Annulment and Vacatur

Introduction

Finality of an award is not just a desired but an essential feature of international arbitration. However, such finality must be balanced with the need to ensure the sanctity and integrity of the arbitral process.[2] Accordingly, as considered in this chapter, both International Centre for Settlement of Investment Disputes (ICSID) and non-ICSID treaty awards are subjected to limited grounds for challenge within fixed limits.[3]

Annulment and vacatur; ICSID and non-ICSID awards

The scope of the grounds for challenging an investment treaty award depends on whether the arbitration is governed by the ICSID Convention[4] or not.

There is a distinction between a challenge to the award in the nature of a vacatur/setting aside of the award and a challenge to the enforcement of the award. While the enforcement of the award may be sought and resisted at any place where the assets of the award debtor may be located, including at the seat of the arbitration, an award can be set aside only at the seat of the arbitration.[5]

In the case of a non-ICSID award or an award under the ICSID Additional Facility Rules 2006, enforcement would, depending on the laws of the particular state concerned, generally be sought and resisted under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention),[6] which has been adopted by 168 states, whereas the vacatur of an award can be sought under the relevant national laws of the seat of the arbitration.[7] The 1985 UNCITRAL Model Law (the Model Law), which has been adopted by multiple countries, prescribes certain rules for setting aside/seeking a vacatur of a non-ICSID award.[8]

In the case of an ICSID award, the ICSID Convention is a self-contained code, governing the enforcement of the award and the challenge to the finality of the award. The ICSID Convention imposes an obligation to recognise and enforce ICSID awards on the Member States as a treaty obligation.[9] It contains two provisions to engender compliance with arbitral awards. Article 53(1) requires the disputing parties to ‘abide by and comply with the terms of the award’, and Article 54(1) obliges every contracting party to the ICSID Convention to recognise ICSID awards as binding.

ICSID awards are not subject to an appeal or to other remedies except those provided under the ICSID Convention.[10] The ICSID Convention allows a party to make an application for annulment of the award on limited grounds.[11] An ICSID annulment application is heard and decided by a three-member ad hoc committee, which is constituted by the chair of the Administrative Council from the ICSID Panel of Arbitrators.[12]

This chapter discusses challenges to the finality of ICSID and non-ICSID awards. Matters concerning enforcement and execution of awards are dealt with in the subsequent chapters.

Annulment of awards under the ICSID Convention

Article 52 of the ICSID Convention provides either party the right to seek an annulment of the award. Article 52 read with Rule 52 of the ICSID Rules of Procedure for Arbitration (the ICSID Arbitration Rules), which details the procedural aspects, is a complete code governing the annulment proceedings.

Nature of annulment

Article 52 provides an exhaustive list of grounds[13] on which an award may be annulled. The grounds enumerated in Article 52 provide a limited exception to the finality of awards contemplated in Article 53 of the ICSID Convention,[14] and the decision to annul cannot be made on grounds other than those listed in Article 52.[15]

The annulment proceeding is not an appeal[16] or a recourse against an incorrect decision of a tribunal.[17] It is in the nature of a limited review of the award.[18] Under the ICSID Convention, annulment is an exceptional remedy with a limited purpose. The decision of the ad hoc committee on the annulment request in CDC Group PLC v. Seychelles[19] is seminal to the essence of the ICSID annulment mechanism and notes as under:

The ICSID annulment procedure is concerned with determining whether the underlying proceeding was fundamentally fair: Article 52(1) looks not to the merits of the underlying dispute as such, but rather is concerned with the fundamental integrity of the tribunal, whether basic procedural guarantees were largely observed, whether the tribunal exceeded the bounds of the parties’ consent, and whether the tribunal’s reasoning is both coherent and displayed. To borrow Caron’s terminology, annulment is concerned with the ‘“legitimacy” of the process of decision’ rather than with the ‘substantive correctness of decision.’ Because of its focus on procedural legitimacy, annulment is an ‘extraordinary remedy for unusual and important cases.’

What may be annulled

The ICSID Convention allows the parties to seek annulment of an ‘award’. The term award covers decisions that contain the final disposition on all the matters submitted by the parties that have the characteristics of an award contained in Article 48 of the ICSID Convention read with Rule 47 of the Arbitration Rules.

Procedural decisions or provisional measures cannot be annulled under Article 52 of the ICSID Convention.[20] A preliminary decision on jurisdiction is not an ‘award’ that can be challenged in an annulment proceeding.[21] The aggrieved party needs to wait until the decision on jurisdiction, even if it raises issues that may be the basis of annulment, becomes part of the dispositive award before it can be sought to be annulled.[22]

Decisions on annulment are themselves not subject to annulment. This is a further illustration of the different use of the word ‘award’ in Articles 52 and 53. An ad hoc committee is an invigilator of last recourse. Its decision is not subject to any formal process of review by way of annulment or otherwise.[23] Having said that, it is possible for similar issues to be referred to a different ad hoc committee if an annulled award leads to a new ICSID arbitration and a subsequent annulment application.

Finally, Article 52(3) of the ICSID Convention specifically provides that the ad hoc committee shall have the authority to annul the award or any part thereof.

