81843 2012 ANNUAL REPORT 2012 ANNUAL REPORT ii | ICSID CONTENTS Letter of Transmittal 1 ICSID Secretariat 2 Chapter 1: Introduction 5 Chapter 2: Membership 9 Chapter 3: Panels of Conciliators and of Arbitrators 17 Chapter 4: Operations of the Centre 21 Chapter 5: Outreach 43 Chapter 6: Forty-fifth Annual Meeting of the Administrative Council 51 Chapter 7: Finance 53 Financial Statements 54 Independent Auditors’ Report 67 The photos of art in this Annual Report come from the World Bank collection and are reproduced with the kind permission of the curator of the World Bank. ANNUAL REPORT 2012 | iii iv | ICSID INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES September 6, 2012 Dear Mr. Chairman, Pursuant to Administrative and Financial Regulation 5(4), I am pleased to submit to the Administrative Council for its approval the Annual Report on the operation of the International Centre for Settlement of Investment Disputes required by Article 6(1)(g) of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. This Annual Report covers the fiscal year from July 1, 2011 to June 30, 2012. The Report includes the audited financial statements of the Centre, presented pursuant to Administrative and Financial Regulation 19. Yours sincerely, Meg Kinnear Secretary-General Dr. Jim Yong Kim Chairman Administrative Council International Centre for Settlement of Investment Disputes ANNUAL REPORT 2012 | 1 SECRETARIAT OF THE INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES June 30, 2012 Meg Kinnear, Secretary-General Legal Staff Aurélia Antonietti, Team Leader/Legal Counsel Gonzalo Flores, Team Leader/Legal Counsel Milanka Kostadinova, Team Leader/Legal Counsel Eloïse Obadia, Team Leader/Legal Counsel Martina Polasek, Team Leader/Legal Counsel Mercedes Cordido-Freytes de Kurowski, Legal Counsel Aïssatou Diop, Legal Counsel Anneliese Fleckenstein, Legal Counsel Michael Gagain, Legal Counsel – Institutional Matters Ann Catherine Kettlewell, Legal Counsel Mike King, Legal Counsel – Institutional Matters Paul-Jean Le Cannu, Legal Counsel Lindsey Marchessault, Legal Counsel – Institutional Matters Alicia Martín Blanco, Legal Counsel Marco Tulio Montañés-Rumayor, Legal Counsel Frauke Nitschke, Legal Counsel Natalí Sequeira, Legal Counsel Mairée Uran Bidegain, Legal Counsel Janet Whittaker, Legal Counsel Shingirirai Chaza, Intern Louis-Philippe Coulombe, Intern FINANCIAL AND GENERAL ADMINISTRATION STAFF Javier Castro, Team Leader/Program Officer Zelalem Tesfa Dagnaw, Financial Officer Rita A. Rovira, Information Analyst William D. Casson, Consultant Lamiss Al-Tashi, Hearings Organizer Sonia Lee, Financial Assistant Walter Meza-Cuadra, Financial Assistant Malkiat Singh, Financial Assistant Richard Carter, Information Specialist PARALEGAL, ADMINISTRATIVE AND CLIENT SUPPORT STAFF Daniela Argüello, Paralegal Anna D. Avilés-Alfaro, Paralegal Ivania Fernandez, Paralegal Maria Cristina Padrao, Paralegal Danielle Paas, Paralegal Eric Stanculescu, Paralegal Angela Ting, Paralegal Alix Ahimon, Program Assistant Cindy Ayento, Administrative Assistant to Secretary-General Claudio Batista, Program Assistant Paula Carazo, Program Assistant Cinthya Ibáñez Rodríguez, Program Assistant Lanny Isimbi, Program Assistant Annie An, Receptionist 2 | ICSID ANNUAL REPORT 2012 | 3 4 | ICSID CHAPTER 1 INTRODUCTION The recent growth in investor-State arbitration has continued apace. ICSID registered a record 38 cases in 2011, and had registered 19 further cases by June 30, 2012. Included in these numbers are 3 new conciliation cases, showing an increased resort not simply to arbitration but also to alternative methods of dispute resolution available under the ICSID Convention and Additional Facility. Over the past year, ICSID administered more than 100 hearings in cities around the world, and numerous case decisions and awards were rendered by tribunals and ad hoc Committees. Approximately 45% of all cases ever registered at ICSID are currently on the docket, so one can safely predict that these trends will continue in the upcoming year. Such statistics should not be considered in isolation from their broader economic context.There have been unprecedented increases in global flows of foreign direct investment in the last two decades. Globalization, increased cross-border trade and investment, and growing economic interdependence between sovereign States have resulted in numerous States becoming simultaneously importers and exporters of capital. In turn, a number of States have updated their investment treaties, adopted model treaties, and entered into new agreements with diverse governmental and private partners. These statistics must also be read in light of the fact that international investment law and investor- State dispute settlement are a new discipline. The first bilateral investment treaty (BIT) was signed by Pakistan and Germany in 1959, only 53 years ago. The first BIT offering investor-State arbitration was concluded between the Netherlands and Indonesia in 1968, and the first investment treaty case at ICSID was decided in 1990, only 22 years ago. Indeed, some commentators estimate that about 75% of all investor-State awards have been issued in the last five years. ICSID continues to play a vital role in the evolving international investment legal system. Its primary job is very specific: to offer foreign investors and host States an impartial, effective and accessible facility for arbitration and conciliation of international investment disputes. ICSID has taken numerous steps in the past year to enhance its capacity to fulfill this role. In September of Arthur Fata, Zimbabwe The Prayer ANNUAL REPORT 2012 | 5 2011, ICSID announced a new list of Chairman’s appointees to the Panel of Arbitrators and Panel of Conciliators. A number of States have also updated their arbitrator and conciliator lists, offering disputing parties more potential panelists for disputes. These designations are most welcome, as increasing the number of qualified arbitrators and conciliators is one of the keys to ensuring that the caseload is addressed in a timely and expert fashion. The Centre continued to improve its internal practices to ensure optimal service for facility users. For example, we developed electronic document management and case management systems to better manage the substantial documentation generated in each case. We have implemented consistent best practices in case administration, incorporating service standards by which we can ensure timely, high quality, and consistent practices in each case. ICSID continues to encourage transparent proceedings, for example by offering parties the option to webcast proceedings and to publish decisions and awards rendered in individual cases. The operations of the Centre and the profile of its caseload are detailed in Chapter 4 of this report, and demonstrate the dynamism of the work done by the ICSID Secretariat. ICSID will continue its efforts to provide excellent service to disputing parties in the upcoming year. Work has already begun on designing a revised website which will provide better navigation, have enhanced search capacity, an improved look and feel, and expanded information about arbitration and conciliation under the ICSID Convention and Additional Facility. Similarly, the Centre will start planning the second phase of our case management system which will allow facility users to file and access case-related materials electronically. These and other initiatives will allow ICSID to remain the premier facility for resolution of international investment disputes. 6 | ICSID It is an extraordinary privilege to serve as Secretary-General of ICSID, and I would like to thank Contracting States and facility users for their confidence in the Centre. We will make every effort to continue to earn this confidence over the coming year. Finally, I am most grateful to the staff of ICSID for their collegiality, work ethic, skill, and enthusiasm. Their efforts make the Centre a unique facility, and I look forward to our achievements in the upcoming year. Meg Kinnear Secretary-General ANNUAL REPORT 2012 | 7 Gerald Chukwuma, Nigeria The Thin Line 8 | ICSID CHAPTER 2 MEMBERSHIP As of June 30, 2012, 158 States were signatory to the ICSID Convention. Of these, 148 States were ICSID Contracting States by virtue of their having deposited instruments of ratification, acceptance or approval of the ICSID Convention. On January 24, 2012, the World Bank received a written notice of denunciation of the Convention from the República Bolivariana de Venezuela. The denunciation took effect on July 25, 2012. The Republic of South Sudan signed and deposited its instrument of ratification of the Convention with the World Bank on April 18, 2012. The ICSID Convention entered into force for South Sudan on May 18, 2012. Shortly following the end of FY2012, on July 19, 2012, Montenegro signed the ICSID Convention. A map showing the distribution of current ICSID membership and a complete list of the Contracting States and other signatories of the ICSID Convention, both as of June 30, 2012, follow. ANNUAL REPORT 2012 | 9 IBRD 39525 This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information 10 shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any | endorsement or acceptance of such boundaries. ICSID CONTRACTING STATES TO THE ICSID CONVENTION JUNE 2012 SIGNATORY STATES TO THE ICSID CONVENTION LIST OF CONTRACTING STATES AND OTHER SIGNATORIES OF THE CONVENTION as of June 30, 2012 The 158 States listed below have signed the Convention on the Settlement of Investment Disputes between States and Nationals of Other States on the dates indicated. The names of the 148 States that have deposited their instruments of ratification are in bold, and the dates of such deposit and of the attainment of the status of Contracting State by the entry into force of the Convention for each of them are also indicated. Deposit of Entry into Force State Signature Ratification of Convention Afghanistan Sep. 30, 1966 June 25, 1968 July 25, 1968 Albania Oct. 15, 1991 Oct. 15, 1991 Nov. 14, 1991 Algeria Apr. 17, 1995 Feb. 21, 1996 Mar. 22, 1996 Argentina May 21, 1991 Oct. 19, 1994 Nov. 18, 1994 Armenia Sep. 16, 1992 Sep. 16, 1992 Oct. 16, 1992 Australia Mar. 24, 1975 May 2, 1991 June 1, 1991 Austria May 17, 1966 May 25, 1971 June 24, 1971 Azerbaijan Sep. 18, 1992 Sep. 18, 1992 Oct. 18, 1992 Bahamas, The Oct. 19, 1995 Oct. 19, 1995 Nov. 18, 1995 Bahrain Sep. 22, 1995 Feb. 14, 1996 Mar. 15, 1996 Bangladesh Nov. 20, 1979 Mar. 27, 1980 Apr. 26, 1980 Barbados May 13, 1981 Nov. 1, 1983 Dec. 1, 1983 Belarus July 10, 1992 July 10, 1992 Aug. 9, 1992 Belgium Dec. 15, 1965 Aug. 27, 1970 Sep. 26, 1970 Belize Dec. 19, 1986 Benin Sep. 10, 1965 Sep. 6, 1966 Oct. 14, 1966 Bosnia and Herzegovina Apr. 25, 1997 May 14, 1997 June 13, 1997 Botswana Jan. 15, 1970 Jan. 15, 1970 Feb. 14, 1970 Brunei Darussalam Sep. 16, 2002 Sep. 16, 2002 Oct. 16, 2002 Bulgaria Mar. 21, 2000 Apr. 13, 2001 May 13, 2001 Burkina Faso Sep. 16, 1965 Aug. 29, 1966 Oct. 14, 1966 Burundi Feb. 17, 1967 Nov. 5, 1969 Dec. 5, 1969 Cambodia Nov. 5, 1993 Dec. 20, 2004 Jan. 19, 2005 Cameroon Sep. 23, 1965 Jan. 3, 1967 Feb. 2, 1967 Canada Dec. 15, 2006 Cape Verde Dec. 20, 2010 Dec. 27, 2010 Jan. 26, 2011 Central African Republic Aug. 26, 1965 Feb. 23, 1966 Oct. 14, 1966 Chad May 12, 1966 Aug. 29, 1966 Oct. 14, 1966 Chile Jan. 25, 1991 Sep. 24, 1991 Oct. 24, 1991 ANNUAL REPORT 2012 | 11 Deposit of Entry into Force