Author

Mr Manuel Casas

Counsel - WilmerHale

Editors
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Denunciation of ICSID Convention

I. Denunciation of the ICSID Convention

1.

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.”

II. Non-jurisdictional consequences of a State's denunciation of the ICSID Convention

III. Jurisdictional consequences of a State's denunciation of the ICSID Convention

3.

The jurisdictional consequences of denunciation of the ICSID Convention are not straightforward. Tribunals and scholars are divided on the issue.5 6 These divergences arise from the wording of Articles 71 and 72 and due to the Convention’s jurisdictional structure.7

4.

The ICSID Convention has so far been denounced by three States: Bolivia, in 2007; Ecuador, in 2009, and Venezuela, in 2012. However, tribunals have only decided cases against Venezuela, likely due to a peculiarity in Venezuelan investment treaties,8 9 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. Bolivian and Ecuadorian investment treaties do not have similar limitations. Investors that have initiated arbitrations against those States that have denounced the Convention have done so under ICSID Additional Facility or UNCITRAL Rules.10

5.

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.

A. Claimant consents to the Centre's jurisdiction before the denouncing State issues its notice

B. Claimant consents to the Centre's jurisdiction during the six-month notice period

7.

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.13
  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. This requires accepting consent issued during the notice period. Otherwise, a State’s denunciation would have immediate effect – depriving Article 71 of any effectiveness.14 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 72.15

C. Disputes submitted after the notice period

8.

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.16
  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.17 

IV. Denunciation and annulment proceedings

9.

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.

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