. 28 71. There have been 6 resubmission proceedings registered to date, 129 3 of which led to awards that were subject to a second annulment proceeding. 130 The applications for annulment in those second annulment proceedings were rejected by the ad hoc Committees with the exception of the Amco II case, where the ad hoc Committee annulled the Tribunal’s Decision on Supplemental Decisions and Rectification. 131 V. Interpretation of the Annulment Mechanism, the Role of the ad hoc Committee, and the Individual Grounds for Annulment A. The General Standards Identified in the Drafting History and ICSID Cases 72. As illustrated by Section III, the drafting history of the ICSID Convention demonstrates that assuring the finality of ICSID arbitration awards was a fundamental goal for the ICSID system. As a result, annulment was designed purposefully to confer a limited scope of review which would safeguard against “violation of the fundamental principles of law governing the Tribunal’s proceedings.� 132 The remedy has thus been characterized as one concerning “procedural errors in the decisional process� rather than an inquiry into the substance of the award. 133 73. The drafting history of the ICSID Convention also demonstrates that annulment “is not a procedure by way of appeal requiring consideration of the merits of the case, but one that merely calls for an affirmative or negative ruling based upon one [of the grounds for annulment].� 134 It does not provide a mechanism to appeal alleged misapplication of law or mistake in fact. The Legal Committee confirmed by a vote that even a “manifestly incorrect application of the law� is not a ground for annulment. 135 74. The limited and exceptional nature of the annulment remedy expressed in the drafting history of the Convention has been repeatedly confirmed by ICSID Secretary-Generals in Reports to the Administrative Council of ICSID, papers and lectures. 136 129 Amco II; Klöckner II; MINE; Vivendi II; Enron (pending); Sempra (pending). 130 See Amco II; Klöckner II; Vivendi II. 131 Amco II. The annulment is regarded as a partial annulment of an award for purposes of the tables contained in this paper. 132 See comment to Section 13 of the Preliminary Draft, History, supra note 14, at Vol. II, 218 & 219. 133 Broches, supra note 15, at 298. 134 See comment to Section 13 of the Preliminary Draft, History, supra note 14, at Vol. II, 218 & 219. 135 See supra para. 26. 136 See e.g., Report of Secretary-General Ibrahim F.I. Shihata to the Administrative Council at its Twentieth Annual Meeting 3 (October 2, 1986): “The history of the Convention makes it clear that the draftsmen intended to: (i) assure the finality of ICSID awards; (ii) distinguish carefully an annulment proceeding from an appeal; and (iii) construe narrowly the ground for annulment, so that this procedure remained exceptional;� Report of Secretary-General Ibrahim F.I. Shihata to the Administrative Council at its Twenty-Second Annual Meeting (September 27-29, 1988): “It may be expected that use of the annulment procedure would be a rare event because of the seriousness of the 29 75. ICSID ad hoc Committees have also affirmed these principles in their 137 decisions. These decisions have clearly established that: (1) the grounds listed in Article 52(1) are the only grounds on which an award may be annulled; (2) annulment is an exceptional and narrowly circumscribed remedy and the role of an ad hoc Committee is limited; (3) ad hoc Committees are not courts of appeal, annulment is not a remedy against an incorrect decision, and an ad hoc Committee cannot substitute the Tribunal’s determination on the merits for its own; (4) ad hoc Committees should exercise their discretion not to defeat the object and purpose of the remedy or erode the binding force and finality of awards; (5) Article 52 should be interpreted in accordance with its object and purpose, neither narrowly nor broadly: and (6) an ad hoc Committee’s authority to annul is circumscribed by the Article 52 grounds specified in the application for annulment, but an ad hoc Committee has discretion with respect to the extent of an annulment, i.e., either partial or full. The following section enumerates each of these commonly cited principles related to ICSID annulment, accompanied by excerpts of annulment decisions confirming the relevant principle. (1) The grounds listed in Article 52(1) are the only grounds on which an award may be annulled • “The remedy of annulment requested by either or by both Parties under Article 52 of the CONVENTION is essentially limited by the grounds expressly enumerated in paragraph 1, on which an application for annulment may be made. This limitation is further confirmed by Article 53 (1) by the exclusion of review of the merits of the Awards.� Amco Asia Corporation and others v. Republic of Indonesia (Amco II), ICSID Case No. ARB/81/1, Decision on the Applications by Indonesia and Amco Respectively for Annulment and Partial Annulment, para. 1.17 (December 17, 1992). • “It seems quite clear that, in accordance with Article 52(1), the grounds on which an application is founded can only be the five grounds provided for in the Convention.� Klöckner Industrie-Anlagen GmbH and others v. United Republic of Cameroon and Société Camerounaise des Engrais (Klöckner II), ICSID Case No. ARB/81/2, Decision on Annulment, para. 4.24 (May 17, 1990) [unofficial translation from French]. • “Claimants and Respondent agree that an ad hoc Committee is not a court of appeal and that its competence extends only to annulment based on one or other of the grounds expressly set out in Article 52 of the ICSID Convention.� Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic (Vivendi I), ICSID Case No. ARB/97/3, Decision on Annulment, para. 62 (July 3, 2002). • “The power for review is limited to the grounds of annulment as defined in [Article 52 of the ICSID Convention].� Wena Hotels Limited v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision shortcomings against which it is meant to be a safeguard. It is also wrong to confuse the annulment proceeding with an appeals process which is not possible in respect of awards issued by ICSID’s tribunals;� Broches, supra note 15, at 354 & 355; Annex 4, para. 28. 137 All decisions on annulment have been published, either by ICSID with the consent of the parties, by the parties themselves, or in summaries of the legal reasoning of the ad hoc Committee excerpted by ICSID. See Annex 1, which includes references to each decision on annulment and its publication source. Pursuant to ICSID Arbitration Rule 48(4), the Centre has published the legal reasoning of the decisions on annulment in RFCC, Repsol and Transgabonais. 30 on the Application by the Arab Republic of Egypt for Annulment of the Arbitral Award dated December 8, 2000, para. 18 (February 5, 2002). • “Annulment may be based only on a very limited number of fundamental grounds exhaustively listed in Article 52(1).� Consortium R.F.C.C. v. Kingdom of Morocco, ICSID Case No. ARB/00/6, Decision of the ad hoc Committee on the Application for Annulment of Consortium R.F.C.C., para. 222 (January 18, 2006) [free translation from French]. • “Both parties recognize that an ad hoc committee is not a court of appeal and that its competence extends only to annulment based on one or other of the grounds expressly set out in Article 52 of the ICSID Convention.� CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/01/8, Decision of the ad hoc Committee on the Application for Annulment of the Argentine Republic, para. 43 (September 25, 2007). • “The limitation of recourse to the annulment mechanism to the few grounds listed in Article 52(1) serves to reinforce the finality and stability of ICSID awards...� Hussein Nuaman Soufraki v. United Arab Emirates, ICSID Case No. ARB/02/7, Decision of the ad hoc Committee on the Application for Annulment of Mr. Soufraki, para. 127 (June 5, 2007). • “Annulment review is limited to a specific set of carefully defined grounds (listed exhaustively in Article 52(1) of the ICSID Convention).� Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Decision on the Argentine Republic’s Request for Annulment of the Award, para. 74 (June 29, 2010) (footnote omitted). • “The role of the Committee is confined to the grounds of annulment in Article 52 of the ICSID Convention, and as noted above, even if the Tribunal erred in law, this would not be a ground for annulment.� Enron Creditors Recovery Corporation (formerly Enron Corporation) and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Decision on the Application for Annulment of the Argentine Republic, para. 237 (July 30, 2010). • “The review conducted by an ad hoc Committee is limited to the grounds that were carefully contemplated and are exhaustively listed in Article 52(1) of the Convention.� Sociedad Anónima Eduardo Vieira v. Republic of Chile, ICSID Case No. ARB/04/7, Decision of the ad hoc Committee on the Application for Annulment of Sociedad Anónima Eduardo Vieira, para. 236 (December 10, 2010) (footnote omitted) [free translation from Spanish]. • “The grounds for annulment are exhaustively listed in Article 52(1). Neither the ordinary meaning of the terms used by such article nor its context allows any possibility for additional grounds.� Togo Electricité and GDF-Suez Energie Services v. Republic of Togo, ICSID Case No. ARB/06/7, Decision on Annulment, para. 51 (September 6, 2011) (footnote omitted) [free translation from French]. (2) Annulment is an exceptional and narrowly circumscribed remedy and the role of an ad hoc Committee is limited • “Article 52(1) makes it clear that annulment is a limited remedy.� Maritime International Nominees Establishment v. Republic of Guinea, ICSID Case No. ARB/84/4, Decision on the Application by Guinea for Partial Annulment of the Arbitral Award dated January 6, 1988, para. 4.04 (December 22, 1989). 31 • “Because of its focus on procedural legitimacy, annulment is ‘an extraordinary remedy for unusual and important cases.’� CDC Group plc v. Republic of the Seychelles, ICSID Case No. ARB/02/14, Decision of the ad hoc Committee on the Application for Annulment of the Republic of Seychelles, para. 34 (June 29, 2005) (footnote omitted). • “The sole purpose of Article 52 is to provide for an exceptional remedy in cases where there has been a manifest and substantial breach of a number of essential principles set out in this Article.� Consortium R.F.C.C. v. Kingdom of Morocco, ICSID Case No. ARB/00/6, Decision of the ad hoc Committee on the Application for Annulment of Consortium R.F.C.C., para. 223 (January 18, 2006) [free translation from French]. • “The purpose of the grounds for annulment under Article 52 of the Convention is to allow a limited exception to the finality of ICSID awards, which is highlighted by Article 53.� Repsol YPF Ecuador S.A. v. Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No. ARB/01/10, Decision on the Application for Annulment, para. 81 (January 8, 2007) (footnote omitted) [unofficial translation from Spanish]. • “[T]he role of an ad hoc committee in the ICSID system is a limited one.� MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Decision on Annulment, para. 54 (March 21, 2007) (footnote omitted). • “At the outset, the Committee must recall that, in the ICSID system, annulment has a limited function.� CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/01/8, Decision of the ad hoc Committee on the Application for Annulment of the Argentine Republic, para. 44 (September 25, 2007). • “It is not contested by the parties that the annulment review, although obviously important, is a limited exercise, and does not provide for an appeal of the initial award.� Hussein Nuaman Soufraki v. United Arab Emirates, ICSID Case No. ARB/02/7, Decision of the ad hoc Committee on the Application for Annulment of Mr. Soufraki, para. 20 (June 5, 2007). • “[T]he Committee is conscious that it exercises its jurisdiction under a narrow and limited mandate conferred by Article 52 of the ICSID Convention. The scope of this mandate allows annulment as an option only when certain specific conditions exist.� CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/01/8, Decision of the ad hoc Committee on the Application for Annulment of the Argentine Republic, para. 158 (September 25, 2007). • “One general purpose of Article 52, including its sub-paragraph (1)(b), must be that an annulment should not occur easily.� Industria Nacional de Alimentos, S.A. and Indalsa Perú, S.A. (formerly Empresas Lucchetti, S.A. and Lucchetti Perú, S.A.) v. Republic of Peru, ICSID Case No. ARB/03/4, Decision on Annulment, para. 101 (September 5, 2007). • “[T]he role of an ad hoc committee is a limited one, restricted to assessing the legitimacy of the award and not its correctness.� M.C.I. Power Group, L.C. and New Turbine, Inc. v. Republic of Ecuador, ICSID Case No. ARB/03/6, Decision on Annulment, para. 24 (October 19, 2009). • “It is true that the annulment procedure is exceptional in its nature…the grounds for the annulment remedy and the mandate of the ad hoc committee are limited.� Compagnie d’Exploitation du Chemin de Fer Transgabonais v. Gabonese Republic, ICSID Case No. ARB/04/5, Decision of the ad hoc Committee on the Application for Annulment of the Gabonese Republic, para. 228 (May 11, 2010) [free translation from French]. 32 • “T]he Committee considers that annulment proceedings are confined to determining whether the integrity of the arbitration proceedings has been respected.� Sociedad Anónima Eduardo Vieira v. Republic of Chile, ICSID Case No. ARB/04/7, Decision of the ad hoc Committee on the Application for Annulment of Sociedad Anónima Eduardo Vieira, para. 236 (December 10, 2010)[free translation from Spanish]. • “It is not contested by the parties that the annulment review, although obviously important, is a limited exercise, and does not provide for an appeal of the initial award. In other words, it is not contested that ‘. . . an ad hoc committee does not have the jurisdiction to review the merits of the original award in any way. The annulment system is designed to safeguard the integrity, not the outcome, of ICSID arbitration proceedings.’� Hussein Nuaman Soufraki v. United Arab Emirates, ICSID Case No. ARB/02/7, Decision of the ad hoc Committee on the Application for Annulment of Mr. Soufraki, para. 20 (June 5, 2007) (footnote omitted). (3) Ad hoc Committees are not courts of appeal, annulment is not a remedy against an incorrect decision, and an ad hoc Committee cannot substitute the Tribunal’s determination on the merits for its own • “The law applied by the Tribunal will be examined by the ad hoc Committee, not for the purpose of scrutinizing whether the Tribunal committed errors in the interpretation of the requirements of applicable law or in the ascertainment or evaluation of the relevant facts to which such law has been applied. Such scrutiny is properly the task of a court of appeals, which the ad hoc Committee is not.� Amco Asia Corporation and others v. Republic of Indonesia (Amco I), ICSID Case No. ARB/81/1, Decision on Annulment, para. 23 (May 16, 1986). • “Annulment is not a remedy against an incorrect decision. An ad hoc Committee may not in fact review or reverse an ICSID award on the merits under the guise of annulment under Article 52.� Amco Asia Corporation and others v. Republic of Indonesia (Amco II), ICSID Case No. ARB/81/1, Decision on the Applications by Indonesia and Amco Respectively for Annulment and Partial Annulment, para. 1.17 (December 17, 1992). • “It is incumbent upon Ad Hoc Committees to resist the temptation to rectify incorrect decisions or to annul unjust awards.� Amco Asia Corporation and others v. Republic of Indonesia (Amco II), ICSID Case No. ARB/81/1, Decision on the Applications by Indonesia and Amco Respectively for Annulment and Partial Annulment, para. 1.18 (December 17, 1992). • “[I]t should be recalled that as a rule an application for annulment cannot serve as a substitute for an appeal against an award and permit criticism of the merits of the judgments rightly or wrongly formulated by the award. Nor can it be used by one party to complete or develop an argument which it could and should have made during the arbitral proceeding or help that party retrospectively to fill gaps in its arguments. � Klöckner Industrie-Anlagen GmbH and others v. United Republic of Cameroon and Société Camerounaise des Engrais (Klöckner I), ICSID Case No. ARB/81/2, Decision of the ad hoc Committee, para. 83 (May 3, 1985) [unofficial translation from French]. • “Another basic consideration which must be mentioned concerns the limited scope of the annulment procedure, which cannot in any way serve as an appellate procedure.� Klöckner Industrie-Anlagen GmbH and others v. United Republic of Cameroon and Société Camerounaise des Engrais (Klöckner II), ICSID Case No. ARB/81/2, Decision on Annulment, para. 5.07 (May 17, 1990) [unofficial translation from French]. 33 • “Annulment is not a remedy against an incorrect decision. Accordingly, an ad hoc Committee may not in fact reverse an award on the merits under the guise of applying Article 52.� Maritime International Nominees Establishment v. Republic of Guinea, ICSID Case No. ARB/84/4, Decision on the Application by Guinea for Partial Annulment of the Arbitral Award dated January 6, 1988, para. 4.04 (December 22, 1989). • “It is agreed by all that Article 52 does not introduce an appeal facility but only a facility meant to uphold and strengthen the integrity of the ICSID process. In the Treaty, the possibility of annulment is in this connection based on specific and limited grounds.� Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic (Vivendi II), ICSID Case No. ARB/97/3, Decision on the Argentine Republic’s Request for Annulment of the Award Rendered on 20 August 2007, para. 247(i) (August 10, 2010). • “As has been stated in earlier published decisions made on requests for annulment of ICSID awards, the remedy of Article 52 is in no sense an appeal.� Wena Hotels Limited v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision on the Application by the Arab Republic of Egypt for Annulment of the Arbitral Award dated December 8, 2000, para. 18 (February 5, 2002) (footnote omitted). • “No one has the slightest doubt – all the ad hoc Committees have so stated, and all authors specializing in the ICSID arbitration system agree – that an annulment proceeding is different from an appeal procedure and that it does not entail the carrying out of a substantive review of an award.� Patrick Mitchell v. Democratic Republic of the Congo, ICSID Case No. ARB/99/7, Decision on the Application for Annulment of the Award, para. 19 (November 1, 2006). • “Even the most evident error of fact in an award is not in itself a ground for annulment.� Consortium R.F.C.C. v. Kingdom of Morocco, ICSID Case No. ARB/00/6, Decision of the ad hoc Committee on the Application for Annulment of Consortium R.F.C.C., para. 222 (January 18, 2006) [free translation from French]. • “In annulment proceedings under Article 52 of the ICSID Convention, an ad hoc Committee is thus not a court of appeal, and cannot consider the substance of the dispute, but can only determine whether the award should be annulled on one of the grounds in Article 52(1).� Enron Creditors Recovery Corporation (formerly Enron Corporation) and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Decision on the Application for Annulment of the Argentine Republic, para. 63 (July 30, 2010). • “Under Article 52 of the ICSID Convention, an annulment proceeding is not an appeal, still less a retrial; it is a form of review on specified and limited grounds which take as their premise the record before the Tribunal.� MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Decision on Annulment, para. 31 (March 21, 2007). • “[T]he role of an ad hoc committee in the ICSID system is a limited one. It cannot substitute its determination on the merits for that of the tribunal. Nor can it direct a tribunal on a resubmission how it should resolve substantive issues in dispute. All it can do is annul the decision of the tribunal: it can extinguish a res judicata but on a question of merits it cannot create a new one.� MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Decision on Annulment, para. 54 (March 21, 2007) (footnote omitted). • “The Committee recalls, once more, that it has only a limited jurisdiction under Article 52 of the ICSID Convention. In the circumstances, the Committee cannot simply substitute its own view of the 34 law and its own appreciation of the facts for those of the Tribunal.� CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/01/8, Decision of the ad hoc Committee on the Application for Annulment of the Argentine Republic, para. 136 (September 25, 2007). • “The Parties are aware that the annulment proceedings are designed to grant reparation for damages only in cases of serious violations of certain fundamental principles [footnote omitted]. Such procedures should not be confused with the proceedings of an Appeals Tribunal and, therefore, should be adopted only in special situations.� Repsol YPF Ecuador S.A. v. Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No. ARB/01/10, Decision on the Application for Annulment, para. 86 (January 8, 2007) [unofficial translation from Spanish]. • “In annulment proceedings under Article 52 of the ICSID Convention, an ad hoc committee is thus not a court of appeal, and cannot consider the substance of the dispute, but can only determine whether the award should be annulled on one of the grounds in Article 52(1).� Azurix Corp. v. Argentine Republic, ICSID Case No. ARB/01/12, Decision on the Application for Annulment of the Argentine Republic, para. 41 (September 1, 2009) (footnotes omitted). • “An ad hoc committee is responsible for controlling the overall integrity of the arbitral process and may not, therefore, simply determine which party has the better argument. This means that an annulment, as already stated, is to be distinguished from an ordinary appeal, and that, even when a ground for annulment is justifiably found, an annulment need not be the necessary outcome in all circumstances.� Hussein Nuaman Soufraki v. United Arab Emirates, ICSID Case No. ARB/02/7, Decision of the ad hoc Committee on the Application for Annulment of Mr. Soufraki, para. 24 (June 5, 2007). • “Article 52(1) looks not to the merits of the underlying dispute as such, but rather is concerned with the fundamental integrity of the tribunal, whether basic procedural guarantees were largely observed, whether the Tribunal exceeded the bounds of the parties’ consent, and whether the Tribunal's reasoning is both coherent and displayed. To borrow Caron’s terminology, annulment is concerned with the ‘legitimacy’ of the process of decision� rather than with the ‘substantive correctness of decision.’ Because of its focus on procedural legitimacy, annulment is ‘an extraordinary remedy for unusual and important cases.’ That annulment is not the same thing as appeal is a principle acknowledged, although applied unevenly, in the various decisions of ad hoc Committees.� CDC Group plc v. Republic of the Seychelles, ICSID Case No. ARB/02/14, Decision of the ad hoc Committee on the Application for Annulment of the Republic of Seychelles, para. 34 (June 29, 2005) (footnotes omitted). • “Annulment is distinct from an appeal. An ad hoc committee cannot substitute its own judgment on the merits for the decision of the Tribunal.� Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Decision on the Argentine Republic’s Request for Annulment of the Award, para. 73 (June 29, 2010). • “[A] request for annulment is not an appeal, which means that there should not be a full review of the tribunal’s award.� Industria Nacional de Alimentos, S.A. and Indalsa Perú, S.A. (formerly Empresas Lucchetti, S.A. and Lucchetti Perú, S.A.) v. Republic of Peru, ICSID Case No. ARB/03/4, Decision on Annulment, para. 101 (September 5, 2007). • “[I]t is no part of the Committee's functions to review the decision itself which the Tribunal arrived at, still less to substitute its own views for those of the Tribunal, but merely to pass judgment on whether the manner in which the Tribunal carried out its functions met the requirements of the ICSID Convention.� Industria Nacional de Alimentos, S.A. and Indalsa Perú, S.A. (formerly Empresas 35 Lucchetti, S.A. and Lucchetti Perú, S.A.) v. Republic of Peru, ICSID Case No. ARB/03/4, Decision on Annulment, para. 97 (September 5, 2007). • “It is an overarching principle that ad hoc committees are not entitled to examine the substance of the award but are only allowed to look at the award insofar as the list of grounds contained in Article 52 of the Washington Convention requires... Consequently, the role of an ad hoc committee is a limited one, restricted to assessing the legitimacy of the award and not its correctness. The committee cannot for example substitute its determination on the merits for that of the tribunal...� M.C.I. Power Group, L.C. and New Turbine, Inc. v. Republic of Ecuador, ICSID Case No. ARB/03/6, Decision on Annulment, para. 24 (October 19, 2009) (footnote omitted). • “Although this Committee expressed earlier some reservations about the way the Tribunal proceeded in its interpretation exercise, it is not itself empowered to act as an appeal body and substitute its own interpretation of the BIT for the one adopted by the Arbitral Tribunal.� Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines, ICSID Case No. ARB/03/25, Decision on the Application for Annulment of Fraport AG Frankfurt Airport Services Worldwide, para. 112 (December 23, 2010). • “An ad hoc committee, which is not an appellate body, is not called upon to substitute its own analysis of law and fact to that of the arbitral tribunal.� Duke Energy International Peru Investments No. 1 Ltd. v. Republic of Peru, ICSID Case No. ARB/03/28, Decision of the ad hoc Committee, para. 144 (March 1, 2011). • “It is very common for an ad hoc Committee considering an application for annulment to deem it necessary to delineate between appeal (which relates to the merits of the arbitral award) and annulment (a form of specific control over the arbitral process subject to the requirements of Article 52 of the ICSID Convention)…The Committee insists, however, on strongly emphasizing that annulment is certainly not a means by which a party to an arbitral proceeding may seek to invalidate the merits of the arbitral award that it does not like.� Compagnie d’Exploitation du Chemin de Fer Transgabonais v. Gabonese Republic, ICSID Case No. ARB/04/5, Decision of the ad hoc Committee on the Application for Annulment of the Gabonese Republic, para. 19 (May 11, 2010) [free translation from French]. • “An ad hoc committee may not replace the Tribunal’s decision on the merits of the dispute by its own decision.� Sociedad Anónima Eduardo Vieira v. Republic of Chile, ICSID Case No. ARB/04/7, Decision of the ad hoc Committee on the Application for Annulment of Sociedad Anónima Eduardo Vieira, para. 235 (December 10, 2010) [free translation from Spanish]. • “An ad hoc committee is not a court of appeal and cannot therefore enter, within the bounds of its limited mission, into an analysis of the probative value of the evidence produced by the parties.� Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Republic of Kazakhstan, ICSID Case No. ARB/05/16, Decision of the ad hoc Committee, para. 96 (March 25, 2010). • “In respect to the legal framework of the ICSID annulment proceedings, both Parties agree that an annulment proceeding is not an appeal process and that Article 52 of the ICSID Convention should be construed in accordance with the Vienna Convention on the Law of Treaties.� Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Republic of Kazakhstan, ICSID Case No. ARB/05/16, Decision of the ad hoc Committee, para. 70 (March 25, 2010). • “It is no part of the function of an annulment committee to reconsider findings of fact made by an ICSID arbitral tribunal. Rather the issues for this Committee are circumscribed by the terms of Article 36 52(1) of the ICSID Convention and relate to the Tribunal itself: its powers; its process; and the reasoning of its Award.� Helnan International Hotels A/S v. Arab Republic of Egypt, ICSID Case No. ARB/05/19, Decision of the ad hoc Committee, para. 20 (June 14, 2010). • “Article 52 excludes a review of the Award on the merits to the extent that article 53(1) excludes any appeal. As a result, an ad hoc Committee cannot consider new matters regarding the merits of a case in an annulment proceeding.� Togo Electricité and GDF-Suez Energie Services v. Republic of Togo, ICSID Case No. ARB/06/7, Decision on Annulment, para. 50 (September 6, 2011) (footnote omitted) [free translation from French]. • “An ICSID award is not subject to any appeal or to any other remedy except those provided for in the ICSID Convention. In annulment proceedings under Article 52 of the ICSID Convention, an ad hoc committee is thus not a court of appeal, and cannot consider the substance of the dispute, but can only determine whether the award should be annulled on one of the grounds in Article 52(1).� Continental Casualty Company v. Argentine Republic, ICSID Case No. ARB/03/9, Decision on the Application for Partial Annulment of Continental Casualty Company and the Application for Partial Annulment of the Argentine Republic, para. 81 (September 16, 2011) (footnotes omitted). • “As unambiguously expressed in Article 53 of the Convention, an award is not subject to an appeal. Annulment must therefore be different from appeal. It is well settled in international investment arbitration that an ad hoc committee may not substitute its own judgment on the merits for that of a tribunal.� AES Summit Generation Limited and AES-Tisza Erömü Kft. v. Hungary, ICSID Case No. ARB/07/22, Decision of the Ad Hoc Committee on the Application for Annulment, para. 15 (June 29, 2012). (4) Ad hoc Committees should exercise their discretion not to defeat the object and purpose of the remedy or erode the binding force and finality of awards • “An ad hoc Committee retains a measure of discretion in ruling on applications for annulment. To be sure, its discretion is not unlimited and should not be exercised to the point of defeating the object and purpose of the remedy of annulment. It may, however, refuse to exercise its authority to annul an award where annulment is clearly not required to remedy procedural injustice and annulment would unjustifiably erode the binding force and finality of ICSID awards.� Maritime International Nominees Establishment v. Republic of Guinea, ICSID Case No. ARB/84/4, Decision on the Application by Guinea for Partial Annulment of the Arbitral Award dated January 6, 1988, para. 4.10 (December 22, 1989). • “The ad hoc Committee may refuse to exercise its authority to annul an Award if and when annulment is clearly not needed to remedy procedural injustice and annulment would unwarrantably erode the binding force and finality of ICSID Awards.� Amco Asia Corporation and others v. Republic of Indonesia (Amco II), ICSID Case No. ARB/81/1, Decision on the Applications by Indonesia and Amco Respectively for Annulment and Partial Annulment, para. 1.20 (December 17, 1992). • “[It] appears to be established that an ad hoc committee has a certain measure of discretion as to whether to annul an award, even if an annullable error is found... Among other things, it is necessary for an ad hoc committee to consider the significance of the error relative to the legal rights of the parties.� Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic (Vivendi I), ICSID Case No. ARB/97/3, Decision on Annulment, para. 66 (July 3, 2002). 37 • “Keeping the object and purpose of the Convention as well as these underlying policy considerations in mind, we note that the ad hoc Committees operating during the last two decades have considered that a Committee has discretion to determine not to annul an Award even where a ground for annulment under Article 52(1) is found to exist... We thus should consider the significance of the [alleged annullable] error relative to the legal rights of the parties.� CDC Group plc v. Republic of the Seychelles, ICSID Case No. ARB/02/14, Decision of the ad hoc Committee on the Application for Annulment of the Republic of Seychelles, para. 37 (June 29, 2005) (footnotes omitted). • “[The Committee] should therefore refrain from making an annulment decision too hastily. It must do so only in case of manifest error, substantial breach or, more specifically, whenever the breach is such that, if it had not been committed, the Tribunal would have reached a different outcome than the one reached. To this extent, the ad hoc Committee retains a measure of discretion.� Consortium R.F.C.C. v. Kingdom of Morocco, ICSID Case No. ARB/00/6, Decision of the ad hoc Committee on the Application for Annulment of Consortium R.F.C.C., para. 226 (January 18, 2006) (citations omitted) [free translation from French]. • “An ad hoc Committee should not decide to annul an award unless it is convinced that there has been a substantial violation of a rule protected by Article 52.� Patrick Mitchell v. Democratic Republic of the Congo, ICSID Case No. ARB/99/7, Decision on the Application for Annulment of the Award, para. 19 (November 1, 2006). • “[E]ven in the case of annullable error, the ad hoc Committee still has a measure of discretion under Article 52(3) in ordering annulment or in refusing to do so.� Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic (Vivendi II), ICSID Case No. ARB/97/3, Decision on the Argentine Republic’s Request for Annulment of the Award Rendered on 20 August 2007, para. 252 (August 10, 2010). • “An ad hoc committee will not annul an award if the Tribunal’s disposition is tenable, even if the committee considers that it is incorrect as a matter of law.� Helnan International Hotels A/S v. Arab Republic of Egypt, ICSID Case No. ARB/05/19, Decision of the ad hoc Committee, para. 55 (June 14, 2010) (footnote omitted). (5) Article 52 should be interpreted in accordance with its object and purpose, neither narrowly nor broadly • “[A]pplication of the paragraph demands neither a narrow interpretation, nor a broad interpretation, but an appropriate interpretation, taking into account the legitimate concern to surround the exercise of the remedy to the maximum extent possible with guarantees in order to achieve a harmonious balance between the various objectives of the Convention.