State Signature Ratification of Convention China Feb. 9, 1990 Jan. 7, 1993 Feb. 6, 1993 Colombia May 18, 1993 July 15, 1997 Aug. 14, 1997 Comoros Sep. 26, 1978 Nov. 7, 1978 Dec. 7, 1978 Congo, Democratic Rep. of Oct. 29, 1968 Apr. 29, 1970 May 29, 1970 Congo, Rep. of Dec. 27, 1965 June 23, 1966 Oct. 14, 1966 Costa Rica Sep. 29, 1981 Apr. 27, 1993 May 27, 1993 Côte d’Ivoire June 30, 1965 Feb. 16, 1966 Oct. 14, 1966 Croatia June 16, 1997 Sep. 22, 1998 Oct. 22, 1998 Cyprus Mar. 9, 1966 Nov. 25, 1966 Dec. 25, 1966 Czech Republic Mar. 23, 1993 Mar. 23, 1993 Apr. 22, 1993 Denmark Oct. 11, 1965 Apr. 24, 1968 May 24, 1968 Dominican Republic Mar. 20, 2000 Egypt, Arab Rep. of Feb. 11, 1972 May 3, 1972 June 2, 1972 El Salvador June 9, 1982 Mar. 6, 1984 Apr. 5, 1984 Estonia June 23, 1992 June 23, 1992 July 23, 1992 Ethiopia Sep. 21, 1965 Fiji July 1, 1977 Aug. 11, 1977 Sep. 10, 1977 Finland July 14, 1967 Jan. 9, 1969 Feb. 8, 1969 France Dec. 22, 1965 Aug. 21, 1967 Sep. 20, 1967 Gabon Sep. 21, 1965 Apr. 4, 1966 Oct. 14, 1966 Gambia, The Oct. 1, 1974 Dec. 27, 1974 Jan. 26, 1975 Georgia Aug. 7, 1992 Aug. 7, 1992 Sep. 6, 1992 Germany Jan. 27, 1966 Apr. 18, 1969 May 18, 1969 Ghana Nov. 26, 1965 July 13, 1966 Oct. 14, 1966 Greece Mar. 16, 1966 Apr. 21, 1969 May 21, 1969 Grenada May 24, 1991 May 24, 1991 June 23, 1991 Guatemala Nov. 9, 1995 Jan. 21, 2003 Feb. 20, 2003 Guinea Aug. 27, 1968 Nov. 4, 1968 Dec. 4, 1968 Guinea-Bissau Sep. 4, 1991 Guyana July 3, 1969 July 11, 1969 Aug. 10, 1969 Haiti Jan. 30, 1985 Oct. 27, 2009 Nov. 26, 2009 Honduras May 28, 1986 Feb. 14, 1989 Mar. 16, 1989 Hungary Oct. 1, 1986 Feb. 4, 1987 Mar. 6, 1987 Iceland July 25, 1966 July 25, 1966 Oct. 14, 1966 Indonesia Feb. 16, 1968 Sep. 28, 1968 Oct. 28, 1968 12 | ICSID Deposit of Entry into Force State Signature Ratification of Convention Ireland Aug. 30, 1966 Apr. 7, 1981 May 7, 1981 Israel June 16, 1980 June 22, 1983 July 22, 1983 Italy Nov. 18, 1965 Mar. 29, 1971 Apr. 28, 1971 Jamaica June 23, 1965 Sep. 9, 1966 Oct. 14, 1966 Japan Sep. 23, 1965 Aug. 17, 1967 Sep. 16, 1967 Jordan July 14, 1972 Oct. 30, 1972 Nov. 29, 1972 Kazakhstan July 23, 1992 Sep. 21, 2000 Oct. 21, 2000 Kenya May 24, 1966 Jan. 3, 1967 Feb. 2, 1967 Korea, Rep. of Apr. 18, 1966 Feb. 21, 1967 Mar. 23, 1967 Kosovo, Rep. of June 29, 2009 June 29, 2009 July 29, 2009 Kuwait Feb. 9, 1978 Feb. 2, 1979 Mar. 4, 1979 Kyrgyz Republic June 9, 1995 Latvia Aug. 8, 1997 Aug. 8, 1997 Sep. 7, 1997 Lebanon Mar. 26, 2003 Mar. 26, 2003 Apr. 25, 2003 Lesotho Sep. 19, 1968 July 8, 1969 Aug. 7, 1969 Liberia Sep. 3, 1965 June 16, 1970 July 16, 1970 Lithuania July 6, 1992 July 6, 1992 Aug. 5, 1992 Luxembourg Sep. 28, 1965 July 30, 1970 Aug. 29, 1970 Macedonia, former Yugoslav Rep. of Sep. 16, 1998 Oct. 27, 1998 Nov. 26, 1998 Madagascar June 1, 1966 Sep. 6, 1966 Oct. 14, 1966 Malawi June 9, 1966 Aug. 23, 1966 Oct. 14, 1966 Malaysia Oct. 22, 1965 Aug. 8, 1966 Oct. 14, 1966 Mali Apr. 9, 1976 Jan. 3, 1978 Feb. 2, 1978 Malta Apr. 24, 2002 Nov. 3, 2003 Dec. 3, 2003 Mauritania July 30, 1965 Jan. 11, 1966 Oct. 14, 1966 Mauritius June 2, 1969 June 2, 1969 July 2, 1969 Micronesia, Federated States of June 24, 1993 June 24, 1993 July 24, 1993 Moldova Aug. 12, 1992 May 5, 2011 June 4, 2011 Mongolia June 14, 1991 June 14, 1991 July 14, 1991 Morocco Oct. 11, 1965 May 11, 1967 June 10, 1967 Mozambique Apr. 4, 1995 June 7, 1995 July 7, 1995 Namibia Oct. 26, 1998 Nepal Sep. 28, 1965 Jan. 7, 1969 Feb. 6, 1969 Netherlands May 25, 1966 Sep. 14, 1966 Oct. 14, 1966 ANNUAL REPORT 2012 | 13 Deposit of Entry into Force State Signature Ratification of Convention New Zealand Sep. 2, 1970 Apr. 2, 1980 May 2, 1980 Nicaragua Feb. 4, 1994 Mar. 20, 1995 Apr. 19, 1995 Niger Aug. 23, 1965 Nov. 14, 1966 Dec. 14, 1966 Nigeria July 13, 1965 Aug. 23, 1965 Oct. 14, 1966 Norway June 24, 1966 Aug. 16, 1967 Sep. 15, 1967 Oman May 5, 1995 July 24, 1995 Aug. 23, 1995 Pakistan July 6, 1965 Sep. 15, 1966 Oct. 15, 1966 Panama Nov. 22, 1995 Apr. 8, 1996 May 8, 1996 Papua New Guinea Oct. 20, 1978 Oct. 20, 1978 Nov. 19, 1978 Paraguay July 27, 1981 Jan. 7, 1983 Feb. 6, 1983 Peru Sep. 4, 1991 Aug. 9, 1993 Sep. 8, 1993 Philippines Sep. 26, 1978 Nov. 17, 1978 Dec. 17, 1978 Portugal Aug. 4, 1983 July 2, 1984 Aug. 1, 1984 Qatar Sep. 30, 2010 Dec. 21, 2010 Jan. 20, 2011 Romania Sep. 6, 1974 Sep. 12, 1975 Oct. 12, 1975 Russian Federation June 16, 1992 Rwanda Apr. 21, 1978 Oct. 15, 1979 Nov. 14, 1979 Samoa Feb. 3, 1978 Apr. 25, 1978 May 25, 1978 Sao Tome and Principe Oct. 1, 1999 Saudi Arabia Sep. 28, 1979 May 8, 1980 June 7, 1980 Senegal Sep. 26, 1966 Apr. 21, 1967 May 21, 1967 Serbia May 9, 2007 May 9, 2007 June 8, 2007 Seychelles Feb. 16, 1978 Mar. 20, 1978 Apr. 19, 1978 Sierra Leone Sep. 27, 1965 Aug. 2, 1966 Oct. 14, 1966 Singapore Feb. 2, 1968 Oct. 14, 1968 Nov. 13, 1968 Slovak Republic Sep. 27, 1993 May 27, 1994 June 26, 1994 Slovenia Mar. 7, 1994 Mar. 7, 1994 Apr. 6, 1994 Solomon Islands Nov. 12, 1979 Sep. 8, 1981 Oct. 8, 1981 Somalia Sep. 27, 1965 Feb. 29, 1968 Mar. 30, 1968 South Sudan Apr. 18, 2012 Apr. 18, 2012 May 18, 2012 Spain Mar. 21, 1994 Aug. 18, 1994 Sept. 17, 1994 Sri Lanka Aug. 30, 1967 Oct. 12, 1967 Nov. 11, 1967 St. Kitts & Nevis Oct. 14, 1994 Aug. 4, 1995 Sep. 3, 1995 St. Lucia June 4, 1984 June 4, 1984 July 4, 1984 St. Vincent and the Grenadines Aug. 7, 2001 Dec. 16, 2002 Jan. 15, 2003 14 | ICSID Deposit of Entry into Force State Signature Ratification of Convention Sudan Mar. 15, 1967 Apr. 9, 1973 May 9, 1973 Swaziland Nov. 3, 1970 June 14, 1971 July 14, 1971 Sweden Sep. 25, 1965 Dec. 29, 1966 Jan. 28, 1967 Switzerland Sep. 22, 1967 May 15, 1968 June 14, 1968 Syria May 25, 2005 Jan. 25, 2006 Feb. 24, 2006 Tanzania Jan. 10, 1992 May 18, 1992 June 17, 1992 Thailand Dec. 6, 1985 Timor-Leste July 23, 2002 July 23, 2002 Aug. 22, 2002 Togo Jan. 24, 1966 Aug. 11, 1967 Sep. 10, 1967 Tonga May 1, 1989 Mar. 21, 1990 Apr. 20, 1990 Trinidad and Tobago Oct. 5, 1966 Jan. 3, 1967 Feb. 2, 1967 Tunisia May 5, 1965 June 22, 1966 Oct. 14, 1966 Turkey June 24, 1987 Mar. 3, 1989 Apr. 2, 1989 Turkmenistan Sep. 26, 1992 Sep. 26, 1992 Oct. 26, 1992 Uganda June 7, 1966 June 7, 1966 Oct. 14, 1966 Ukraine Apr. 3, 1998 June 7, 2000 July 7, 2000 United Arab Emirates Dec. 23, 1981 Dec. 23, 1981 Jan. 22, 1982 United Kingdom of Great Britain and Northern Ireland May 26, 1965 Dec. 19, 1966 Jan. 18, 1967 United States of America Aug. 27, 1965 June 10, 1966 Oct. 14, 1966 Uruguay May 28, 1992 Aug. 9, 2000 Sep. 8, 2000 Uzbekistan Mar. 17, 1994 July 26, 1995 Aug. 25, 1995 Venezuela Aug. 18, 1993 May 2, 1995 June 1, 1995 Yemen, Republic of Oct. 28, 1997 Oct. 21, 2004 Nov. 20, 2004 Zambia June 17, 1970 June 17, 1970 July 17, 1970 Zimbabwe Mar. 25, 1991 May 20, 1994 June 19, 1994 ANNUAL REPORT 2012 | 15 16 | ICSID CHAPTER 3 PANELS OF CONCILIATORS AND OF ARBITRATORS The ICSID Convention requires the Centre to maintain a Panel of Conciliators and a Panel of Arbitrators. Under Article 13 of the Convention, each Contracting State may designate up to four persons to each Panel. The designees serve for a renewable period of six years and may be nationals or non-nationals of the designating State. In addition, up to ten persons may be designated to each Panel by the Chairman of the ICSID Administrative Council. The Panels are an important component of the ICSID system of dispute settlement. When the Chairman of the Administrative Council is called upon to appoint conciliators, arbitrators or ad hoc Committee members under Articles 30, 38 or 52 of the ICSID Convention, these appointees must be drawn from the Panels. With an increasing ICSID caseload, it has become ever more important for States to exercise their right to make designations to the ICSID Panels. To this end, the Centre continues to encourage States to name qualified candidates where nominations have expired or the Panels are otherwise incomplete. During FY2012, Mr. Robert B. Zoellick, then-President of the World Bank in his capacity as Chairman of the ICSID Administrative Council, designated 10 persons to each Panel. In addition, 17 ICSID Contracting States made designations to the ICSID Panels, namely, the Bahamas, Bahrain, Chile, Colombia, Democratic Republic of the Congo, Denmark, France, Grenada, Honduras, Japan, Kuwait, Lebanon, Moldova, Nepal, Seychelles, Switzerland, and Timor-Leste. In all, 77 persons were designated or re-designated to the Panels. At the end of FY2012, there were 556 individuals on the ICSID Panels of Conciliators and of Arbitrators. The names of designees to the ICSID Panels made in FY2012 are provided on the following page. Michael Heindorff, Germany Tasso’s Trees Vi, 1986 ANNUAL REPORT 2012 | 17 Chairman of the Colombia Administrative Council Panel of Conciliators Panel of Conciliators Designations effective February 27, 2012: Designations effective September 15, 2011: Juan Pablo Cárdenas Mejía, Néstor Humberto Luiz Olavo Baptista, Lawrence Boo, Laurence Martínez Neira, José Antonio Rivas, and Jorge Boulle, David J. A. Cairns, Nayla Comair-Obeid, Suescún Melo Roberto Echandi, Siegfried H. Elsing, Anna Joubin-Bret, James Ogoola, and Jeswald W. Salacuse Panel of Arbitrators Designations effective February 27, 2012: Panel of Arbitrators Martín Carrizosa Calle, Enrique Gómez-Pinzón, Designations effective September 15, 2011: Nicolás Lloreda, and Carlos Urrutia Valenzuela Teresa Cheng, Azzedine Kettani, Makhdoom Ali Khan, Donald M. McRae,Tinuade Oyekunle, Democratic Republic of Alain Pellet, Lucy Reed, Pierre Tercier, Claus the Congo von Wobeser, and Eduardo Zuleta Panel of Arbitrators Designation effective March 26, 2012: Bahamas Adèle Kalambay Ndaya Moleka Panels of Conciliators and of Arbitrators Designations effective March 30, 2012: Denmark Bertha Cooper-Rousseau, Caryl Lashley, and Panels of Conciliators and of Arbitrators Rubie Nottage Designations effective May 15, 2012: Jan Schans Christensen, Per Magid, Mogens Bahrain Skipper-Pedersen, and Jon Ulrik Stokholm Panel of Arbitrators Designations effective December 1, 2011: France Tariq Baloch, Jan Paulsson, and Stephen Panel of Conciliators M. Schwebel Designations effective May 16, 2012: Claire Favre, Pierre Mayer, Pierre Raoul-Duval, Chile and Henri Toutée Panel of Conciliators Designations effective September 1, 2011: Panel of Arbitrators Gonzalo Biggs, Jorge Carey, Carlos Eugenio Designations effective May 16, 2012: Jorquiera Malschafsky, and León Larrain Abascal Geneviève Bastid Burdeau, Magali Bouvier, Emmanuel Gaillard, and Gilbert Guillaume Panel of Arbitrators Designations effective September 1, 2011: Enrique Barros Bourie, Hernán Fontaine Talavera, Andrés Jana Linetzky, and Arturo Yrarrázaval Covarrubias 18 | ICSID Grenada Nepal Panels of Conciliators and of Arbitrators Panels of Conciliators and of Arbitrators Designation effective November 21, 2011: Designation effective March 12, 2012: Jonathan Jacob Gass Surya P. Subedi Honduras Seychelles Panels of Conciliators and of Arbitrators Panel of Arbitrators Designations effective September 13, 2011: Designation effective May 14, 2012: Joaquín Donato Alcerro Díaz, César Augusto Mahnaz Malik Batres Galeano, Juan Carlos Basombrío, and Juan Arnaldo Hernández Espinoza Switzerland Panel of Arbitrators Japan Designation effective April 30, 2012: Panel of Conciliators Paolo Michele Patocchi Designations effective March 30, 2012: Hiroshi Fukuda and Kiyoto Ido Timor-Leste Panels of Conciliators and of Arbitrators Kuwait Designation effective August 17, 2011: Panels of Conciliators and of Arbitrators Ruth