INTERNATIONAL INVESTMENT LAW AND ARBITRATION PAPER

COMPARATIVE ANALYSIS OF THE DISPUTE RESOLUTION MECHANISMS UNDER THE ICSID AND

UNCITRAL ARBITRATION RULES

SUNDAY ADEOLU (as8001@nyu.edu)

I. INTRODUCTION

II. COMPOSITION OF THE ARBITRAL TRIBUNAL

a. APPOINTMENT OF ARBITRATORS

b. CHALLENGE OF ARBITRATORS

III. THE ARBITRAL AWARDS

a. DECISION

b. THE CONTENT OF THE AWARD

c. ANNULMENT OF AWARDS

IV. CONCLUSION AND RECOMMENDATIONS

I. INTRODUCTION

International arbitration has gained its importance in today‟s world. The reason for this

may stem out of the fact that the world is being caught up with by globalization. Globalization

accounts for the situation where individuals, juridical persons and government of nations will

leave the shore of their own territory to invest in another nation. In the event of their investment

in other nations, a dispute may arise between parties to the investment or contract – which in

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most cases arise due to unforeseen situations such as change in laws. It may also be as a result of

legal and illegal expropriation. As a result of this, parties to such investment tend to seek an

acceptable dispute resolution mechanism acceptable by all the parties involved in such

investment in order to adjudicate the dispute that has arisen between them.

The practice is that parties enter into a binding dispute resolution agreement for their

investment at the time of entering into the contract or investment agreement. The dispute

resolution agreement may be included in a Bilateral Investment Treaty (BIT). Such dispute

resolution agreement spells out the manner in which any dispute that may arise between them

will be settled. It goes further to state the dispute resolution mechanism such as the institution

that will adjudicate the dispute and the institutional rules that may be employed to adjudicate the

dispute that may arise between them.

Because, in most cases, sovereign nations are in most cases involved in international

investment, it practically becomes practically difficult for sovereign nations to submit themselves

for adjudication in a national court of another country. On the other hand, in an investor-state

dispute, investors are wary of approaching the national courts of the sovereign state where they

have investment for settlement of their disputes based on the fact that the judges of the local

courts of the state of investment may tend to be partial, and in most cases, they are not

independent.1 Thus, investors feel that the use of the local courts of the state of investment will

put them at a great disadvantage.

1 In Nigeria for example, the constitution empowers the President to appoint the Chief Justice of Nigeria,

subject to the approval of the Senate. See Section 231(1) of the Constitution of the Federal Republic of

Nigeria which provides: “The appointment of a person to the office of Chief Justice of Nigeria shall be

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In some countries, where the judges are appointed by the President, and remunerated by

the government, it may be difficult to a great extent to obtain a judgment from the local court

against the government. The fear of this led to preference for a neutral dispute resolution

mechanism which does not belong to the country of any of the parties to the dispute.2

Prior to the proliferation of Bilateral Investment Treaties (BIT), in a state-investor

dispute, when there is either a lawful or unlawful expropriation of the investor‟s investment or

any violation of the investor‟s rights under the investment agreement, the investor‟s state used to

espouse the investor‟s rights by instrumentality of diplomacy under international law.3 In this

instance, discussions and negotiation between the two levels of government may resolve the

dispute with little damage to the mutual interests of the two governments.4 Thus, once the

investor‟s rights are espoused by his state, the investor‟s claims become that of his home state‟s

claims.5

In Barcelona Traction case6, the International Court of Justice (ICJ) noted that espousal

lies within the discretion of the state. The ICJ further stated that the government itself is the sole

judge of the espousal request.7 Since this is the case, there tends to be situation in which the state

made by the President on the recommendation of the National Judicial Council subject to confirmation of

such appointment by the Senate”.

2 See Krista Nadakavukaren Schefer, International Investment Law, Text, Cases, and Materials, at 363.

3 It was the belief that an individual does not have the right under traditional international law to espouse

his own right with a sovereign state. At best, such espousal could only be done on behalf of such

individual by his home state.

4 Supra, note 3, at 364.

5 Id.

6 See Barcelona Traction Light and Power Company ltd., February 5, 1970 at 44, ¶79

7 Id.

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may not be able to espouse the investors‟ rights properly due to one or two political reasons that

characterized the system. The fact that the espoused investor‟s claim becomes that of the state

afterwards might be one of the backlashes to this traditional international law dispute resolution

mechanism when it comes to investment law. This might prompt the search for the better means

of dispute resolution mechanism under investment law as mentioned above.

Typically, nowadays, there are various BITs between states under which there are

reciprocal provisions for individuals, companies and governments of each state to invest in one

another state. These BIT also do contain a clause for dispute resolution mechanism that will be

opted for by the party should there is any dispute that arises between them in the future. From a

typical BIT provision, parties will prefer to submit their disputes to international arbitration

administered by the International Centre for Settlement of Investment Disputes (ICSID) which is

a branch of the World Bank, with its seat at Washington DC, United States of America.8

Alternatively, settlement of investment disputes under the BIT is also provided for under the

United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules.9

8 See https://icsid.worldbank.org/ICSID/Index.jsp. The idea of an International Centre for Settlement of

Investment Disputes which will focus more on procedural norms for investment protection rather than the

substantive aspect was initiated by the then World Bank legal counsel, Aron Broches He wanted a neutral

multilateral forum where investment disputes will be resolved between the host state and the investor

which will also be accepted by parties to the disputes.

9 Article 24(3) of the US Model BIT 2004 provides: “. . . a claimant may submit a claim referred to in

paragraph 1: (a) under the ICSID Convention and the ICSID Rules of Procedures for Arbitration

Proceedings, provided that both the respondent and the non-disputing Party are parties to the ICSID

Convention; (b) under the ICSID Additional Facility Rules, provided that either the respondent or the

non-disputing Party is a party to the ICSID Convention; (c) under the UNCITRAL Arbitration Rules; . . .

. Note that Article 1120 of NAFTA provides something very similar to the above provisions.

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The UNCITRAL Arbitration Rules were originally designed for ad hoc arbitration in the

context of international commercial arbitration.10

However, there have been many reviews of the

UNCITRAL Arbitration Rules. The recent is the UNCITRAL Arbitration Rules adopted in

December 2013 and which came into force on the 1st of April 2014. One of the unique things

about the 2013 reviewed Rules is the fact that it incorporates rules on transparency in treaty-

based investor-state arbitration.11

However, the use of the UNCITRAL Arbitration Rules has

been extended to other disputes that are not commercial origin in nature as originally

contemplated. The UNCITRAL Arbitration Rules have also been useful in the investment

arbitration context.12

This is evidenced by references to the UNCITRAL Arbitration Rules in

many BIT between states13

and that of North America Free Trade Agreement (NAFTA). The

UNCITRAL Arbitration Rules may also serve as institutional rules for arbitrations that are

conducted under arbitral institutions such as International Chamber of Commerce (ICC), or

London Court of International Arbitration (LCIA) to mention but a few.