Grounds of annulment

Article 52(1) of the ICSID Convention provides an exhaustive list of grounds[24] on which a party to an ICSID award may seek annulment. These grounds include:

  • the tribunal was not properly constituted (Article 52(1)(a));
  • the tribunal manifestly exceeded its powers (Article 52(1)(b));
  • there was corruption on the part of a member of the tribunal (Article 52(1)(c));
  • there has been a serious departure from a fundamental rule of procedure (Article 52(1)(d)); and
  • the award has failed to state the reasons on which it is based (Article 52(1)(e)).

The burden of proof lies on the party requesting an annulment to show that one or more grounds in Article 52 apply to the facts and circumstances of the case.[25] There is no presumption for or against the annulment.[26] Similarly, in determining whether the grounds invoked by the requesting party are made out, the grounds of Article 52 are neither to be interpreted strictly or broadly.[27] They should be interpreted in accordance with their scope and object.[28] This implies exclusion of a review on the merits of the award and conversely includes the power to refuse to annul the award where there is no procedural injustice.[29]

A closer look at the individual grounds on which an annulment may be sought is presented below.

Article 52(1)(a): the tribunal was not properly constituted

Article 52(1)(a) covers challenges relating to: (1) the procedure for the appointment of arbitrators; and (2) the qualifications of the tribunal. This ground is the second least invoked for annulment applications, having been invoked on 13 occasions and prevailed only once.[30] The fact that the ICSID Secretariat carefully monitors this stage of the proceeding making procedural irregularities unlikely may explain the lack of annulment requests under this ground.[31] The first category of challenge encompasses cases concerning a departure from the procedure or eligibility agreed to by the parties for the appointment of the tribunal.[32] The bulk of the 13 challenges raised under this ground have been in the second category (i.e., regarding the qualification of the tribunal).

In that regard, Article 14 of the ICSID Convention describes the qualitative criteria for the members of the tribunal, including independence, competence and high moral integrity. If a member of the tribunal is not, or fails to remain, compliant with Article 14, a party may propose his or her disqualification under Article 57 of the ICSID Convention.[33]

The right of a party to raise this disqualification challenge before the tribunal does not bar the issue from being raised as a ground of annulment under Article 52(1)(a).[34] Where a disqualification challenge has been previously filed with the ICSID Secretary General and decided by the other members of the tribunal, the role of the ad hoc committee is limited such that the disqualification decision should be accepted unless it was plainly unreasonable.[35] In contrast, where the issue has not been raised by way of a disqualification challenge and there is no evidentiary record, the ad hoc committee may decide the issue de novo.[36] The ad hoc committee may annul the award where the facts disclose a manifest (i.e., obvious or evident) appearance of bias.[37]

If a party fails to raise an objection regarding the alleged improper constitution of a tribunal despite having knowledge of the same, it may be treated as having waived its right to raise this as a ground for annulment. However, it is only if the waiver is clear and unequivocal that the party can be treated as having surrendered its right to challenge the award under Article 52 (1)(a) of the ICSID Convention.[38]

Article 52(1)(b): the tribunal manifestly exceeded its power

The most common and successful ground for annulment is an allegation under Article 52(1)(b) that a tribunal has exceeded its powers.

What amounts to an excess of powers in this context has been explained succinctly by the ad hoc committee in the annulment decision in Helnan v. Egypt[39] as follows:

The concept of the ‘powers’ of a tribunal goes further than its jurisdiction, and refers to the scope of the task which the parties have charged the tribunal to perform in discharge of its mandate, and the manner in which the parties have agreed that task is to be performed. That is why, for example, a failure to apply the law chosen by the parties (but not a misapplication of it) was accepted by the Contracting States of the ICSID Convention to be an excess of powers, a point also accepted by annulment committees. Further, a failure to decide a question entrusted to the tribunal also constitutes an excess of powers, since the tribunal has also in that event failed to fulfil the mandate entrusted to it by virtue of the parties’ agreement.

The tribunal exceeds its powers where it: (1) incorrectly assumes or fails to assume jurisdiction; (2) fails to apply (as opposed to misapply) the applicable law; and (3) does not fulfil or exceeds its mandate.

An award may be annulled only where the tribunal exceeds its powers ‘manifestly’. The term ‘manifestly’ in the context of Article 52(1)(b) means ‘plain, clear, obvious and easily understood or recognized by the mind’.[40] This implies that an excess of power is manifest where ‘it is discernible with little effort and without deeper analysis’.[41] This view, which has been endorsed by a majority of ad hoc committees,[42] relates to the readiness with which the excess of power is apparent and not to the gravity of the excess of power by the tribunal.[43] The term ‘manifestly’ in Article 52(1)(b) has also been interpreted to include, albeit only by a few ad hoc committees,[44] a requirement that the excess of power by the tribunal be substantially serious. The approach taken by the ad hoc committee in Soufraki v. UAE[45] is worth noting in this context, holding that both approaches were harmonious such that for the purposes of Article 52(1)(b) ‘the excess of power should at once be textually obvious and substantially serious’.[46]

Article 52(1)(c): corruption on the part of a member of the tribunal

This ground is intended to safeguard the integrity of the tribunal and the arbitral process.[47] The corruption must be established and not merely inferred in order to constitute a ground for annulment.[48]

The ICSID Arbitration Rules provide guidance on what is ‘corruption’ in this context.[49] They provide that an arbitrator who agrees to serve as a member of a tribunal is required to declare that he or she shall ‘not accept any instruction or compensation with regard to the proceeding from any source except as provided in the ICSID Convention’.[50] Accordingly, corruption would be present if biased behaviour is shown to have been caused by an improper compensation or on account of the arbitrator taking unauthorised or improper ‘instructions’.[51]