Wedgwood Designations effective August 17, 2011: Ahmed Al-Melhem, Eli Whitney Debevoise II, Panel of Arbitrators Mahmoud Ahmed Mahmoud, and Nassib G. Ziadé Designation effective June 28, 2012: Cherie Booth Lebanon Panel of Arbitrators Designation effective July 4, 2011: Nayla Comair-Obeid Moldova Panel of Conciliators Designations effective October 13, 2011: Violeta Cojocaru and Natalia Suceveanu Panel of Arbitrators Designations effective October 13, 2011: Ion Capatina and Mark A. Meyer Panels of Conciliators and of Arbitrators Designations effective October 13, 2011: Victor Burac and Mihail Buruiana ANNUAL REPORT 2012 | 19 Untitled 20 | ICSID CHAPTER 4 Operations of the Centre Summary of ICSID Operations ICSID Cases ICSID is an autonomous international institution established by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention or the Washington Convention). Its primary purpose is to provide facilities for conciliation and arbitration of international investment disputes. The initiation and conduct of cases under the Centre’s auspices may be governed by one of ICSID’s two sets of procedural rules. These are the ICSID Convention, Regulations and Rules or the ICSID Additional Facility Rules. Conciliation and arbitration under the ICSID Convention must involve a legal dispute between an ICSID Contracting State and a national of another ICSID Contracting State. Additionally, such disputes must arise directly out of an investment and the disputing parties must have consented in writing to the submission of their dispute to ICSID. ANNUAL REPORT 2012 | 21 The ICSID Additional Facility Rules allow the ICSID Secretariat to administer conciliation and arbitration of investment disputes where either the State party or the home State of the foreign investor is not an ICSID Contracting State. They also authorize conciliation and arbitration of disputes that do not arise directly out of an investment where at least one of the disputing parties is a Contracting State or a national of a Contracting State. These rules have been available since 1978. While the vast majority of cases before the Centre are arbitrations administered under the ICSID Convention, the last year has seen an increase in the use of ICSID conciliation services. Non-ICSID Cases The ICSID Secretariat also administers international dispute settlement proceedings under rules and treaties other than the ICSID Convention or the ICSID Additional Facility. In particular, the Secretariat often assists parties and tribunals with investment arbitrations conducted pursuant to the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL Arbitration Rules). The services provided in non-ICSID proceedings are similar to those available under the ICSID Rules, ranging from handling specific aspects of a case to offering full administrative services. In the past fiscal year, the Centre administered 2 investor-State proceedings under the UNCITRAL rules, which are pending. ICSID also received requests to act as appointing authority in 4 non-ICSID cases. Finally, ICSID provided hearing organization services in 1 case administered by the London Court of International Arbitration. Non-ICSID Cases Administered by the ICSID Secretariat in FY2012 4 3 3 2 2 1 0 Investor-State UNCITRAL Arbitrations Other Cases 22 | ICSID Overview of ICSID Arbitration ICSID Convention arbitration is initiated by the submission of a Request for Arbitration to the Secretary-General.The Request is filed by the potential claimant and outlines the basic facts and legal issues to be addressed. The Request must be registered unless the dispute is manifestly outside the jurisdiction of ICSID. In the past year, Requests for Arbitration were processed on average within 25 days of being filed at ICSID. The next procedural step is constitution of the arbitral tribunal. The ICSID Arbitration Rules allow significant flexibility regarding the number of arbitrators and the method of their appointment. In most instances, the tribunals consist of 3 arbitrators: 1 arbitrator appointed by each party, and the third, presiding, arbitrator appointed by agreement of the parties or of the party-appointed arbitrators. The parties may ask the Centre to assist with the appointment of arbitrators, either in accordance with a previous agreement or pursuant to the default provisions in the ICSID Rules. In FY2012, ICSID made such appointments on average within 38 days of receiving the request to appoint. Proceedings are deemed to have begun once the tribunal is constituted. The tribunal holds a first session within 60 days of its constitution. Preliminary questions of procedure are dealt with at the first session. Subsequently, the proceeding usually comprises 2 distinct phases: a written procedure followed by in-person hearings. After the parties present their case, the tribunal deliberates and renders its award. Once an ICSID Convention award is rendered, it is binding and not subject to any appeal or other remedy except those provided by the Convention. The Convention allows the parties to request a supplementary decision or rectification of the award, or to seek the post-award remedies of annulment, interpretation or revision. ANNUAL REPORT 2012 | 23 Conduct of an ICSID Convention Arbitration Request for Arbitration Refusal to Register Registration Constitution of the Tribunal First Session Written Procedure Oral Procedure Deliberations Award Supplementary Decision and Rectification Post-Award Remedies: Annulment, Interpretation, Revision Arbitration under the ICSID Additional Facility is similar in process to ICSID Convention arbitration with some notable differences. In particular, parties must obtain approval of access to the Additional Facility prior to instituting proceedings, and post-award remedies under the Additional Facility Rules are limited to interpretation, correction, and supplementary decision by the original tribunal. New ICSID Cases Registered Thirty-nine new ICSID cases were registered in FY2012. This is the most cases registered at ICSID in a single fiscal year and is a 20% increase over the number of cases registered in FY2011. Thirty-six 24 | ICSID of the new proceedings are arbitrations: 31 under the ICSID Convention and 5 under the Additional Facility. In addition, 3 conciliation proceedings were registered in FY2012. Two of the conciliation proceedings registered in FY2012 are the first conciliation cases to be conducted under the Additional Facility Rules. One conciliation proceeding was initiated jointly by agreement of the parties involved. New Cases Registered under the ICSID Convention and Additional Facility Rules in FY2012 35 31 30 25 20 15 10 5 5 1 2 0 ICSID Convention Arbitration Cases ICSID Convention Conciliation Cases ICSID Additional Facility Arbitration Cases ICSID Additional Facility Conciliation Cases In total, the Centre administered a record 172 cases over the course of the year. This is the highest number of pending cases facilitated by ICSID in a single year and represents 44% of the 390 ICSID cases ever administered by the Centre. ANNUAL REPORT 2012 | 25 ICSID Cases Administered by the Secretariat (FY2003–FY2012) 200 150 172 100 50 63 0 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 Basis of Consent to ICSID Proceedings Arbitration and conciliation under the ICSID Convention and Additional Facility are entirely voluntary. The basis of the parties’ consent to ICSID jurisdiction can be found in a variety of sources, including investment laws, contracts concluded between a foreign investor and the host State of the investment, and bilateral or multilateral treaties. Basis of Consent Invoked to Establish ICSID Jurisdiction in New Cases Registered in FY2012 under the ICSID Convention and Additional Facility Rules 5% North American Free Trade Agreement 7% Investment Law of the Host State Bilateral Investment Treaty (BIT) 68% 12% Investment Contract between the Investor and the Host State 5% Energy Charter Treaty 3% Oman-U.S. Free Trade Agreement 26 | ICSID Of the new cases registered in FY2012, the vast majority (28 cases) asserted ICSID jurisdiction on the basis of a bilateral investment treaty (BIT). In 5 cases, the parties invoked ICSID arbitration clauses in multilateral investment agreements such as the Oman-U.S. Free Trade Agreement, the North American Free Trade Agreement, and the Energy Charter Treaty. Investors claimed under investment contracts in 5 further cases, and 3 cases relied on investment laws. One of these cases invoked both a BIT and a law as bases of consent and another invoked both a law and a contract. State Parties to ICSID Proceedings Registered in FY2012 State parties involved in ICSID disputes registered in FY2012 remained diverse and included States from every region of the world. This year, Eastern Europe and Central Asia was the region with the greatest number of States involved in newly registered ICSID cases. Geographic Distribution of New Cases Registered in FY2012 under the ICSID Convention and Additional Facility Rules by State Party Involved North America (Canada, Mexico, U.S.) Central America & the Caribbean 8% 5% Eastern Europe & Central Asia 31% South America 21% Western Europe 2% South & East Asia & the Pacific Sub-Saharan Africa 8% Middle East & 15% North Africa 10% ANNUAL REPORT 2012 | 27 Six Eastern European and Central Asian States were named as respondent in 12 cases, while 8 cases were instituted against 2 States in South America. States from Sub-Saharan Africa were involved in 6 cases, and 4 cases were instituted against States in the Middle East and North Africa region. Three cases were brought against States in North America, 3 against States in the South and East Asia region, and 2 against States in the Caribbean and Central America region. Finally, 1 case was brought against a State in Western Europe. Notably, 31% of newly registered cases in FY2012 involved State parties from high income economies. State Parties in New Cases Registered in FY2012 under the ICSID Convention and Additional Facility Rules by Geographic Region Moldova, 1 Slovak Republic, 1 Turkey, 1 Albania, 2 Peru, 2 Turkmenistan, Cameroon, 1 3 Guinea, 2 Oman, 1 Venezuela, 6 Indonesia, 1 Canada, 1 Hungary, 4 Equatorial Egypt, 3 Pakistan, 1 Mexico, 1 Costa Rica, 1 Guinea, 3 Philippines, 1 United St. Lucia, 1 Germany, 1 States, 1 Eastern South Sub-Saharan Middle East South & North Central Western Europe & America Africa & North East Asia & America America Europe Central Asia Africa the Pacific (Canada, & the Mexico, Caribbean U.S.) 28 | ICSID Economic Sectors Involved in New Proceedings The investment disputes commenced in FY2012 involved a variety of economic sectors. Based on World Bank industry sector codes, the oil, gas, and mining sector remained dominant, with 25% of cases registered in FY2012. However, this fiscal year has seen an increase in the diversity of other industries represented, with 25% of cases involving pharmaceuticals, chemicals, gaming, textiles, and food production.The number of cases registered concerning transportation increased from 6% in FY2011 to 15% in FY2012. Ten percent of the new cases concerned the information and communication sector. The segment of the new cases relating to electric power and other energy decreased to 8% and the number of cases involving the construction industry increased slightly to 8%. The remaining cases involved tourism; services and trade; and water, sanitation, and flood protection. Distribution of New Cases Registered in FY2012 under the ICSID Convention and Additional Facility Rules by Economic Sector Information & Communication 10% Oil, Gas and Mining Services and Trade 3% 25% Transportation 15% 8% Electric Power & Other Energy 3% Water, Sanitation & Flood Protection Other Industry 8% Construction 25% 3% Tourism ANNUAL REPORT 2012 | 29 Post-Award Remedy Applications In FY2012, the Centre also registered 9 proceedings in which the parties sought post-award remedies under the ICSID Convention. Parties applied to revise 1 award and filed 8 applications for annulment. The number of registered annulment applications in FY2012 remained the same as in FY2011. Of the 8 applications for annulment initiated in FY2012, 5 were brought by the State party to the dispute, and 3 were brought by investors. Number of Annulment Applications Registered by ICSID (FY2008–FY2012) 10 9 8 8 8 8 6 4 3 2 0 FY2008 FY2009 FY2010 FY2011 FY2012 Constitution of Tribunals and ad hoc Committees in ICSID Cases In the course of the fiscal year, 37 tribunals, 8 ad hoc Committees, and 1 conciliation commission were constituted or reconstituted in proceedings pending before the Centre. A total of 131 individual appointments were made by the parties and by ICSID.This is the most appointments made in a single fiscal year. Overall, 82 individuals from 33 different countries were appointed to serve as arbitrators, conciliators, or ad hoc Committee members in ICSID cases in FY2012. In FY2012, the pool of arbitrators, conciliators and ad hoc Committee members continued to expand. In terms of diversity, 31% of the new appointees were nationals of developing countries, and 9% of the new appointees were women. 