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Part II Grounds for Annulment, 9 Failure to State Reasons on which the Award is Based

From: Annulment Under the ICSID Convention

R Doak Bishop, Silvia M Marchili

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2021. All Rights Reserved. Subscriber: null; date: 09 May 2021

Subject(s):
Failure to state reasons — Annulment

(p. 151) Failure to State Reasons on which the Award is Based

9.01  Unlike improper constitution of the tribunal and serious departure from a fundamental rule of procedure, this ground for annulment is not related to the procedure leading to the award, but to the manner in which the substantive decision is justified in the award. This ground has led some annulment committees to succumb to the temptation to review the merits of the dispute.1 While the first annulment panel in Klöckner I set a high water mark (p. 152) by requiring that the tribunal state ‘sufficient’ reasons, the majority of ICSID panels after MINE have expressed a preference for a lower reasons threshold, which only ‘implies that [the tribunal’s reasoning] must enable the reader to follow the reasoning of the Tribunal on points of fact and law’.2

9.02  This chapter analyses ICSID practice on failure to state reasons and the special challenges that this ground for annulment poses for panels and for ICSID as a dispute resolution venue in general.

A.  The Tribunal’s Obligation to Provide Reasons

9.03  The rules of most arbitration and international adjudicatory systems require tribunals to provide reasons for their decisions, although some of them waive the requirement in cases in which the parties agreed that no reasons need be given.3 There have been some interesting precedents in which arbitrators gave no reasons, and were subject to strong criticism. That was the case, for example, in Portendic, an 1843 arbitration between France and Great Britain in which the King of Prussia was the arbitrator, and also in the 1897 Cerruti case between Colombia and Italy.4

9.04  Article 48(3) of the Convention provides: ‘The award shall deal with every question submitted to the Tribunal and shall state the reasons upon which it is based’.5 In turn, ICSID Arbitration Rule 47(1)(i) requires that the award must contain ‘the decision of the Tribunal on every question submitted to it, together with the reasons upon which the decision is based’.

9.05  The ICSID Convention’s drafting history sheds little light on how much detail the reasoning in the awards should include.6 ICSID practice shows that tribunals have provided reasons for their awards, but some of the most controversial annulment decisions were based on the alleged failure by tribunals to provide sufficient or tenable reasons or on the fact that they allegedly failed to deal with questions and arguments that were only discussed during the annulment proceeding.

9.06  In addition, commentators and committees have taken different positions with respect to the question whether Article 52(1)(e) sanctions, with annulment, both the failure to state reasons and the tribunal’s obligation to deal with every question submitted to it. Section E addresses these issues in further detail.

(p. 153) B.  The Drafting of Article 52(1)(e)

9.07  Historically, only a few authors identified failure to state reasons as a specific ground for annulment of international arbitral awards.7 Pascuale Fiore, for example, considered that failure to state reasons could constitute a ground for annulment only in the event of complete absence of reasons regarding both facts and law.8

9.08  In the context of the drafting of the ILC Rules on Arbitral Procedure, an interesting debate arose regarding a failure to state reasons as a ground for annulment. In providing comments to a draft article on annulment, the Government of Brazil noted that ‘[f]ailure to include a full statement of reasons, as required in Article 24, might be made a ground for annulment of the award’.9 In addition, during the 1953 ILC debates, one of its members suggested an amendment to the original text of the article on annulment, which until then made no reference to the requirement to state reasons as a ground for annulment. His proposal consisted of adding, as a ground for annulment, ‘that the award is not supported by valid reasons’.10 Ricardo Alfaro, the Panamanian member of the ILC, considered that it would be ‘extremely dangerous’ if failure to state reasons became a ground for annulment, because ‘it would then be open to either party to claim that the statement of reasons was insufficient’.11 Hersch Lauterpacht, who was also a member of the ILC, echoed this concern.12 Special Rapporteur Georges Scelle, considered ‘failure to give valid reasons’ to be a fundamental deviation from the rules of procedure, and suggested that the paragraph providing for serious departure from a fundamental rule of procedure be modified to add ‘and particularly omission to furnish a statement of reason for the award’.13 This proposal was adopted by 11 votes to 1.14 In the final version of the ILC Model Rules, the article on annulment included as a ground for annulment ‘that there has been a failure to state the reasons for the award or a serious departure from a fundamental rule of procedure’.15

9.09  The 1963 preliminary draft of the ICSID Convention, which mirrored the article on annulment in the 1953 ILC Draft Rules on Arbitral Procedure, expressly provided for failure to state reasons as an instance of a serious departure from a fundamental rule of procedure.16 (p. 154) Because the first draft of the Convention empowered the parties to agree that reasons need not be stated, the drafters subsequently added ‘failure to state reasons’ as a separate ground, so that the exception could be added to that particular ground, avoiding the possibility of the text becoming awkward. At that point, clause (e) of the article on annulment stated ‘failure to state the reasons for the award, unless the parties have agreed that reasons need not be stated’.17 After the Legal Committee eliminated the exception, the ground nevertheless remained identified separately.18

9.10  Committees relying on Article 52(1)(e) as a tool to expand their review of the underlying decision have sometimes disregarded the fact that the travaux préparatoires illustrate that this ground: (i) was originally conceived as a part of the provision involving a serious departure from a fundamental rule of procedure, a ground that committees tend to credit only rarely; (ii) actually purported to ensure that the tribunal gave reasons ‘for the award’; and (iii) was intended to ensure that the minimum guarantees of ‘natural justice’ were observed.19 To turn Article 52(1)(e) into a gateway to a disguised appeal is contrary to the text and the travaux préparatoires of the ICSID Convention. As Mark Feldman stated:

At most, the negotiating history of the Convention suggests that a statement of reasons should contain enough material on the facts and the law ‘to enable the reader to follow the reasoning of the tribunal.’20

C.  The Applicable Standard

9.11  Although committees and authors seem to unanimously agree that Article 52(1)(e) does not empower them to assess the correctness or persuasiveness of the award, some committees have interpreted this standard in a manner that results in such an assessment. Christoph Schreuer has observed that annulment committees have consistently confirmed that Article 52(1)(e) does not permit any inquiry into the quality or persuasiveness of reasons. Committees may be disappointed with the adequacy of reasons, but provided they meet the conditions set out in MINE, and confirmed in Vivendi I, the reasons requirement must be considered as satisfied.21

9.12  The precise scope of this ground for annulment in ICSID practice has varied, however, throughout time.22 While the first annulment committees emphasized the need for the reasons given in an award to be ‘sufficient’ or ‘adequate’, ICSID’s subsequent practice demonstrates that the standard is related to the mere furnishing of reasons that support the tribunal’s decision.23

(p. 155) 9.13  The following subsections describe the different standards applied by ICSID committees to interpret the requirement to state reasons under Article 52(1)(e).

1.  ‘Sufficient’ reasons

9.14  The first ICSID annulment committee—the Klöckner I committee—held that tribunals were required to give ‘sufficient’ reasons or suffer the penalty of annulment under Article 52(1)(e) of the Convention.24 Under the Klöckner I committee’s rationale, it is not sufficient for an award to contain ‘apparently relevant’ reasons, as ‘[t]his would deprive of any substance the control of legality Article 52 of the Convention is meant to provide’.25 On the other hand, the committee admitted that interpreting this provision as implicitly requiring ‘relevant reasons’ could turn annulment into an appellate mechanism, and lead the committee to pass judgment on the tribunal’s decision.26 Therefore, the committee concluded:

A middle and reasonable path is to be satisfied with reasons that are ‘sufficiently relevant’, that is, reasonably capable of justifying the result reached by the Tribunal. In other words, there would be a ‘failure to state reasons’ in the absence of a statement of reasons that are ‘sufficiently relevant’, that is reasonably sustainable and capable of providing a basis for the decision.27

9.15  Echoing this position, the committee in Amco I stated that for an award not to be annulled there must be a reasonable connection between the bases invoked by the tribunal and the conclusions it reaches. It therefore found that the phrase ‘sufficiently pertinent reasons’ was a simple and useful clarification of the term ‘reasons’ as used in the ICSID Convention.28

9.16  Several years later, the Soufraki committee endorsed the ‘sufficiency’ requirement, but it also stated that it could not look into the correctness of the reasons, and that it was not necessary for a tribunal to give a reason for every word or for an assertion which is in itself a reason.29 Moreover, the committee clarified that lack of references supporting a proposition was not by itself a ground for annulment, especially in those cases in which the documentation is provided by the parties throughout the proceedings, or related to well-known propositions.30

9.17  More recently, the Lucchetti committee noted that a failure to state reasons ‘aims at ensuring the parties’ right to ascertain whether or to what extent a tribunal’s findings are sufficiently based on the law and on a proper evaluation of relevant facts’.31

(p. 156) 9.18  But interpreting Article 52(1)(e) as requiring tribunals to provide the parties with ‘sufficient’ reasons should not be the proper standard in light of the limited scope of review of annulment committees. In practice, it is difficult to distinguish sufficient reasons from ‘correct’ or ‘persuasive’ ground, and the analysis would inevitably lead to a subjective assessment of the tribunal’s considerations in light of the committee’s opinions. As Schreuer explained:

Once an ad hoc committee starts looking into whether the tribunal’s explanation is sufficient to constitute a statement of reasons, it has already embarked upon a quality control of the award.32

9.19  Many commentators joined the list of detractors of the Klöckner I approach. De Berranger pointed out that it constituted a control on the substance as opposed to a control on the form by requiring that the reasons given be sufficient or adequate.33 Mark Feldman, for his part, considered that analysing the adequacy of the tribunal’s reasoning in the award ‘necessarily draws the ad hoc Committee into an examination of the substance of the tribunal’s decision…which is not authorized by Article 52’.34

2.  ‘Understandable’ decision

9.20  Despite the findings in Klöckner I, Amco I, and Soufraki, most ICSID annulment panels have held that Article 52(1)(e) does not provide for annulment awards that fail to give ‘sufficient’ reasons. The standard mostly embraced by ICSID annulment committees is that to avoid annulment, the award should allow the reader to understand the decision and how it connects point A to point B. In this sense, the MINE committee held that the requirement to state reasons is met if the tribunal’s line of reasoning (even if inaccurate) is traceable. The MINE committee analysed the scope of this ground for annulment, and held in the most quoted paragraphs:

[T]he requirement to state reasons is satisfied as long as the award enables one to follow how the tribunal proceeded from Point A to Point B, and eventually to its conclusion, even if it made an error of fact or law …

The adequacy of the reasoning is not an appropriate standard of review under paragraph 1(e), because it almost inevitably draws an ad hoc Committee into an examination of the substance of the tribunal’s decision, in disregard of the exclusion of the remedy of appeal by Article 53 of the Convention.35

9.21  The Amco II committee echoed the finding in MINE by holding that Article 52(1)(e) does not require that the reasons be adequate or sufficient, because if annulment committees are entitled to pass judgment on the quality of the reasons given by their predecessors, it would exceed the power otherwise conferred by the Convention.36 The Amco II committee held that (p. 157) this would constitute appellate jurisdiction, which is explicitly excluded by Article 53(1).37 It concluded by stating: ‘It is incumbent upon Ad hoc Committees to resist the temptation to rectify incorrect decisions or to annul unjust awards’.38 Many other committees followed this rationale, which is more consistent with the text of Article 52(1)(e) and the Convention’s travaux préparatoires.39 As Schreuer explained, ‘the purpose of a statement of reasons is to explain to the reader of the award, especially to the parties, how and why the tribunal reached its decision’.40

3.  ‘Non-frivolous’ reasons

9.22  Some committees emphasized that the reasons given by a tribunal must not be ‘frivolous’. The CDC committee, for example, found that the more recent practice by committees is to apply Article 52(1)(e) in such a manner that the committee does not intrude into the legal and factual decision-making of the tribunal.41 Echoing the rationale of the MINE committee, the CDC committee added, however, that ‘Article 52(1)(e) requires that the Tribunal have stated reasons, and that such reasons be coherent, i.e., [not] “frivolous,” but does not provide us with the opportunity to opine on whether the Tribunal’s analysis was correct or its reasoning persuasive’.42

9.23  Other committees also considered that the provision of ‘frivolous’ reasons would be tantamount to a failure to state reasons.43

9.24  Several authors have pointed out that the reference to ‘contradictory or frivolous reasons’ emphasizes a search for manifest incoherence or manifest error in the content of a particular reason (‘frivolous’), both of which shade easily into appeal.44

9.25  Aron Broches, on the other hand, embraced the position that contradictory reasons might result in annulment under Article 52(1)(e). He considered that the ‘non-frivolous’ standard was applicable to Article 52(1)(e). Broches took the position that reasons might be considered frivolous if they are manifestly irrelevant and ‘known to be so by the tribunal’, and he added that failure to sanction this form of ‘inadequacy’, ‘which at the margin does not require an examination of the substance of the tribunal’s decision, would permit a tribunal to pervert its function and to commit a grave injustice’.45

4.  ‘Non-contradictory’ reasons

9.26  The Klöckner I committee was the first to consider the issue of contradictory reasons. It maintained that ‘two genuinely contradictory reasons cancel each other out’, and thus, amount to a failure to state reasons.46 The committee held, however, that even in that case, (p. 158) committees still had to analyse whether the award was sufficiently well founded by other reasons stated in the award, and whether the failure to state reasons caused any harm to the party seeking annulment, given the principle ‘no annulment without grievance’.47 The MINE committee also considered that contradictory reasons might result in annulment under Article 52(1)(e).48

9.27  Aron Broches also took the position that the ‘minimum requirement’ under Article 52(1)(e) would not be met by contradictory reasons, because they ‘cancel each other out and are equivalent to the absence of reasons’.49

9.28  The committee in Mitchell explained that ‘a failure to state reasons exists whenever reasons are purely and simply not given, or are so inadequate that the coherence of the reasoning is seriously affected’. It added that ‘a seriously contradictory reasoning would be equivalent to a failure to state reasons under Article 52(1)(e), provided that the contradiction is at the same time apparent, to a point such that the ad hoc Committee cannot be reproached for engaging in an analysis of the merits’.50

9.29  More recently, the Rumeli committee took a more restrictive position, by arguing that contradictory reasons do not constitute a failure to state reasons ‘unless they completely cancel each other out and therefore amount to a total absence of reasons’.51

9.30  By contrast, the Vivendi I committee correctly noted that the contradictory reasons and basis for annulment should not necessarily result in a failure to state reasons pursuant to Article 52(1)(e), when what is really expressed are conflicting considerations that must be weighed by the tribunal. It held:

It is frequently said that contradictory reasons cancel each other out, and indeed, if reasons are genuinely contradictory so they might. However, tribunals must often struggle to balance conflicting considerations, and an ad hoc committee should be careful not to discern contradiction when what is actually expressed in a tribunal’s reasons could more truly be said to be but a reflection of such conflicting considerations.52

9.31  It added that reasons could be stated succinctly or at length, and that ‘different legal traditions differ in their modes of expressing reasons’.53 Hence, the committee found, tribunals must be allowed a degree of discretion as to the way in which they express their reasoning.54

9.32  As Michael Reisman pointed out, arbitrators’ different levels of personal ability and diverse legal culture, as well as the varying degrees of skill and elegance with which they draft judgments, sometimes in a language in which they are not native, are factors that need to be taken into account when a decision is analysed.55 Thus, according to Reisman, if a (p. 159) committee with members from different legal cultures is unwilling to try to ‘get into the skin’ of the original tribunal and reconstruct the reasoning of the award, the risk of annulment will be much higher.56

9.33  Similarly, commentators have noted that the reference to contradictory reasons emphasizes a search for manifest incoherence, which shades easily into appeal.57 One commentator strongly criticized the MINE decision on this point:

Why, in the absence of express language, should contradictory, or even frivolous, reasons be more objectionable than wrong reasons? Indeed, every wrong proposition is, by definition, a contradiction of that which is correct. This restriction appears to be little more than the thin end of a wedge by which wrong reasons might in time be seen themselves to be ‘contradictory’, thereby undermining the principle of finality of awards which the Committee recognized to be so central to the ICSID Convention. It might be said that the presence of contradictory reasons within an ICSID award undermines its authority while some other form of error—whether of law or fact—is less likely to do so because it is less likely to be apparent. Be that as it may, there is no logical distinction between an error in the form of a contradiction in the reasoning of the award and an error of law or fact manifested on the face of the award. The attempt to draw such a distinction shows that the introduction of exceptions which are not expressly sanctioned by the Convention is the first step down a slippery slope which undermines ICSID’s procedures.58

9.34  Indeed, broadening the scope of Article 52(1)(e) to comprise decisions with contradictory reasons could transform an annulment proceeding into an appeal.

