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[email protected]On 21 March 2022, member states of the World Bank's International Centre for Settlement of Investment Disputes ("ICSID") adopted a new set of rules for mediation in investment treaty disputes (the "ICSID Mediation Rules"), which will come into effect on 1 July 2022.
In this article, we take a deep dive into the Mediation Rules, one of the pioneer institutional mediation rules designed specifically for investor-State disputes.
There are two pre-requisites for the use of the Mediation Rules, pursuant to Rule 2(1). First, the dispute must relate to an investment involving a State or a Regional Economic Integration Organisation (such as ASEAN or the African Union). Second, the parties must consent in writing to engaging in mediation under the Rules.
Rule 2(2) makes clear that the involvement of an agent of the State is sufficient to trigger the jurisdiction of the Mediation Rules, provided that the State approves the consent to mediate of the agent which is the party to the mediation (unless the State notifies ICSID that such approval is not required).
Unlike arbitrations and conciliations under the ICSID Convention and Additional Facility, there is no requirement for the State to be an ICSID Member State to utilise the Mediation Rules. This is to be welcomed given the expected rise in demand for investor-State mediation, particularly amidst investor-State arbitration's legitimacy crisis.
Under the Mediation Rules, the key steps in the investor-State mediation process can be broken down into: (i) request for mediation; (ii) appointment of mediator; (iii) initial written statements; (iv) first mediation session and mediation protocol; and (v) termination of the mediation.
We explore each stage in further detail below.
To commence the mediation process, a Request for Mediation is required. The process of filing a Request for Mediation depends on whether there is a pre-existing agreement to mediate, which can usually be found in the relevant investment treaty.
If there is a pre-existing agreement to mediate, any party can file (whether independently or jointly with the other party) a Request for Mediation with the ICSID Secretary-General and pay the required fee. The Secretary-General will then transmit the request to the other party.
If there is no pre-existing agreement to mediate, any party can file a Request for Mediation with the Secretary-General and pay the required fee. If the other party rejects or fails to respond within 60 days from the transmission of the Request (or within such other period as the parties may agree), the Secretary-General will inform the parties that no further action will be taken. Similarly, the Secretary-General will communicate an acceptance of the Request to the requesting party.
In both scenarios, the Request for Mediation must contain the information set out in Rules 5(3) and 5(4). Additionally, if there is no pre-existing agreement to mediate, Rule 6(2)(b) requires the Request for Mediation to also include an offer to mediate pursuant to the Mediation Rules.
Once the parties have agreed to mediate and have filed the Request for Mediation, the Secretary-General will consider if the jurisdiction of the Mediation Rules is engaged. If so, the Secretary-General will register the Request for Mediation.
After the Request for Mediation is registered, the next step is to appoint the mediator in accordance with Rules 12 to 14. In summary, the appointment process is as follows:
Under the Mediation Rules, mediators have an ongoing obligation to promptly disclose any change of circumstance which may affect their impartiality or independence. In a similar vein, Rule 14(7) prohibits mediators from double-hatting, i.e. a mediator may not act as arbitrator, counsel, expert, judge or witness in proceedings relating to issues in dispute in the mediation, unless the parties agree otherwise.
After the mediator has been appointed, Rule 19 requires each party to file a brief written statement with the Secretary-General within 15 days of the Request for Mediation being transmitted to the appointed mediator unless the mediator directs otherwise, but in any event before the first mediation session. The statements will then be circulated by the Secretary-General to all parties and the mediator.
The initial written statements will describe the issues in dispute and each party will set out their views on the respective issues, as well as the proposed procedure for the mediation.
Pursuant to Rule 20, the first mediation session must be held within 30 days of the registration of the Request for Mediation, unless agreed otherwise. The purpose of the first session is for the mediator and the parties to agree the protocol of the conduct of the mediation and any other procedural matters (including next steps, key dates, whether further written statements or information are required, and whether expert evidence is required). Rule 20(3) sets out a useful list of topics to be considered at the first session.
More importantly, at the first session, the parties are expected to identify persons or entities who are authorised to negotiate and settle issues on their behalf, and to describe the process involved in concluding and implementing any settlement agreement.
Once the mediation protocol has been decided at the first session, Rule 21 requires the mediator to conduct the mediation in accordance with this protocol. This means that, after the first session, the process and timeline for the remainder of the mediation will be dictated by the parties' requirements (by consent), thereby affording great flexibility to the parties.
The mediation will conclude when the Secretary-General issues a notice of termination. Rule 22 provides that a notice of termination may be issued following the occurrence of specified events, including: (i) the parties signing a settlement agreement; (ii) the parties agreeing to terminate the mediation; (iii) any party withdrawing from the mediation; or (iv) the mediator determining that there is no likelihood of resolution through mediation.
In practice, the Mediation Rules may be used as a stand-alone process or may be combined with other processes such as "med-arb", "arb-med", or "arb-med-arb". This means that the mediation may be conducted prior to or in parallel with an arbitration.
Other important considerations for parties involved in the Mediation Rules include:
Please feel free to get in touch with any questions on the ICSID Mediation Rules or on investor-State disputes in general. Rovine Chandrasekera, a partner in our London office and the global head of the firm's international arbitration practice, has experience in investor-State disputes and also sits on the Centre for Effective Dispute Resolution's Advisory Board for investor-State mediation. Dr Fan Yang, a partner in our Hong Kong office, also sits on this board, in addition to being a CEDR-accredited mediator for investor-State disputes.
To find out more, please drop us a line.
[email protected]