Denunciation of ICSID Convention

The ICSID Convention contains two provisions that regulate denunciation:

1. Article 71 provides that States may denounce the Convention “by written notice” and that the “denunciation shall take effect six months after receipt of such notice”.
2. Article 72 provides that denunciation does “not affect the rights or obligations…of that State…arising out of consent to the jurisdiction of the Centre given by one of them before such notice was received by the depositary.”

There are several consequences of denunciation.¹ Once denunciation becomes effective, the denouncing State is:

1. No longer entitled to a representative in the Centre’s Administrative Council;²
2. no longer entitled to nominate persons to the Panel of Conciliators and Arbitrators;³ and
3. no longer under the duty to refrain from exercising diplomatic protection in respect of its nationals;⁴ 
4. no longer under any obligation to contribute to the Centre’s finances,⁵ or to respect the privileges and immunities set out in the Convention;⁶ and
5. no longer entitled to propose amendments to the Convention.⁷

The jurisdictional consequences of denunciation of the ICSID Convention are not straightforward. Tribunals and scholars are divided on the issue - some have upheld jurisdiction⁸ while others have declined it.⁹ These divergences arise from the wording of Articles 71 and 72 and due to the Convention’s jurisdictional structure.¹⁰

The ICSID Convention has so far been denounced by three States: Bolivia, in 2007, Ecuador, in 2009,¹¹ and Venezuela, in 2012. However, tribunals have only decided cases against Venezuela, likely due to a peculiarity in Venezuelan investment treaties, most of which provide for arbitration under different international arbitration rules (such as the ICSID Additional Facility Rules, or UNCITRAL Rules) exclusively when ICSID Arbitration is not available.¹² Bolivian, Ecuadorian and a few exceptional Venezuelan investment treaties do not have similar limitations.¹³ Investors that have initiated arbitrations against those States that have denounced the Convention have done so under ICSID Additional Facility¹⁴ or UNCITRAL Rules.¹⁵

The main issue arising from denunciation of the ICSID Convention is the timing of the claimant’s consent to the Centre’s jurisdiction, as explained in the following sections.

There is broad consensus that a State’s denunciation of the Convention does not affect a tribunal’s jurisdiction over those claims. Two tribunals have addressed this issue and both upheld jurisdiction, arguing that the claimants had consented to the Centre’s jurisdiction before Venezuela had issued its notice denouncing the Convention.¹⁶ Another tribunal has confirmed this position outside of the Venezuelan context.¹⁷

There are diverging views on this issue:

1. Tribunals lack jurisdiction. Article 72 requires perfected consent (express consent given by both parties). Thus, if a claimant consents after denunciation, that consent is outside the scope of Article 72 and does not provide a valid basis for a tribunal’s jurisdiction.¹⁸
2. Tribunals may have jurisdiction. This view is based on two theories. One is that the term consent in Article 72 must be interpreted together with Article 71.¹⁹ This requires accepting consent issued during the notice period. Otherwise, a State’s denunciation would have immediate effect – depriving Article 71 of any effectiveness.²⁰ The other is that if the State’s consent to arbitration expressed in an investment treaty is unequivocal, that constitutes a firm offer to arbitrate and is thus within Article 72.²¹

There are also diverging views on this issue:

1. Tribunals lack jurisdiction. Article 25(1) provides that a requirement for the Centre’s jurisdiction is that a State be a party to the Convention. Thus, the Centre will lack jurisdiction over any claims filed after denunciation has taken effect as it is no longer a party. No tribunal has yet considered this issue.²²
2. Tribunals may have jurisdiction. If a State enters into an investment treaty, an investment contract, or issues domestic legislation that provides for arbitration under the Convention, that State is considered as having accepted the Centre’s jurisdiction while the treaty, contract, or legislation is in force.²³

Denunciation does not affect the Centre’s jurisdiction over annulment proceedings. The jurisdiction of an annulment committee is determined at the time the initial claim was filed.