10

This is evident from the preamble of the UNCITRAL Arbitration Rules. It provides thus: Recognizing

the value of arbitration as a method of settling disputes arising in the context of international commercial

relations; being convinced that the establishment of rules for ad hoc arbitration that are acceptable in

countries with different legal, social, and economic systems would significantly contribute to the

development of harmonious international economic relations . . . .

11 See www.uncitral.org/uncitral/uncitral_texts/arbitration/2014Transparency.html.

12 See David D. Caron, Lee M. Caplan, & Matti Pellonpaa, The UNCITRAL Arbitration Rules, A

Commentary at 8.

13 See Article 24(3) of the US Model BIT 2004, supra, note 10.

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It has been noted that a number of arbitral institutions have also adopted the UNCITRAL

arbitration Rules in handling international cases.14

Because the UNCITRAL Arbitration Rules

was designed for ad hoc purposes, parties find flexibility in choosing them. Aside this, some

renown arbitral institutions that have their own rules also do provide services as appointing

authority coupled with administrative services for arbitration that are conducted under the

UNCITRAL Arbitration Rules.15

The foregoing is a pointer to the fact that the UNCITRAL

Arbitration Rules have been widely accepted as procedural framework being used in

international dispute settlement.16

Under the UNCITRAL Arbitration Rules, the former Article 1(1) stipulates that “where

parties have agreed in writing that disputes in relation to that contract shall be referred to

arbitration under the UNCITRAL Arbitration Rules, such disputes shall be settled in accordance

with these Rules subject to such modification as the parties may agree in writing”.17

The

implication of this provision is that parties have the flexibility to make the rules to suit their

needs. However, the modification may not be something that will be totally out of the scope of

the provisions of the Rules. One of the elements of the requirements in the former Article 1(1)

above is that parties‟ agreements to arbitrate must be made in writing. The writing requirement is

14

Caron & Caplan, et al, supra, note 12 at 9. Such institutions include Inter-America Commercial

Arbitration Commission, the Cairo International Commercial Arbitration Centre (CICAC), and Hong

Kong International Arbitration Centre (HKIAC) etc.

15 Id. Some of the Arbitral institutions that engage in this are America Arbitration Association (AAA),

the London Court of International Arbitration (LCIA), and the Stockholm Chamber of Commerce (SCC).

See n 29 of the book cited here.

16 Id.

17 See Article 1(1), United Nations Commission on International Trade Law (UNCITRAL) Arbitration

Rules, General Assembly Resolution 31/98.

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no more in the 2013 adopted UNCITRAL Arbitration Rules. It has been noted that the writing

requirement is important in order to avoid a situation where there may be uncertainty with

respect to whether the Rules have been made applicable.18

Given certainty and conformity with

national laws, and the New York Convention19

, it seems that the writing requirement of this

article will strengthen the acceptance and enforceability of the arbitral award that may emanate

from the arbitral proceedings under these Rules.20

But the world has advanced more than then

and so the writing requirement is not a necessary condition as mentioned above. Oral agreement

is now being recognized.

Another reason why the UNCITRAL Rules give latitude to parties to modify the Rules

may stem out of the fact that parties autonomy which underlies the rule of contract is respected.21

As such, the Rules do not give a stringent condition that the parties must adopt the Rule

wholesale. The Tribunal Rules of the Iran-US Claims Tribunal has been noted to be one of the

modified versions of the UNCITRAL Arbitration Rules.22

The UNCITRAL Arbitration Rules

can be smoothly modified to cover disputes that involve non-contractual issues like torts, or

public international law.23

The Iran-US Claims Tribunal is an example of situation where the

scope of article 1 incorporated claims that arose from debts, contracts, expropriation and other

measures that affected property rights.24

18

Caron & Caplan, et al, supra, note 16 at 19-20.

19 See the New York Convention on Enforcement of Foreign Arbitral Awards, 1958.

20 Caron & Caplan et al, supra, note 18.

21 Id.

22 Such a modification is reflected in the following provisions of the

23 Caron & Caplan, et at, supra, note 21 at 21.

24 Id.

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On the other hand, the ICSID Convention does not have a provision in which the

subheading deals with “scope of application”. From the preamble of the ICSID Convention, it is

clear that the aim of the Convention is basically for the need to encourage international

cooperation for economic development.25

Further to this, under the Section 1 of the Convention,

article 1(1) provides thus: “there is hereby established the International Centre for Settlement of

Investment Disputes. Article 1(2) further states: “the purpose of the Centre shall be to provide

facilities for conciliation and arbitration of investment26

disputes between Contracting States in

accordance with the provisions of this Convention.27

It is evident from the foregoing provisions

that the ICSID Convention was purposely designed for the resolution of investment disputes.28

However, there is one salient factor in this provision. The Convention dispute resolution

mechanism cannot be employed by countries that are not Contracting States to the Convention.

This gives a narrow application to the Convention. Unlike the UNCITRAL Arbitration Rules

which could be applied by any country whether a party to the UNCITRAL Rules or not, the

ICSID Convention can only be applied by Contracting States to the Convention.

Article 2 of the Convention stipulates that the seat of the Centre shall be at the principal

office of the International Bank for Reconstruction and Development.29

However, the seat may

25

The ICSID Convention preambles provides: “the Contracting States, considering the need for

international cooperation for economic development, and the role of private international investment

therein; bearing in mind the possibility that from time to time disputes may arise in connection with such

investment between Contracting States and nationals of other Contracting States; . . . .

26 Emphasis is mine.

27 See the International Centre for Settlement of Investment Disputes, October 14, 1966.

28 This is evidence by section 25 of the ICSID Convention.

29 The full provision of article 2 provides that: the seat of the Centre shall be at the principal office of the

International Bank for Reconstruction and Development (hereinafter called the Bank). The seat may be

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be moved to other places as may be agreed by Administrative Council.30

This is a pointer to the

fact that parties that bring investment disputes to be resolved under the ICSID system do not

have the freedom to move the Centre‟s seat to other places under their agreement as they may

have under the UNCITRAL Rules without the consent of the Administrative Council. Article 63

of the ICSID Convention stipulates, inter alia, that arbitration proceedings may be held under the

parties‟ agreement at the Permanent Court of Arbitration (PCA) or at any other appropriate institution.

With respect to other appropriate institutions, these may be private or public institutions. However, the

Centre has to endorse the option of any other appropriate institutions because it is the Centre that

will make arrangement for this.31

Aside this, if the parties also wish to move the seat of

arbitration to any other place, there is a need for the Commission or Tribunal‟s approval after

due consultation with the Secretary-General of the Secretariat.32

Under the UNCITRAL

Arbitration Rules, parties have the latitude to choose wherever they want the seat of arbitration to

be.33

As noted above, this is because the UNCITRAL Arbitration Rules were purposely

designed for ad hoc arbitral processes which will not limit parties‟ flexibility and autonomy to

modify the Rules to suit their purpose.

moved to another place by decision of the Administrative Council adopted by a majority of two-thirds of

its members.