Article 52(1)(c) has never been successfully invoked by a party in annulment proceedings,[52] nor has it been dealt with in any publicly available annulment decision.[53]

Article 52(1)(d): serious departure from a fundamental rule of procedure

The ICSID Convention recognises the importance of preserving the integrity and legitimacy of the arbitral process and thus provides for the annulment of an award under Article 52(1)(d) where the procedural sanctity of the process is violated. An annulment request under Article 52(1)(d) must relate to a fundamental rule of procedure from which there was a serious departure in order to be successful.[54]

Not every procedural rule of the applicable arbitral rules can be treated as being fundamental for the purposes of Article 52(1)(d). Article 52(1)(d) is restricted to a violation of ‘a set of minimal standards of procedure to be respected as a matter of international law’.[55] This understanding of the phrase ‘fundamental’ has widespread acceptance.[56] Ad hoc committees have previously considered the following to constitute fundamental rules of procedure: (1) equal treatment of parties; (2) right to be heard; (3) independence and impartiality of the tribunal; (4) treatment of evidence; and (5) deliberation among members of the tribunal.[57]

A departure from a procedural rule must also be considered ‘serious’. This establishes both quantitative and qualitative criteria: the departure must be substantial and be such as to deprive a party of the benefit or protection that the rule was intended to provide.[58] A violation would be considered to be serious where it ‘causes the tribunal to reach a result substantially different from what it would have awarded had the rule been observed’.[59]

The enquiry into whether there is a serious departure from a fundamental rule of procedure is a fact-specific one and may involve examination by the ad hoc committee of the record before the tribunal.

The right to seek an annulment on the basis of this ground does not imply that a party that discovered the procedural irregularity can keep silent. On the contrary, a party is obliged to raise any irregularity at the time it became aware of it. Not doing so may be taken as a waiver and the ad hoc committee may refuse to allow annulment on that basis.[60]

Article 52(1)(e): the award fails to state the reasons on which it is based

Article 48(3) of the ICSID Convention states that the award shall deal with every question submitted to the tribunal and shall state the reasons upon which it is based, thereby helping to preserve the integrity of the arbitral process.

It is ‘the tribunal’s duty to identify, and to let the parties know, the factual and legal premise leading for its decision’.[61] While evaluating a challenge under this ground, the ad hoc committee does not have the authority to reassess the merits of the dispute or to substitute the tribunal’s determination by its own convictions.[62] Its authority is limited to the examination of the award with respect to the alleged failure to state the reasons on which the tribunal has based its decision.[63] The test to be applied by the ad hoc committee for the purposes of this ground may be formulated as follows: whether the reasons developed by the tribunal have enabled the addressees of the award and, for that matter, the committee itself, to understand the process leading to its conclusions and to the determination of the amount of compensation.[64]

Application for annulment

An application seeking an annulment of an award must be filed within 120 days of the date of the award. In the case of a request for annulment under Article 52(1)(c), such an application must be filed within 120 days of the discovery of corruption and in any event within three years of the date on which the award was rendered.[65]

An application seeking annulment must identify an award to which it relates and enumerate the grounds upon which the award is sought to be annulled.[66] After the application is registered by the Secretary General of ICSID, the chair of the Administrative Council will be requested to constitute an ad hoc committee that will hear and decide the request for annulment.[67]

Constitution of the ad hoc committee

The ad hoc committee consists of members from the ICSID panel of arbitrators. The panel comprises members appointed either by one of the contracting states or the chair of the Administrative Council.[68] The ICSID Convention stipulates that, to be on the panel, designees must be persons of high moral character and recognised competence in the fields of law, commerce, industry or finance.[69]

Further, to be a member of the ad hoc committee, a person should not have been a member of the tribunal that rendered the award or be of the same nationality as any of the tribunal members.[70] Additionally, the nominee cannot be of the same nationality as the parties, have been appointed to the ICSID panel of arbitrators by either the state party to the dispute or the state whose national is a party to the dispute, or have been a conciliator in the same dispute.[71]

As opposed to the appointment of tribunal members, the chair of the Administrative Council need not consult the parties before making appointments to the ad hoc committee. ICSID merely informs the parties about the proposed appointments and shares each one’s curriculum vitae. This gives the parties an opportunity to provide comments to indicate if there is a manifest lack of any of the qualities listed in Article 14 of the ICSID Convention, which would preclude a proposed appointee from serving as a committee member.[72]

Role of the ad hoc committee in the annulment proceedings

The ad hoc committee does not act as a court of appeal.[73] It cannot consider the substance of the dispute, but can only determine whether the award can be annulled on any of the grounds listed in Article 52 of the ICSID Convention.[74] It cannot substitute its own views on the law or facts.[75] As noted by the ad hoc committee in MTD Equity Sdn and MTD Chile SA v. Republic of Chile:[76]

The role of the ad-hoc committee is a limited one. It cannot substitute its determination on the merits for that of the tribunal. Nor can it direct a tribunal on a resubmission how it should resolve substantive issues in dispute. All it can do is annul the decision of the tribunal: it can extinguish a res judicata but on question on merits it cannot create a new one.

