By Hugo Cardona[1]
Introduction
The 10th Annual EFILA Lecture, held on 25 November 2024 at Queen Mary University of London, represented a significant milestone in EFILA’s series of successful academic events. It provided a forum for an insightful analysis of the evolving landscape of ICSID arbitration. The lecture was delivered by Martina Polasek, who assumed the role of Secretary-General of ICSID this summer after a 23-year tenure at the Centre, succeeding Meg Kinnear.
The event began with an address by Prof. Nikos Lavranos, Secretary-General of EFILA, who discussed the consistent aim of the lecture series to provide the arbitral community with valuable insights from leading figures in international arbitration. Subsequently, Prof. Loukas Mistelis recalled the first EFILA Conference, which was held at London’s Senate House during a period of social unrest surrounding the Transatlantic Trade and Investment Partnership (“TTIP”). Prof. Mistelis emphasized that EFILA events are designed to foster debate and described the 10th lecture as an important achievement—not only because it marked a decade of impactful events, but also because of the relevance of Polasek’s speech. The topic was timely, as foreign direct investment (“FDI”) and international investment law and arbitration are ultimately shaped by state policies and treaties.
The welcoming address was delivered by José Ángel Rueda, Chairman of the EFILA Executive Board, who recalled Aron Broches, Polasek’s predecessor and widely regarded as the father of the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the “ICSID Convention”). Rueda referenced a passage from Broches’ 1972 Hague Academy Lecture, in which he stated: ‘The purpose of the convention is to promote private foreign investment by improving the investment climate for investors and host states alike. The drafters have taken great care to make it a balanced instrument serving the interests of host states as well as investors”.
Following the introduction of the guest speaker, Rueda characterized ICSID as the foremost institution in the investor-state dispute settlement (“ISDS”) system, highlighting its role in assisting parties to resolve their disputes by peaceful means.
What are the lessons learned from ICSID’s first 1000 cases and what do they tell us about the future?
In her introduction, Martina Polasek highlighted the 1,000th case under the ICSID Convention and Additional Facility, which was registered shortly after her appointment, on 8 August 2024.
Polasek used this milestone as an opportunity to reflect on ICSID’s contributions and its impact on advancing the rule of law in the field of international investment and dispute resolution. Describing ISDS, particularly based on investment treaties, as a “young and evolving discipline”, she highlighted data that illustrates the expanding scope and demographic profile of ICSID cases. Furthermore, she examined landmark cases that illustrate ICSID’s adaptability and the prospective developments. The lecture presented a threefold framework:
- An analysis of current ICSID arbitration statistics
- Insights into ICSID’s flexibility and adaptability
- New projects and future initiatives
1. Analysis of ICSID arbitration statistics
In 2001, when Polasek joined ICSID, the institution had administered 85 cases over a 35-year period. By 2015, the number of cases had increased significantly, reaching 500. While the number of registered cases per year has remained at 50 to 60, over half of ICSID’s total cases have been registered in the past decade, reflecting a period of significant growth.
This expansion is in line with the diversification of the sources consenting to ICSID arbitration. When the Washington Convention was originally drafted, investment contracts were the primary source of FDI protection. Polasek noted that the first 18 ICSID cases were contract-based, up to the 1994 award in SPP v. Egypt. Since 2000, however, the ICSID arbitration system has been dominated by treaty-based cases. By the date of the lecture, 832 ICSID arbitrations had been initiated under 320 bilateral investment treaties (“BITs”), while 30 had been started under multilateral agreements. Building on this, Polasek noted that 97% of ICSID cases are rooted in treaties concluded before 2000, citing UNCTAD data. While only 55 states were involved in investment cases up to 2001, this number increased to 139 by 2024, reflecting the global flow and rise of FDI.
Recent ICSID caseload statistics indicate a growing diversity in the nationalities of investors, particularly from traditionally capital-importing countries. Moreover, both South-South and North-North disputes, driven by increased cross-border transactions and the proliferation of investment treaties, laws, and contracts, have been registered at ICSID. The Secretary General said that a broader range of economic sectors is now involved (eleven in total), and new subject matters are emerging in disputes. For instance, a trend is the increasing number of disputes related to energy transition and climate change policies.