30 Id.

31 See Article 63 of the ICSID Convention which provides that “Conciliation and arbitration proceedings

may be held, if the parties so agree, (a) at the seat of the Permanent Court of Arbitration or of any other

appropriate institution, whether private or public with which the Centre may make arrangements for that

purpose; or (b) at any other place approved by the Commission or Tribunal after consultation with the

Secretary-General.

32 Id.

33 This is further evidenced by the Model Arbitration Clause which provides inter alia that parties may

wish to consider adding: “ (c) the place of arbitration shall be . . . (town or country).”

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Initiating arbitration process under the two systems is characterized with some

differences. Article 3(1) of the UNCITRAL Rules presupposes that it is the claimant who shall

initiate the arbitration process.34

Addition to this, the arbitration shall be deemed to commence

on the date that the respondent receives the notice of arbitration. The demand that the dispute

shall be referred to arbitration made by the claimant seems to be an important element in the

initiation of the arbitration process. In the ICSID arbitration system, it seems that any party

between the claimant and the respondent could initiate the arbitration process. In the words of

Article 36 of the ICSID Convention, it make reference to “making a request” for arbitration,

which is different from the language used by the UNCITRAL Rules.35

34

The full provision of Article 3 of the Rules reads: “(1) the party initiating recourse to arbitration

(hereinafter called the “claimant”) shall give to the other party (hereinafter called the “respondent”) a

notice of arbitration. (2) Arbitration proceedings shall be deemed to commence on the date on which the

notice of arbitration is received by the respondent. (3) The notice of arbitration shall include the

following: (a) A demand that the dispute be referred to arbitration; (b) The names and addresses of the

parties; (c) A reference to the arbitration clause or the separate arbitration agreement that is invoked; (d)

A reference to the contract out of or in relation to which the dispute arises; (e) The general nature of the

claim and an indication of the amount involved, if any; (f) The relief or remedy sought; (g) A proposal as

to the number of arbitrators (i.e. one or three), if the parties have not previously agreed thereon. (4) The

notice of arbitration may also include: (a) The proposals for the appointments of a sole arbitrator and an

appointing authority referred to in article 6, paragraph 1; (b) The notification of the appointment of an

arbitrator referred to in article 7; (c) The statement of claim referred to in article 18.

35 The provisions of article 36 of ICSID Convention provides as follows: (1) Any Contracting State or any

national of a Contracting State wishing to institute arbitration proceedings shall address a request to that

effect in writing to the Secretary-General who shall send a copy of the request to the other party. (2) The

request shall contain information concerning the issues in dispute, the identity of the parties and their

consent to arbitration in accordance with the rules of procedures for the institution of conciliation or

arbitration proceedings. (3) The Secretary-General shall register the request unless he finds, on the basis

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This paper does a comparative analysis of the dispute resolution mechanisms under the

ICSID regime and UNCITRAL Arbitration Rules. However, the paper does not to do an

exhaustive comparative analysis of the dispute resolution mechanisms under the two systems.

Part II of this paper examines the composition of ICSID arbitral tribunal and that of UNCITRAL

arbitral tribunal. It looks at appointment of arbitrators and the challenge of arbitrators under both

systems which have become troubles wearing a special cap. Few cases are considered here in

order to critically examine this position.

Part III examines the arbitral awards, its content and the effect of the award under the two

systems. The mere fact that an award is issued at the end of an arbitral proceedings does not

suffice for the enforcement of the award. Also, this part considers whether the two systems have

provisions for annulment of arbitral awards after it has been issued by the arbitral panel. In part

IV, a conclusion is drawn. Concurrently, a recommendation is made based on the observation

from the disparities inherent in the two systems and how they can better serve the international

arbitration community.

II. COMPOSITION OF THE ARBITRAL TRIBUNAL

Article 7 of the UNCITRAL Rules seems to favor the appointment of three arbitrators as

against one arbitrator. A careful reading of the intendment of the drafters of the Rules tends to

show this. The provision of the article states that “if the parties have not previously agreed on the

number of arbitrators, and if within 30 days after the receipt by the respondent of the notice of

of the information contained in the request that the dispute is manifestly outside the jurisdiction of the

Centre. He shall forthwith notify the parties of registration or refusal to registrar.

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arbitration the parties have not agreed that there shall be only one arbitrator, three arbitrators

shall be appointed.” Perhaps, one of the reasons why the Rules tilt towards the side of three

arbitrators might be because a three-member panel arbitrator will render a thorough and un-bias

decision characterized with competence and expertise.36

Absent the choice of one arbitrator by

the parties to the dispute, the choice of three arbitrators favored by the UNCITRAL Rules is said

to have worked well in the experience of both Iranian and American Arbitrators with the Iran-US

Claims Tribunal.37

In the case of NAFTA under Chapter Eleven, a commentator has noted that it

is a choice that is politically wise and beneficial.38

In the ICSID regime, Article 37(1) states that ”the Arbitral Tribunal (hereinafter called

the Tribunal) shall be constituted as soon as possible after registration of a request pursuant to

Article 36”. Further in paragraph 2(a) of the same Article, attention is drawn to the fact that the

number of the arbitrators that may be chosen by the parties is either one or an uneven number,

subject to the parties‟ agreement.39

The possible interpretation from the above provision is that

where parties appoint arbitrators under their agreement, in situations where they agree to choose

more than one arbitrator, it is not a mandatory requirement for them to appoint only three

arbitrators. However, in their bid to appoint more than one arbitrator, the number of the

arbitrators must be uneven. For example, this could be five, or seven. It seems that the

constitution of the Tribunal under the ICSID regime is governed by the freedom of choice of the

36

See Caron & Caplan et al, supra, note 24 at 171.

37 Id.

38 Id.

39 See Article 36(2)(a) which states that: “ The Tribunal shall consist of a sole arbitrator or any uneven

number of arbitrators appointed as the parties shall agree.”

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parties and that of non-frustration.40

These principles are also inherent in the UNICTRAL regime

in the Tribunal‟s constitution. The only situation in which the number of arbitrators will consist

of three under the ICSID regime will be where the parties to arbitration do not agree on the

number of arbitrators and the method of appointment.41

In this wise, the Convention mandates

that the number of arbitrator shall consist of three. Each of the party to the arbitration shall be

allowed to appoint its own arbitrator, which shall be one from each party, and the third arbitrator

who shall be the presiding arbitrator shall be appointed by the “agreement of the parties” and not

by the parties‟ appointed arbitrators.42

This is evident in Fedax v. Venezuela43

In situations where the parties have appointed their arbitrators under the ICSID regime

and there is a deadlock in appointing the presiding arbitrator under the parties‟ agreement, one of

the parties could request the Chairman to act under Article 38 of the Convention and nominate

the presiding arbitrator. In SOABI v. Senegal44

, the two parties appointed their arbitrators.

40

See Christoph H. Schreuer & Loretta Malintoppi et al, The ICSID Convention – A Commentary, at

476.

41 See Article 37(2)(b) of ICSID Convention. It provides: “where the parties do not agree upon the

number of arbitrators and the method of their appointment, the Tribunal shall consist of three arbitrators,

one arbitrator appointed by each party and the third, who shall be the president of the Tribunal, appointed

by agreement of the parties” (Emphasis is mine).

