Excess of Powers

Since the ICSID system has an exceptional (delocalized) structure not anchored to any national regime, it also operates with autonomous mechanism of the review of arbitral awards, pursuant to Article 52 of the ICSID Convention, where ad hoc Committees will be tasked with evaluating the annulment requests. See further Annulment of ICSID Awards; Grounds of Annulment in ICSID Awards.

According to Article 52(1)(b) of the ICSID Convention, a party may request annulment of the award (in whole or in part) when “the Tribunal has manifestly exceeded its powers”.

This ground is almost always invoked during the annulment proceedings.¹ To date it was (partially or fully) successful in 11 instances.²

“Excess of powers” was always considered to be an essential element of post-award review mechanism under the ICSID system.³ In the process of drafting, however, a qualifier “manifestly” has been added in order to prevent the overuse of this provison. See further Section B below. Notwithstanding different lines of interpretation by ad hoc Committees, the threshold for annulment under Article 52(1)(b) of the Convention remains high.

The award should qualify for annulment only if the excess of powers is evident on the face of the award.⁴ Ad hoc Committees regularly confirm this high threshold for annulment.

For example, it was confirmed that to be manifest, the excess can be “discerned with little effort and without deeper analysis.”⁵ In the same vein, some tribunals have considered that the excess must be self-evident.⁶ Another approach is to reconcile the many definitions of “manifest” by stating that excess of powers should be “textually obvious and substantively serious.”⁷ There are still panels that consider that extensive argumentation may be required to prove the manifest excess of powers, however.⁸

Importantly, in order to annul the award, ad hoc Committees should also reflect whether there is a causal link between the manifest excess of powers and (serious) consequences to the parties.⁹

All in all, such an interpretation of Article 52(1)(b) of the ICSID Convention allows “[...] ensur[ing] the finality of awards by fixing a high threshold for annulment and providing a limited scope of review, while safeguarding against “the violation of the fundamental principles of law governing the Tribunal's proceedings”.”¹⁰

Ad hoc Committees engage either in a single or two-steps inquiry when faced with allegations of manifest excess of powers.¹¹

Although ad hoc Committees do not apply manifest excess of powers standard in a uniform fashion, most of them consider that the Article 52(1)(b) test requires a two-step analysis.¹² At the same time, there are some that have decided to apply either a single-step analysis or both methods.¹³ Some scholars have posited that such an approach (i.e. two-step inquiry) enhances predictability of the annulment decisions.¹⁴

Consequently, ad hoc Committees usually examine: (i) whether the tribunal exceeded its powers and further (only if (i) in affirmative)¹⁵ (ii) whether the tribunal’s excess of powers was manifest.¹⁶

Competence of the ad hoc Committees is limited to a review of the arbitral awards. It means that the tribunal’s interim decisions (e.g. procedural orders or other decisions not in the form of the award) potentially in excess of the tribunal’s powers escapes scrutiny of ad hoc Committees until they form part of the tribunal’s award.¹⁷ Only then an aggrieved party may invoke Article 52(1)(b) of the ICSID Convention.

Parties’ consent constitutes a source of all tribunal’s powers.¹⁸ Therefore, the framework of tribunal’s powers is squarely prescribed by the parties agreement to arbitrate as manifested by the reference to the ICSID Convention as well as any additional provisions agreed by the parties.¹⁹ The arbitral tribunal interpreting and applying the consent instrument in light of all surrounding circumstances and evidence provided to it is therefore unlikely to exceed its powers.²⁰

Any argument regarding lack of consent should be raised before the original tribunal, or else precluded in annulment proceedings (when excess of powers is raised as a ground for annulment).²¹

Excess of powers challenge has been applied in cases where dissatisfied parties objects to the tribunal's jurisdiction (see Section III.B below) or or alleges that the tribunal failed to to apply the proper law (see Section III.C. below).