Polasek further noted that only two-thirds of ICSID cases result in awards, with the remainder being settled or discontinued. Historically, the outcomes of ICSID awards have been balanced. Overall, including the 108 awards that declined jurisdiction or found that a claim was manifestly without legal merit, the rate is roughly equal—49% in favour of the investor and 51% in favour of the state. Counting only the awards that were decided on the merits, 60-64% of awards rendered since 2011 have upheld the claims in part or in full, Polasek indicated.
She also highlighted UNCTAD’s forecast that while disputes arising from older treaties will continue for another 10 to 15 years, newer regional agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”), are expected to be the basis for future cases. In a nutshell, the massive growth in ICSID’s caseload, which began less than 25 years ago, has now resulted in a broader pool of users and a wider range of economic activities being involved.
2. Insights into ICSID’s flexibility and adaptability
“ISDS is a flexible and adaptable system, which evolves in response to the dynamic landscape of FDI, as well as changes in investment laws, policies, and case law”, Polasek stated. This adaptability might be grounded in the ICSID Convention and Rules, as well as in the ongoing development of ICSID case law on both substantive and procedural issues. Polasek highlighted two landmark cases in this regard: SPP v. Egypt, under which the jurisdiction was established based on a domestic investment law, and AAPL v. Sri Lanka, the first case based on a BIT.
The ICSID Convention’s flexible approach to written consent has facilitated the growing trend of treaty-based cases, which now represent the majority of cases in this field, she said. The theory of “arbitration without privity”, which has been discussed by Jan Paulsson, has enabled the development of arbitration where there is no direct contractual relationship between the parties. To further illustrate ICSID’s flexibility and adaptability, Polasek looked at certain pivotal issues in investment arbitration, including: (i) transparency, (ii) treaty interpretation, (iii) case complexity; (iv) mediation, (v) public attention, and the procedural innovations to address them.
Transparency
The speaker emphasized the growing importance of transparency, particularly in cases involving public interests such as environmental protection, public health and human rights. In the Biwater Gauff v. Tanzania case, she stated that the tribunal noted the role of transparency in enhancing the legitimacy of arbitration and supported the publication of decisions on a case-by-case basis. The principle of transparency was later incorporated into the 2022 ICSID Rules, which make the publication of orders and decisions the default rule. Redactions may be made by the parties unless otherwise stipulated, she mentioned. To date, approximately 350 ICSID awards or extracts, along with numerous decisions and orders, have been published.
Polasek went on to discuss the scope for non-disputing parties to submit written evidence to ICSID tribunals. In the Suez v. Argentina case (2005), she said five NGOs filed petitions to participate as amicus curiae, and the tribunal granted them the opportunity to do so, recognizing the value of civil society’s perspectives in case assessments. This represented a shift towards broader inclusion of non-disputing parties in investment arbitration cases, she said.
She emphasized that a further step favoring transparency was allowing non-disputing parties to access hearings, either in person or via streaming. For instance, in Methanex v. United States, the parties agreed to make the hearing open to the public through a live broadcast. Similarly, Pac Rim v. El Salvador became the first ICSID case in which the hearing was webcast. Since then, several hearings have been streamed based on treaty provisions or a party agreement. The 2022 ICSID Arbitration Rules reflect this practice, favoring public hearings unless objected by the parties.
Interpretation by arbitral tribunals
While ISDS does not adhere to binding precedents, Polasek noted that increased transparency has enabled arbitrators to consider the interpretations of previous tribunals when deciding disputes. She referenced the Saipem v Bangladesh case, where the tribunal placed great emphasis on the importance of “harmonious case law” and “certainty of the rule of law”.
The aim is to follow consistent solutions unless there are compelling reasons to deviate, she said. For example, tribunals often refer to the case of Salini v Morocco, which established criteria for defining “investment” that were later refined in Joy Mining v. Egypt.
Case complexity
ISDS cases are becoming increasingly complex, Polasek said, a development she attributed less to the nature of the disputes and more to procedural practices by the parties that tend to prolong proceedings and increase costs. For instance, extensive preparation time—sometimes six months or more—for briefs that exceed 500 pages and include thousands of exhibits. These practices have a particularly adverse impact on small and medium enterprises and states with limited resources, she noted.