Blackaby, N., ICSID Withdrawal: a Storm in a Teacup?, Les Cahiers de l'Arbitrage/The Paris Journal of International Arbitration, 2008, pp. 45-61.

Bolivar, G., The Effect of Survival and Withdrawal Clauses in Investment Treaties: Protection of Investments in Latin America, in Trakman, L., and Ranieri, N., (eds.), Regionalism in International Investment Law, 2013.

Castro de Figueiredo, R., Euro Telecom v. Bolivia: The Denunciation of the ICSID Convention and ICSID Arbitration under Bits, Transnational Dispute Management, 2009, pp. 1-22.

Cazala, J., La dénonciation de la convention de Washington établissant le CIRDI, Annuaire Français de Droit International, 2012, pp. 551-565.

Dolzer, R., and Schreuer, C., Principles of International Investment Law, 2008.

Durney, M., Legal Effects and Implications of the Denunciation of the ICSID Convention on Unilateral Consent Contained in Bilateral Investment Treaties: A Perspective from Latin American Cases, Max Planck Yearbook of United Nations Law, 2013, pp. 223-304.

Escobar, A., Bolivia Exposes ‘Critical Date’ Ambiguity, Global Arbitration Review, 2007, pp. 17-18.

Fouret, J., Denunciation of the Washington Convention and NonContractual Investment Arbitration: ‘Manufacturing Consent’ to ICSID Arbitration?, Journal of International Arbitration, 2008, pp. 71-87.

Gaillard, E., Denunciation of the ICSID Convention, New York Law Journal, 2007, pp. 1-3.

Garibaldi, O.M., On The Denunciation Of The ICSID Convention, Consent To ICSID Jurisdiction, And The Limits Of The Contract Analogy, in Binder, C., Kriebaum, U., Reinisch, A., and Wittich, S. (eds.), International Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer, 2009, pp. 251-277.

Gattini, A., Jurisdiction ratione temporis in International Investment Arbitration, in Gattini, A., Tanzi, A., and Fontanelli, F., (eds.), General Principles of Law and International Investment Arbitration, 2018, pp. 111- 129.

Giraud Martinelli, V., Modern Authoritarian Regimes and the Denunciation of the ICSID Convention, in Baltag, C. (ed.), ICSID Convention after 50 years. Unsettled Issues, 2017, pp. 499-508.

Hamida, B., La dénonciation de la convention CIRDI, in Horchani, F., (ed.), CIRDI 45 ans après. Bilan d'un système, 2010, pp. 109-138.

Hepburn, J. Tomka-chaired Tribunal Declines Jurisdiction Over Transban Claim – But Majority Diverges from Fabrica Tribunal, and Sees No Problem with Investor Consent Given After Venezuela’s ICSID Denunciation Notice, IA Reporter, 2017.

Kownacki, N.E., Prospects for ICSID Arbitration in Post-Denunciation Countries: An Updated Approach, UCLA Journal of International Law and Foreign Affairs, 2010, pp. 529-560.

Lavopa, F.M., Barreiros, L.E., and Bruno, M.V., How to Kill a BIT and not Die Trying: Legal and Political Challenges of Denouncing or Renegotiating Bilateral Investment Treaties, Journal of International Economic Law, 2013, pp. 869-891.

Lusa Bordin, F., Reasserting Control through Withdrawal from Investment Agreements: What Role for the Law of Treaties?, in Kulick, A., (ed.), Reassertion of Control over the Investment Treaty Regime, 2016, p. 220.

Mancieux, S., Bolivia’s withdrawal from ICSID, Transnational Dispute Management, 2007, pp. 1-6.

Mantilla-Serrano, F., La denuncia de la Convención de Washington. ¿Impide el recurso al CIADI?, Revista Peruana de Arbitraje, 2008, pp. 205-216.

Mantilla-Serrano, F., ¿Existe Hostilidad Hacia el Arbitraje de Inversión en América Latina?, in Fernández-Ballesteros, M.A. and Arias, D. (eds.), Liber Amicorum Bernardo Cremades, 2010, pp. 789-806.

