On August 13, 2020, the International Centre for Settlement of Investment Disputes (ICSID) released its Fiscal Year 2020 Caseload Report (FY2020 Report or Report).1 ICSID updates its caseload statistics every six months. This FY2020 Report is based on cases registered and administered by the institution as of June 30, 2020.2
ICSID is a leading institution for investor state dispute settlement (ISDS). The FY2020 Report confirms that, despite criticism raised against the ISDS system in past years, parties continue resorting to investment arbitration and they do so primarily by means of bilateral investment treaties (BITs) and multilateral treaties.3 The Report also reveals four noteworthy points:
- Investment disputes in the energy sector continue leading in number over disputes in other sectors.
- The tendency as to the geographic distribution of cases by state party involved does not present major changes.
- The “pro-Claimant system” myth is once again dispelled. From the disputes that actually get to be decided by a tribunal under the ICSID Convention and Additional Facility rules, statistics show a moderate percentage of cases in which the tribunal upheld claims in part or in full.
- The gender diversity deficit prevails in ISDS as male arbitrators continue to dominate the field.
The purpose of this Legal Alert is not to cover every statistic included in the Report but instead to provide highlights. Other relevant statistics the Report touches on include: the number of cases administered by the ICSID secretariat, under ICSID and Non-ICSID rules; outcomes of cases settled or otherwise discontinued; outcomes in annulment proceedings; and the nationalities and geographic origins of arbitrators, conciliators and ad hoc committee members appointed in ICSID cases.
Investment disputes in the energy sector
The majority of investment disputes continue emerging from the energy sector. The statistics show that 41% out of all cases registered and administered by ICSID are oil, gas and mining or electric power and energy related.4 This trend remains true to date, as 50% out of the total number of cases registered and administered by ICSID in FY2020 fall under those same sectors,5 with 7 out of the 23 cases arising under the Energy Charter Treaty (ECT).6 This continued increase in number of energy sector cases is due, in part, to the green growth. For example, 20% out of the total number of FY2020 cases fall under the electric power and other energy related sectors.
Geographic distribution of ICSID cases by state party involved
Foreign investment is an important source of economic growth, especially for certain regions. Consequently, the tendency in ISDS as to the geographic distribution of cases by state party involved is no surprise.7 In FY2020, there was a dip in the number of cases against Eastern European countries. Contrary to prior years,8 South American countries lead the list of Respondents in FY2020, making up 32 % of cases registered—primarily against Colombia and Peru.9
Notwithstanding this tendency, ICSID has seen an increase in the number of disputes against Respondents from Western Europe. The geographic distribution of cases registered under the ICSID Convention and Additional Facility Rules in FY2019 shows that 10% of cases involved State parties from Western Europe.10 This year, we saw a 3-point increase in these statistics, as 13% of FY2020 cases involved Respondents from Western Europe. 11
Additionally, it is worth noting that ICSID has recently seen two “firsts.” On August 17, 2020, ICSID registered the first treaty case against Switzerland.12 Human Rights Defenders Inc., a Seychelles entity—acting on behalf of Italian investors—filed claims under the Switzerland-Hungary BIT for an investment in real estate development. Similarly, on August 18, 2020, the institution registered the first treaty case against Denmark.13 A Lithuanian businessman filed claims under the Lithuania-Denmark BIT over alleged damages that protesters caused on a construction project. While not accounted for in FY2020’s statistics, it is important to note these two “firsts” and what they represent for the practice. On the one hand, this could be a reflection of a more diverse arena involving geographic regions and backgrounds that had not been represented in the ISDS system before; and on the other hand, this could be the result of a changing investment landscape with less investment capital flowing from west to east or north to south regions. It is also possible that because of the attention that has surrounded in ISDS in recent years—both positive and critical—investors are more aware of their rights under international law and the type of actions that could trigger investment arbitration disputes.
Some critics have characterized ISDS as a mechanism designed to work in favor of private companies at the expense of national sovereignty. Others have gone as far to say that ISDS gives Claimants a special advantage. However, the Report provides statistics that refute this unrooted criticism and show that ISDS results are much more balanced than what critics argue.
