Dispute Settlement Clauses in Investment Treaties

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A vital element of investment treaty arbitration is the dispute settlement clause found in investment treaties. It grants investors the right to institute arbitration proceeding directly against a state. This type of clause represent a change from traditional international law practice where by an investor was generally dependent on its home sate to pursue a diplomatic protection claim on behalf of the investor.[1]

3.8.1. International Center for Settlement of Investment Disputes

The ICSID is an autonomous international institution formulated under the auspices of the World Bank to facilitate as a specialized method of international dispute settlement. The claimant in this form of arbitration is a private party and the respondent is a foreign state. The convention also known as the Washington convention entered into force in October 14, 1996. The ICSID is based in Washington; the center offers special autonomous procedures for administering investment arbitration between a state, or state entity and a foreign private investor. ICSID was created as n independent international organization (article 18 of ICSID), but it’s structurally linked to the World Bank. The banks governor sits on the administrative council of ICSID, the chairman of the administrative council is the World Bank president and the ICSID secretariat is funded through the World Bank. The ICSID has a comprehensive o structure consisting of a council and a secretariat. The administrative council is composed of all contracting states, the secretariat on the other hand provides the day to day administrative and support function for arbitration. Initially numbers of cases registered with the ICSID was low. After the conventions entry to force in 1966 no case was registered with ICSID,[2] between 1966 to 1996 only 35 cases were registered, an average of one case per year approximately.[3] Today though the picture is totally different, the number of cases registered at the ICSID has increased significantly. The ICSID has also brought some revolutionary change in private vs. state arbitrations. Traditionally investors depended on their home state to pursue claims on their behalf against a host state before an international court or tribunal. The ICSID conventions grants investors’ direct arbitration rights against states. In contrast with other arbitral institutions, ICSID procedure is self contained and insulated from domestic court involvement during arbitral procedure.[4] The insulation of ICSID arbitral proceedings from the influence of domestic court is achieved through a number of provisions in the ICSID convention. Under the ICSID convention domestic courts have no power to set aside ICSID awards. Under international law submission of a private party claim against states before an international tribunal requires that the party first needs to exhaust the local domestic legal remedies available in the respondents states domestic courts. The ICSID reverse these notion and it presumes that parties to the convention have waived there requirement of exhaustion of domestic remedies. Due to its advantages, ICSID is a major actor in the field of international investment and economic development,

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