LEGAL PROBLEMS WITH JURISDICTION, ENFORCEMENT AND FINALITY IN ICSID ARBITRATION

The Convention on the Settlement of Investment Disputes between States and Nationals of other States in 1965 created the International Center for the Settlement of Investment Disputes (“ICSID”) to satisfy the need for an apolitical mechanism to provide facilities for the arbitration of investment disputes between states seeking an inflow of investment and foreign investors desiring a neutral forum in which to arbitrate disputes. Although it is difficult and even unrealistic to measure the impact of ICSID on the level of use of its arbitration machinery, the significance of ICSID is increasing because it gives both investors and Contracting States an impartial, low-cost center of dispute resolution expertise. The ICSID has a three-step procedure which may provide the optimal protection against reneging: a state agrees to the Convention in general, reconfirms its intent to be bound by putting an ICSID provision in a given contract, and can have an ICSID award enforced in any contracting state. The annulment mechanism also affords significant advantages for reviewing the validity of the Center’s arbitral awards. It can contribute to the independence of the Center from municipal legal systems in which enforcement is sought, even though it may harm the efficacy of the arbitration mechanism as an efficient, speedy and cheap tool for the settlement of dispute. Accordingly, the ICSID’s success finally will rely on whether it can give substantial assurance that its awards will be submitted to annulment process in only exceptional circumstances. Even though decisions rendered by such an institution would have virtually no precedential effect and would not be a part of the body of international law, this loss of predictability, however, may be a necessary sacrifice in the interest of proving the flexibility and control which states require if they are to participate at all. Reinvigorating these potential advantages will require the efforts of investors, Contracting States and the institution of ICSID itself.