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Other Alternative Dispute Resolution Methods 
International Centre for the
Model Clauses
A. Consent in Respect of Future Disputes: Clause 1 II. SPECIAL CLAUSES RELATING TO THE SUBJECT-MATTER OF THE
DISPUTE A. Stipulation that Transaction Constitutes an Investment: Clause 3
III. SPECIAL CLAUSES RELATING TO THE PARTIES
A. Constituent Subdivision or Governmental Agency: Clause 5 IV. METHOD OF CONSTITUTING THE TRIBUNAL Clause 9 A. Specification of System of Law: Clause 10 VI. CLAUSES RELATING TO OTHER REMEDIES
A. Agreement that Other Remedies are Not Excluded: Clause 12 VII. WAIVER OF IMMUNITY FROM EXECUTION OF THE AWARD Clause 15 A. Use of Current Version of Rules of Procedure: Clause 16 Clause 18 Clause 19 XI.
CLAUSES REFERRING TO THE ADDITIONAL FACILITY RULES A. Additional Facility Conciliation/Arbitration: Clause 20 XII. DESIGNATION OF THE SECRETARY-GENERAL
OF ICSID AS APPOINTING AUTHORITY OF AD HOC ARBITRATORS Clause 22 The International Centre for Settlement of
Investment Disputes (ICSID or the Centre) is a public international
organization established by a multilateral treaty, the 1965 Convention on
the Settlement of Investment Disputes between States and Nationals of
Other States (the Convention). As of November 15, 1995, 123 countries
had signed and ratified the Convention to become Contracting
States. The purpose of ICSID, as set forth in Article
1(2) of the Convention, is to provide facilities for the conciliation and
arbitration of investment disputes between Contracting States and
nationals of other Contracting States. The jurisdiction of the Centre, or
in other terms the scope of the Convention, is elaborated upon in Article
25(1) of the Convention. It defines ICSID�s jurisdiction as extending to
"any legal dispute arising directly out of an investment, between a
Contracting State (or any constituent subdivision or agency of a
Contracting State designated to the Centre by that State) and a national
of another Contracting State, which the parties to the dispute consent in
writing to submit to the Centre." The consent of the parties has been described
as the "cornerstone" of the jurisdiction of the Centre as thus defined.
The present brochure suggests clauses to record such consent. Also
proposed in this brochure are clauses for use in conjunction with the
Rules Governing the Additional Facility for the Administration of
Proceedings by the Secretariat of ICSID (the Additional Facility Rules)
which are available for certain types of proceedings between States and
foreign nationals falling outside the scope of the Convention. A
concluding section of the brochure contains an example of an ad hoc
arbitration clause designating the Secretary-General of the Centre as
appointing authority of arbitrators. The only formal requirement that the Convention
establishes with respect to the consent of the parties is that such
consent be in writing. In many cases, as in the ones envisaged in this
brochure, the consent of both parties will be set forth in a single
instrument. However, the parties� consents may also be recorded in
separate instruments. Nor is any special form of words required. The
following clauses thus are intended merely as models. Actual clauses will
vary in substance and terminology according to the circumstances of each
case. In general, the Contracting State party is in
the proposed clauses called the "Host State" and the national of another
Contracting State "the Investor." Square brackets: [ ] are used to
indicate optional material or, if separated by a virgule: [ ]/[ ], to
indicate alternative formulations. Underscored material indicates a blank
to be filled in accordance with the underscored directions. For
simplicity, the clauses generally refer only to arbitration; however, in
several of them (in particular, Clauses 9, 16, 17 and 19) the words:
"arbitration," "arbitrators," "Arbitral Tribunal" or "Arbitration Rules"
can be replaced by corresponding references to "conciliation,"
"conciliators," "Conciliation Commission" or "Conciliation Rules," or by a
reference to both conciliation and arbitration. Consent in Respect of Future Disputes Under the Convention, consent may be given in
advance, with respect to a defined class of future disputes. Clauses
relating to future disputes are a common feature of investment agreements
between Contracting States and investors who are nationals of other
Contracting States. Clause 1 The [Government]/[name of constituent
subdivision or agency] of name of Contracting State
(hereinafter the "Host State") and name of investor (hereinafter
the "Investor") hereby consent to submit to the International Centre for
Settlement of Investment Disputes (hereinafter the "Centre") any dispute
arising out of or relating to this agreement for settlement by
[conciliation]/[arbitration]/[conciliation followed, if the dispute
remains unresolved within time limit of the communication of the
report of the Conciliation Commission to the parties, by arbitration]
pursuant to the Convention on the Settlement of Investment Disputes
between States and Nationals of Other States (hereinafter the
"Convention"). Consent in Respect of Existing Disputes Consent may also be given in respect of a
particular, existing dispute. Clause 2 The [Government]/[name of constituent
subdivision or agency] of name of Contracting State
(hereinafter the "Host State") and name of investor
(hereinafter the "Investor") hereby consent to submit to the