5.  ‘Necessary’ reasons: the distinction between obiter dicta and ratio decidendi

9.35  Some committees have highlighted the fact that not every issue discussed by a tribunal needs to be justified in order to avoid annulment under Article 52(1)(e). Indeed, when the tribunal is simply making an obiter dicta statement and it fails to give reasons for its position on that point, annulment should not be the result.

9.36  The committee in Amco I applied this distinction by refusing to accept that obiter statements could constitute an independent basis for annulment.59 Similarly, the Vivendi I committee noted:

[A]nnulment under Article 52(1)(e)…entails two conditions: first, the failure to state reasons must leave the decision on a particular point essentially lacking in any expressed rationale; and second, that point must itself be necessary to the tribunal’s decision.60

9.37  In addition, there can be no lack of reasons with respect to a new argument or evidence that was never presented to the tribunal, but that was tendered only after the award was (p. 160) rendered, because the tribunal was obviously deprived of the opportunity to consider it. In this sense, the committee in Wena stated that the tribunal’s duty to state the reasons supporting its conclusion is based on the evidence and legal authorities that were before it at the time it declared the proceeding closed. It added that the award cannot be challenged under Article 52(1)(e) for a lack of reasons ‘in respect of allegations and arguments, or parts thereof, that have not been presented during the proceeding before the Tribunal’.61

6.  ‘Implicit’ reasons and the committees’ authority to reconstruct the tribunal’s reasoning

9.38  An important distinction that should be drawn under Article 52(1)(e) is that between express and implicit reasons. Some committees have held that when the reasons can be inferred from the award, even if not expressly stated, the award does not need to be annulled. The committee should strive to reconstruct those implicit reasons. In other words, Article 52(1)(e) does not constitute a hair-trigger rule under which the mere absence of express reasons result in annulment.62

9.39  The committee in Klöckner I was the first to address the issue of a committee’s power to reconstruct its predecessor’s reasoning. It stated as follows:

It is not for the Committee to imagine what might or should have been the arbitrators’ reasons, any more than it should substitute ‘correct’ reasons for possibly ‘incorrect’ reasons, or deal ‘ex post facto’ with questions submitted to the Tribunal which the Award left unanswered. The only role of the Committee here is to state whether there is one of the grounds for annulment set out in Article 52 of the Convention, and to draw the consequences under the same Article. In this sense, the Committee defends the Convention’s legal purity.63

9.40  Subsequent committees adopted a more flexible position and acknowledged their power to reconstruct the tribunal’s reasoning by finding implicit reasons. The Wena committee, for example, held that neither Article 48(3) nor Article 52(1)(e) specify the manner in which tribunals have to state reasons, and since their purpose is to ensure that the parties understand the tribunal’s reasoning, it is not necessary that each reason be stated expressly. It concluded that the tribunal’s reasons may be implicit in the considerations and conclusions contained in the award, as long as they can be reasonably inferred from the terms used in the decision.64 It added:

It is in the nature of this ground of annulment that in case the award suffers from a lack of reasons which can be challenged within the meaning and scope of Article 52(1)(e), the remedy need not be the annulment of the award. The purpose of this particular ground for annulment is…to allow the parties to understand the Tribunal’s decision…If the ad hoc committee so concludes, on the basis of the knowledge it has received upon the dispute, the reasons supporting the Tribunal’s conclusions can be explained by the ad hoc Committee itself.65

(p. 161) 9.41  As Michael Reisman argued, if committees are unwilling to try to determine whether a plausible and defensible answer was effectively reached, nullifications with formal (but no material) justification will occur.66

9.42  Reconstructing implicit reasons ‘where the result reached by the tribunal appears capable of explanation in the light of the reasons actually supplied’67 constitutes a necessary methodology to avoid a hair-triggering approach that results in overly formalistic annulments.

D.  ICSID Practice on Article 52(1)(e)

1.  Klöckner I

9.43  The claimant requested the annulment of the award for contradictory reasons. According to the applicant, the tribunal observed that the claimant had violated its duty of full disclosure to its partner (in that case, the State), but in contrast rejected the counterclaim brought by the respondent, because ‘one can hardly accept that the State having access to many sources of technical assistance, could be entitled to claim compensation for the fact that it was misled by a private company proposing a particular contract’.68 Thus, the claimant argued that the tribunal engaged in a contradiction by considering that the claimant failed to comply with its obligations regarding the provision of information to the State, but that the latter could not have been deceived. The committee rejected the request because the tribunal had found that there was omission or dissimulation on the part of the claimant, regardless of a potential deception, and therefore, there was no contradiction in the tribunal’s reasoning.69

9.44  The claimant also requested the annulment of the award because it systematically used conditional or purely hypothetical reasons. The annulment committee, however, rejected this argument. In so doing, it considered that the claimant’s analysis resembled an appellant’s criticism, which made no distinction between the ratio decidendi and broader considerations.70 Nonetheless, the committee pointed out that the applicant for annulment had to show that ‘the contested Award is based, on one point or another, on a simple hypothesis, instead of on facts or definite legal arguments’, which it did not.71

9.45  As to the claimant’s allegations on absence and inadequacy of reasons, the annulment committee rejected them and considered that the ‘reasons’ requirement under Article 52(1)(e) (p. 162) implies that the reasons should be the basis of the tribunal’s decision and be ‘sufficient’.72 It concluded:

There would be a ‘failure to state reasons’ if no reasoning or explanation whatsoever, or no ‘sufficiently relevant’ or ‘reasonably acceptable’ reasoning could be found for some conclusion or decision in the Award. Such would not be the case if the Tribunal, having justified its finding or a particular decision in a certain way, even if subject to criticism, did not address this or that particular argument….73

9.46  As regards the alleged failure by the tribunal to deal with questions submitted to it, the committee analysed each of the issues with respect to which claimant alleged that the tribunal did not address its arguments. First, Klöckner argued that the tribunal imposed on that party an obligation of result, which was expressly excluded in the relevant contract (ie, the management contract), as Cameroon recognized.74 The committee held that it was unclear from the applicant’s submissions whether it considered this to amount to a manifest excess of powers or a failure to state reasons. Nonetheless, it proceeded to analyse whether the tribunal actually imposed such an obligation on Klöckner.75 Although the award did not so expressly state, the committee interpreted several passages as indicating that the tribunal was imposing an obligation of result on Klöckner.76 The committee, thus, annulled the award on this point and held:

[T]he Award’s text gives no indication of the reasons why the Tribunal decided, in substance if not in so many words, that there was an ‘obligation of result’. Above all, it did not take into consideration Klöckner’s pleas on the best efforts obligation or the contractual or legislative provisions limiting seller/supplier liability. Despite many readings of the text, it is impossible to discern how and why the Tribunal could reach its decision on this point.77

9.47  The committee concluded that it was superfluous to examine whether the tribunal manifestly exceeded its powers on this point, because ‘the Award in no way allows the ad hoc committee or for that matter the parties to reconstitute the arbitrator’s reasoning in reaching a conclusion that is perhaps ultimately perfectly justified and equitable…but is simply asserted or postulated instead of being reasoned’.78

9.48  Klöckner’s second allegation regarding the alleged failure to deal with questions was the fact that the tribunal failed to address some of its ‘essential arguments’.79 The committee, however, considered that the arguments to which the applicant referred were not properly elaborated in the original proceedings, and thus, it rejected this request.80

9.49  Klöckner’s third allegation was that the tribunal failed to address the applicability of certain contractual clauses limiting the claimant’s liability.81 The committee held that the tribunal said ‘nothing on this essential question and contains no reason on this topic, or…no (p. 163) expressed reason’.82 In admitting this point, the committee stated that it was not for it to imagine what might have been the tribunal’s reasons, but rather to find whether there was one of the grounds for annulment as stated in Article 52 of the Convention.83

9.50  The applicant’s fourth complaint regarding failure to deal with questions was based on the fact that the tribunal failed to take into account several confirmations by Cameroon of its debts to the claimant.84 The committee, however, considered that the award addressed the applicant’s arguments on one of the points raised by the claimant, but failed to give reasons regarding a second point, and thus, it partially accepted the request for annulment on this point.85

9.51  The fifth and final allegation involved the time limit for a contractual warranty, which was not taken into account by the tribunal.86 The committee found that the tribunal failed to expressly address the conditions of that warranty, and decided that it could not infer implicit reasons from other sections in the award. Thus, it annulled the award on this issue for failure to state reasons.87

9.52  As Aguilar Alvarez and Reisman explained, the Klöckner I decision constitutes the most thorough discussion of this ground for annulment, but it sets ‘an extremely high, indeed unprecedented standard’.88 Subsequent committees adopted a more moderate position.

9.53  Several authors strongly criticized the Klöckner I committee’s findings on Article 52(1)(e), because it opened the door to review of the substance of the tribunal’s decision while allegedly purporting to verify the existence of ‘sufficient’ or ‘adequate’ reasons.89 Jan Paulsson stated that the committee went beyond its mandate and ‘[w]ith a degree of sententiousness which has not been well received…explained that it did so in order to guide arbitrators and parties in future proceedings’.90 He concluded ‘one might consider pragmatically whether or not this “public service” of the Klöckner I Committee in fact has helped arbitrators to render more acceptable awards, and parties to understand precisely which grievances are sufficient to justify a request for annulment’.91

2.  Amco I

9.54  Indonesia claimed that the tribunal in Amco I failed to state any reasons in holding it responsible for the acts of the Army when seizing a hotel, basing its decision on a duty imposed by international law to protect foreign investors and their property.92 The committee rejected Indonesia’s allegation, because Indonesia itself admitted that it had a duty under Indonesian law to assist the lawful possessor of the hotel. The committee concluded from that statement that under general Indonesian law, the State has a duty to protect a person in actual, (p. 164) peaceful possession of property. The committee considered that the tribunal’s decision should not be annulled, but it highlighted that it was controversial whether States had a special duty imposed by public international law to protect foreign-owned property.93

9.55  Indonesia also claimed that the tribunal failed to state any reasons for holding that Amco could bring its claims based on the acts of the Indonesian Army directly to an ICSID tribunal without previously exhausting local remedies.94 The committee rejected Indonesia’s position, ruling that by accepting ICSID jurisdiction and failing to make any reservation under Article 26 of the ICSID Convention, Indonesia waived the right to require prior exhaustion of local remedies.95

9.56  In addition, Indonesia contended that the tribunal failed to state reasons when deciding that there was an uninterrupted causal link between the illegality of the Army’s acts and the revocation of the investment license, because an Indonesian court ended the alleged illegality by its own decision. The committee rejected this claim. It considered that the illegality persisted after the issuance of the decision by the Indonesian court, since just before the revocation of the investment license, an Indonesian court held that the Army’s acts were illegal.96

9.57  Indonesia was successful in claiming that the tribunal failed to state reasons regarding the calculation of the investment. The committee found that the tribunal did not calculate P.T. Amco’s investment in light of Indonesia’s Foreign Investment Law, because it failed to take into account that a portion of the investment was not duly registered and that part of the investment consisted in a loan, which does not qualify as investment under the Foreign Investment Law.97 The committee reached this decision after applying what Michael Reisman called the ‘material violation’ approach. Indeed, the committee not only determined whether a technical ground for annulment existed, but also determined what should have been the proper finding and analysed whether the ‘mistaken’ approach had harmful consequences.98

9.58  With respect to the analysis of why the tribunal failed to state reasons, the committee did not elaborate on the standard, but simply stated that ‘the Tribunal seemed to have contradicted itself. At least, this impression is not fully disproved by the text of the Award itself’.99 The reasoning here seems to imply that an award may be presumed annullable until it is proven otherwise, which is clearly at odds with Article 52(1) of the ICSID Convention.100

9.59  Indonesia also challenged the award for failure to state reasons when ordering that the conversion of any amounts due as damages from the local currency into US dollars should be made as of the date on which the damage occurred. The committee rejected this contention (p. 165) because it considered that the tribunal reached that decision by applying a local law, and that all references to international law were obiter dicta.101

9.60  The Amco I committee followed Klöckner I to a certain extent, although it lowered the threshold regarding the requirement to state reasons. It held that a full review of a tribunal’s reasoning would transform an annulment proceeding into an appeal. Nonetheless, it stated that supporting reasons must be ‘an appropriate foundation for the conclusions reached through such reasons’, and that there must be a reasonable connection between the bases invoked by a tribunal and the conclusions it reached.102 It concluded: ‘The phrase “sufficiently pertinent reasons” appears to this ad hoc Committee to be a simple and useful clarification of the term “reasons” used in the Convention’.103

9.61  Some commentators noted that the Amco I committee took a middle position as compared to Klöckner I and MINE, in the sense that while Klöckner I explicitly stated that reasons where sufficiently relevant only if they were based on identified sources of law and actual facts, Amco reformulated the standard as ‘sufficiently pertinent reasons’ without necessarily requiring the reasons to have been derived from certain rules of law or facts.104 The same commentators point out that it is different from the rationale in MINE, because the latter simply required the tribunal to provide reasons that allow a reader to follow the tribunal’s reasoning from Point A to Point B, while the Amco committee required a reasonable relationship between the tribunal’s findings and its conclusions.105

3.  MINE

9.62  Guinea contended that while the tribunal discarded certain hypotheses for the purposes of calculating damages, it applied another criterion that was actually more hypothetical. The committee agreed and held that since the tribunal concluded that theories ‘Y’ and ‘Z’ were inapplicable given their speculative nature, it could not, without contradicting itself, adopt a damage theory that ‘disregarded the real situation and relied on hypotheses which the Tribunal itself had rejected as a basis for the calculation of damages’. In annulling the decision on damages, the committee held that the requirement that awards must state the reasons on which they are based is not satisfied by contradictory reasons.106

9.63  In one of the most commonly quoted paragraphs of this decision, the MINE committee explained the standard that awards should meet in order to avoid annulment for failure to state reasons:

The Committee is of the opinion that the requirement that an award has to be motivated implies that it must enable the reader to follow the reasoning of the Tribunal on points of fact and law. It implies that, and only that. The adequacy of the reasoning is not an appropriate standard of review under Paragraph (1)(e) because it almost inevitably draws an ad hoc Committee into an examination of the substance of the tribunal’s decision, in disregard of the exclusion of the remedy of appeal by Article 53 of the Convention.

