Author: Noah Sosnick
| Jurisdiction: International |
Topics: ICSID International Institutions and Rules ADR Investment Disputes Practice and Procedure Third Parties in Arbitral Proceedings |
On March 15, the International Centre for Settlement of Investment Disputes (ICSID) released its most recently updated proposals for amendment of the ICSID Rules.[1] According to ICSID, the proposed changes are “the most comprehensive in ICSID’s history, encompassing the existing rules for arbitration, conciliation and fact-finding, and introducing a new set of mediation rules.”[2] Many of the proposed changes are procedural, aimed at reducing the costs associated with arbitral proceedings. [3]
In an interview, the Secretary-General of ICSID identified several motivating factors behind the proposed amendments. First, Kinnear noted that 12 years had elapsed since any amendments had been made to the ICSID Rules, and that therefore it was time for “periodic updating.”[4] Kinnear added that ICSID wanted to take the opportunity to “memorialize” some of the best practices that had developed in the intervening years.[5] Finally, Kinnear stated that the amendments sought to address growing concerns surrounding investor-state dispute settlement.[6] Alexander Leventhal identifies these concerns as primarily involving the cost-effectiveness of ISDS, in addition to critiques from those who advocate for “greater state sovereignty and increased public access to the process.”[7]
Several of the proposed amendments seek to create a more efficient arbitral process by shortening time limits, discouraging the use of interlocutory procedural motions, and an instituting an optional expedited arbitration process.[8] The expedited process would cut the duration of the proceeding by half the length of a non-expedited one.[9] Additional reforms address concerns regarding the legitimacy of the process, including required disclosure of third-party funding, one part of a series of reforms designed to increase transparency.[10]
ICSID is due to consult with its Member States on the proposal at a meeting in Washington in early April.[11] In advance of the meeting, ICSID invited its member states and other private actors to comment on the proposed changes.
REACTIONS REGARDING THE EXPEDITED ARBITRATION OPTION
Some of the comments from the states and private actors reveal different concerns regarding the proposals, particularly with respect to the Expedited Arbitration option (Chapter XII). Generally, the law firms were much more enthusiastic and limited in their criticism regarding the expedited option. For example, the Canadian contingent argued that the expedited procedure required an opt-out in the event that an expeditious procedure was no longer feasible, and it questioned whether the proposed timelines for document production were attainable.[12] The Austrian and Slovakian delegations echoed Canada’s concern that the proposed deadlines were difficult to meet.[13] Ucheora Onwuamaegbu, former ICSID Senior Counsel (writing on behalf of Arent Fox LLP), argued that the proposed rules for expedited proceedings “would be more effective if accompanied by measures aimed at helping governments respond more quickly to requests for arbitration and to actively participate in proceedings.”[14]
In contrast, the law firm Debevoise & Plimpton called the amendments “welcome changes to ICSID procedure that will allow for more timely resolution of parties’ disputes,” while Steptoe & Johnson “applaud[ed] ICSID for its effort…to make the process more effective and cost-efficient, including the provisions for expedited arbitration.”[15]
REACTIONS REGARDING MANDATORY TPF DISCLOSURE
A further reform, Rule 21, requires parties to disclose the sources of their third-party funding.[16] According to Frank Garcia and Kirrin Hough, the proposed amendment is part of the recent trend “favor[ing] increased transparency regarding the existence and identity of a TPF funder as well as the terms of funding agreements.”[17] However, Garcia notes, “ICSID’s proposed rules…stop at [a call] for limited disclosure.”[18]
Most of the comments from state actors echoed the sentiments expressed by Australia, which stated, “Australia supports AR 21 which…promotes greater transparency in relation to funding arrangements.”[19] However, several states with federal governmental structures, including Australia and Canada, expressed their concern that the amendment as drafted may be construed to include funding by different levels of a federal government.[20] Nonetheless, the commentary expressed by state actors either praised the Rule as drafted, or requested further clarification in order to strengthen the Rule’s effectiveness.[21]
Unsurprisingly, the commentary from private actors was less positive. Burford Capital, the “world’s largest legal finance provider by a clear distance,” wrote a lengthy critique of Rule 21, arguing that it was over-broad and unnecessary for several reasons. First, Burford cited 20 recent cases in which parties revealed the sources of their third-party funding absent a requirement to do so. Second, Burford identified no ICSID arbitrations in which a party was disqualified based on conflicts of interest arising from a connection with an arbitration finance firm. Finally, Burford argued that none of the other arbitration rules that figure prominently in investment arbitration disputes expressly require any disclosures from users of arbitration finance.[22] Additionally, law firms like Gibson, Dunn & Crutcher expressed their concern that the “overly broad” definition of third-party funding might be read to include “law firms acting on contingency.”[23]
CONCLUSION
The differing reactions to the proposed ICSID amendments create some doubt as to whether the proposed reforms will be adopted at the upcoming meeting. If the reforms are passed in their current state, they would represent a major step forward in ICSID’s attempt to provide parties with a more efficient, cost-effective and transparent dispute resolution process. However, the potential relaxing of some of the more aggressive reforms, like the expedited option and the disclosure of third-party funding, is certainly suggested by the reactions from state actors. As, Alexander Leventhal writes, “the Proposals are not a foregone conclusion…they may evolve in ways that are difficult to foresee.”[24]
[1] Updated Proposals for Amendment of the ICSID Rules, ICSID (last visited Mar. 27, 2019), https://icsid.worldbank.org/en/Pages/News.aspx?CID=317.
[2] Id.
[3] Id.
[4] American Society of International Law, Unfolding the Working Paper on ICSID Rules Amendment: Interview with Meg Kinnear, Youtube (Sep. 7, 2018), https://www.youtube.com/watch?v=iwT_u72wtQk.
[5] Id.
[6] Id.
[7] Alexander G. Leventhal, The 2018 Proposals for Amendments of the ICSID Rules: ICSID Enters the Era of Trump, Populism, and State Sovereignty, ASIL Insights (Oct. 9, 2018), https://www.asil.org/insights/volume/22/issue/15/2018-proposals-amendments-icsid-rules-icsid-enters-era-trump-populism#_edn3.
[8] Id.
[9] Supra note 1.
[10] Supra note 7.
[11] Id.
[12] The Government of Canada’s Comments on the Proposed Revisions to the ICSID Arbitration Rules, https://icsid.worldbank.org/en/amendments/Documents/Canada_Comments_12.28.18.pdf (last visited Mar. 27, 2019).
[13] Id.
[14] Id.
[15] Id.
[16] ICSID Secretarat, Proposals for Amendment of the ICSID Rules—Working Paper (Aug. 2, 2018), https://icsid.worldbank.org/en/Documents/III.Amendments_Vol_3_AR.pdf#page=50
[17] Frank J. Garcia and Kirrin Hough, Third Party Funding in International Investor-State Arbitration, ASIL Insights (Nov. 1, 2018) https://www.asil.org/insights/volume/22/issue/16/third-party-funding-international-investor-state-arbitration
[18] Id.
[19] Rule Amendment Project – Member State & Public Comments on Working Paper # 1 of August 3, 2018, https://icsid.worldbank.org/en/Documents/Compendium_Comments_Rule_Amendment_3.15.19.pdf (last visited Mar. 27, 2019).
[20] Id.
[21] Id.
[22] Id.
[23] Id.
[24] Supra note 7.