“International Arbitration”: Threat or Normal Procedure for Dispute Settlement?

Recently, the issue of turning Amulsar into a mine has been widely discussed on the Internet, in the context of which there are regular references to various international legal acts. Public and private sector representatives, experts and citizens do not bypass the subject of “international arbitration” when expressing their views. In particular, some believe that if Amulsar fails to become a mine, the “international court” like a mythical monster will seize the state budget means of the Republic of Armenia.

Not aiming to analyze the situation around Amulsar in this article, we will refer to the frequently cited and  as “international arbitration” referred body; the International Center for Investment Dispute Settlement (hereinafter: ICSID), its functions and significance.

What is ICSID?

Along with technological development, people were given the opportunity to communicate more easily in different states of the world. In this period of declining borders, economic growth is also inevitable, which, among other things, assumes the activity of foreign investors in another state. Although the relative elimination of conditional barriers and the extension of accessibility can be described as a positive phenomenon with the naked eye, conflicts, pressures and contradictions between investors and states are, of course, inevitable.

The ICSID is an independent and apolitical body, the main purpose of which is to resolve disputes between foreign investors and the state. The founding document of the Center was the ICSID Convention, which came into force in 1966 and now has 153 member states. This number reflects the fact that the ICSID owns a reputation in different corners of the world and has extensive experience in the area of ​​dispute settlement in the mentioned sphere.

The settlement of the investor-state dispute, as it is already clear from the term, is a set of means and ways to reconcile the state and the investor. Both parties agree in advance on this dispute settlement procedure. The state, for example, can express its consent both by joining international treaties and by domestic law or by a contract with an investor. In this context, the ICSID provides both parties with dispute settlement procedures and mechanisms.

In each case, when the dispute settlement enters the stage of the ICSID resolution, there is usually a three-tier panel of arbitrators, who assume the responsibility of settlement. As a rule, one arbitrator is elected by the state, the other by the investor and the third through  the agreement of the parties. In case of disagreement on the elections, the ICSID may appoint its own candidate.

Why is the option of the ICSID settlement chosen for the investor-state dispute resolution?

ICSID was originally formed to settle disputes related to legal relations concerning investment disputes. That is, the Center is specialized in this kind of relations. Moreover, the regulations that are followed by the ICSID are intended to balance the interests of the state and the investor. Another reason is the availability of the Center for not only massive but also smaller investors. It is also noteworthy that ICSID decisions are mandatory for all parties involved.

ICSID procedure: a brief description

The first step in submitting a specific case to the ICSID is to contact the General Secretary of the Center presenting the significant legal and factual circumstances of the dispute. If the case is not out of the ICSID scope, it will proceed to the next stages.

After the formation of the arbitrators, preliminary hearings begin. The process is mainly both in written and in oral forms. There is also the possibility of holding sessions using telecommunication means.

In recent years the ICSID has expanded the scope of its cases under review, however, it can be argued that traditionally most of the cases reviewed at the Center relate to investors and states engaged in oil, gas or, for example, mining. In most of the cases under review, disputes arose in developing countries, although this line has also undergone changes in recent years.

Thus, ICSID is an internationally recognized center specializing in investment legal relations and dispute settlement. It is an apolitical and independent body and cannot give preference to any of the parties. The composition of the arbitrators also depends on the will of both parties of the dispute. The Center does not aim to automatically protect the interests of the investor or the state. It is a center that includes  impartial, highly reputable and professional lawyers as arbitrators.

Author: Lusine Hovhannisyan  © All rights are reserved.

Translator: Loran Ohanyan

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