* * * *(p. 166)

In the Committee’s view, the requirement to state reasons is satisfied as long as the award enables one to follow how the tribunal proceeded from Point A to Point B, and eventually to its conclusion, even if it made an error of fact or of law. This minimum requirement is in particular not satisfied by either contradictory or frivolous reasons.107

9.64  In addition, Guinea argued that the tribunal failed to give reasons to award interest at the US bank rate. The committee held that although the US dollar was the currency of the contract, and therefore, the justification was apparent, ‘[a]n express statement to that effect is however wanting’.108

9.65  Finally, Guinea claimed that the tribunal seriously departed from a fundamental rule of procedure by failing to state reasons on which it awarded MINE part of the ICSID costs. The committee found that under Article 61(2) of the Convention, tribunals have discretionary power, and the tribunal was under no particular obligation to state reasons for awarding costs against the losing party. The committee also pointed out that Guinea had failed to argue that the tribunal abused its discretion. It decided, however, that because it annulled the tribunal’s decision regarding damages, Guinea was no longer ‘the losing party’. The committee concluded that the award of costs could not survive the annulment of that portion of the award with which it was inextricably linked, and it annulled the tribunal’s finding on costs as well.109

4.  Klöckner II

9.66  In Klöckner II, Cameroon claimed that the second tribunal failed to state reasons justifying the damages awarded or the division of responsibility between Cameroon and Klöckner, because it merely declared without further explanation that the amount covered both damnum emergens and lucrum cessans.110

9.67  The committee found that the award was ‘without a doubt very artificial’ on that point, because it simply indicated the total sum owed by one of the parties without elaborating on the causation link between the measures at issue and of the alleged damages.111 Notwithstanding this strong criticism, the committee decided that the second tribunal’s decision could be perfectly understood from the tribunal’s reasoning, because the amount represented ‘the result of the assessment made by the Tribunal of the responsibilities generated by the various wrongs and their imputation to the Parties’.112 It concluded:

[T]he determination of the partition rate of responsibilities comes within the sovereign assessment of the judge on the merits, an assessment over which the annulment jurisdiction cannot exercise any control.113

9.68  Cameroon also alleged that the second tribunal contradicted itself, which would justify annulment, because it found on the one hand that certain letters by Klöckner informing Cameroon of a price increase proved that no fraud existed, but at the same time it held that (p. 167) the letters did not fulfill Klöckner’s obligation to inform.114 The committee rejected this request, finding no contradiction.115

5.  Amco II

9.69  Indonesia contended that the second tribunal failed to state reasons, because the reasons it provided were not clear or complete enough. The second committee pointed out that under Article 31 of the Vienna Convention on the Law of the Treaties, Article 52(1)(e) should not be interpreted beyond its ‘ordinary meaning’, and thus, the committee could not add a further requirement that the reasons stated be ‘sufficiently pertinent’.116 It added:

The Committee observes, however, that not every gap or ambiguity in a judgement constitutes a failure to state reasons…[T]he ground for annulment in Article 52(1)(e) of the Convention is applicable where no reasons at all are given or where the reasons given are inconsistent or so weak as to be frivolous.117

9.70  Regarding Indonesia’s application, it concluded that despite the fact that the second tribunal was sometimes ‘laconic in its reasons or not totally clear in its reasoning’, this did not constitute a failure to state reasons.118

9.71  Indonesia also alleged that the second tribunal failed to state reasons upon which its supplemental award—through which the tribunal allegedly ‘reconsidered’ an asset’s valuation—was based. The second committee refrained from deciding this issue because it had already annulled the supplemental award for a serious departure of a fundamental rule of procedure.119

6.  Wena

9.72  According to Egypt, when addressing the disputes between the State entity involved in the dispute and Wena, the tribunal merely noted that it was not necessary to determine the conflicting allegations of the parties, and therefore, failed to state reasons for this conclusion. The committee rejected Egypt’s request because the tribunal had found it unnecessary to consider the conflicting allegations, and adding ‘[t]he explanation thus given for not determining the respective obligations of Wena and EHC under the lease is sufficient to understand the premises on which the Tribunal’s decision is based in this respect’.120

9.73  In addition, the committee pointed out

The Tribunal’s duty to state reasons supporting its conclusions has as its basis the statements on facts and law, together with all the evidence adduced, that were before the Tribunal at the latest at the time it declared the proceeding closed pursuant to Arbitration Rule 38. The award cannot be challenged under Article 52(l)(e) for a lack of reasons in respect of allegations and arguments, or parts thereof, that have not been presented during the proceeding before the Tribunal.121

(p. 168) 9.74  This conclusion seems evident, because otherwise tribunals would be required to state reasons with respect to arguments that were never advanced before them. The committees in MINE and Klöckner I reached similar decisions.122

9.75  Egypt also complained that the tribunal failed to state reasons regarding the legal basis on which it admitted Wena’s claim for damages and the grounds for its quantification. The committee explained that the award was based on the expropriation provision of the applicable BIT, which provided for ‘the fundamental notion of ‘prompt, adequate and effective compensation’. The committee found this to be the legal basis for awarding damages.123 With respect to the quantification of the damages awarded, the committee held that the ‘prompt, adequate, and effective compensation’ standard conferred on the tribunal some margin of discretion, within which ‘few reasons more than a reference to the Tribunal’s estimation can be given, together with statements on the relevance and the evaluation of the supporting evidence’.124 Hence, the committee rejected the application for annulment on this point.

9.76  Finally, the committee held that any further reason supporting the tribunal’s finding could be found in Wena’s documentary evidence, and Article 52(1)(e) does not permit the committee to inquire further whether the tribunal erroneously evaluated the evidence submitted to it.125

9.77  Egypt also argued that the tribunal failed to state reasons for deciding to apply a 9 per cent interest rate and the date from which the interest accrued. The committee rejected Egypt’s arguments because tribunals have a large margin of discretion when fixing interest, and both parties simply referred to the allocation of ‘appropriate interest’ in general, thus conferring on the tribunal a wide discretionary power to assess interest.126 Hence, according to the committee, the tribunal need not be more explicit than the parties were, and the latter in turn could not validly make new arguments and submissions that had not been developed before the tribunal.127

9.78  With respect to the dies ad quo, the committee decided that although it was true that no such date was specified expressly in the award, Egypt accepted that this date might be determined by taking into account the total amount of accrued interest and the interest rate awarded. The committee pointed out that Egypt did not undertake any such calculation, nor did it demonstrate that the tribunal had chosen a ‘wrong’ date. The committee then added that, although Egypt had argued that if that was the date to be used, it would be wrong, ‘because a substantial portion of Wena’s investment had been invested long after that date’. But the committee rejected this argument ‘because it invites this Committee to proceed to a re-examination of the merits of the Award’.128

(p. 169) 7.  Vivendi I

9.79  Argentina requested the partial annulment of the award alleging that the local company, which was one of the claimants in the arbitration proceeding, was not controlled by the French claimant and therefore, was not an ‘investor’ under the France-Argentina BIT.129 The committee rejected Argentina’s argument, because ‘while it is arguable that the Tribunal failed to state any reasons for its finding that “CAA should be considered a French investor from the effective date of the Concession Contract,” that finding played no part in the subsequent reasoning of the Tribunal, or in its dismissal of the claim’.130

9.80  According to Stanimir Alexandrov, the Vivendi I annulment proceeding revealed the limitations of relying on the reasons requirement as a basis of annulment, because although it appears to offer the broadest opportunity to attack errors in an award, in reality, the threshold for its application is very high. Alexandrov concluded:

Ad hoc committees are understandably reluctant to suggest that an arbitral tribunal…has produced reasoning that is so contradictory that the reasons cancel each other out, or so incomprehensible that the logic of the award cannot be followed. The Vivendi ad hoc Committee avoided this thicket by deciding the annulment on grounds of manifest excess of powers, and not reaching the ‘failure to state reasons’ claims.131

8.  CDC

9.81  The applicant alleged that the tribunal failed to deliberate, failed to consider relevant matters, and considered irrelevant ones as amounting to a serious violation of a fundamental rule of procedure. The committee considered, however, that such alleged errors were more commonly understood to amount to a failure to state reasons.132

9.82  The Seychelles argued that the tribunal failed to state reasons with respect to three issues; the first being the tribunal’s interpretation of a contract clause. The applicant held that the tribunal took into consideration irrelevant matters while failing to address relevant issues, and that thus, its ‘interpretation was so faulty that it does not come up to the standard of reasons’ in Articles 52(1) and 48(3) of the Convention.133 The committee noted that nowhere in the discussion of this clause did the applicant cite any authority indicating that an erroneous interpretation can result in the annulment of the award.134 The committee rejected the request for annulment on that basis and concluded that Article 52(1)(e) does not empower the committee to annul an award if the tribunal does not state certain particular reasons or if the reasons are not convincing to the committee.135

(p. 170) 9.83  The second ground for requesting annulment under Article 52(1)(e) was the tribunal’s failure to consider certain pieces of evidence. The committee highlighted that ‘the Republic fails to recognize the distinction between offering evidence and meeting the burden of proof’.136 Additionally, in the few instances in which the award did not seem particularly clear, the committee reconstructed the tribunal’s reasoning and rejected the applicant’s request for annulment.137

9.84  The third basis for requesting annulment under Article 52(1)(e) was the tribunal’s finding on costs. The committee pointed out that tribunals in general do not extend their reasoning to the issue of costs and added that it ‘may be doubted whether Article 52(1)(e) was intended to embrace such an issue’.138 The committee concluded that even assuming arguendo that the article embraced the issue, it was unacceptable, because of the unparticularized objection of the applicant during the original proceeding and the fact that the award spoke for itself on this point.139

9.  Mitchell

9.85  The applicant in Mitchell requested that the committee annul the award for manifest excess of powers and failure to state reasons because the dispute did not fall within the jurisdiction of ICSID. More specifically, the applicant’s main argument was an alleged failure to state reasons with regard to the tribunal’s jurisdiction on the basis of an improper definition of investment.140 In that sense, the applicant alleged that the activity of the claimant’s law firm could not be considered an ‘investment’, because: (i) it did not contribute to the economic and social development of the DRC; (ii) it could not be considered as a commercial or economic activity; (iii) legal counselling did not constitute a commercial or economic ‘service’; and (iv) that activity did not constitute a long-term operation or entail a significant economic contribution, and thus, it could not be distinguished from an ordinary commercial transaction.141 These requirements are commonly referred to as the Salini test.142

9.86  The committee first considered whether the claimant’s activity in the host state could qualify as an ‘investment’ under the ICSID Convention and the applicable BIT, and only then did it analyse the tribunal’s findings.

9.87  The committee noted that within the ICSID framework the term ‘investment’ implied a commitment of the investor, a certain duration of the project, an economic risk, and a contribution to the economic development of the host country.143

(p. 171) 9.88  In turn, while the claimant considered the contribution to the economic development of the DRC was a supplementary condition, the DRC argued that it constituted an ‘essential element’ of investment.144 The committee agreed with the DRC and held:

  1. (i)  the tribunal engaged in a vicious cycle by stating that ‘service’ includes ‘any service provided by a foreign investor’, when it did not explain why the claimant could be considered an investor;

  2. (ii)  it is the service provided by the claimant’s law firm that should constitute an ‘investment’ within the meaning of the ICSID Convention and the BIT, not the rights and assets protected by the BIT because they are part of the project;145

  3. (iii)  the tribunal should have indicated how the claimant’s law firm contributed to the economic development ‘or at least the interests of the State’;146 and

  4. (iv)  the award was incomplete and obscure with respect to what it considered investment; it failed to indicate the reasons why it regards it as an investment; and it failed to provide ‘the slightest explanation as to the relationship between [the law firm] and the DRC’.147

9.89  For those reasons, the committee concluded:

[T]he Award is tainted by a failure to state reasons, in the sense that the inadequacy of reasons is such that it seriously affects the coherence of the reasoning as to the existence of an investment in accordance with Article 25(1) of the Convention and the Bilateral Treaty between the United States of America and the Democratic Republic of Congo, on which relied the jurisdiction of the Arbitral Tribunal.148

9.90  The annulment decision in Mitchell has been severely criticized. Schreuer opined that it stands apart from a consistent line of cases in which committees have refrained from substituting their own view of the ‘correct’ decision for that of the tribunal.149

9.91  Mitchell has also been criticized given that the definition of investment is still controversial, and thus, annulment would seem a severe remedy when there are genuinely conflicting views.150 Moreover, that ICSID case law on the concept of investment is to a certain extent controversial evidences by itself that a decision applying or failing to apply the so-called Salini test should not be annulled solely for that reason.151 In addition, the mere fact that at least two tribunals—and subsequently, two annulment committees—decided the issue differently shows that it cannot be said that they committed a ‘manifest’ excess of power, if ‘manifest’ is to be interpreted as ‘easily perceived’.152

(p. 172) 9.92  Perhaps most importantly, the Mitchell committee reassessed the tribunal’s jurisdiction on a de novo basis. It did not analyse the observance of a minimum set of standards that address the procedural fairness of the award rather than the substance of the decision, and disregarded any boundaries under Articles 52 and 53 of the ICSID Convention. In short, the committee’s methodology was more akin to a court of appeal.153

9.93  The DRC also alleged that the tribunal failed to state reasons as regards the application of Article X(1) of the applicable BIT entitled ‘Measures not precluded by this Treaty’, which provides as follows:

This Treaty shall not preclude the application by either Party of measures necessary in its territory for the maintenance of public order and morality, the fulfillment of its obligations with respect to the maintenance and restoration of international peace and security, or the protection of its own essential security interests.154

9.94  The committee rejected that allegation, because ‘there can be no serious discussion of “failure to state reasons”’ in the case of a provision that was not at issue before the arbitral tribunal. Interestingly, the committee highlighted that ‘even if it were assumed that the Arbitral Tribunal had examined Article X(1) and had agreed that the measures undertaken were not wrongful, this would not have ruled out the need for compensation’.155

9.95  In addition, the committee also rejected the DRC’s request to annul the award for failing to consider provisions which were not adduced before the arbitral tribunal.156

9.96  Finally, the DRC alleged that the tribunal failed to state reasons regarding the award of damages. In an obiter comment, the committee rejected the DRC’s request and held that although the DRC’s claims pertained to questions on the merits, they could be analysed under Article 52(1)(e) ‘when the reasoning of the Arbitral Tribunal is inadequate or contradictory’.157 But the committee concluded that the reasoning of the tribunal was lengthy and detailed, and that it appeared that both parties were given ample opportunity to argue their cases regarding damages.158

9.97  As regards the DRC’s specific arguments, the committee held that the tribunal’s assessment was based on an expert opinion; that the tribunal evaluated the evidence adduced and its value; that the inclusion of certain expenses in the damage award could be an incorrect finding, but was within the tribunal’s powers; and that although the tribunal only briefly explained why the calculation of the damages for the claimant was based on the to total revenue of the firm, ‘it was apparently considered’ that the claimant was the sole owner of the firm and this could not be regarded as a failure to state reasons.159

10.  MTD

9.98  In MTD, Chile argued that the tribunal failed to state reasons when it disregarded the necessary separation of powers and attributed to an agency more authority than it actually (p. 173) possessed. The committee rejected this argument, concluding that there was no contradiction in asserting, on the one hand, that MTD could have expected that its project was viable, and on the other, that it had no right to planning permission. The committee said:

[T]the question is whether an informed reader of the Award would understand the reasons given by the Tribunal and would discern no material contradiction in them. In the Committee’s view the answer to that question in the present case is that the reasons are sufficiently clear and sufficiently displayed and that they entail no contradiction: thus the case for annulment under Article 52(1)(e) fails.160

9.99  In addition, Chile argued that the award should be annulled on two other bases, the first being causation.161 According to Chile, the tribunal’s findings on Chilean law implied that the project could have never gone ahead in any event. The committee rejected this allegation because it considered that the breach of the fair and equitable treatment standard was the act of approving a specific investment by reference to a location where it was not possible to implement the investment. The committee added that absent the agency’s decision to admit the investment, the loss would not have occurred.162

9.100  The second reason alleged by Chile was the apportioning of the loss on a 50:50 basis by the tribunal. The committee held that the award explained how the claimant contributed to its own loss and estimated that MTD’s contribution to the damage amounted to 50 per cent after deduction of the residual value of the investment, and said:

[S]ome further reasons for a 50:50 split of damages could have been offered at this stage. But the Tribunal had already analysed the faults on both sides in some detail, holding both to be material and significant in the circumstances…[T]he role of the two parties contributing to the loss was very different and only with difficulty commensurable, and the Tribunal had a corresponding margin of estimation…the Tribunal having analysed at some length the failings of the two parties, there was little more to be said—and no annullable error in not saying it.163

9.101  Chile also contended that the tribunal failed to state reasons in holding Chile responsible for the unreasonable price that MTD paid for the land involved in the dispute. The committee rejected this allegation and held that the tribunal took the price actually paid, deducted the amount offered by a third party to MTD, and halved the resulting amount because of MTD’s failure to protect itself, ‘a failure which included its failure to protect itself against a refusal of planning permission’.164 The committee considered that the tribunal had adequately explained its procedure and reasoning.165

9.102  Furthermore, Chile complained of the arbitrary and unexplained decision to use a cut-off date for taking the expenses into account as damages. The committee, however, rejected the request for annulment on that point and decided that the tribunal gave reasons for its decision.166

(p. 174) 11.  Soufraki

9.103  The Soufraki committee rejected the claimant’s request to annul the award for failure to state reasons. The claimant based its request on the tribunal’s finding on nationality. In particular, the claimant complained that the tribunal’s assertion of its authority to examine its Italian nationality for ICSID purposes was a bare affirmation, which failed to include any authority or reasoning.167