42 Id.

43 See the case of Fedax v. Venezuela, Decision on jurisdiction, 11 July 1997, ¶¶ 4-7 as illustration on this

issue. Here, when the Claimant did not receive a response from the Respondent after 60 days, it informed

the Centre that it was adopting the provisions of Article 37(2)(b)(sic). However, the Respondent acted

promptly after this and appointed its own arbitrator. Subsequently after this, the Respondent proposed that

the presiding arbitrator be appointed by the Chairman. The Claimant accepted the proposal and the

Chairman appointed the presiding arbitrator in that case.

44 SAOBI v. Senegal, Decision on jurisdiction, 1 August, 1984, ¶¶ 4-5; Also, Award, 25 of February 1988

¶¶ 1.04 – 1.05.

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Subsequent to this, by their agreement, the two parties further appointed Mr. Pierre Lalive as

presiding arbitrator. However, Mr. Lalive declined the appointment and the parties were unable

to reach an agreement to appoint another presiding arbitrator. Further to this, SAOBI requested

the Chairman of the Centre to appoint the presiding arbitrator pursuant to Article 38 of the ICSID

Convention. The Chairman nominated Professor R.L. Bindschedler. Professor Bindschedler

accepted the nomination to act as the presiding arbitrator and the Tribunal was fully constituted

pursuant to Rule 6 of ICSID Arbitration Rules of Procedures.

Radically different from the last sentence of the preceding paragraph is Article 9(1) of the

UNCITRAL Arbitration Rules. The article provides that where parties intend to appoint three

arbitrators, each of the party shall appoint one arbitrator, while the presiding arbitrator shall be

appointed by the parties‟ appointed arbitrators.45

In the event that a party has not notified the

other party within 30 days of receipt of a party‟s notification of appointment of an arbitrator, the

first party who has made appointment under here has the right to request the appointing authority

to appoint the second arbitrator for the other party. Afterwards, the procedure set forth in

paragraph 1 of Article 9 may then apply in appointing the presiding arbitrator. However, if the

two parties‟ appointed arbitrators as well failed to appoint the presiding arbitrator within 30 days,

the appointing authority shall appoint the presiding arbitrator without having any recourse to any

of the parties.46

45

See note 48 below.

46 See note 48 below as well.

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Under the UNCITRAL Arbitration Rules, the case is different. If none of the parties

responded to either of the party‟s proposal to appoint a sole arbitrator within the 30 days47

provided for in paragraph 1 of Article 7, or the necessary party that is expected to appoint the

second arbitrator has failed to do so in accordance with Article 948

, or 1049

. If a party then makes

a request to the appointing authority for appointment of the other arbitrator or a sole arbitrator,

the appointing authority has the latitude to appoint a sole arbitrator. This is consequent to the

47

Article 7(2) provides that “ Notwithstanding paragraph 1, if no other parties have responded to a party‟s

proposal to appoint a sole arbitrator within the time provided for in paragraph 1 and the party or parties

concerned have failed to appoint a second arbitrator in accordance with article 9 or 10, the appointing

authority may, at the request of a party, appoint a sole arbitrator pursuant to the procedure provided for in

article 8, paragraph 2, if it determines that, in view of the circumstances of the case, this is more

appropriate.

48 Article 9 of the UNCITRAL Arbitration Rules provides; “(1) if three arbitrators are to be appointed,

each party shall appoint one arbitrator. The two arbitrators thus appointed shall choose the third arbitrator

who will act as the presiding arbitrator of the arbitral tribunal. (2) If within 30 days after the receipt of a

party‟s notification of the appointment of an arbitrator the other party has not notified the first party of the

arbitrator it has appointed, the first party may request the appointing authority to appoint the second

arbitrator. (3) If within 30 days after the appointment of the second arbitrator the two arbitrators have not

agreed on the choice of the presiding arbitrator, the presiding arbitrator shall be appointed by the

appointing authority in the same way as a sole arbitrator would be appointed under article 8.

49 Article 10 of the same Rules provides: (1) For the purposes of article 9, paragraph 1, where three

arbitrators are to be appointed and there are multiple parties as claimant or as respondent, unless the

parties have agreed to another method of appointment of arbitrators, the multiple parties jointly, whether

as claimant or as respondent, shall appoint an arbitrator. (2) If the parties have agreed that the arbitral

tribunal is to be composed of a number of arbitrators other than one or three, the arbitrators shall be

appointed according to the method agreed upon by the parties. (3) In the event of any failure to constitute

the arbitral tribunal under there Rules, the appointing authority shall, at the request of any party,

constitute the arbitral tribunal and, in doing so, may revoke any appointment already made and appoint or

reappoint each of the arbitrators and designate one of them as presiding arbitrator.

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procedure in paragraph 2, article 8 of the UNCITRAL Rules. However, this is subject to the

discretion of the appointing authority given what might be the circumstances of the case.

Article 39 of the ICSID Convention makes provision for the arbitrators‟ origin. At the

first arm of this article, it stipulates that the “majority” of the arbitrators that shall be appointed

by parties to the arbitration shall not come from countries of parties to the dispute. The purpose

of this might be an effort to ensure transparency at the arbitration proceedings and to ensure that

the arbitrators are not bias. However, the second arm of the same article in discussion gives

arbitrating parties the freedom to choose their arbitrators without restriction in so far there is an

agreement between the parties to that effect. In the case of a sole arbitrator, if there is an

agreement to that effect as well, the sole arbitrator could come from the country of any of the

parties to the dispute.50

From the provision of this article, in the case of three arbitrators, it seems

that the presiding arbitrator could also come from the country of any of the party to the dispute

provided that this is done under their mutual agreement. It has been noted that the provision of

this article could lead to a situation where the party that first appoints an arbitrator will appoint a

national of its country and thus preventing the other party from appointing an arbitrator from its

own State.51

Rule 1(3) of the ICSID Arbitration seems to provide a solution for this when it

states, inter alia, that in a situation where the Tribunal is expected to consist of three arbitrators,

a national of either of the two parties in dispute may not be appointed as an arbitrator by a party

50

Article 39 of the ICSID Convention provides that: “The majority of the arbitrators shall be nationals of

States other than the Contracting State party to the dispute, and the Contracting State whose national is a

party to the dispute; provided however, that the foregoing provisions of this Article shall not apply if the

sole arbitrator or each individual member of the Tribunal has been appointed by agreement of the

parties”.

51 Schreuer & Malintoppi et al, supra, note 40 at 501.

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without the agreement of the other party to the dispute. Additionally, where the Tribunal is

supposed to consist of five or more arbitrators, the nationals of each of the disputing parties may

not be appointed if the appointment by the other party would result in a majority number of

arbitrators from the parties‟ nationalities.