International Centre for Settlement of Investment Disputes (hereinafter
the "Centre") for settlement by
[conciliation]/[arbitration]/[conciliation followed, if the dispute
remains unresolved within time limit of the communication of the
report of the Conciliation Commission to the parties, by arbitration]
pursuant to the Convention on the Settlement of Investment Disputes
between States and Nationals of Other States, the following dispute
arising out of the investment described below: . . . . SPECIAL CLAUSES RELATING TO
THE SUBJECT-MATTER OF THE DISPUTE Stipulation that Transaction Constitutes an
Investment While the Convention requires that the dispute
arise "directly out of an investment," it deliberately does not define the
latter term. The Report of the World Bank Executive Directors on the
Convention explains that such definition was not attempted "given the
essential requirement of consent by the parties." Parties thus have much,
though not unlimited, discretion to determine whether their transaction
constitutes an investment. The fact that the parties consent to submit a
dispute to the Centre of course implies that they consider it to arise out
of an investment. If the parties wish to strengthen the presumption, they
may include an explicit statement to this effect in the consent
agreement. Clause 3 It is hereby stipulated that the
transaction to which this agreement relates is an investment. Limitation of Subject-Matter of Disputes Submitted to
the Centre The Convention does not require that the
parties to an investment arrangement must agree to submit to the Centre
all the disputes that might arise out of the transaction. They may decide
to submit only particular types of questions, or to submit all with
certain exceptions, as illustrated by the following clause. Clause 4 The consent to the jurisdiction of the
Centre recorded in citation of basic clause above shall
[only]/[not] extend to disputes related to the following
matters:.... SPECIAL CLAUSES RELATING TO
THE PARTIES Constituent Subdivision or Governmental
Agency When the party representing the Contracting
State is not the govern, itself but only a "constituent subdivision" or a
governmental "agency," two special requirements must be fulfilled pursuant
to Article 25(1) and (3) of the Convention: (a) the subdivision or agency must be
designated by the Contracting State to the Centre; and (b) the consent given by the subdivision or
agency must be either: (i) approved by the State; or (ii) one as to which the State has notified
the Centre that no approval is
required. While the clause suggested below does not
directly fulfill these requirements, it constitutes a convenient reminder
of the steps that should be undertaken-preferably before the effective
date of the consent clause. Clause 5 The name of constituent subdivision or
agency is [a constituent subdivision]/[an agency] of the Host State,
which has been designated to the Centre by the Government of that State
in accordance with Article 25(1) of the Convention. In accordance with
Article 25(3) of the Convention, the Host State [hereby gives its
approve to this consent agreement] /[has given its approval to this
consent agreement in citation of instrument in which approval is
expressed]/[has notified the Centre that no approval of [this type
of consent agreement]/[of consent agreements by the name of
constituent subdivision or agency] is required]]. Stipulation of Nationality of
Investor If the investor is a natural person, the
Convention requires that the investor be a national of a Contracting State
other than the host State both on the date of consent and on the date of
the registration of the request for conciliation or arbitration, and the
investor may not on either of these two dates also have the nationality of
the host State. If the investor is a juridical person then, except as
noted in Section III(C) below, it must merely have the nationality of a
Contracting State other than the host State on the date of consent. While
the Convention does not require that nationality be specified in the
consent agreement and a stipulation of nationality cannot correct an
actual disability (again except as stated in Section III(C)), it may be
useful to specify, by means of a clause such as the one below, the
nationality of the investor. Clause 6 It is hereby stipulated by the parties
that the Investor is a national of name of another Contracting
State. Agreement that a Juridical
Person is Under Foreign Control If the investor is a juridical person that on
the date of consent has the nationality of the host State, then Article
25(2)(b) of the Convention still permits the Centre to assume jurisdiction
if the parties have agreed that "because of foreign control" the juridical
person "should be treated as a national of another Contracting State for
the purposes of [the] Convention." When this is the case, the parties may
record their agreement as to the nationality of the investor in a clause
such as the one set forth below. Clause 7 It is hereby agreed that, although the
Investor is a national of the Host State, it is controlled by nationals
of name(s) of other Contracting State(s) and shall be treated as
a national of [that]/[those] State[s] for the purposes of the
Convention. Preservation of Rights of Investor after
Compensation A number of States have developed schemes for
insuring their nationals, generally through governmental agencies, against
losses that may be in relation to foreign investments. There arc also at