It is important to note that some considerations apply to both issues, including inter alia:

1. the standard for assessing whether the tribunal manifestly exceeded its powers is the same for both categories;²²
2. a tribunal diverging from previous case-law does not necessarily exceed its powers;²³ 
3. ad hoc Committees are not mandated to harmonize arbitral case law;²⁴ (see also Annulment of ICSID awards, Section III);
4. occasionally, parties attempt to seek annulment of tribunal’s decision that are allegedly ultra or infra petita.²⁵ This being said, the threshold remains high. Therefore, it is important to note that the tribunal is under no obligation to refer to every single argument put forward by the parties,²⁶ unless it would have been decisive to its decision.²⁷ It follows that a tribunal that does not address issues that were not specifically raised or extensively argued by the parties does not exceed its powers.²⁸ 

The primary example when the tribunal exceeds its power relates to the tribunal’s jurisdiction, namely when the tribunal lacks jurisdiction or goes beyond the scope of the jurisdiction given.²⁹ The jurisdictional requirements being a basis for the evaluation are primarily set out in Article 25 of the ICSID Convention.³⁰ In this context, it is important to highlight that the failure to apply the Salini test would not in itself amount to a manifest excess of powers.³¹

Importantly, a number of ad hoc Committees observed that failure to act (refusal of jurisdiction) may also constitute a manifest excess of powers³² and annulled the awards on this basis.³³ That being said, ad hoc Committees regularly confirm that the tribunal is the judge of its own competence and that they may not consider the issue de novo.³⁴

Finally, a resubmission tribunal that reconsiders issues that are res judicata (have been decided and not annulled by an ad hoc committee) commits a manifest excess of powers.³⁵

Failure to apply proper law continues to be another (perhaps more contentious) reason why parties challenge the award for tribunal’s manifest excess of powers. Dolzer and Schreuer observe that “Article 52(1) of the ICSID Convention does not, in express terms, provide for annulment for failure to apply the proper law."³⁶

Yet, it is now settled, that the tribunal which does not follow or wilfully disregards³⁷ the parties’ choice of the applicable (proper) law (e.g. by deciding ex aequo et bono) or base its decision on a law different than agreed will risk its decision being annulled under Article 52(1)(b) of the ICSID Convention.³⁸

To this extent, some³⁹ ad hoc Committees have adopted a three-step method in identifying whether an arbitral tribunal manifestly failed to apply the proper law:

1. identify the appropriate applicable law;
2. identify what law the tribunal applied;
3. whether this decision resulted in a manifest failure to apply the applicable law.⁴⁰

In assessing whether a tribunal has failed to apply the proper law, ad hoc Committees have systematically underscored the difference between the misapplication of the applicable law, which is not a ground for annulment, and the non-application of the applicable law, which is.⁴¹

Importantly, annulment is not an appeal,⁴² therefore an error in application of proper law (however grave) does not amount to ground for challenge and should not lead to annulment of the award.⁴³ It holds true, even if the ad hoc Committee would have had reached different legal conclusions based on the facts of the case.⁴⁴ This being said, a few tribunals have adopted a less stringent distinction, stating that annulment may even be possible if the misapplication of the applicable law is egregious and objectively amounts to a failure to apply the proper law⁴⁵ or if it is “manifest” and unarguable.⁴⁶

Article 52(1)(b) of the ICSID Convention draws parallel with Article V(1)(c) of the New York Convention. Although there is a large convergence in scope of application of both provisions, these two standards can be distinguished in particular in context of failure to apply proper law (at least in context of threshold when the challenge should be accepted – the New York Convention system being more impervious to the review of the merits of the award). See further Matters not Falling within the Terms of the Submission to Arbitration. 

Djanic, V. and Schill, S.W., Article 52(1)(B), in Fouret, J., Gerbay, R. and Alvarez, G.M. (eds.), The ICSID Convention, Regulations and Rules A Practical Commentary, Edward Edgar, 2019.

Dolzer, R. and Schreuer, C., Principles of International Investment Law, Oxford University Press, 2^nd ed., 2012.

Kryvoi, Y., International Centre for Settlement of Investment Disputes (ICSID), 4th ed., Kluwer Law International, 2020.

Schreuer, C., Malintoppi, L., Reinisch, A. and Sinclair, A., The ICSID Convention A Commentary, Cambridge University Press, 2^nd ed., 2009. 

ICSID, History of the ICSID Convention, Vol. I. 

ICSID, Update Background Paper on Annulment for the Administrative Council of ICSID May 5, 2016, 2016. 

United Nations International Law Commission, Commentary on the Draft Convention on Arbitral Procedure by the International Law Commission at its Fifth Session, Document A/CN.4/92, 1955.