History

In the 1950s and 1960s, the Organization for European Economic Cooperation (now the Organisation for Economic Co-operation and Development) had made several attempts to create a framework to protect international investments, but its efforts revealed conflicting views on how to provide compensation for the expropriation of foreign direct investment.

Creationedit

In 1961, then-General Counsel of the International Bank for Reconstruction and Development (IBRD) Aron Broches developed the idea for a multilateral agreement on a process for resolving individual investment disputes on a case-by-case basis as opposed to imposing outcomes based on standards. Broches held conferences to consult legal experts from all parts of the world, including Europe, Africa, and Asia, to discuss and compose a preliminary agreement. The IBRD staff wrote an official draft of the agreement and consulted with legal representatives of the IBRD's board of directors to finalize the draft and have it approved.

The board of directors approved the final draft of the agreement, titled Convention on the Settlement of Investment Disputes between States and Nationals of Other States, and the Bank president disseminated the convention to its member states for signature on 18 March 1965. Twenty states immediately ratified the convention. The convention established the ICSID would become officially active on 14 October 1966.page neededpage needed

Disputes settlededit

The Indonesian government was sued in June 2012 by a London-based mining company Churchill Mining after the local government revoked the concession rights held by a local company in which the firm had invested. The government is countering the Churchill case, claiming that Churchill did not have the correct type of mining licenses.

In October 2012, an ICSID tribunal awarded a judgment of $1.8 billion for Occidental Petroleum against the government of Ecuador. Additionally, Ecuador had to pay $589 million in backdated compound interest and half of the costs of the tribunal, making its total penalty around $2.4 billion. The South American country annulled a contract with the oil firm on the grounds that it violated a clause that the company would not sell its rights to another firm without permission. The tribunal agreed the violation took place but judged that the annulment was not fair and equitable treatment to the company.

Irish oil firm Tullow Oil took the Ugandan government to court in November 2012 after value-added tax (VAT) was placed on goods and services the firm purchased for its operations in the country. The Ugandan government responded that the company had no right to claim tax on such goods prior to commencement of drilling.

Tobacco major Philip Morris sued Uruguay for alleged breaches to the Uruguay-Swiss BIT for requiring cigarette packs to display graphic health warnings and sued Australia under the Australia-Hong Kong BITS for requiring plain packaging for its cigarettes. The company claimed that the packaging requirements in both countries violate its investment.

In the context of Nuclear power phase-out in Germany, Swedish Energy company Vattenfall sought compensation from the German government for the premature shut-down of nuclear plants.

Performance since creationedit

Bilateral investment treaties (BITs) proliferated during the first decade of the 21st century, reaching more than 2,500 by 2007. Many such treaties contain text that refers present and future investment disputes to the ICSID.

From its launch to 30 June 2012, the ICSID has registered 390 dispute cases.:7 The ICSID's caseload consisted of 88% convention arbitration cases, 2% convention conciliation cases, as well as 9% additional facility arbitration cases, and 1% additional facility conciliation cases.:8 The ICSID's registered cases were distributed across oil, gas and mining (25%), electricity and other energy (13%), other industries (12%), transportation industry (11%), construction industry (7%), financial industry (7%), information industry and communication industry (6%), water industry, sanitation, and food protection (6%), agriculture, fishing, and forestry (5%), services and trade (4%), and tourism industry (4%).:12

As of 27 July 2012update, 246 of 390 registered arbitration cases were concluded, as of 30 June 2012update, the ICSID's tribunal had resolved nearly two thirds (62%) of disputes while the remainder (38%) were settled or discontinued.:13 As of 14 May 2016update, 362 of 574 (62%) registered arbitration cases were concluded.

Conciliation commission reports were issued for 67% of the conciliation proceedings, while 33% of proceedings were discontinued. In 75% of the conciliation reports, parties failed to reach an agreement, and only 25% recorded agreement among parties.

As of 2012update only two governments, Gabon and Romania, had ever filed an ICSID case against an investor. States appearing most often as a respondent were in descending order: Argentina 49, Venezuela 36, Egypt 17, Ecuador 12, Congo 12, Peru 11 and Ukraine 10 times. Between 2009 and 2012, legal representation cost between US$1 and 7.6 million. The approximate duration of a case was 3.6 years.