9.104  The committee held that after examining the tribunal’s award, its reasoning was concise and not overburdened with citations to the cases and literature, but complete, ‘with no essential point missing, and is not open to annulment under Article 52(1)(e)’.168 It added ‘[t]he reasoning set out by the Tribunal enables one easily to understand how the Tribunal reached its conclusion. There are no gaps…in the chain of reasoning and no internal inconsistencies’.169

12.  Lucchetti

9.105  Lucchetti alleged that the award was contradictory and unclear, because the tribunal employed standards that were contradictory and failed to deal with some of its contentions.170 The committee rejected Lucchetti’s request because, although the award did not properly take into account various elements as required under the Vienna Convention, it did refer to various standards adopted in international case law and doctrine and noted the elements that the tribunal found conclusive.171 Moreover, the committee held that it could not find in the tribunal’s reasoning any contradiction or lack of precision ‘such as to leave a doubt about the legal or factual elements upon which the tribunal based its conclusion’.172

9.106  In his dissenting opinion, Sir Franklin Berman drew a distinction between the reasons requirements in the jurisdictional and the merits stages. He wrote that when a tribunal finds that a case falls outside its jurisdiction, the grounds for doing so must be clear and strong so as to enable the claimant and other ICSID users to understand what the tribunal has done and why.173 Berman concluded that ‘if a Tribunal chooses to decline jurisdiction at the preliminary stage without adequately explaining the reasons why, then one is at once within the area of annullable error—if not on the basis of an excess of powers, then at least on the basis of a failure to give reasons’.174 Moreover, in a 2010 publication discussing the Luccheti decision, he noted that ‘[a] decision to wipe the case off the board as a preliminary matter must be strongly motivated’.175

9.107  This distinction, however, does not seem to have its basis under the ICSID Convention as tribunals are always required to give reasons, regardless of whether it is a decision on jurisdiction or on the merits of the case. In addition, reassessing the tribunal’s jurisdiction on a de (p. 175) novo basis to inquire into the substance of the jurisdictional decision is contrary to Articles 41 and 53 of the Convention.176

13.  CMS

9.108  The Government of Argentina requested the annulment of the CMS award, alleging that by finding that Argentina breached the ‘umbrella clause’ of the US-Argentina BIT, the tribunal manifestly exceeded its powers and failed to give reasons.177

9.109  The umbrella clause of that BIT provides: ‘Each Party shall observe any obligation it may have entered into with regard to investments’.178 In the annulment proceeding, the claimant explained that through a literal interpretation of the umbrella clause, Argentina had entered into legal obligations under the license, which were obligations ‘with regard to investments’ under that Article. The committee, however, held that in finding that Argentina breached the umbrella clause:

It is implicit…that the Tribunal may have accepted [the claimant’s] interpretation of [the umbrella clause]. But the Tribunal nowhere addressed this point expressly. Instead it repeatedly referred back to the Decision on Jurisdiction…where this specific matter was not dealt with at all.179

9.110  The committee concluded that it was unclear how the tribunal arrived at its conclusion that CMS could enforce the obligations of Argentina to the local company, and there was a significant lacuna in the Award, which makes it impossible for the reader to follow the reasoning on this point. It also decided that the reasons could not reasonably be inferred from the decision.180

9.111  As Aguilar Alvarez and Reisman explained, this would seem to go beyond the Wena rationale, which the CMS committee invoked, since literal interpretations of a provision amounts to ‘reasons’ for which one would not expect more than the iteration of the text.181 They conclude, however, that the committee’s problem was not the absence of reasons as much as its conviction that even a literal reasoning was incorrect.182 The authors added:

[T]he CMS committee relied on ‘right reasons’ to dismiss a plausible construction of the tribunal’s reasons for its decision on the effect of the umbrella clause. This reliance on ‘right reasons’ may signal a subtle constitutive change in the function of the ad hoc committee procedure under ICSID Article 52 from review to quasi-appeal, which will have major significance for the meaning of ‘reasons’ in future cases.183

9.112  Along the same lines, other authors maintain that although the CMS committee explicitly rejected any authority to engage in an appellate review, it annulled part of the award in which the tribunal provided coherent reasons based on a literal reading of the relevant treaty provision.184

(p. 176) 9.113  In addition, despite invoking the Wena rationale, the CMS committee refused to reconstruct the tribunal’s reasoning, which is contrary to the position of other committees such as in Wena.185 Notably, the tribunal expressly stated that Argentina failed to observe the obligation under Article II(2)(c) ‘to the extent that legal and contractual obligations pertinent to the investment have been breached’—a finding that the committee actually quoted in its decision.186

9.114  With a view to justifying its decision to annul, the committee also enumerated ‘major difficulties’ allegedly resulting from the tribunal’s interpretation of the umbrella clause, which according to the committee, ‘one would have expected a discussion of the issues of interpretation referred to above’.187 This seems to impose an extraordinary burden on the tribunal. It implies that not only should it resolve the dispute as articulated by the parties, but also anticipate and rebut any potential observations by a committee in the future, which of course, is an impossible task. In addition, it could well be argued that the committee’s decision on this point was ultra petita as it involved arguments that were apparently not raised by the applicant.188

9.115  In an attempt to reinterpret the CMS committee’s findings, the committee in Enron stated that all the CMS committee could have meant is that the absence of any discussion on those ‘problematic’ issues made it impossible to conclude that the tribunal actually adopted claimant’s interpretation of that clause.189 But the parties in CMS did not identify or argue those ‘problematic’ issues before the tribunal. Thus, the ‘Enron interpretation’ is not consistent with the record.

9.116  In expressing its own views on the substance of the issue, the CMS committee went so far as to state that the effect of the umbrella clause ‘is not to transform the obligation which is relied on into something else’.190

9.117  The Enron committee tacitly criticized this statement:

[I]t is not for an annulment committee to express its own views on the meaning of particular provisions of the treaty. Thus, in the Committee’s view, the CMS ad hoc committee should not be regarded as having thereby purported, akin to an appeal court, to (p. 177) pronounce on what the correct position is. Rather, this paragraph of the CMS Annulment Decision should, in the Committee’s view, be regarded merely as identifying lacunae that were found to have existed in the award in that particular case, in view of the absence of any express rationale or any discussion of certain issues from which a rationale might have been implied.191

9.118  It seems difficult to differentiate the CMS committee’s findings regarding the umbrella clause from what might be expected of an appellate court. The committee expressed its own views regarding the meaning of the provision, found that the tribunal’s interpretation was inconsistent with it, developed new arguments that allegedly challenged the tribunal’s interpretation, and concluded that the tribunal should have considered them, without regard to whether the parties ever raised those issues or made those arguments. Reisman criticized the CMS committee’s decision because the real basis for the annulment decision was the committee’s perception of the ‘incorrectness’ of the legal interpretation of the umbrella clause. He stated:

[A]s one studies the Committee’s decision, it becomes clear that the Committee’s problem was not the absence of reasons so much as the Committee’s conviction that even the plausible literal reasoning was incorrect!192

9.119  The CMS committee also addressed Argentina’s complaint that the tribunal failed to state reasons for its rejection of Argentina’s defence of necessity under customary international law.193 The committee observed that the tribunal dealt with Argentina’s defence of necessity under customary international law before addressing Article XI of the Argentina-US BIT. The committee pointed out that the tribunal considered that Article 25 of the ILC’s Articles on State Responsibility reflects customary international law, examined the requirements provided therein, and concluded that they had not been fully proved. The committee concluded ‘the Tribunal clearly stated its reasons and the Committee has no jurisdiction to consider whether, in doing so, the Tribunal made any error of fact or law’.194

9.120  In addressing Article XI of the BIT, according to the committee, the tribunal concluded that it had the authority to proceed to a substantive review and to examine whether the state of necessity met the conditions under customary law and the treaty provisions, and whether it would preclude the wrongfulness of the measures. On this point, the committee held that the problem was that the tribunal stopped there and failed to provide any further reasoning regarding Article XI. The committee justified this, however, by noting that this was as far as the arguments advanced by the parties developed the issues. The tribunal evidently considered that Article XI was to be interpreted in the light of the customary international law of necessity, (p. 178) and thus, if the conditions fixed under it were not met, Argentina’s defence under Article XI should likewise be rejected:

Accordingly, having considered the arguments eventually developed by the Parties with respect to Article XI, it did not find it necessary to revert to its previous assessment concerning the application of customary international law and to repeat the conclusions it had arrived at during the course of examination of Argentina’s first defense.

The motivation of the Award on this point is inadequate. The Tribunal should certainly have been more explicit in specifying, for instance, that the very same reasons which disqualified Argentina from relying on the general law of necessity meant that the measures it took could not be considered ‘necessary’ for the purpose of Article XI either.

* * * *

In the Committee’s view, although the motivation of the Award could certainly have been clearer, a careful reader can follow the implicit reasoning of the Tribunal…On this point, therefore, the submission of Argentina cannot be upheld.195

9.121  On this point—similarly to Jan Paulsson’s comment regarding Klöckner I—Aguilar Alvarez and Reisman stated: ‘One wonders whether such comments, which exceed the ambit of ICSID Article 52, will erode the authority of an award that has, ironically, been confirmed and must be implemented by the respondent state’.196 Indeed, what the ICSID annulment committee did in practice was to provide an advisory opinion, opining on the virtues and vices of the substantive decision, as opposed to limiting its analysis and decision to the limits of the annulment mechanism under the Convention.197

9.122  As Van Houtte explained, annulment is a limited remedy that does not purport to review the merits of the original decision or to correct any error of fact or law. He pointed out:

[T]he members of the ad hoc committee…should also be careful not to create an impression that they are better minds than the arbitrators whose award they have to review. They should not be eager to demonstrate their superiority in mastering and interpreting the facts and applying the law. Otherwise, the whole review process could be depicted as a mere academic rivalry.198

9.123  Argentina also alleged that the tribunal failed to state reasons when deciding to grant compensation to a shareholder in accordance with the standard for expropriation, although it found that there was no expropriation.199 The committee strongly rejected Argentina’s (p. 179) allegation and highlighted that ‘the Award is one of the most detailed decisions on damages in ICSID case-law’.200

14.  Azurix

9.124  Argentina argued that the tribunal contradicted itself by maintaining that it would not apply Argentine law except to the alleged breaches of the concession agreement, but then applying domestic law. The committee rejected this argument and held:

[T]he Tribunal found that as Azurix’s claims were based on the BIT and not on any contract, the Tribunal’s enquiry was governed by ‘the ICSID Convention…the BIT and…applicable international law’. However, the Tribunal found that alleged breaches of the Concession Agreement could be an element in that enquiry. The extent to which alleged breaches of contract were material to the determination of claims of breaches of a treaty standard was a matter for the Tribunal to determine when dealing with each of the individual claims. The Committee finds nothing contradictory in the Award in this respect.201

9.125  The government also argued that the tribunal failed to state reasons for its decision on zoning coefficients, because it failed to address Argentina’s position that the regulator’s decision had become administratively final. The committee rejected this request because whether that decision was final was not relevant for the purposes of the tribunal’s decision.202

9.126  In addition, Argentina contended that the tribunal failed to state the standard required by the ‘full protection and security’ of Article II(2)(a) of the US-Argentina BIT, since it found that Argentina breached that provision because it also breached the fair and equitable treatment standard. According to Argentina, this denied any effet utile for the full protection and security standard, given that the tribunal’s decision implied that they were the same standard. The committee also rejected this argument, noting that the tribunal considered that standard to be a sub-category of the fair and equitable treatment standard. With respect to the effet utile argument, the committee stated:

Argentina’s argument that the Tribunal’s findings in this respect leave no effet utile for the full protection and security standard might, if accepted, support a conclusion that the Tribunal was wrong in law. However, a mere error of law, even if this could be established, is not a ground for annulment. The Committee considers that the Tribunal’s reasoning, right or wrong, is quite clear. The Committee therefore considers that there is no basis for annulling this finding under Article 52(1)(e) of the ICSID Convention.203

15.  MCI Power

9.127  The claimants argued that the tribunal failed to state reasons by failing to address the question whether Ecuador breached the BIT by refusing to pay outstanding accounts receivable owed to them, whether on a continuous basis starting before the entry into force of the Treaty, or only for those invoices issued after it became effective, an issue that had an impact on the outcome of the award.204

(p. 180) 9.128  The committee rejected the applicants’ contention because in analysing the issue of continuing and composite acts, the tribunal opined that such acts would breach the BIT, but that would not have been possible before its entry into force. The committee held that the tribunal’s finding that the acts and omissions argued by the claimants as being prior to the entry into force of the BIT did not constitute continuing and composite wrongful acts under the BIT implied acceptance of Ecuador’s view that the refusal to pay the accounts receivable was an instantaneous, not continuing act. In rejecting the request for annulment, it concluded:

While this is not clearly stated in the Award, it can be deducted from the Tribunal’s reasoning. Thus, the Tribunal’s finding that acts and omissions prior to May 11, 1997 cannot constitute continuing and composite wrongful acts under the BIT was ‘not bereft of any reference to the specific issue of the outstanding accounts receivable claim’, as alleged by the Applicants.205

9.129  The committee also rejected the contention that the tribunal gave contradictory reasons. It held that contradictory reasons should be distinguished from reasons which are claimed to be legally or factually wrong, because the latter are not reviewable by an annulment committee. The committee added that the tribunal ‘answered—rightly or wrongly but without any apparent contradiction—the parties contentions on jurisdiction regarding the accounts receivable, which is sufficient for the purposes of Article 52(1)(e)’.206

16.  Rumeli

9.130  The applicant argued that the tribunal in Rumeli failed to state reasons in finding jurisdiction, because the tribunal disregarded ‘clear and unrebutted [sic] evidence of fraud’ such as a finding of a Federal District Court of New York.207 The committee rejected the request for annulment, and found that the applicant was actually requesting the committee to reassess evidence, which falls outside the scope of an annulment committee’s powers.208

9.131  Kazakhstan also contended that the tribunal failed to state reasons explaining why it rejected certain pieces of evidence which, according to Kazakhstan, proved that no collusion existed between the Executive, a local court, and a local company, and argued that, in turn, this would have affected the finding on damages.209 The committee rejected this argument because the tribunal did sufficiently explain the reasons on which the award was based, and pursuant to Arbitration Rule 34, tribunals are empowered to judge the probative value of the evidence in the case.210

9.132  The applicant also claimed that the tribunal failed to state reasons with respect to causation. The committee admitted that that if a tribunal fails ‘to consider the legal and factual question of whether the breaches of treaty committed by the RoK had caused the loss of Rumeli and Telsim’s shares, that might well constitute a failure to give reasons within the (p. 181) meaning of the Convention’, but it concluded that the tribunal properly explained its reasoning regarding causation in the case.211

9.133  Kazakhstan also argued that with respect to the damages award, the tribunal’s decision was based on ‘inconsistent, illogical or nonexistent reasons’, and thus, it was impossible to follow the progression in its reasoning from point A to point B.212

9.134  The Rumeli committee pointed out that the valuation of expropriated shares in a company necessarily involves a consideration of the future profitability of the business, which is inherently uncertain.213 Nonetheless, inherent uncertainty is not a reason for the tribunal to decline to award damages. Tribunals are generally allowed a considerable measure of discretion in determining issues of quantum.214

9.135  With respect to the tribunal’s reasoning on damages, the Rumeli committee reconstructed it by looking both at the wording of the award and the record. The committee concluded that once the tribunal had determined that Rumeli and Telsim had established that they had lost something of real value, the valuation was a matter decided by the tribunal, which was not limited to the evidence or figures provided by the parties.215 It added:

The estimation of damages in such circumstances is not an exact science. It is of the essence of such an exercise that the tribunal has a measure of discretion, since the final figure must of its nature be an approximation of the claimant’s loss. There may in that context be real limitations on the extent of reasoning which can reasonably be expected.