� Klöckner Industrie-Anlagen GmbH and others v. United Republic of Cameroon and Société Camerounaise des Engrais (Klöckner I), ICSID Case No. ARB/81/2, Decision of the ad hoc Committee, para. 3 (May 3, 1985) [unofficial translation from French]. • “The fact that annulment is a limited, and in that sense extraordinary, remedy might suggest either that the terms of Article 52(1), i.e., the grounds for annulment, should be strictly construed or, on the contrary, that they should be given a liberal interpretation since they represent the only remedy against unjust awards. The Committee has no difficulty in rejecting either suggestion. In its view, Article 52(1) should be interpreted in accordance with its object and purpose, which excludes on the one hand, as already stated, extending its application to the review of an award on the merits and, on the other, an unwarranted refusal to give full effect to it within the limited but important area for 38 which it was intended.� Maritime International Nominees Establishment v. Republic of Guinea, ICSID Case No. ARB/84/4, Decision on the Application by Guinea for Partial Annulment of the Arbitral Award dated January 6, 1988, para. 4.05 (December 22, 1989). • “Article 52(1) should be interpreted in accordance with its object and purpose: this precludes its application to the review of an Award on the merits and in a converse case excludes an unwarranted refusal to give full effect to it within the limited but significant area for which it was intended.� Amco Asia Corporation and others v. Republic of Indonesia (Amco II), ICSID Case No. ARB/81/1, Decision on the Applications by Indonesia and Amco Respectively for Annulment and Partial Annulment, para. 1.17 (December 17, 1992). • “It also appears to be established that there is no presumption either in favour of or against annulment, a point acknowledged by Claimants as well as Respondent.� Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic (Vivendi I), ICSID Case No. ARB/97/3, Decision on Annulment, para. 62 (July 3, 2002) (footnote omitted). • “As has been stated in earlier published decisions made on requests for annulment of ICSID awards, the remedy of Article 52 is in no sense an appeal. The power for review is limited to the grounds of annulment as defined in this provision. These grounds are to be interpreted neither narrowly nor extensively.� Wena Hotels Limited v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision on the Application by the Arab Republic of Egypt for Annulment of the Arbitral Award dated December 8, 2000, para. 18 (February 5, 2002) (footnotes omitted). • “As for the interpretation of grounds for annulment there is compelling support for the view that neither a narrow nor a broad approach is to be applied [footnote omitted].� Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Decision on the Argentine Republic’s Request for Annulment of the Award, para. 75 (June 29, 2010). • “[T]he grounds for annulment set out in Article 52 must be examined in a neutral and reasonable manner, that is, neither narrowly nor extensively.� Patrick Mitchell v. Democratic Republic of the Congo, ICSID Case No. ARB/99/7, Decision on the Application for Annulment of the Award, para. 19 (November 1, 2006) (footnote omitted). • “Furthermore, there is no presumption either in favor of or against annulment.� Consortium R.F.C.C. v. Kingdom of Morocco, ICSID Case No. ARB/00/6, Decision of the ad hoc Committee on the Application for Annulment of Consortium R.F.C.C., para. 220 (January 18, 2006) (citation omitted) [free translation from French]. • “Article 52 of the ICSID Convention must be read in accordance with the principles of treaty interpretation forming part of general international law, which principles insist on neither restrictive nor extensive interpretation, but rather on interpretation in accordance with the object and purpose of the treaty. Some commentators have suggested that in case of doubt, an annulment committee should decide in favor of the validity of the award. Such presumption, however, finds no basis in the text of Article 52 and has not been used by annulment committees.� Hussein Nuaman Soufraki v. United Arab Emirates, ICSID Case No. ARB/02/7, Decision of the ad hoc Committee on the Application for Annulment of Mr. Soufraki, paras. 21-22 (June 5, 2007) (footnote omitted). • “As for the interpretation of grounds for annulment there is compelling support for the view that neither a narrow nor a broad approach is to be applied. Nor is there any preponderant inclination “in favorem validitatis�, i.e. a presumption in favour of the Award’s validity.� Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Decision on the Argentine 39 Republic’s Application for Annulment of the Award, paras. 75-76 (June 29, 2010) (footnotes omitted). (6) An ad hoc Committee’s authority to annul an award is circumscribed by the Article 52 grounds specified in the application for annulment, but an ad hoc Committee has discretion with respect to the extent of an annulment, i.e., either full or partial • “[M]erely because the Parties agree on the total or partial annulment of the Award on the same ground does not mean that the Committee must follow their requests in whole or in part. The annulment procedure is above all a procedure for the protection of the law. It is not instituted merely in the interest of the Parties.� Klöckner Industrie-Anlagen GmbH and others v. United Republic of Cameroon and Société Camerounaise des Engrais (Klöckner II), ICSID Case No. ARB/81/2, Decision on Annulment, para. 9.15 (May 17, 1990) [unofficial translation from French]. • “The Committee notes that an ad hoc Committee may annul an award (or any part thereof) only pursuant to a request by a party and only within the scope of that request, unless by necessary implication annulment entails the annulment of other portions.� Maritime International Nominees Establishment v. Republic of Guinea, ICSID Case No. ARB/84/4, Decision on the Application by Guinea for Partial Annulment of the Arbitral Award dated January 6, 1988, para. 4.08 (December 22, 1989). • “[W]here a ground for annulment is established, it is for the ad hoc committee, and not the requesting party, to determine the extent of the annulment. In making this determination, the committee is not bound by the applicant’s characterisation of its request, whether in the original application or otherwise, as requiring either complete or partial annulment of the award.� Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic (Vivendi I), ICSID Case No. ARB/97/3, Decision on Annulment, para. 69 (July 3, 2002). • “The ad hoc Committee derives its authority from the same source, the parties’ will, as the Arbitral Tribunal itself. Its authority is no more legitimate than that of the Arbitral Tribunal. It should therefore refrain from deciding to annul too hastily.� Consortium R.F.C.C. v. Kingdom of Morocco, ICSID Case No. ARB/00/6, Decision of the ad hoc Committee on the Application for Annulment of Consortium R.F.C.C., para. 226 (January 18, 2006) [free translation from French]. • “Once an ad hoc committee has concluded that there is one instance of manifest excess of powers (or any other ground for annulment), which warrants annulment of the Award in its entirety, this will be the end of the ad hoc committee’s examination. Since annulment of an award in its entirety necessarily leads to the loss of the res judicata effect of all matters adjudicated by the Tribunal, it is unnecessary to consider whether there are other grounds - whether in respect of the same matter or other matters - that may also lead to annulment. On the other hand, an ad hoc committee will need to proceed differently where it decides not to annul the Award or decides to annul the Award only in part. In those instances it will be necessary for the ad hoc committee to examine all of the grounds invoked by the applicant in support of its application.� Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Decision on the Argentine Republic’s Application for Annulment of the Award, paras. 78-79 (June 29, 2010). B. The Interpretation of Specific Grounds 76. The grounds for annulment in Article 52(1) of the ICSID Convention are: (a) the improper constitution of the Tribunal; (b) manifest excess of powers by the Tribunal; (c) 40 corruption on the part of a Tribunal member; (d) a serious departure from a fundamental rule of procedure; and (e) failure to state reasons. Grounds (b), (d) and (e) are the most frequently relied upon grounds for annulment and they are usually invoked cumulatively in support of the application to annul an award. 138 Grounds Invoked Number of Annulment Decisions Reviewed* 30 Art. 52(1)(a) - Improper constitution of the Number of 4 Tribunal Proceedings in which Ground was Invoked Art. 52(1)(b) - Manifest excess of powers 30 2 Art. 52(1)(c) - Corruption 0 Number of Proceedings in which Art. 52(1)(d) - Serious departure from a 22 Ground was Invoked fundamental rule of procedure by Both Parties Art. 52(1)(e) - Failure to state reasons 28 2 0 10 20 30 40 *See Annex 6 77. The specific grounds for annulment were discussed in the drafting history of the ICSID Convention and have been extensively analyzed and interpreted in ICSID cases, in particular grounds (b), (d) and (e). The following is a brief summary of the meaning of these grounds as indicated in the drafting history and as interpreted by ad hoc Committees. The table at Annex 6 details the grounds invoked in annulment decisions, showing which were upheld and rejected. 139 (i) Improper Constitution of the Tribunal 78. The drafting history of the ICSID Convention indicates that the ground of improper constitution of the Tribunal was intended to cover situations such as a departure from the parties’ agreement on the method of constituting the Tribunal or an arbitrator’s failure to meet the nationality or other requirements for becoming a member of the Tribunal. 140 79. No provision of the ICSID Convention or rules explicitly addresses when a Tribunal might be considered to be improperly constituted. However, Chapter I of the ICSID Arbitration Rules, entitled “Establishment of the Tribunal,� provides detailed rules concerning constitution of a Tribunal, including nationality and other requirements for Tribunal members, 138 ICSID Convention Article 52(1) provides that a party may request annulment “on one or more� grounds. 139 See “Annulment Grounds in Concluded Proceedings,� Annex 6. 140 See supra para. 23. 41 the appointment process, and the arbitrator’s declaration of impartiality and independence.141 The parties may raise an objection concerning compliance with any of these provisions, which should be addressed by the Tribunal as soon as it has been constituted. In practice, Tribunals consistently ask the parties whether they have any objection to the constitution of the Tribunal or to any individual member during the Tribunal’s first session dealing with procedural matters.142 If a Tribunal decides that it has been properly constituted following an objection by a party, that party must await the Tribunal’s award before filing an application for annulment on this ground. 143 80. Improper constitution of a Tribunal has been raised in only 4 annulment cases leading to decisions. Three rejected the allegation based on this ground. 144 In a fourth case, the ad hoc Committee did not address the ground, as it had already decided to annul the award in full based on another ground. 145 81. The 4 decisions indicate that annulment applications based on this ground are likely to succeed only in rare circumstances. One annulment decision held that the ad hoc Committee’s role is limited to considering whether the provisions concerning constitution of the Tribunal were respected in the original proceeding, and did not extend to matters such as review of the Tribunal’s decision on a request for disqualification of a Tribunal member under Article 58 of the Convention. 146 Ad hoc Committees have also indicated that a party with knowledge of an alleged improper constitution of the Tribunal in the original proceeding who fails to raise such issue may be taken to have waived its right to raise this as a ground for annulment. 147 (ii) Manifest Excess of Powers 82. The drafters of the ICSID Convention anticipated an excess of powers when a Tribunal went beyond the scope of the parties’ arbitration agreement, decided points which had not been submitted to it, or failed to apply the law agreed to by the parties. 148 The main powers of the Tribunal that appear to have been contemplated by this provision thus relate to the Tribunal’s jurisdiction and to the applicable law. These two categories will be described separately below. 141 See Arbitration Rules 1-12 (which implement the provisions of ICSID Convention Articles 14(1), 37-40 & 56- 58). 142 See Arbitration Rule 13(1). The first session is to be held within 60 days after the Tribunal’s constitution or such other period as the parties may agree. 143 History, supra note 14, at Vol. II, 851 & 852. 144 See Annex 6; Vivendi II; Azurix; Transgabonais. 145 Sempra. 146 Azurix, paras. 272-284. 147 Azurix, para. 291; Transgabonais, paras. 129 & 130. 148 See supra paras. 19, 24-25. 42 83. Article 52(1)(b) of the ICSID Convention provides that only instances of “manifest� excess of the Tribunal’s powers may lead to an annulment, indicating a dual requirement of an “excess� that is “manifest.� 149 As a result, ad hoc Committees have identified two methodological approaches to determine whether there is an annullable error on this ground. The first is a two-step analysis determining whether there was an excess of powers and, if so, whether the excess was “manifest.� 150 The second is a prima facie test, consisting of a summary examination to determine whether any of the alleged excesses of power could be viewed as “manifest.� 151 84. The “manifest� nature of the excess of powers has been interpreted by most ad hoc Committees to mean an excess that is obvious, clear or self-evident, 152 and which is discernable without the need for an elaborate analysis of the award. 153 However, some ad hoc Committees have interpreted the meaning of “manifest� to require that the excess be serious or material to the outcome of the case. 154 85. Manifest excess of powers has been invoked in every case leading to a decision on annulment. There have been 8 instances of partial or full annulment on this basis. 155 (a) Manifest Excess of Powers Relating to Jurisdiction 86. A Tribunal is expected to observe the parties’ arbitration agreement. If a Tribunal goes beyond the scope of the parties’ arbitration agreement, it in effect surpasses the mandate granted to it by the parties. In addition, the ICSID Convention prescribes certain mandatory 149 See supra paras. 19 & 24–26. 150 Sempra, para. 212; Fraport, para. 40; AES, para. 32. 151 Id. 152 Vivendi II, para. 245 (“must be ‘evident’�); Repsol, para. 36 (“obvious by itself�); Azurix, para. 68 (“obvious�); Soufraki, para. 39 (“obviousness�) (citing Webster’s Revised Unabridged Dictionary (1913) (“‘clear,’ ‘plain,’ ‘obvious,’ ‘evident’….�)); CDC, para. 41 (citing Wena, para. 25 (“clear or ‘self-evident’�)); MCI, para. 49 (citing Wena, para. 25) (“self-evident�); Rumeli, para. 96 (“evident on the face of the Award�); Helnan, para. 55 (“obvious or clear�). 153 See Wena, para. 25 (“The excess of power must be self-evident rather than the product of elaborate interpretations one way or the other.�); Mitchell, para. 20 (manifest if found “with certainty and immediacy, without it being necessary to engage in elaborate analyses of the award�); Enron, para. 69 (quoting MTD, para. 47 (“not arguable)); Repsol, para. 36 (quoting Christoph H. Schreuer, The ICSID Convention: A Commentary 933 (Cambridge University Press 2001) (“discerned with little effort and without deeper analysis�)); Azurix, paras. 48 & 68; CDC, para. 41 (“Any excess apparent in a Tribunal’s conduct, if susceptible ‘one way or the other’, is not manifest); Sempra, para. 213 (“quite evident without the need to engage in an elaborate analysis�); MCI, para. 49 (“the manifest excess requirement in Article 52(1)(b) suggests a somewhat higher degree of proof than a searching analysis of the findings of the Tribunal�). 154 Klöckner I, para. 52(e) (“the [Tribunal’s] answers seem tenable and not arbitrary�), Vivendi I, para. 86 (“clearly capable of making a difference to the result�); Soufraki, para. 40 (“at once be textually obvious and substantially serious�), Fraport, para. 44 (“demonstrable and substantial and not doubtful�), MHS, para. 80; AES, para. 31. 155 Amco I (full); Klöckner I (full); Vivendi I (partial); Mitchell (full); Enron (partial); Sempra (full); MHS (full); Helnan (partial). 43 requirements that must be fulfilled for a Tribunal to have jurisdiction. 156 These jurisdictional requirements require: (i) ‘a legal dispute;’ (ii) ‘arising directly out of an investment;’ (iii) ‘between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State);’ (iv) ‘and a national of another Contracting State;’ (v) ‘which the parties to the dispute consent in writing to submit to the Centre.’ 157 The parties cannot agree to derogate from these criteria. In fact, the Tribunal must decline jurisdiction where a mandatory requirement is not met, even if neither party has raised any objection to jurisdiction. 158 87. Objections to jurisdiction are often raised in international investment cases and the jurisdictional requirements have been extensively discussed and analyzed in such cases. 88. Ad hoc Committees have held that there may be an excess of powers if a Tribunal incorrectly concludes that it has jurisdiction when in fact jurisdiction is lacking, 159 or when the Tribunal exceeds the scope of its jurisdiction. 