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Mme Anna Korneva

Senior Associate - Ogier

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Discontinuance of ICSID Conciliation Proceedings

I. Definition

1.

Conciliation may be discontinued by the Secretary-General of the International Centre for Settlement of Investment Disputes (ICSID) for failure of the parties to pay the advances required to cover the costs of the proceeding.1

II. Procedure leading to discontinuance

2.

A conciliation proceeding is not automatically discontinued after the party defaults on payment. The process leading to discontinuance involves several stages.2 The parties will first be requested to pay the outstanding amount of fees. Both parties are required to put the advances on costs in equal shares, half of the required amount. If the outstanding amount of fees are not paid within 30 days, the Commission (or the Secretary-General if the former is not constituted) will inform both parties of the default. Following this, either party will have an opportunity to make the necessary payment. If the party fails to pay the outstanding amount, 15 days after the notice of the default, the Secretary-General may move a Commission to stay the proceedings. If any proceeding is stayed for non-payment for a consecutive period in excess of six months, the Secretary-General may move that the Commission discontinue the proceeding. This is subject to the notice to and as far as possible in consultation with the parties.3

3.

The decision on discontinuance is of discretionary nature.4 The rule on discontinuance is equally applicable to arbitration proceedings, some of which were continued without the parties making an advance payment.5 The application of discontinuance rule to conciliation proceeding can be observed by analogy with arbitration.6

4.

It is the Secretary-General's prerogative to request that the proceedings be discontinued. However, it remains open for a Commission to issue an order taking note of the discontinuance of the proceedings.

5.

To date no conciliation proceeding has been discontinued. In general, the recourse to conciliation in ICSID disputes has been quite limited; only 12 cases have been administered by ICSID as conciliation proceedings.7 The conciliation is relatively inexpensive in comparison to arbitration, which might be the reason for the lack of discontinuance to date. For example, in the Tesoro Petroleum Corporation case the total costs for the conciliation proceedings were less than USD$11,000.00, including the costs of the conciliator and administrative costs, despite the procedure being as extensive and as complex as arbitration, involving the extensive exchange of memorials, oral submissions, a ruling on jurisdictional objection, findings on the merits, and so forth.8 However, the costs of every proceeding should always be assessed in totality. The prime example of unsuccessful conciliations are Togo Electricité v. Republic of Togo and RSM Production Corporation v. Republic of Cameroon, which were duplicated later in arbitration proceedings Togo Electricité and GDF-Suez Energie Services v. Republic of Togo and RSM Production Corporation v. Cameroon. It is also possible to argue that if a conciliation is successful it leads to a significant saving of costs, particularly for smaller cases.9

III. Closure of conciliation proceedings

6.

Both arbitration and conciliation can be discontinued on the basis of non-payment of costs in the proceedings.10 However, unlike the Rules 43-45 of Procedure for Arbitration Proceedings the Convention Conciliation Rules do not contain provisions that provide for the discontinuance of an arbitration proceeding either pursuant to a party request or due to the parties’ failure to act. This is likely to be changed soon as discussed further in this note.

7.

The Commission may issue a report recording the closure of the proceedings in the following circumstances: declining the jurisdiction;11 recording the parties’ agreement;12 recording the failure to reach an agreement;13 and recording failure to appear or failure to participate.14 Unlike discontinuance, closure of conciliation proceedings will prevent the parties from initiating the conciliation on the same grounds.

IV. Consequences of discontinuance

8.

Discontinuance does not result in issuing of the report by the Commission. To record the discontinuance of conciliation proceedings, the Commission will take a note in an order. In cases where the Commission has not yet been constituted the discontinuance will be recorded by the Secretary-General.15 

9.

Discontinuance does not preclude the proceedings to be initiated on the same grounds and between the same parties.16

10.

Unlike the Tribunal, the Commission will not be able to apportion the costs even in cases where the party’s behavior was unreasonable or prejudicial.17

V. Proposed changes to conciliation proceedings

11.

At present, the conciliation proceeding can only be discontinued on the grounds of non-payment, which means that in all other circumstances when the report is issued by the Commission, the parties would be precluded from reinitiating the proceedings on the same grounds and between the same parties. According to future proposed changes, the parties may be able to discontinue the conciliation proceedings by an agreement or by way of proposal by one of the parties, and in cases when the parties fail to act prior to the constitution of the Commission.18 The proposed changes may contribute to an increase in demand for conciliation and make it more practicable.19

Bibliography

Sim, C., Ideas for ICSID Amendments in 2017: Exploring Early Mediation or Conciliation, 2017.

Schreuer, C.H., The ICSID Convention: A Commentary, Cambridge University Press, 2001.

Nurick, L. and Schnably, S., The First ICSID Conciliation: Tesoro Petroleum Corporation v. Trinidad and Tobago, ICSID Review-Foreign Investment Law Journal, Vol. 1, Issue 2, p. 343.

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