Investor-State Mediation

However effective and broadly adopted the Convention and Rules of the International Centre for Settlement of Investment Disputes (ICSID) have been, the ICSID Conciliation Rules have enjoyed very little respect and have seldom been used.

This is especially to be regretted, because ICSID arbitrations, though relatively few in number, are often time-consuming, recondite, expensive and magnets for ancillary proceedings.  It has also been observed that the outcomes of ICSID arbitrations are less predictable than ordinary international arbitrations, based on a shallow pool of precedent to assist adjudication of fundamental concepts.

Yet the ICSID Conciliation Rules, last amended in 2002, evidence fundamental misunderstandings of the mediation process as practiced by global companies.  They call for a Commission of Conciliators qualified by virtue of their “high moral character and recognized competence in the fields of law, industry or finance,” and making decisions by a majority vote.  Sessions of the Commission resemble hearings, with evidence taken.  Witnesses and experts are heard, and a report is prepared and filed with the Secretary-General of the Centre.

Good tidings, then, that the International Bar Association has promulgated modern, informed, responsive rules for mediation of investor-state disputes that reflect not only the peculiar attributes of those conflicts but also best practices of modern mediation.  Co-Chairs Anna Joubin-Bret and Barton Legum are to be congratulated, along with the members of the committees responsible for an excellent result.

Under the IBA Rules, a mediation is initiated by a party sending a written request to mediation to both the other party and to the mediation institution that the parties have agreed will administer the mediation. (Art. 2)  An impartial and independent mediator is designated jointly by the parties within 21 days, and failing that designation by the institution they have agreed upon, in accordance with a procedure set forth as an appendix to the Rules.  (Art. 3-4) Unless otherwise agreed, the mediator takes on no other role in the dispute, and in consultation with the parties makes determinations with respect to the procedures to be observed.  (Art. 7)

In conducting the mediation, no information is conveyed to any party without the originating party’s consent, and the mediator assists the parties in making their own decisions.  If requested, the mediator may make recommendations concerning an appropriate resolution.  (Art. 8)  In recognition of the delicate nature of negotiations with a sovereign state, the Rules provide that each party shall either designate a representative with authority to settle the matter “or describe the process necessary for a settlement to be authorized.”  (Art. 9)  Information exchanged may not be used by a receiving party for any purpose other than the mediation, “including, in particular, in legal proceedings,” and the privacy and confidentiality provisions extend to “every person participating in the mediation” — an improvement upon the analogous provisions of the ADR Directive of the European Union.  (Art. 10)  Costs and fees are to be equally divided. (Art. 12)

Investor-State disputes are growing in number.  One hopes that counsel who strategically advise the parties to these complicated and high-value conflicts will find that the IBA Rules for Mediation present an opportunity to explore resolution of these claims in a commercially rational manner, benefiting all of the parties in the process.

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