30 | ICSID About 70% of the appointments were made either by the parties or by the party-appointed arbitrators, while the other 30% were made by the Chairman of the Administrative Council or the ICSID Secretary-General. In total, the Centre acted as appointing authority 40 times in FY2012 and appointed 33 different individuals of 22 different nationalities. Almost 50% of the appointments by ICSID involved nationals of developing economies, and 13% involved women. Arbitrators, Conciliators and ad hoc Committee Members Appointed in FY2012 in Cases Registered under the ICSID Convention and Additional Facility Rules— Distribution of Appointments by ICSID and by the Parties (or Party-appointed Arbitrators) by Geographic Region 45 40 40 35 30 25 23 20 15 13 11 12 10 8 7 6 5 2 2 2 1 1 2 0 1 0 North South Central Middle Sub-Saharan South & Eastern Western America America America East Africa East Asia Europe Europe (Canada, & the & & the & Mexico Caribbean North Pacific Central Asia & U.S.) Africa Appointments by ICSID Appointments by the Parties (or Party-appointed Arbitrators) ANNUAL REPORT 2012 | 31 Nationality of Arbitrators, Conciliators and ad hoc Committee Members Appointed in FY2012 in Cases Registered under the ICSID Convention and Additional Facility Rules Swedish 1 Somali 1 Pakistani 1 Moroccan 1 Mauritian/French 1 Lebanese/French 1 Iranian/French 1 Greek 1 Finnish 1 Egyptian 1 Cameroonian 1 British/French 1 Brazilian/French 1 Brazilian 1 Nationality of Appointee Austrian 1 Philippine 2 New Zealand/Canadian 2 Italian 2 Dutch 2 Costa Rican 2 Colombian/French 3 Chilean 3 Bulgarian 3 Argentine 3 New Zealand 4 Mexican 4 Belgian 4 German 5 Chinese 5 Australian 5 Swiss 6 Colombian 6 Canadian 7 Spanish 8 British 9 French 12 U.S. 19 0 5 10 15 20 Number of Appointments 32 | ICSID Challenges to Arbitrators and Counsel During the fiscal year, parties to ICSID proceedings proposed the disqualification of 5 arbitrators and 1 ad hoc Committee member in ICSID proceedings. Five of these proposals were declined and the ad hoc Committee member resigned following the filing of the proposal. One further decision was issued dismissing a challenge to an ad hoc Committee member that was originally filed in FY2011. In 1 case in FY2012, the parties to the proceeding each proposed the disqualification of the other party’s counsel. The tribunal declined both of these proposals. Cases concluded in FY2012 Thirty-one proceedings were concluded in the course of the fiscal year. Twenty-two of these were arbitration cases, 7 were annulment proceedings, and 2 were revision proceedings. In the 22 concluded arbitration proceedings, 15 disputes were decided by a tribunal, and 7 cases were discontinued or settled. Arbitration Proceedings under the ICSID Convention and Additional Facility Rules Concluded in FY2012—Outcomes Dispute settled or proceeding otherwise discontinued 32% Dispute decided by Tribunal 68% ANNUAL REPORT 2012 | 33 Of the 15 cases decided by a tribunal, 3 awards declined ICSID jurisdiction, 3 tribunals rejected all of the investors’ claims, and 9 upheld the investors’ claims in part or in full. Disputes Decided by Arbitral Tribunals under the ICSID Convention and Additional Facility Rules in FY2012—Outcomes Award dismissing all claims Award declining jurisdiction 20% 20% 60% Award upholding claims in part or in full Of the 7 arbitration cases that were discontinued or settled, 4 were discontinued following agreement by the parties, 1 was discontinued at the request of one party, and 1 was discontinued for lack of payment of the required advances. In 1 further case, the parties’ settlement agreement was embodied in an award. Both of the revision proceedings that concluded during FY2012 were also discontinued following agreement by the parties. The majority of arbitrations concluded in FY2012 lasted between 3 to 4 years from the date of the tribunal’s constitution. The Centre has recently adopted a number of new practices in an effort to reduce the length and cost of arbitrations while respecting the due process rights of the parties. These include: (i) requiring arbitrators to submit calendars indicating their long-term availability when 34 | ICSID accepting their appointment, (ii) updating parties on a regular basis concerning the costs expended to date, (iii) encouraging tribunal members to establish a budget at the outset of a case outlining anticipated arbitrator fees and expenses, (iv) encouraging tribunal consultations immediately prior to hearings and deliberations immediately after hearings, and (v) requiring tribunals to report to the parties on the timing of outstanding decisions or awards. Seven annulment proceedings were concluded in FY2012. In 3 cases, the ad hoc Committee rejected the application for annulment of the award. Three annulment proceedings were discontinued at the request of one or both parties, and 1 case was discontinued for failure to pay the required advances. No awards were annulled in FY2012. Awards Rendered and Outcomes in Annulment Proceedings under the ICSID Convention, by Decade 100 96 80 60 40 23 20 18 13 9 8 4 5 4 6 0 0 0 1 3 0 0 1 1 0 0 1971–1980 1981–1990 1991–2000 2001–2010 2011– JUNE 30, 2012 Number of Convention awards rendered Number of decisions rejecting the application for annulment Number of decisions annulling the award in part or in full Number of annulment proceedings discontinued ANNUAL REPORT 2012 | 35 The average duration of annulment proceedings concluded in FY2012 was shortened by about a third, from an average duration of 25 months in FY2011, to an average of 17 months from the date of registration of the application. Average Duration of ICSID Annulment Proceedings Concluded in FY2010–FY2012 (in months) 30 24 25 23 20 20 17 MONTHS 15 10 0 FY2010 FY2011 FY2012 Average Duration—Registration to Conclusion Average Duration—Constitution of ad hoc Committee to Conclusion Matters of Procedure in ICSID Cases in FY2012 Of the 172 ICSID cases administered in FY2012, 78 were conducted in English, 10 in French and 13 in Spanish, which are the three official languages of the Centre. Seventy proceedings were conducted in 2 official languages, with the English-Spanish combination continuing to be the most frequent. One further case was administered in all three official languages. 36 | ICSID Cases Administered in FY2012 under the ICSID Convention and Additional Facility Rules by Procedural Language(s) 80 78 70 65 60 NUMBER OF CASES 50 40 30 20 13 10 10 4 1 1 0 English English Spanish French English French English, and and and French, & Spanish French Spanish Spanish PROCEDURAL LANGUAGE(S) In the course of the year, 109 sessions or hearings were held in the cases administered by ICSID.These were held at the seat of the Centre in Washington, D.C., at the World Bank offices in Paris, or at other venues as agreed by the parties. Where suitable, hearings and sessions were conducted by telephone or video conference, reflecting the Centre’s continuing efforts to reduce the cost and increase the efficiency of proceedings. The number of proceedings conducted by telephone and video conference increased significantly in FY2012, resulting in about 40% of all sessions and hearings in FY2012 being held in this manner. During the fiscal year, 16 awards and 180 decisions and procedural orders were issued by arbitral tribunals, conciliation commissions and ad hoc Committees. A number of these rulings have been published on the Centre’s website with the parties’ permission. Where parties refused permission to publish awards, the Centre published excerpts of the legal reasoning of the tribunal. ANNUAL REPORT 2012 | 37 Comprehensive and up-to-date information about the procedural steps taken in each case, the composition of the tribunal, commission, or ad hoc Committee, the party appointing each arbitrator, counsel representing the parties, and the outcome of proceedings is found on the ICSID website at www.worldbank.org/icsid. Institutional Matters In FY2012, ICSID undertook numerous institutional initiatives. These included support for the ICSID Administrative Council, expanding the Centre’s network of institutional cooperation agreements, and collaborating with other international organizations on matters related to investment law and dispute resolution. ICSID continued efforts in FY2012 to improve service, increase efficiency, and enhance the cost-effectiveness of ICSID proceedings. Developments related to the Administrative Council Dr. Jim Yong Kim became the ex officio Chairman of the ICSID Administrative Council after becoming President of the World Bank on July 1, 2012. He succeeded Mr. Robert B. Zoellick, who held the position from July 1, 2007 to June 30, 2012. At the Annual Meeting of the ICSID Administrative Council held in September 2011, ICSID undertook to prepare a background paper on the ICSID annulment mechanism. This paper was prepared by the Secretariat over the course of FY2012 and was transmitted to all Contracting States in August 2012. The paper provided a comprehensive overview of the drafting of the annulment provisions, procedure in annulment cases, a summary of ad hoc Committee decisions, and empirical data on all aspects of annulment. The background paper reiterated the well-established principle that the drafters of the ICSID Convention intended annulment to be a limited and extraordinary remedy. Consistent with this intent, of the 344 cases ever registered, only 6 have been annulled in full and 6 have been annulled in part. 38 | ICSID Annulment Proceedings under the ICSID Convention — Overview 344 Convention Arbitrations Registered 150 Convention Awards Rendered 53 Annulment Proceedings Instituted 18 Decisions Refusing Annulment 12 Proceedings Discontinued 12 Awards Annulled (6 in full + 6 in part) Institutional