To address these challenges, she highlighted the potential of procedural innovations. For example, the summary procedure introduced by ICSID in 2006 permits the early dismissal of claims that are manifestly lacking in legal merit, known as a Rule 41 (5) objection, which has been further clarified in the 2022 ICSID Rules, under Rule 41. The first case to invoke this procedure was Trans-Global v. Jordan in 2007. Since then, the procedure has been invoked almost 50 times, leading to the dismissal of at least a dozen cases. The 2022 ICSID Rules clarify this procedure and introduce expedited arbitration, as well as set time limits for issuing decisions and awards, with the aim of improving efficiency, she said. However, the Secretary-General stressed that while procedural rules are important, their success depends on the availability of tools, training, and best practices of users.
“ICSID is taking steps to enhance its services through initiatives such as monitoring decision timelines under the 2022 rules and investing in advanced technology for case management. We remain committed to playing our part in this regard”, she added.
Investment mediation
Polasek also spoke of the growing trend for parties to adapt ISDS procedures and, in particular, to opt for mediation of investment disputes. Given the high settlement rate in ISDS, there is potential for mediation to be used more frequently, both before and during arbitration proceedings, she said. Moreover, she expressed optimism about this tendency, noting that ICSID has actively supported parties in reaching amicable resolution and encouraged negotiated settlements in recent years.
Public attention
ISDS has been a topic of significant public attention in recent years, with certain cases sparking widespread debate. However, Polasek noted that public attention tends to focus on the initiation of cases rather than their outcome or effective resolution. Several high-profile cases, despite initial controversy, have been settled with the involvement of the relevant parties.
For instance, she cited Philip Morris v. Uruguay, which involved restrictions on the market for tobacco products and attracted media attention. However, less attention was given to the fact that the majority of the tribunal found that Uruguay had a valid right to exercise its regulatory powers to protect public health. The claim was dismissed, and Philip Morris agreed to partially reimburse Uruguay for its legal expenses.
Another example is the 2012 Vattenfall v. Germany ECT claim, which stands out as one of ICSID’s most publicized cases and made a major impression in Germany and across Europe. Nevertheless, the fact that the parties settled the case did not generate the same level of attention as the issuing of the claim. She clarified that the media sometimes focuses primarily on cases initiated against states, rather than on cases initiated by national investors of those states seeking relief at a neutral forum.
Polasek highlighted that it is crucial to continually present facts and evidence regarding how the ISDS system is functioning. This will become increasingly important as ISDS is scrutinized in the context of global challenges. “We at ICSID will address these challenges through our robust outreach program and publications, disseminating information and statistics about our cases to our stakeholders and the wider public”, she concluded.
3. New projects and future initiatives
The new ICSID Secretary-General asserted that by looking back at ICSID’s first 1,000 cases, we can envision a system that evolves quickly while adapting effectively, fostering optimism about future trends in ISDS, and placing ICSID at the forefront of the system. She concluded her lecture by presenting some institutional initiatives and ongoing projects.
- Effective operation of the 2022 ICSID rules. The objective is to guarantee they are effectively implemented, provide enhanced services to users and reduce the time and costs of proceedings through the integration of advanced technology, she said.
- Dissemination and training on ICSID’s role in resolving disputes arising from investment contracts. ICSID is promoting the use of expedited arbitration for these cases and conducting internal research on how best to settle them.
- Active participation in UNCITRAL Working Group III. ICSID is engaging in the global discussions about improvements to ISDS, including the potential establishment of an appeals mechanism.
- Promotion of mediation and other mechanisms as effective tools for amicable dispute settlement in investment-related matters.
- Expansion of its international presence. ICSID plans to establish regional offices within World Bank facilities to bring ICSID closer to its users and member states and strengthen its global reach.
In her final remarks, Polasek reiterated ICSID’s commitment to addressing emerging challenges and fostering a robust, sustainable investment environment. The 60th anniversary of the Washington Convention in 2025 will undoubtedly mark a significant milestone for the institution.
The session culminated with an engaging Q&A session moderated by Aakash Brahmachari of Control Risks in London, followed by a presentation of the new Kluwer Arbitration tool by Yael Hollander of Wolters Kluwer.
Hugo Cardona is a dual qualified lawyer and Associate Professor of International Arbitration & ADR at CEU San Pablo University in Madrid. The views expressed above do not necessarily reflect those of the author. ↑