In September-October 2009, three annulment committees of the International Centre for Settlement of Investment Disputes (ICSID) published decisions relating to the annulment of ICSID tribunal awards. These decisions confirm that annulment committees will afford parties full opportunity to apply for annulment, but will continue to set a high threshold for the success of such an application.
The circumstances in which an ICSID award can be annulled are limited under the ICSID Convention. According to Article 52 of the ICSID Convention, an applicant must show that the tribunal “manifestly exceeded its powers” or failed to observe certain standards of due process. A party must apply for annulment within 120 days of the award. Three recent ICSID annulment committees recently reiterated the high threshold needed for annulment of an ICSID award.
The first decision was Azurix Corp. v. The Argentine Republic.1 The tribunal held that Argentina had failed to accord Azurix’s investment protection to which it was entitled under the US-Argentina Bilateral Investment Treaty (BIT). Argentina applied for annulment of the award. The annulment committee rejected Argentina’s application. In response to Argentina’s arguments, the committee made five key findings. First, the tribunal did not manifestly exceed its powers by allowing Azurix, instead of its related entity with whom Argentina contracted, to bring the claim because nothing in the wording of the BIT or the ICSID Convention limited Azurix’s capacity as a shareholder to sue Argentina. Second, the tribunal did not manifestly exceed its powers or fail to state reasons for its decision when it selected international law rather than Argentine law as the applicable law, and, moreover, any error in the application of the selected law cannot be an annullable error. Third, the tribunal did not seriously depart from a fundamental rule of tribunal procedure or fail to state reasons for its decision when it refused to order the production of documents by Azurix because a respondent State does not have a right to production, and the tribunal’s discretion to refuse production is not reviewable by an annulment committee. Fourth, the tribunal’s appointment of its president, and its review of that appointment, did not seriously depart from a fundamental rule of tribunal procedure despite the president’s previous relationship with Azurix. Fifth, the tribunal did not manifestly exceed its powers when selecting the applicable law for the awarding of damages and stated sufficient reasons for its conclusion that Azurix should receive damages. Accordingly, at no point did Argentina’s challenge to the tribunal’s award surpass the high threshold required to obtain annulment before the committee.
The second decision was M.C.I. Power Group L.C. v. Republic of Ecuador.2 M.C.I. originally claimed that its investment in Ecuador, which was protected by the US-Ecuador BIT, was expropriated by Ecuador before and after the BIT’s entry into force. The tribunal held that it did not have jurisdiction over acts consummated before the BIT’s entry into force. This lack of jurisdiction included Ecuador’s failure to pay accounts which fell due before, but remained unpaid after, the BIT’s entry into force. The tribunal treated Ecuador’s failure to pay those accounts as acts occurring before the BIT’s entry into force, over which it did not have jurisdiction. M.C.I. applied for annulment of the adverse portion of the award. The annulment committee rejected the application. It held that the tribunal’s reasoning was not “egregiously wrong” to the extent that the tribunal manifestly acted beyond its powers. It also held that the tribunal had sufficiently justified its conclusions. The committee emphasised that it was not a court of appeal and its mandate was only to “assess the legitimacy of the award and not its correctness.” Whether the BIT applied to non-payment of the accounts was open to interpretation. The tribunal chose its interpretation and it was not within the committee’s power to substitute its own interpretation for that of the tribunal.
The final decision was Continental Casualty Company v. The Argentine Republic.3 A tribunal rendered an award partly adverse to each party. Both parties applied for rectification of errors in the award. The tribunal decided the rectification points. Argentina applied for annulment of the award 270 days after the award but only 102 days after the rectification decision. Continental filed a preliminary objection to Argentina’s application. Continental argued that Argentina’s application was made more than 120 days after the award and therefore was outside the jurisdiction of the annulment committee. Argentina argued that, following a rectification decision subsequent to an award, the limit of 120 days should be calculated from the date of that decision. The committee agreed with Argentina. Relying on the plain meaning of Article 49 of the ICSID Convention, it held that the limit of 120 days runs from the date of the rectification decision, rather than the date of the award. Argentina’s application fell within the time limit and within the committee’s jurisdiction.
The threshold for annulment of an ICSID award remains high. Azurix and M.C.I. emphasize that an annulment committee is not a court of appeal and that annulment will only occur when the circumstances outlined in Article 52 of the ICSID Convention are present. On the other hand, Continental Casualty demonstrates that the committee will not readily abbreviate the procedural right of a party to lodge, and be heard in respect of, an application for annulment.