160 It has been recognized, in the inverse case, that a Tribunal’s rejection of jurisdiction when jurisdiction exists also amounts to an excess of powers. 161 89. At the same time, ad hoc Committees have acknowledged the principle specifically provided by the Convention that the Tribunal is the judge of its own competence. 162 This means that the Tribunal has the power to decide whether it has jurisdiction to hear the parties’ dispute based on the parties’ arbitration agreement and the jurisdictional requirements in the ICSID Convention. In light of this principle, the drafting history suggests—and most ad hoc Committees have reasoned—that in order to annul an award based on a Tribunal’s determination of the scope of its own jurisdiction, the excess of powers must be “manifest.� 163 However, one ad hoc Committee found that an excess of jurisdiction or failure to exercise jurisdiction is a manifest excess of powers when it is capable of affecting the outcome of the case. 164 156 ICSID Convention Article 25(1). 157 Id. 158 ICSID Convention Article 41(1). 159 Vivendi I, para. 86; Mitchell, paras. 47, 48 & 67; CMS, para. 47 (quoting Klöckner I, para. 4); Azurix, para. 45 (quoting Klöckner I, para. 4); Lucchetti, para. 99; MCI, para. 56 (quoting Lucchetti, para. 99). 160 Klöckner I, para. 4; Soufraki, para. 42. 161 Vivendi I, para. 86; Soufraki, para. 43 (quoting Vivendi I, para. 86); Lucchetti, para. 99; Fraport, para. 36 (citing Vivendi I, para. 86); MHS, para. 80; Helnan, para. 41 (citing Soufraki, para. 44 and Vivendi I, para. 86). 162 Enron, para. 69 (citing Azurix, para. 67); Azurix, para. 67; Soufraki, para. 50; see also History, supra note 14, at Vol. I, 186-190, Vol. II, 206, 291-92, 406 & 511; International Bank for Reconstruction and Development, Report of the Executive Directors on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States para. 38 (March 18, 1965). 163 See supra para. 24; MTD, para. 54; Azurix, paras. 64–66 (quoting Lucchetti, paras. 101 & 102); Soufraki, paras. 118 & 119 (“the requirement that an excess of power must be ‘manifest’ applies equally if the question is one of jurisdiction�); Lucchetti, para. 101; Rumeli, para. 96. 164 Vivendi I, paras. 72 & 86. 44 90. The issue of excess of jurisdiction has been ruled on in 18 annulment decisions and has led to one full annulment. 165 In addition, the non-exercise of an existing jurisdiction has been decided in 12 decisions and has resulted in one full and 2 partial annulments. 166 (b) Manifest Excess of Powers Relating to the Applicable Law 91. The drafting history of the ICSID Convention shows that a Tribunal’s failure to apply the proper law could constitute a manifest excess of powers, but that erroneous application of the law could not amount to an annullable error, even if it is manifest. 167 As stated above, there is no basis for an annulment due to an incorrect decision by a Tribunal, a principle that has been expressly recognized by many ad hoc Committees. 168 92. The ICSID Convention provides as follows concerning the law to be applied by a Tribunal: The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable. 169 93. Where the parties’ agree on applicable law, a disregard of this law would likely be equivalent to a derogation from the mandate conferred on the Tribunal by the parties. 94. Ad hoc Committees agree that a Tribunal’s complete failure to apply the proper law or acting ex aequo et bono without agreement of the parties to do so as required by the ICSID Convention could constitute a manifest excess of powers. 170 However, ad hoc Committees have taken different approaches to whether an error in the application of the proper law may effectively amount to non-application of the proper law. Some ad hoc Committees have concluded that gross or egregious misapplication or misinterpretation of the law may lead to annulment, 171 while others have found that such an approach comes too close to an appeal.172 Similarly, ad hoc Committees have discussed whether application of a law different from that 165 See Mitchell, para. 67. The award in Mitchell was annulled in full on 2 grounds: manifest excess of powers and failure to state the reasons. 166 Vivendi I (partial); Helnan (partial); MHS (full). 167 See supra paras. 20 & 26. 168 See supra para. 75. 169 ICSID Convention Article 42(1). 170 Amco I, paras. 23 & 28; Amco II, para. 7.28; Klöckner I, para. 79; MINE, para. 5.03; Enron, para. 218 (quoting Azurix, para. 136 (footnotes omitted)); MTD, para. 44; CMS, para. 49, Soufraki, para. 85 (quoting Amco I, para. 23). 171 Soufraki, para. 86; Sempra, para. 164; MCI, paras. 43 & 51 (quoting Soufraki, para. 86); MHS, para. 74; AES, paras. 33 & 34 (quoting Soufraki, para. 86). 172 MINE, paras. 5.03 & 5.04; MTD, para. 47; CMS, paras. 50–51 (quoting MINE, paras. 5.03 & 5.04; MTD, para. 47); Sempra, para. 206. 45 purportedly applied by the Tribunal could be considered a manifest excess of powers. 173 These discussions have led ad hoc Committees to observe that there is sometimes a fine line between failure to apply the proper law and erroneous application of the law. 174 In this connection, one issue discussed by some ad hoc Committees concerns which rules of law apply when consent to arbitration is based on an arbitration clause in a bilateral investment treaty. 175 95. The failure to apply the proper law has been invoked in 26 out of 30 annulment decisions. It has led to one partial and 3 full annulments. 176 (iii) Corruption on the Part of a Tribunal Member 96. The drafters of the ICSID Convention decided not to replace the word “corruption� with “misconduct,� “lack of integrity� or “a defect in moral character.� 177 They also decided not to limit this ground to cases of corruption evidenced by a court judgment or a showing of “reasonable proof that corruption might exist.�178 97. When an arbitrator accepts to serve as a member of a Tribunal, the arbitrator is required to sign a declaration that he or she “shall not accept any instruction or compensation with regard to the proceeding from any source except as provided in the ICSID Convention.�179 An arbitrator’s conduct in breach of that declaration can thus lead to annulment of an award. If a party has knowledge of such conduct during the proceeding before the Tribunal, it should file a request for disqualification based on Article 57 of the ICSID Convention. 98. This ground has not been dealt with in any decision on annulment to date. (iv) Serious Departure from a Fundamental Rule of Procedure 99. It appears from the drafting history of the ICSID Convention that the ground of a “serious departure from a fundamental rule of procedure� has a wide connotation including principles of natural justice, but that it excludes the Tribunal’s failure to observe ordinary arbitration rules. The phrase “fundamental rules of procedure� was explained by the drafters as a reference to principles. 180 One such fundamental principle mentioned during the negotiations 173 MTD, para. 47; CMS, para. 51 (quoting MTD, para. 47); Azurix, para. 136, fn 118 (citing MTD, para. 47); Sempra, para. 163, fn 44 (citing MTD, para. 47). 174 Klöckner I, para. 60; Enron, paras. 68 & 220; Azurix, para. 47. 175 Enron; CMS; Sempra. 176 Amco I (full); Klöckner I (full); Enron (partial); Sempra (full). 177 See supra para. 27. 178 Id. 179 See Arbitration Rule 6(2), which provides the standard form of the declaration. 180 See supra para. 28. 46 was the parties’ right to be heard. 181 The drafting history thus indicates that this ground is concerned with the integrity and fairness of the arbitral process. 100. Based on the words “serious� and “fundamental� in this ground, ad hoc Committees have adopted a dual analysis: the departure from a rule of procedure must be serious and the rule must be fundamental. 182 Ad hoc Committees have thus consistently held that not every departure from a rule of procedure justifies annulment. 183 Examples of fundamental rules of procedure identified by ad hoc Committees are: (i) the equal treatment of the parties; 184 (ii) the right to be heard; 185 (iii) an independent and impartial Tribunal; 186 (iv) the treatment of evidence and burden of proof; 187 and (v) deliberations among members of the Tribunal. 188 101. The task of determining whether an alleged fundamental rule of procedure has been seriously breached is usually very fact specific, involving an examination of the conduct of the proceeding before the Tribunal. Some ad hoc Committees have required that the departure have a material impact on the outcome of the award for the annulment to succeed. 189 102. The ground of serious departure from a fundamental rule of procedure has been pursued in 22 proceedings which led to annulment decisions. It resulted in the annulment in full of one award and in the annulment of a decision on supplemental decisions and rectification. 190 (v) Failure to State the Reasons on which the Award is Based 103. During the drafting of the ICSID Convention, the ground of “failure to state the reasons on which the award is based� was originally included in the ground of a “serious departure from a fundamental rule of procedure.� 191 It subsequently became a stand-alone ground. In addition, a proposed qualifier enabling parties to waive the requirement that reasons be stated was eliminated during the negotiation of the Convention. 192 This elimination of the proposed waiver related to the removal of the same discretion in another provision in the Convention, which now reads: “[t]he award shall deal with every question submitted to the 181 See supra para. 21. 182 Amco II, para. 9.07; MINE, para. 4.06; Wena, para. 56; CDC, para. 48; Fraport, para. 180. 183 MINE, para. 4.06; CDC, para. 48; Fraport, para. 186. 184 Amco I, paras. 87 & 88. 185 Amco II, paras. 9.05-9.10; Klöckner I, paras. 89-92; Wena, para. 57; CDC, para. 49; Lucchetti, para. 71; Fraport, para. 197. 186 Klöckner I, para. 95; Wena, para. 57; CDC, paras. 51-55. 187 Amco I, paras. 90 & 91; Klöckner II, para. 6.80; Wena, paras. 59-61. 188 Klöckner I, para. 84; CDC, para. 58. 189 Wena, para. 58; Repsol, para. 81; CDC, para. 49; Fraport, para. 246. 190 Fraport; Amco II. 191 See supra para. 13. 192 See supra para. 29. 47 Tribunal, and shall state the reasons upon which it is based.� 193 There is thus a clear link between the provision in the Convention requiring the Tribunal to state the reasons for the award, and the ground providing for annulment when there has been a failure to provide the reasons on which the award is based. The drafting history of the Convention concerning annulment based on a failure to state reasons does not provide further guidance as to when such a failure has occurred, nor does the Convention specify the manner in which a Tribunal’s reasons should be stated. 104. While a Tribunal must deal with every question submitted to it, the drafting history indicates that a failure to do so should not result in annulment. 194 Instead, the ICSID Convention provides another remedy where a Tribunal fails to address a question: the dissatisfied party may request that the same Tribunal issue a supplementary decision concerning the question not addressed. 195 In addition, if there is a dispute between the parties as to the meaning or scope of the award, either party may request interpretation of the award by the original Tribunal. 196 Therefore, certain issues relating to the reasoning or lack of reasoning in an award can be heard by the Tribunal that rendered the award. 197 105. At the same time, if a Tribunal’s failure to address a particular question submitted to it might have affected the Tribunal’s ultimate decision, this could, in the view of some ad hoc Committees, amount to a failure to state reasons and could warrant annulment. 198 Ad hoc Committees have also noted that such failure could amount to a serious departure from a fundamental rule of procedure. 199 106. Ad hoc Committees have explained that the requirement to state reasons is intended to ensure that parties can understand the reasoning of the Tribunal, meaning the reader can understand the facts and law applied by the Tribunal in coming to its conclusion. 200 The correctness of the reasoning or whether it is convincing is not relevant. 201 193 See supra para. 29; ICSID Convention Article 48(3). 194 History, supra note 14, at Vol. II, 849. 195 ICSID Convention Article 49(2). The request must be made within 45 days of the dispatch of the award. The supplementary decision becomes part of the award and is thus subject to the remedy of annulment. 196 Id. at Article 50(1). There is no time bar for a request to interpret an award under the ICSID Convention. 197 Wena, para. 100. 198 Amco I, para. 32; Klöckner I; para. 115; MINE, para. 5.13; Soufraki, para. 126; Duke Energy, para. 228. 199 Amco I, para. 32; Klöckner I; para. 115. 200 MINE, para. 5.09 (“the requirement to state reasons is satisfied as long as the award enables one to follow how the tribunal proceeded from Point A. to Point B. and eventually to its conclusion, even if it made an error of fact or of law�); Vivendi I, para. 64; Wena, para. 81; Transgabonais, para. 88. 201 Klöckner I, para. 129; MINE, paras. 5.08 & 5.09; Vivendi I, para. 64; Wena, para. 79; CDC, paras. 70 & 75; MCI, para. 82; Fraport, para. 277; Vieira, para. 355. 48 107. Some ad hoc Committees have suggested that “insufficient� and “inadequate� reasons could result in annulment. 202 However, the extent of insufficiency and inadequacy required to justify annulment on this basis has been debated. 203 Other ad hoc Committees have suggested that they have discretion to further explain, clarify, or infer the reasoning of the Tribunal rather than annul the award. 204 108. Finally, a majority of ad hoc Committees have concluded that “frivolous� and “contradictory� reasons are equivalent to no reasons and could justify an annulment. 205 109. The ground of failure to state the reasons on which the award is based has been invoked by parties in 28 proceedings leading to decisions. The ground was upheld in 6 cases which resulted in 3 full and 3 partial annulments. 206 VI. Conclusion 110. It is clear that annulment is a limited and exceptional recourse, available only on the basis of the grounds enumerated in Article 52 of the ICSID Convention. It safeguards against “violation of the fundamental principles of law governing the Tribunal’s proceedings.� 207 111. While there is agreement on the general standards for annulment, commentators sometimes disagree on whether a specific case has been decided correctly or incorrectly. 208 The complexity of the task assigned to ad hoc Committees was summarized by Broches as follows: Annulment is an essential but exceptional remedy. It is well understood that the grounds listed in Article 52(1) are the only grounds on which an award may be annulled. [footnote omitted] However, the application of that paragraph places a heavy responsibility on the ad hoc committees which must rule on requests for annulment. For example, in relation to a Tribunal’s alleged “excess of powers� they may have to make fine 202 Mitchell, para. 21 (“a failure to state reasons exists whenever reasons are... so inadequate that the coherence of the reasoning is seriously affected�); Soufraki, paras. 122-26 (“insufficient or inadequate reasons, which are insufficient to bring about the solution or inadequate to explain the result arrived at by the Tribunal�). 203 Compare Amco I, para. 43 (“sufficiently pertinent reasons�), and Klöckner I, para. 120 (“sufficiently relevant�), with Amco II, para. 7.55 (“no justification for adding a further requirement that the reasons stated be ‘sufficiently pertinent’�), and MINE, para. 5.08 (“[t]he adequacy of the reasoning is not an appropriate standard of review�). 204 Vivendi II, para. 248; Wena, para. 83; Soufraki, para. 24; CMS, para. 127; Rumeli, para. 83 (with the caveat that if non-stated reasons “do not necessarily follow or flow from the award’s reasoning, an ad hoc committee should not construct reasons in order to justify the decision of the tribunal�). 205 Amco I, para. 97; Klöckner I, para. 116; MINE, paras. 5.09 & 6.107; CDC, para. 70; MCI, para. 84; Vieira, para. 357. 206 Amco I (full), Klöckner I (full), MINE (partial), Mitchell (full); CMS (partial), Enron (partial). 207 See supra, para. 72. 208 A number of authors have analyzed and commented on annulment decisions and the annulment mechanism generally. Such discussions are included in the bibliography at Annex 7 of this paper. 49 distinctions between failure to apply the applicable law, which is a ground for annulment, and incorrect interpretation of that law, which is not. With respect to allegations that a tribunal’s failure to deal with questions submitted to it constitutes a serious departure from a fundamental rule of procedure, or failure to state the reasons on which the award is based, they will have to assess the relevance of those questions, that is to say, their nature and potential effect, had they been dealt with, on the tribunal’s award. They are also likely to be called on to give specific meaning to such terms as “manifest,� “serious departure� and “fundamental rule of procedure� in judging the admissibility of claims for annulment. After these determinations have been made on the basis of objective legal analysis, the ad hoc committees may be faced with the delicate final task of weighing the conflicting claims of finality of the award, on the one hand and, on the other, of protection of parties against procedural injustice, as defined in the five sub-paragraphs of Article 52(1). This requires that an ad hoc committee be able to exercise a measure of discretion in ruling on applications for annulment. 