The ad hoc committee enjoys some discretion when it comes to deciding the extent to which the award needs to be annulled. Where a ground for annulment is established, it is for the ad hoc committee and not the requesting party to determine the extent of the annulment.[77] In making this determination the ad hoc committee is not bound by the applicant’s characterisation of its request.[78]

Vacatur/setting aside of non-ICSID awards

Non-ICSID arbitrations[79] may be conducted under the aegis of various arbitral institutions, such as the Permanent Court of Arbitration (PCA) or the International Chamber of Commerce, or as an ad hoc arbitration under the UNCITRAL Rules.[80]

Non-ICSID awards can be set aside by the courts of the seat of arbitration.[81] The relevant national legislation will govern the grounds and the procedure for setting aside the award. Many states, but not all, have adopted the Model Law as the basis of their national legislation for regulating arbitration.

The grounds available under the Model Law to set aside an award are broadly divided into two categories: (1) party proven grounds in Section 34(2)(a) (which are often considered as procedural or jurisdictional grounds of review); and (2) grounds in Section 34(2)(b) (which are often considered substantive grounds of review).[82] While parties can agitate grounds under both provisions, courts are empowered under Section 34(2)(b) to scrutinise awards against the specified grounds on their own.

The grounds of review under Section 34 of the Model Law are as follows.

A party was under some incapacity or the arbitration agreement is invalid as per the applicable law (Article 34(2)(a)(i))

This ground is premised on the principle of consent – which is fundamental to any arbitration.[83] If the arbitration agreement in question (even when contained in a treaty) was not validly entered, the resultant award can be set aside as the very basis for parties arbitrating their disputes is called into question.

This ground was analysed by the US Supreme Court in BG Group v. Argentina.[84] This dispute involved an investment treaty claim for losses arising out of certain Argentine economic reforms. The seat of arbitration was Washington, DC, and the BG Group initiated arbitration under the BIT without litigating the matter in local courts (as was required by the treaty). The tribunal assumed jurisdiction and issued an award against Argentina, noting that the requirement to exhaust local remedies was not an impediment to arbitrate disputes. The award was challenged by Argentina before the US courts on the ground that there was no valid agreement to arbitrate since the prerequisite to exhaust local remedies was never fulfilled by the investor. The US Supreme Court upheld the tribunal’s jurisdiction and ruled that it was for the tribunal to determine its own jurisdiction because the relevant provision in the treaty only governed when the contractual duty to arbitrate arises, not whether there is a contractual duty to arbitrate at all.[85]

A party was not given sufficient notice of the appointment of an arbitrator or arbitral proceedings or was otherwise unable to present its case (Article 34(2)(a)(ii))

This is a ‘due process’ or ‘denial of natural justice’ ground meant to ensure that a party to an arbitration is given a fair chance to present its case before a tribunal. The Singapore High Court has held that parties must meet a high threshold to dislodge an award on the basis that a party was denied a principle of natural justice.[86]

When reviewing an award rejecting the tribunal’s jurisdiction to hear a claim against Mexico, a Canadian court held that a court cannot undertake a de novo review to determine whether any natural justice principles were violated.[87] As per Canadian practice, the courts deferred to the tribunal’s assessment and concluded (after reviewing the materials of the case) that the tribunal had rightfully determined it had no jurisdiction.

The award deals with a dispute not contemplated by or within the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission (Article 34(2)(a)(iii))

This ground is also premised on the principle that consent is fundamental to an arbitration. If a tribunal rules on an issue that is beyond the scope of the parties’ submission to the tribunal, then such ruling may be set aside.

A Canadian court partially vacated an ICSID Additional Facility award under the North American Free Trade Agreement (NAFTA) since the tribunal in question had read into the NAFTA treaty an obligation to maintain transparency.[88] The court held that the tribunal had exceeded its mandate and vacated that portion of the award and reduced the computation of damages payable by the host state. The ground that the tribunal had exceeded its mandate was agitated under Canadian law, which has adopted the Model Law. In another challenge to a NAFTA award on the basis that the tribunal had awarded damages for loss suffered outside the territory of Mexico, a Canadian court ruled that courts are to be circumspect in their approach to determining whether an error alleged under Article 34 (2)(a)(iii) properly falls within that provision and is a true question of jurisdiction. They are obliged to take a narrow view of the extent of any such question.[89]

Singapore is a Model Law jurisdiction that has reviewed investment treaty awards in the past. The Singapore Court of Appeal upheld the judgement of the High Court that set aside an award passed by a tribunal seated in Singapore in an arbitration initiated under the Treaty of the Southern African Development Community. The Court of Appeal dismissed the appellant’s contention that the High Court had incorrectly set aside the award on the ground that the tribunal did not have jurisdiction because the investor had not exhausted local remedies before approaching the Court.[90] Interestingly, the Court reviewed the award against, inter alia, Article 34(2)(a)(iii) of the Model Law and held that the exhaustion of local remedies is an issue that relates to the jurisdiction of the tribunal, and the burden of proof was on the party that made the positive claim that it had satisfied the requirement of exhaustion of local remedies.[91]

The composition of the tribunal was not in accordance with the parties’ agreement (Article 34(2)(a)(iv))

As arbitration is ultimately a creature of contract, parties to an arbitration expect the tribunal to be composed in accordance with their agreement. The parties’ agreement, of course, is naturally subject to the mandatory rules of the seat (which is clear from the wording of Section 34(2)(a)(iv) itself).

