The first ever summary dismissal of ICSID annulment grounds for being “manifestly without legal merit”

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] Continue reading “The first ever summary dismissal of ICSID annulment grounds for being “manifestly without legal merit””

ICSID Caseload Statistics (2023 Fiscal Year)

The ICSID Caseload Statistics have now been updated with new data for the fiscal year 2023 (“FY2023”) to capture statistics drawn from cases registered under the ICSID Convention, the Additional Facility Rules and other ICSID-administered cases between 1 July 2022 and 30 June 2023.

The International Centre for Settlement of Investment Disputes (“ICSID”) was established in 1966 by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the “ICSID Convention”) as a means of furthering the World Bank’s objective of promoting international investment through the provision of a neutral and reliable forum for the resolution of disputes between foreign investors and States. To date, the ICSID Convention counts 158 Contracting States and seven signatory States, bringing the total number of ICSID Member States to 165. Continue reading “ICSID Caseload Statistics (2023 Fiscal Year)”

New Code of Conduct for arbitrators in investment arbitration

The UN Commission on International Trade Law (UNCITRAL) has approved a Code of Conduct for arbitrators in international investment arbitration (available here). The Code is intended to apply to members of an ICSID arbitral tribunal or ad hoc committee, and to candidates for such roles, and also to apply to other investor-state arbitrations. The precise mechanics by which this will be achieved is unclear, and the commentary to the Code suggests that it may come to be incorporated into the UNCITRAL Arbitral Rules. Parties are free to agree that the Code should apply in their arbitrations and it is likely that this will become common.

The Code of Conduct is a mixture of codifying existing best practice, such as a prohibition on ex parte communications outside the remit of an initial appointment, and a requirement for independence and impartiality.

The Code also, however, contains a number of far-reaching new rules, in relation to so-called “double-hatting” where the same person acts as both arbitrator and party-appointed counsel in relation to the same actions by particular states or the same treaty provisions; in relation to the a requirement to maintain an arbitration’s confidentiality; and requirements for arbitrator disclosure.

Continue reading “New Code of Conduct for arbitrators in investment arbitration”

An Overview on Summary Procedure in International Arbitration

INTRODUCTION

The benefits and advantages of international arbitration as a dispute resolution process are well known: arbitration proceedings are confidential in nature; there is flexibility to decide on the rules and procedures governing the arbitration; parties have the ability to choose arbitrators with industry or specialist knowledge; and there can be significant savings in time and costs when compared to litigation.

Given that one of the key traits of international arbitration is the savings in time and costs, it is logical that arbitration tribunals and institutions find ways to reduce costs and the length of proceedings in natural ways – summary procedures are a great tool to achieve this goal, however, litigants and arbitral tribunals have been slow to take advantage of such procedures.

OVERVIEW OF SUMMARY PROCEDURES AND ITS INCREASING PREVALENCE IN MAJOR INSTITUTIONAL RULES

Summary procedures in international arbitration enable an arbitral tribunal to reach an early determination of the matter on the merits, without a full hearing of the evidence, or can be used to narrow the issues. Akin to summary judgment motions in common law court proceedings, summary procedures allow the arbitral tribunal to dispose of unmeritorious claims and defences at an earlier stage.

There is a difference between summary procedures from expedited proceedings as the latter provides for a more streamlined arbitration proceedings, usually by the prescription of shorter timelines, while the former is an application taken out in the ordinary arbitration proceedings.

For a period of time, there was doubt as to whether arbitral tribunals have the authority to summarily issue awards or dispose of a party’s claim and arbitral tribunals appeared to be hesitant to decide on such matters. To address this concern, an increasing number of major arbitral institutions amended their rules to expressly provide arbitral tribunals with such authority, including:

(a) In 2006, the International Centre for Settlement of Investment Disputes (ICSID) introduced Rule 41 which allows parties to file an objection that a claim is manifestly without legal merit.

(b) In 2016, the Singapore International Arbitration Centre (SIAC) introduced Rule 29 to the SIAC Rules which allows parties to apply for the early dismissal of a claim or a defence on the basis that the claim or defence is manifestly without legal merit or manifestly outside the jurisdiction of the Tribunal.

(c) In 2017, Article 39(1) was introduced the Stockholm Chamber of Commerce Arbitration Rules allowing parties to request the arbitral tribunal to decide on issues of jurisdiction, admissibility or merits.

