Serious departure from a Fundamental Rule of Procedure

Article 52(1)(d) of the ICSID Convention provides that a party may request annulment of an award on the ground that “there has been a serious departure from a fundamental rule of procedure”.¹ Such application must be made within 120 days of the award being rendered.² See further Annulment of ICSID awards, Section V for other procedural considerations.

This ground for annulment is independent of the other grounds listed under Article 52(1).³

The applicant seeking annulment of an award must have raised the alleged violation of procedure with the tribunal as soon as it arose, unless the applicant was not aware of the violation or it was not reasonably possible for it to have done so.⁴ Failure to object promptly will be treated as waiving the right to object at a later stage and the applicant will be precluded from claiming the irregularity constituted a serious departure from a fundamental rule of procedure for the purposes of annulment.⁵ 

The applicant under ICSID Article 52(1)(d) bears the burden of proving both that (i) the tribunal committed a serious departure from a procedural rule; and (ii) the said rule was fundamental.⁶ 

The applicant must specify the fundamental rule affected as well as where the serious departure lies.⁷

Establishing this ground for annulment has two basic requirements, both of which must be met.⁸ First, the rule of procedure from which there has been a departure must be “fundamental”.⁹ Second, there must have been a “serious departure” from that fundamental rule.¹⁰

Where both requirements are met, some ad hoc Committees have held that they may not exercise their discretion in not annulling the award.¹¹ See also Annulment of ICSID awards, Sections VII and VIII. 

As of date, this ground for annulment was successfully claimed (partially or fully) in only 5 instances.¹² 

Fundamental rules of procedure are generally considered to refer to a “set of minimal standards of procedure to be respected as a matter of international law”.¹³ These minimal standards are often considered to be the rules of natural justice, and said to be the procedural rules “essential to the integrity of the arbitral process and [which] must be observed by all ICSID tribunals”.¹⁴ Generally, fundamental rules of procedure relate to due process and the manner in which the tribunal proceeded in rendering the award, rather than to the substance of the award itself.¹⁵ The threshold for finding a rule of procedure is fundamental is high.¹⁶

While there is no definitive list of what rules of procedure are “fundamental”, the following rules of procedure have been considered in annulment proceedings.¹⁷

The equal treatment of the parties is widely recognised as a fundamental rule of procedure.¹⁸ The rule has been invoked by applicants in a variety of ways including inter alia:

1. the treatment of evidence (see also Sections II.A.5 and II.A.6 below);¹⁹
2. the lack of equality in providing each party an opportunity to present its case (see also Section II.A.2 below);²⁰
3. the application of the “principe du contradictoire”.²¹

A party’s right to be heard – i.e., to have a full opportunity to present its case, including all argument and evidence in support of it – is widely accepted as a fundamental rule of procedure.²²

For instance, some tribunals have held that the right to be heard may be breached where the tribunal goes beyond the “legal framework” established by the parties.²³

However, the right to be heard is not absolute or unlimited.²⁴ To this extent, a tribunal will not necessarily depart from a fundamental rule of procedure when it:

1. adopts a reasoning that was not advanced by the parties or uses a term not introduced by the parties;²⁵
2. does not address every single sub-argument advanced by the parties.²⁶ However, tribunals must address issues that are crucial to its decision;²⁷
3. does not actively seek out more information regarding claims or arguments that were not substantially discussed by the parties;²⁸ or
4. allows new arguments to be raised, given the opposing party had an opportunity to address them during the proceedings.²⁹

The requirement of “serious” or “real” deliberation by the tribunal may be considered as a fundamental rule of procedure.³⁰

Furthermore, the tribunal must render a valid award according to Article 48 of the ICSID Convention, meaning that the majority vote must be consistent although the reasoning of the members of the tribunal may differ.³¹ As such, individual opinions (concurring and dissenting opinions) may not impact the validity of the award.³²

The independence and impartiality of the tribunal is recognised as a fundamental rule of procedure.³³ However, non-disclosure in itself does not necessarily render the arbitrator impartial.³⁴ The applicable legal standard is an objective standard – i.e., an arbitrator has a duty to not only be impartial and independent, but also to be perceived as such by an independent and objective third-party observer.³⁵ See also Arbitrator independence and impartiality, Arbitrator disclosure, Arbitrator disqualification.

The ad hoc Committee’s discretion to review the independence and impartiality of a member of the tribunal may depend on whether or not a challenge has already been raised during the proceedings.³⁶ See also Constitution of the arbitral tribunal as a ground to annul ICSID awards, Sections III.B and III.C. 

General principles on burden of proof may also constitute fundamental rules of procedure.³⁷ This will depend on whether the subject regarding which the burden has been reversed is of sufficient importance to the decision of the tribunal.³⁸ Some ad hoc Committees have however been more hesitant to consider that the rules on the burden of proof constitute fundamental rules of procedure.³⁹

Apart from burden of proof, there is some disagreement over which rules of evidence constitute fundamental rules of procedure. While stating that the “disregard of evidence” constitutes an infringement of a fundamental rule of procedure,⁴⁰ annulment committees have generally rejected applications challenging a tribunal’s assessment of evidence (including its admissibility)⁴¹ and have held that a decision by a tribunal not to accede to a party’s request to order production of documents can never in and of itself be a departure from a fundamental rule of procedure due to the discretionary nature of that power.⁴²

Outside of these general categories of procedural rules, ad hoc Committees have also considered that:

1. False representation by legal counsel may result in the breach of a fundamental rule of procedure;⁴³
2. A matter contrary to public policy or international law will not necessarily constitute a departure from a fundamental rule of procedure;⁴⁴ and
3. The reconsideration of prior decisions that are not res judicata (such as decisions on jurisdiction that have not yet been incorporated into final awards) does not in itself constitute a serious departure from a fundamental rule of procedure.⁴⁵

For there to have been a serious departure from a fundamental rule of procedure, the violation of the rule “must have had or may have had a material effect on the tribunal’s decision”.⁴⁶ 

While the applicant is not required to establish that the departure would have actually changed the result of the award,⁴⁷ the “departure must be substantial and be such as to deprive a party of the benefit of the protection which the rule was intended to provide”.⁴⁸ In other words, observance of the rule had the potential to result in a substantially different outcome.⁴⁹ Some ad hoc Committees have however adopted a more stringent standard, requiring a showing that the departure actually changed the outcome of the award.⁵⁰

Furthermore, the appreciation of the serious character of the departure is fact specific.⁵¹

(Any opinions expressed in this note are that of the author and do not necessarily reflect the views of Latham & Watkins or any other person or entity with whom the author is affiliated. The author thanks Ms. Amaryllis Bernitsa, Trainee Solicitor at Latham & Watkins for her research assistance in preparing this note. Any errors or omissions are the author’s alone.)

International Centre for Settlement of Investment Disputes, History of the ICSID Convention, 2009.

International Centre for Settlement of Investment Disputes, Updated Background Paper on Annulment for the Administrative Council of ICSID, 2016.

Menaker, A.J. and Dhillon, H.K., Article 52(1)(D), in Fouret, J., Gerbay, R. and Alvarez, G.G., The ICSID Convention, Regulations and Rules: A Practical Commentary, 2019.

Scherer, M., ICSID Annulment Proceedings Based on Serious Departure from a Fundamental Rule of Procedure, Czech (& Central European) Yearbook of Arbitration, 2007, pp. 211-226.

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

United Nations Conference on Trade and Development, Dispute Settlement International Centre for Settlement of Investment Disputes 2.8 Post-Award Remedies and Procedures, 2003.