209 112. The task of an ad hoc Committee should also be assessed in the overall context of the ICSID case load. In its 47 year history, ICSID registered 344 cases and issued 150 awards. Of these, 6 awards have been annulled in full and another 6 awards have been partially annulled. In other words, only 4 percent of all ICSID awards have led to full annulment and 4 percent have led to partial annulment. 209 Broches, supra note 15, at 354 & 355. 50 Annulment Proceedings under the ICSID Convention – Overview 344 Convention Arbitrations Registered 150 Convention Awards Rendered 53 Annulment Proceedings Instituted 18 Decisions Refusing Annulment 12 Proceedings Discontinued 12 Awards Annulled (6 in full + 6 in part) 113. While the number of applications for annulment registered annually may fluctuate, the increase in annulment applications in the last 11 years reflects the vastly increased number of cases registered and awards rendered at ICSID in this same period. Between 2001 and June 2012, 119 awards were issued, 36 annulment proceedings were instituted (30 percent of the cases leading to awards) and 8 awards were annulled in full or in part (7 percent awards were annulled). 210 This should be compared to the period between 1966 and 2001, when 31 awards were rendered, 6 annulment proceedings were instituted (19 percent of the cases leading to awards) and 4 awards were annulled in full or in part (13 percent awards were annulled). In short, the rate of annulment in the past 11 years is lower than the rate for all previous years. 210 See supra paras. 36 & 37. 51 Annulment Proceedings under the ICSID Convention - Outcomes by Decade 120 96 100 80 60 40 23 18 20 9 13 4 8 5 4 6 0 0 0 1 3 0 0 1 1 0 0 1971-1980 1981-1990 1991-2000 2001-2010 2011 - Number of Convention awards rendered Number of decisions rejecting the application for annulment Number of decisions annulling the award in part or in full Number of annulment proceedings discontinued 114. Finally, it is vital that ICSID Contracting States continue to supply the ICSID Panel of Arbitrators with capable, experienced and impartial individuals who may be called upon to apply the standards of Article 52 of the ICSID Convention. *** 52 Annex 1 Pending and Concluded Annulment Proceedings Case Award Tribunal** Ad Hoc Committee** Outcome (Short Title) (President in Bold) (President in Bold) 1. Amco Asia Corporation and others Award of November 21, 1984 Berthold Goldman (French) Ignaz Seidl-Hohenveldern Annulled in full v. Republic of Indonesia (Austrian) Available at Isi Foighel (Danish) Decision of May 16, 1986 ARB/81/1 1 ICSID Rep. 413 (1993) Florentino P. Feliciano (English); Unofficial French Edward W. Rubin (Canadian) (Philippine)* Available at translation in 114 J. Droit Int’l 1 ICSID Rep. 509 (1993) (English); 145 (1987) (excerpts) Andrea Giardina (Italian) Unofficial French translation in 114 (Amco I) J. Droit Int’l 175 (1987) (excerpts) 2. Amco Asia Corporation and others Award of June 5, 1990 Rosalyn Higgins (British) Sompong Sucharitkul (Thai)* Annulment rejected (Supplemental v. Republic of Indonesia Decision and Rectification Available at Marc Lalonde (Canadian) Arghyrios A. Fatouros (Greek) annulled) ARB/81/1- 1 ICSID Rep. 569 (1993) Resubmission (English); Unofficial French Per Magid (Danish) Dietrich Schindler (Swiss) Decision of December 17, 1992 translation in 118 J. Droit Int’l 172 (1991) (excerpts) Available at (Amco II) 9 ICSID Rep. 9 (2006) (English) 3. Klöckner Industrie- Anlagen GmbH and Award of October 21, 1983 Eduardo Jimenez de Pierre Lalive (Swiss) Annulled in full others v. United Arechaga (Uruguayan)* Republic of Cameroon Available at Ahmed Sadek El-Kosheri Decision of May 3, 1985 and Société 111 J. Droit Int’l 409 (1984) William D. Rogers (U.S.) (Egyptian)* Camerounaise des (French; excerpts); Unofficial Available at Engrais English translation in 2 ICSID Dominique Schmidt (French) Ignaz Seidl-Hohenveldern 114 J. Droit Int’l 163 (1987) Rep. 9 (1994) (Austrian) (French; excerpts); Unofficial ARB/81/2 English translation at http://icsid.worldbank.org (Klöckner I) *Developing country nationality at the time of appointment **Excludes members who resigned during the proceeding 1 4. Klöckner Industrie- Anlagen GmbH and Award of January 26, 1988 Carl F. Salans (U.S.) Sompong Sucharitkul (Thai)* Annulment rejected others v. United Republic of Cameroon Available at Jorge Castaneda (Mexican)* Andrea Giardina (Italian) Decision of May 17, 1990 and Société 14 ICSID Rep. 8 (2009) Camerounaise des (English); French version Juán Antonio Cremades Kebá Mbayé (Senegalese)* Available at Engrais unpublished Sanz-Pastor (Spanish) 14 ICSID Rep. 101 (2009) (Unofficial English translation); ARB/81/2 – French original unpublished Resubmission (Klöckner II) 5. Southern Pacific Properties (Middle East) Award of May 20, 1992 Eduardo Jimenez de Claude Reymond (Swiss) Discontinued (Rule 43(1)) Limited v. Arab Arechaga (Uruguayan)* Republic of Egypt Available at Arghyrios A. Fatouros (Greek) http://icsid.worldbank.org Mohamed Amin Elabassy El ARB/84/3 (English); Official French Mahdi (Egyptian)* Kéba Mbaye (Senegalese)* translation in 121 J. Droit Int’l 229 (1994) (excerpts) Robert F. Pietrowski, Jr. (SPP) (U.S.) 6. Maritime International Nominees Award of January 6, 1988 Donald E. Zubrod (U.S.) Sompong Sucharitkul (Thai)* Annulled in part Establishment v. Republic of Guinea Available at Jack Berg (U.S.) Aron Broches (Dutch) Decision of December 22, 1989 4 ICSID Rep. 61 (1997) ARB/84/4 (English) David K. Sharpe (U.S.) Kéba Mbaye (Senegalese)* Available at http://icsid.worldbank.org (English); Unofficial French translation in 1 La Juris. du CIRDI (MINE) 291(2004) (excerpts) 2 7. Compañía de Aguas del Aconquija S.A. and Award of November 21, 2000 Francisco Rezek L. Yves Fortier (Canadian) Annulled in part Vivendi Universal S.A. v. (Brazilian)* Argentine Republic Available at James R. Crawford (Australian) Decision of July 3, 2002 http://icsid.worldbank.org Thomas Buergenthal (U.S.) ARB/97/3 (English and Unofficial José Carlos Fernández Rozas Available at Spanish translation) Peter D. Trooboff (U.S.) (Spanish) http://icsid.worldbank.org (English and Spanish); Unofficial French translation in 130 J. Droit (Vivendi I) Int’l 195 (2003) 8. Compañía de Aguas del Aconquija S.A. and Award of August 20, 2007 J. William Rowley Ahmed Sadek El-Kosheri Annulment rejected Vivendi Universal S.A. v. (Canadian) (Egyptian)* Argentine Republic Available at Decision of August 10, 2010 http://italaw.com Gabrielle Kaufmann-Kohler Andreas J. Jacovides (Cypriot) Separate Opinion by Jan Hendrik ARB/97/3- (English and Spanish) (Swiss) Dalhuisen Resubmission Jan Hendrik Dalhuisen (Dutch) Carlos Bernal Verea Available at (Mexican)* http://italaw.com (Vivendi II) (English and Spanish) 9. Víctor Pey Casado and President Allende Award of May 8, 2008 Pierre Lalive (Swiss) L. Yves Fortier (Canadian) Pending Foundation v. Republic of Chile Available at Mohammed Chemloul Piero Bernardini (Italian) http://italaw.com (Algerian)* ARB/98/2 (French and Spanish) Ahmed Sadek El-Kosheri Emmanuel Gaillard (French) (Egyptian)* (Pey Casado) 3 10. Wena Hotels Limited v. Arab Republic of Award of December 8, 2000 Monroe Leigh (U.S.) Konstantinos D. Kerameus Annulment rejected Egypt (Greek) Available at Ibrahim Fadlallah Decision of February 5, 2002 ARB/98/4 http://italaw.com (Lebanese*/French) Andreas Bucher (Swiss) (English) Available at Don Wallace, Jr. (U.S.) Francisco Orrego Vicuña http://italaw.com (Chilean)* (English); Unofficial French translation in 130 J. Droit Int’l 167 (Wena) (2003) 11. Philippe Gruslin v. Malaysia Award of November 28, 2000 Thomas Buergenthal (U.S.) Discontinued (Administrative and Gavan Griffith (Australian) Financial Regulation 14(3)(d)) ARB/99/3 Available at Kamal Hossain (Bangladeshi)* http://italaw.com (English) Gabrielle Kaufmann-Kohler (Gruslin) (Swiss) 12. Patrick Mitchell v. Democratic Republic of Award of February 9, 2004 Andreas Bucher (Swiss) Antonias C. Dimolitsa (Greek) Annulled in full the Congo Unpublished (excerpts Yawovi Agboyibo Robert S.M. Dossou (Beninese)* Decision of November 1, 2006 ARB/99/7 forthcoming) (Togolese)* Andrea Giardina (Italian) Available at Marc Lalonde (Canadian) http://italaw.com (English); French version in 2 La (Mitchell) Juris. du CIRDI 333 (2010) 13. Consortium R.F.C.C. v. Kingdom of Morocco Award of December 22, 2003 Robert Briner (Swiss) Bernard Hanotiau (Belgian) Annulment rejected ARB/00/6 Available at Bernardo M. Cremades Arghyrios A. Fatouros (Greek) Decision of January 18, 2006 http://icsid.worldbank.org (Spanish) (French) Franklin Berman (British) Available at Ibrahim Fadlallah 26 ICSID Rev.— FILJ 196 (2011) (RFCC) (Lebanese*/French) (French; excerpts) 4 14. Enron Creditors Recovery Corporation Award of May 22, 2007 Francisco Orrego Vicuña Gavan Griffith (Australian) Annulled in part (formerly Enron (Chilean)* Corporation) and Available at Patrick L. Robinson (Jamaican)* Decision of July 30, 2010 Ponderosa Assets, L.P. http://italaw.com Albert Jan Van den Berg v. Argentine Republic (English); Spanish version (Dutch) Per Tresselt (Norwegian) Available at unpublished http://italaw.com ARB/01/3 Pierre-Yves Tschanz (English); Spanish version (Swiss/Irish) unpublished (Enron) 15. MTD Equity Sdn. Bhd. and MTD Chile Award of May 25, 2004 Andrés Rigo Sureda Gilbert Guillaume (French) Annulment rejected S.A. v. Republic of (Spanish) Chile Available at James R. Crawford (Australian) Decision of March 21, 2007 http://italaw.com Marc Lalonde (Canadian) ARB/01/7 (English); Spanish version Sara Ordoñez Noriega Available at unpublished Rodrigo Oreamuno (Costa (Colombian)* http://italaw.com Rican)* (English and Spanish); Unofficial French translation in 2 La Juris. (MTD) CIRDI 385 (2010) (excerpts)_ 16. CMS Gas Transmission Company Award of May 12, 2005 Francisco Orrego Vicuña Gilbert Guillaume (French) Annulled in part v. Argentine Republic (Chilean)* Available at Nabil Elaraby (Egyptian)* Decision of September 25, 2007 ARB/01/8 http://icsid.worldbank.org Marc Lalonde (Canadian) (English and Spanish); James R. Crawford (Australian) Available at Unofficial French translation Francisco Rezek (Brazilian)* http://icsid.worldbank.org in 2 La Juris. du CIRDI 177 (English and Spanish); Unofficial (2010) (excerpts) French translation in 2 La Juris. du (CMS) CIRDI 413 (2010) (excerpts) 5 17. Repsol YPF Ecuador S.A. v. Empresa Estatal Award of February 20, 2004 Rodrigo Oreamuno (Costa Judd L. Kessler (U.S.) Annulment rejected Petróleos del Ecuador Rican)* (Petroecuador) Available at Piero Bernardini (Italian) Decision of January 8, 2007 26 ICSID Rev.— FILJ 231 Eduardo Carmigniani ARB/01/10 (2011) (Spanish; excerpts) Valencia (Ecuadorian)* Gonzalo Biggs (Chilean)* Available at http://icsid.worldbank.org (Spanish Alberto Wray Espinosa and unofficial English translation); (Ecuadorian)* Unofficial French translation in 2 La Juris. du CIRDI 375 (2010) (Repsol) (excerpts) 18. Azurix Corp. v. Argentine Republic Award of July 14, 2006 Andrés Rigo Sureda Gavan Griffith (Australian) Annulment rejected (Spanish) ARB/01/12 Available at Bola Ajibola (Nigerian)* Decision of September 1, 2009 http://icsid.worldbank.org Marc Lalonde (Canadian) (English and Spanish) Michael Hwang (Singaporean) Available at Daniel H. Martins http://icsid.worldbank.org (Azurix) (Uruguayan)* (English and Spanish) 19. LG&E Energy Corp., LG&E Capital Corp. and Award of July 25, 2007 Tatiana Bogdanowsky de Pending Pending LG&E International Inc. Maekelt (Venezuelan)* v. Argentine Republic Available at http://icsid.worldbank.org Francisco Rezek (Brazilian)* ARB/02/1 (English and Spanish) Albert Jan van den Berg (LGE) (Dutch) 6 20. Hussein Nuaman Soufraki v. United Arab Award of July 7, 2004 L. Yves Fortier (Canadian) Florentino P. Feliciano Annulment rejected Emirates (Philippine)* Available at Aktham El Kholy Decision of June 5, 2007 ARB/02/7 http://italaw.com (Egyptian)* Omar Nabulsi (Jordanian)* Dissenting Opinion by Omar (English) Nabulsi Stephen M. Schwebel (U.S.) Brigitte Stern (French) Available at http://icsid.worldbank.org (English); Unofficial French translation in 2 La Juris. du CIRDI (Soufraki) 395 (2010) (excerpts) 21. Siemens A.G. v. Argentine Republic Award of February 6, 2007 Andrés Rigo Sureda Gilbert Guillaume (French) Discontinued (Rule 43(1)) (Spanish) ARB/02/8 Available at Florentino P. Feliciano http://italaw.com Charles N. Brower (U.S.) (Philippine)* (English); Spanish version unpublished Domingo Bello Janeiro Mohamed Shahabuddeen (Siemens) (Spanish) (Guyanese)* 22. CDC Group plc v. Republic of Seychelles Award of December 17, 2003 Anthony Mason (Australian) Charles N. Brower (U.S.) Annulment rejected ARB/02/14 Available at Michael Hwang (Singaporean) Decision of June 29, 2005 http://icsid.worldbank.org (English) David A. R. Williams (New Available at Zealand) http://www.investmentclaims.com (CDC) (English) 23. Ahmonseto, Inc. and others v. Arab Republic Award of June 18, 2007 Pierre Tercier (Swiss) Piero Bernardini (Italian) Discontinued (Administrative and of Egypt Financial Regulation 14(3)(d) and Available at Ibrahim Fadlallah Azzedine Kettani (Moroccan)* (e)) ARB/02/15 23 ICSID Rev.— FILJ 356 (Lebanese*/French) (2008) (English; excerpts) Peter Tomka (Slovak)* (Ahmonseto) Alain Viandier (French) 7 24. Sempra Energy International v. Award of September 28, 2007 Francisco Orrego Vicuña Christopher Söderlund Annulled in full Argentine Republic (Chilean)* (Swedish) Available at Decision of June 29, 2010 ARB/02/16 http://icsid.worldbank.org Marc Lalonde (Canadian) David A.O. Edward (British) (English and Spanish) Available at Sandra Morelli Rico Andreas J. Jacovides (Cypriot) http://icsid.worldbank.org (Sempra) (Colombian)* (English and Spanish) 25. Industria Nacional de Alimentos, S.A. and Award of February 7, 2005 Thomas Buergenthal (U.S.) Hans Danelius (Swedish) Annulment rejected Indalsa Perú, S.A. (formerly Empresas Available at Jan Paulsson (French) Andrea Giardina (Italian) Decision of September 5, 2007 Lucchetti, S.A. and http://icsid.worldbank.org Dissenting Opinion by Franklin Lucchetti Perú, S.A.) v. (English and Spanish) Bernardo M. Cremades Franklin Berman (British) Berman Republic of Peru (Spanish) Available at ARB/03/4 http://icsid.worldbank.org (English and Spanish); Unofficial French translation in 2 La Juris. du (Lucchetti) CIRDI 407 (2010) (excerpts) 26. M.C.I. Power Group, L.C. and New Turbine, Award of July 31, 2007 Raúl E. Vinuesa Dominique Hascher (French) Annulment rejected Inc. v. Republic of (Argentine)* Ecuador Available at Hans Danelius (Swedish) Decision of October 19, 2009 http://italaw.com Benjamin J. Greenberg ARB/03/6 (English and Spanish) (Canadian) Peter Tomka (Slovak)* Available at http://icsid.worldbank.org Jaime C. Irarrázabal (English and Spanish) (MCI) (Chilean)* 8 27. Continental Casualty Company v. Argentine Award of September 5, 2008 Giorgio Sacerdoti (Italian) Gavan Griffith (Australian) Annulment rejected Republic Available at V.V. Veeder (British) Bola Ajibola (Nigerian)* Decision of September 16, 2011 ARB/03/9 http://italaw.com (English); Spanish version Michell Nader (Mexican)* Christopher Söderlund Available at unpublished (Swedish) http://icsid.worldbank.org (Continental Casualty) (English and Spanish) 28. Joy Mining Machinery Limited v. Award of August 6, 2004 Francisco Orrego Vicuña Antonias C. Dimolitsa (Greek) Discontinued (Rule 43(1)) Arab Republic of Egypt (Chilean)* Available at Michael Hwang (Singaporean) ARB/03/11 http://icsid.worldbank.org C.G. Weeramantry (Sri (English); Unofficial French Lankan)* José Luis Shaw (Uruguayan)* translation in 132 J. Droit Int’l 163 (2005) (excerpts) William Laurence Craig (Joy Mining) (U.S.) 29. El Paso Energy International Company Award of October 31, 2011 Lucius Caflisch (Swiss) Rodrigo Oreamuno (Costa Pending v. Argentine Republic Rican)* Available at Piero Bernardini (Italian) ARB/03/15 http://italaw.com Teresa Cheng (Chinese)* (English and Spanish) Brigitte Stern (French) (El Paso) Rolf Knieper (German) 30. Fraport AG Frankfurt Airport Award of August 16, 2007 L. Yves Fortier (Canadian) Peter Tomka (Slovak)* Annulled in full Services Worldwide v. Republic of the Available at Bernardo M. Cremades Dominique Hascher (French) Decision of December 23, 2010 Philippines http://italaw.com (Spanish) (English) Campbell McLachlan (New Available at ARB/03/25 W. Michael Reisman (U.S.) Zealand) http://italaw.com (English) (Fraport) 9 31. Duke Energy International Peru Award of August 18, 2008 L. Yves Fortier (Canadian) Campbell McLachlan (New Annulment rejected Investments No. 1 Ltd. v. Zealand) Republic of Peru Available at: Guido Santiago Tawil Decision of March 1, 2011 http://investmentclaims.com (Argentine)* Dominique Hascher (French) ARB/03/28 (English) Available at Pedro Nikken (Venezuelan)* Peter Tomka (Slovak)* http://investmentclaims.com (Duke Energy) (English) 32. Compagnie d'Exploitation du Award of March 7, 2008 Ibrahim Fadlallah Franklin Berman (British) Annulment rejected Chemin de Fer (Lebanese*/French) Transgabonais v. Available at Ahmed Sadek El-Kosheri Decision of May 11, 2010 Gabonese Republic 26 ICSID Rev.