Author

Mr Jonathan Tompkins

Counsel in International Arbitration - Shearman & Sterling LLP

Stay of enforcement of ICSID awards

I. Definition

1.

ICSID is a self-contained system, meaning that any arbitral award arising out of an ICSID proceeding is self-executing upon being rendered through dispatch by the Secretariat to the parties. The parties are immediately bound under their treaty obligations to comply with the arbitral award, unless a stay of enforcement is granted.1 In other words, the Convention temporarily exempts a party from complying with the obligations imposed by an award, but only to the extent that the enforcement of those obligations has been stayed.2

II. Related Wiki Notes

III. Circumstances where a stay may be granted

A. Application for interpretation

4.

A party who, in disputing the meaning or scope of the award, requests an interpretation of such award, the Tribunal may stay enforcement thereof if it considers that the circumstances so require, pending its decision on interpretation.5

B. Application for revision

5.

A party who requests revision of an award on the ground of discovery of some fact of such a nature as decisively to affect the award (provided that fact was unknown to the Tribunal and the applicant at the time the award was rendered and the lack of knowledge of such fact is not due to the applicant’s negligence) may also request that the Tribunal which rendered the award (or a newly constituted tribunal, if the original Tribunal is unavailable) stay enforcement of such award, if it considers that the circumstances so require, pending the Tribunal’s decision on revision.6 The party requesting the stay must specify the circumstances requiring the stay.7 Upon request, enforcement shall be stayed provisionally until the Tribunal rules on such request after having given each party an opportunity to present its observations.8 Once constituted, the Tribunal shall, if either party requests, issue its ruling on the continuation of the provisional stay within 30 days. If the ad hoc Committee determines not to continue the stay, the stay shall automatically be terminated.9

C. Application for annulment

6.

A party who requests annulment of an award on one or more of the grounds listed in Article 52(1) of the Convention may request that the duly appointed ad hoc Annulment Committee stay enforcement of the award, if it considers that the circumstances so require, pending the Committee’s decision on annulment.10 The party requesting the stay must specify the circumstances requiring the stay.11 Upon request, enforcement shall be stayed provisionally until the Committee makes a final ruling on such request after having given each party an opportunity to present its observations.12 Once constituted, the ad hoc Committee shall, if either party requests, issue its ruling on the continuation of the provisional stay within 30 days. If the ad hoc Committee determines not to continue the stay, the stay shall automatically be terminated.13

D. Application for supplementation or rectification

IV. Authority to modify or terminate a stay

8.

A stay, if granted, can be modified or terminated at any moment at the discretion of the Tribunal (in the case of an application for interpretation or revision) or the ad hoc Committee (in the case of an application for annulment).16 If a stay is not terminated during the proceeding, it terminates automatically upon the issuance of the Tribunal’s or ad hoc Committee’s final decision on the original application.17

V. Prior decisions by ad hoc Annulment Committees not binding precedent

9.

Prior decisions by ad hoc Committees, while they may be persuasive, are not binding authority. Each ad hoc Committee must consider the factual circumstances of the case before it in assessing whether to grant a stay.18 While ad hoc Committees may, and often do, consider the practice of prior ad hoc Committees, they are not bound by any rules of precedent in this respect.19

VI. Common issues in assessing stays pursuant to applications for annulment

10 .

To date, there have been at least 86 decisions rendered on stays of enforcement by ad hoc Annulment Committees.20 At time of writing:

  • 21 decisions have granted a stay of enforcement without conditions;
  • 2 decisions have granted stays in part, without conditions;
  • 26 decisions have granted stays with some form of condition (security or undertaking);
  • 16 decisions have rejected the request for a stay;
  • 1 decision rejected the request based on mootness;
  • in 2 cases, the stay was agreed by the parties;
  • in 1 case, the request to terminate or lift a stay was rejected;
  • in 4 cases, the request to terminate or lift a stay was granted; and
  • in 12 cases, information on the decisions is unavailable.21
11.

Given the divergent approaches to assessing stay applications, a number of issues often arise, including (A) which party bears the burden of proof, (B) whether there exists a presumption in favor of a continued stay, and (C) what standard or considerations may justify (or not) the continuation of a provisional stay. These are described below.

A. Burden of proof

12.

Which party bears the burden of proof in respect of stay applications is the subject of much debate. That said, it appears generally accepted that the party seeking the continuation of a stay must bear the burden of establishing the basis for that request.22 On the other hand, at least some ad hoc Committees have accepted that the party seeking to lift the provisional stay bears the burden to prove that there are circumstances that warrant the attachment of conditions in the case the stay is granted.23 It has also been suggested that the award creditor bears the burden of advancing evidence in support of any positive allegations it makes against continuation of a stay.24

B. Presumption of a stay

13.

