The International Center for the Settlement of Investment Disputes (ICSID) is an institution of the World Bank established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention or the Washington Convention, 1965). The Convention sets forth ICSID’s mandate, organization and core functions. The primary purpose of ICSID is to provide facilities for conciliation and arbitration of international investment disputes. The ICSID Convention is a multilateral treaty formulated by the Executive Directors of the International Bank for Reconstruction and Development (the World Bank). It was opened for signature on March 18, 1965 and entered into force on October 14, 19662.
The Convention sought to remove major impediments to the free international flows of private investment posed by non-commercial risks and the absence of specialized international methods for investment dispute settlement. ICSID was created by the Convention as an impartial international forum providing facilities for the resolution of legal disputes between eligible parties, through conciliation or arbitration procedures. Recourse to the ICSID facilities is always subject to the parties’ consent3. As evidenced by its large membership4, considerable caseload5, and by the numerous references to its arbitration facilities in investment treaties and laws, ICSID plays an important role in the field of international investment and economic development.
ICSID is an autonomous international organization and is considered to be the leading international
1 + I would like to acknowledge the contributions of Ms Izuoma Egeruoh, Assistant Research Fellow, Nigerian Institute of Advanced Legal Studies, Abuja in the writing of this article.
2 http:// icsid.worldbank .org/icsid/index.jsp
4 As at May 2011, 157 countries had signed the Convention while 144 countries ratified it. Nigeria signed on 13 July, 1965 and ratified it on August 23, 1965. See http://en.wikipedia.org/wiki/International_ Centre_for_Settlement_of_Investment-Disputes
5 As at 31 December, 2010, 331 cases were registered under the Convention and the Additional Facility Rules. See http://icsid.worldbank.org/ICSID/FrontServlet . See also ICSID, “The ICSID Caseload – Statistics” (Issue 2011-1) p 11, http:// icsid.worldbank.org/ICSID/Index.jsp and Reed L et al Guide to ICSID Arbitration (2nd Edn, The Netherlands, Kluwer Law International, 2011) p7 . 73% of the registered cases are investment treaty cases.
arbitration institution devoted to investor-State dispute settlement (also known as investment treaty arbitration)6.
HISTORY OF ICSID
In the past, the World Bank as an institution has assisted in mediation or conciliation of investment disputes between nations and private foreign investors7. Thus to reduce the burden on World Bank , Aron Broches, then General Counsel of the World Bank conceived the idea for the Convention in 1961 in conjunction with the Organization for Economic Cooperation and Development (OECD), The idea was to create a framework for the protection of international investment. This idea gave birth to the International Centre for Settlement of Investment Disputes (ICSID) under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States which came into force on October 14,1966. The aim of establishing the ICSID was the Bank’s belief that an institution specially designed to facilitate the settlement of investment disputes between governments and foreign investors, could help promote increased flow of international investment.
ICSID has an Administrative Council and a Secretariat. The Administrative Council is chaired by the World Bank’s President and consists of one representative of each State which has ratified the ICSID Convention. Annual meetings of the Council are held in conjunction with the joint Bank/Fund annual meetings8 . ICSID has close links with the World Bank and all ICSID’s members are also members of World Bank. Unless a government makes a contrary designation, each Governor or Alternate Governor of a Bank appointed by a Contracting State shall be ex officio its representative and its alternate respectively on ICSID’s Administrative Council. The expenses of the ICSID Secretariat are financed out of World Bank budget, although the costs of proceedings are borne by the parties involved individually.
GOALS OF ICSID
Article 1(2) of the ICSID Convention, Regulations and Rules of April 10, 2006 provides for the purpose of ICSID, which is to provide facilities for conciliation and arbitration of investment disputes between Contracting States and nationals of other Contracting States in accordance with the provisions of the Convention. However, the report of the Executive Directors on the Convention emphasized the aim of promoting global economic development through private international investment.9 Thus the basic goal of ICSID is to promote much needed international investment by offering a neutral dispute resolution forum both to investors that are either rightly or wrongly wary of nationalistic decisions by local courts and to host states that are rightly or wrongly wary of self–interested actions by foreign investors, hence the preamble of the ICSID Convention underlines this goal and the operational objective of establishing an effective regime for neutral resolution of investment disputes that is attractive to both Governments and investors.