ICSID study shows widescale investment treaty compliance despite growing scepticism

The study (104 pages / 1.3 MB) is the first published by the International Centre for Settlement of Investment Disputes (ICSID) on the enforcement of ICSID arbitral awards and usefully complements other background papers on the functioning of the ICSID Convention. It is also the most comprehensive study on enforcement of ICSID awards so far. The study examines 253 ICSID awards with pecuniary obligations rendered by 31 December 2021, including costs awards against investors, and offers a detailed analysis of the ICSID Convention’s regime, focusing on the post-awards phase.

Out of the 151 damages awards reviewed, the study shows that 66% were voluntarily complied with or reached a settlement. The voluntary compliance rate reached 90% when excluding awards where the enforcement was pending, not pursued or the outcome unavailable. Out of the enforcement actions considered by the study, 73% were successful. Regarding the 80 costs awards considered, the rate of voluntary compliance was lower (36%), although higher (45%) for costs awards of $5 million or above. 

Investor-state dispute resolution expert Sylvia Tonova of Pinsent Masons said: “The study shows that despite recent scepticism about the enforcement of damages awards against states, a majority of damages awards were voluntarily complied with or successfully enforced.”

The study provides useful insights on the history of the drafting of the ICSID Convention’s provisions relative to recognition, enforcement and execution. On article 54 of the Convention, recognition and enforcement, the drafters’ decision not to provide any grounds according to which recognition and enforcement may be refused, including public policy, was driven by the intention to make the binding force of the award as unconditional as possible, so that no substantive review of the award would be made by national courts. 

The study takes into consideration 124 court decisions and orders on enforcement and execution in 21 jurisdictions. Annex A includes a list of such decisions indicating the reason for enforcing the award or refusing enforcement, with useful quotes from the decisions at Annex B.

Tonova said: “The study shows that, for the most part, national courts comply with the letter of article 54 and refrain from reviewing the award substantively, generally limiting their review to confirming its authenticity”.

However, following the recent ruling of the Court of Justice of the European Union which took the position that the arbitration provision contained in an intra-EU BIT was incompatible with EU law, award debtors have sought to resist enforcement of ICSID awards on substantive grounds. To date, proceedings before courts in non-EU states have granted enforcement of intra-EU arbitration awards. Further, only one ICSID award, in Micula v Romania, has been refused enforcement in Sweden and Luxemburg because of the intra-EU BIT jurisdictional objection whilst courts in Romania, the UK and the US have granted enforcement. 

At the execution stage, the ICSID Convention does not offer protection from the state immunity defence that states or state entities may raise against execution. 

“The study provides a helpful review of when domestic courts have categorised state assets as immune from execution,” said Tonova.