REUTERS | Kate Munsch

ICSID Rules and Regulations 2022: an interview with Meg Kinnear

On 21 March 2022, member states of the ICSID Convention approved amendments to the ICSID Regulations and Rules, which will enter into force on 1 July 2022.

The approval of the revised rules follows an extensive process spanning over five years, involving public consultations, meetings with state experts, and the publication of six working papers. The new modernised rules include valuable provisions directed at reducing time and costs, including new mandatory timeframes for rendering orders and awards and new “opt-in” expedited arbitration rules. The new rules also embrace the use of technology and, for the first time, address the disclosure of third-party funding.

We are delighted to welcome Meg Kinnear, Secretary-General of the International Centre for Settlement of Investment Disputes (ICSID) at the World Bank Group since 2009. Meg is in her third term as ICSID Secretary-General, prior to which she served as Director General of the Trade Law Bureau of Canada, where she was responsible for the conduct of international investment and trade litigation involving Canada. Meg has therefore seen investment disputes from different perspectives, and we are delighted that she has agreed to answer some of our questions about the new ICSID arbitration rules.

1. You have followed the trend of requiring parties to provide prompt notice of third-party funding arrangements. Do you think this will fuel applications for security for costs under new Rule 53?

As you note, the amended rules require disclosure of any third-party funding. This is a continuing requirement throughout the proceeding and applies to both the claimant and respondent. We already receive applications for disclosure of third-party funding arrangements, and not infrequently parties volunteer this information at the start of a proceeding. So, I don’t think this disclosure will fuel applications for security for costs under new Rule 53. Rule 53 provides a specific test for an order of security for costs and requires the tribunal to consider all relevant circumstances, including a party’s willingness and ability to comply with an adverse decision and the potential effect of a security for costs order on the other party’s ability to pursue its claim or counterclaim. While the existence of third-party funding might (or might not) be a relevant circumstance, this will be very case-specific, and the simple fact of third-party funding will not be sufficient to justify an order for security for costs. As a result, such applications won’t necessarily become more common.

2. Rule 46 on voluntary consolidation is clearly a useful tool to aid consistency of decisions, but do you think there will be many applications for consolidation under this rule? Would a state party with a weak case not be better off taking its chances with two separate tribunals?

Claimants and respondents told us clearly during consultations that consistency of decisions is very important to them and consolidating related proceedings will certainly contribute to such consistency. All parties have a very real interest in reducing the time and costs of proceedings, which would not be accomplished in your example of taking a chance with separate tribunals. In fact, the amended rules place a duty on parties to proceed in an expeditious and cost-effective manner, and this is now an express consideration for tribunals when allocating costs of a proceeding. As a result, hopefully parties will agree to consolidation or coordination where the cases are sufficiently similar.

3. New Rule 52 on allocation of costs requires the tribunal to take account of the parties’ conduct during the proceedings. Do you think tribunals will be able to use this provision, coupled with the party obligations in Rule 3, in a meaningful way to deter game-playing by recalcitrant parties, or will an adverse costs order simply become an additional overhead in achieving strategic goals?

We do think that the combination of Rule 52, Rule 3, and other time-saving provisions in the rules will lead to noticeable efficiency gains in proceedings. This will likely be complemented by more interim decisions on costs, which is a practice that tribunals are already increasingly adopting.

4. There are some very valuable measures in the new rules designed to make the arbitration process more time and cost efficient, for example, the 60-day case management conference and the Special Procedure for disposing of meritless claims. However, given the busy caseloads that many ICSID arbitrators have, do you think tribunals will always be able to take maximum advantage of these provisions?

We expect that tribunals will use the tools at their disposal to make the process more efficient, and that parties will insist on taking advantage of these tools. The rules were drafted in a way that reinforces the expectation that they will be part of practice at ICSID, and not just an option that can be ignored.  For example, the first session must be held within 60 days unless the parties agree otherwise, and the tribunal must hold at least one additional case management conference with the parties. This was intended to ensure parties and tribunals used case management and gave it a real chance to have an impact. The updated rules include other provisions that address the time and cost of proceedings and reinforce the overall impact of these provisions. Among them, arbitrators will need to expressly confirm their availability for the case when they file their acceptance of appointment. Finally, I should note that most of our staff were involved in the rule amendment process from the start, and all have been trained about the new procedures, so we will be reminding parties and tribunals of the new provisions to ensure timeliness.

