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Other Alternative Dispute Resolution Methods
International Centre for the
Rules governing the additional facility
Rules governing the additional facility
On September 27, 1978, the Administrative Council of the Centre authorized the Secretariat to administer at the request of the parties concerned certain proceedings between States and nationals of other States which fall outside the scope of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. They are (i) conciliation or arbitration proceedings for the settlement of investment disputes arising between parties one of which is not a Contracting State or a national of a Contracting State; (ii) conciliation or 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 (iii) fact-finding proceedings.
The scope within which and the terms on which the Secretariat may administer these proceedings, which would of course not be governed by the provisions of the Convention, are set out in the attached Additional Facility Rules. They provide, among other things, that the Additional Facility will not be available for the settlement of ordinary commercial disputes. The text of most of the Articles of the Additional Facility Rules are followed by explanatory comments.
Four schedules are also attached:
A. The Administrative and Financial Rules (Additional Facility)
These Rules provide for non-refundable fees, expressed in Special Drawing Rights, of SDR 100 each for an application for approval under Article 4 of the Additional Facility Rules and for notice of commencement of proceedings. Fees of conciliators, arbitrators and members of fact-finding committees are, unless otherwise agreed between them and the parties, determined on a time basis at the rate of SDR 350 per day of meetings or other work performed in connection with the proceedings. These fees are subject to adjustment by the Secretary-General in the light of changes in price levels. The Secretariat's administrative charges consist of reimbursement of out-of-pocket expenses and a time charge for staff services. Advance payments in respect of estimated fees and administrative charges are required on a quarterly basis.
B. The Conciliation (Additional Facility) Rules
These Rules are an amalgam of certain provisions of the Convention suitable for inclusion in an instrument of a contractual nature and of appropriate portions of the ICSID Conciliation Rules. The reference table following the text of the Conciliation (Additional Facility) Rules shows the origin of their provisions.
C. The Arbitration (Additional Facility) Rules
The Arbitration (Additional Facility) Rules are based on the ICSID Arbitration Rules, and provisions of the Convention which lend themselves to inclusion in an instrument of a contractual nature, and include some provisions derived from the UNCITRAL Rules and the ICC Rules. The reference table following the text of the Arbitration (Additional Facility) Rules shows the origin of their provisions.
As under the ICSID Rules, the majority of the members of a tribunal are required to be nationals of third countries, and the Chairman of the Centre's Administrative Council is the residual appointing authority. However, the Chairman is not restricted in his choice to a Panel of Arbitrators. Arbitrators are explicitly required to disclose any past and present professional business and other relevant relationships with the parties (Art. 14).
In order to assure the widest possible international recognition and enforcement of awards arbitration proceedings may be held only in States that are parties to the 1958 UN Convention. Subject thereto the Tribunal determines the place of arbitration and the award must be made at that place (Art. 20, 21).
Following UNCITRAL Article 1.2 the Rules provide that they shall govern the proceedings "save that if any of these Rules is in conflict with a provision of the law applicable to the arbitration from which the parties cannot derogate, that provision shall prevail" (Art. 1). As regards the law applicable to the dispute in the absence of its designation by the parties "the Tribunal shall apply (a) the law determined by the conflict of laws rules which it considers applicable and (b) such rules of international law as the Tribunal considers applicable" (Art. 55). Paragraph (a) follows UNCITRAL Article 33.1 while paragraph (b) is derived from Article 42 of the Convention.
D. The Fact-Finding (Additional Facility) Rules
Fact-finding, as contemplated by the Additional Facility Rules is a process for preventing, rather than settling legal disputes. It is thus basically different from conciliation as well as arbitration. Under these Rules the proceedings will end with a Report which "shall be limited to findings of fact. The Report shall not contain any recommendations to the parties nor shall it have the character of an award" (Art. 16), and the parties will be "entirely free as to the effect to be given to the Report" (Art. 17).
The reason for including fact-finding in the Additional Facility was the need perceived in both private and public circles for tact-finding proceedings in the "pre-dispute" stage. They could provide the parties with an impartial assessment of facts which, if accepted by them, would prevent differences of view arising on specific factual issues in the course of a long-term relationship from escalating to legal disputes. Fact-finding can be useful in a contractual framework as well as in other contexts such as national or international guidelines or codes of conduct relating to foreign investment.
Article 1 - Definitions
"Convention" means the Convention on the Settlement of investment Disputes between States and Nationals of Other States, submitted to Governments by the Executive Directors of the International Bank for Reconstruction and Development on March 18, 1965, which entered into force on October 14, 1966.
"Centre" means the International Centre for Settlement of Investment Disputes established pursuant to Article 1 of the Convention.
"Secretariat" means the Secretariat of the Centre.
"Contracting State" means a State for which the Convention has entered into force.
"Secretary-General" means the Secretary-General of the Centre or his deputy.
"National of another State" means a person who is not, or whom the parties to the proceeding in question have agreed not to treat as, a national of the State party to that proceeding.
The Secretariat of the Centre is hereby authorized to administer, subject to and in accordance with these Rules, proceedings between a State (or a constituent subdivision or agency of a State) and a national of another State, falling within the following categories:
conciliation and arbitration proceedings for the settlement of legal disputes arising directly out of an investment which are not within the jurisdiction of the Centre because either the State party to the dispute or the State whose national is a party to the dispute is not a Contracting State;
conciliation and arbitration proceedings for the settlement of legal disputes which are not within the jurisdiction of the Centre because they do not arise directly out of an investment, provided that either the State party to the dispute or the State whose national is a party to the dispute is a Contracting State; and
fact-finding proceedings. The administration of proceedings authorized by these Rules is hereinafter referred to as the Additional Facility.