It is worth noting that a significant percentage of disputes are settled or discontinued. Therefore, arbitral tribunals constituted under the ICSID Convention and Additional Facility rules have only decided 65% of all disputes.14 Historically, 31% of the 65% of disputes decided by a tribunal upheld claims in part or in full.15 The FY2020 statistics further disprove critics’ positions—as statistics show that only 35% out of the 74% of disputes decided by a tribunal under the ICSID Convention and Additional Facility rules upheld claims in part or in full.16
Gender diversity – A step back from progress
Male arbitrators, mostly from Western Europe and North America, take the front seats at ISDS tribunals.17 Historically, only 12 % of arbitrators, conciliators and ad hoc committee members appointed in all cases registered under the ICSID Convention and Additional Facility Rules have been women.18 Some may think that these dire statistics are not representative of todays’ reality but instead reflect the uphill battle women have faced to take a seat in an arbitral tribunal. Unfortunately, the Report confirms that in FY2020, gender diversity is a mere 2% higher than the average. Only 14% of arbitrators, conciliators and ad hoc committee members appointed in FY2020 cases were women.19 Additionally, this year’s statistics reveal a 10% step back from progress compared to last year.20
While criticism of the gender diversity deficit may have prompted the arbitration community to engage in the discussion of this issue and attempt to work towards progress, the data speaks for itself and the deficit prevails. Indeed, the Report brings to light the long road we have ahead of us before we attain gender parity when appointing arbitrators, conciliators and ad hoc committee members. Despite shows of “commitment” throughout the community to diversify the field of ISDS, the Report presents undeniable evidence that it is time for everyone to walk their talk. According to the Report, Claimants appointed women arbitrators 1 out of 49 times. Respondents appointed women arbitrators 10 out of 36 times. Co-arbitrators or conciliators did not appoint a single woman in FY2020. Lastly, ICSID appointed women arbitrators 16 out of 61 times.21 It is clear from the Report that achieving gender parity in the field will require true commitment and specific actions of all stakeholders involved.
Given ICSID’s role as leading institution in ISDS, its statistics can be seen as a representation of trends across the field. The Report corroborates that the system remains a popular and reliable mechanism to resolve investment disputes. However, the statistics also confirm the need for progress. Indeed, there is a significant amount of work to be done—particularly to achieve gender parity among arbitrators, conciliators and ad hoc committee members.
1 The ICSID Caseload – Statistics Issue 2020-2.
2 The ICSID Fiscal Year covers the period July 1 to June 30.
3 See Report, Chart 3 (Part II, FY2020 Statistics) at p. 23.
4 See Report, Chart 8 (Part I, 1966-2020 Statistics) at p. 12.
5 See Report, Chart 6 (Part II, FY2020 Statistics) at p. 25.
6 Zaur Leshkasheli and Rosserlane Consultants Limited v. Republic of Azerbaijan (ICSID Case No. ARB/20/20); EP Wind Project (Rom) Six Ltd. v. Romania (ICSID Case No. ARB/20/15); Hamburg Commercial Bank AG v. Italian Republic (ICSID Case No. ARB/20/3); VM Solar Jerez GmbH and others v. Kingdom of Spain (ICSID Case No. ARB/19/30); Strabag SE, Erste Nordsee-Offshore Holding GmbH and Zweite Nordsee-Offshore Holding GmbH v. Federal Republic of Germany (ICSID Case No. ARB/19/29); Sapec, S.A. v. Kingdom of Spain (ICSID Case No. ARB/19/23); and Petrochemical Holding GmbH v. Romania (ICSID Case No. ARB/19/21).
7 See Report, Chart 7 (Part I, 1966-2020 Statistics) at p. 12.
8 In the past three years, Eastern European and Central Asian countries have lead the list as Respondent parties subject to ICSID arbitration.
9 See Report, Charts 4 and 5 (Part II, FY2020 Statistics) at p. 24.
10 The ICSID Caseload – Statistics Issue 2019-2 at p. 24.
11 See Report, Charts 4 and 5 (Part II, FY2020 Statistics) at p. 24.
12 Human Rights Defenders Inc., as assignee of Mr. Natale Palazzo, Mr. Rodolfo Scodeller and Mr. Antonio Basile v. Swiss Confederation (ICSID Case No. ARB/20/29).
13 Donatas Aleksandravicius v. Kingdom of Denmark (ICSID Case No. ARB/20/30).
14 See Report, Chart 9 (Part I, 1966-2020 Statistics) at p. 13.
15 See Report, Chart 9a (Part I, 1966-2020 Statistics) at p. 13.
16 See Report, Charts 7 and 7a (Part II, FY2020 Statistics) at p. 26.
17 The Report’s classification of the geographic regions is based on the World Bank’s regional system, available at https://www.worldbank.org/en/where-we-work.
18 See Report, Chart 16 (Part I, 1966-2020 Statistics) at p. 17.
19 See Report, Chart 11 (Part II, FY2020 Statistics) at p. 30.
20 See The ICSID Caseload – Statistics Issue 2019-2 Chart 11 (Part II, FY2019 Statistics) at p. 30 (showing that 24% of appointed arbitrators in FY2019 were women).
21 See Report, Chart 12 (Part II).