An English court has ruled that this ground (which falls within the scope of Section 67 of the English Arbitration Act 1996) can be applied when there has been a substantial failure to apply the procedure agreed by the parties for composing a tribunal.[92]

In France, a prominent non-Model Law jurisdiction, the Paris Court of Appeal has annulled a partial award constituting a tribunal in an arbitration between a UAE investor and Libya under the Agreement for Promotion, Protection and Guarantee of Investments among Member States of the Organization of Islamic Cooperation (the OIC Investment Agreement).[93] The tribunal was constituted with the intervention of the PCA Secretary General, whose intervention was sought to be justified by a most-favoured-nation clause present in the OIC Investment Agreement. The Court held that the Secretary General had no legal basis to intervene and therefore the composition of the tribunal was not in accordance with the parties’ agreement.[94]

The subject matter is incapable of being settled by arbitration

The ‘arbitrability’ ground tests an award as to whether the issues it dealt with are capable of being settled by arbitration in accordance with the law of the seat. Countries differ widely as to what is considered arbitrable, and this issue is intertwined with that of public policy because a country’s policies often inform whether certain disputes can be referred to a private forum of dispute resolution.[95] For instance, some jurisdictions have declared antitrust, securities and intellectual property disputes to be non-arbitrable.[96]

This ground is rarely relied on to challenge investment treaty awards as such arbitrations are typically seated in jurisdictions such as the Netherlands and Canada, which have broad rules on arbitrability.[97] This may, however, change if countries take a strict position on the arbitrability of government disputes.[98]

The award conflicts with the public policy of the seat

The concept of ‘public policy’ is difficult to define as each country’s legal system has its own interpretation of ‘public policy’ and how an award can be set aside on this basis. Courts of Model Law countries have considered an award to be against public policy if it permits acts that are against public good or injurious to the public;[99] if it is against the most basic notions of justice;[100] or if it is contrary to the fundamental principles of the country’s laws.[101] In most jurisdictions, mere violations of local law or procedural defects are not sufficient to warrant setting aside an award on the basis that it violates public policy.[102] A Singapore court has ruled that the public policy ground should be limited to a tribunal’s findings of law and must not concern the underlying facts of the dispute (even if dealing with an illegality) unless there is proof of fraud or a violation of natural justice.[103]

A Swedish court refused to set aside the award in Stati v. Kazakhstan.[104] Kazakhstan argued that the award must be set aside as the tribunal was presented with fabricated evidence.[105] The court ruled that the evidence that was claimed to be false was not the primary basis of the tribunal’s final ruling in its award, and therefore the award must not be set aside.[106] Elaborating on the ground of public policy, the court also ruled that there is ‘[n]o question of declaring an arbitral award invalid solely on the ground that false evidence or untrue testimony has occurred when it is not clear that such have been directly decisive for the outcome’.[107] The court also ruled that there should be ‘[n]o question of allowing such an indirect impact on the arbitral tribunal to result in the arbitral award being deemed invalid, except when it appears to be obvious that such indirect influence has been of decisive significance for the outcome in the case’.[108]

French courts also rely on the principle of ‘international public policy’ to scrutinise arbitral awards. In Venezuela v. Gold Reserve, the Paris Court of Appeal set aside an award on the basis that it violated international public policy as construed by the French courts.[109] The arbitration concerned an investor’s investment in a Kyrgyz bank that was under investigation. The tribunal dismissed the contention that the bank indulged in illegal activities and awarded compensation. In challenge proceedings, the Paris Court of Appeal set aside the award because it found that the compensation awarded to the investor concerned illegal activities, which, as per the Paris Court of Appeal, violated international public policy.

Some practical considerations

Article 36 of the Model Law specifies that parties have three months from the date of delivery of the award to file a motion to challenge it.

Many non-Model Law states, including the US,[110] have adopted the same timelines. Additionally, in the US, an application to set aside an award is decided as a motion. Typically, US courts decide such motions based on documents submitted by the parties and retain the discretion to direct further fact-finding inquiries if necessary.[111]

In the UK, Section 70(2) and 70(3) of the English Arbitration Act 1996 first require a party to exhaust any internal review mechanism for the award, and thereafter, prescribe a 28-day limit to file a challenge to an award before the courts. Section 70(6) and 70(7) also empower a court to direct a party challenging the award to furnish security for the award amount, as well as for the costs of challenge proceedings.

In France, Articles 1494 and 1519 of the French Code of Civil Procedure provide that a challenge to an international arbitration (which refers to arbitrations with an international character) must be filed within a month of the date the award was notified (which can be extended to up to two months if a party is abroad). If the stipulated deadlines are not complied with, the motion to challenge the award will not be admissible. Further, as per Article 902, once a respondent has been served with an application to set aside an award, it must appoint counsel within 15 days, failing which the request to set aside the award will be decided on the contents of the application alone.