present two intergovernmental agencies�the Multilateral Investment
Guarantee Agency and the Inter-Arab Investment Guarantee Corporation�that
administer similar investment insurance schemes. If such a governmental or
intergovernmental agency indemnifies an investor, the agency will normally
become subrogated to the investor�s rights. The agency may nevertheless be
unable to avail itself of such agreement providing for the resolution of
disputes under the Convention as may originally have been concluded
between the investor and the host State. This is so because ICSID�s
facilities are not available for proceedings between governmental entities
or between governments and intergovernmental organizations. It may
therefore be necessary that in any dispute the proceeding be conducted by
the investor. The following clause may be used to cover this
situation. Clause 8 It is hereby agreed that the right of
the Investor to refer a dispute to the Centre pursuant to this agreement
shall not be affected by the fact that the Investor has received full or
partial compensation from any third party with respect to any loss or
injury that is the subject of the dispute [; provided that the Host
State may require evidence that such third party agrees to the exercise
of that right by the Investor]. METHOD OF CONSTITUTING THE
TRIBUNAL Article 37(2)(a) of the Convention provides
that an Arbitral Tribunal "shall consist of a sole arbitrator or any
uneven number of arbitrators"; under Article 39 of the Convention, the
majority of the arbitrators must be nationals of States other than the
host and the home State of the investor, unless each individual arbitrator
is appointed by agreement of the parties; and according to Article 40(2)
of the Convention arbitrators appointed from Outside the Panel of
Arbitrators of the Centre must possess the qualities required for those
serving on that Panel. Except for the above requirements, the parties
are free to constitute their Tribunal in any way they wish. If they have
not reached an agreement thereon by the time the request for arbitration
has been registered, Arbitration Rule 2 provides a procedure for agreeing
on how to constitute a Tribunal; however, if the parties are unable to
reach an agreement, then either may, at the expiration of the 60-day
period provided for in Arbitration Rule 2(3), invoke the automatic formula
provided for in Article 37(2)(b) of the Convention. If the parties can
agree in advance on the method of constituting their Tribunal, it would
seem best to record this in the consent agreement by means of a clause
such as the following. Clause 9 Any Arbitral Tribunal constituted
pursuant to this agreement shall consist of [a sole
arbitrator]/[uneven total number arbitrators, number
appointed by each party, and an arbitrator, who shall be President of
the Tribunal, appointed by [agreement of the parties]/[title of
neutral official]/[agreement of the parties or, failing such
agreement, by title of neutral official]]. Specification of System of Law Article 42(1) of the Convention provides that a
Tribunal shall decide a dispute in accordance with such rules of law as
may be agreed by the parties. The parties are free to agree on rules of
law defined as they choose. They may refer to a national law,
international law, a combination of national and international law, or a
law frozen in time or subject to certain modifications. Clause 10 Any Arbitral Tribunal constituted
pursuant to this agreement shall apply specification of system of
law [as in force on the date on which this agreement is
signed]/[subject to the following
modifications:...]. Ex Aequo et Bono Power Article 42(3) of the Convention provides that a
Tribunal may decide a dispute ex aequo et bono if the parties so
agree. If the parties wish to give the Tribunal the authority so to
decide, they may use a clause such as follows. Clause 11 Any Arbitral Tribunal constituted
pursuant to this agreement shall have the power to decide a dispute ex
aequo et bono. CLAUSES RELATING TO OTHER
REMEDIES Agreement that Other Remedies are Not Excluded The first sentence of Article 26 of the
Convention provides that the consent of the parties to arbitration "shall,
unless otherwise stated, be deemed consent to such arbitration to the
exclusion of any other remedy." Since this provision permits the parties
to "state otherwise," they may do so by means of a clause along the
following lines. Clause 12 The consent to the jurisdiction of the
Centre recorded in citation of basic clause above shall not
preclude either party hereto from resorting to the following alternative
remedy: identification of other type of proceeding. While such
other proceeding is pending, no arbitration proceeding pursuant to the
Convention shall be instituted. Requirement to Exhaust Local Remedies The second sentence of Article 26 of the
Convention permits a Contracting State to "require the exhaustion of local
administrative or judicial remedies as a condition of its consent to
arbitration under this Convention." If a State so requires, a clause along
the following lines might be included in the consent
agreement. Clause 13 Before either party hereto institutes an
arbitration proceeding under the Convention with respect to a particular
dispute, that party must have taken all steps necessary to exhaust the
[following] [administrative] [and] [judicial] remedies available under
the laws of the Host State with respect to that dispute [list of
required remedies], unless the other party hereto waives that
