Arjun Solanki*
Anushka Tanwar**
Introduction
Summary
procedure, laid down in Rule 41(5) of ICSID Arbitration Rules, enable parties
to the dispute with an opportunity to get rid of unmeritorious
and abusive claims quickly at an initial phase of the arbitration proceedings.
This procedure saves both
time and cost while ensuring due
process to the parties. Rule 41(5) was introduced by
amendment in 2006,
it allowed early dismissal of the claims which are ‘manifestly
without legal merit’. In 2010, the Rule 41(5) have been brought to life
by the award of tribunal in Global Trading v. Ukraine
and RSM Production v. Grenada.
Moreover, Rule 41(5) permits both
merit and jurisdictional based objections.
The reactions of initial scholarships about this rule were mixed, but recent scholarships consider the rule to be favorable. The rule evolved with the appearance of decisions/awards by the tribunals, which made the rule more solidly established and reduced the fear of unwarranted summary dismissals. Any unwarranted dismissal will waste the time and resources of both the parties. It is, however, desired that States should clarify the conditions required while filing for a summary dismissal provision. Such explanation might be incorporated in arbitral rules or International Investment Agreements ("IIAs") by the State. Moreover, the tribunal by laying down a strict timeline at the initial phase could reduce the misspending of the parties.
Provisions
of other arbitral institutions or investment treaties, similar to summary
procedure of ICSID:
|
Institution |
Provision |
|
Stockholm
Chamber of Commerce |
Rule
39(2) |
|
International
Chamber of Commerce |
Article
22 |
|
Singapore
International Arbitration Centre |
Rule
29(1) |
|
Singapore
International Arbitration Centre Investment Arbitration Rules 2017 |
Rule
26(1) |
|
China
International Economic and Trade Arbitration Commission Investment Arbitration
Rules 2017 |
Article
26 |
|
Bahrain
Chamber for Dispute Resolution |
Rule 18.1
|
|
Hong Kong International
Arbitration Centre |
Rule 43 |
|
United
States-Dominican Republic-Central American Free Trade Agreement |
Articles
10.20.4 and 10.20.5 |
|
EU-Canada
Comprehensive and Economic Trade Agreement |
Article
8.32 |
Procedure
The summary procedure under Rule 41(5) is residual in nature and would only be applicable to the extent not otherwise agreed by the parties for making preliminary objections under relevant treaties.
The procedure laid down in Rule 41(5) is remarkably expedited in contrast to Rule 41(1) of the ICSID Arbitration Rules. If a party wants to raise an objection regarding the claim being manifestly without legal merit, then it has at most 30 days after the constitution of the tribunal and before the first session of tribunal, to file such objection. According to the tribunal in Trans-Global v. Panama, both the temporal conditions present in Rule 41(5) are cumulative in nature, which indeed means that both the condition should be met to file a preliminary objection.
The reason for retaining the 30 days period in the 2006 ICSID amendment was that it fits with the default 60 days period following the constitution of the tribunal within which the tribunal must hold the first session with the parties, thereafter tribunal is bound to render a decision or award ‘promptly’. As per the phrasing of Rule 41(5) and strict application of 30 days period, ‘promptly’ refers to day or weeks, and not months, but various tribunals have used this word in terms of weeks and, sometimes, months.
Moreover, if the tribunal fails to grant proper opportunity to parties for presentation of their observation on objections and renders an award, then such award could face danger of annulment proceedings under Article 52(1)(d) of the ICSID Convention on the ground of ‘serious departure from a fundamental rule of procedure’.
The standard conduct of proceedings under Rule 41(5) is that the tribunal enable parties for one to two rounds of written submissions, succeeded by a round of oral arguments. After this, the tribunal issues a decision or an award under Rule 41(5). Rule 41(5) is silent about the conduct of accelerated proceedings; orally or only through written submission. Moreover, various tribunals have allowed the parties with a round of oral arguments, but, as per the tribunal in Trans-Global, oral arguments would be difficult to fit in the strict timeline of Rule 41(5).