Arrangement Agreements In FY2012, ICSID continued to develop partnerships with other arbitration institutions to enhance its ability to offer hearings in locations around the world. In the past year, ICSID entered its first facilities cooperation agreement with an arbitration center in Latin America, the Centre for Arbitration and Conciliation at the Chamber of Commerce in Bogota, Colombia. ICSID now has 12 such agreements in place, including agreements with: the Australian Centre for International Commercial Arbitration in Melbourne; the Australian Commercial Disputes Centre in Sydney; the German Institution of Arbitration; the Gulf Cooperation Council Commercial Arbitration Centre in Bahrain; the Hong Kong International Arbitration Centre; Maxwell Chambers in Singapore; the Permanent Court of Arbitration in The Hague; the Regional Arbitration Centres of the Asian- African Legal Consultative Committee in Cairo, Kuala Lumpur and Lagos; and the Singapore International Arbitration Centre. Cooperation with Other International Organizations ICSID continued its collaboration with other multilateral institutions on issues pertinent to international investment law and dispute settlement during FY2012. For example, ICSID participated in several conferences organized by the United Nations Commission on International Trade Law (UNCITRAL) which addressed transparency in treaty-based investor-State arbitration. This project ANNUAL REPORT 2012 | 39 included the Working Group II Meetings on Arbitration and Conciliation in Vienna, Austria on October 3–7, 2011 and in New York City on February 6–10, 2012. ICSID also participated in an UNCITRAL Expert Group Meeting in Vienna, Austria on December 12–13, 2011 to discuss the UNCITRAL Recommendations to assist arbitral institutions and other interested bodies with regard to arbitration under the UNCITRAL Arbitration Rules, as revised in 2010. The Secretary-General and several senior ICSID staff lawyers contributed to a series of discussions about current issues in investor-State dispute settlement and investment law sponsored by the United Nations Conference on Trade and Development (UNCTAD). These were informal discussions with practitioners, negotiators, civil society, and academia, and were organized by UNCTAD in a number of States around the world. ICSID also participated in an Organization for Economic Co-operation and Development (OECD) roundtable on Freedom of Investment held in March 2012 in Paris, which involved a discussion of key issues in investor-State dispute settlement. In FY2012, ICSID Secretary-General Meg Kinnear was elected to the governing bodies of the International Federation of Commercial Arbitration Institutions and the International Council for Commercial Arbitration. Finally, in FY2012, the Secretary-General and senior staff participated in several International Bar Association (IBA) committees and contributed to projects concerning various issues in investment arbitration, including the potential for alternative dispute resolution of investment disputes. Best Practices During FY2012, ICSID continued to develop and implement best practices to increase cost- effectiveness and efficiency. This included templates and specific targeted timetables for conclusion of internal steps by the Secretariat. As examples, two key best practices are the acknowledgement within 24 hours of receipt of an electronic copy of a Request for Arbitration, and completion of the registration procedure in an average of 25 days from the time the lodging fee and hard copy of the Request for Arbitration are received. Regarding parties’ requests for the Centre to appoint arbitrators under Article 38 of the ICSID Convention, the Centre adopted and met the goal of completing these appointments in an average of six weeks after the request was filed. Upon constitution of the tribunal, 40 | ICSID the Centre requires the first session hearing to be held within 60 days or less. Immediately upon constitution, ICSID requests an availability calendar from tribunal members and encourages the tribunal to meet the day before a hearing and to stay after the hearing to plan their next steps. The Centre also developed similar practices with regard to annulment proceedings. For instance, the Centre aims to register applications for annulment within one week from the date of receipt, and to constitute ad hoc Committees within four weeks from the date of registration. Technology ICSID continued to harness technology in FY2012 to increase its ability to deliver cost-effective, high-quality service. For example, the Centre revised and enhanced its knowledge management tools and archiving practices. This involved the institution of a new document management system for both the Centre’s pending cases and its institutional documents. The system contains over 150,000 documents, which are organized for easy location and search. Moreover, ICSID developed a new case management system, which aids ICSID staff in the efficient administration of the Centre’s growing caseload.The new systems will facilitate the Secretariat’s management of case-related and institutional documents, and monitoring procedural developments in cases. Among other things, the case management system will allow ICSID staff to share case-related information more efficiently, generate a variety of case-related statistics and reports, record and track procedural details in cases, and maintain a centralized contacts database. Staffing The number of ICSID staff was increased in FY2012 to respond to the challenges of the Centre’s growing caseload. This entailed the appointment of additional legal staff, and there are now 19 full- time legal counsel dedicated to case administration or institutional affairs. The Centre also enlarged its paralegal, administrative, and client support staff through recent hiring. In an effort to expose young lawyers and recent law school graduates to investor-State dispute settlement at ICSID, the Centre instituted a one-year internship program starting in January, 2012. Currently, there are two ICSID legal interns working on a variety of case-related issues. ANNUAL REPORT 2012 | 41 42 | ICSID CHAPTER 5 OUTREACH PUBLICATIONS UPDATE ICSID REVIEW—FOREIGN INVESTMENT LAW JOURNAL — During FY2012, the Centre published one issue of the Review (Fall 2011). The issue featured articles exploring a diverse range of topics in international arbitration, including the role of international courts and tribunals; most- favored-nation clauses and international dispute settlement; the right of access to information and investment arbitration; the nature of investment protection rights; the legal framework of foreign investment in Rwanda; and moral damages in ICSID arbitration. In November, 2011, ICSID announced a new partnership with Oxford University Press for publication of the ICSID Review in print and electronic form, beginning with the Spring 2012 issue. Through this new partnership, the full archive of the ICSID Review is now available online for the first time. The publication arrangement will increase access to the Review for international audiences, simplify legal research, and complement the research initiatives of the Centre. In addition, beginning with the Spring 2012 issue, the structure and content of the Review has been updated. The Review has expanded its editorial board to include an editorial advisory board and a standing peer review board. The Review will be organized into three sections with case comments, articles and notes. Case comments will feature critical analyses of significant decisions. Articles will continue to address diverse topics related to investment law and arbitration, and may include a thematic focus from time to time. Notes will address current issues in investment arbitration law and procedure on a more focused basis. All submissions for these sections will be evaluated under a double-blind peer review process. ICSID also held the second annual ICSID Review Student Writing Competition in 2011. One winner was selected by a panel of experts and the student’s paper was published in the Fall 2011 issue of the Review. The 2012 Competition is currently underway. The Student Writing Competition furthers an important aspect of the Centre’s mission by encouraging students to critically analyze current issues in international investment law. COLLECTIONS — In FY2012, the Centre published four releases of its loose-leaf collections, Investment Laws of the World and Investment Treaties. The two Investment Laws of the World releases Justus Kyalo, Kenya Same Sky Twice ANNUAL REPORT 2012 | 43 contained new or revised investment legislation passed by: Afghanistan, Angola, Comoros, and Timor- Leste (release 2012–1); and Benin, Chad, Honduras, Indonesia, and Yemen (release 2012–2). The two Investment Treaties releases contained the texts of 35 bilateral investment agreements and protocols, concluded by 32 countries from all regions of the world between 1997 and 2012. THE ICSID CASELOAD—STATISTICS — In FY2012, the Centre published Issues 2011-2 and 2012-1 of the ICSID Caseload—Statistics online in English, French and Spanish. In these issues, the Centre continued its practice of profiling the ICSID caseload by reporting quantitative analyses on the cases registered and administered by the ICSID Secretariat; the basis of consent to ICSID jurisdiction invoked in registered arbitration and conciliation cases; the geographic distribution of ICSID cases by the State party to the dispute; the economic sectors involved in ICSID disputes; the outcomes in ICSID arbitration and conciliation proceedings; the nationality and geographic origins of arbitrators, conciliators and ad hoc Committee members appointed in ICSID proceedings; and the outcomes in annulment proceedings under the ICSID Convention. PUBLICATION INITIATIVE — The Centre continued its efforts to publish awards, decisions and orders in ICSID cases with the consent of the parties. At the outset of each current ICSID proceeding, parties are encouraged to consider whether they would agree to publication of any award or decision rendered in the case. The Centre continued to contact ICSID parties in concluded cases to seek their authorization to publish all rulings. ICSID published numerous awards, decisions, and orders on its website during FY2012. This ongoing initiative supports the Centre’s outreach mission by enhancing public understanding of ICSID proceedings and investment law and offering free access to as much ICSID case law as possible. PUBLIC HEARING WEBCASTS — The Centre continued to offer parties to ICSID cases the option of webcasting proceedings. During FY2012, a hearing on the merits in Railroad Development Corporation v. Republic of Guatemala (ICSID Case No. ARB/07/23) was webcasted from December 8–16, 2011, and a hearing on jurisdiction in Apotex Inc. v. United States of America (NAFTA/ UNCITRAL) was webcasted on February 15–16, 2012. Both hearings were held in Washington, D.C. WEB UPDATES — ICSID continued to utilize its website as a primary means of communicating information in English, French, and Spanish about ICSID cases and practices, as well as significant events and institutional developments. 