* * * *

In arriving at its final figure, the Tribunal was entitled to balance a number of countervailing considerations.216

9.136  Although the Rumeli committee held that the figure was stated without an explanation of a mathematical calculation, it concluded that:

[T]he award of damages is [not] one which it ought to annul, since the Tribunal did not fail to give reasons for its award of damages. On the contrary, the Tribunal examined the position as to damages with considerable care and set out the reasons for its award in terms appropriate to the circumstances of the case and the evidence available to it.217

17.  Helnan

9.137  In Helnan, the committee summarily rejected the applicant’s request for annulment due to an alleged failure to state reasons. The committee found that the tribunal’s decision to impose a requirement to resort to local courts in order to claim a breach of the applicable BIT’s fair and equitable treatment was clearly reasoned.218 The committee found that the award enabled the reader to follow its reasoning, and that the tribunal’s failure to deal with each argument by the parties did not amount to a failure to state reasons under Article 52(1)(e).219 Interestingly, (p. 182) the committee also emphasized that because Article 52(1)(e) of the ICSID Convention permits annulment on the ground that ‘the award has failed to state the reasons on which it is based’, the object of this ground is the reasoning which leads to the tribunal’s award.220

18.  Sempra

9.138  In Sempra, as in CMS, Argentina argued that the tribunal failed to state reasons regarding the application of Article XI of the US-Argentina BIT. The tribunal rejected this request for annulment. The committee observed that the tribunal dealt with Argentina’s necessity defence under Argentine law, customary international law, and Article XI of the BIT in that order. It found that in so doing, the tribunal gave a detailed account of its reasoning and held that the conditions listed in Article 25 of the ILC Articles were necessary for invoking an ‘essential security interest’ under the BIT. The committee added that the tribunal reasoned that since the BIT itself did not deal with the legal elements necessary for the legitimate invocation of a state of necessity, criteria found in customary international law had to be applied. It concluded: ‘From the above overview it is clear how the Tribunal reasoned in order to reach the conclusion it did. Hence, there is no failure to state reasons’.221

19  Enron

9.139  In Enron, as in CMS, Azurix, and other cases, Argentina argued that the tribunal failed to state the reasons on which it based its finding on jurisdiction regarding the claimants’ ius standi. The applicant contended that the dispute concerned a local company’s contractual rights, not claimants’ rights.222 In addition, according to Argentina, the tribunal failed to state reasons in rejecting the respondent’s objection that the claim was of an ‘indirect’ nature in violation of Article 25(2)(b) of the ICSID Convention, which did not arise directly out of an investment as required by the ICSID Convention.223 In rejecting these objections, the tribunal relied on the prolific case law. The committee concluded:

Contrary to what Argentina has argued in the present annulment proceedings, the Committee considers that there is no reason why a tribunal cannot state sufficient reasons for its decision by referring to, and expressing agreement with, the reasoning in a previous ICSID case, or indeed, the reasoning in any other arbitration or judicial decision, or for that matter the reasoning in a commentary or publication or in any other source. Where a tribunal does so, the Committee sees no reason why the tribunal must itself repeat at length the reasoning contained in that other source. There is nothing to prevent a tribunal from agreeing with, and incorporating by reference as its own, reasoning found in any other source, provided that it is ultimately sufficiently clear what are the tribunal’s reasons…

There are no rigid or formulaic requirements as to the form or method by which a tribunal must state its reasons.224

(p. 183) 9.140  The Enron committee analysed some of the tribunal’s findings in its first decision on jurisdiction and concluded that Argentina’s arguments were materially similar to arguments that were raised and rejected in prior ICSID cases with which the tribunal expressly agreed.225

9.141  Argentina, however, reiterated its claim that the tribunal failed to address the issue of ‘which rights a shareholder may claim for’, and thus, failed to address the respondent’s argument that a shareholder cannot claim for alleged violations of rights belonging to the local company in which the shareholder has a participation.226 The committee also rejected this argument. It held that it was clear from the first decision on jurisdiction that the tribunal understood that the answer to that argument was that the shareholder was not claiming on behalf of the local company, but on its own behalf.227

9.142  Finally, the Enron committee also rejected the applicant’s request to annul the award for allegedly failing to deal with various specific issues and arguments. The committee held that the tribunal was not required to comment on all arguments of the parties in relation to a particular issue.228

9.143  The committee also concluded that the tribunal ‘was not required to give its evaluation of each individual item of evidence or each individual legal authority or legal provision relied upon’.229 Regardless of the validity of that proposition, the committee did not seem to tie this observation to any ground for annulment.

9.144  With respect to another finding related to the license involved in the dispute, the applicant also argued that the award should be annulled because the tribunal ‘left unanswered particular arguments’, ‘ignored particular items of evidence’, and ‘made findings of fact not supported by the evidence, or in contradiction to the evidence’.230 The committee also rejected this request for two main reasons: (i) the tribunal was not required to address every argument or piece of evidence, and (ii) even if true, errors of fact or law are not themselves grounds for annulment.231

9.145  The applicant also requested that the award be annulled because the tribunal allegedly failed to give reasons to reject one of its defences under Argentine law.232 The committee rejected the request because it was easy to understand the tribunal’s reasoning, and it was ‘beyond the scope of the mandate of the Committee to consider whether the Tribunal correctly articulated and applied’ the relevant defence.233

9.146  The applicant also argued that the tribunal failed to state reasons regarding its finding that the so-called umbrella clause of the applicable BIT was breached.234 The committee (p. 184) rejected that allegation because it found that the reasoning of the tribunal was clear. According to the tribunal, the claimants had invested in Argentina and channelled their investments through a local company. Argentina had entered into obligations and guarantees under the legislative framework which constituted ‘obligations’ entered into by the State ‘with regard to’ the investment, which it subsequently breached.235 Therefore, since the standard for review is limited, regardless of whether the reasoning was correct or convincing, the award should not have been annulled for that reason.236

9.147  In rejecting Argentina’s request regarding the umbrella clause, the committee also distinguished the case from CMS—in which the umbrella clause finding was annulled—by holding that the reasoning in the two original cases was different. According to the Enron committee, the tribunal in that case held that the terms of the license formed part of the implementing legislation, so that a breach of its terms also amounted to a violation of the guarantees contained in the legislative framework.237 In contrast, the Enron committee noted that the CMS tribunal concluded that because the measures complained of were not of a commercial nature, they constituted breaches of the BIT.238 In deciding to uphold the tribunal’s finding on the breach of umbrella clause, the Enron committee emphasized that some of the CMS committee’s remarks regarding that BIT clause should not be interpreted as pronouncements on ‘what the correct position is’.239

20.  Vivendi II

9.148  Argentina claimed that the tribunal failed to state reasons regarding the damages and interest award. The committee summarily rejected this request, because it found that the tribunal’s reasons regarding damages were sufficient. In addition, with respect to the tribunal’s failure to provide ‘express specific reasons’ regarding the interest applied, the committee considered that it did not amount to a ground for annulment under Article 52(1)(e), because ‘the reasons stated within the context of the Tribunal’s approach to the evaluation of the damages to be compensated may be understood to cover also the issue of interest’.240

21.  Fraport

9.149  Fraport argued that the tribunal’s award failed to state reasons regarding its finding that the claimant violated a Philippine law. The committee rejected some of Fraport’s allegations, because the party’s arguments were new.241 In addition, the committee rejected Fraport’s request because in reaching its decision, the tribunal need not give reasons for criminal liability, guilt, or other issues, which were ‘a question of interest to a criminal court, but which [were] not within the remit of the Tribunal’.242

(p. 185) 22.  Vieira

9.150  In Vieira, the applicant argued that the tribunal failed to state the reasons regarding its finding that certain claims were not covered by the applicable BIT because of their timing. The requesting party emphasized that the tribunal failed to consider some of its arguments, which proved that the disputes were different and subsequent, and thus, covered by the treaty. The committee rejected the request because it considered that the tribunal was free to choose the relevant facts and arguments submitted by the parties. In any case—the committee stated—the tribunal’s line of reasoning was clear and the fact that it rejected the applicant’s position did not per se amount to a ground for annulment.243

23.  Continental Casualty

9.151  In Continental Casualty, the claimant maintained that the Tribunal failed to consider and decide one of its arguments regarding Article XI of the US-Argentina BIT; namely, that because the alleged emergency argued by Argentina had already passed, it did not excuse the State’s failure to compensate the claimant subsequently.244 The committee rejected this request because it considered it abundantly clear in the award that the tribunal found that the BIT obligations would not apply at all with respect to measures covered by Article XI.245

9.152  The committee also rejected Continental’s request for annulment on the basis of the tribunal’s damages award. The claimant argued that the tribunal failed to determine an expropriation claim related to measures that took place in 2004. The committee considered that the award had to be interpreted as a whole, and in light of that interpretation, it was clear that the tribunal implicitly found that any expropriation would have occurred in 2002, at a time when the Article XI applied to the measures. Thus, by 2004 no ‘additional’ expropriation could have occurred, and therefore, there was no failure to state reasons.246

9.153  Argentina also requested the partial annulment of the award due to an alleged failure to state reasons regarding Argentina’s obligation to pay compensation due to the 2004 measures that affected claimant’s investment. The committee noted that the tribunal had found that by 2004 the circumstances militating in favour of applying Article XI of the BIT ceased to exist, and thus, Argentina’s subsequent measures, which ‘effectively abrogated the remaining rights’ of Continental were not covered by Article XI or the defence of necessity under customary international law.247

24.  Duke

9.154  The Duke committee summarily rejected Peru’s contention that the tribunal failed to state reasons regarding its jurisdictional decision. The committee stated that it could only take the decision ‘as it is, not as Peru would have wished the decision to be’.248 And it clarified that its role was to ensure the stability of the ICSID arbitration system, ‘not to overthrow (p. 186) awards because of its disagreement with the arbitral tribunal’.249 Therefore, it rejected the request for annulment on that basis, because Peru’s criticism concerned the correctness of the tribunal’s reasoning, a matter that fell outside its powers.250

9.155  Peru also alleged that the tribunal contradicted itself when describing Peru’s arguments during the original proceedings. The committee found that no such contradiction existed, and indeed, that the tribunal had captured the nuances of each party’s position.251

9.156  The applicant also criticized the tribunal’s decision because in some passages it failed to cite to authorities, but the Committee noted that this was part of the tribunal’s process of logical reasoning, and no citation of authority was required.252

9.157  In addition, Peru argued that the tribunal failed to decide an issue submitted to it; namely, that one of the companies involved in the dispute submitted itself to a tax amnesty, an issue that allegedly had consequences on the admissibility and the substance of the claim. The committee rejected the request for annulment for manifest excess of power, because it found that the issue submitted to the tribunal was only one legal question: the legal effect of the amnesty, which the tribunal adequately addressed.253

25.  Togo Electricité

9.158  In Togo Electricité, the applicant argued that the tribunal failed to state reasons regarding several of its findings. In most cases, the committee limited its analysis to verifying that the tribunal actually gave reasons to support its findings.254

9.159  The committee also found that Togo’s arguments regarding the existence of contradictory reasons resulted from that party’s misinterpretation of the tribunal’s conclusions.255

9.160  With respect to the tribunal’s reasoning in distinguishing different claims and determining the existence of certain indemnities, the committee reconstructed the tribunal’s reasoning with some effort, and refused to annul it because its task was not to judge the elegance, excellence, and accuracy of the award, but merely to verify the existence of reasons.256

E.  Failure to Address Every Question Submitted to the Tribunal

9.161  Article 48(3) of the ICSID Convention provides that the award ‘shall deal with every question submitted to the tribunal, and shall state the reasons upon which it is based’. The proposal to include a provision establishing the tribunals’ duty to decide on every issue submitted to it was voted unanimously. By contrast, the motion to include failure to comply with that requirement as a ground for annulment was rejected.257

(p. 187) 9.162  Several authorities consider that the requirement of exhaustiveness under Article 48(3) does not imply that the award must discuss every argument raised by the parties in the pleadings.258 The award, instead, should address the questions that are reasonably related to the principal issues to be decided.259

9.163  Thus, failure to comply with the second requirement of Article 48(3)—stating the reasons on which the award is based—is included in Article 52(1)(e) as a ground for annulment; while failure to deal with every question submitted to the tribunal is at least not expressly a basis for annulment.

9.164  Nonetheless, ICSID annulment committees have noted the possibility of annulling an award for failure to address the parties’ questions or arguments, for they have considered it a potential (i) manifest excess of powers (Repsol, Togo Electricité) or, most commonly, (ii) a serious departure from a fundamental rule of procedure or a failure to state the reasons on which it is based (Klöckner I, Amco I).

9.165  The committee in Klöckner I found that failure to deal with questions submitted to the tribunal under Article 48(3) of the Convention could amount to a ground for annulment. It held that ‘the part of Article 48(3) imposing the obligation to give reasons is obviously enforced by Article 52(1)(e)’.260 The committee, however, also mentioned serious departure from a fundamental rule of procedure as another possible ground for annulment that could be alleged because of the tribunal’s failure to deal with all the questions submitted to it.261

9.166  Michael Reisman criticized the decision because Article 52 itemizes specific grounds for annulment, which differ from other provisions of the Convention.262 He highlighted that the Klöckner I committee interpreted the ICSID Convention as requiring it to examine a challenged award’s compliance with all the standards set out in the rest of the Convention.263 Reisman added that the interpretation of the committee in Klöckner I overlooked the plain meaning of Article 52(1)(e) and the intentional difference in language.264 In criticizing the decision in Klöckner I, Reisman quoted the ICJ decision in the Case Concerning the Arbitral Award Made by the King of Spain (Honduras v Nicaragua), in which the Court required the award to deal only with all ‘relevant’ considerations.265 It held:

An examination of the Award shows that it deals in logical order and in some detail with all relevant considerations and that it contains ample reasoning and explanations in support (p. 188) of the conclusions arrived at by the arbitrator. In the opinion of the Court, this ground is without foundation.266

9.167  Aron Broches, on the other hand, considered that ‘[a]n unexplained failure to deal with substantial questions submitted to a tribunal and briefed and argued before it, is, however, inconsistent with the obligation to state reasons on which the award is based, which must necessarily include the reasons for a tribunal’s disregard of those questions’.267 Broches also considered Reisman’s position ‘formalistic’ and held that it ‘leads to the absurd result that a tribunal may pick and choose among the questions submitted to it by a party and deal only with those on which it will base a reasoned award, acting as if the other questions had not been read’.268

9.168  Like Michael Reisman, Alan Redfern criticized the finding in Klöckner I on this point. He pointed out that the procedure followed in ICSID arbitrations, which is for the parties to submit memorials and counter-memorials, is useful in giving the historical and factual background to the dispute, but does not always lead to a clear definition of the issues between the parties.269 In this context, Redfern considered that tribunals’ task is made even more difficult if they are required to deal not only with questions raised in the memorials and counter-memorials, but also with any questions which may be raised in subsequent oral arguments.270

9.169  George Delaume also joined the long list of authors criticizing Klöckner I’s holding on this point. He suggested that in light of the history of the Convention, all that is required is that the award be motivated in such a way as to ‘enable the reader to follow the reasoning of the tribunal, both on points of fact and of law, including applicable law’.271 Therefore, like Feldman, Delaume noted that Article 49(2) of the Convention should be the appropriate mechanism to correct any possible omissions in an award.272

9.170  The next committee to address this issue after Klöckner I was Amco I. In that case, Indonesia maintained that the tribunal failed to answer all of the questions submitted to it in breach of Article 48(3) of the ICSID Convention, by refusing to consider some grounds that could (p. 189) have led it to conclude that the investment license granted to the claimant was lawfully revoked. Indonesia considered that such refusal entailed a denial of equal treatment to the parties, and thus, a serious departure from a fundamental rule of procedure.273

9.171  In admitting the possibility of annulling the award on that ground, the committee held:

[T]he obligation set out in Article 48(3) of the Convention to ‘deal with every question submitted to the Tribunal and [to] state the reasons upon which [the award] is based’, can find its sanction in Article 52(1)(e) of the Convention. Failure to deal with one or more questions raised by the parties would entail annulment of the award where such omission amounts to ‘failure to state reasons upon which [the award] is based’ (Article 52[1][e], Convention). Such an omission could, moreover, amount in particular situations to ‘a serious departure from a fundamental rule of procedure’ (Article 52[1][d]) and to a manifest excess of power (Article 51[1][b]).274