(d) In 2017, the International Chamber of Commerce Court of Arbitration issued a revised practice note confirming that Article 22 of the ICC Rules allows applications for the expeditious determination of manifestly unmeritorious claims or defences.

(e) In 2018, Article 39 of the 2018 Hong Kong International Arbitration Centre (HKIAC) Administered Arbitration Rules introduced an early determination procedure empowering the arbitral tribunal to decide on points of law or fact on the basis that they are manifestly without merit, manifestly outside the arbitral tribunal’s jurisdiction or in instances where no award could be rendered in favour of a party even if the facts or law as alleged are assumed to be correct.

(f) In 2020, the London Court of International Arbitration introduced Article 22(viii) which provided for an early determination procedure which empowered arbitral tribunals to make an order or award in the event that a claim, defence or counterclaim is inadmissible or manifestly without merit.

Given the significant uptake in the number of major arbitration institutions which have adopted rules permitting summary procedures, arbitral rules permitting summary procedures would likely be the default option moving forward.

ENFORCEMENT OF SUMMARY AWARDS

As summary procedures have only taken root in institutional rules relatively recently, and with the historical hesitancy of arbitral tribunals relying on such powers, there is some level of uncertainty regarding the enforcement of summary awards given the limited quantity of such cases. This uncertainty creates a self-perpetuating cycle as it has been one of the reasons why arbitral tribunals have been reluctant to grant summary awards.

Nevertheless, so long as parties adhered to the agreed rules and parties were able to present their respective cases, there is no reason to believe that summary awards would not be enforced in the same manner as an arbitral award obtained after the conclusion of an arbitration. In particular, parties that see the benefit of summary procedure should consider adopting rules that explicitly authorise summary procedures.

This position is supported by the English decision of Travis Coal Restructured Holdings LLC v Essar Global Funding Ltd [2014] EWHC 2510 (Comm) where ICC arbitral tribunal had already granted an award against the defendant by way of a summary judgment procedure. In the enforcement proceedings brought by the plaintiff, the defendant alleged, amongst others, that the arbitral tribunal had exceeded its powers by adopting the summary judgment procedure and that the summary judgment process is a violation of due process. These arguments were rejected by the Commercial Court which noted that the arbitral tribunal had made every effort to conduct the arbitration in an expeditious and cost-effective manner, had given each party a fair opportunity to present its case and that the summary judgment procedure fell within the arbitration clause.

POTENTIAL REASONS FOR USING SUMMARY PROCEDURES

The most obvious benefit of summary procedures are the significant savings in time and costs. For instance, the average duration of cases in the SIAC is 13.8 months and even cases involving the SIAC Expedited Procedure would only an expect an award issued within 6 months of the constitution of the arbitral tribunal. By comparison, pursuant to the various summary procedures under the SIAC, ICSID and HKIAC Rules, the arbitral tribunals would be required to issue a decision or award within 60 days of the application or the constitution of the tribunal. The shortened length consequently means that there is a corresponding reduction in the parties’ cost and legal fees.

Interestingly, commentators have also voiced some concerns that the introduction of summary procedures can have an opposite effect by extending arbitration proceedings as a party may file an unmeritorious application for summary procedure in order to further delay matters and cause the other party to incur further unnecessary costs. In this regard, given the expedited timelines contained in many of the institutional rules on summary procedures, as well as the potential costs orders that may be made against such applications, there is limited cause for concern that summary procedures would be abused.

Summary procedures may also reduce the number of unmeritorious claims being brought forth in the first place as such claims would likely face an application for the case to the summarily dismissed almost immediately. This can give parties additional comfort that unmeritorious claims can be disposed of without incurring the cost of a full arbitration as they would otherwise have to wait until the conclusion of a full arbitration before receiving a cost award.

While summary procedures may not always be useful, it serves as a helpful tool that can and should be relied upon in the appropriate circumstances and advocates and arbitrators should not be afraid to rely on the same when the time arises.

The Glass Ceiling Looms Large – Gender Diversity in Arbitration

In a previous blog, we looked at diversity, specifically in relation to gender parity, in the context of adjudication.[1] Although we have come a long way in this arena, the issue of gender diversity still casts a long shadow. It should therefore be no surprise that the world of arbitration suffers much of the same problem. Continue reading “The Glass Ceiling Looms Large – Gender Diversity in Arbitration”

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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