— FILJ 181 Charles Jarrosson (French) (Egyptian)* (2011) (French; excerpts) Available at ARB/04/5 Michel Gentot (French) Rolf Knieper (German) 26 ICSID Rev.— FILJ 214 (2011) (French; excerpts) (Transgabonais) 33. Sociedad Anónima Eduardo Vieira v. Award of August 21, 2007 Claus von Wobeser Christopher Söderlund Annulment rejected Republic of Chile (Mexican)* (Swedish) Available at Decision of December 10, 2010 ARB/04/7 http://icsid.worldbank.org Susana B. Czar de Zalduendo Piero Bernardini (Italian) (Spanish) (Argentine)* Available at Eduardo Silva Romero http://icsid.worldbank.org (Vieira) W. Michael Reisman (U.S.) (Colombian*/French) (Spanish) 10 34. Malaysian Historical Salvors, SDN, BHD Award of May 17, 2007 Michael Hwang Stephen M. Schwebel (U.S.) Annulled in full v. Malaysia (Singaporean) Available at Mohamed Shahabuddeen Decision of April 16, 2009 ARB/05/10 http://icsid.worldbank.org (Guyanese)* Dissenting Opinion by Mohamed (English) Shahabuddeen* Peter Tomka (Slovak)* Available at http://icsid.worldbank.org (English) Unofficial French translation in 2 La Juris. du CIRDI (MHS) 559 (2010) (excerpts) 35. RSM Production Corporation v. Grenada Award of March 13, 2009 V.V. Veeder (British) Gavan Griffith (Australian) Discontinued (Administrative and Financial Regulation 14(3)(d) and ARB/05/14 Available at Bernard Audit (French) Cecil W.M. Abraham (e)) http://investmentclaims.com (Malaysian)* (English) David Berry (Canadian) Campbell McLachlan (New (RSM v. Grenada) Zealand) 36. Waguih Elie George Siag and Clorinda Award of June 1, 2009 David A.R. Williams (New Stephen M. Schwebel (U.S.) Discontinued (Rule 45) Vecchi v. Arab Republic Zealand) of Egypt Available at Azzedine Kettani (Moroccan)* http://italaw.com Francisco Orrego Vicuña ARB/05/15 (English) (Chilean)* Peter Tomka (Slovak)* Michael C. Pryles (Siag) (Australian) 11 37. Rumeli Telekom A.S. and Telsim Mobil Award of July 29, 2008 Bernard Hanotiau (Belgian) Stephen M. Schwebel (U.S.) Annulment rejected Telekomunikasyon Hizmetleri A.S. v. Available at Stewart Boyd (British) Campbell McLachlan (New Decision of March 25, 2010 Republic of Kazakhstan http://italaw.com Zealand) (English) Marc Lalonde (Canadian) Available at ARB/05/16 Eduardo Silva Romero http://italaw.com (Colombian*/French) (English) (Rumeli) 38. Ioannis Kardassopoulos v. Award of March 3, 2010 L. Yves Fortier (Canadian) Dominique Hascher (French) Discontinued (Rule 43(1)) Georgia Available at Francisco Orrego Vicuña Cecil W.M. Abraham ARB/05/18 http://italaw.com (Chilean)* (Malaysian)* (English) Vaughan Lowe (British) Karl-Heinz Böckstiegel (Kardassopoulos) (German) 39. Helnan International Hotels A/S v. Arab Award of July 3, 2008 Yves Derains (French) Stephen M. Schwebel (U.S.) Annulled in part Republic of Egypt Available at Michael J.A. Lee (British) Bola Ajibola (Nigerian)* Decision of June 14, 2010 ARB/05/19 http://icsid.worldbank.org (English) Rudolf Dolzer (German) Campbell McLachlan (New Available at Zealand) http://icsid.worldbank.org (Helnan) (English) 40. Togo Electricité and GDF-Suez Energie Award of August 10, 2010 Ahmed Sadek El-Kosheri Albert Jan van den Berg Annulment rejected Services v. Republic of (Egyptian)* (Dutch) Togo Available at Decision of September 6, 2011 http://icsid.worldbank.org Marc Gruninger (Swiss) Franklin Berman (British) ARB/06/7 (French) Available at Marc Lalonde (Canadian) Rolf Knieper (German) http://icsid.worldbank.org (Togo Electricité ) (French) 12 41. Libananco Holdings Co. Limited v. Republic Award of September 2, 2011 Michael Hwang Andrés Rigo Sureda (Spanish) Pending of Turkey (Singaporean) Available at Hans Danelius (Swedish) ARB/06/8 http://icsid.worldbank.org Henri C. �lvarez (Canadian) (English) Eduardo Silva Romero (Libananco) Franklin Berman (British) (Colombian*/French) 42. Joseph C. Lemire v. Ukraine Award of March 28, 2011 Juan Fernández-Armesto Claus von Wobeser Pending (Spanish) (Mexican)* ARB/06/18 Available at http://italaw.com Jan Paulsson (French) Azzedine Kettani (Moroccan)* (English) (Lemire) Jurgen Voss (German) Eduardo Zuleta (Colombian)* 43. Nations Energy, Inc. and others v. Republic Award of November 24, 2010 Alexis Mourre (French) Stanimir A. Alexandrov Discontinued (Administrative and of Panama (Bulgarian)* Financial Regulation 14(3)(d) and Available at José María Chillón Medina (e)) ARB/06/19 http://italaw.com (Spanish) Jaime C. Irarrázabal (Chilean)* (Spanish) Claus von Wobeser Enrique Gómez-Pinzón (Nations) (Mexican)* (Colombian)* 44. RSM Production Corporation v. Central Award of July 11, 2011 Azzedine Kettani Bernardo M. Cremades Pending African Republic (Moroccan)* (Spanish) Unpublished ARB/07/2 Philippe Merle (French) Abdulqawi Ahmed Yusuf (Somali)* Brigitte Stern (French) Fernando Mantilla-Serrano (RSM) (Colombian)* 13 45. Tza Yap Shum v. Republic of Peru Award of July 7, 2011 Judd L. Kessler (U.S.) Dominique Hascher (French) Pending ARB/07/6 Available at Hernando Otero Donald M. McRae (Canadian) http://italaw.com (Colombian)* (Spanish) David A.R. Williams (New Juan Fernández-Armesto Zealand) (Shum) (Spanish) 46. Ron Fuchs v. Georgia Award of March 3, 2010 L. Yves Fortier (Canadian) Dominique Hascher (French) Discontinued (Rule 43(1)) ARB/07/15 Available at Francisco Orrego Vicuña Cecil W. M. Abraham http://italaw.com (Chilean)* (Malaysian)* (English) Vaughan Lowe (British) Karl-Heinz Böckstiegel (Fuchs) (German) 47. Impregilo S.p.A. v. Argentine Republic Award of June 21, 2011 Hans Danelius (Swedish) Rodrigo Oreamuno (Costa Pending Rican)* ARB/07/17 Available at Charles N. Brower (U.S.) http://icsid.worldbank.org Eduardo Zuleta (Colombian)* (English and Spanish) Brigitte Stern (French) (Impregilo) Teresa Cheng (Chinese)* 48. AES Summit Generation Limited and Award of September 23, 2010 Claus von Wobeser Bernard Hanotiau (Belgian) Annulment rejected AES-Tisza Erömü Kft. v. (Mexican)* Republic of Hungary Available at Rolf Knieper (German) Decision of June 29, 2012 http://icsid.worldbank.org J. William Rowley ARB/07/22 (English) (Canadian) Abdulqawi Ahmed Yusuf Available at http://italaw.com (Somali)* (English) (AES) Brigitte Stern (French) 14 49. SGS Société Générale de Surveillance S.A. v. Award of February 10, 2012 Stanimir A. Alexandrov Pending Pending Republic of Paraguay (Bulgarian)* Available at ARB/07/29 http://italaw.com Donald Donovan (U.S.) (English and Spanish) (SGS v. Paraguay) Pablo García Mexía (Spanish) 50. Astaldi S.p.A. v. Republic of Honduras Award of September 17, 2010 Eduardo Sancho González Juan Fernández-Armesto Discontinued (Rule 43(1)) (Costa Rican)* (Spanish) ARB/07/32 Available at http://investmentclaims.com Jaime C. Irarrázabal (Chilean)* (Spanish) Eduardo Silva Romero (Astaldi) (Colombian*/French) 51. ATA Construction, Industrial and Trading Award of May 18, 2010 L. Yves Fortier (Canadian) Gilbert Guillaume (French) Discontinued (Rule 44) Company v. Hashemite Kingdom of Jordan Available at Ahmed Sadek El-Kosheri Juan Fernández-Armesto http://icsid.worldbank.org (Egyptian)* (Spanish) ARB/08/2 (English) W. Michael Reisman (U.S.) Bernard Hanotiau (Belgian) (ATA) 52. Malicorp Limited v. Arab Republic of Egypt Award of February 7, 2011 Pierre Tercier (Swiss) Andrés Rigo Sureda (Spanish) Pending ARB/08/18 Available at Luiz Olavo Baptista Stanimir A. Alexandrov http://icsid.worldbank.org (Brazilian)* (Bulgarian)* (English and French) Pierre-Yves Tschanz Eduardo Silva Romero (Malicorp) (Swiss/Irish) (Colombian*/French) 15 53. Commerce Group Corp. and San Sebastian Award of March 14, 2011 Albert Jan van den Berg Emmanuel Gaillard (French) Pending Gold Mines, Inc. v. (Dutch) Republic of El Salvador Available at Michael C. Pryles (Australian) http://icsid.worldbank.org Horacio A. Grigera Naón ARB/09/17 (English and Spanish) (Argentine)* Christoph H. Schreuer (Austrian) J. Christopher Thomas (Commerce Group) (Canadian) 16 Annex 2 Republic of Philippines ®fffu of tfj £~olfcftOt ~enetnl 27 June 2011 Members of the Administrative Council International Centre for Settlement of Investment Disputes 1818 H Street NW Washington, D.C. 20433 Dear Members of the Administrative Council: The Republic of the Philippines submits this letter to draw to the Council's attention the seriously flawed decision dated December 23, 2010 of the ICSID ad hoc Committee (the "Annulment Decision") annulling the arbitral award issued on August 16,2007 (the "Award") in Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines, ICSID Case No. ARB/03/25. The Annulment Decision was taken in excess of the ad hoc Committee's limited power under Article 52 of the ICSID Convention and, as such, stands as a threat to the continued utility and acceptance of the ICSID arbitration system. As a party to the arbitration, the Philippines obviously is deeply disappointed by the Annulment Decision, as it annulled the product of four years of work before a stellar Tribunal to which considerable resources had been devoted to obtain final resolution for both parties of a costly and disruptive dispute. As a Contracting State to the ICSID Convention, the Philippines is gravely concerned that the Annulment Decision is further evidence of a systemic problem of ICSID ad hoc committees failing to adhere to the mandate established in Article 52 of the ICSID Convention. I For the reasons elaborated further below, the Philippines, therefore, resrectfully urges the Council to exercise its authority under Article 6(3) of the ICSID Convention to issue guidelines 1 The recent annulment decisions in Sempra Energy Int'J v. Argentine Republic, ICSID Case No. ARB/021J6 (Decision on Annulment dated June 29, 2010) and in Enron Corp. Ponierosa Assets v. Argentine RepubJic, ICSID Case No. ARB/O 113 (Decision on Annulment dated July 30, 2010) in particular have attracted similar serious concerns. See, e.g., Promod Nair and Claudia Ludwig, ICSID annulment awards: the fourth generation? Global Arbitration Review, 28 Oct. 2010 (noting that following criticism of the recent Sempra, Enron, Helnan and Vivendi II annulment decisions, there have been "reiterated calls for the reform of the ICSID annulment regime"); Markus BurgstaJler and Charles B. Rosenberg, Challenging International Arbitral Awards: To ICSID or not to ICSID?, Arbitration International, (Kluwer Law International 2011 Volume 27 Issue I), at 91-108 (noting that following recent annulment decisions, "investors and their counsel may choose to avoid ICSID arbitration because under the ICSID Convention there are more comprehensive possibilities to annul awards than under most developed legal systems ...... ). regarding the remedy of annulment, as a necessary measure to ensure implementation of Article 52 of the ICSID Convention in accordance with its provisions. Summary Annulment as established in Article 52 of the ICSID Convention is an extraordinary remedy. The very high threshold for invoking annulment in Article 52-"corruption" by an arbitrator, "manifest excess" of power, and "serious departure" from a fundamental rule of procedure­ reflects its intentionally limited nature. Those limits serve to promote the finality of awards and confidence in ICSID as an effective system for dispute resolution. An Article 52 committee has the authority to undo, potentially entirely, the work of an arbitral tribunal. The ICSID Convention provides no recourse against the decision of an Article 52 committee. The importance of proper implementation of Article 52 therefore is evident. Yet nearly one third of all ICSID arbitral awards have been subjected to annulment proceedings. Eleven of 41 annulment applications have resulted in annulment, with 8 pending to date. Significantly, 8 of the 11 annulments were rendered in the past 10 years. These high figures must be of concern. Users of the ICSID system must be able to rely on the efficacy of the system, and centrally, on the finality of awards. The Annulment Decision in the dispute between Fraport and the Philippines is an unfortunate illustration of a failure to adhere to the Article 52 mandate and thus of the need for guidance for ad hoc committees to ensure the implementation of Article 52 in accordance with its provisions. The Award The Award in question was rendered by an ICSID Tribunal that by majority held it lacked jurisdiction over the claims asserted by Fraport pursuant to the bilateral investment treaty between Germany and the Philippines. In the Tribunal's view, which was accepted by the Committee, the treaty's protections applied only to investments that were in compliance with the law of the host state at the initiation of the investment. Regarding Fraport's investment, the Tribunal concluded that'that"Fraport knowingly and intentionally had structured its investment to circumvent a Philippine law known as the Anti Dummy Law and therefore did not fall within the scope of the treaty's protections. Section 1 of the Anti Dummy Law requires entities deemed to be public utilities to have at least 60 percent Philippine equity ownership. Section 2A prohibits intervention by non-Philippine entities in the administration, management, operation and control of a Philippine public utility. The Tribunal concluded that Fraport had intervened in the management and control of PIATCO, the company that held the concession that was deemed to be a public utility under Philippine law, at the initiation of its investment, and thus violated Section 2A of the Anti Dummy Law. The Tribunal reached this conclusion after considering extensive evidence, witness testimony and oral argument in light of its appreciation for the development of the evidence during a long 2 Article 6(3) of the ICSID Convention provides that the Administrative Council "shall exercise such other powers and perform such other functions as it shall determine to be necessary for the implementation of the provisions of this Convention." 2 proceeding. The Tribunal reached its conclusions with ample opportunity to examine credibility after fifteen days of oral hearings with witnesses, examination of thousands of documents, and eleven written submissions over four years. The Tribunal noted that Fraport's own internal documents showed that Fraport had consciously, intentionally and covertly structured its investment in violation of the Anti Dummy Law and that the relevant facts, found in Fraport's own documents, were incontrovertible. The Annulment Decision The Ad Hoc Committee annulled the Award for reasons not advanced by either party and announced for the first time in the Annulment Decision. The Committee concluded that the Tribunal had seriously violated a fundamental rule of procedure by failing to invite further submissions from the parties on a late-occurring legal development that the Committee pronounced to be of central relevance to the Award and to the Tribunal's application of the Anti DurnmyLaw. That development was a resolution issued by a Philippine State Prosecutor. It dismissed private criminal complaints that alleged violations of both sections of the Anti Dummy Law by various defendants, including Fraport officials. The Committee concluded that the Prosecutor's Resolution was a critical legal authority because it showed how Philippine authorities applied the Anti Dummy Law-a line of reasoning that neither of the parties had proffered. Without the benefit ofhem;ng from the parties, the Committee conducted its own analysis of the Prosecutor's Resolution as evidence of the application of the Anti Dummy Law. It concluded that the Tribunal's application of the Anti Dummy Law in the Award was not in accord with the analytic framework described in the Prosecutor's Resolution. Accordingly, in the Committee's view, the Tribunal's ruling against Fraport in the Award was based upon an understanding of Philippine law that had been rejected by the Philippine authorities. This conclusion was wrong. Analytically, the Award was fully consistent with the description of the Anti Dummy Law set out in the Prosecutor's Resolution, which addressed a violation of Section I of the Anti Dummy Law and not, as the Committee mistakenly concluded, a violation of Section 2A. Moreover, without question, the Tribunal applied international and Philippine law to reach its conclusion. Under the guise of a serious departure from a fundamental rule of procedure, the ad hoc Committee effectively applied an appellate standard to set aside what it implicitly concluded was based on an incomplete and mistaken view of Philippine law. Thus the Committee concluded there was a basis to annul where none existed. Moreover, by not seeking submissions from the parties on this question, which the Committee considered to be the most troubling issue before it, the Committee denied .due process and caused a serious and costly miscarriage ofjustice. The Committee's additional conclusion that the Tribunal seriously violated a fundamental rule of procedure because it failed to give the parties a further opportunity to address the state of the record before the Prosecutor is also flawed. The record does not support the conclusion that additional submissions by Fraport on this point, following the six letters Fraport and the Government of the Republic of the Philippines submitted to the Tribunal on the Prosecutor's Resolution, would have altered the Tribunal's assessment of the evidence that was before the 3 -.