The “Statement of Reasons” of an award, also known as its “Reasoning,” “Motives,” or “Motivation,” is the section of an award that generally explains the grounds for the arbitral tribunal’s decision.1 It includes the findings of fact and rationale for the award.2 It is usually clearly labeled with an appropriate heading in the award.
The Islamic Republic of Iran v. The United States of America, IUSCT Case Nos. A15(IV) and A24, Decision (Decision No. DEC 136-A15(IV)/A24-FT), 5 March 2015, para. 3; Eureko B.V. v. Republic of Poland, Setting Aside of Award, Judgment of Court of First Instance of Brussels, 23 November 2006, Section IV.
II. Relationship to the award's operative part
To understand an arbitral tribunal’s decision clearly, it is necessary to refer to the Statement of Reasons.3 It therefore complements the award’s Operative Part (also known as the award’s Dispositif), which constitutes the arbitral tribunal’s decision itself.4 The Statement of Reasons is considered a “fundamental” portion of the award.5
This is consistent with the well-established principle that the Statement of Reasons and the Operative Part are regarded as an indivisible whole within the award.6 An award must be read holistically for clarity and full meaning of its scope, and the Statement of Reasons is crucial to this understanding.7 Through the Statement of Reasons, an arbitral tribunal provides rationale and support for the Operative Part of its award.
As explained by the U.S. District Court for the District of Columbia in response to an application to confirm an ICSID award: “To be sure, a dispositif, like a court order, is the portion of the decision that has affirmative legal effect. That does not mean, however, that a dispositif —or a court order—must be construed in a vacuum, without reference to the reasoning that led to the operative conclusion. […] In practice, moreover, it is not unusual for courts to look to the reasoning contained in an arbitral award to clarify or to understand the ultimate disposition”.8
Notably, among the Grounds for Annulment provided by Article 52 of the ICSID Convention is the tribunal’s failure to state the reasons on which its award is based. In accordance with Article 31 of the Vienna Convention on the Law of Treaties, this ground is given its ordinary meaning. Thus, past ICSID annulment committees have construed this ground to mean that an arbitral award may be annulled if it fails to provide enough rationale to substantiate the award’s conclusion (i.e., its Operative Part).9
El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/03/15, Decision on Application for Annulment, 22 September 2014 [applied ICSID Arbitration Rules (2006)], para. 221; RSM Production Corporation v. Central African Republic, ICSID Case No. ARB/07/02, Decision on Annulment (excerpts), 20 February 2013 [French], paras. 82, 84-86, 92-94; Maritime International Nominees Establishment v. Republic of Guinea, ICSID Case No. ARB/84/4, Decision for Partial Annulment of the Arbitral Award, 22 December 1989, para. 5.09; Klöckner Industrie-Anlagen GmbH and others v. United Republic of Cameroon and Société Camerounaise des Engrais, ICSID Case No. ARB/81/2, Excerpts of Ad hoc Committee Decision on Annulment, 3 May 1985 [English Translation], para. 118.
III. The statement of reasons is not necessarily designed to have res judicata effect
The Statement of Reasons is not necessarily designed by the arbitral tribunal to have binding effect (see also Res Judicata) on the arbitration and its parties. To the extent the Statement of Reasons (or other views) contained in an award go beyond the scope of the Operative Part and are outside its actual decision, their binding effect is not unanimously agreed.10 The binding purpose is specifically delegated to the Operative Part.
On the other hand, past arbitral tribunals have taken a flexible view of where the line on binding elements must be drawn. For example, in RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à.r.l. v. Kingdom of Spain, the ICSID arbitral tribunal explained in its Decision on Responsibility and on the Principles of Quantum: “Although these findings do not appear in the operative part of the Decision on Jurisdiction, they constitute the necessary support for it and are therefore res judicata.”11
Polish Postal Service in Danzig, PCIJ Series B. No 11, Advisory Opinion, 16 May 1925, pp. 29-30; Chevron Corporation and Texaco Petroleum Company v. The Republic of Ecuador (I), PCA Case No. 2007-02/AA277, Final Award, 31 August 2011, para. 273; International Law Association, Interim Report: “Res Judicata” and Arbitration, Berlin Conference (2004) International commercial arbitration, p. 22.
Schreuer, C.H., The ICSID Convention - A Commentary, Cambridge University Press, 2001.