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.
II. General remarks
A. Travaux Preparatoires
“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 proviso. 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.
B. Importance of the “excess of powers” to be manifest
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
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
C. Methodolog(ies) under Article 52(1)(b) of the ICSID Convention
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
D. Manifest excess of powers can only be evidenced in the award
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.
III. Manifest excess of powers in practice
Parties’ consent constitutes a source of all tribunal’s powers.18 Therefore, the framework of tribunal’s powers is squarely prescribed by parties agreement to arbitrate as manifested by the reference to the ICSID Convention as well as any additional provisions agreed by the parties.19 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).20
A. Application to jurisdictional issues
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.21 The jurisdictional requirements being a basis for the evaluation are primarily set out in Article 25 of the ICSID Convention.22
Importantly, a number of ad hoc Committees observed that failure to act (refusal of jurisdiction) may also constitute a manifest excess of powers23 and annulled the awards on this basis.24 That being said, the failure to apply the Salini test would not in itself amount to a manifest excess of powers.25
B. Failure to apply proper law
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.”29 Yet, it is now settled, that the tribunal which does not follow 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.30
Importantly, annulment is not an appeal,31 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.32 It holds true, even if the ad hoc Committee would have had reached different legal conclusions based on the facts of the case.33 Notably, a few tribunals have adopted a less stringent distinction, stating that annulment may even be possible if the misapplication of the applicable law objectively amounts to a failure to apply the proper law34 or if it is “manifest” and unarguable.35
C. Comparison with review of non-ICSID awards under the New York Convention
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.
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