Author

Mr Mikhail Vishnyakov

Dispute resolution lawyer - Linklaters LLP

Editors
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Annulment of ICSID Awards

I. Definition

1.

Annulment is one of the five post-award remedies provided for by the ICSID Convention, the other remedies being: rectification (Article 49); supplementary decision (Article 49); interpretation (Article 50) and revision (Article 51).1 Unlike the other remedies, an application for annulment is considered by a new Tribunal (see Annulment Tribunal). Annulment is only available in respect of ICSID Awards.2 Article 53(1) of the ICSID Convention precludes parties from challenging ICSID Awards in national courts. The annulment process has been described as being “autonomous from domestic law”.3

2.

Annulment has been described by Annulment Tribunals as: an “extraordinary remedy with a high threshold”;4 an “exceptional remedy”;5 and as “a limited and extraordinary remedy”.6 Commentators have described it as the “most drastic remedy available under the ICSID Convention”.7

3.

If an award is annulled, the dispute can be reheard at the request of a party by a new Tribunal (Article 52(6)),8 thereby providing the parties with a “second chance to arbitrate the same issues again”.9

II. Frequency and success rate

4.

As of 31 December 2019, there were 6 decisions annulling the award in whole or in part (with 47 rejected applications) since 2011. This is a notable decline in the success rate in the prior decade, where there were 8 decisions annulling the award in whole or in part (with 13 rejected applications).10

III. Annulment is not an appeal

5.

Annulment is not an appeal of the Tribunal’s award,11 and should not revisit the merits of the case.12 ICSID arbitration “lacks an appellate structure”.13 The annulment process is designed to safeguard the integrity, not the outcome, of ICSID arbitration,14 and its focus is not the merits or substance of the award.15 

6.

However, some Annulment Tribunals have been criticised for improperly re-examining the merits of a case by other Annulment Tribunals16 and by commentators (“thereby effectively transforming an annulment proceedings into an appeal”).17

IV. Grounds for annulment

7.

The exhaustive list of grounds for annulment18 is set out in Article 52(1), being: 

  1. the Tribunal was not properly constituted;
  2. the Tribunal has manifestly exceeded its powers;
  3. there was corruption on the part of a member of the Tribunal;
  4. there has been a serious departure from a fundamental rule of procedure; or
  5. the award has failed to state the reasons on which it is based.
8.

The customary rules of treaty interpretation reflected in Article 31 of the Vienna Convention have also been held by Annulment Tribunals to apply in interpreting the available grounds.19 These grounds should not be interpreted narrowly or broadly.20 There is also no presumption either in favour or against annulment.21  

9.

If one of the grounds for annulment is established, this does not automatically require the Annulment Tribunal to annul the award in whole or in part, albeit the Annulment Tribunal’s discretion in that regard is not unlimited.22 Annulment will ensue only if the flaw has had a serious adverse impact on one of the parties.23

Bibliography

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

Bishop, R.D. and Marchili, S.M., Annulment Under the ICSID Convention, Oxford University Press, 2012.

ICSID, The ICSID Caseload – Statistics, Issue 2020-1

McLachlan, C., Shore, L. and Weiniger, M., International Investment Arbitration: Substantive Principles, Oxford University Press, 2nd ed., 2017.

Reed, L., Paulsson, J. and Blackaby, N., Chapter 5: The ICSID review regime, in Guide to ICSID Arbitration, Kluwer Law International, 2004.

Lim, C.L., Ho, J. and Paparinskis, M., International Investment Law and Arbitration, 3rd ed., Cambridge University Press, 2019.

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