Title: Empirical Study: Annulment in ICSID Arbitration
Abstract: This report examines the trends and practices of annulment committees on key issues such as the success rate of annulment applications, the most frequently invoked annulment grounds, the length and costs of annulments proceedings. It also provides an in-depth analysis on how tribunals approach the specific annulment grounds under Article 52(1) of the ICSID Convention.
NEARLY A HALF OF ALL ICSID AWARDS FACE ANNULMENT APPLICATIONS, AND THE PROPORTION IS GROWING
Of the estimated 355 awards rendered under the ICSID Convention to date, 156 have been or are currently the subject of annulment proceedings – over 40% of all ICSID awards. This number has increased dramatically over the last decade. Three quarters of annulment proceedings have been initiated since 2009. This growth has significantly outpaced the growth in the number of substantive ICSID arbitration proceedings.
THE SUCCESS RATE OF ANNULMENT APPLICATIONS REMAINS LOW
Applicants have only succeeded in approximately 12% of annulment requests. To date, only six ICSID awards have been annulled in full. This represents less than 2% of the total awards under the ICSID Convention. With many annulment proceedings still pending, the number of successful applications will likely increase. Annulment (or set-aside) applications in non-ICSID investment arbitration proceedings (i.e., before national courts) have a significantly higher success rate than in ICSID proceedings.
NEARLY HALF OF ANNULMENT APPLICATIONS ARE DISCONTINUED BEFORE REACHING AN AD HOC COMMITTEE
Almost 30% of all annulment cases are discontinued and never decided by ad hoc committees. The apparent reason for this is that many annulment applications are made on a tentative basis, in order to comply with the 120-day application deadline and or to create leverage for settlement negotiations. The discontinuance rate has increased over the past decade.
STATES ARE MORE LIKELY TO SEEK ANNULMENT AND TO PREVAIL THAN INVESTORS
States seek to annul ICSID awards more often than investors and are more likely to prevail. A small number of States account for a significant portion of ICSID annulment applications. Argentina, Venezuela and Spain are the most frequent State applicants and account for nearly 45% of all annulment applications submitted by States.
MOST POPULAR AND SUCCESSFUL ANNULMENT GROUNDS
The three most commonly invoked grounds of annulment are those in Article 52(1)(b), (d) and (e) of the Convention, namely: (i) that the tribunal manifestly exceeded its powers; (ii) that there was a serious departure from a fundamental rule of procedure and (iii) that the award failed to state the reasons on which it is based. They are also the most frequently successfully invoked grounds. In practice, where a partial annulment is ordered (which is more common than full annulment), the tribunal’s damages analyses and jurisdictional findings are more likely to be annulled than findings on liability.
The most frequently and successfully invoked annulment ground is manifest excess of powers. It has been raised in almost 90% of all completed annulment proceedings. Seventeen percent of applications were successful. Of the 11 successful applications, three related to jurisdiction, six related to the applicable law and two related to other powers. Parties have claimed that there was an absence of reasons in most annulment proceedings (80%), with a 15% success rate.
Ad hoc committees have linked the ground of a serious departure from a fundamental rule of procedure with the need to ensure fundamental principles of due process and natural justice are complied with. Parties relied on this ground in over 70% of annulment proceedings but have only been successful in slightly less than 8% of cases.
Requests for annulment on the basis that the tribunal was not properly constituted have been relatively rare. Parties have invoked this annulment ground in 6% of completed proceedings (often in conjunction with an allegation of a serious departure from a fundamental rule of procedure) but only once successfully. The final ground for annulment based on corruption on the part of a member of the tribunal has not yet been successfully invoked.
Publication Year: 2021
Publication Date: 2021-01-01
Language: en
Type: article
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Cited By Count: 1
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