In Singapore, applications for setting aside an award are taken up by a judge who has arbitration experience.[112] The relevant court will typically hear the application within 12 to 18 weeks of the date of filing.[113] A court hearing a setting aside application has no power to review the merits of the case, or to review any decision of law or fact made by the tribunal. In fact, the court does not even have the power to extend the three-month deadline under Article 36 to file an application to set aside the award.[114]

Conclusion

Annulment or vacatur of an investment treaty award is an exceptional remedy that is available to applicants on limited grounds, whether under the ICSID Convention or national laws. While there are disagreements between commentators regarding whether an application for annulment in relation to a particular investment treaty award has been correctly decided or not, there is consensus that investment treaty awards should only be annulled or vacated in exceptional cases where there is procedural injustice.[115]

It is vital for the integrity and finality of investment treaty awards that ad hoc annulment committees and municipal courts continue to ensure that the remedy of annulment is not exercised by parties as a quasi-appeal on the merits of the tribunal’s decision. However, despite the differences in the grounds available for annulment of an investment treaty award under the ICSID Convention and national laws, there is consensus and uniformity in how ad hoc committees and national courts have ensured that the remedy of annulment is not abused by unsuccessful parties.


Notes

[1] Vijayendra Pratap Singh and Roopali Singh are partners at AZB & Partners. The authors gratefully acknowledge the contribution of Paresh B Lal, Durga Priya Manda and Ravilochan Daliparthi to this chapter.

[2] Report of the International Law Commission to the General Assembly [1953] 2 Yearbook of the International Law Commission 211, U.N.Doc. A/CN.4/SER.A/1953/Add.1.

[3] id., p. 205.

[4] Convention on the Settlement of Investment Disputes between States and Nationals of Other States (International Centre for Settlement of Investment Disputes, 575 UNTS 159 (the ICSID Convention)).

[5] C L Lim et al., International Investment Law and Arbitration, Commentary, Awards and Other Materials, First edition, Cambridge University Press (2018), p. 448 (Lim).

[6] Article III, New York Convention. It should be noted that the New York Convention deals with recognition and enforcement of arbitral awards and does not deal with setting aside of arbitral awards.

[7] Article V(1)(e), New York Convention, which notes that a signatory state may refuse to recognise or enforce an award that has ‘been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made’; also see Lim, footnote 5.

[8] Lim, footnote 5, p. 450.

[9] S.A.R.L. Benvenuti & Bonfant v. Gouvernement de Republique du Congo, 20 ILM 877 (1981); this was the first decision of a national court granting recognition and enforcing an ICSID arbitral award. The Paris Court of Appeal noted that the provisions of the ICSID Convention ‘offer a simplified procedure for recognition and enforcement and restrict the function of the court designated by each Contracting State to ascertain the authenticity of the award certified by the Secretary General of the International Centre for Settlement of International Disputes’.

[10] Hi Taek Shin, ‘Annulment’, in Meg Kinnear et al. (eds), Building International Investment Law: The First 50 years of ICSID, Wolters Kluwer (2015), p. 699.

[11] Article 52, ICSID Convention.

[12] Rule 52(1), ICSID Rules of Procedure for Arbitration read with Article 52(3), ICSID Convention.

[13] Discussed in detail in the following section.

[14] Adem Dogan v. Turkmenistan, ICSID Case No. ARB/09/9, Decision on Annulment, 15 January 2016, ¶ 28.

[15] Total S.A. v. Argentine Republic, ICSID Case No. ARB/04/1, Decision on Annulment, 1 February 2016, ¶ 163; TECO Guatemala Holdings, LLC v. Republic of Guatemala, ICSID Case No. ARB/10/23, Decision on Annulment, 5 April 2016, ¶ 73.

[16] Patrick Mitchell v. Democratic Republic of Congo, ICSID Case No. ARB/99/7, Decision on the Application for Annulment of the Award, 1 November 2006, ¶ 19.

[17] Maritime International Nominees Establishment v. Republic of Guinea, ICSID Case No. ARB/84/4, Decision on Partial Annulment, 22 December 1989, ¶ 4.04 (Maritime International).

[18] Tulip Real Estate and Development Netherlands B.V. v. Republic of Turkey, ICSID Case No. ARB/11/28, Decision on Annulment, 30 December 2015, ¶ 43.

[19] ICSID Case No. ARB/02/14, Decision on Annulment, 29 June 2005, ¶ 34.

[20] R Dolzer and C Schreuer, Principles of International Investment Law, Second edition, Oxford University Press (2012), p. 301 (Dolzer and Schreuer); see also Holiday Inns v. Morocco, ICSID Case No. ARB 72/1, where, as per ICSID Twelfth Annual Report 1977/78, p. 5, the registration of the request to annul the procedural order was declined on the ground that the same did not constitute an award.

[21] Southern Pacific Properties v. Arab Egypt, ICSID Case No. ARB/84/3, Decision on Jurisdiction II, 14 April 1988.

[22] Updated Background Paper on Annulment for the Administrative Council of ICSID, 5 May 2016 (Updated Background Paper), p. 10.

[23] Christoph H Schreuer, et al., The ICSID Convention: A Commentary, Second edition, Cambridge University Press (2009), p. 925 (Schreuer on ICSID Convention).

[24] Dolzer and Schreuer, footnote 20, p. 303.

[25] Standard Chartered Bank (Hong Kong) Limited v. Tanzania Electric Supply Company Limited, ICSID Case No. ARB/10/20, Decision on Annulment, 22 August 2018, ¶ 461; Tidewater Investment SRL and Tidewater Caribe, C.A. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/5, Decision on Annulment, 27 December 2016, ¶ 160.