9.172  The committee in MINE emphasized that while failure to state the reasons on which the award is based constitutes a ground for annulment, the requirement that the award should deal with every question submitted to the tribunal does not.275 The committee considered, however, that an award can be annulled for failure to deal with questions submitted to it if the defect complained of could not be cured by supplementing the award, ‘but would have required in effect that it be reconsidered in the light of the Tribunal’s decision on the ‘omitted’ question’.276 It concluded ‘in such a case failure to deal with a question may render the award unintelligible and thus, subject to annulment for failure to state reasons’.277

9.173  MINE’s approach is more subtle than that of Klöckner and Amco, because under MINE’s rationale, a failure to deal with a question does not necessarily entail a failure to state reasons, unless the failure to deal with a particular question rendered the award unintelligible. In the words of Schreuer: ‘The mechanical requirement that every argument put forward by a party must be addressed is replaced by the requirement that the reasoning must be coherent’.278

9.174  Nonetheless, when analysing the tribunal’s approach to certain questions, it annulled the award:

The Tribunal either failed to consider them, or it did consider them but thought that Guinea’s arguments should be rejected. But that did not free the Tribunal from its duty to give reasons for its rejection as an indispensable component of the statement of reasons on which its conclusion was based.279

9.175  Other committees followed MINE’s approach. The committee in Vivendi I confirmed that tribunals are not required to address in the awards every argument made by the parties, ‘provided of course that the arguments which it actually does consider are themselves (p. 190) capable of leading to the conclusion reached by the tribunal and that all questions submitted to a tribunal are expressly or implicitly dealt with’.280 The committees in Wena, CDC, Lucchetti, Rumeli, Helnan, and Continental Casualty took the same position.281 The Repsol and Togo Electricié committees also followed this trend, although they regarded the issue as a potential manifest excess of power under Article 52(1)(b).282

9.176  Another relevant case on this issue is the decision by the British Columbia Supreme Court in Metalclad v Mexico, an ICSID decision under the Additional Facility Rules and Chapter 11 of the NAFTA. Mexico sought to set aside the award alleging that the tribunal failed to answer all the questions raised by Mexico, which could have affected the result. Mexico based its request on the annulment decisions in Klöckner I, Amco I, and MINE. The acting judge considered that those three decisions interpreted the phrase ‘every question’ overly broadly, by finding it to mean ‘every argument made to the Tribunal which could have changed the outcome of the award’.283 The judge of the British Columbia Supreme Court added:

[T]he tribunal must deal fully with the dispute between the parties and give reasons for its decision. It is not reasonable to require the tribunal to answer each and every argument which is made in connection with the questions which the tribunal must decide.284

9.177  In sum, ICSID practice after Klöckner I and Amco I appears to indicate that Article 52(1)(e) does not purport to sanction a failure to deal with specific questions, so long as that failure does not turn the award into an unintelligible decision. But this conclusion raises another issue: what constitutes a ‘question’?

1.  The notion of ‘question’

9.178  When addressing the issue of what constitutes a ‘question’, the committee in Klöckner I concluded that the ambiguity of the term ‘questions’ in Article 48(3) could be interpreted either as those issues that may be formulated separately, at the end of an application or memorial, and presented formally in the main text of the parties’ pleadings, rather than, for example, in the form of ‘final conclusions’ or ‘submissions’. But it could also refer to some arguments alleged by the parties.285

9.179  As mentioned above, legal commentators have strongly criticized the decision of the Klöckner I committee. Alan Redfern criticized its definition of ‘question’ because according to him, it (p. 191) is not always clear what are the issues in dispute between the parties, and the tribunal’s task would be much more difficult if—on pain of nullity—it is required to deal not only with the questions raised in the pleadings, but also with any question that might have been raised in oral arguments.286 Nonetheless, it must be pointed out that in Klöckner I, the committee only annulled the award for failing to address ‘essential’ arguments, relevant to the parties and duly addressed by them.287

9.180  In Amco I, the committee described ‘questions’ in the following terms:

Indonesia alleges that the Tribunal had disregarded the facts and arguments which, had they been considered, could have obliged the Tribunal to abandon the very bases of its arguments invoked in the Application for annulment.…288

9.181  Similarly, the committee in MINE considered that the tribunal had to address ‘questions’ or arguments that, had they been accepted, would have required the tribunal to reverse its decision.289

9.182  The judge of the British Columbia Supreme Court, in deciding Mexico’s request to set aside the award in Metalclad v Mexico, rejected the position according to which ‘questions’ mean ‘arguments’, and pointed out that the word ‘questions’ is used in Article 49 of the Additional Facility Rules to mean that if a party fails to appear or to present its case at any stage of the proceeding, the other party may request the tribunal to deal with the questions submitted to it and to render an award. He thus concluded:

If a ‘question’ were to be interpreted as the equivalent of an ‘argument,’ one would think that a word different from ‘question’ would have been used in Article 49 because the circumstances contemplated by [it] could well arise before the arguments by both of the parties have been made.290

9.183  More recently, the Enron committee emphasized that tribunals have a duty to deal with each of the ‘questions’ or ‘pretensiones’ submitted to it, but it is not required to comment on all arguments made by the parties in relation to each of those questions.291

9.184  ICSID practice illustrates the relevance of determining precisely which ‘questions’ or ‘pretensiones’ were submitted to the tribunal. A practice that might help the tribunal is either to request at the conclusion of the hearings that each party submit a list of the issues that it is requesting the tribunal to address, or for the tribunal to draft a list of such issues and submit them to the parties for comment. This practice should help the tribunal address all of the issues that the parties perceive as significant.

2.  The tribunal’s obligation to deal with questions directly

9.185  The annulment committee in Klöckner I admitted the claimant’s allegation that the tribunal failed to state reasons and to deal with the claimant’s pleas considering the application of (p. 192) certain contractual provisions that limited liability. In accepting the claimant’s position, the committee emphasized the relevance of the unanswered question to the parties and considered that an indirect treatment of a question would not suffice:

[I]t is not for the Committee to imagine what might or should have been the arbitrators’ reasons, any more than it should substitute ‘correct’ reasons for possibly ‘incorrect’ reasons, or deal ‘ex post facto’ with questions submitted to the Tribunal which the Award left unanswered.292

9.186  On another issue that the tribunal allegedly failed to address, the annulment committee said:

[I]t must be accepted that the Tribunal did not deal, at least expressly, with the questions submitted to it by Klöckner. In order to be exhaustive, it might however be asked whether there is an implicit rejection of these questions elsewhere in the reasoning.

* * * *

On [an essential] question…it is in any case difficult to conceive that an indirect and implicit response may be found in reasons given on another subject.293

9.187  In MINE, on the other hand, the committee noted the possibility of indirect treatment of questions. Guinea complained that the tribunal did not address some of its allegations on breaches of a contract by MINE, but the committee held that the tribunal was not obliged to address them, because it found that MINE had not breached the agreement on the basis of reasons that could be followed without difficulty.294

9.188  More recently, in Rumeli, the committee held that ‘it is not necessary for a tribunal explicitly to deal with all the arguments raised by the parties’.295

9.189  According to Christoph Schreuer, in light of this practice, tribunals may deal with the questions indirectly, but only if it can be implied from the reasons given why a specific argument cannot be supported.296

3.  The requirement to file a request for a supplemental decision before requesting annulment

9.190  Article 49 of the ICSID Convention provides that within 45 days after the date on which the award was rendered, a party can request the tribunal to decide on ‘any question which it had omitted to decide in the award’, and the tribunal ‘shall rectify any clerical, arithmetical or similar error in the award’.

9.191  Aron Broches explained:

While the draft of what became Art. 48(3) initially only required a reasoned award, the final text also requires that the award ‘deal with every question submitted to the Tribunal’. This additional requirement was the result of a decision taken at a late stage by the Legal Committee. Failure to meet the requirement is not specifically mentioned as a ground for annulment of the award. This raises the question whether it may under certain circumstances be subsumed under one or the other of the grounds of annulment of Art. 52(1), particularly (p. 193) in view of the possibility provided by Art. 49(2) for a party to request the Tribunal to decide ‘any question which it had omitted to decide in the award.’297

9.192  It has been argued that as a result of Article 49 and the possibility of requesting a supplementary decision, parties should not be allowed to request the annulment of an award for failure to deal with every question submitted to the tribunal, unless they have first sought a supplemental decision under Article 49(2).

9.193  Mark Feldman, for example, considered that in the event a tribunal failed to do so, the remedy provided by the ICSID Convention was the request of a supplemental or rectifying decision under Article 49(2) of the Convention.298

9.194  ICSID case law, however, appears to admit requests for annulment due to failure to deal with every question submitted to the tribunal in cases in which the applicant did not previously request a supplemental decision under Article 49(2) of the Convention. The committee in Klöckner I held:

With regard to Article 48(3) of the Convention, and the obligation to ‘deal with every question submitted to the Tribunal’, it may be noted that there is one sanction in Article 49(2)…This is not relevant in the present case and the part of Article 48(3) imposing the obligation to give reasons is obviously enforced by Article 52(l)(e).

Prima facie, therefore, one does not see how a failure to deal with ‘every question submitted to the Tribunal’ can have a sanction other than annulment for a failure to state reasons—unless, of course, the failure to deal with ‘every question submitted to the Tribunal’ is considered to be a ‘serious departure from a fundamental rule of procedure’ under Article 52(l)(d)….299

9.195  The committee in Amco I decided that the first solution to deal with a tribunal’s failure to rule on some of the questions submitted before it is Article 49(2), which directs the tribunal to rectify any clerical, arithmetical, or similar error in the award. This constitutes a remedy for unintentional omissions.300 It concluded that any omissions of relatively minor points may be repaired pursuant to Article 49(2) by simply inserting the tribunal’s conclusions thereon in the award, the main reasoning of the award remaining unaffected by such insertion.301 By contrast, Indonesia’s position—according to the committee—involved facts and arguments that if admitted, would have obligated the tribunal to reverse its decision on the investment license, and thus, Article 49(2) was not an adequate recourse.302 The committees in MINE and Wena took the same position.303 The Wena committee held that Article 49(2) is not (p. 194) always a sufficient remedy, because the omitted answer may have direct or collateral effects upon the arguments in the tribunal’s reasoning.304 The committee concluded:

The ground for annulment under Article 52(1)(e) includes therefore the case where the Tribunal omitted to decide upon a question submitted to it to the extent such supplemental decision may affect the reasoning supporting the Award.305

9.196  Under ICSID case law, Article 49 appears to provide a remedy for undecided issues, but not for decisions that would contradict the rest of the award or would render it unintelligible.

4.  ICSID practice

9.197  In Klöckner I, the committee annulled the award on the basis of the tribunal’s failure to address some of the questions submitted to it, such as a contractual clause limiting the liability of one of the parties.306 The committee opined as follows:

It is clear that the argument Klöckner bases on the contractual clauses limiting liability can and should be considered a ‘question submitted to the Tribunal’ and that this is an essential question for both parties. The Claimant has a major interest in seeing these contractual clauses deemed applicable and applied. The Respondent has a major interest in seeing them judged inapplicable or irrelevant to the present case. Both parties have for that matter addressed this subject.

Is the complaint well founded?

It must be noted that the Award says nothing on this essential question and contains no reason on this topic, or, more precisely, no expressed reason.307

9.198  The committee also accepted the applicant’s arguments regarding a contractual warranty against defects and conditions that was involved in the case, and which had not been properly addressed by the tribunal.308 The committee concluded that the tribunal failed to deal, at least expressly, with the questions submitted to it by Klöckner, and rejected the possibility of the issue being addressed implicitly, given the crucial nature of the issue.309

9.199  The committee in MINE partially annulled the award and stated that if Guinea’s arguments before the tribunal had been accepted, they would have entailed a reduction of MINE’s damages. These arguments were briefed by the parties and raised important issues. The committee annulled the relevant part of the award because it considered that even if the tribunal considered the arguments but thought that they should be rejected, it still had the duty ‘to give reasons for its rejection as an indispensable component of the statement of reasons on which its conclusion was based’.310

9.200  On the other hand, the applicants’ requests for annulment for failure to deal with every question submitted to the tribunal were rejected in Wena, Vivendi I, CDC, Luchetti, Azurix, and Enron. In Wena, the committee rejected the applicant’s request because it (p. 195) did not involve a failure to state reasons, but was a disguised challenge to the merits of the arguments,311 and because it failed to demonstrate that the alleged failure of the tribunal to consider certain arguments ‘would have any effect on the result of the Award, which is a prerequisite to entertain a request based on Article 52(1)(e) complaining that the Tribunal omitted to deal with a question submitted to it’.312 Eric Schwartz strongly criticized this finding:

In requiring Egypt to demonstrate and satisfy the Committee that the Tribunal’s failure to deal with its question ‘would have resulted in affecting Wena’s right to protection of its investment under the IPPA’…the Committee moved beyond the standards established by earlier ad hoc committees…[requiring] an applicant in annulment proceedings to establish that the omitted question would in fact have made a difference…[This] would obviously necessitate a reconsideration by the ad hoc committee itself of the merits of the dispute.313

9.201  In CDC, the committee found that the applicant’s arguments were related to an assessment of the proof it submitted before the tribunal, rather than to a failure to deal with questions submitted to the tribunal, and consequently, it rejected the request for annulment.314 In addition, the respondent also alleged that the tribunal seriously violated a fundamental rule of procedure by answering the wrong question, but the committee considered that the tribunal did answer the proper legal question before it.315

9.202  The Luchetti committee also rejected the applicant’s request for annulment, finding that although the award did not give a full picture of the various elements which should be taken into account for treaty interpretation under the Vienna Convention, it did refer to various standards adopted in international case law and doctrine and it noted the elements which the tribunal found conclusive. The committee added that it could not find in the tribunal’s reasoning ‘any contradiction or lack of precision such as to leave a doubt about the legal or factual elements upon which the Tribunal based its conclusion’.316 It was satisfied that the tribunal examined all of Lucchetti’s arguments and held that the tribunal ‘dealt with them in the Award to such an extent and in such a manner as could reasonably be required’.317

9.203  The judge of the British Columbia Supreme Court concluded regarding the award in Metalclad v Mexico:

[T]he Tribunal adequately dealt with the principal issues before it and the failure of the Tribunal to explicitly deal with all of Mexico’s arguments is not sufficiently serious to justify the exercise of this Court’s discretion to set aside the Award.318

(p. 196) 9.204  In Azurix, the applicant alleged that the tribunal failed to consider its accusations of corruption and failed to decide why Azurix paid such a high ‘canon’ for the concession. The committee held that the tribunal had implicitly decided the issue, and added that the tribunal agreed with Argentina’s claim that Azurix had paid an unreasonably large amount for the concession, but that it was implicit from the award as a whole that the tribunal did not consider that the reason why Azurix had done so to be material to its decision. The committee was not persuaded that the tribunal had failed to consider Argentina’s argument that, because of the alleged irregularities in the bidding process, Azurix was not entitled to any compensation at all.319

9.205  The Enron committee similarly found that the tribunal was not required to comment on all arguments of the parties in relation to a particular issue.320 The committee clarified that if the tribunal states its ‘pertinent findings of fact, its pertinent findings as to the applicable legal principles, and its conclusions in respect of the application of the law to the facts’ the award should not be annulled for failure to state reasons.321

F.  Conclusion

9.206  Failure to state reasons relates to the manner in which the substantive decision is justified in the award. Although this ground appears to be limited to the integrity of the decision, rather than its correctness, Article 52(1)(e) has led some annulment committees to succumb to the temptation to review the merits of the dispute.322 The first ICSID annulment panel (Klöckner I) dealt with this ground and set a high water mark for reasons by requiring that the tribunal state ‘sufficient’ reasons. The committee in MINE subsequently expressed a preference for a lower reasons threshold, which only ‘implies that [the tribunal’s reasoning] must enable the reader to follow the reasoning of the Tribunal on points of fact and law’.323 Subsequent committees have endorsed the rationale in MINE.

9.207  In deciding on a request for annulment for failure to state reasons, committees should consider the travaux préparatoires, which illustrate that this ground was intended to ensure that the minimum guarantees of ‘natural justice’ were observed. To turn Article 52(1)(e) into a gateway to a disguised appeal is contrary to its text and to the travaux préparatoires of the ICSID Convention and to the characteristics of ICSID annulment as a control mechanism. Put simply, Article 52(1)(e) purports to ensure that the tribunal provides reasons for its decision. It does not require that those reasons be ‘sufficient’ or ‘persuasive’, let alone ‘correct’.