There seems to be no similar provision of this nature under the UNCITRAL Arbitration

Rules. The reason for that, as noted above, might be because the UNCITRAL Rules is purposely

designed for ad hoc arbitration. Article 10 of the Rules makes a provision that covers multi

parties.52

In effect, by the provisions of this Article, where there is more than one person as

claimant or respondent in an arbitration, assuming that they are claiming from the same

respondent, there shall not be a situation where each of them shall appoint different arbitrators as

claimants arbitrators. The article stipulates that all the potential claimants shall appoint one

arbitrator to represent them. This is also the situation in a case where we have many respondents.

However, the situation described here shall only happen where three arbitrators are to be

appointed in the case and there are many claimants or respondents. I envisage that the problem

that may emanate here bothers on how to balance the interest of all the claimants or respondents

and as well factor in the interest of all the claimants or respondents in choosing their arbitrators.

However, if the parties agreed to another method of appointing their arbitrators, the provision

that the multi parties shall jointly appoint their arbitrators shall not apply.53

Paragraph 2 of the

same article further provides that in a situation where parties by their agreement voluntarily

52

Article 10 of the UNCITRAL Arbitration Rules provides that: “. . . where three arbitrators are to be

appointed and there are multiple parties as claimant or respondent, unless the parties have agreed to

another method of appointment of arbitrators, the multiple parties jointly, whether as claimant or as

respondent, shall appoint an arbitrator.

53 Id.

PAGE 18 OF 33

agreed that the tribunal shall be composed of numbers that are different from the traditional one

or three for arbitrators, there is no other way than for the arbitrators to be appointed by the

method that have been agreed upon by parties.54

Paragraph 3 of Article 10 in discussion makes provision for situation similar to what is

found under Article 38 of the ICSID Convention. Under the UNCITRAL Arbitration Rules, the

above paragraph stipulates that in situations where the parties have reached a deadlock to

constitute the arbitral tribunal, one of the parties to the dispute could make a request to the

appointing authority to constitute the arbitral tribunal. Subsequent to this, the paragraph further

empowers the appointing authority to revoke any previous appointment that might have been

made by the party and reappoint the new arbitrators. The appointing authority also has the power

to designate one of the arbitrators appointed as the presiding arbitrator.55

Notable in this

paragraph is the fact that the appointing authority could also reappoint parties‟ appointed

arbitrators.

Article 40 of the ICSID Convention bothers on the appointment of arbitrators from the

Panel of Arbitrators that is preserved by the Centre with respect to Articles 12-16. Therefore, in

the event that the Chairman is requested by one of the parties to make appointment of arbitrators

54

Paragraph 2 of the above article provides thus: “if the parties have agreed that the arbitral tribunal is to

be composed of a number of arbitrators other than one or three, the arbitrators shall be appointed

according to the method agreed upon by the parties”.

55 See Paragraph 3, Article 10, UNCITRAL Arbitration Rules, which provides thus: “In the event of any

failure to constitute the arbitral tribunal under these Rules, the appointing authority shall, at the request of

any party, constitute the arbitral tribunal and, in doing so, may revoke any appointment already made and

appoint or reappoint each of the arbitrators and designate one of them as the presiding arbitrator.

PAGE 19 OF 33

on their behalf under article 38, the Chairman may not go beyond the Panel of Arbitrators in

making this appointment.56

B. CHALLENGE OF ARBITRATORS

Challenge of arbitrators is a big issue in international arbitration – whether in

international investment arbitration or international commercial arbitration. Domestic arbitration

is not as well left out of this issue. There have been attempts by the International Bar Association

(IBA) to ensure that there are some guidelines which will guide arbitrators in order to reduce the

cases which challenge to arbitrators may spring up.57

This part examines challenge under the

UNCITRAL Arbitration Rules vis-a-vis that of ICSID Convention.

After appointment of an arbitrator in an international arbitration, situations abound where

either claimant or respondent may challenge the claimant or respondent‟s appointed arbitrator

based on some reasons. Some of these reasons may be based on the connection of the arbitrator

concerned with the case or relationship with one of the parties.58

If this situation arises, what is

56

See Article 40 (1) which provides that; “ Arbitrators may be appointed from outside the Panel of

Arbitrators, except in the case of appointments by the Chairman pursuant to Article 38”. (2) Arbitrators

appointed from outside the Panel of Arbitrator shall possess the qualities stated in paragraph (1) of Article

14.

57 See the IBA Guidelines on Conflict of Interest in International Arbitration.

58 See Blue Bank International & Trust (Barbados) Ltd. v. Bolivarian Republic of Venezuela, decided in

2013 where the Centre‟s Chairman disqualified the Claimant‟s appointed arbitrator in a bilateral

investment treaty arbitration on the ground that there the Claimant‟s appointed arbitrator‟s law firm, in

another arbitration case, is acting against Venezuela. Available at

http://www.iareporter.com/downloads/2013118_1.

PAGE 20 OF 33

expected of the arbitrator concerned is either to resign his appointment or continue to be on the

panel of arbitrators. If the arbitrator continues to be on the panel of arbitrators that will decide the

case, this may significantly affect the credibility of the award that will emanate from the arbitral

process.

Article 11 of the UNCITRAL Arbitration Rules stipulates that a potential arbitrator is

expected to disclose any circumstances likely to give rise to justifiable doubts as to his or her

impartiality or independence59

at the point where he or she is approached. However, this must be

when the potential arbitrator is approached in connection with his or her appointment as an

arbitrator in a case.60

Aside this initial disclosure that is expected of a potential arbitrator in a

case, the article also seeks the arbitrator to disclose any further circumstances that may affect his

independence or impartiality in the case to the other parties and every other arbitrators. The only

exemption to where the arbitrator will be expected to do further disclosure of any situation which

will might affect his or her independence or impartiality is where the other party or other

arbitrators are informed of the situations. However, the provision of this article does not tell us

the person that is obligated to inform the other party or the arbitrators. It is assumed that the onus

to discharge this responsibility rests on the arbitrator that is expected to disclose or on the party

59

Emphasis is mine.

60 See Article 11 of the UNCITRAL Arbitration Rules which provides: “When a person is approached in

connection with his or her possible appointment as an arbitrator, he or she shall disclose any

circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence. An

arbitrator, from the time of his or her appointment and throughout the arbitral proceedings, shall without

delay disclose any such circumstances to the parties and the other arbitrators unless they have already

been informed by him or her of these circumstances.

PAGE 21 OF 33

that appointed him. Notable here is the fact that the disclosure expected of the arbitrator is a

continuing one which lasts till the end of the arbitration proceedings.61

Paragraph 2 of Article 12 of the UNCITRAL Arbitration Rules considers a situation

where the party itself will be challenging its own appointed arbitrator. The paragraph gives

latitude to a party to challenge its appointed arbitrator in a circumstance where the party becomes

aware of the reasons after the appointment. This may probably be in a case where it is later

discovered by the party that the arbitrator it has appointed has a bias against it or the arbitrator is

working in favor of the other party.62

It should be noted that this is the only ground upon which a

party can challenge its own appointed arbitrator.63

The silent question in this paragraph that

seems unaddressed is who makes the effort to become aware of the reasons. In other words, if

the party appointed arbitrator later discloses this information by himself to the party that

appointed it, will the party still reserve the right to challenge the arbitrator?