If the objection is successful about the manifest lack of legal merit of a claim, then the tribunal will issue an award. Otherwise, on failure, the tribunal will probably give ruling in the shape of a decision.
However,
Rule 41(5) makes it comprehensible through the last sentence that dismissal of
a preliminary objection under Rule 41(5) does not hinder the right of a party
to file for jurisdictional objection, as per the standard procedure under Rule 41(1).
Accordingly, Rule 41(5) establishes a harmonious
continuum with Article 36(3) of the ICSID Convention. The
tribunal in the Brandes Investment v. Venezuela
stated, in support, that: ‘there are
actually three levels at which jurisdictional objections could be examined.
First by the Secretariat, and if the case passes that level, it would then be
under Rule 41(5), and if it passes that level, it might still be under Rule
41(1).’
Test for ‘Manifest Lack of Legal Merit’
ICSID tribunals have used the test for ‘Manifest Lack of Legal Merit’ in great consistency. Tribunals have uniformly observed that ‘Manifest’ means ‘evident’, ‘obvious’, or ‘clearly revealed to the eye, mind or judgement’. In Brandes, the tribunal stated that the term ‘legal merit’ includes: ‘all objections to the effect that the proceedings should be discontinued at an early stage because, for whatever reason, the claim can manifestly not be granted by the Tribunal’.
Moreover, tribunals have set the standard of Rule 41(5) high, and requires respondent to establish the objection as ‘clearly and obviously, with relative ease and dispatch’. Furthermore, it is the responsibility of respondent to prove that the claim is ‘clearly and unequivocally unmeritorious’.
The high standard of Rule 41(5) has been seldomly crossed by the parties. Usually, the standard is fallen short of. In the decision of PNG Sustainable Development Program v. Papua New Guinea, respondent filed objections regarding both the jurisdiction and merits of the case. The tribunal rendered the reasoning, while dismissing the respondent’s objection, that objections raised by the State involves novel issues of interpretation and analysis, and requires consideration of complex facts in a summary fashion.
Similar reasoning is rendered by the tribunal in Eskosol v. Italian Republic, where the tribunal dismissed the objections raised by respondent State under Rule 41(5). The tribunal concluded that the issues were not ‘manifest’, and requires analysis of both novel and complex law and facts, and thus the issue cannot be resolved by Rule 41(5).
These interpretation
of the test for ‘manifest lack of legal merit’ should not be equated to the
prima facie test, less strict, under Rule 41(1) on jurisdictional preliminary
objections.
Avoid delay
The effectiveness of Rule 41(5) is limited by the set high standard, reluctance of tribunals to give conclusion in summary proceedings, and the likelihood that claimant could adjust factual and legal argument during the course of proceedings. These defects allow parties to invoke Rule 41(5) without genuine basis to disrupt and delay the proceedings, and increase the wastage of parties financial resources, making it difficult for them to avail justice.
Nevertheless, till now, only 8 out of 34 cases have rendered full and partial dismissal, which makes it clear that persistent abuse of this rule is absent in the present time. Moreover, parties to a dispute should be aware of the fact that the dismissal standard for an objection is high and parties should remain realistic about their preliminary objections.
It is
suggested by Lars
Markert that if a respondent tries to disturb the balance, between
successfully dismissing objections that are unmeritorious or frivolous and
adequately protecting the right of claimant to present its claim, then the
tribunal may penalize the respondent by assigning the fees and cost for
unethical or bad faith behavior, while rendering the award. This approach could
provide a positive perspective to the use of Rule 41(5) in ICSID.
Conclusion
After 15
years of Rule 41(5), and 34 decisions or awards, it is evident that the
concerns raised in the initial stages of implementation of this rule regarding
the misuse of Rule 41(5) by respondents in delaying the proceedings and
increasing financial burden on the parties, luckily never occurred. The set
high standard and uniformity in decisions played a crucial role in the
promoting Rule 41(5). Moreover, the strict timeline set in Rule 41(5)
guaranteed quick dismissal of filing, and at the same time protected from any
delaying stratagem.
 of ICSID Arbitration Rules: Manifest Lack of Legal Merit ){kind=link}
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