Footnotes:

1  See A Rigo Sureda, ‘Introduction to Investor-State Arbitration. A Case Study: Wena Hotels Limited (Wena) v Arab Republic of Egypt’ in C Jimenez Piernas (ed), The Legal Practice in International Law and European Community Law: A Spanish Perspective (The Hague: Brill Academic Publishers, 2006), 233.

2  MINE para 5.08 (emphasis added).

3  See for example LCIA Rules, Art 26(1); UNCITRAL Arbitration Rules, Art 34(3). See Art 79 of the Hague Convention of 1907 and Art 56(1) of the Statute of the International Court of Justice.

4  See Memorandum on Arbitral Procedure, prepared by the Secretariat, Doc A/CN.4/35, Yearbook of the International Law Commission, 1950, Vol II, 176.

5  ICSID Arbitration Rule 47(1)(i) echoes these requirements and provides that the award must state ‘the decision of the Tribunal on every question submitted to it, together with the reasons upon which the decision is based’.

6  See G Aguilar Alvarez and W M Reisman, ‘How Well Are Investment Awards Reasoned?’ in G Aguilar Alvarez and W M Reisman (eds), The Reasons Requirement in International Investment Arbitration: Critical Case Studies (Leiden: Brill, 2008), 3.

7  See L Goldschmidt, ‘Projet de règlement pour tribunaux arbitraux internationaux’ (1874) 6 Revue de Droit International et de Législation Comparée 421, 447 (‘La sentence arbitrale duement prononcée peut être attaquée et mise à néant…Si, le compromis prescrivant l’exposé des motifs, la sentence a été rendue sans motifs’); and P Fiore, Le Droit International Codifié (Paris: Pedone, 1911), 619–20 (‘La sentence arbitrale sera réputée nulle …Si [la décision] manque totalement de motifs aussi bien en fait qu’en droit’).

8  Fiore, Le Droit International Codifié, 619–20.

9  See Arbitral Procedure—Comments by Governments on Draft on Arbitral Procedure, Doc A/CN.4/68, Yearbook of the International Law Commission, 1953, Vol II, 233.

10  See Summary Records of the Fifth Session, Yearbook of the International Law Commission, 1953, Vol 1, 44–5.

11  See Summary Records of the Fifth Session, 45.

12  See Summary Records of the Fifth Session, 45.

13  See Summary Records of the Fifth Session, 45.

14  See Summary Records of the Fifth Session, 45. The text was subsequently amended to provide ‘including failure to state the reasons for the award’ (see Yearbook of the International Law Commission, 1953, Vol II, 211).

15  See Yearbook of the International Law Commission, 1958, Vol II, 86.

16  See History of the ICSID Convention, Vol I, 230 (‘The validity of an award may be challenged by either party on one or more of the following grounds…that there has been a serious departure from a fundamental rule of procedure, including failure to state the reasons for the award’) (emphasis added). See History of the ICSID Convention, Vol II, 269, 330, 331, 421, 515, 572, 654, 817–18.

17  See History of the ICSID Convention, Vol I, 232 (emphasis added).

18  See A Broches, ‘Observations on the Finality of ICSID Awards’ (1991) 6 ICSID Rev–FILJ 330; ICSID, ‘Background Paper on Annulment for the Administrative Council of ICSID’, Aug 10, 2012, at 47–9.

19  See Broches, ‘Observations on the Finality of ICSID Awards’, 330.

20  See M B Feldman, ‘The Annulment Proceedings and the Finality of ICSID Arbitral Awards’ (1987) 2 ICSID Rev–FILJ 85, 109 (quoting History of the ICSID Convention, Vol II, 515).

21  C Schreuer et al, The ICSID Convention: A Commentary (Cambridge: Cambridge University Press, 2009), 1011.

22  G Aguilar Alvarez and W M Reisman (eds), The Reasons Requirement in International Investment Arbitration: Critical Case Studies (Leiden: Brill, 2008), 21.

23  CDC para 70.

24  Klöckner I para 119. The Klöckner I committee held that under Article 52(1)(e), the tribunal is not merely required to state ‘just any reasons, purely formal or apparent, but rather reasons having some substance’ (para 119). According to Andrea Bjorklund, this formulation, although questionable, does not always work against tribunals, because it might lead to a ‘reconstruction’ of the tribunal’s reasoning by the annulment committee analysing the award. See A K Bjorklund, ‘The Continuing Appeal of Annulment: Lessons from Amco Asia and CME’ in T Weiler (ed), International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and Customary International Law (London: Cameron May, 2005), 503–4.

25  Klöckner I para 120.

26  Klöckner I para 120. The committee also pointed out that the sufficiency should be interpreted with caution because ‘the application for annulment under Article 52 is not to serve as an appeal in disguise’ (para 118).

27  Klöckner I para 120.

28  See Amco I para 43.

29  Soufraki para 131, 128.

30  Soufraki para 128.

31  Lucchetti para 98 (emphasis added).

32  Schreuer, Commentary, 1003.

33  T de Berranger, ‘L’article 52 de la Convention de Washington du 18 mars 1965 et les premiers enseignements de sa pratique’ (1988) 1 Revue de l’arbitrage 93, 110).

34  Feldman, ‘The Annulment Proceedings’, 109. See B Pirrwitz, ‘Annulment of Arbitral Awards Under Article 52 of the Washington Convention on the Settlement of Investment Disputes Between States and Nationals of Other States’ (1988) 23 Texas International Law Journal 73, 110. Contra P Rambaud, ‘L’Annulation des Sentences Klöckner et Amco’ (1986) 32 Anuaire Français de Droit International 259, 266 and F Lattanzi, ‘Convenzione di Washington Sulle Controversie Relative ad Investimenti e Invalidità delle Sentenze Arbitrali’ (1987) 70 Rivista di Diritto Internazionale 535–6.

35  MINE paras 5.08–5.09. See Amco I para 23; Vivendi I para 63; Azurix paras 53, 137; Enron paras 74, 220; Duke para 162; and D D Caron, ‘Reputation and Reality in the ICSID Annulment Process: Understanding the Distinction Between Annulment and Appeal’ (1992) 7 ICSID Rev–FILJ 21, 43–4.

36  Amco II para 1.18.

37  Amco II para 1.18.

38  Amco II para 1.18.

39  See Vivendi I para 64; CMS para 55 (quoting MINE para 5.08); MTD para 78; Togo Electricité para 62.

40  C Schreuer, ‘ICSID Annulment Revisited’ (2003)(30)(2) Legal Issues of Economic Integration, 112.

41  CDC para 70.

42  CDC para 70.

43  See MINE para 5.09; Mitchell para 21; Soufraki para 126; Lucchetti para 127; CMS para 55; Enron para 74; Sempra para 167; Continental Casualty para 100; Vieira para 357; Fraport para 249.

44  See Caron, ‘Reputation and Reality’, 44. See Feldman, ‘The Annulment Proceedings’, 105; W L Craig, ‘Uses and Abuses from Awards’ (1988) 4(3) Arbitration International 174, 210–1; and Pirrwitz, ‘Annulment of Arbitral Awards Under Article 52’, 110.

45  See Broches, ‘Observations on the Finality of ICSID Awards’, 366.

46  Klöckner I para 116.

47  Klöckner I para 116.

48  MINE para 5.09. See Mitchell para 21; Soufraki para 126; Lucchetti para 127; CMS para 5; Enron para 74; Sempra para 167; Continental Casualty para 100; Vieira para 357; Fraport para 249.

49  See Broches, ‘Observations on the Finality of ICSID Awards’, 366.

50  See Mitchell para 21. See MTD para 78.

51  Rumeli para 82. See Togo Electricité para 63.

52  Vivendi I para 65.

53  Vivendi I para 64.

54  Vivendi I para 64.

55  W M Reisman, ‘The Breakdown of the Control Mechanism in ICSID Arbitration’ (1989) 4 Duke Law Journal 739, 764–65.

56  Reisman, ‘Breakdown of the Control Mechanism’, 764–65.

57  See Caron, ‘Reputation and Reality’, 44; Feldman, ‘The Annulment Proceedings’, 109; Craig, ‘Uses and Abuses from Awards’, 210; and Pirrwitz, ‘Annulment of Arbitral Awards Under Article 52’, 110.

58  See M Sturzenegger, ‘ICSID Arbitration and Annulment for Failure to State Reasons: The Decision of the Ad Hoc Committee in Maritime International Nominees Establishment v The Republic of Guinea’ (1992) 9(4) Journal of International Arbitration 192–3. See G Alvarez-Avila, ‘ICSID Annulment Procedure: A Balancing Exercise Between Correctness and Finality’ in A J van den Berg (ed), Arbitration Advocacy in Changing Times, ICCA Congress Series, 2010 Rio Volume 15 (Kluwer Law International, 2011), 300.

59  See Amco I para 114.

60  Vivendi I para 64, cited in MTD para 50; CMS para 54; Azurix para 55; and Enron para 76. See Rumeli para 104 and Duke paras 236–51.

61  Wena para 82.

62  See Chapter 4.

63  Klöckner I paras 143–51. See Fraport para 258.

64  Wena para 81. See CMS paras 97, 127; Azurix paras 54–6; Enron para 75; Vieira para 355; Togo Electricité paras 57, 61, 233; Continental Casualty para 131.

65  Wena paras 81, 83. See Soufraki para 24; CMS para 127; Azurix paras 54–6; Enron para 75; Rumeli para 138; and Continental Casualty para 101. The Rumeli committee held: ‘The Committee is not limited in its review of the Award under Article 52(1)(e) of the ICSID Convention to the text of the Award alone, but rather should seek to understand the motivation of the Award in the light of the record before the Tribunal’ (Rumeli para 179).

66  Reisman, ‘Breakdown of the Control Mechanism’, 764–5. Similarly, Schreuer opined that committees are prepared to take a proactive role to explain apparent defects in awards regarding alleged failures to state reasons, because they should not annul awards ‘for trivial cause’, as annulment is an extraordinary remedy for situations that are grossly illegitimate (Schreuer, Commentary, 914, 1003).

67  Schreuer, Commentary, 914, 1003. Schreuer also pointed out: ‘If the decision appears incorrect or inexplicable, the ad hoc committee will be more inclined to view the absence of reasons as a ground for annulment’. We understand that an analysis of the decision’s correctness by an annulment committee is improper, at any stage.

68  Klöckner v Republic of Cameroon (ICSID Case No ARB/81/2), Award, 1983, p 186.

69  Klöckner I para 123.

70  Klöckner I para 126.

71  Klöckner I para 126 (emphasis in the original).

72  Klöckner I para 118.

73  Klöckner I para 130.

74  Klöckner I para 134.

75  Klöckner I para 136.

76  Klöckner I para 138.

77  Klöckner I para 141.

78  Klöckner I para 144.

79  Klöckner I para 145.

80  Klöckner I paras 145–6.

81  Klöckner I para 148.

82  Klöckner I para 149 (emphasis in the original). See para 150.

83  Klöckner I paras 143–51.

84  Klöckner I para 152.

85  Klöckner I paras 156–7.

86  Klöckner I para 164.

87  Klöckner I para 164.

88  Aguilar Alvarez and Reisman, The Reasons Requirement, 10.

89  See Caron, ‘Reputation and Reality’, 44; Feldman, ‘The Annulment Proceedings’, 109; Craig, ‘Uses and Abuses from Awards’, 210; and Pirrwitz, ‘Annulment of Arbitral Awards Under Article 52’, 110.

90  J Paulsson, ‘ICSID’s Achievements and Prospects’ (1991) 6 ICSID Rev–FILJ 380, 392.

91  Paulsson, ‘ICSID’s Achievements and Prospects’, 392.

92  See Amco I para 57.

93  See Amco I paras 58–60.

94  See Amco I paras 61–2.

95  See Amco I para 63.

96  See Amco I para 66.

97  See Amco I paras 90–8. Indonesia also alleged that the tribunal failed to state reasons when considering that a shortfall in Amco’s investment of one-sixth of the required level of investment was not material. The committee rejected Indonesia’s contention and held that the notion of ‘materiality’ was not alien to Indonesian administrative law, and therefore, the committee did not fail to state reasons (paras 99–102).

98  Reisman, ‘Breakdown of the Control Mechanism’, 780.

99  See Amco I para 97.

100  See Chapter 4.

101  See Amco I para 120.

102  See Amco I para 43.

103  See Amco I para 43.

104  T Cheng and R Trisotto, ‘Reasons and Reasoning in Investment Treaty Arbitration’ (2008–9) 32 Suffolk Transnational Law Review 409, 420.

105  Cheng and Trisotto, ‘Reasons and Reasoning’, 420.

106  MINE para 6.107.

107  MINE para 5.08–5.09 (emphasis added).

108  MINE para 6.104.

109  MINE paras 6.111–6.112.

110  Klöckner II para 7.03.

111  Klöckner II paras 7.13–7.14.

112  Klöckner II para 7.14.

113  Klöckner II para 7.14. See paras 7.68–7.71.

114  Klöckner II paras 7.22–7.45.

115  Klöckner II para 7.49.

116  Amco II para 7.55.

117  Amco II para 7.56.

118  Amco II para 7.56.

119  Amco II paras 9.11–9.13. The committee, however, stated that the second tribunal did not exceed its power to rectify a clerical error and that its duty to state reasons in that context was confined to ‘making plausible the assertion that the error was inadvertent’ (Amco II, para 9.11).

120  Wena para 86.

121  Wena para 82.

122  C Schreuer, ‘Three Generations of ICSID Annulment Proceedings’ in E Gaillard and Y Banifatemi (eds), Annulment of ICSID Awards (New York: Juris Publishing, 2004), 39 (citing Klöckner and MINE).

123  Wena para 87.

124  Wena para 91.

125  Wena para 93.

126  Wena paras 96–7.

127  Wena paras 96–7.

128  Wena paras 98–9.

129  Vivendi para 49.

130  Vivendi para 50.

131  S A Alexandrov, ‘The Vivendi Annulment Decision and the Lessons for Future ICSID Arbitrations—The Applicants’ Perspective’ in E Gaillard and Y Banifatemi (eds), Annulment of ICSID Awards (New York: Juris Publishing, 2004), 117.

132  CDC para 58.

133  CDC para 73.

134  CDC para 73.

135  CDC para 75.

136  CDC para 86.

137  CDC paras 84, 86.

138  CDC para 87.

139  CDC para 87.

140  Mitchell para 15.

141  See Mitchell para 23.

142  The Salini test identifies four elements as indicative of the existence of an ‘investment’ for purposes of the ICSID Convention: (i) a contribution; (ii) a certain duration over which the project is implemented; (iii) a sharing of operational risks; and (iv) a contribution to the host State’s development. See Salini Costruttori SpA and Italstrade SpA v Kingdom of Morocco (ICSID Case No ARB/00/4), Decision on Jurisdiction, Jul 23, 2001, para 30.

143  See Mitchell para 27.

144  See Mitchell para 27.

145  See Mitchell paras 37–8.

146  See Mitchell para 39.

147  See Mitchell para 40. The committee added: ‘Such inadequacy of reasons is deemed to be particularly grave, as it seriously affects the coherence of the reasoning and, moreover, it opens the door to a risk of genuine abuses, to the extent that it boils down to granting the qualification as investor to any legal counseling firm or law firm established in a foreign country, thereby enabling it to take advantage of the special arbitration system of ICSID’ (Mitchell para 40).

148  See Mitchell para 41.

149  Schreuer, Commentary, 915.

150  See W Hamida, ‘Two Nebulous ICSID Features: The Notion of Investment and the Scope of Annulment Control’ (2007) 24(3) Journal of International Arbitration 287, 303.

151  See I Marboe, ‘ICSID Annulment Decisions: Three Generations’ in Essays in Honour of Christoph Schreuer (Oxford: Oxford University Press, 2009), 207–9.