------ .. --------- -_. Prosecutor. Therefore there was no serious departure from a fundamental fllie of procedure: the Committee misapplied the Article 52 standard. The Annulment Decision is also objectionable because the Ad Hoc Committee criticized the Award on grounds that were not relevant to its decision to annul and not found to be a basis to annul, notably regarding the Tribunal's construction of Article 1(1) of the bilateral investment trea~y. The Committee's criticism may imply that the Committee considered the Tribunal's construction of the treaty. although not a manifest excess of power, to be mistaken. The Committee's mandate, however, is not to sit as an appellate court or to provide purportedly corrective commentary on points fully litigated between the parties and on which there is no basis to annul. Such practice serves only to undermine the legitimacy of a Tribunal's determination and is destructive of the ICSID system. There are profound consequences to the ICSID system quite apart from the significant consequences of this annulment for the Philippines, which now faces the continuation of a dispute that has been resubmitted to arbitration. If the Award in this case could be annulled for a purported failure to observe the right to be heard based on a committee's reassessment of the evidence after four years of contentious proceedings and submissions, there are few cases in which a similar procedural basis for annulment could not be found. Annulment proceedings should not serve as an incentive to losing parties to seek annulment. ICSID must address the problem presented by the annulment mechanism as it is currently being applied in order to remain a credible system of dispute resolution. The Philippines urges the Administrative Council to consider seriously the need for guidance to ad hoc committees as set forth herein. The Extraordinary Nature o/the Annulment Remedy and the Authority 0/ an Article 52 Committee As a necessary control mechanism, the ICSID Convention includes the possibility to obtain annulment as a safeguard against seriously flawed arbitration awards. The remedy is established in Article 52 of the ICSID Convention. 3 The nature of the specified grounds, including "corruption" by an arbitrator, "manifest excess" of power, and "serious departure" from a fundamental rule of procedure, signifies that annulment is a remedy only for obvious failings by the tribunal or other egregious circumstances that if left standing would undermine ICSID as a just means of dispute resolution that the Contracting Parties to the Convention could accept. Accordingly, Aron Broches, the principal architect of the ICSID Convention, and the first Secretary-General of ICSID and General Counsel of the World Bank, underscored that the remedy of annulment under Article 52 is "extraordinary and narrowly circumscribed.,,4 J Article 52 pennits annulment of an arbitral award only on the basis of the following grounds: "(a) that the Tribunal was not properly constituted; (b) that the Tribunal has manifestly exceeded its powers; (c) that there was corruption on the part of a member of the Tribunal; (d) that there has been a serious departure from a fundamental rule of procedure; or (e) that the award has failed to state the reasons on which it is based." 4 Aron Broches, Observations on the Finality o/ICS/D Awards. 6 ICSID Rev.-FILJ 321, 327 (1991). See also Christoph Schreuer, et a1.. The ICSID Convention: A Commentary 903 (2009) ("[Annulment] is designed to provide 4 Article 52 establishes a very high threshold for annulment in view of the extraordinary nature of the remedy, which is to set aside the work of the arbitral tribunal, leaving the parties with the option only of resubmitting the dispute to a new tribunal. Annulment was intentionally limited in scope in order to promote the finality of awards and confidence in ICSID as an effective system for dispute resolution. Given that an Article 52 committee has the authority to undo, potentially entirely, the work of an arbitral tribunal, and that the ICSID Convention provides no recourse whatsoever against the de~ision of an Article 52 committee, the importance of proper implementation of Article 52 is evident. For that reason, former ICSID Secretary-General Ibrahim F.I. Shihata, in a Report to the Administrative Council submitted in 1986, underscored that Article 52 must be implemented so as to ensure that the remedy of annulment is applied as intended within its very narrow scope and is clearly distinguished from an appeal. s Mr. Shihata observed that if Article 52 is implemented to permit annulment when the ad hoc committee concludes that the award is incorrect on a point of fact or law, it will undermine the ICSID system. According to Mr. Shihata, "The danger thus exists that if parties, dissatisfied with an award, make it a practice to seek annulment, the effectiveness of the ICSID machinery might become questionable and both investors and Contracting States might be deterred from making use ofiCSID arbitration.,,6 These concerns remain today. During the period between 1971 and 2010, 127 ICSID Convention awards were issued and 41 applications for annulment were registered. That is, nearly one-third ofall ICSID arbitral awards have been subjected to annulment proceedings. Of the 41 applications, 11 have resulted in annulment and 8 remain pending to date. 7 Of the annulments, most striking is that 8 of the 11 annulments were rendered in the past 10 years. These high figures must be of concern to ICSID, as users of the Convention must be able to rely on the efficacy of the system, centrally including the finality of awards. The Fraport Annulment Decision The Annulment Decision is an unfortunate illustration of the need for guidance for ad hoc committees to ensure the implementation of Article 52 in accordance with its provisions. In addition to criticizing the Award on grounds for which the Ad Hoc Committee concluded there was no basis to annul and that were not relevant to its decision to annul, and thus signaling its apparent disagreement with the conclusions reached in the Award, as if its mandate included providing such purported corrective commentary, the Ad Hoc Committee decided to annul the emergency relief for egregious violations of a few basic principles while preserving the finality of the decision in most respects. Art. 52 follows this model of a limited review process."). 3 Report of the Secretary-General (Ibrahim F.1. Shihata) to the Administrative Council of ICSID, ICSID Doc. No. Ac/86/4, Annex A, at 3 (2 Oct. 1986) in vol. 2 International Arbitration Report (Feb. 1987). 6 Report of the Secretary-General (Ibrahim F.1. Shihata) to the Administrative Council of ICSID, ICSID Doc. No. Ac/86/4, Annex A, at 2 (2 Oct. 1986) in vol. 2 International Arbitration Report (Feb. 1987). 7 ICSID Case load - Statistics, Issue 2011-1, at 15; List of ICSID Cases, available at http://icsid.worldbank.orglICSID. 5 Award sua sponte for reasons not advanced by either party and announced for the first time in the Annulment Decision itself. The Ad Hoc Committee thus denied the parties due process with respect to the annulment, as neither party had the opportunity to address the alleged ground justifying annulment of the Award. More egregious still, the Ad Hoc Committee's decision was premised on a mistaken assessment as to the content of the legal development that was the focus of its analysis. That is, having failed to advise the parties of the ground it was considering as a basis for annulment, and thus without the benefit of the parties' observations on the issue, the Committee concluded that the Tribunal seriously violated a fundamental rule of procedure by failing to invite further submissions from either of the parties on a late-occurring legal development that the Committee concluded was of central relevance to the Award. The Committee's assessment of that legal development, however, was wrong as a matter of fact, leading to a gross miscarriage of justice. The new development, a prosecutor's resolution, did not address the point of law that the Committee wrongly' concluded was at issue, which explains why the Tribunal concluded it was irrelevant and why annulment was not sought on that basis. Thus, the Committee recklessly concluded there was a basis to arlnul where none existed. The Award On August 16, 2007, the Tribunal composed of L. Yves Fortier (President), Dr. Bernardo Cremades, and Professor W. Michael Reisman, by majority,S rendered the Award holding that it lacked jurisdiction over claims asserted by Fraport AG Frankfurt Airport Services Worldwide ("Fraport") under the bilateral investment treaty between Germany and the Philippines9 (the "BIT" or "treaty"). The Tribunal concluded that Article 1(1) of the BIT limited the scope of the treaty's protections to investments that were in compliance with the law of the host state at the initiation of the investment. 10 After extensive review of the evidence, the Tribunal concluded that Fraport had structured its investment "knowingly and intentionally" in circumvention of Philippine law. ll The Tribunal found that Fraport "consciously concealed"12 the violation, that Fraport's "comportment .,,' as is clear from its own records was egregious,"13 that the evidence of wrongdoing was "incontrovertible;,,14 and therefore that Fraport "cannot claim to have made an investment 'in accordance with law'" under the terms of the BIT. IS 8 Dr. Cremades dissented from the Award. 9 Agreement between the Federal Republic of Germany and the Republic of the Philippines for the Promotion and Reciprocal Protection of Investments, done at Bonn on 18 April 1997 and entered into force on February 2, 2000. 10 Award 1 345. II Award 1 401. 12 Award 1387. 13 Award p97. 14 Award, 399. 15 Award, 401. 6 . "--- .- ... -----­ The Tribunal's findings were based upon its familiarity with both the content and the development of the evidentiary record over the course of the case, including in particular, following Fraport's resistance to producing evidence in certain categories. The record eventually included eleven full written submissions supported by more than 32 witness statements, 30 expert reports and legal opinions, 1,100 exhibits and 440 legal authorities. The Tribunal also assessed in person the credibility of the 16 witnesses and' experts who were subject to ex'amination during the course of an II-day hearing, as well as the credibility and reliability of the parties themselves as they presented their respective cases over four years of proceedings. The Philippine law at issue was Commonwealth Act No. 108, otherwise known as the Anti Dummy Law, which applied to Fraport's investment in PIATCO, the company that held the concession for a public utility under Philippine law. There are two distinct and autonomous modes of violation of the Anti Dummy Law: one is a disregard of the nationality requirement, which restricts public utilities to Philippine nationals, and in the case of companies, to companies with at least 60 percent Philippine equity ownership (Section 1 of the Law). The second and distinct violation of the Anti Dummy Law consists of disregard of the prohibition of intervention by non-Philippine entities in the administration, operation, management and control of a Philippine public utility (Section 2A of the Law). 16 Although the Philippines had argued that Fraport's investment violated the Anti Dummy Law in both respects (Section 1 and Section 2A), the Tribunal rejected that argument. The Tribunal expressly concluded that Fraport's equity investment did not exceed the statutorily determined level of investment permitted to a foreign investor in a public utility, and likewise rejected other arguments put forward by the Philippines, such as that Fraport "loaned too much" to PIATCO or otherwise violated the nationality restrictions for investment in a public utility.17 Thus the Tribunal concluded that Fraport did npt violate the nationality portion of the Anti Dummy Law. ls The Tribunal had accepted Fraport's submission that, following the passage of the Foreign Investment Act of 1991, which defined Philippine national in a manner consistent with the so­ called "Control Rule," other ways of assessing the level of foreign equity investment in a company were no longer applicable to an analysis under Section 1 of the Anti Dummy Law. Fraport's equity holding was consistent with the Control Rule requirements; and the arguments put forward by the Philippines that were based upon the so-called "Grandfather Rule" or on "badges" of dummy status as a means of demonstrating that Fraport violated the nationality provisions of the Anti Dummy Law (Section 1) could not be accepted. I 9 The Tribunal therefore turned to the second mode of Anti Dummy Law violation, that is, whether there was a violation of the prohibition of intervention by non-Philippine entities in the administration, operation, management and control of a Philippine public utility (Section 2A). The Control Rule, the Grandfather Rule and the so-called "badges" of dummy status were not relevant to this second mode of violation of the Anti Dummy Law. As to this second mode, the Tribunal took particular notice of the following record evidence: 16 Award, 354. 17 Award 11350. 18 Award 11350. 19 Award 1111350, 352-55. 7 ----_ ... -'--­ • A confidential "control agreement" or "pooling agreement" that required a majority of the Philippine investment company's shareholders to act in accordance with Fraport's binding "recommendations; ,,20 • A contemporaneous report on Fraport's investment made to Fraport's Supervisory Board, which concluded that Fraport's plan to control its investment through binding recommendations "cannot be enforced legally because of locallaws;,,21 ' • A contemporaneous report from a member of Fraport's Supervisory Board, which noted that the planned control was not consistent with Philippine law, observing that Fraport "cannot legally enforce its intended leadership in this consortium. This however, is the most important prerequisite for the entire transaction;,,22 • Contemporaneous legal analyses of Philippine counsel that cautioned Fraport prior to its investment about the dual nature of the Anti Dummy Law restrictions23 and subsequently that concluded that Fraport's investment structure violated the [management and control 24 prohibitions of the] Anti Dummy Law. Based on this and other evidence,2s including witness testimony, as welJ as the further submissions of the parties, including oral argument as to the provisions of the Anti Dummy Law, the' Tribunal concluded that Fraport's "own internal documents show that Fraport was consciously, intentionally and covertly structuring its investment in a way which it knew to be a violation of the [Anti Dummy Law].,,26 The Tribunal further stated that "this is a case in which res ipsa loquitur. The relevant facts, all of which are found in Fraport's own documents, are incontrovertible.,,27 The Tribunal also discussed the question of estoppel as to the Philippines' jurisdictional objection, i.e., whether "[p]rinciples of fairness should require a tribunal to hold a government estopped from raising violations of its own law as a jurisdictional defense when it knowingly overlooked them and endorsed an investment which was not in compliance with its law.,,28 It 20 Award ''11319-27. 21 Award '11 313 (quoting Final Holding Report dated Feb. 26, 1999), 22 Award 1315 (quoting Report from Dr. Werner Schmidt dated Mar. 7, 1999). 23 Award fIl309-1 O. 24 Award fIl329-30. 2$ Evidence as to the content of Philippine law, included a due diligence report by Philippine counsel that described the regulatory environment that applied to the investment, the Foreign Investments Act of 1991, the investment limitations of the Philippine Constitution and the Anti Dummy Law, with reference to opinions of the Philippine Department of Justice that addressed the Anti Dummy Law (Award fIl 309-10); documents from Fraport's files showing that Fraport decided to make its investment using covert arrangements, including confidential agreements, to obtain control over the project in violation of Philippine law (Award,., 311-27); and 2001 documents showing that when the covert arrangements subsequently were communicated to Philippine counsel, Fraport's Philippine counsel and Philippine counsel for potential third-party investors advised Fraport that its investment structure violated the Anti Dummy Law (Award n 329-30). 26 Award, 323. 27 Award, 399. 28 Award '11 346. 