Paragraph 1 of the same Article 12 gives the standard that is expected before an arbitrator

can be challenged by any of the parties to the arbitration. The UNCITRAL Arbitration Rules

makes use of the words “justifiable doubts” as to the arbitrator‟s impartiality or independence. It

appears that the inclusion of the word “justifiable” to define the type of doubt expected to sustain

a challenge under the UNCITRAL Rules reflects a clear intention to establish an objective

standard for impartiality and independence.64

It has been noted that while a party‟s subjective

concern as to an arbitrator‟s bias may trigger a challenge, it is the objective reasonableness that

61

Id.

62 See Caron & Caplan et al, supra, note 38 at, 231.

63 See Article 12 (2) which states that: “A party may challenge the arbitrator appointed by it only for

reasons of which it becomes aware after the appointment has been made.‟

64 See Caron & Caplan, supra, note 62, at 210.

PAGE 22 OF 33

will be eventually used as a standard.65

For an arbitrator to be „impartial and independent‟ of all

the parties in the arbitration proceedings, circumstances must exist to evidence that the arbitrator

will not favor one party over another party. Additionally, it must be ensured that the arbitrator

concerned is free from the control of any of the party to the arbitration.66

It seems that questions

as to the impartiality of the arbitrator will arise as a result of the arbitrator‟s internal dispositions

while questions as to his independence will arise as a result of the arbitrator‟s external control by

one of the parties.67

It appears that the independence and impartiality standard expected of an arbitrator under

the UNCITRAL Arbitration Rules is the same under the International Bar Association (IBA)

general standards regarding impartiality, independence, and disclosure. In the IBA guidelines on

the conflicts of interests in international arbitration, the general principle provision under its Part

I provides that “every arbitrator shall be impartial and independence of the parties at the time of

accepting an appointment to serve and shall remain so during the entire arbitration proceeding

until the final award has been rendered or the proceeding has otherwise terminated”. This is a

pointer to the fact that the obligation of impartiality and independence placed on the arbitrator is

continuing all through the whole of arbitration proceedings. Alternatively, where the arbitration

65

Id. In the Challenge Decision of 11 January 1995, para., 23, reprinted in (1997) XXII YCA 227, 234,

the appointing authority explained the standard thus: “if the doubt had merely to arise in the mind of a

party contesting the impartiality of an arbitrator, „justifiable‟ would have been almost redundant. The

word must import some other standard – a doubt that is justifiable in an objective sense. In other words,

the claimant here has to furnish adequate and solid grounds for its doubts. Those grounds must respond to

reasonable criteria. In some, would a reasonable well informed person believe that the perceived

apprehension – the doubt – is justifiable? Is it ascertainable by that person and so serious as to warrant the

removal of the arbitrators?”

66 Supra, note 65 at 215.

67 Id.

PAGE 23 OF 33

proceeding is terminated, the obligation is expected to continue until the point of termination of

the arbitration proceeding. This provision is the same under the UNCITRAL Arbitration Rules as

mentioned above where the burden of disclosure placed on arbitrator is continuing till the end of

the arbitration proceeding.

Further, the IBA Guidelines on conflict of interests in international arbitration

categorized circumstances that would be necessary for an arbitrator to make disclosure in order

to avoid conflict of interest among parties to the arbitration. There is non-waivable red list. In the

non-waiveable red list, the fact that the prospective arbitrator made disclosures would not cure

the potential conflict that would arise in the arbitration proceedings if the arbitrator would have

to continue to act in the arbitration proceedings. In other words, the arbitrator would have to

resign notwithstanding disclosures in order to forestall situations where the award that will

emanate from the arbitration will be challenged and subsequently annulled.

There is the waivable red list. Under here, though the situations are serious, the parties

may still consent that the arbitrator continues to act after disclosure. Absent parties‟ consent that

the arbitrator continues to act after disclosure, the arbitrator would have to decline the

appointment. The orange list contains some specific situations which may give rise to justifiable

doubts in the eyes of the parties as to arbitrator‟s impartiality and independence. However, this is

depending on the facts of each case. Thus, the arbitrator would have to disclose such situations.

The green list contains situations where there is no any appearance and actual conflict of interest

between parties. In this circumstance, there is no any obligation on the arbitrator to make any

disclosure to parties to the arbitration. To a very large extent, the situations above have reduced

PAGE 24 OF 33

the rate at which arbitrators are challenged, especially in international commercial arbitration and

where the UNCITRAL Arbitration Rules are used.

Article 13 of the same UNCITRAL Arbitration Rules informs us of the steps the party

that intends to challenge an arbitrator must take.68

As soon as the party that intends to challenge

an arbitrator has been notified of the appointment of the arbitrator, it is obligatory on the party to

send the notice of its challenge within 15 days after such party has been notified of the

appointment of the arbitrator that it wishes to challenge. In another sense, the notice could also

be sent after 15 days in which the circumstances giving rise to „justifiable doubts‟ as to the

arbitrator‟s impartiality or independence arise. Further, this notice of challenge shall forthwith be

communicated to every other party involved in the arbitration which shall include the challenged

arbitrator and other arbitrators. The challenge may be invalid if the reasons for the challenge are

not stated in the notice that communicates the challenge.

It is instructive to note that when an arbitrator has been challenged, it is not necessary for

the arbitrator to resign just because there has been a challenge to his appointment. The fact that

68

Article 13(1) provides thus: “A party that intends to challenge an arbitrator shall send notice of its

challenge within 15 days after it has been notified of the appointment of the challenged arbitrator, or

within 15 days after the circumstances mentioned in article 11 and 12 became known to the party.

Paragraph 2 of the same article further provides that: “The notice of challenge shall be communicated to

all other parties to the arbitrator who is challenged and to the other arbitrators. The notice of challenged

shall state the reasons for the challenge”. Paragraph 3 stipulates that: “When an arbitrator has been

challenged by a party, all parties may agree to the challenge. The arbitrator, may, also after the challenge,

withdraw from his or her office. In neither case does this imply acceptance of the validity of the grounds

for challenge”. In the paragraph 4 of this same article, it provides as follows: “If within 15 days from the

date of the notice of challenge, all parties do not agree to the challenge or the challenged arbitrator does

not withdraw, the party making the challenge may elect to pursue it. In that case, within 30 days from the

date of the notice of challenge, it shall seek a decision on the challenge by the appointing authority”.

PAGE 25 OF 33

other arbitrators and parties to the arbitration agree to the challenge does not suggest that the

grounds for the challenge are valid.69

Notable is the use of the word “may” in paragraph 3 of the

article to infer discretion. Thus, it is left at the discretion of the challenged arbitrator whether he

or she wants to withdraw or not.