152  See the awards and annulment decisions in Malaysian Historical Salvors and Mitchell.

153  See Chapter 6.

154  See Mitchell para 50.

155  See Mitchell para 59.

156  See Mitchell para 62.

157  See Mitchell para 65.

158  See Mitchell para 62.

159  See Mitchell para 65.

160  MTD para 92.

161  MTD para 94.

162  MTD para 97.

163  MTD para 101.

164  MTD para 103.

165  MTD para 103.

166  MTD para 105.

167  Soufraki para 129.

168  Soufraki para 132.

169  Soufraki para 134.

170  Lucchetti para 126.

171  Lucchetti para 129.

172  Lucchetti para 129.

173  Lucchetti, Sir Franklin Berman Dissenting Opinion para 4.

174  Lucchetti, Sir Franklin Berman Dissenting Opinion para 4.

175  See F Berman, ‘Review of the Arbitral Tribunal’s Jurisdiction in ICSID Arbitration’ in E Gaillard (ed), The Review of International Arbitral Awards (New York: Juris Publishing, 2010), 260.

176  See Chapter 6.

177  CMS para 87.

178  Treaty Between the United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and Protection of Investment, signed Nov 14, 1991, entered into force Oct 20, 1994, Art II(2)(c).

179  CMS para 94.

180  CMS paras 96–7.

181  Aguilar Alvarez and Reisman, The Reasons Requirement, 23.

182  Aguilar Alvarez and Reisman, The Reasons Requirement, 23.

183  Aguilar Alvarez and Reisman, The Reasons Requirement, 25.

184  Cheng and Trisotto, ‘Reasons and Reasoning’, 422–3.

185  Wena para 83. It held: ‘If the award does not meet the minimal requirement as to the reasons given by the Tribunal, it does not necessarily need to be resubmitted to a new Tribunal. If the ad hoc Committee so concludes, on the basis of the knowledge it has received upon the dispute, the reasons supporting the Tribunal’s conclusions can be explained by the ad hoc Committee itself’. See MINE paras 6.48–6.56. For an opposite view, see E Schwartz, ‘Finality at What Cost? The Decision of the Ad Hoc Committee in Wena Hotels v Egypt’ in E Gaillard and Y Banifatemi (eds), Annulment of ICSID Awards (New York: Juris Publishing, 2004), 43.

186  CMS Award para 303; CMS para 93.

187  CMS paras 95–6. The ‘major difficulties’ were that: (a) that it seemed clear that Art II(2)(c) is concerned with consensual obligations arising independently of the BIT itself (ie under the law of the host State or possibly under international law); (b) consensual obligations are not entered into erga omnes but with regard to particular persons; (c) the effect of the umbrella clause is not to transform the obligation which is relied on into something else; (d) a shareholder, though apparently entitled to enforce the company’s rights in its own interest, will not be bound by the company’s obligations, eg as to dispute settlement; (e) if the tribunal’s implicit interpretation is right, then the mechanism in Art 25(2)(b) of the ICSID Convention is unnecessary wherever there is an umbrella clause; (f) there is no discussion in the award of the travaux of the BIT on this point, or of the prior understandings of the proponents of the umbrella clause as to its function (CMS para 95).

188  See S Marchili, ‘ICSID Annulment: A Saga of Virtue and Vice’ in I A Laird and T J Weiler (eds), Investment Treaty Arbitration and International Law—Vol 5 (New York: Juris Publishing, 2012).

189  Enron para 339.

190  CMS para 95.

191  Enron para 340.

192  W M Reisman, ‘Reflections on the Control Mechanism of the ICSID System’ in E Gaillard (ed), The Review of International Arbitral Awards (New York: JurisNet, 2010), 245. Verhoosel, on the other hand, pointed out that while the committee ‘was evidently eager to lay out its own views on the proper construction of the umbrella clause, the partial annulment arguably remained within the boundaries of the standard set for itself by the committee’ (G Verhoosel, ‘Annulment and Enforcement Review of Treaty Awards: To ICSID or Not to ICSID?’ in 50 Years of the New York Convention: 14 ICCA International Arbitration Conference 285 (Dublin: Kluwer Law International, 2009), 303); E Gaillard, ‘Chroniques des sentences arbitrales’ (2008) 175(1) Journal du Droit International 311, 362–4.

193  CMS para 113. Argentina alleged that this also amounted to a manifest excess of power.

194  CMS para 121.

195  CMS paras 123–4, 125, 126.

196  Aguilar Alvarez and Reisman, The Reasons Requirement, 26. See Paulsson, ‘ICSID’s Achievements and Prospects’, 392.

197  See Gaillard, ‘Chroniques des sentences arbitrales’, 364; Reisman, ‘Reflections on Control Mechanism’, 247–50; and Marboe, ‘ICSID Annulment Decisions’, 217. See Chapter 6. For an interesting discussion on obiter dicta in annulment decisions, see the discussion among several prominent experts in Annex 4, E Gaillard (ed), The Review of International Arbitral Awards (New York: JurisNet, 2010), 373–81. Gaëtan Verhoosel, on the other hand, considers that the CMS annulment decision ‘will carry no more authority than what the prestige of its members commands in the community’ and that ‘as long as it is benign and the dicta remain no more than that, it matters little for purposes of finality’ (Verhoosel, ‘Annulment and Enforcement Review of Treaty Awards’, 307).

198  H Van Houtte, ‘Article 52 of the Washington Convention—A Brief Introduction’ in E Gaillard and Y Banifatemi (eds), Annulment of ICSID Awards (New York: Juris Publishing, 2004), 14–15. Similarly, Cheng and Trisotto held that if a committee decides to apply a low standard of reasoning, that is disregarding potential errors in the law, it should be slow to express in obiter dictum its criticism of the law or facts determined by the tribunal. See Cheng and Trisotto, ‘Reasons and Reasoning’, 426.

199  CMS para 152.

200  CMS para 154.

201  Azurix para 180.

202  Azurix para 181.

203  Azurix para 184.

204  MCI Power para 58.

205  MCI Power paras 77, 82.

206  MCI Power para 86.

207  Rumeli para 88.

208  Rumeli paras 98–9.

209  Rumeli para 100.

210  Rumeli para 100.

211  Rumeli para 112.

212  Rumeli para 118.

213  Rumeli para 142.

214  Rumeli paras 144, 146.

215  Rumeli para 179.

216  Rumeli para 179.

217  Rumeli paras 174, 178.

218  Helnan paras 36–7.

219  Helnan paras 36–7.

220  Helnan para 36 (emphasis in the original).

221  Sempra para 168.

222  Enron para 90.

223  Enron para 90.

224  Enron paras 94–5. The committee considered that the same applies with references to prior decisions in the same case: ‘Provided that the tribunal’s own reasons are sufficiently apparent, it is not necessary for a tribunal in adopting the reasoning of the earlier decision to distinguish specifically between those passages in the earlier decision that it adopts as its own reasoning, and those passages in the earlier decision that it considers inapplicable to its own decision’ (Enron para 95; see para 96).

225  Enron paras 98–107.

226  Enron para 108.

227  Enron para 109.

228  Enron paras 109–10.

229  Enron para 262.

230  Enron para 277.

231  Enron para 277.

232  Enron paras 284–7.

233  Enron paras 284–7. The committee reached the same conclusion regarding another defence raised by Argentina under Argentine law (paras 288–91).

234  Enron para 319.

235  Enron para 331.

236  Enron para 332.

237  Enron para 330.

238  Enron para 334.

239  Enron para 340.

240  Vivendi II paras 255–7. See para 263.

241  Fraport para 262.

242  Fraport para 269.

243  Vieira paras 360–72.

244  Continental Casualty paras 110 et seq.

245  Continental Casualty paras 124–32.

246  Continental Casualty paras 151–75.

247  Continental Casualty paras 237 et seq.

248  Duke para 165.

249  Duke para 165.

250  Duke para 166. See paras 182, 185–9.

251  Duke paras 206–9.

252  Duke paras 217–18.

253  Duke paras 224–35.

254  Togo Electricité paras 95, 117–18, 135, 140, 162–3.

255  Togo Electricité paras 102, 123.

256  Togo Electricité paras 191–200.

257  See History of the ICSID Convention, Vol II, 849. Indeed, the drafters of the ICSID Convention unanimously indicated that the remedy should be a supplemental review.

258  See Schreuer, Commentary, 798; Enron paras 72, 110; MCI Power paras 66–7.

259  Schreuer, Commentary, 799. Schreuer added: ‘Arguments must be decisive in the sense that their serious consideration might conceivably have affected the outcome’.

260  Klöckner I para 115. The Klöckner I committee also stated ‘Obviously, and in accordance with principles of interpretation that are recognized generally—for example Article 31 of the Vienna Convention on the Law of Treaties—Article 52 on the annulment of awards, must be interpreted in the context of the Convention and in particular of Articles 42 and 48, and vice versa. It is furthermore impossible to imagine that when they drafted Article 52, the Convention’s authors would have forgotten the existence of Articles 42 or 48(3), just as it is impossible to assume that the authors of provisions like Articles 42(1) or 48(3) would have neglected to consider the sanction for non-compliance’ (Klöckner I para 58).

261  Klöckner I para 115.

262  Reisman, ‘Breakdown of the Control Mechanism’, 763.

263  Reisman, ‘Breakdown of the Control Mechanism’, 763.

264  Reisman, ‘Breakdown of the Control Mechanism’, 789.

265  Reisman, ‘Breakdown of the Control Mechanism’, 791.

266  Case Concerning the Arbitral Award made by the King of Spain 1969 ICJ 216.

267  A Broches, ‘On the Finality of Awards: A Reply to Michael Reisman’ (1993) 8 ICSID Rev–FILJ 92, 96. Further, Broches added: ‘[T]he explicit requirement to deal with such questions constitutes a fundamental procedural protection of the parties against arbitrary decisions. Failure of a tribunal to observe it is a serious departure from a fundamental rule of procedure which is a ground for annulment under Article 52(1)(d). The objective of the annulment process is the protection of parties against procedural injustice. Reisman’s interpretation of Article 52 would allow a tribunal to perpetrate injustice with impunity’.

268  Broches, ‘Observations on the Finality of ICSID Awards’, 367. Reisman responded to this criticism arguing that ‘a claim for annulment on the basis of inadequacy of reasons may be based upon the narrow grounds of Article 52(1)(e) but not on the broader grounds of Article 48(3)’ (W M Reisman, ‘Repairing ICSID’s Control System: Some Comments on Aron Broches’ “Observations on the Finality of ICSID Awards”’ (1992) 7 ICSID Rev–FILJ 204).

269  See D A Redfern, ‘ICSID—Losing its Appeal?’ (1987) 3(2) Arbitration International 109–10, 111. See Feldman, ‘The Annulment Proceedings’, 105.

270  See Redfern, ‘ICSID—Losing its Appeal?’, 109–10, 111. He added: ‘Lawyers who are experienced in the practice of international commercial arbitration will know of many cases in which arguments are put forward, but are ignored or barely touched upon by the arbitral tribunal because, in the final analysis, they are not considered to have any bearing on the arbitral tribunal’s decision’.

271  G R Delaume, ‘The Finality of Arbitration Involving States: Recent Developments’ (1989) 5(1) Arbitration International 21, at 32, citing History of the ICSID Convention, Vol II at 515.

272  Delaume, ‘The Finality of Arbitration Involving States: Recent Developments’, at 32.

273  See Amco I para 30.

274  Amco I para 32.

275  MINE paras 5.12–5.13. See Togo Electricité para 57, stating that failure to deal with every question submitted to the tribunal does not constitute a ground for annulment.

276  See MINE paras 5.12–5.13.

277  See MINE para 5.13.

278  Schreuer, Commentary, 1001.

279  MINE paras 6.101. Eric Schwartz interpreted this paragraph as meaning that ‘an award should not be found to be supported by reasons if important questions have not been addressed’ (in E Schwartz, ‘Finality at What Cost?’, 81).

280  Vivendi I para 87.

281  Wena para 101; CDC para 71; Lucchetti para 129; Continental Casualty para 229. The Helnan committee went a step further and held that Article 52(1)(e) of the ICSID Convention permits annulment on the ground that ‘the award has failed to state the reasons on which it is based’, which meant that ‘the object of this ground is the reasoning which leads to the Tribunal’s Award’ (Helnan para 36) (emphasis in the original). The Rumeli committee held: ‘If the arguments of the parties have been correctly summarized and all the claims have been addressed, there is no need explicitly to address each and every one of the arguments raised in support of the particular claims, and it is in the discretion of the tribunal not to do so’. The Rumeli committee also held that Art 52(1)(e) does not to require the tribunal to explain its take on each piece of evidence adduced by either party, but rather to enable the reader to see the reasons upon which the award itself is based. See Rumeli paras 81, 84, 104.

282  Repsol para 44; Togo Electricité paras 57, 63, 109.

283  The United Mexican States v Metalclad Corp, 2001 BCSC 664, para 121.

284  The United Mexican States v Metalclad Corp, 2001 BCSC 664, para 122.

285  Klöckner I para 131.

286  See Redfern, ‘ICSID—Losing its Appeal?’, 108–9. Aron Broches joined Redfern in criticizing the broad concept of ‘questions’ in the annulment in Klöckner, see Broches, ‘Observations on the Finality of ICSID Awards’, 377.

287  See Klöckner I para 148.

288  Amco I para 35.

289  See MINE paras 5.11–12, 6.99–101.

290  The United Mexican States v Metalclad Corp, 2001 BCSC 664, para 122.

291  Enron paras 72–7, 222; MCI Power paras 66–9; Continental Casualty para 99.

292  Klöckner I para 151.

293  Klöckner I para 164.

294  MINE paras 6.48–6.56 (emphasis added).

295  Rumeli para 84.

296  Schreuer, Commentary, 798.

297  See A Broches, ‘Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 1965, Explanatory Notes and Survey of its Application’ in A J van den Berg (ed), Yearbook Commercial Arbitration, Vol XVIII (1993), 627, 681.

298  See Feldman, ‘The Annulment Proceedings’, 105.

299  Klöckner I para 115.

300  See Amco I para 34.

301  See Amco I para 34.

302  See Amco I paras 35–6. See MCI Power para 69.

303  See MINE paras 5.11–5.13. The committee stated: ‘The Committee has considered whether Article 49(2) constitutes the only remedy for non-compliance with the obligation to deal with every question submitted to the tribunal. It has concluded that Article 49(2) provides a satisfactory remedy for the case of a tribunal having failed to exercise its jurisdiction in full. For example, in the present case the Tribunal failed to rule on MINE’s claim to be reimbursed for the costs and expenses incurred in the United States District Court and in arbitration before the American Arbitration Association in earlier stages of its conflict with Guinea. Article 49(2) would have provided a specific remedy and, not having invoked it, MINE could not have relied on that failure for purposes of annulment’ (MINE para 5.12).

304  See Wena paras 100–1.

305  Wena para 101.

306  See Klöckner I paras 148–51.

307  Klöckner I paras 148–9.

308  See Klöckner I para 164.

309  See Klöckner I para 164.

310  MINE para 6.101. With respect to another claim, however, the committee found that the tribunal did not have to address specific conflicting contentions of the parties because it had addressed and resolved the principal argument on the issue (MINE para 6.51).

311  See Wena para 103.

312  Wena para 105.

313  Schwartz, ‘Finality at What Cost?’, 82–3.

314  See CDC para 86.

315  See CDC para 56: ‘The specific terminology used by the Republic in its Memorial cannot define the question the Tribunal was obliged to answer. Rather, the Tribunal was required to answer a legal question, or to put it another way, come to a conclusion about the Parties’ rights and liabilities. In this case, the legal question for the Tribunal’s determination was whether or not the Republic’s claimed defenses protected it from liability under the 1993 Guarantee. This question necessarily entailed, under English law as the Tribunal understood it, the determination, inter alia, of whether the Republic was entitled to rely on CDC’s loan decision as a representation regarding the substance of the project it financed. The Tribunal answered the question in the negative, thereby addressing the proper legal question before it’.

316  Lucchetti para 129.

317  Lucchetti para 129.

318  The United Mexican States v Metalclad Corp, 2001 BCSC 664, para 122.

319  See Azurix para 244.

320  See Enron paras 109–10.

321  See Enron para 222. In reaching one of the most controversial annulment decisions, the committee annulled the award under Art 52(1)(e) on the basis of an argument that the applicant did not raise in its annulment submissions (see Enron paras 373–95 and Chapter 6).

322  See A Rigo Sureda, ‘Introduction to Investor-State Arbitration’, 233.

323  MINE para 5.08 (emphasis added).