The Effect of the Annulment Decisions In Amco v. Indonesia and Klöckner v. Cameroon on the Future of the International Centre for the Settlement of Investment Disputes
The E ffect of the Annulment Decisions In Amco v. Indonesia and Klöckner v. Cameroon on the Future of the International Centre for the Settlement of Investment Disputes
Sylvia Schatz 0
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Article 6
Schatz, Sylvia. "The Effe ct of the Annulment Decisions In Amco v. Indonesia and Klöckner v. Cameroon on the Future of the
International Centre for the Settlement of Investment Disputes." American University International Law Review 3, no. 2 (1988):
481-515.
RECENT DEVELOPMENTS
IN INTERNATIONAL
ORGANIZATIONS
THE EFFECT OF THE ANNULMENT
DECISIONS IN
AMCO v. INDONESIA AND
KLOCKIVER v. CAMEROON
ON THE FUTURE OF THE INTERNATIONAL
CENTRE
FOR THE SETTLEMENT OF INVESTMENT DISPUTES
Sylvia Schatz*
INTRODUCTION
The International Centre for Settlement of Investment Disputes
(ICSID)" provides a forum for arbitrating investment disputes between
foreign investors and contracting states.' Theoretically, ICSID
interna* J.D., 1988, Washington College of Law, The American University.
1. Convention on the Settlement of Investment Disputes Between States and
Nationals of Other States, openedfor signatureMar. 18, 1965, 17 U.S.T. 1270, T.I.A.S.
No. 6090, 575 U.N.T.S. 159, reprinted in 4 I.L.M. 532 (1965) [hereinafter ICSID
Convention]. The United States signed the Convention on August 27, 1965. Note,
Some Legal Questions Concerning the Convention on the Settlement of Investment
Disputes Between States and Nationals of Other States, 12 ST. Louis U.L.J. 679, 679
n.1 (1968). The Senate approved the Convention on May 16, 1966, and President
Johnson ratified it on June 1, 1966. Id. Congress later enacted enabling legislation. 22
U.S.C. §§ 1650, 1650a (1966).
2. Broches, The Convention on the Settlement of Investment Disputes: Some
Observations on Jurisdiction,5 COLUM. J. TRANSNAV'L L. 263, 264 (1966) [hereinafter
Broches, Observations on Jurisdiction].To initiate ICSID proceedings, an applicant
must establish a prima facie case that ICSID has jurisdiction over the dispute.
Broches, Settlement of Disputes Arising out of Investment in Developing Countries,11
INT'L Bus. LAW. 206, 208 (1983) [hereinafter Broches, Settlement of Disputes]. The
ICSID Secretary-General will register the request and will establish a tribunal, unless
the request for arbitration is manifestly outside the jurisdiction of ICSID. Id. The
respondent may address objections to the jurisdiction of ICSID pursuant to article 41 of
the Convention. Id.; see also ICSID Convention, supra note 1, art. 41(2) (providing
that a tribunal must determine whether the objection of a contracting party to the
jurisdiction of ICSID is a preliminary question or part of the merits of the dispute).
Unless the parties do not agree on the number of arbitrators, the tribunal will consist
tional arbitral awards are final and binding.' Foreign investors rely on
ICSID to enforce tribunal awards, because article 54 of the Convention
on the Settlement of Investment Disputes Between States and
Nationals of Other States (ICSID
Convention) provides that a contracting
state must treat an ICSID award as a final judgment of a court of that
state.4 Similarly, a contracting state expects enforcement of ICSID
tribunal awards, because ICSID
prevents the foreign investor's home
state from
making international claims or intervening through
diplomatic channels. 5
An ad hoc committee, however, pursuant to ICSID rules,' annulled
the ICSID arbitration awards in Amco v. Indonesia7 and Klbckner v.
Cameroon.8 These two annulments of arbitral awards are the only ones
in the history of ICSID. Nevertheless, the annulments aroused
considerable controversy about the future of ICSID as an alternative dispute
settlement forum.'
This concern, however, is not entirely justified. Recent developments
within the ICSID system will promote heightened demand for ICSID
arbitration. First, the arbitral tribunals' expansive interpretations of
ICSID jurisdiction in case law increases the willingness of contracting
parties to incorporate ICSID
arbitration clauses into their
agreeof three arbitrators. Each party will appoint one arbitrator and the third, who is the
president of the tribunal, is appointed through the agreement of the parties. ICSID
Convention, supra note 1, art. 37(2)(b). If the parties do not appoint arbitrators, then
the President of the World Bank (acting as ex officio chairman of the Administrative
Council of ICSID) appoints the arbitrators. Id. art. 38.
3. See Branson, Annulments of "Final'ICSID Awards Raise Questions About the
Process,NAT'L L.J., Aug. 4, 1986, at 25 (questioning the finality of i (...truncated)