One of the key virtues of any dispute resolution mechanism is finality. Will the dispute resolution mechanism lead to a final result in a relatively short amount of time and avoid endless and expensive reviews, appeals and challenges? If a dispute can be prolonged with a seemingly endless round of challenges and reviews, this creates serious questions about the effectiveness and legitimacy of the dispute resolution mechanism employed. Investors generally do not want to wait a decade or more for a result or spend the enormous sums that will unavoidably be incurred if endless rounds of reviews and challenges are necessary to reach a final and enforceable result. And this may act as a deterrent to investment.
In disputes between an investor and a country (or subdivision or agency, etc. of a county), companies often prefer resolution of the dispute outside that country’s judicial system for various reasons, particularly if the company is claiming that the country is exercising discriminatory practices against the company. And companies can seek to resolve a dispute in an international forum if there is an agreement to do so. Such investor state dispute resolution agreements are often found in investment and free trade agreements.
But even when a company can assert a claim against a country outside the domestic courts of that country, there is often debate over various issues, such as what arbitral rules should apply and whether the dispute resolution process should be administered by a specific institute or done on an “ad hoc” arbitration basis, particularly if the agreement (often a provision in a treaty) does not address this issue. The seminal institute for the settlement of investor state disputes is the International Centre for the Settlement of Investment Disputes (“ICSID”). But does ICSID provide the finality that arbitration is supposed to provide?
In an article recently published by Oxford University Press’s prestigious ICSID Review, entitled, Finality under the Washington and New York Conventions: Another Swing of the Pendulum, Joshua Robbins and BakerHostetler partner Kenneth Reisnefeld (a former chair of the International Section of the American Bar Association) contend that the current trend is to favor awards issued by ICSID. They state that domestic courts undertake more in depth review of an “an arbitral tribunal’s substantive analysis” while exercising more deference to ICSID awards. They write:
As a result, parties with a choice of ICSID or non-ICSID fora and a preference for finality over the opportunity for further judicial review may once again conclude that ICSID is a preferable venue.