To resolve legal disputes and mediate agreements between foreign investors and States, the International Centre for Settlement of Investment Disputes (ICSID) was formed as an international arbitration agency in 1966. The World Bank Group, with its headquarters in Washington, D.C., supports ICSID through membership fees. A treaty written by the executive directors of the International Bank for Reconstruction and Development and ratified by member nations created this independent, multilateral agency with the specific purpose of promoting global investment flow and reducing non-commercial risks. In compliance with the ICSID Convention, 153 contracting member nations have as of May 2016 pledged to uphold and enforce arbitral judgements.
The Organisation for European Economic Cooperation (now known as the Organisation for Economic Co-operation and Development) made several attempts to establish a framework to safeguard international investments in the 1950s and 1960s, but these efforts revealed divergent opinions regarding how to compensate for the expropriation of foreign direct investment.
Aron Brochures, the International Bank for Reconstruction and Development’s (IBRD) General Counsel at the time, came up with the concept of a multilateral agreement in 1961 to establish a procedure for resolving individual investment disputes on a case-by-case basis rather than imposing results based on standards. To negotiate and draught a preliminary agreement, Broches organised seminars to consult legal professionals from all over the world, including Europe, Africa, and Asia. To complete and get the board of directors’ approval for the agreement, the IBRD personnel drafted an official draught and sought legal advice.
|ICSID Full Form||International Centre for Settlement of Investment Disputes|
|Managing Director||Meg Kinnear|
|Method||Social science research|
By the Convention, ICSID offers options for the mediation and arbitration of disputes between investors who are legitimate citizens of other member nations and member countries. It is optional to use ICSID for conciliation and arbitration.
But once the parties have agreed to arbitrate disputes under the ICSID Convention, neither can do so on its own. Furthermore, the Convention mandates that all ICSID Contracting States recognise and uphold ICSID arbitral rulings, regardless of whether they are parties to the dispute or not.
In addition to this basic function, the Centre has had a set of Additional Facility Rules in place since 1978 that provide the ICSID Secretariat to oversee specific actions between States and foreign nationals that are outside the purview of the Convention.
The State party or the foreign national’s home State must not be a member of ICSID for the conciliation or arbitration to take place. If the disagreement relates to a transaction that has “elements that distinguish it from an ordinary commercial transaction,” additional facility conciliation and arbitration are also available for those situations.