30 Jun 2012
The Political Economy of Settlements within ICSID Arbitration: Some Empirical Evidence
NCCR Trade Working Paper No. 2012/19 by Roberto Echandi
Among other critical aspects, the significant increase of investor-State international arbitration that has taken place over the last two decades has revealed a critical puzzle of the current international investment regime. It is widely recognized that, rather than adjudication, disputes between foreign investors and States should be voluntarily settled if at all possible. However, despite the prevalence of encouragement of consensual settlement of controversies in investment treaties, and the existence of various procedural venues to dispute settlement different from arbitration, recourse to mediation or conciliation in international investment disputes has been extremely limited. Moreover, over the last three decades, voluntary settlement of investment disputes has tended to take place predominantly in the litigious context of investor-State arbitration. In our previous research we surveyed the literature on the political economy of investor-State arbitration, and suggested that the barriers limiting the voluntary settlement of investment disputes outside the context of arbitration can be grouped in three broad categories: First, there are determinants related to the perceived novelty of the idea of interest-based dispute resolution in the investor-State context. Second, there are factors related to the public nature of the respondent and the challenged measure in investor-State disputes, and third, there are barriers stemming from the lack of clarity and still evolving nature of international investment law. This paper tests these hypotheses by examining the empirical evidence related to the settlements within ICSID investor-State arbitrations from 1970 to 2011. In particular, this paper examines critical aspects such as the frequency of settlements, the legal ground invoked by the parties to discontinue the arbitration proceedings, the timing within the arbitration process when the settlements tend to occur, the settlements by economic sector, and the countries that tend to settle and those that do not. This paper concludes that empirical evidence tends to confirm the characterization of the political economy of investor-State disputes undertaken in our previous work.