Arbitration at ICSID: The Costs Involved, by Nida Mahmood

This article attempts to highlight the costs associated with bringing a case for arbitration at the International Centre for Settlement of Investment Disputes (ICSID) that the Parties will incur. 

Introduction

The International Centre for Settlement of Investment Disputes (ICSID) was established under the auspices of the World Bank through the promulgation of the International Convention for Settlement of Investment Disputes between States and Nationals of other States in 1965[1] as a specialized institution for the resolution of international investment disputes. The centre provides conciliation and arbitration facilities directly to Parties to the dispute without having to resort to diplomatic channels in cases where both Parties have consented to the jurisdiction of ICSID for the resolution of their dispute.[2]

International Investment and Commercial Arbitration is increasingly becoming the norm for resolution of investment disputes between States and individuals. Almost all Bilateral Investment Treaties (BITs) now contain a clause for resolution of disputes arising from the investment or related to one of more aspects of the investment at an international arbitral forum. ICSID has proved to be instrumental in this regard for it has in a very short span of time gained immense popularity and credibility as the premier choice of investors for the resolution of their investment disputes with foreign States. This is so because of the perception of the advantages that a neutral, flexible, independent and expeditious forum free from national influence or prejudice, is thought to bring to the investor confidence when taking the decision to invest in a foreign State. Provision of such a clause in a BIT therefore, acts as an ‘incentive’ to attract foreign investment in the host State.[3]

However, bringing a case to an international forum involves certain costs that need to be met by the Party seeking to commence arbitration proceedings before the dispute can be submitted to the forum. This article therefore, attempts to highlight the costs associated with bringing a case for arbitration at the ICSID that the Parties are likely to incur for the sole purpose of creating awareness among people and prospective claimants. The information taken is based on the official fee schedule as found in ICSID Regulations as at 14th of April 2013.[4]

The Costs Involved 

Chapter 3 of the Administrative and Financial Regulations issued by the Centre lays down the framework for the costs that may be involved should a Party wish to bring proceedings under ICSID,[5] whereas, the Schedule of Fees[6] issued by ICSID on a yearly basis contains the amounts in US Dollars that need to be paid under the framework established in the Administrative and Financial Regulations.

i. Costs for Lodging Requests and Instituting Conciliation or Arbitration Proceedings

Regulation 16 of the Administrative and Financial Regulations deals with costs involved for lodging requests including that of instituting Conciliation or Arbitration proceedings and states that,

the Party or Parties wishing to institute a conciliation or arbitration proceeding, requesting a supplementary decision to or the rectification, interpretation, revision or annulment of an arbitral award, or requesting resubmission of a dispute to a new Tribunal after the annulment of an arbitral award, shall pay to the Centre a non-refundable fee determined from time to time by the Secretary General”.[7]

The Schedule of Fees 2013 requires a Party seeking to, (a) institute arbitration or conciliation proceedings, (b) applying for annulment of an arbitral award or (c) requesting the institution of fact-finding proceedings under the Additional Facility Rules of ICSID to pay to the Centre a non-refundable fee of US $ 25,000/-.[8]

Alternatively, if a Party is seeking a supplementary decision for (a) the rectification, interpretation or revision of an arbitral award rendered pursuant to the Convention, (b) correction or interpretation of an arbitral award rendered pursuant to the Additional Facility Rules or (c) requesting the resubmission of a dispute to a new Tribunal after the annulment of an arbitral award rendered pursuant to the Convention, then it would be required to pay to the Centre a non-refundable fees of US $ 10,000/-.[9]

It is pertinent to mention here that Regulation 14 (3) requires the Party (or Parties) to make advance payments to the Centre without prejudice to the final decision as to Costs of an Arbitration Proceeding, initially as soon as a Tribunal or Commission is constituted and thereafter, at any time that the Secretary General determined after consultation with the President of the body in question and as far as possible the Parties.

ii. Administrative Charges

Once the Conciliation Commission, the Arbitral Tribunal, the Fact Finding Committee or ad hoc Committee is constituted, an additional administrative charge of US $ 32,000/- is levied by the Centre on an annual basis.[10] These costs are borne out of the advance payments that the Party or Parties are periodically requested to make to the Centre under the Administrative and Financial Regulation 14.

iii. Fees and Expenses of Conciliators, Arbitrators, Commissioners and ad hoc Committee Members

Regulation 14 of the ICSID Administrative and Financial Regulations provides that in addition to reimbursement of any reasonable direct expenses, each member of a Commission, Tribunal or an ad hoc Committee appointed pursuant to Article 52 (3) of the ICSID Convention shall receive (a) a fee for each day on which he participates in meetings of the body of which he is a member, (b) a fee for the equivalent of each eight hour day of work performed in connection with the Proceedings, (c) subsistence expenses and  a per diem allowance when away from normal place of Residence, and (d) travel expenses in connection with the meetings of the body of which he is a member based on the norms established from time to time for the Executive Directors of the Bank (World Bank).

These amounts are to be determined by the Secretary General from time to time with the approval of the Chairman and any requests for higher amounts shall be made through the Secretary General.

In this regard, para. 3 of the Schedule of Fees 2013 fixes the amount of US $ 3,000/- as fee for per day of meetings and other work performed in connection with the proceedings for the Conciliators, Arbitrators and Committee Members. However, all direct expenses including travel expenses and subsistence allowances which may vary also need to be taken care of by the Party or Parties wishing to pursue proceedings at ICSID.

iv. Special Services to Parties

The Centre may sometimes be asked to provide special services to Parties such as including but not limited to providing translations or copies for example. In this case, Regulation 15 of the Administrative and Financial Regulations requires the Party (or Parties) to submit the charges as determined by the Secretary General in the Schedule of Fees from time to time, for such a service in advance.

Para. 7 of the Schedule of Fees 2013 does not attempt to quantify any amount in US $ for this as this is a variable cost and will be determined on the basis of the nature of the special request made from time to time determined on the basis of rates established by the World Bank under its normal administrative procedures.

Conclusion

In conclusion, the costs that a Party will incur on a fixed basis includes US $ 25,000/- or US $ 10,000/- for lodging of requests. In addition to that, they will have to incur the administrative charges on an annual basis of US $ 32,000/- and US $ 3,000/- on a per day basis together with any direct expenses and subsistence allowance of the Conciliators or Arbitrators during the course of the Proceedings.

This approximately rounds up to US $ 60,000–80,000 or US $ 45,000–55,000 a year in the least depending upon whether the request worth US $ 25,000/- or whether the request worth US $ 10,000/- is lodged and it could be more depending upon the number of days of the Proceedings and the variable travel and other costs and whether or not there are any special requests involved.

I would also like to point out that this article does not include the fee of the legal counsel that the Parties will have to hire to represent them at ICSID. This will be a variable cost and will depend upon the Parties; however, it is important to understand that this will be a significant cost as well.

                                                                                                                                


[1] The International Convention for Settlement of Investment Disputes between States and Nationals of other States (ICSID Convention) available at https://icsid.worldbank.org/ICSID/StaticFiles/basicdoc/partA.htm.

[2] See Article 25 and 26 of the ICSID Convention.

[3] See The Role of International Investment Agreements in Attracting Foreign Direct Investment to Developing Countries, UNCTAD Series on International Investment Policies for Development, 2009, 14, para. 2, available at http://unctad.org/en/Docs/diaeia20095_en.pdf.

[7] Regulation 16, Fee for Lodging Requests, Chapter 3, Administrative and Financial Regulations, ICSID.

[9] Ibid, para. 2.

[10] Ibid, para. 5.

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