requirement in writing. Provisional Measures Article 47 of the Convention provides that,
except as the parties otherwise agree, a Tribunal may, if it considers the
circumstances so require, recommend any provisional measures which should
be taken to preserve the respective rights of either party. Under
Arbitration Rule 39(5) the parties may, if they have so provided in their
consent agreement, also request a court or other authority to order
provisional measures. If the parties wish thus to provide for the
possibility of seeking court-ordered provisional measures, they may use a
clause such as the following for the purpose. Clause 14 Without prejudice to the power of the
Arbitral Tribunal to recommend provisional measures, either party hereto
may request any judicial or other authority to order any provisional or
conservatory measure, including attachment, prior to the institution of
the arbitration proceeding, or during the proceeding, for the
preservation of its rights and interests. WAIVER OF IMMUNITY FROM EXECUTION
OF THE AWARD Under Article 54 of the Convention, all
Contracting States, whether or not parties to the dispute, must recognize
awards rendered pursuant to the Convention as binding and enforce the
pecuniary obligations imposed thereby. Article 55 of the Convention
nevertheless makes it clear that a State does not by becoming a party to
the Convention waive such immunity from execution of an award as the State
might enjoy under national laws. Such a waiver may, however, be effected
by an express stipulation of which the following is an
example. Clause 15 The Host State hereby waives any right of
sovereign immunity as to it and its property in respect of the
enforcement and execution of any award rendered by an Arbitral Tribunal
constituted pursuant to this agreement. Use of Current Version of Rules of Procedure Article 44 of the Convention provides that
arbitration proceedings shall in general and "except as the parties
otherwise agree" be conducted in accordance with the Arbitration Rules of
the Centre in effect on the date on which the parties consented to
arbitration under the Convention. The parties may however wish to provide
that the Arbitration Rules should always apply in their most up-to-date
form. This can be accomplished by a clause along the lines of the
following. Clause 16 Any arbitration proceeding pursuant to
this agreement shall be conducted in accordance with the Arbitration
Rules of the Centre in effect on the date on which the proceeding is
instituted. Substitution of Particular Procedural Rules Instead of using the Arbitration Rules of the
Centre, the parties may prefer to substitute their own dispositions for
some of the ICSID ones. Clause 17 Any arbitration proceeding pursuant to
this agreement shall be conducted in accordance with the Arbitration
Rules of the Centre except that the following provisions shall be
substituted for the Rules indicated below:... Article 61(2) of the Convention provides that,
except as the parties otherwise agree, the Arbitral Tribunal shall assess
the expenses incurred by the parties in connection with an arbitration
proceeding and shall decide how and by whom those expenses, as well as the
fees and expenses of the members of the Tribunal and the charges of the
Centre, shall be paid. If the parties wish to make an advance agreement on
this point, they may do so by means of a clause along the following
lines. Clause 18 In any arbitration proceeding conducted
pursuant to this agreement, the fees and expenses of the members of the
Arbitral Tribunal as well as the charges for the use of the facilities
of the Centre shall be [borne equally by the parties hereto]/[divided
between the parties hereto as follows:...]. Under Articles 62 and 63 of the Convention,
proceedings may be held at: (a) the seat of the Centre (in Washington,
D.C.); (b) the seat of any institution with which
the Centre has made the necessary arrangements (Article 63(a) of the
Convention singles out the Permanent Court of Arbitration at The Hague
as an example of such an institution ); or (c) any other place agreed by the parties (in
which case Article 63(b) of the Convention requires that the venue also
be approved by the Tribunal after consultation with the
Secretary-General). If the parties wish to address this matter in
advance, they may do so by means of a clause such as the one below,
bearing in mind the fact that the designation of a place of proceedings
will if it falls under Article 63(b) of the Convention be subject to the
approval of the Tribunal after consultation with the
Secretary-General. Clause 19 The parties hereto hereby agree that any
arbitration proceeding conducted pursuant to this agreement shall be
held at/in name of institution or place. CLAUSES REFERRING TO
THE ADDITIONAL FACILITY RULES The Additional Facility Rules were approved by
the Administrative Council of ICSID in 1978. Under these Rules, the
Secretariat of the Centre is authorized to administer the following types
of proceedings between States (or subdivisions or agencies of States) and
nationals of other States which fall out side the scope of the
Convention: (a) conciliation and arbitration proceedings
for the settlement of investment disputes between parties one of which
is not a Contracting State or a national of a Contracting
State; (b) conciliation and arbitration proceedings
between parties at least one of which is a Contracting State or a
national of a Contracting State for the settlement of disputes that do