[26] Klockner Industrie-Anlagen GmbH et al v. United Republic of Cameroon and Société Camerounaise des Engrais, ICSID Case No. ARB/81/2, Decision on Annulment, 3 May 1985, ¶ 3.

[27] Consortium R.F.C.C. v. Kingdom of Morocco, ICSID Case No. ARB/00/6, Decision of the ad hoc committee on Annulment, 18 January 2006, ¶ 220.

[28] Updated Background Paper, footnote 22, p. 49.

[29] Maritime International, footnote 17, ¶ 4.10.

[30] British Institute of International and Comparative Law & Baker Botts LLP, ‘Empirical Study: Annulment in ICSID Arbitration’, February 2021 (2021 Study) at pp. 22–23.

[31] Schreuer on ICSID Convention, footnote 23, p. 935.

[32] Updated Background Paper, footnote 22, p. 54; see also Carnegie Minerals v. Republic of Gamibia, ICSID Case No. ARB./09/19, Decision on Annulment, 7 July 2020, ¶ 171, where the appointment of the arbitrator by the ICSID, in the absence of a party nominee, was challenged; or see Azurix Corp. v. The Argentine Republic, ICSID Case No. ARB/01/12, Decision on Application of Annulment by the Argentine Republic, 1 September 2009, ¶¶ 274–279, where it was alleged by the applicant that the body that took the decision on a challenge by the applicant to the neutrality of the arbitrators was not properly constituted.

[33] Eiser Infrastructure Limited and Energia Solar Luxemborg S.A.R.L. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Decision on the Kingdom of Spain’s Application for Annulment, 11 June 2020, ¶¶ 157, 158 and 168 (Eiser).

[34] EDF International S.A. and Ors. v. Argentine Republic, ICSID Case No. ARB/03/23, Decision on Annulment, 5 February 2016 (EDF).

[35] ibid.

[36] ibid.

[37] Eiser, footnote 33.

[38] id., ¶ 190.

[39] Helnan International Hotels A/S v. Arab Republic of Egypt, ICSID Case No. ARB/05/19, Decision of ad hoc committee, 14 June 2010, ¶ 41.

[40] Schreuer on ICSID Convention, footnote 23, p. 938.

[41] ibid.

[42] 2021 Study, footnote 30, p. 31.

[43] EDF, footnote 34, ¶ 192.

[44] El Paso Energy International Company v. The Argentine Republic, ICSID Case No. ARB/03/15, Decision on Annulment, 22 September 2014, ¶ 142.

[45] Hussein Nuaman Soufraki v. United Arab Emirates, ICSID Case No. ARB/02/7, Decision of Annulment, 5 June 2007.

[46] id., ¶ 40.

[47] Asian International Arbitration Centre, ‘Annulment of Investment Arbitration Awards’, in Barton Legum (ed), The Investment Treaty Arbitration Review, Fifth edition, Global Arbitration Review (2020), p. 344.

[48] Schreuer on ICSID Convention, footnote 23, p. 978.

[49] ibid.

[50] Rule 6, ICSID Arbitration Rules.

[51] Schreuer on ICSID Convention, footnote 23, pp. 978, 979; 2021 Study, footnote 30, p. 32.

[52] 2021 Study, footnote 30, p. 32.

[53] Updated Background Paper, footnote 22, p. 54.

[54] Dolzer and Schreuer, footnote 20, p. 306.

[55] Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision on Annulment, 5 February 2002, ¶ 57 (Wena Hotels).

[56] 2021 Study, footnote 30, at 34.

[57] For specific decisions, see 2021 Study, footnote 30, p. 33; also see Updated Background Paper, footnote 22, p. 60.

[58] Maritime International, footnote 17, ¶ 5.05.

[59] CDC Group, footnote 19, ¶ 49; accepted with approval in Victor Pey Casado v. Republic of Chile, ICSID Case No. ARB/98/2, Decision on Annulment, 8 December 2012, ¶ 203.

[60] Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18, Decision on Annulment, 8 July 2013, ¶¶ 211–215.

[61] Wena Hotels, footnote 55, ¶ 79.

[62] Impregilo S.p.A. v. Argentine Republic, ICSID Case No. ARB/07/17, Decision on Annulment, 24 January 2014, ¶ 181.

[63] ibid.

[64] Tidewater Inc. and Ors. v. The Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/5, Decision on Annulment, 27 December 2016, ¶ 172.

[65] Rule 50(3)(b), ICSID Arbitration Rules.

[66] Rule 50(1)(a) and (c)(iii), ICSID Arbitration Rules.

[67] Rule 52(1), ICSID Arbitration Rules.

[68] Articles 12 to 16, ICSID Convention.

[69] Article 14(1), ICSID Convention.

[70] Article 52(3), ICSID Convention.

[71] Updated Background Paper, footnote 22, ¶ 39.

[72] id., ¶ 41.

[73] Enron Creditors Recovery Corporation v. Argentine Republic, ICSID Case No. ARB/01/3, Decision on the Application for Annulment, 30 July 2010, ¶ 63.

[74] ibid.

[75] CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/01/8, Decision on Annulment, 25 September 2007, ¶ 136.

[76] ICSID Case No. ARB/01/7, Decision on Annulment, 21 March 2007, ¶ 54.

