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

American University International Law Review, Dec 1988

By Sylvia Schatz, Published on 01/01/88

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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 0 Thi s Article is brought to you for free and open access by the Washington College of Law Journals & Law Reviews at Digital Commons @ American University Washington College of Law. It has been accepted for inclusion in American University International Law Review by an authorized administrator of Digital Commons @ American University Washington College of Law. For more information , please contact , USA - 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)


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Sylvia Schatz. 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, American University International Law Review, 1988, Volume 3, Issue 2,