Present and future of ICSID Annulment: The path to an appellate body?

Abstract

As a largely self-contained regime, ICSID's legitimacy relies to a significant extent on an adequate functioning of its internal control mechanisms. Annulment is the most important of such mechanisms. Further, legitimacy is particularly relevant in investment arbitration, where public interest is by definition involved. Annulment under the ICSID Convention must be distinguished from an appeal remedy. It only proceeds under one of the annulment grounds provided for in Article 52. Yet, the annulment grounds, which are not concerned only with procedural aspects, must be given full effect. Ad hoc committees must engage with the annulment grounds before them, unless they are frivolous. Attempts to advance restrictive readings of the annulment remedy in general or of the annulment grounds in particular generally lack legal basis and are ultimately prejudicial to the system's legitimacy. Paradoxically, they may also provide justification for certain proposed significant changes to the current institutions and procedures of international investment law. On the other hand, States continue to consider the creation of appeals facilities, as the recent mega-regional treaties show. With an adequate design, an appeal mechanism would constitute an improvement with respect to the current award review mechanisms. In the meantime, ad hoc committees should be allowed to exercise their judgment in applying the annulment grounds, bearing in mind the limited but important function of the annulment remedy.