TO STAY OR NOT TO STAY: ICSID proposals for amending the rule on stays of enforcement during annulment proceedings

1. INTRODUCTION

In August 2018, ICSID published the proposals for amendment of the ICSID Rules accompanied by a Working Paper (“Working Paper 1”) and distributed them to Member States. ICSID invited written comments, which have since been compiled and published in January 2019. Based on the comments received, ICSID updated the Working Paper (“Working Paper 2”) on 15 March 2019 modifying also the proposals for amendment. Amendments to the ICSID Rules require the approval of two-thirds of ICSID Member States. A vote on the amendments is expected later this year or in 2020. The proposed changes are aimed at modernising the Rules, codifying practice, and making procedures more efficient.

The rule pertaining to the request for the stay of enforcement of the award during annulment proceedings (Rule 54(2)) has led to different interpretations and a jurisprudential split which Proposed new Rule 71 and the Working Papers attempt to address.

The Working Papers shed some much needed light on who bears the burden of proof – now in principle with the applicant – and whether the stay of enforcement of an award is a quasi-automatic or an exceptional remedy, in favour of the latter.

On conditional stays, the amendment proposals are less illuminating: while codifying the committees’ power to subject the granting of continued stay to security, Proposed new Rule 71(4) and the accompanying commentary in the Working Papers miss the opportunity to go deeper.

2. CURRENT RULE

Article 52(5) of the ICSID Convention provides that, upon request in the annulment application, the Secretary-General will automatically grant a provisional stay of enforcement of the award. The provisional stay will stay in place until the annulment committee decides on the continuation or lifting of this provisional stay. The same provision then provides the committee with ample discretion to continue the stay pending its decision on the annulment application, “if it considers that the circumstances so require”.

Rule 54 of the Arbitration Rules details the procedure for stay applications:

Rule 54(2) provides that “[a]s soon as the Tribunal or Committee is constituted it shall, if either party requests, rule within 30 days on whether such stay should be continued; unless it decides to continue the stay, it shall automatically be terminated”; and Rule 54(4) provides that the stay application shall “specify the circumstances that require the stay or its modification or termination.”

Committees have settled on different interpretations of these provisions in relation to three issues that will be examined here:

a) Whether the default should be continuation or lifting of the stay?

b) Who bears the burden of proof?

c) Can security be ordered, and if yes, in what circumstances?

3. STAY OF ENFORCEMENT – QUASI-AUTOMATIC OR EXCEPTIONAL REMEDY?

Until 2016, a stay of enforcement was requested in about 50% of annulment applications [1]. The stay was continued in close to 90% of these cases [2], leading to arguments that the continuation of the stay was quasi automatic. The first Committee to reject an application for stay was in Total v Argentina [3], in 2014, by which time Argentina had established a reputation for not complying with awards.

This pattern of granting requests for stay was not consistently based on the interpretation of the Convention and the Rules, but very often on practice, as noted in Libananco [4], and later in Total v Argentina and OIEG [5].

The committee in OIEG first went further and focused on the Convention’s provisions that provide for the binding and final nature of the award and that specify that the continuation of the stay should be granted where the circumstances “require” it. The committee concluded that the continuation of a stay was an exceptional remedy and that the applicant bears the burden to prove that the circumstances require it.

Over recent years, committees’ positions have not become more coherent: an analysis of the decisions issued or published since 2018 demonstrates the still fragmented nature of the current jurisprudence. On the one side we find committees, such as in Tenaris I [6], Valores Mundiales [7], Karkey [8], and Churchill Mining [9], that have adopted the OIEG construction of the Convention and Rules whereby the continuation of the stay is an exceptional remedy.

On the other side, the annulment committee in Casado (2018) [10] found that stays should be preserved absent unusual circumstances and the committee in Tenaris  II [11] found that, while the continuation of the stay is not automatic, committees should lift the stay only in exceptional circumstances.

To date, at least three positions have emerged: some committees have acknowledged a practice to grant automatic stays, some view the lifting of the stay as exceptional, while others hold the view that the default position should be the lifting of the stay.

4. WHO BEARS THE BURDEN OF PROOF?

Annulment committees have also failed to reach consensus on which party bears the burden of proving whether the stay should be continued or lifted.

Among recent decisions, most committees following the OIEG interpretation of the Convention, whereby the stay is an exceptional remedy, have also found that the burden lies with the applicant seeking to continue the stay. By contrast, the committee in Tenaris II, following the SCB v. Tanzania approach, found that neither party bore the burden of proof [12], which can be a problematic stance with any legal question.

5. CONDITIONAL STAYS

Finally, committees have adopted different positions in determining whether a stay can be conditioned on the posting of security and, if so, what circumstances warrant this.

The Convention and the Rules do not specifically address the committees’ authority to subject the stay to the requesting party’s posting of security. In practice, committees have found themselves empowered to do so: until 2016, out of the 36 stay requests granted, 22 were conditional [13]. Also more recently, committees have found that the power to condition the stay to posting of a guarantee fell within their broad discretion.

There is less agreement regarding the circumstances that warrant subjecting the stay to the posting of security. Committees have taken into account several issues in their determinations, for example whether there are legitimate fears of non-enforcement [14] or whether the posting of a guarantee would be overly burdensome for the applicant [15]. Another view is that committees should abstain from conditioning the stay to security where this would be equal to compliance with the award [16], or improve the position of the application beyond what it would have been had there been no application for annulment [17].

