RECENT ICSID DEVELOPMENTS: CASELOAD STATISTICS AND THE FIRST YEAR OF PRACTICE UNDER THE ICSID 2022 RULES

ICSID has recently released its biannual caseload statistics for FY2023 and a separate publication reviewing the first year of practice under the newly implemented ICSID 2022 Rules. These publications offer valuable information for practitioners and stakeholders interested in the evolving landscape of investment arbitration. This article summarises some of the key information from each publication.

Caseload statistics for the 2023 fiscal year

ICSID has published the latest edition of its biannual caseload statistics for FY2023. The latest edition includes detailed information on different elements of international investment cases, such as the quantity of cases, regional and economic distribution of cases, results of proceedings and gender of arbitrators and conciliators. ICSID has published its caseload statistics every year since the first case was registered in 1972.

Regional distribution

ICSID's caseload in FY2023 demonstrates notable regional diversity. New cases were reported from various regions, with Central America and the Caribbean representing 22% of the total, followed by Eastern Europe and Central Asia at 18%. North America and South America each accounted for 13% of the cases. The remaining cases were attributable to Western cases (11%), the Middle East and North Africa (9%), Sub Saharan Africa (9%), and South and East Asia/Pacific (5%).

Economic sectors  

ICSID cases involve a diverse range of economic sectors. Following the trends of previous years, the extractive and energy sectors were responsible for the majority of cases in FY2023. The oil, gas and mining sectors were responsible for 27% of cases, and electric power and other energy-related cases comprised 15% of total cases.

The finance sector also played a significant role, comprising 11% of cases. Construction and transportation each accounted for 9% of cases, while information and communication, as well as agriculture, fishing, and forestry, made up 7% each. Other cases involved water, sanitation, and flood protection (4%), tourism (2%), and services and trade (2%).

The remaining 7% of cases registered in FY2023 involved various other industries.

Diversity of arbitration tribunals

Women accounted for 22% of tribunal appointments in FY2023, compared with women accounting for 14% of appointments in all ICSID cases since 1972.

Western Europe and North America remain the dominant regions in terms of geographic distribution of arbitrators, accounting for 41% and 26% respectively.

Case outcomes

Of the arbitrations concluded in FY2023, 62% of disputes were determined by the tribunal with the remainder settled or discontinued. 59% of awards partially or fully upheld the investors' claims, 24% of awards rejected all of the investors' claims on the merits, and 14% of awards involved a determination that the tribunal did not have jurisdiction. 3% of cases concluded in FY2023 were dismissed due to a clear lack of legal merit.

ICSID publishes overview of first year of practice under the ICSID 2022 Rules

The 2022 ICSID Rules and Regulations came into force on 1 July 2022 and were designed to make the administration of ICSID cases more efficient and transparent and to ensure ICSID's facilities are accessible to a broader range of cases.

The overview provides observations on application of the modernised rules for arbitration, conciliation, fact-finding and the newly introduced mediation rules. As it is only one year into the implementation of the ICSID 2022 Rules and Regulations, cases proceeding under the new rules remain in their early stages. Therefore, the overview provides insight into the operation of the new rules corresponding to the first steps in an ICSID proceeding.

Institution Rules

The overview reflects on the amended Institution Rules ("IR") which apply to all requests to initiate arbitration or conciliation proceedings under the ICSID Convention after 1 July 2022, even if administered under prior versions of the ICSID Arbitration and Conciliation Rules.

Notably, the overview reflected on IR 2(2)(b)(iii) which states that the Request shall include the parties' date of consent, which in turn will determine the applicable arbitration rules.

In many cases, the date of consent is the date of the Request, but in others, the written consent may have been made earlier, such as in a notice of dispute or a contract. As such, requesting parties should ensure that the indication of consent is explicit, referencing the ICSID rules and the date of consent.

Arbitration Rules

The overview reflects on the application of several amended rules under the 2022 ICSID Arbitration Rules ("AR").

Notably, AR 31 provides for additional case management conferences throughout the arbitration proceedings to provide an opportunity for the tribunal and parties to actively manage the case. Where case management conferences are substantive in nature, they may narrow the issues in dispute or lead to a settlement. This can benefit parties in situations where certain issues are narrowed or settled before substantial costs are incurred.

AR 62-66 regulate the transparency and confidentiality of cases. These rules aim to provide greater public access to information regarding ICSID arbitration proceedings, while fine-tuning procedures to protect confidential information. In practice, the Secretariat will circulate a proposed draft Procedural Order No. 2 for consideration by the parties which includes provisions related to transparency throughout the ICSID arbitration, e.g. publication of party submissions, transcripts, orders and the award. All provisions in the draft order may be revised by the parties, and it provides an opportunity for the parties to specify in detail the information which shall be kept confidential.

Administrative and Financial Regulations

The overview also addresses the introduction of the 2022 Administrative and Financial Regulations ("AFR") which apply to all pending ICSID Convention proceedings, including those pending under prior versions of the ICSID Rules.

Upon registration of a Request, claimants are now required to advance funds to defray costs from registration through to the first session of the Tribunal (or Commission in the case of Conciliation Proceedings). Respondents are required to pay their share of the advance following the constitution of the tribunal (as set out in Regulations 15 and 16 of the 2022 AFR); on average each party will be asked to pay USD150,000 upon registration.

The purpose of this new regulation is to prevent delays due to a lack of funds in the initial procedures of a case. The Secretary-General has discretion to suspend or discontinue proceedings on the basis of non-payment. In the last year, two cases have been suspended under this regulation: Astronergy Solar Netherlands B.V. v. Republic of Bulgaria (ICSID Case No. ARB/22/32) and Sepadeve International LLC v. United Mexican States (ICSID Case No.ARB/23/6). Given this, it is important that parties ensure payments are made in accordance with Regulations 15 and 16 of the 2022 AFR in order to ensure expedition of the proceedings.

Comment

The goal of the amendments to the ICSID Rules and Regulations was to "modernise, simplify and streamline the rules, while also leveraging information technology to reduce the environmental footprint of ICSID proceedings." While the overview provides some insight into how the amendments have begun to modernise and simplify arbitration proceedings in practice, it is still yet to be seen whether the arbitration community will be able to apply the Rules so as to conduct more sustainable proceedings.

For further information, please contact Antony Crockett, Partner, Caitlin Setter, Registered Foreign Lawyer (Victoria, Australia), or your usual Herbert Smith Freehills contact.