This provision defines the scope of the Additional Facility by specifying three categories of proceedings which may be administered by the Secretariat of the Centre. There is a common requirement of all three categories, namely that the parties to the proceedings be a State (or a constituent subdivision or agency of a State) on the one hand and a national of another State on the other. The three categories of proceedings also share a common negative feature namely that they are not within the jurisdiction of the Centre, either because the requirements ratione personae are not met or because the dispute is not an investment dispute or, finally, because the type of proceeding, namely fact-finding is not provided for in the Convention.
It should be noted that in the case of conciliation and arbitration proceedings under (a) and (b) either the State party to the dispute or the State whose national is the other party to the dispute must be a Contracting State.
Paragraph (b) should be read in conjunction with Article 4(3) and (4).
Since the proceedings envisaged by Article 2 are outside the jurisdiction of the Centre, none of the provisions of the Convention shall be applicable to them or to recommendations, awards, or reports which may be rendered therein.
This is an explicit reminder that the provisions of the Convention are not applicable to Additional Facility proceedings. With respect to arbitration proceedings this means, e.g., that awards, unlike awards rendered pursuant to the Convention, are not insulated from national law and that their recognition and enforcement will be governed by the law of the forum, including applicable international conventions.
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. The parties may apply for such approval at any time prior to the institution of proceedings by submitting to the Secretariat a copy of the agreement concluded or proposed to be concluded between them together with other relevant documentation and such additional information as the Secretariat may reasonably request.
In the case of an application based on Article 2 (a), the Secretary-General shall give his approval only if (a) he is satisfied that the requirements of that provision are fulfilled at the time, and (b) both parties give their consent to the jurisdiction of the Centre under Article 25 of the Convention (in lieu of the Additional Facility) in the event that the jurisdictional requirements ratione personae of that Article shall have been met at the time when proceedings are instituted.
In the case of an application based on Article 2 (b), the Secretary-General shall give his approval only if he is satisfied (a) that the requirements of that provision are fulfilled, and (b) that the underlying transaction has features which distinguish it from an ordinary commercial transaction.
If in the case of an application based on Article 2 (b) the jurisdictional requirements ratione personae of Article 25 of the Convention shall have been met and the Secretary-General is of the opinion that it is likely that a Conciliation Commission or Arbitral Tribunal, as the case may be, will hold that the dispute arises directly out of an investment, he may make his approval of the application conditional upon consent by both parties to submit any dispute in the first instance to the jurisdiction of the Centre.
The Secretary-General shall as soon as possible notify the parties whether he approves or disapproves the agreement of the parties. He may hold discussions with the parties or invite the parties to a meeting with the officials of the Secretariat either at the parties' request or at his own initiative. The Secretary-General shall, upon the request of the parties or any of them, keep confidential any or all information furnished to him by such parties or party in connection with the provisions of this Article.
The Secretary-General shall record his approval of an agreement pursuant to this Article together with the names and addresses of the parties in a register to be maintained at the Secretariat for that purpose. Such approval shall be a conclusive determination that the proceedings contemplated by the agreement come within the scope of these Rules.
Paragraphs (1) and (6): The Additional Facility is neither intended as an alternative to the Convention nor as a broad alternative to existing mechanisms for the settlement of commercial disputes. The requirement of advance approval serves to prevent access to the Additional Facility beyond its intended scope. In order to avoid surprises and possible frustration of the conciliation or arbitration undertaking, it is advisable as a practical matter that such undertakings (compromissory clauses or compromis) be submitted for approval prior to being entered into. Approval once obtained is a conclusive determination that the proceedings contemplated by the agreements come within the scope of the Additional Facility, thus barring jurisdictional objectives on this issue once proceedings have been instituted.
Paragraph (2): This paragraph calls for a compromissory clause providing in the alternative for consent to the jurisdiction of the Centre, if at the time of institution of proceedings the State party to the dispute as well as the State whose national is the other party to the dispute are parties to the Convention, or Additional Facility proceedings if the requirements ratione personae have not been met at that time. Its purpose is to promote use of the Convention whenever this is possible.
Paragraph (3): This provision guards against the use of the Additional Facility for disputes arising out of an "ordinary commercial transaction". While the term is not defined, and hardly capable of precise definition, the Administrative Council in approving the provision recorded the following: "Economic transactions which (a) may or may not, depending on their terms, be regarded by the parties as investments for the purposes of the Convention, which (b) involve long-term relationships or the commitment of substantial resources on the part of either party, and which (c) are of special importance to the economy of the State party, can be clearly distinguished from ordinary commercial transactions. Examples of such transactions may be found in various forms of industrial cooperation agreements and major civil works contracts".
Paragraph (4): The term "investment" is not defined in the Convention and among the reasons for the proposal to establish the Additional Facility was the concern that a conciliation or arbitration agreement might be frustrated if a Commission or Tribunal declared itself incompetent on the ground that it considered the underlying transaction not to be an "investment". The purpose of paragraph (4) is to avoid such frustration on the one hand and unnecessary failure to use the Convention on the other. Use of the authority given the Secretary-General by this paragraph would be appropriate in border-line cases.
The responsibilities of the Secretariat in operating the Additional Facility and the financial provisions regarding its operation shall be as set forth in Schedule A, Administrative and Financial Rules (Additional Facility).
Conciliation, arbitration and fact-finding proceedings under the Additional Facility
shall be conducted in accordance with the respective Conciliation (Additional Facility),
Arbitration (Additional Facility) and Fact- finding
(Additional Facility) Rules set forth
in Schedules B, C and D.