In a situation where the challenged arbitrator refuses to withdraw after the 15 days from

the date of notice, the party initiating the challenge may elect to pursue it. At this stage, it is also

clear that the pursuit by the party that initiates the challenge is a discretionary one. This is

evidenced by the use of the word “may”. In a circumstance where the party that initiates the

challenge elects to pursue it, within 30 days from the date that the notice of challenge was

received, the party initiating the challenge shall seek to obtain a decision from the appointing

authority.

Article 14 of the ICSID Convention stipulates the standard that is expected of persons

expected to serve on the panels of arbitration under the ICSID dispute settlement mechanism.

Among these standards is the requirement that the person designated to serve on the panel must

be of “high moral character”. Aside this, it further provides that the person must have

recognized competence in the relevant field. Emphasis is laid on competence in the field of law

as of particular importance for individuals expected to be on the panel of arbitrators.70

It seems

that the standard of high moral character required from an arbitrator which will enable him/her

69

See paragraph 3 of Article 13 in note 66 above.

70 The full provisions of Article 14(1) of the ICSID Convention provides thus: “Persons designated to

serve on the Panel shall be persons of high moral character and recognized competence in the fields of

law, commerce, industry or finance, who may be relied upon to exercise independent judgment.

Competence in the field of law shall be of particular importance in the case of persons on the Panel of

Arbitrators”.

PAGE 26 OF 33

to exercise independent judgment is not defined in the Convention. However, Rule 6(2) of

Arbitration Rules of ICSID makes provision for what is similar to disclosure that is expected of

an arbitrator under the UNCITRAL Arbitration Rules. The provision requires that an arbitrator

files a declaration of independence. The Arbitrator is also expected to provide a written

statement of (a) his past and present professional business and other relationship with parties to

the arbitration. It should be noted that this is only in the case where there is any past or present

business or professional relationship; (b) the arbitrator is expected to provide a statement of any

other situation that may cause his reliability for independent judgment to be questioned by one of

the parties to the arbitration. Notable among the statement of declaration is the fact that the

disclosure obligation placed on the arbitrator to notify the Secretary-General of the Centre is a

continuing one which lasts till the end of the arbitration proceeding. This is akin to what we have

under the UNCITRAL Arbitration Rules.71

If an arbitrator fails to sign a declaration by the end

of the first session of the tribunal, the arbitrator shall be deemed to have resigned from acting as

an arbitrator in the proceeding.72

Notwithstanding the statement of declaration above, a party may still propose to the

Commission or Tribunal to disqualify an arbitrator if there is any fact to the effect that there is a

“manifest lack of the qualities”73

required by paragraph (1) of Article 14 of the ICSID

Convention.74

Additional to this, a party to the arbitration proceedings may also propose the

71

Rule 6(2) of Rules of Procedures for ICSID Arbitration Proceedings.

72 Id.

73 Emphasis is mine.

74 Article 57 of the ICSID Convention provides: “A party may propose to a Commission or Tribunal the

disqualification of any of its members on account of any fact indicating a manifest lack of the qualities

required by paragraph (1) of Article 14. A party to arbitration proceedings may, in addition, propose the

PAGE 27 OF 33

disqualification of an arbitrator on the ground that such arbitrator is ineligible for appointment to

the Tribunal under Articles 37, 38, 39, and 40 of the ICSID Convention.

Under the ICSID regime, the controversial issue boils down on manifest lack of qualities.

The use of the word “manifest” sets a very high threshold for proposing the disqualification of

an arbitrator under the ICSID Convention. It does suggest that it must be very clear, unequivocal,

and unambiguous, that the arbitrator lacks the qualities required in Article 14(1) of the ICSID

Convention.75

The Amco v. Indonesia case is a good example to the high threshold

clarification.76

Article 58 of the ICSID Convention technically gives the Centre‟s Chairman the

power to make decision on any proposal to disqualify an arbitrator.77

However, this will only

happen in situations where other members of the Commission or Tribunal have not been able to

have a consensus on the disqualification of the arbitrator.78

disqualification of an arbitrator on the ground that he was ineligible for appointment to the Tribunal under

Section 2 of Chapter IV. See also Rule 9(1-6) of the ICSID Arbitration Rules of Proceedings.

75 In Amco v. Indonesia, Decision on Jurisdiction, 25 September 1983, the Respondent filed a proposal for

disqualification of the Claimant‟s appointed arbitrator shortly after the Tribunal‟s constitution. The

Respondent alleged acquaintance between the Claimant‟s appointed arbitrator and the individual who

controlled the Claimant. However, the majority of the Arbitrators found that the facts of the case did not

reveal a manifest or highly probable lack of independence. He Arbitrators further said that the mere

appearance of partiality was not a sufficient ground for disqualification. The lack of independence had to

be “manifest” or “highly probable” and not just “possible”.

76 Id.

77 Supra, note 58.

78 See Article 58 of the ICSID Convention which provides that: “The decision on any proposal to

disqualify a conciliator or arbitrator shall be taken by the other members of the Commission or Tribunal

as the case may be, provided that where those members are equally divided, or in the case of a proposal to

disqualify a sole conciliator or arbitrator, or a majority of the conciliators or arbitrators, the Chairman

shall take the decision. . . .

PAGE 28 OF 33

III. THE ARBITRAL AWARDS

Akin to the judgment of national and international courts is arbitral award. At the end of

the arbitral proceedings, the arbitrators render a decision which is called an award. The award

could be in favor of the Claimant and on the other hand, it could be against the Claimant.

Because there is no appellate system like the national court where arbitrators‟ decision can be

appealed, in situations where a party is dissatisfied with the decision of the tribunal, then there

may be annulment of the decision. This part considers the decision of the arbitral tribunal and

annulment of arbitral awards.

III.A. DECISION

Article 33 of the UNCITRAL Arbitration Rules set forth the basic rule for the level of

agreement required for an award to be made in favor of one of the parties to the arbitration.

Specifically, when the number of arbitrators is more than one, it is expected that decision as to

the award or any other decision of the arbitral panel shall be made by the majority of the

arbitrators. However, where there is a sole arbitrator, the decision as touching on the award is

expected to be made by the sole arbitrator.79

Paragraph 2 of the same Article in discussion

empowers the presiding arbitrator to make decision alone. This shall be in the case of questions

of procedure, when there is a deadlock in reaching a decision or when the arbitral tribunal so

79

See Article 33 (1) of the UNCITRAL Arbitration Rules which provides as follows: “Where there is

more than one arbitrator, any award or other decision of the arbitral tribunal shall be made by a majority

of the arbitrators.

PAGE 29 OF 33

authorizes. However, this single decision may be subject to revision, where there is a provision

for that mechanism under the UNCITRAL Arbitration Rules.80

The ICSID Convention is not left out of the majority facts represented under the

UNCITRAL Arbitration Rule. Article 48 (1) of the ICISD Convention provides that the Tribunal

shall decide questions by a “majority” of votes of all its members.

III. B. THE CONTENT OF THE AWARD

Article 34(2) of the UNCITRAL Arbitration Rules provides that the arbitral awards shall

be made in writing and shall be final and binding on the parties. Essential to note in this

provision is the finality of the arbitral awards arising under the UNCITRAL Arbitration Rules.