Mezgravis, A., and Gonzalez, C., Denunciation of the ICSID Convention: Two Problems. One Seen and One Overlooked, Transnational Dispute Management, 2012.

Nolan, M.D., and Sourgens, F.G., The Interplay Between State Consent to ICSID Arbitration and Denunciation of the ICSID Convention: The (Possible) Venezuela Case Study, Transnational Dispute Management, 2007, pp. 1-52.

Nolan, M.D., and Sourgens F.G., Limits of Consent - Arbitration without Privity and Beyond, in Fernández-Ballesteros, M.A. and Arias, D. (eds), Liber Amicorum Bernardo Cremades, 2010, pp. 873-914.

Parra, A.R., Participation in the ICSID Convention, ICSID Review, 2013, pp. 169-178.

Pauwelyn, J. and Hamilton, R., Exit from International Tribunals, Journal of International Dispute Settlement, 2018, 679-690. 

Polanco Lazo, R., Is There a Life for Latin American Countries after Denouncing the ICSID Convention?, Transnational Dispute Management, 2014.

Rastegar, K., Denouncing ICSID, in Binder, C., Kriebaum, U., Reinisch, A., and Wittich, S. (eds.), International Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer, 2009, pp. 278-299.

Ripinsky, S., Venezuela’s Withdrawal from ICSID: What It Does and Does Not Achieve, Investment Treaty News, 2012.

Rodner, J.O., and Martínez Estévez, J., BITs in Pieces: The Effectiveness of ICSID Jurisdiction after the ICSID Convention Has Been Denounced, Journal of International Arbitration, 2012, pp. 437-451.

Schnabl, M. and Bédard, J., The Wrong Kind of ‘Interesting’, National Law Journal, 2007.

Schreuer, C., Malintoppi, L., Reinish, A., and Sinclair, A., The ICSID Convention: A Commentary, 2^nd ed., 2009.

Schreuer, C., Denunciation of the ICSID Convention and Consent to Arbitration, in Waibel, M., Kaushal, A., Liz Chung, K.H., and Balchin, C., (eds.), The Backlash against Investment Arbitration: Perceptions and Reality, 2010.

Sourgens, F.G., Keep the Faith: Investment Protection Following the Denunciation of International Investment Agreements, Santa Clara Journal of International Law, 2013, pp. 335-396. 

Tejera, V., Unraveling ICSID’s Denunciation: Understanding the Interaction Between Articles 71 and 72 of the ICSID Convention, ILSA Journal of International and Comparative Law, 2014, pp. 423-438.

Tietje, C., Nowrot, K., and Wackernagel, C., Once and Forever? The Legal Effects of a Denunciation of ICSID, Beiträge zum Transnationalen Wirtschaftsrecht, 2008, pp. 5-31. 

Tzanakopoulos, A., Denunciation of the ICSID Convention under the General International Law of Treaties, in Hofmann, R., and Tams, C. (eds.), International Investment Law And General International Law: From Clinical Isolation To Systemic Integration?, 2011, pp. 75-93.

Voon, T., Mitchell, A., and Munro, J., Parting Ways: The Impact of Mutual Termination of Investment Treaties on Investor Rights, ICSID Review, 2014, p. 451. 

Voon, T. and Mitchell A., Denunciation, Termination and Survival: The Interplay of Treaty Law and International Investment Law, ICSID Review, 2016, p. 417. 

Wick, D.M., The Counter-Productivity of ICSID Denunciation and Proposals for Change, Journal of International Business and Law, 2012, pp. 239-292.

Woodring, B., Denunciations Plus: Evaluating ICSID Withdrawals Bearing Additional New ICSID Provisions, Transnational Dispute Management, 2015, pp. 5-14.

Yusuf, G., and Owczarek, O., Fabrica de Vidrios Los Andes, CA and Owens-Illinois de Venezuela, CA v Bolivarian Republic of Venezuela, Removing the Sword of Damocles: ICSID Denunciation under Articles 71 and 72, ICSID Review, 2018, pp. 331-339.