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The International Centre for Settlement of Investment Disputes has recently published the most comprehensive study exclusively focused on compliance with and enforcement of ICSID awards (the “ICSID Study”).
The ICSID Study:
The findings reveal that a vast majority of ICSID awards were satisfied, either through compliance, settlement, or successful enforcement.
The study also features a review of 124 publicly available domestic court decisions relating to enforcement. This case law confirms that a large majority of domestic courts recognise and enforce ICSID awards.
The overview of the ICSID Convention’s regime governing compliance and enforcement of ICSID awards
The ICSID Study highlights that the regime governing compliance and enforcement of ICSID awards is a critical aspect of the ICSID Convention, which constitutes one of the reasons why, in investment treaty disputes, investors, where possible, opt for ICSID arbitration over other arbitration mechanisms.
The system is designed to be self-contained, as awards are final and binding, not subject to appeal, and are only subject to post-award remedies provided for under the ICSID Convention (see the ICSID Background Paper on Annulment).
Furthermore, ICSID awards can be enforced by domestic courts of the signatory states as if they were final domestic judgments, and the ICSID Convention does not provide any ground to refuse recognition and enforcement such as those provided in the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The ICSID system is thus designed to minimise the possibility of any challenge before domestic courts to a much greater extent than commercial arbitration awards.
The ICSID Secretariat notes that this regime instils confidence that parties will voluntarily comply with the award, or at least that the award will be upheld in case one of the parties seeks enforcement actions.
The rate of compliance and enforcement of ICSID awards
Overview of the results
The ICSID Study includes the study of 231 ICSID awards with pecuniary obligations (i.e. damages and/or costs awarded to a party), and shows that the ICSID Convention’s compliance and enforcement regime proves to be highly effective:
Overall, amongst the cases with known outcomes, award creditors obtained satisfaction through voluntary compliance, post-award settlement or enforcement in respect of:
Detailed methodology
To ascertain the rate of compliance and enforcement of awards rendered under the ICSID Convention, the ICSID Secretariat analysed 565 arbitration proceedings that had concluded by 31 December 2021.
Amongst these 565 arbitration proceedings, the ICSID Study focused on the 231 awards:
It thus excludes: (i) 182 cases that were discontinued, (ii) 130 awards which do not impose pecuniary obligations, or which were annulled by an ad hoc committee, or for which post awards remedy proceedings (annulment, revision, supplementary decision or rectification) were still pending, and (iii) 22 awards for which no information was retrieved.
Amongst those 231 awards, the ICSID Study distinguished between:
These totals, however, included a number of awards where enforcement outcomes were not known at the time of the ICSID study; being 40 of the Damages Awards and 39 of the Costs Awards.
Detailed results
As regards total Damages Awards, the ICSID Study showed that:
As such, after excluding the 40 Damages Awards for which the outcome of enforcement actions was unavailable, or where enforcement was not pursued or still pending, the ICSID Study shows that:
In sum, satisfaction was obtained in relation to 97% of Damages Awards where the outcome is known.
As regards total Costs Awards, the ICSID Study shows that:
As such, after excluding the 39 Costs Awards for which the outcome of enforcement actions was unavailable, or where enforcement was not pursued or still pending, the ICSID Study shows that:
In sum, satisfaction was obtained in relation to 83% of Costs Awards where the outcome is known.
The overall high rate of voluntary compliance with ICSID awards can be explained amongst other factors by the parties’ wish to avoid accrued interest; to avoid incurring additional costs in enforcement.