44 | ICSID CONFERENCES During FY2012, ICSID participated in numerous conferences as a co-sponsoring institution with other arbitration associations and as a partner with multilateral institutions. The Centre also held several of its own events during the year. ICSID co-sponsored the 28th AAA/ICC/ICSID Joint Colloquium on International Arbitration in New York City on November 18, 2011. The colloquium focused on diverse topics including: time and costs issues and initiatives; tailoring alternative dispute resolution to meet the challenges of unique catastrophes; arbitrator immunity; participation by amici in arbitration; enforcement of awards; and the perspective of corporate counsel and investors on arbitration, conciliation, mediation, and alternative dispute resolution. On July 20, 2011, ICSID held its one-day ICSID practice and procedure course called “ICSID 101” at the World Bank in Washington, D.C. ICSID lawyers explained how the ICSID system functions and gave advice on effective case presentation under the ICSID Convention and Rules. The event was attended by counsel, policymakers, and government officials. Another ICSID 101 course was held at the World Trade Institute in Bern, Switzerland on July 13 and 14, 2011. On November 14–17, 2011, ICSID partnered with the Legal Departments of the World Bank, International Finance Corporation, and the Multilateral Investment Guarantee Agency to co-organize the Law, Justice and Development Week 2011 at the World Bank in Washington, D.C. The conference focused on the contributions of legal innovation and empowerment to development. Experts discussed myriad global legal and development issues, including international financial regulation; the challenges faced by fragile and conflict-affected States; and legal harmonization and legal innovation as tools for integration and empowerment. The conference was attended by over 700 participants representing governments, international financial institutions, the legal and international development community, academia, civil society, and the World Bank. The Centre participated in the Sixth Annual Investment Treaty Arbitration Conference on March 27, 2012 in Washington, D.C., organized by Juris Conferences LLC. The conference was dedicated to investment protection in the Americas and featured topics focusing on NAFTA and CAFTA arbitration. ANNUAL REPORT 2012 | 45 In addition to the events listed above, ICSID staff participated as speakers in numerous other events taking place in locations all over the world including Auckland, Bogota, Dubai, London, Montreal, Paris, and New York. ICSID STAFF PUBLICATIONS Mairée Urain Bidegain (with Chiara Giorgetti and Carolyn B. Lamm), International Centre for Settlement of Investment Disputes, in The Rules, Practice, and Jurisprudence of International Courts and Tribunals (Chiara Giorgetti ed., Martinus Nijhoff 2012) Anneliese Fleckenstein, Introductory Note: Repsol YPF Ecuador, S.A. v. Empresa Estatal Petroleos Del Ecuador (Petroecuador) (ICSID Case No. ARB/01/10), Decisión sobre Competencia (23 de enero de 2003) and Laudo (20 de febrero de 2004), 26 ICSID REV.—FILJ 215 (2011) Jenna Godfrey, Introductory Note: Consortium R.F.C.C. v. Kingdom of Morocco (ICSID Case No. ARB/00/6) (Annulment Proceeding), Décision du Comité ad hoc sur la demande d’annulation du Consortium R.F.C.C. (18 janvier 2006), 26 ICSID REV.—FILJ 184 (2011) Meg Kinnear, Presentation at Preparation of Cases before International Courts and Tribunals, Mar. 29, 2012, Washington, D.C., PROC. 106TH ANNUAL MEETING OF ASIL (forthcoming 2012) Meg Kinnear, Current Problems and Developments in Investment Arbitration, First Karl-Heinz Böckstiegel Lecture, German Institution of Arbitration, Cologne, Germany, Sept. 9, 2011 (SchiedsVZ) Martina Polasek, The Threshold for Registration of a Request for Arbitration under the ICSID Convention, 5(2) DISP. RES. INT’L 177 (2011) Martina Polasek, Treaty Arbitration Before the International Centre for Settlement of Investment Disputes, 4(5) JFT (TIDSKRIFT UTGIVEN AV JURIDISKA FÖRENINGEN I FINLAND) 582 (2011) 46 | ICSID ICSID DOCUMENTS AND OTHER PUBLICATIONS AVAILABLE FROM THE CENTRE FREE OF CHARGE UNLESS OTHERWISE INDICATED List of Contracting States and Other Signatories of the Convention, Doc. ICSID/3 (periodic updates) (English, French and Spanish) Contracting States and Measures Taken by Them for the Purpose of the Convention, Doc. ICSID/8 (periodic updates) (English) Members of the Panels of Conciliators and of Arbitrators, Doc. ICSID/10 (periodic updates) (English) ICSID Regulations and Rules, Doc. ICSID/4/Rev. 1 (May 1975) (contains the texts of the Centre’s Regulations and Rules in effect from January 1, 1968 to September 25, 1984) (English, French and Spanish) ICSID Basic Documents, Doc. ICSID/15 (January 1985) (contains the texts of the Centre’s Regulations and Rules in effect from September 26, 1984 to December 31, 2002 and the text of the ICSID Convention) (English, French and Spanish) ICSID Convention, Regulations and Rules, Doc. ICSID/15/Rev. 1 (January 2003) (contains the texts of the Centre’s Regulations and Rules in effect from January 1, 2003 to April 9, 2006 and the text of the ICSID Convention) (English, French and Spanish) ICSID Convention, Regulations and Rules, Doc. ICSID/15 (April 2006) (contains the texts of the Centre’s Regulations and Rules in effect from April 10, 2006 and the text of the ICSID Convention) (English, French and Spanish) ICSID Additional Facility for the Administration of Conciliation, Arbitration and Fact-Finding Proceedings, Doc. ICSID/11 (June 1979) (contains the texts of the Additional Facility Rules in effect from September 27, 1978 until December 31, 2002) (English, French and Spanish) ANNUAL REPORT 2012 | 47 ICSID Additional Facility Rules, Doc. ICSID/11/Rev. 1 (January 2003) (contains the texts of the Additional Facility Rules in effect from January 1, 2003 to April 9, 2006) (English, French and Spanish) ICSID Additional Facility Rules, Doc. ICSID/11 (April 2006) (contains the texts of the Additional Facility Rules in effect from April 10, 2006) (English, French and Spanish) ICSID Model Clauses, Doc. ICSID/5/Rev. 1 (February 1, 1993) (English, French and Spanish) (Internet edition only) Bilateral Investment Treaties 1959–1996: Chronological Country Data and Bibliography, Doc. ICSID/17 (May 30, 1997) (English) (Internet edition only) Bilateral Investment Treaties 1959–2007: Chronological Country Data (Internet edition only) ICSID Annual Report (1967—) (English, French and Spanish) ICSID Review—Foreign Investment Law Journal (semi-annual) (available from Oxford University Press, Journals Customer Service Department, 2001 Evans Road, Cary, N.C. 27513, U.S.A.; Tel.: 800–852–7323; Fax: 919–677–1714; URL: http://icsidreview.oxfordjournals.org; Email: jnlorders@oup.com at $65 for individuals (print and online combined) and $150, $165, or $180 for institutions for online, print, or print and online combined subscriptions) Documents Concerning the Origin and Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1967; 2001; 2006) (English, French and Spanish) (available from the Centre at US$250) 48 | ICSID Investment Laws of the World (ten loose-leaf volumes) and Investment Treaties (eleven loose-leaf volumes) (available from Oxford University Press, Order Management Department, North Kettering Business Park, Hipwell Road, Kettering, Northamptonshire, NN14 1UA, UK; Tel.: +44 (0) 1536 452773; Email: customer.services@oup.com at US$2,420 for both sets, US$1,210 for the Investment Laws of the World volumes only and US$1,210 for the Investment Treaties volumes only) The ICSID Caseload—Statistics, Issues 2010-1, 2010-2, 2011-1, 2011-2, 2012-1 (contains a profile of the ICSID caseload; semi-annual updates) (English, French and Spanish) (Internet edition only) ANNUAL REPORT 2012 | 49 Epee Mbounja Louis (Louisepee), Cameroon Port de Peche I, 2007 50 | ICSID CHAPTER 6 FORTY-FIFTH ANNUAL MEETING OF THE ADMINISTRATIVE COUNCIL The Forty-fifth Annual Meeting of the Administrative Council took place on September 23, 2011, in Washington, D.C. on the occasion of the Annual Meetings of the Boards of Governors of the World Bank Group and the International Monetary Fund. The Administrative Council approved the Centre’s 2011 Annual Report and its administrative budget for FY2012 at that meeting. AC(45)/RES/119— AC(45)/RES/120— Approval of the Annual Report Adoption of Budget for Fiscal Year 2012 The Administrative Council The Administrative Council RESOLVES RESOLVES To approve the 2011 Annual Report on the To adopt, for the period July 1, 2011 to June operation of the Centre. 30, 2012, the budget set forth in paragraph 2 of the Report and Proposal of the Secretary- General on the Budget for Fiscal Year 2012, dated June 29, 2011. ANNUAL REPORT 2012 | 51 52 | ICSID CHAPTER 7 FINANCE ICSID’s administrative expenditures in FY2012 were covered by the International Bank for Reconstruction and Development (IBRD) pursuant to the Memorandum of Administrative Arrangements concluded between the IBRD and ICSID, and also by fee income. It is therefore not necessary to assess any excess expenditures on Contracting States pursuant to Article 17 of the Convention. Expenditures relating to pending arbitration proceedings are borne by the parties in accordance with ICSID’s Administrative and Financial Regulations. The Financial Statements of the Centre for FY2012 are set forth in the following pages. Vladimir Novak, Czech Republic Untitled, 1998 ANNUAL REPORT 2012 | 53 FINANCIAL STATEMENTS all amounts Expressed in u.s. dollars unless otherwise noted STATEMENTS OF FINANCIAL POSITION June 30, 2012 and june 30, 2011 2012 2011 Assets: Cash $ 3,239,450 $ 2,036,300 Share of cash and investments in the Pool (Notes 2 and 3) 22,192,061 19,357,700 Due from parties to arbitration/conciliation proceedings (Note 2) 279,700 470,534 Other receivables 32,092 54,759 Other assets, net (Note 4) 377,813 505,508 Total assets $ 26,121,116 $ 22,424,801 LIABILITIES AND NET ASSETS: Liabilities: Payable to International Bank for Reconstruction and Development (Note 2) $ 899,744 $ 814,358 Accrued expenses related to arbitration/conciliation proceedings 6,360,496 5,771,787 Deferred revenue (Note 2) 1,562,019 1,023,333 Advances from parties to arbitration/conciliation proceedings (Note 2) 16,111,265 14,056,447 Advance from International Bank for Reconstruction and Development (Note 5) 569,157 758,876 Total liabilities 25,502,681 22,424,801 Net assets, unrestricted (Note 6) 618,435 — Total liabilities and net assets $ 26,121,116 $ 22,424,801 STATEMENTS OF activities for The years ended June 30, 2012 and june 30, 2011 2012 2011 Support and revenues: Revenues from arbitration/conciliation proceedings (Notes 2 and 8) $ 28,084,175 $ 24,016,191 In-kind contributions (Notes 2 and 10) 2,796,419 1,519,456 Net investment income (Note 2) 48,074 41,060 Sales of publications 16,088 18,717 Total support and revenues 30,944,756 25,595,424 EXPENSES: Expenses related to arbitration/conciliation proceedings (Notes 2 and 9) 23,779,301 19,914,865 Administrative expenses (Note 10) 6,371,251 5,524,019 Amortization expenses (Notes 2, 4 and 10) 127,695 115,480 Net investment income applied to arbitration/conciliation proceedings (Note 2) 48,074 41,060 Total expenses 30,326,321 25,595,424 Change in net assets $ 618,435 $ — Net assets, beginning of the year — — Net assets, end of the year $ 618,435 $ — 54 | ICSID STATEMENTS OF Cash flows for years ended June 30, 2012 and june 30, 2011 2012 2011 Cash flows from operating activities: Change in net assets $ 618,435 $ — Adjustments to reconcile change in net assets to net cash provided by operating activities: Amortization 127,695 115,480 Decrease in due from parties