On 2 February 2024, the ICSID ad hoc Annulment Committee in Nachingwea and others v. Tanzania, ICSID Case No. ARB/20/38 (the “Nachingwea Committee”) issued a Decision dismissing much of Tanzania’s annulment application, having found those parts to be “manifestly without legal merit”.
Issued ten years after the first consideration by an ad hoc Annulment Committee of Rule 41(5) objections to an annulment application,[1] the Nachingwea Committee’s Decision is the first to grant a Rule 41(5) preliminary objection.[2]
Rule 41(5) provides an expedited procedure for the disposal of claims which are manifestly without legal merit at an early stage of proceedings.[3] It is available in ICSID arbitration proceedings, as well as mutatis mutandis in Chapter VII proceedings,[4] including annulment proceedings.[5]
Due process and procedural economy in Annulment proceedings
Though one of Tanzania’s grounds for annulment remains live, the Nachingwea Committee’s decision demonstrates the potential for Rule 41(5) to give effect to the principle of procedural economy in annulment proceedings.
Applications for dismissal under Rule 41(5) will, due to the summary nature of annulment proceedings, give rise to a balancing exercise. Indeed, as the Nachingwea Committee noted, “annulment proceedings are limited in scope, time and costs, and the procedural economy due to summary decisions under Rule 41(5) is limited.” In other words, how great is the procedural saving if the annulment process is itself already truncated? This partially explains the reluctance of previous ad hoc Annulment Committees to grant such objections. The other explanation is no doubt the high bar presented by the ‘manifestly lacking in legal merit’ standard.
This balancing act informed the Nachingwea Committee’s approach as it proceeded to dismiss only those aspects of Tanzania’s annulment application which the Committee held could be determined by a careful review of the law and the relevant passages of the Award (i.e. without the need for a hearing).[6]
The part of Tanzania’s annulment application that survived were 20 of the 21 instances when the Tribunal was said to have departed seriously from a fundamental rule of procedure (Article 52(1)(d)). The Nachingwea Committee reasoned that “when reviewed grouped together, [Tanzania’s 20 remaining allegations] may indicate infringements of the right to be heard and of the duty of impartial and equal treatment”[7] and that since these rights were so fundamental, they were not suited to summary determination under Rule 41(5) on the facts of the case.
Comment
The Nachingwea Decision provides important and welcome guidance on the application of an under-utilised part of the ICSID procedure. Those seeking to make annulment applications will need to take the threat of summary dismissal seriously and consider structuring such applications to fall within grounds unsuitable to summary determination. Those facing annulment applications will need to more seriously contend with objections brought pursuant to Rule 41(5).
It is, however, too early to say whether this Decision will encourage future Annulment Committees to grant what the Nachingwea Committee rightly referred to as “an exceptional remedy against an exceptional remedy”.[8]
[1] Elsamex, S.A. v. Republic of Honduras, ICSID Case No. ARB/09/4, Decision on Elsamex S.A.’s Preliminary Objections, 7 January 2014.
[2] Nachingwea and others v. Tanzania, ICSID Case No. ARB/20/38, Decision on Preliminary Objections Pursuant to ICSID Arbitration Rule 41(5), 2 February 2024, paragraph 69.
[3] This was an innovation introduced by the 2006 amendment to the ICSID Arbitration Rules, intended to yield savings of time and cost (i.e. to further the ends of procedural economy).
[4] ICSID Convention, Section 5 – Interpretation, Revision and Annulment of the Award, given effect in Chapter VII of the ICSID Arbitration Rules.
[5] Though Rule 41(5) itself refers to “claims” (and so not, expressly, to annulment applications), Rule 53 states that “The provisions of these Rules shall apply mutatis mutandis to any procedure relating to the interpretation, revision or annulment of an award and to the decision of the Tribunal or Committee.”
[6] The Annulment Committee decided to grant the Claimants’ Rule 41(5) objections as against Tanzania’s Applications for Annulment based on Article 52(1)(b) (manifest excess of powers), and Article 52(1)(e) (failure to state reasons), as well as a single allegation (allegation 21) pertaining to Tanzania’s Article 52(1)(d) Annulment Application (serious departure from a fundamental rule of procedure). The Annulment Committee was content to dismiss allegation 21 (the Tribunal’s alleged failure to explain the guidelines for costs on legal representation) under Rule 41(5) since Tanzania had not cited any rule of procedure to support this- hence the allegation manifestly lacked legal merit.
[7] Nachingwea and others v. Tanzania, paragraph 158.
[8] Nachingwea and others v. Tanzania, paragraph 61.