The record number of new arbitration cases registered with the International Centre for Settlement of Investment Disputes (ICSID) in 2020 highlights the confidence that investors retain in resolving their disputes with states and state sponsored companies through arbitration, an expert has said.
According to ICSID, which is part of the World Bank and deals in international investment dispute resolution and conciliation, there were 58 new cases registered with it last year, up from the previous record high of 56 in 2018 and the 39 recorded in 2019. The number of cases registered with ICSID has typically been rising since the late 1990s.
Clea Bigelow-Nuttall
Senior Associate
In the years to come it may well be because of pandemic-related challenges that we see a further uptake in cases referred to arbitration under ICSID
The latest figures show a wide geographic spread of ICSID case participants. In 2020, the most common state parties involved in newly registered ICSID disputes were from Eastern Europe and Central Asia. They featured in 28% of the 58 cases recorded.
Clea Bigelow-Nuttall of Pinsent Masons, the law firm behind Out-Law, who specialises in commercial and investment arbitration, said: "The statistics show that despite some of the political and economic challenges that 2020 presented us with, investors are still turning confidently to ICSID arbitration to resolve their investment disputes. Indeed, in the years to come it may well be because of those challenges that we see a further uptake in cases referred to arbitration under ICSID."
The sector in which most new ICSID cases were registered was oil, gas and mining, accounting for 26% of the 58 in total, with 17% of all cases stemming from the construction sector. Bigelow-Nuttall said she expects the number of construction-related disputes to continue rising in 2021.
"We fully expect that construction cases will continue to represent an important percentage of disputes off the back of 2020 and the turmoil caused to the construction industry by the Covid pandemic," she said.
In 2020, 15% of cases concerned investment disputes in the electric power and other energy. Bigelow-Nuttall said that the continued growth of renewable energy, reflecting its importance to the global decarbonisation agenda, is likely to spur an increase in investor-state arbitrations in that area in the years ahead.
According to ICSID, 60% of new cases in 2020 were brought under bilateral investment treaties (BITs), with a considerable number brought against EU member states from both Eastern and Western Europe.
BITs are international agreements signed between two states which establish the terms and conditions for private investment by nationals and companies of one state in the other state. They usually incorporate alternative dispute resolution mechanisms, including, in some cases, providing for disputes to be referred to an international arbitration institution such as ICSID, rather than allowing the state to be sued in its own courts.
Last year, however, 23 of the 27 EU member states signed an agreement to terminate all intra-EU BITs. The termination agreement implements a March 2018 judgment of the Court of Justice of the EU (CJEU) in the so-called Achmea case, in which the court found that investor-state arbitration clauses in intra-EU BITs are incompatible with the treaties underpinning the EU.
Bigelow-Nuttall said the termination agreement is likely to have an impact on the new arbitrations raised before ICSID in the years ahead.
Proposed reforms to another international agreement, the Energy Charter Treaty (ECT), could likewise impact on the volume of ICSID arbitrations in future, she said. In 2020, 9% of ICSID disputes were brought under the ECT, but proposed changes to the ECT are under discussion and the CJEU is also expected to give an advisory opinion concerning an intra-EU ECT disputes in the coming months.
Reflecting on the statistics relating to arbitrator appointments by geographic region and by gender, as well as the fact that there had been a slight rise, to 23%, in the proportion of women arbitrators, conciliators and ad hoc committee members appointed to cases registered in 2020, Bigelow-Nuttall said there is "clearly still a lot of work to be done, particularly in the respect of both regional, racial and gender diversity, to broaden the pool of arbitrators hearing these disputes".
ICSID has been developing proposals for amending its investor-state dispute procedural rules since 2016, though this work has been delayed by the Covid-19 pandemic in recent months.
By Clea Bigelow-Nuttall