[77] Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. (formerly Compañía de Aguas del Aconquija, S.A. and Compagnie Génér), ICSID Case No. ARB/97/3, 10 August 2010.

[78] ibid.

[79] This would include an award rendered under an investment treaty where at least one of the signatories is not a member of the ICSID Convention. ‘The Award and Enforcement Issues’, in Josefa Sicard-Mirabal and Yves Derains, Introduction to Investor-State Arbitration, Wolters Kluwer (2018), p. 237.

[80] Norbert Horn, ‘Current Use of the UNCITRAL Arbitration Rules in the Context of Investment Arbitration’, in William W Park (ed), Arbitration International, Oxford University Press (2008), Volume 24, Issue 4, pp. 587–590.

[81] ‘Annulment, Set Aside, and Refusal to Enforce’, in Borzu Sabahi, Noah Rubins and Don Wallace, Jr, Investor-State Arbitration, Second edition, Oxford University Press (2019), p. 796 (Sabahi, Rubins and Wallace).

[82] ‘Article 34: Application for Setting Aside’, in Peter Binder, International Commercial Arbitration and Mediation in UNCITRAL Model Law Jurisdictions, Fourth edition (2019), pp. 449–450.

[83] ibid.

[84] BG Group v. Argentina, UNCITRAL/BIT Arbitration, Final Award of 24 December 2007.

[85] BG Grp. PLC v. Republic of Argentina, 134 S.Ct. 1198 (2014), pp. 1207–1208. The US Supreme Court’s decision was recently applied by the English High Court in Republic of Sierra Leone v. SL Mining Ltd [2021] EWHC 286, ¶¶ 15 and 16.

[86] Rakna Arakshaka Lanka Ltd v. Avant Garde Maritime Services (Private) Ltd [2018] SGHC 78, ¶¶ 75–76.

[87] Bayview Irrigation District No 11 and others v. Mexico, Case No. 07-CV-340139-PD2 (Judicial Review Decision of the Ontario Court of 25 March 2008), ¶¶ 60–62.

[88] Mexico v. Metalclad Corporation, 2001 BCSC 664, ¶ 70.

[89] Mexico v. Cargill, 2011 ONCA 622 (Decision of Ontario Court of Appeal of 4 October 2011), ¶ 47.

[90] Swissbourgh Diamond Mines (Pty) Ltd and others v. Kingdom of Lesotho [2018] SGCA 81.

[91] ibid.

[92] Sumukan Ltd v. Commonwealth Secretariat [2007] EWCA Civ 1148, ¶ 23.

[93] Michael Ostrove et al., ‘Paris Court of Appeal finds PCA lacked power to intervene in OIC investor-state arbitration’ (DLA Piper, 2021) available at http://www.dlapiper.com/en/latinamerica/insights/publications/2021/04/paris-court-finds-pca-lacked-power-to-intervene-oic-investor-state-arbitration/ (last accessed on 1 August 2021).

[94] ibid.

[95] Sabahi, Rubins and Wallace, footnote 81, pp. 819, 820.

[96] ibid.

[97] ibid.

[98] ibid.

[99] Egerton v. Brownlow [1843 to 1860] All ER Rep 970, p. 995.

[100] Parsons and Whittemore Overseas v. Société Générale, 508 F.2d. 969, p. 74 (US); ‘Legal Framework for Arbitration in Singapore’, in John Choong, Mark Mangan and Nicholas Lingard, A Guide to the SIAC Arbitration Rules, Second edition, Oxford University Press (2018), pp. 48 and 49 at ¶¶ 2.109–2.111.

[101] ‘Awards: Challenges’, Michael Ostrove, James Carter and Ben Sanderson, in J William Rowley QC (ed), The Guide to Challenging and Enforcing Arbitration Awards, Global Arbitration Review (2019), p. 22.

[102] Sabahi, Rubins and Wallace, footnote 81, p. 820.

[103] AJT v. AJU, Court of Appeal, [2011] SGCA 41, ¶¶ 65 and 69.

[104] Award dated 19 December 2013 in Anatolie Stati, Gabriel Stati, Ascom Group SA and Terra Raf Trans Traiding Ltd v. Kazakhstan, SCC Case No. V 116/2010.

[105] Kazakhstan v. Ascom Group, Anatoli Stati et al., Case No. T 2675-14, Svea Court of Appeal, 9 December 2016, English version available at http://www.italaw.com/sites/default/files/case-documents/italaw8791.PDF (last accessed on 2 August 2021).

[106] id., pp. 44–46.

[107] ibid.

[108] ibid.

[109] ‘The Award and Enforcement Issues’, in Josefa Sicard-Mirabal and Yves Derains, Introduction to Investor-State Arbitration, Wolters Kluwer (2018), pp. 237–264 at 250.

[110] Federal Arbitration Act, Title 9, USC § 12.

[111] ‘United States’, Eliot Friedman, David Livshiz and Shannon M Leitner, in J William Rowley QC (ed), The Guide to Challenging and Enforcing Arbitration Awards, Global Arbitration Review (2019), p. 734.

[112] Kohe Hasan and Shourav Lahiri, ‘Singapore’, in J William Rowley QC (ed), The Guide to Challenging and Enforcing Arbitration Awards, Global Arbitration Review (2019), pp. 609–610.

[113] ibid.

[114] ibid.

[115] Updated Background Paper, footnote 22, ¶¶ 109 and 110.

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