not directly arise out of an investment; and (c) fact-finding
proceedings. Additional Facility Conciliation/Arbitration According to Article 4 of the Additional
Facility Rules, any agreement providing for conciliation or arbitration
proceedings under the Additional Facility in respect of existing or future
disputes requires the approval of the Secretary-General of the Centre. The
parties may apply for such approval at any time prior to the institution
of proceedings, but it is advisable that such agreements be submitted for
approval before they are concluded. In practice, agreements providing for
Additional Facility conciliation or arbitration are most commonly
concluded in respect of investment disputes which cannot be brought under
the Convention because either the host or the home State of the investor
is not a Contracting State. For such cases, Article 4 of the Additional
Facility Rules requires that the Secretary-General give his approval of
the agreement for recourse to Additional Facility conciliation or
arbitration only if the parties also consent to have recourse to
conciliation or arbitration under the Convention (in lieu of the
Additional Facility) if, by the time that proceedings are instituted, both
the host and the home States are Contracting States. The latter type of
consent may conveniently be coupled with the reference to the Additional
Facility in a single clause. An arbitration clause of this type might read
as follows. Clause 20 The Government of name of host
State (hereinafter the "Host State") and name of investor
(hereinafter the "Investor"), a national of name of home State
(hereinafter the "Home State"), hereby consent to submit to the
International Centre for Settlement of Investment Disputes (hereinafter
the "Centre") any dispute arising out of or relating to this agreement
for settlement by arbitration pursuant to: (a) the Convention on the Settlement of
Investment Disputes between States and Nationals of Other States
(hereinafter the "Convention") if the Host State and the Home State
have both become parties to the Convention at the time when any
proceeding hereunder is instituted, or (b) the Arbitration (Additional Facility)
Rules of the Centre if the jurisdictional requirements ratione
personae of Article 25 of the Convention remain unfulfilled at the
time specified in (a) above. Additional Facility Fact-Finding Additional Facility fact-finding is intended as
a mechanism for preventing, rather than settling, disputes. Under Article
16 of the Fact-Finding (Additional Facility) Rules, the proceeding ends
with a report that is "limited to findings of fact." The report has no
binding character and must not even contain recommendations. Fact-Finding
can, however, provide parties with impartial assessments of facts which,
if accepted by them, may prevent differences of view on specific factual
issues from escalating into legal disputes. Also in contrast to the
position with regard to conciliation and arbitration under the Additional
Facility, any State and national of any other State (irrespective of
whether these be Contracting States) may have recourse to Additional
Facility fact-finding and the parties� agreement in this respect is not
subject to approval by the Secretary-General of the Centre. Such an
agreement might read as follows. Clause 21 The parties hereto hereby agree to submit
to the International Centre for Settlement of Investment Disputes
(hereinafter "the Centre") for an inquiry under the Additional Facility
(Fact-Finding) Rules of the Centre [the following questions of
fact:...]/[any questions of fact related to the following
matters:...]. DESIGNATION OF THE
SECRETARY-GENERALOF ICSID AS APPOINTING AUTHORITY OF AD HOC
ARBITRATORS From time to time, parties to existing or
potential disputes seek the assistance of the Secretary-General of the
Centre in arranging for ad hoc (i.e., non-institutional) arbitration by
having him appoint some or all of the arbitrators in certain defined
contingencies. This may in particular be done in the context of agreements
providing for arbitration in accordance with the Arbitration Rules of the
United Nations Commission on International Trade Law (UNCITRAL), which are
specially designed for ad hoc proceedings. Although the Secretary-General
has often undertaken to act as appointing authority of ad hoc arbitrators,
he is not obliged to do so. It is thus advisable for parties wishing to
entrust such a task to the Secretary-General to obtain his consent in
advance, preferably before the agreement incorporating the assignment is
concluded. The following is an example of a clause
referring to the Secretary-General of ICSID as appointing authority of ad
hoc arbitrators. This is a clause providing for arbitration under the
UNCITRAL Arbitration Rules. It is based on the model text published with
those Rules, to which the designation of the Secretary-General is added
here. Clause 22 Any dispute, controversy or claim arising
out of or relating to this contract, or the breach, termination or
invalidity thereof, shall be settled by arbitration in accordance with
the UNCITRAL Arbitration Rules as at present in force. The appointing
authority shall be the Secretary-General of the International Centre for
Settlement of Investment Disputes. [The number of arbitrators shall be
[one]/ [three]. The place of arbitration shall be name of town or
country. The language[s] to be used in the arbitral proceedings
shall be name of language(s).]
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