to arbitration/conciliation proceedings 190,834 162,172 Decrease/(Increase) in other receivables 22,667 (29,756) Increase/(Decrease) in payable to International Bank for Reconstruction and Development 85,386 (69,209) Increase in accrued expenses related to arbitration/ conciliation proceedings 588,709 504,133 Increase/(Decrease) in deferred revenue 538,686 (1,667) Increase in advances from parties to arbitration/ conciliation proceedings 2,054,818 150,492 Net cash provided by operating activities 4,227,230 831,645 Cash flows from investing activities: Increase in share in pooled investments (2,834,361) (816,796) Purchase of other assets — (218,163) Net cash used in investing activities (2,834,361) (1,034,959) Cash flows from financing activities: Advance from International Bank for Reconstruction and Development — 218,163 Payment of advance from International Bank for Reconstruction and Development (189,719) — Cash provided by financing activities (189,719) 218,163 Net increase in cash 1,203,150 14,849 Cash at beginning of the year 2,036,300 2,021,451 Cash at end of the year $ 3,239,450 $ 2,036,300 The notes to the financial statements are an integral part of these statements. ANNUAL REPORT 2012 | 55 NOTES TO FINANCIAL STATEMENTS June 30, 2012 and JUNE 30, 2011 Note 1 — Organization The International Centre for Settlement of Investment Disputes (ICSID or the Centre), established on October 14, 1966, is a member of the World Bank Group which also includes the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC), the International Development Association (IDA) and the Multilateral Investment Guarantee Agency (MIGA). The Centre provides facilities for the conciliation and arbitration of investment disputes between Contracting States (Countries that have ratified the ICSID Convention) and nationals of other Contracting States. The Centre provides such facilities for cases brought under the ICSID Convention, the ICSID Additional Facility Rules, or where parties involved so request, under the Arbitration Rules of the United Nations Commission on International Trade Law. In order to process the cases, the Centre constitutes Conciliation Commissions, Arbitral Tribunals or ad hoc Committees, as necessary. On February 13, 1967, IBRD and the Centre entered into Administrative Arrangements, which were effective as of the date of the establishment of the Centre. The Memorandum of Administrative Arrangements (the Memorandum) provides that, except to the extent that ICSID, pursuant to its Administrative and Financial Regulations (Regulations), collects funds from the parties to proceedings to cover the Centre’s administrative expenses, IBRD shall provide reasonable facilities and services to ICSID, as described in Notes 2 and 10 without charge. The Centre, pursuant to the Regulations is required within a reasonable time prior to the end of each fiscal year, to inform IBRD of the estimated type and quantity of services, and facilities that are required for the next fiscal year. In turn, IBRD will inform the Centre of the amount approved by the Executive Directors of IBRD which will constitute IBRD’s in-kind contribution for the next fiscal year. Effective February 2012, pursuant to the Operational Guidelines for the Funding of the Operations of the Centre entered into by IBRD and the Centre, at the end of each subsequent fiscal year, if the Centre’s total expenditure less IBRD’s in-kind contribution is less than the revenues collected by the Centre, the accumulated surplus amount will be retained by the Centre and may be carried forward 56 | ICSID indefinitely. In the event the Centre’s total expenditure, less the IBRD’s in-kind contribution, is greater than the revenues collected by the Centre during the year, such excess expenditure will be charged against the balance of any accumulated surpluses retained by the Centre before the Centre computes supplementary funding requests from IBRD. Note 2 — Significant Accounting Policies Basis of Accounting and Financial Statement Presentation: The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP and IFRS requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with the related disclosures as at the date of the financial statements. Management estimates the amount of unbilled expenses incurred by arbitrators, and related revenues, for ongoing cases at each year end. The nature of arbitration/conciliation cases handled by the Centre requires the use of external arbitrators, who charge fees for their service based on time spent on the cases. The estimation process uses information received from the arbitrators about unbilled time spent on the cases through the end of the fiscal year. In some cases the determination of arbitrators’ fees and expenses incurred for ongoing cases is based on estimated time spent by the arbitrators in relation to the progress of the case and the number of proceedings through the end of the year. Actual results of arbitrator fees earned but unbilled, and arbitration/conciliation case expenses incurred for the year may differ materially from management’s estimates. Cash: Cash consists of cash held in a bank account. Share of the Cash and Investments in the Pool: Investments in the Pool are held for trading and they are reported at fair value. Resulting gains or losses are reported as an increase or reduction, in Net investment income in the Statement of Activities. All income earned is required to be used by the parties to arbitration/conciliation proceedings to offset the costs of their proceedings. ANNUAL REPORT 2012 | 57 NOTES TO FINANCIAL STATEMENTS (CONTINUED) Due from Parties to the arbitration/conciliation proceedings: Direct expenses incurred by arbitrators in excess of advance payments made by the parties to the ongoing arbitration/conciliation proceedings are recognized as due from parties to arbitration/conciliation proceedings and are payable in accordance with the Centre’s Regulations. Other assets and amortization: The Centre’s other assets comprise computer systems software and website development costs; which, upon achieving technological feasibility, are capitalized at cost and amortized using the straight line method over a range of four to ten years. Amortization is charged from commencement of the use of the software. The Centre evaluates the carrying value of software and website annually, and whenever events or changes in circumstances indicate that impairment has occurred. Impairment is considered to have occurred if the carrying amount exceeds its recoverable amount, at which time, a write-down would be recorded. Payable to International Bank for Reconstruction and Development: These amounts represent the balance of outstanding expenses paid by IBRD on behalf of ICSID, which are incurred in the normal course of business. Advances from parties to arbitration/conciliation proceedings: In accordance with the Regulations, the Centre periodically requests parties to arbitration/conciliation proceedings to make advance payments to cover administrative charges and the fees and expenses of the Conciliation Commissions, Arbitral Tribunals or ad hoc Committees. These advances are recorded as liabilities. Revenues from arbitration/conciliation proceedings: The Centre’s direct expenses attributable to arbitration/conciliation proceedings are borne by the parties in accordance with the Centre’s Regulations. These direct expenses, which include fees and travel expenses and the costs associated with meeting rooms and support services for conducting proceedings, are paid from Advances from parties (see Note 9). Accordingly, the Centre recognizes revenues from these transactions to the extent expenses related to arbitration/conciliation proceedings are incurred during the period. In addition, revenues from arbitration/conciliation proceedings also include the following (see Note 8): Case registration fees: The Centre charges a non-refundable fee of $25,000 to parties wishing to institute an arbitration/conciliation proceeding or $10,000 to parties wishing to request a 58 | ICSID supplementary decision to, or the rectification, interpretation, revision or annulment of an arbitral award, or request resubmission of a dispute to a new Tribunal after the annulment of an arbitral award. The revenues are recognized upon receipt of payment from the parties to the case. Administration fees: The Centre charges an initial administration fee following the constitution of the Conciliation Commission, Arbitral Tribunal or ad hoc Committee concerned and the same amount on an annual basis thereafter. Effective January 1, 2012, the Centre revised the administration fee from $20,000 to $32,000. The Centre collects administration fees from advance deposits from the parties to arbitration/conciliation proceedings. The revenues are recognized on a straight-line basis, over the twelve month period during which services are performed. The unearned revenue at year end is deferred and recognized in the subsequent fiscal year. Case attendance fees: If the proceeding is held away from the seat of the Centre (Washington, D.C.), the Centre charges a case attendance fee of $1,500 per day when the Secretary of the Commission, Tribunal, or Committee attends the meetings. The Centre collects these fees from advance deposits from the parties to the arbitration/conciliation proceedings. The fees are recognized as revenue when the service is rendered. Effective January 1, 2012, the Centre ceased charging case attendance fees. Investment of undisbursed advances from parties and refund of surplus to the parties: Net investment income earned on funds advanced from parties is recorded as revenue and expense in the Statement of Activities, and applied to Advances from parties to arbitration/conciliation proceedings, which can be used for expenses related to arbitration/conciliation proceedings. After the completion of an arbitration/conciliation proceeding, if there is an excess of advances and investment income over expenditures for the proceedings, the surplus is refunded to the parties in proportion to the amounts advanced by each party to the Centre. Value of services provided by the Bank and in-kind contributions: IBRD provides support services and facilities to the Centre including the following: (1) The services of staff members and consultants; and (2) Other administrative services and facilities, such as travel, communications, office accommodations, furniture, equipment, supplies, and printing. ANNUAL REPORT 2012 | 59 NOTES TO FINANCIAL STATEMENTS (CONTINUED) The Centre recognizes expenses, as incurred, for the value of services provided by IBRD, which is determined by the estimated fair value of such services. Services by IBRD for which the Centre provides no compensation are similarly recognized and measured and are recorded as in-kind contribution revenue. Relevant accounting and reporting developments: Financial Accounting Standards Board: In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. The ASU is similar to IFRS 13, Fair Value Measurement issued by the International Accounting Standards Board in May 2011. While many of the amendments are changes in wording that are not expected to significantly impact current practice, some of the amendments change the existing fair value measurement and disclosure requirements. The ASU is effective for annual periods beginning after December 15, 2011, and IFRS 13 is effective for annual periods beginning after January 1, 2013. The Centre is currently evaluating the impact of these amendments. International Accounting Standards Board (IASB): In November 2009, the IASB issued IFRS 9 Financial Instruments as the first step in its project to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 introduces new requirements for classifying and measuring financial assets. In October 2010, the IASB reissued IFRS 9, incorporating new requirements on accounting for financial liabilities, and carrying over from IAS 39 the requirements for derecognition of financial assets and financial liabilities. IFRS 9 as amended is mandatorily effective for annual periods beginning on or after January 1, 2015. The Centre is currently evaluating the impact of these amendments. Note 3 — Share of cash and investment in the Pool and fair value measurement Amounts paid to the Centre, but not yet disbursed, are managed by IBRD, which maintains an investment portfolio (the Pool) for all of the trust funds administered by the World Bank Group. 