6. PROPOSED NEW RULE

Proposed new Rule 67 of 2 August 2018, now Proposed new Rule 71 of Working Paper 2, maintains that the request for the stay of enforcement “shall specify the circumstances that require the stay”. Working Paper 2 expressly addresses the split in the case law that has emerged over the past few years by clarifying that – unless the committee decides that burden-shifting is appropriate in the circumstances – the applicant bears the burden of proving why the stay should continue [18].

Proposed new Rule 71(4) addresses conditional stays  and codifies what has been annulment committees’ practice by stating that “[i]f a Tribunal or Committee decides to stay enforcement of the Award, it may impose conditions for the stay, or for lifting the stay, in view of all relevant circumstances.”

While the proposed amendment addresses the committees’ authority to condition the stay, it misses the opportunity to clarify the circumstances that warrant requiring security. Working Paper 1, accompanying the amendment proposal, does not offer much in the way of clarification:

Proposed AR [71](4) codifies and regulates the practice of conditionally staying enforcement if: (i) a stay is required by the circumstances; and (ii) the condition(s) is necessary in light of the circumstances. The condition should not amount to compliance with the terms of the Award (…). A conditional stay is typically not an alternative to not staying enforcement, but an exercise of Tribunal or Committee discretion, having already determined that a stay is required.

More questions than answers emerge from this explanatory note, which were also not addressed in Working Paper 2: e.g. does the proviso about conditions not amounting to compliance mean that posting a security for the payment of the award sum is no longer an option? In what circumstances should a committee find that the applicant has proven that circumstances exist for the stay to continue, but that security should be provided? And who bears the burden of proof or persuasion on the need for security?

7. CONCLUSION

An argument could be made that the recent decisions on stays of enforcement show that committees design their decisions to match the circumstances of each case, but a closer review shows that the divergent results stem from different interpretations of the applicable provisions and of the committees’ practice and jurisprudence.

Proposed new Rule 71 and the Working Papers attempt to address the disagreement and confusion about the basic principles applicable to stays of enforcement. The Working Papers now clarify that the burden of proof is borne by the applicant, thereby clarifying that a stay is not a quasi automatic remedy but rather an exceptional one.

On conditional stays, Proposed new Rule 71(4) codifies and regulates the practice of conditioning stays of enforcement, however the Proposed new Rule and the accompanying commentary in the Working Papers miss the opportunity to address what circumstances require this.

[1] Updated Background Paper on Annulment for the Administrative Council of ICSID, 5 May 2016, p. 19 (para. 58).

[2] Id.

[3] Total S. A. v. Argentine Republic, Decision on Stay of Enforcement of the Award, ICSID Case No. ARB/04/1, 4 December 2014.

[4] Libananco Holdings Co. Limited v. Republic of Turkey, Decision on Applicant’s Request for a Continued Stay of Enforcement of the Award, ICSID Case No. ARB/06/8, 7 May 2012.

[5] OI European Group B. V. v. Bolivarian Republic of Venezuela, Decision on Stay of Enforcement of the Award, ICSID Case No. ARB/11/25, 4 April 2016.

[6] Tenaris S. A. and Talta – Trading e Marketing Sociedade Unipessoal Lda. v. Bolivarian Republic of Venezuela, Decision on the Request to Maintain the Stay of Enforcement of the Award, ICSID Case No. ARB/11/26, 24 March 2017.

[7] Valores Mundiales, S.L. and Consorcio Andino S.L. v. Bolivarian Republic of Venezuela, Decision on the Request for a Continuation of the Stay of Enforcement of the Award (Spanish), ICSID Case No. ARB/13/11, 20 September 2018.

[8] Karkey Karadeniz Elektrik Uretim A.S. v. Islamic Republic of Pakistan, Decision on the Stay of Enforcement of the Award, ICSID Case No. ARB/13/1, 22 February 2018.

[9] Churchill Mining Plc and Planet Mining Pty Ltd v. Republic of Indonesia, Decision on the Request for Continued Stay of Enforcement of Award, ICSID Case No. ARB/12/14 and 12/40, 27 June 2017.

[10] Víctor Pey Casado and President Allende Foundation v. Republic of Chile, Decision on the Request for the Stay of the Enforcement of the Award, ICSID Case No. ARB/98/2, 15 March 2018. A continuation of the stay had been granted in a previous annulment proceeding in the same case, the previous annulment committee having found that continuance of the stay was quasi-automatic absent unusual circumstances.

[11] L. E. Peterson & V. Djanic, Analysis: in a Pair of Recent Decisions, ICSID Committees Disagree on Conditions for Continuing a Stay of Award Enforcement; One Committee Deems Conduct of State in a Prior Case to be in Violation of ICSID Convention, IAREPORTER (17 June 2018).

[12] Id.

[13] Updated Background Paper on Annulment for the Administrative Council of ICSID, 5 May 2016, p. 19 (para. 58).

[14] Churchill Mining; Aktau v Kazakhstan in A. Ross, Kazakhstan Must Pay Up, Says ICSID Annulment Committee, GAR News (5 October 2018); Mobil Argentina S.A. v Argentine Republic, Decision on Suspension of the Stay of Enforcement (Spanish), ICSID Case No. ARB/99/1, 27 January 2017.

[15] Churchill Mining; Tenaris II.

[16] Casado v. Chile (2018).

[17] Carnegie Minerals (Gambia) Limited v. Republic of The Gambia, Decision on the Gambia’s Request for a Continued Stay of Enforcement of the Award, ICSID Case No. ARB/09/19, 18 October 2018.

[18] Working Paper 2, Vol 1, p. 295 (para. 457).