Whether there exists a presumption in favor of granting requests for a continued stay is the subject of debate amongst ad hoc Some Committees have, either implicitly or explicitly, presumed that a stay of enforcement should be continued if requested,25 while others have resisted such presumption.26

C. Standards for determining whether to grant a stay or continuation thereof

14.

Neither the ICSID Convention nor its corresponding arbitration rules provide any indication of what circumstances do (or do not) warrant a stay of enforcement.27 There is no hard and fast rule or standard in this regard. Rather, Articles 50(2), 51(4) and 52(5) of the Convention state only that a stay “may” be granted “if [the Tribunal or ad hoc Committee, as the case may be,] considers that the circumstances so require.” Tribunals and ad hoc Committees therefore have considerable discretion in how to approach the issue of stay,28 subject to the condition that the circumstances must “require” continuing the stay.29

15.

Committees often, but not always, undergo a two-step analysis consisting of, first, determining whether the provisional stay should be continued, and, if so, second, whether to subject the stay to any conditions (for example, posting of security). This two-step analysis is described in the following paragraphs.

1. First step: the standard for determining whether to continue the stay

16.

For the first step, ad hoc Committees have, broadly speaking, tended to balance both (a) the prejudice to the applicant, and (b) prejudice to the award creditor.30 Committees have tended not to consider (c) the prima facie merits of the annulment application. Each of these elements is explained as follows.

a. Prejudice to the applicant

17.

Ad hoc committees have considered, as a factor in assessing whether to lift a stay, potential prejudice to the applicant. Such prejudice may include, for example, the risk of non-recovery (or difficulty of recovery) of sums due under the award if the award were to be annulled,31 32 and whether there will be adverse economic consequences to the applicant (including possible irreparable injury) in case of immediate compliance with the challenged award.33 34 With respect to non-recovery of sums due if the award is annulled, the “few ad hoc committees that have found a real risk of non-recoupment did so when the award creditor was an individual, or a shell company with a sole controlling individual, and where the risk of bankruptcy was shown to be a legitimate concern.”35 With respect to irreparable injury, some ad hoc Committees have considered “whether termination of the stay (or the granting of security) would have catastrophic, immediate and irreversible consequences for the award debtor’s ability to conduct its affairs.”36 Other ad hoc Committees have used a less stringent standard.37 

b. Prejudice to the award creditor

18.

Ad hoc committees have likewise considered, as a factor in assessing whether to lift a stay, potential prejudice to the award creditor. Such prejudice may include, for example, the risk of non-compliance with the award if the award is not annulled.38 39 Ad hoc committees may also consider the limited prospects of enforcement if the award is upheld.40 Finally, whether there is likely to be other adverse economic consequences or hardship to the award creditor is a consideration.41 

c. Prima facie merits of the annulment petition

19.

Ad hoc Committees have generally considered that the merits of an annulment application are not relevant for purposes of their decision on whether to continue a stay.42 

2. Second step: whether to condition the stay

20.

For the second step, parties will often request, in the event an ad hoc Committee is inclined to grant a stay, that the Committee condition such stay on the posting of a bond, bank guarantee, letter of credit, or similar provision of security in the total amount of the award (perhaps also including costs and interest to date).

21.

Ad hoc Committees faced with determining annulment applications have taken different approaches to conditioning stays. Some have taken the view that conditioning the stay upon posting of adequate security would be improper, or otherwise not part of its role, because doing so would “provid[e] the beneficiary of an award with better protection than beneficiaries of awards that are not tested in the annulment process.”43 Most ad hoc Committees, however, appear to have found that conditioning the stay on appropriate security is within their discretion.44 Conditions, however, are typically imposed only after having carefully weighed a number of factors, including: (i) whether the conditions would impose economic hardship to the award debtor,45 (ii) whether requiring security would have an unfair deterrent effect on annulment applications,46 (iii) whether security would put the award creditor in a better position than it would be had the award debtor not sought annulment of the award,47 (iv) whether the award debtor has offered a legitimate indication or assurances that it intends to comply with the award in the event its annulment application is rejected,48 and (v) whether delay of enforcement will result in undue prejudice to the award creditor.49 50

VII. Proposed Rule amendments

22.

On February 28, 2020, the ICSID Secretariat published its fourth working paper (Working Paper #4) containing proposals for Arbitration Rules (AR) amendments. It builds on the proposals published in August 2018 (Working Paper #1), March 2019 (Working Paper #2), and August 2019 (Working Paper #3). Proposed AR 73, which is a modification of current AR 54, continues in its attempt to simplify the text, codify practice, clarify procedure and address efficiency of processes relating to stay of enforcement of award. For example, AR 73(4) reflects the practice arising out of the interpretation of the Convention and the Rules by Committees that a stay of enforcement may be conditional.51 Proposed AR 72(1) and proposed AR 1(2) also provide that the parties may agree to modify the procedure for seeking a stay of enforcement.52

Bibliography

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