60 | ICSID IBRD, on behalf of the World Bank Group, maintains the Pool’s assets separate and apart from the funds of the World Bank Group. The Pool is divided into sub-portfolios to which allocations are made based on fund specific investment horizons, risk tolerances and/or other eligibility requirements for trust funds with common characteristics as determined by IBRD. Generally, the Pool includes cash and financial instruments such as time deposits, money market securities, government and agency obligations, and asset-backed securities. The Pool may also include securities pledged as collateral under repurchase agreements and derivatives, and receivables from resale agreements as well as derivatives for which it has accepted collateral. Additionally, the Pool also includes derivative contracts such as currency forward contracts, currency swaps, interest rates swaps and contracts to purchase or sell mortgage- backed-securities to-be-announced (TBA). Payables and receivables associated with the investment activities are also included in the Pool. The Centre’s funds are invested in a sub-portfolio of the Pool, which invests solely in cash and money market instruments such as overnight time deposits, time term deposits, certificate of deposits and commercial paper with terms of three months or less recorded at par value which approximates fair value. The share in pooled cash and investments represents the Centre’s share of the Pool’s fair value at the end of each reporting period. Net investment income consists of the Centre’s allocated share of: interest income earned by the Pool, realized gains/losses from sales of securities, and unrealized gains/ losses resulting from recording the assets held by the Pool at fair value. As explained in Note 2, Net investment income is recorded as revenue and expense in the Statement of Activities, and applied to Advances from parties to arbitration/conciliation proceedings, which can be used for expenses related to arbitration/conciliation proceedings. IBRD, on behalf of the World Bank Group, has an established and documented process of determining fair values. Fair value is based upon quoted market prices for the same or similar instruments, where available. Financial instruments for which quoted market prices are not readily available are valued based on discounted cash flow models. These models primarily use market-based or independently- sourced market parameters such as yield curves, interest rates, volatilities, foreign exchange rates and credit curves and may incorporate unobservable inputs. Selection of these inputs involves judgment. The Pool’s financial instruments are categorized based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for ANNUAL REPORT 2012 | 61 NOTES TO FINANCIAL STATEMENTS (CONTINUED) identical assets or liabilities (Level 1), the next highest priority to observable market-based inputs or inputs that are corroborated by market data (Level 2) and the lowest priority to unobservable inputs that are not corroborated by market data (Level 3). When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement of the instrument in its entirety. ICSID categorizes overnight time deposits as Level 1 and the other money market instruments as Level 2. Hierarchy level June 30, 2012 June 30, 2011 Level 1 $ 2,155,769 $ 2,693,353 Level 2 20,036,292 16,664,347 Level 3 — — Total $ 22,192,061 $ 19,357,700 As of June 30, 2012 and June 30, 2011, ICSID does not have any financial instruments measured at fair value on a non-recurring basis. During the fiscal year ended June 30, 2012, transfers between levels were not significant. All other financial assets and financial liabilities are carried at cost. Their carrying values are considered to be a reasonable estimate of fair value because these instruments tend to be very short term in nature and none are considered to be impaired. Note 4 — Other assets Other assets comprise computer systems software and website development costs. Amortization charges amounted to $127,695 for the year ended June 30, 2012 (2011: $115,480). None of these assets are considered impaired. Note 5 — Advance from International Bank for Reconstruction and Development During the year ended June 30, 2008, IBRD agreed to lend up to $917,000 to the Centre to enable the Centre to acquire software and develop an information system. The loan bears no interest and is repayable in full within four years upon completion of the development of the information system. 62 | ICSID At June 30, 2012, the Centre had borrowed $758,876 and repaid $189,719 (2011: Nil), with an outstanding balance of $569,157 (2011: $758,876). Note 6 — Net Assets, Unrestricted As described in Note 1, during the fiscal year ended June 30, 2012, ICSID recognized an accumulated surplus to retain and carry forward excess revenue, if any. The amount in the accumulated surplus is unrestricted, and may be carried forward indefinitely. Note 7 — Risk Arising from Financial Instruments The Centre’s financial assets consist of its share of cash and investments in the Pool, cash and other receivables. The Pool is actively managed and invested in accordance with the investment strategy established by IBRD for all trust funds administered by the World Bank Group. The objectives of the investment strategy are foremost to maintain adequate liquidity to meet foreseeable cash flow needs and preserve capital and then to maximize investment returns. The Centre holds the cash in a depository bank account. The Centre is exposed to credit and liquidity risks. There has been no significant change during the financial year, to the types of financial risks faced by the Centre or the Centre’s general approach to the management of those risks. The exposure and the risk management policies employed to manage these risks are discussed below: Credit risk – The risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Of the Centre’s financial assets, cash held in the depository bank account which is subject to U.S. Federal Deposit Insurance Corporation (FDIC) insurance limits is not subject to credit risk. Therefore, the Centre’s maximum credit exposure at June 30, 2012 is equivalent to the gross value of the remaining assets amounting to $25,213,603 (2011: $21,669,293). The Centre does not hold credit enhancements or collateral to mitigate credit risk. IBRD invests the Centre’s share of Pooled investments in money market securities. The Centre’s share of the cash and investments in the Pool is not traded in any market; however, the assets within ANNUAL REPORT 2012 | 63 NOTES TO FINANCIAL STATEMENTS (CONTINUED) the Pool are traded in the market and are reported at fair value. IBRD’s policy is to only invest in money market instruments issued or guaranteed by financial institutions whose senior debt securities are rated at least A- in the U.S. markets or equivalent. At the reporting date, 100% of the Centre’s share of the investment portfolio is held in securities rated at least A (2011: 100%) and 65% is held in securities rated at least AA- (2011: 67%). IBRD defines the concentration of credit risk as the extent to which the Pooled investments are held by an individual counterparty. The concentration of credit risk with respect to the Pool of investments is mitigated because IBRD has investment policies that limit the amount of credit exposure to any individual issuer. Other receivables and amounts due from parties to arbitration/conciliation proceedings result from the ordinary course of business. The amounts are neither past due nor impaired. Liquidity risk – The risk that an entity will encounter difficulty in raising liquid funds to meet its commitments. ICSID regulations require parties to disputes to make advance deposits with the Centre to meet anticipated expenses of arbitration/conciliation proceedings. The Centre invests funds in highly liquid money market instruments and liabilities carried generally have no stated maturity. Note 8 — Revenue from Arbitration/Conciliation Proceedings Revenue from arbitration/conciliation proceedings comprise: 2012 2011 Drawdown of Advances from parties for direct expenses related to arbitration/conciliation proceedings* $ 23,779,301 $ 19,914,865 Administrative fees 2,901,234 2,607,440 Case registration fees 1,216,890 1,121,886 Case attendance fees 186,750 372,000 Total $ 28,084,175 $ 24,016,191 * The Centre recognizes revenue to the extent expenses are incurred related to arbitration/conciliation proceedings. The details of the expenses are provided in Note 9. 64 | ICSID Note 9 — Expenses Related to Arbitration/Conciliation Proceedings Direct expenses related to arbitration/conciliation proceedings are paid out of advances made by parties to arbitration/conciliation proceedings. The expenses comprise: 2012 2011 Arbitrators fees and expenses $ 20,569,583 $ 16,779,099 Arbitration/conciliation meeting costs 2,733,777 2,811,218 Travel expenses 320,613 218,602 Other costs 155,328 105,946 Total $ 23,779,301 $ 19,914,865 Note 10 — In-Kind Contributions As described in Note 1, the Memorandum provides that, except to the extent that the Centre may charge the parties to proceedings for fees and expenses of members of Conciliation Commissions, Arbitral Tribunals or ad hoc Committees, IBRD will provide facilities and services to the Centre. Therefore, in-kind contributions represent the value of services provided by IBRD, less amounts reimbursed to IBRD using proceeds from non-refundable fees and the sale of publications. A summary is provided below: 2012 2011 Recorded value of services provided by IBRD Staff services (including benefits) $ 4,680,759 $ 3,928,428 Administrative services and facilities: Contractual services 409,300 416,065 Administrative services 197,759 234,697 Communications and information technology 434,793 401,832 Office accommodations 563,514 457,464 Travel 85,126 85,533 Total administrative services and facilities 6,371,251 5,524,019 Amortization expense 127,695 115,480 Total recorded value of services provided by IBRD 6,498,946 5,639,499 Less: ICSID contributions 3,702,527 4,120,043 In-kind contributions $ 2,796,419 $ 1,519,456 ANNUAL REPORT 2012 | 65 Note 11 — Authorization of Financial Statements ICSID’s management has evaluated subsequent events through August 28, 2012, the date the financial statements were approved and authorized for issue. 66 | ICSID ANNUAL REPORT 2012 | 67 68 | ICSID 1818 H STREET, NW WASHINGTON, D.C. 20433 USA TELEPHONE (202) 458 1534 FACSIMILE (202) 522 2615