First Tuesday Update is our monthly take on current issues in commercial disputes, international arbitration, and judgment enforcement.

Twelve years after its last major update, the International Centre for Settlement of Investment Disputes (ICSID) proposed extensive revisions to its rules on August 3, 2018. The “comprehensive set of proposed changes to modernize its rules for resolving disputes between foreign investors and states” including new provisions on transparency, arbitrator disclosure, security for costs, and third-party funding.

ICSID member states and the public are invited to submit written comments on the proposed rules until December 28, 2018. The amendments to the ICSID rule require the approval of two-thirds of ICSID member states. A vote on the proposed amendments is expected in 2019 or 2020.

Regardless of whether these proposed amendments are approved, the proposal reflects the current challenges to the legitimacy of investor-state arbitration, major issues in investor-state arbitration, and perceived inefficiencies in the process. The proposals include the following:

Third-Party Funding

The proposed rule requires that parties must disclose whether they are funded by third parties and the source of the funding so that the arbitrators may adequately assess conflicts of interest. The obligation applies throughout the proceeding and arbitrators will be required to disclose whether they have any relationship to the funder.

Security for Costs

There is a proposed new, stand-alone rule allowing a tribunal to order security for costs. The rule states that the tribunal must consider the relevant party’s ability to comply with an adverse decision on costs and any other relevant circumstances. A party’s failure to comply with an order compelling security for costs could lead to a tribunal suspending the arbitration for 90 days and, subsequently, ending the arbitration.

Enhanced Transparency

The current rules require the consent of both parties for an award to be published. Under a proposed new rule, a party is deemed to have consented unless it objects within 60 days. If a party objects, the proposed rule permits publication of legal excerpts of the award.

Arbitrator Appointment and Challenges

The proposed rule changes require an enhanced declaration of independence and impartiality from arbitrators. Additionally, the proposed rules revise the process for challenging arbitrators, establishing an expedited schedule for filing a challenge.

Electronic Filing

Under the proposed rules, all filings are electronic unless there are special reasons for paper filing.

Expedited Arbitration

The proposed rules introduce optional expedited arbitration. If parties select expedited arbitration within 20 days of notice of registration, they must select a tribunal within 30 days of registration. The first session is then held within 30 days. Then, memorials and countermemorials—limited to 200 pages—must be filed within 60 days. Next, replies—limited to 100 pages—must be filed within 40 days. Finally, the hearing is held 60 days after the last written submission.

Award Timeline

The proposed rules include new timelines for issuing awards. The proposal requires awards be rendered within 60 days of the last submission on an application for manifest lack of legal merit, within 180 days of the last submission on a preliminary objection and within 240 days of the last submission on all matters.

Conclusion

ICSID is engaging in an extensive rule-revision process to try to address a number of pressing issues in investor-state arbitration. The proposals attempt to enhance efficiency, mandate transparency, and resolve contentious issues. While a vote on these proposals may not occur until 2019 or 2020, it is likely that practitioners will advocate that the proposals reflect generally accepted practices and should be followed by tribunals.