Challenges in the Proceedings and Enforcement of ICSID Awards

Challenges in the Proceedings and Enforcement of ICSID Awards

Challenges in the Proceedings and Enforcement of ICSID Awards

As much as there are many advantages for persons in the oil and gas company to settle their dispute with the ICSID tribunal; there are also certain challenges that they might face which is important for them to be made aware of.

Firstly, the oil companies and host state may be faced with the problem of how fast arbitrators are appointed after they have registered their request for arbitration. Although Article 37 of the ICSID Convention provides that “the tribunal should be constituted as soon as possible; the reality is that ‘the timeframe laid out in the ICISD Convention is longer than the time frame stipulated in their ICSID arbitration Rule 2′.

This brings great confusion to disputants who are crippled with anxiety on how fast the ICSID tribunal will be constituted because of the lack of uniformity of their rules. Therefore, the oil companies and host state are left uncertain in regards to how fast their arbitration proceedings will begin.

Another challenge for disputing parties in the oil and gas industry borders on the fact that the arbitrators in the ICSID Tribunal usually commit themselves to too many responsibilities. Though they are highly qualified, these arbitrators will commit themselves to too many proceedings within a limited time frame.

The resultant effect is that these arbitrators in ICSID will be acting in different capacities which will increase their workload, and consequently the oil companies cannot have their dispute settled in a timely and expeditious manner.

Another problem with the current ICSID arbitral regime is that though the ICSID has provided for the removal of arbitrators, when the parties have any concerns that the arbitrator who adjudicated over their case was somewhat partial or gave a biased award; the current ICSID arbitration rule provides that the time limits for this challenge must be brought promptly and, in any event, before the proceedings are declared closed.

This standard applicable to Arbitrators challenged under ICSID Convention is quite stricter than those standards applicable under any other major arbitration rules. For instance, the current rule as specified under ICSID Convention provides that, Challenges may be brought where an appointed arbitrator ‘manifestly lacks’ any of the qualities as provided in Article and the ICSID Arbitration Rules.

Whereas, Article 12.1 of United Nations Commission on International Trade Law (UNCITRAL) provides that, for there to be a ground for challenges, the Challenges must have been brought where there are ‘justifiable doubts’ as to the arbitrator’s impartiality or independence and its rule states that the time limit for any challenge shall be brought within 15 days of the notice of appointment or the date the circumstances giving rise to the challenge became known to the Party as provided under Article 13.1.

Contrast it with the standard prescribed in ICSID arbitration for challenges to be brought against their arbitrators; the ‘manifest lack of competence, character or an independent judgment….’ threshold is not as lenient as the ‘justifiable doubts’ threshold provided for in commercial arbitration or under the UNCITRAL rules.

Furthermore, the rule under ICSID Arbitration does not guarantee a firm procedure for filling challenges against arbitrators. This rule is open to abuse as it can serve as a means for one of the disputing parties to employ a delaying tactic and thereby prolong the arbitration proceedings which might frustrate the other disputing party.

In Conoco Phillips v Venezuela; Venezuela filed six separate requests to disqualify an arbitrator over the course of five years, despite the fact that all the six challenges were dismissed for lack of merit. However, the arbitral proceedings were automatically suspended and over 13 months’ delay extended as a result of this.

ICSID Award is binding and can be enforced in any ICSID member state, there is no appeal mechanism provided for in an ICSID tribunal. This is another challenge that disputants in the oil and gas industry may face; since there is no appeal body handling ICSID awards the oil companies and host state have to accept the risk that they might be issued an award that they may not be satisfied with, yet it will still be binding on them. The present ICSID Arbitration rule does not make provision on how they allocate costs for the proceedings, such that the disputants may be aware of.

Necessary Reforms for ICSID Arbitration Tribunal and its Benefits for the Nigerian Oil and Gas Sector

Having reviewed the challenges that disputants in the oil and gas industry may experience if they decide to institute arbitration proceedings in the International Center for the settlement of Dispute, we shall now explore possible solutions to these challenges and how it will benefit our Nigerian oil and gas sector.

Firstly, the ICSID rules should make provision for an appellate body who will review the decision of the ICSID tribunal whenever any party files an appeal. In the case of CME v Czech Republic and Lauder v Czech Republic, ICSID had faced great criticisms on their decision and these cases brought a negative reputation to ICSID Arbitration.

The benefits that will result if ICSID creates an appellate mechanism is that there will be a consistent and coherent jurisprudence of cases. This will enhance the legitimacy of their system of investment arbitration, and any Nigerian oil and gas company who submit themselves to ICSID.

If they can predict the outcome of their case will not be so favorable, then it will be more compelling for them to explore the option of reaching a private agreement or compromise with the host state they are in a dispute with instead of spending unnecessarily.

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Another reform is how fast the arbitrators are appointed after parties register for the request of arbitration. Perhaps what could be done to speed up this process is to give the disputants a time limit of not more than 30 days to choose the arbitrators that will sit in the tribunal. This time frame will aid ICSID make a timely appointment of arbitrators and such will be advantageous for disputants in the Nigerian oil and gas industry.

The challenge of the arbitrators being committed to several disputes at the same time can be resolved by ICSID making provision for a separate rule for the arbitrators. Another reform is to make provision for disputants to make objections in regards to either the substance of the claim, the jurisdiction, or the Competence of the tribunal.

ICSID’s failure to allocate cost to disputants, can be resolved if they amend their rules in such a manner that a provision is included to ensure that the Tribunals are under the compulsory obligation to do ‘a breakdown for the cost of various procedural steps’. This will ‘not only help in raising the parties’ cost awareness, but it will also enhance the transparency and quality of the reasoning of decisions on cost.

The ICSID arbitration also needs to incorporate a rule that makes provision for the consolidation of proceedings. If such rule is provided, it will improve the efficiency of the dispute resolution process in ICSID which would mean that disputants from the Nigerian oil and gas industry can have the cost of their proceedings reduced significantly if they choose to consolidate their proceedings.

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