8 concluded, however, that "[t]here is no indication in the record that the Republic of the Philippines knew, should have known or could have known of the covert arrangements which were not in accordance with Philippine law when Fraport first made its· investment in 1999.,,29 The Tribunal's unchallenged conclusion regarding the covert nature of the way in which Fraport structured its investment was reinforced, according to the Tribunal, by Fraport's failure to produce in a timely fashion evidence of its investment structure, including all of the associated agreements, which Fraport had repeatedly been called upon to produce: Despite requests for document production, the obvious relevance of these secret documents to the Respondent's jurisdictional objection, and a stem warning by the President of the Tribunal early in the arbitration that adverse consequences could be drawn from the failure to produce such documents, it was only in the course of the hearing that the existence of many of these documents became known?O The Tribunal thus also considered the manner in which Fraport approached the evidence in question and drew conclusions as to its import accordingly. The Prosecutor's Resolution After the completion of the written submissions in the case and after the Tribunal had declared the proceedings to be closed, the Philippines wrote to the Tribunal to transmit a copy of a resolution of the Philippine State Prosecutor dismissing private criminal complaints that had been made against various defendants, including Fraport officials, alleging violations of both Sections 1 and 2A of the Anti Dummy Law in regard to Fraport's investment in PIATeO ("Prosecutor's Resolution"). The Prosecutor's Resolution dismissing the complaints turned on the application of Section 1 of the Anti Dummy Law. Fraport and the Philippines then submitted six letters in seriatim to the Tribunal regarding the Prosecutor's Resolution, focusing in particular on the question whether the Prosecutor had available to him the confidential shareholder. agreements that were the focus in the arbitration as to violations of the Anti Dummy Law?1 The Tribunal requested the Philippines to produce "in extenso" the documents from the record of the proceeding before the Prosecutor. The Philippines submitted documents in response and Fraport supplemented the record as well, 29 Award, 347. 30 Award 1 400. 31 See Letter from Fraport to the Tribunal dated Jan. S, 2007; Letter from Fraport to the Tribunal dated Jan. 10,2007; Letter from the Republic to the Tribunal dated Jan. 11,2007; Letter from Fraport to the Tribunal dated Jan. 12. 2007; Letter from Fraport to the Tribunal dated Feb. 27, 2007; Letter from Fraport to the Tribunal dated Mar. 16, 2007. Subsequently, the Philippines submitted a resolution dated Mar. 19, 2007 of the National Bureau of Investigation granting a motion of reconsideration that had been filed by the private complainants ("Reconsideration Resolution"). 9 including with evidence of the scope of the Prosecutor's subpoena powers.32 The Tribunal took the parties letters into consideration.33 Based on its review of the documents submitted by the parties and, in particular, testimony from Fraport officials submitted to the Prosecutor denying that there were any control agreements, the Tribunal concluded that the shareholder agreements that were at issue in the ICSID arbitration, and that were subject to confidentiality agreements requiring that such documents only be used in the context of the ICSID arbitration, were not in the record before the Prosecutor. The Tribunal also concluded that the record would not have indicated to the Prosecutor that there may have been such agreements.34 The Tribunal therefore concluded that the Prosecutor's Resolution dismissing the Anti Dummy Law complaints was made without consideration of the shareholder agreements that were at issue in the ICSID arbitration. Fraport's Application to Annul In support of its application to annul the .Award, Fraport argued that it was a serious departure from a fundamental rule of procedure that the Tribunal had not provided it further opportunity to comment on the evidentiary record before the Prosecutor. Fraport claimed that it was denied a further opportunity to demonstrate that the shareholder agreements at issue were available to the Prosecutor, by way of subpoena or otherwise, and to address the testimony that the Tribunal viewed as confirming that Fraport misled the Prosecutor as to the existence of the agreements. In fact, however, Fraport already had made the point, which had been c~nsidered by the Tribunal, that the Prosecutor had the authority to subpoena documents at issue and already had argued that the Prosecutor was put on notice that such documents may exist.3s The Tribunal considered these points, but simply was not persuaded that the Prosecutor was put on notice that such agreements may have existed, particularly in light of repeated statements of Fraport officials denying that there were such agreements. 36 As to those statements, Fraport also already had elaborated its position as to why such statements denying that there were control agreements were correct and not misleading. 37 The Tribunal had considered those arguments as well, but was not persuaded. 38 Fraport did not argue that it was denied the opportunity to address the legal standard for establishing an Anti Dummy Law violation as discussed in the Prosecutor's Resolution. That is because insofar as the Prosecutor's Resolution addressed the appHcable legal standard, it supported the arguments that Fraport had made in the arbitration, an observation that Fraport 32 Award,.,. 67-75. JJ Award,,. 368,371,381. 34 Award 11 373. 3' See Letter from Fraport to the Tribunal dated Jan. 8,2007; Letter from Fraport to the Tribunal dated Jan. 12,2007; Letter from Frapon to the Tribunal dated Mar. 16, 2~07. 36 See generally Award" 371-82. 37 Oral Hearing Transcript 2320:9 - 2324:5 (Jan. 15,2006). 3S Award~' 323-32,395. 10 ------_._ .. _-­ made in its letters to the Tribunal regarding the Prosecutor's Resolution,39 and which the Tribunal accepted in its Award. 4o The Annulment Decision The Committee rejected the several other arguments that Fraport claimed supported annulment of the Award. The Committee focused on the procedure followed by the Tribunal to address the Prosecutor's Resolution. Adopting a line of reasoning not proffered by either party, the Committee concluded that the Prosecutor's Resolution was a critical legal authority because, the Committee observed, it showed how Philippine authorities applied the Anti Dummy Law. The Committee considered the Prosecutor's decision was of particular importance because it concluded that the record contained little other evidence of how the provisions of the Anti Dummy Law were to be applied. In that respect, the Committee disregarded the record of evidence and submissions made by the parties that formed the basis of the Tribunal's findings as to the content of the Philippine law. As Fraport only first produced the shareholder agreement that was the principal evidence of an Anti Dummy Law violation weeks before the hearing on the merits and some further shareholder agreements at the merits hearing itself, the significance of the agreements had not been addressed by the parties in their principal written submissions. Nevertheless, the record included contemporaneous assessments by Philippine counsel as to the application of the Anti Dummy Law to Fraport's investment, evidence of Fraport's own contemporaneous understanding informed by Philippine counsel as to the Anti Dummy Law restrictions, the text of the statute itself, additional legal materials relating to the Anti Dummy Law, as well as the submissions of counsel, including at the oral hearing. While it was correct to observe that the Prosecutor's Resolution was relevant to an assessment of the content of the Philippine legal rules, most critically, based upon the Committee's own review of the Prosecutor's Resolution, without the benefit of hearing from the parties on the issue, the Committee concluded that the Tribunal's analysis as to the application of the Anti Dummy Law was not in accord with the analytical framework described in the Prosecutor's Resolution. 41 Thus, evidently, in the Committee's estimation, the Tribunal ruled against Fraport and dismissed its claims based upon an understanding of Philippine law that had been rejected by the Philippine authorities, as evidenced by the Prosecutor's Resolution. The fact that the resolution had been introduced so late in the process and, according to the Committee, was not well considered by the Tribunal, presented what appeared to be a troubling result, which clearly motivated the Committee's Annulment Decision. It was, however, the Committee that was mistaken. The Committee accepted that the Tribunal applied Philippine law to reach its decision and thus that the Tribunal did not manifestly exceed its powers. The Prosecutor's Resolution took the position that in regard to the nationality restrictions set forth in the Constitution and penalized in the Anti Dummy Law, since the passage of the Foreign Investment Act, which defined j9 See Letter from Fraport to the Tribunal dated Jan. 8,2007; Leller from Fraport to the Tribunal dated Jan. 12,2007. 40 Award '\1'\1352-53,361. 41 See Annulment Decision '11'11215-27. 11 Philippine nationals as those companies considered Filipino by virtue of the so-called Control Test, other means of assessing whether a company was in compliance with the nationality rules were no longer applicable. Thus, reference to the so-called Grandfather Rule was no longer to be made in this context and similarly, references to "badges" of dummy status were no longer to be applied to detennine the nationality of a company. For that reason, the Prosecutor rejected the various arguments of the private complainants that were made on those bases and resolved to dismiss the complaints accordingly in regard to Section I of the Anti Dummy Law. 42 Notably, the complainants had asgerted that Fraport's investment in PIATCO also was in violation of Section 2A of the Anti Dummy Law, relying, however, on the same corporate structure it claimed constituted a violation of Section 1. On that point, and with reference to Section 2A of the Law, the Prosecutor's Resolution concluded that based on "the foregoing corporate structure of PlATCO, it is far-fetched that a foreign corporation like FRAPORT could gain dominion, control and ascendancy in the management or control of PIATCO considering 60 % of its shares are owned by Filipinos." As the Prosecutor thus observed, as a matter of fact, that based on the foregoing corporate structure it was "far-fetched" that Fraport could exercise control over PIATCO, the question was presented whether the Prosecutor had taken into consideration shareholder agreements actually granting such control. . While the Prosecutor's Resolution is clear that since the introduction of the Foreign Investment Law, such control, even if it were established, would not he relevant to a detennination of the nationality requirement, i.e., Section 1 of the Anti. Dummy Law, nothing in the Prosecutor's Resolution stated that such control by a foreign investor would be irrelevant to a Section 2A violation. To the contrary, the text of Section 2A itself is expressly focused on the possibility of such control. The Tribunal's Award was entirely consistent with the Prosecutor's Resolution in that respect. The Award rejected the argument put forv,;ard by the Philippines that Fraport's investment violated both the nationality provisions of the Constitution and the Anti Dummy Law (Section 1 and Section 2A of the Anti-Dummy Law);t3 and accepted Fraport's submission that nationality is only to be detennined with reference to the "Control Rule" and not by reference to the "Grandfather Rule" or "badges" of dummy slatus:,tl The Tribunal observed, however, that the Anti Dummy Law separately prohibited actual contrDl by a foreign investor, as the text of the Anti Dummy Law itself makes clear. The Tribunal noted that the Prosecutor's Resolution stated. that the Control Test applied to detennine "the nationality of the corporation" and that "badges of dummy status" were no longer applicable in that regard. 45 Having observed that the Prosecutor focused on these various dett:rminations of nationality, as opposed to any actual 42 The Reconsideration Resolution was to the same effect. Ref'!rring to the nationality restrictions penalized in Section I of the Anti Dummy Law, It stated "DOJ Opinion No. 165 was issued way before the DOJ, the SEC and RA No. 7042 decided to do away with the strict application and computation of the 'Grandfather Rule'. The cited indicators or badges of dummy status now find no app:icatior. vi~·a-vis Ihe categor:cal and clear cut rule laid down by the DOJ, the SEC and RA No. 7042 (or d::lermfning :he citizenship of corporations with foreign equity." (Emphasis added.) 43 A ward ~ 350. 44 Award,' 352. 4S Award, 370. 12 demonstration of managerial control, and on that basis considered that it would be "far~fetched" to conclude that Fraport could exercise actual control, the Tribunal considered whether the Prosecutor had any basis to focus on any evidence of actual managerial controL Thus, analytically, the Award was fully consistent with the description of the Philippine law set out in the Prosecutor's Resolution, and was consistent also with Fraport's position that the nationality provisions of the Constitution and Section 1 of the Anti Dummy Law could only be evaluated by reference to the Control Test, witt! which Fraport's investment complied. 46 The Committee, however, concluded that the failure of the Tribunal to permit the parties to make further submissions on the Prosecutor's Resolution amounted to a serious departure from a fi:u1damental rule of procedure. 47 The Committee considered that Fraport was denied the opportunity to present its case both as to the factual record before the Prosecutor and as to the issues of Philippine law. There Was No Serious Departure from a Fundamental Rule ofProcedure While the right of a party to present its case is a fundamental rule of procedure, the record in this case did not support the conclusion that there was a serious departure from that fundamental rule. Under Article 52(l)(d), a "serious departure" from a fundamental rule of procedure means a departure that likely was outcome determinative. 48 Permitting the parties to make further submissions on the Prosecutor's Resolution would not have resulted in any different assessment on the ultimate dis!,osition of the case. The Committee concluded that failing to invite additional submissions from the parties, "in light of important new material casting doubt on the whole basis on which the Tribunal was proceeding underscores the serious nature of the departure from the right to be heard;,,49 and that the "resolutions state in express terms, in response to a specific complaint that Fraport's exercise of management control over PIA TCO constituted a breach of the ADL, that this test was no longer applicable to determine breach. ,,50 Thus, the Committee, lacking the benefit of the parties' observations on its theory justifying annulment, mistakenly concluded that the Tribunal based its Award on an understanding of the Anti Dummy Law that was different from the Prosecutor. The Committee incorrectly concluded that the Prosecutor stated that control was not relevant 10 a Section 2A violation, when, as a matter offact, the Prosecutor's observations ii"l that regard related to a Section 1 violation. 46 The Dissent appears to confuse this point, contlat:ng vivlatiom; of Section I and Section 2A of the Anti Dummy Law, and this might have contributed to the Committee's confusion. This aspect ofthe Dissent, however, was never addressed by the parties in the annulment phase, (IS Frapor;: did no' se-ek annulment on this basis and as the Committee's focus on this issue was not made known until its Annulment Decision. 47 Annulment Decision, 218. 48 CHRISTOPH H. SCHREUER, THE (CSlD CO)\'V<:NTI0N: A COMME~TA~Y Cd ed. 2009), at 982 ("In order to be serious the departure must be more than minimal. It must be substantial. In addition, the cases confirm that this departure must potentially have caused the tribunal to render an award 'substantiaJly different from what it would have awarded had the rule been observed. '''). 49 Annulment Decision T, 235. so Annulment Decision 'il241. ---~ .. --~--.-.-.... ­ "----- ~----- It was thus the Committee's denial of due process on what it considered to be the most troubling issue before it that caused the serious and costly miscarriage ofjustice in this case. The Committee also conc1uded that Fraport should have been given a further opportunity to address the evidence that was before the Prosecutor. The Committee concluded that the opportunity that Fraport was given was inadequate because, in the Committee's view, the state of the record "had been shown to be unreliable" and ..the Tribunal could not· properly, in the Committee's view," have made the determinations it did on the basis of the record before it. SI The Tribunal, however, did not consider the record "unreliable," and even if the Committee would have preferred to have given the parties another opportunity to submit observations as to whether the record before the Prosecutor included (i) the secret shareholder agreements that Fraport had failed to produce until weeks before or even during the oral hearing, or (ii) sufficient indications that such agreements existed to cause the Prosecutor to subpoena them, that is not a basis to conclude that there was a serious departure from a fundamental rule of procedure. The record in the case was such that it was open for the Tribunal reasonably to conclude that the shareholder agreements, which were governed by confidentiality agreements that prevented their disclosure outside of the arbitration, which Fraport had routinely failed to produce until the merits hearing, and which were not discussed in the Prosecutor's Resolution, were not in the record before the Prosecutor. Fraport did address the Prosecutor's Resolution in five different letters52 and never indicated that it had produced those documents in that proceeding or that there was any reason to consider that it otherwise was likely that the Prosecutor would have had access to them. It is difficult to see how further submissi