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Author

Mr Isuru Devendra

Associate (International Arbitration and Public International Law) - Latham & Watkins

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Serious departure from a Fundamental Rule of Procedure

I. Definition

1.

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

II. Basic requirements

2.

Establishing this ground for annulment has two basic requirements, both of which must be met.3 First, the rule of procedure from which there has been a departure must be “fundamental”.4 Second, there must have been a “serious departure” from that fundamental rule.5

A. Fundamental rules of procedure

3.

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”.6 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”.7

4.

While there is no definitive list of what rules of procedure are “fundamental”, the following rules of procedure have been considered in annulment proceedings.8

i. Equal treatment of the parties

5.

The equal treatment of the parties is widely recognised as a fundamental rule of procedure.9 The rule has been invoked by applicants in a variety of ways.10

ii. Right to be heard

6.

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.11

iii. Independence and impartiality of the tribunal

7.

The independence and impartiality of the tribunal is recognised as a fundamental rule of procedure.12 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.13

iv. Burden of proof

8.

General principles on burden of proof may also constitute fundamental rules of procedure. This will depend on whether the subject regarding which the burden has been reversed is of sufficient importance to the decision of the tribunal.14

v. Other rules of evidence

9.

Apart from burden of proof, there is some disagreement over which rules of evidence constitute fundamental rules of procedure, although annulment committees have generally rejected applications challenging a tribunal’s assessment of evidence 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.15

B. Serious departure

10.

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”.16 While the applicant is not required to establish that the departure would have actually changed the result of the award,17 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”.18 In other words, observance of the rule had the potential to result in a substantially different outcome.19

III. Other considerations

A. Timely objection to violation of procedure

11.

The applicant must have raised the 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.20 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.21

B. Burden of proof

12.

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.22

(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.)

Bibliography

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