5. Do you think the revised disclosure requirements imposed on prospective arbitrators, and the improved procedure for challenge, will reduce the number of challenge applications, or only the time expended on them by parties and tribunals? And are you optimistic about the future impact of the Code of Conduct for Adjudicators that you are collaborating on with the UNCITRAL Secretariat?

It is hard to predict whether the revised ICSID rules will reduce the number of challenges commenced by parties, but certainly the process is clearer, has finite (and shorter) timelines, and should reduce the overall time expended on addressing challenges. On the Code of Conduct, I have been encouraged by how far we have come on the text over the last two years, which reflects a lot of common ground among states, arbitrators and counsel. But the ultimate impact of the Code is hard to forecast because some key provisions are still being addressed by states, including “double hatting”, the parameters of disclosure, and the consequences of breach of the Code. But we are committed to the goal of establishing a common set of standards for international investment disputes and will be working very hard with UNCITRAL to achieve that goal.

6. The arbitration community, like other sectors, has embraced the use of technology and e-documents, as illustrated by the change in the new ICSID rules to electronic filings and electronic signatures on awards. ICSID benefits from the world-class information technology security but not all participants in ICSID arbitration will necessarily have that level of sophistication. Rule 38 flags various matters which the tribunal should discuss with the parties at the first session but does not refer expressly to issues of cybersecurity, as some other institutional arbitration rules do. Was this considered unnecessary and, if so, do you think it likely that tribunals will deal with the topic under “any other procedural matter…”?

While the items to be discussed at the first session do not expressly mention cybersecurity, that is certainly something we expect disputing parties and tribunals will address in their first procedural orders. Recall as well that the agenda for the first session includes an item relating to “the treatment of confidential or protected information”. That is intended to address both data privacy and data security matters, and these are issues we expect will be discussed. In addition, as you note, ICSID offers world-class cybersecurity under the rubric of the World Bank Group, which is undoubtedly a benefit to parties.

7. An award must now be rendered within 240 days of the last submission. Are we likely to see an increase in tribunal requests for submissions on discrete issues during the award writing phase?

We don’t expect that tribunals would adopt that kind of procedure. To the contrary, our expectation is that tribunals and parties will be well aware of the 240-day time limit from the start of the case and will be working to ensure compliance with it. So, we would expect that tribunals will ensure they are well equipped to write the final award by the time they start deliberations, and that submissions on discrete issues will rarely be required in the award writing process. Again, parties can help this process by ensuring they provide the necessary information and briefings to enable tribunals to comply with the time limits, that they provide full and well-organised information that facilitates the decision-making process, and that they themselves meet the timelines imposed throughout the proceeding.

8. The expanded jurisdiction under the Additional Facility Rules is an interesting development. Do you see adoption of the new jurisdiction as something that will happen relatively quickly, or will it be a slow burn?

My expectation is that it will take a few years for parties to fully recognise and take advantage of the expanded scope of the Additional Facility and the broader range of cases that might now be commenced under the Additional Facility.  As you know, this includes cases where the investor and the respondent are not ICSID member states or nationals of ICSID member states, and cases where one party is a regional economic integration organization (REIO).  I also hope that REIOs take note of this option and incorporate the Additional Facility in their dispute forum options when they negotiate new treaties and contracts. ICSID publishes regular statistics on the registration of new cases and the basis of consent, so the use of the Additional Facility will be easy for the Centre and the public to track.

9. What single change introduced in the new rules do you think will make the most difference to (a) claimants and (b) state parties?

Our hope is that no single change makes a marked difference for states as opposed to investors, or vice versa, but rather that the rules as a whole advance the discipline of investment arbitration for all parties. One of the most important principles during the elaboration of these rules was that they maintain a balance between the parties, recognising that a set of rules that are not perceived as balanced will not be used by parties.

That said, I hope that the expedited rules will be embraced by states, in particular as an option to make investment arbitration more accessible to small and medium-sized enterprises, as well as for smaller dollar-value claims. I also hope that states will welcome the option of mediation and that we will see more examples of mediation in action for investment disputes. In terms of investors, I think the overall approach to time and cost efficiency is something that investors hoped to see, and that they will take advantage of the tools in the amended rules to ensure this materialises.

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