This simply restates the fact that an award that is rendered by international tribunal is res

judicata.81

In other words, the implication of the finality of the award rendered under the

UNCITRAL Arbitration Rules is that parties will not raise their claims against each other again

in so far the award remains in force.82

In paragraph 3 of the same Article, the arbitral tribunal is

expected to state the reasons upon which the arbitral award is based. However, by the parties‟

agreement, the arbitrators may not give reasons for their decision of the award. Further,

paragraph 4 states that the award shall be signed by the arbitrators. It shall also contain the date

that the award was made and the place where the award was made. This provision further

80

See Article 33 (2) of the UNCITRAL Arbitration Rules. It provides thus: “In the case of questions of

procedure, when there is no majority or when the arbitral tribunal so authorizes, the presiding arbitrator

may decide alone, subject to revision, if any, by the arbitral tribunal.

81 See Caron & Caplan et al, supra, note 67, at 797.

82 Id.

PAGE 30 OF 33

envisages a situation where the award will not be signed by one of the arbitrators. It then

provides that the award shall state the reason why an arbitrator fails to sign the award. It appears

that this provision suggests that all the arbitrators are expected to sign the award. This is

notwithstanding whether an arbitrator refuses to agree with the majority of the arbitrators in

issuing the award.83

Under the ICSID regime, paragraph 2 of Article 48 states that the award that emanates

from the ICSID Tribunal shall be in writing and shall be signed by the members of the Tribunal

who voted for it. There seems to be a sharp difference from what exists under the UNCITRAL

Arbitration Rules. It appears that under the ICSID regime, it is not only arbitrators that expected

to vote for it, irrespective of their positions in the issuing of the award, are not expected to vote

for it.84

However, Rule 46 of the ICSID Arbitration Rules of Proceedings provides that the award

shall be drawn up and signed within 120 days after closure of proceedings by individual or any

dissenter.85

Further to paragraph 2 of Article 48, paragraph 3 states that the award shall address

every question submitted to the tribunal. Also, the reasons upon which the award was rendered

shall be stated. This is an indication that the award must be exhaustive. It is also a measure to

ensure that the tribunal does not deal with a question not presented before it.86

In a case where an

individual of the tribunal dissented with the majority, paragraph 4 allows the dissenter to attach a

statement of his dissent to the award.

III. C. ANNULMENT OF AWARDS

83

See Article 34(1-6) of the UNCITRAL Arbitration Rules.

84 See Article 48(2) of the ICSID Convention.

85 See Rule 46 of the ICSID Arbitration Rules.

86 See Caron & Caplan et al, supra, note 82, at 815.

PAGE 31 OF 33

The ICSID regime provides for a situation where awards that emanated from the ICSID

tribunal could be annulled. Article 52(1) of the ICSID Convention stipulates that any of the

parties to the arbitration proceeding may make request for the annulment of the arbitral award

that has already been issued by the tribunal. However, there are some grounds stipulated by the

article. One or more of these grounds must be met before an award can be effectively annulled.87

Either the Claimant or the Respondent could allege that the tribunal was not properly constituted

or that the tribunal has manifestly exceeded its power. The annulment system under the ICSID

regime could be liken to an appellate mechanism where parties may challenge the outcome of the

arbitral awards88

. Notable is the fact that a party cannot just make a request for annulment of an

arbitral award because such a party is dissatisfied with the outcome of the arbitration procedure.

As noted above, the reason for such request must be based on one of the grounds stipulated under

article 52(1) of the ICSID Convention. In Rule 50(1)(iii), the same grounds upon which an

ICSID arbitral award could be annulled are listed. Further to that, paragraph 3 of the same

section provides for situations in which the Secretary-General shall refuse to register a party‟s

application for annulment of award.

The above paragraph requires that a party making application for annulment should do so

within 120 days after the date on which the award was rendered. Any day counting after the 120

87

Article 52(1) provides as follows: “Either party may request annulment of the award by an application

in writing addressed to the Secretary-General on one or more of the following grounds: (a) that the

tribunal was not properly constituted; (b) that the tribunal has manifestly exceeded its power; (c) that

there was corruption on the part of a member of the tribunal; (d) that there has been a serious departure

from fundamental rule of proceedings; or (e) that the award has failed to state the reason on which it was

based.

88 This opinion is mine and does not represent the ICSID Convention provision nor that of its Rules of

Arbitration.

PAGE 32 OF 33

days after the date that the award is rendered will give the Secretary-General the power to refuse

to register the application for annulment, notwithstanding that the facts alleged by the applicant

are those grounds stated in Article 52(1)(a-e) of the ICSID Convention. Notable is the fact that

the refusal power conferred on the Secretary-General by this Rule is not one where s/he could

choose to exercise discretion as to whether to refuse application for annulment or honor it. The

use of the word “shall” makes it mandatory.89

It should be noted that the UNCITRAL Arbitration

Rules have no provision for annulment of arbitral awards.

IV. CONCLUSION AND RECOMMENDATIONS

The regime where the UNCITRAL Arbitration Rules are used only for international

commercial arbitration has for long time been a bygone. Though the UNCITRAL Arbitration

Rules is an appropriate rules for parties in ad hoc arbitration, there is a growing use of the rules

currently even in state-investor arbitration. The revised UNCITRAL Arbitration Rules adopted in

December 2013 which came into force on April 1st, 2014 is a testimony to this. Additional Rules

on Transparency in Treaty-based Investor-State Arbitration has been added to the UNCITRAL

Arbitration Rules.

There is no doubt that the system of this world cannot be perfect. Essentially because of

the fact that man, judges and arbitrators of this world are all infallible. However, a system that

allows for annulment of arbitral awards after much energies, efforts and financial resources have

been expended leaves much questions to ask about the finality of arbitration, which was initially

seen as a quicker, and less cumbersome procedure. With the annulment procedure under the

ICSID regime, international arbitration, especially state-investor arbitration under BIT is

89

See Rule 50, ICSID Rules of Arbitration.

PAGE 33 OF 33

gradually resembling local litigation where there is an appeal procedure for dis-satisfied parties.

In the history of ICSID, record has it that only few cases had got to the annulment level.90

Instead of retaining the annulment provision under the ICSID Convention which could

cause a serious negative effect on the reputation of international arbitration itself – especially

state-investor arbitration, I would recommend that there should be a broader provision on the

issue of disclosure by arbitrators. Perhaps, a standard definition of manifest lack of qualities will

go a long way in solving the issue of qualities expected of arbitrators. Also, since the grounds for

annulment are exhaustive, I recommend that persons appointed as arbitrators under ICSID

arbitration should only be people knowledgeable in international arbitration or in transnational

dispute resolution. These would obviate the need for annulment under the ICSID regime and

ensure the finality that should be synonymous with arbitration.

90

See Klockner Industrie-Anglagen GmbH and others v. United Republic of Cameroon and Societe

Camerounaise des Engrais, Decision annulling the award, May 3, 1985. See also Amco Asia Corporation

and others v. Republic of Indonesia, Decision annulling the award, May 16, 1986.