Due to Ghana’s abundance of natural resources, investment is needed for the country to reap the benefits of its enormous potential.[1] Thus, it should be no surprise that Ghana has been involved in numerous investor-state settlement conflicts and is familiar with the current framework for investor-state settlements.[2] There are advantages and disadvantages to the current system. While there is room for improvement in any system, various attempts have been made to reduce said critics of the current ISDS system, with the newest amendments to the ICSID Rules hopefully being a positive step toward resolving several pressing issues with the existing system.
Current Advantages of ISDS system as it is to Ghana
Investors Are More Comfortable with Experienced Institutions Than Domestic Courts
Investors will be more inclined to invest in Ghana if the institution handling a dispute is experienced and of international status. These institutions, like ICSID or UNCITRAL (both of whom Ghana is a member of), are a good choice because, aside from the apparent fact that courts may be biased in favour of the state, their arbitrators are well-versed in complex international disputes and have a proven track record.[3]
Cost and time involved in ISDS Mechanisms
Various ISDS institutions, such as UNCITRAL and ICSID, allow for quick and cost-effective dispute resolution. For example, in domestic courts, some basic preliminary objections can take a whole year and a half at only the court of the first instance for a decision to be rendered. However, this is not often the case in ISDS mechanisms. If the respondent asserts the issue is “without merit,” it might apply to dismiss the matter immediately rather than waiting until the completion of the proceedings.[4] Hence it allows a respondent to request that the proceedings be dismissed summarily if they believe the underlying claims are without legal merit. In the case of Trans-Global v. Jordan[5], the host state thought that the accusations were frivolous. The claimant filed an ICSID claim against the respondent, alleging that Jordan violated some US-Jordan BIT articles. The respondent made a 41(5) objection, arguing that the claimant’s claims were without legal merit in numerous ways. The Tribunal confirmed in the operative section of its judgement only THREE months after the objection was made. In addition, the Secretariat’s extensive services and specialist employees supporting each case cost USD 42,000 each year (USD 21,000 per party).[6] Comparing this amount to lawyer’s fees alone in Ghana (10%-15% of the amount claimed) indicates why institutions like ICSID or UNCITRAL should be preferred to local courts for investments which include large amounts.
Simple Award Enforcement Procedure
Another essential advantage of ISDS mechanisms is the enforcement procedure mechanism. Most ISDS institutions are enforceable under the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Some even have specialised enforcement mechanisms. For example, ICSID’s specialised enforcement mechanism saves time and money while ensuring predictability. It even has a post-award remedy process, including those based on the grounds for annulment, leaving no need to rely on domestic courts for that.[7]
Current Disadvantages of ISDS system as it is to Ghana
The Termination of Investor-State Relations
In almost all circumstances, international arbitration of a dispute between an investor and a state will result in the termination of the two parties’ ties. Unfortunately, this is the complete opposite of what Ghana wants when seeking various investors to invest in their countries and improve the economy. A dispute between an investor and a state will ultimately destroy this connection and set a poor precedent for Ghana and potential investors.
Local laws are Susceptible to ISDS challenges.
As more firms are formed, national laws are subjected to more examination. The prospect of foreign companies succeeding in challenges to Ghanaian laws outside the Ghanaian judicial system would make selling trade to a sceptical local public more difficult.[8]
ISDS exceeds obligations regarding “national treatment.”
ISDS, in the opinion of certain parties, turns on its head the concept of “national treatment,” which states that imports and foreign enterprises will receive the same treatment as domestic products and companies. This is because international investors are granted privileges that local investors may not have.[9] It is possible to argue that this is discriminatory and a violation of Article 17 of the 1992 Constitution of Ghana, which states the right of Equality and Freedom from discrimination.
New Amendments to ICSID Rules and their Implications for Ghana:
The most recent changes will take effect on July 1, 2022, and will apply to arbitrations that begin after that date. The following changes will be made to the ICSID Rules as a result of the Amendments:
a) Less Stringent Jurisdictional Requirements;
b) Specification of Ownership and Control of Investments;
c) Disclosure Requirements for Third-Party Funding; and
b) Security for Costs.
- Less Stringent Jurisdictional Requirements
The ICSID Additional Facility Rules have been amended to significantly expand ICSID’s capacity to administer arbitration and conciliation proceedings. Even when none of the parties to the dispute is an ICSID Member State or a national of an ICSID Member State, the rules can still apply to them. This is a significant shift because it gives the non-ICSID Member States and their nationals access to ICSID arbitration and conciliation. These parties, previously limited to commercial arbitration procedures, can utilise the ICSID mechanism.[10]
- Specification of Ownership and Control of Investments
Previously, a request for arbitration just required to include information on the issues in dispute, indicating that there is a disagreement deriving directly from an investment, but the new requirements are more explicit. Under the new rules, the request for arbitration must include “a description of the investment as well as its ownership and control.” This allows both ICSID and respondent States to determine whether the assets qualify as the claimant’s investment and will likely allow for an earlier resolution of jurisdictional difficulties etc.
- Disclosure Requirements for Third-Party Funding
The funded party must reveal the identity and address of any non-party source of funding immediately. This new requirement appears to have a broad scope, as it applies to parties who have received “a donation or grant, or in exchange for remuneration contingent on the outcome of the case” from a non-party, whether received “directly or indirectly.” It further demands identifying the individuals and entities that own and control them. As a general rule, disclosure of the funding arrangement and its terms and circumstances is not required under this new responsibility. This amendment provides a reasonable answer in that the name of a participating funder must now be revealed to potential arbitrators as soon as feasible to minimise unintended conflicts of interest.
- Security for costs
This provision of the interim measure was already approved under the ICSID rules.[11] However, ICSID has now introduced a detailed rule that allows a tribunal to force any party presenting a claim or counterclaim to provide security for expenses. The rule establishes a timeframe for deciding a request for security for expenses and an example list of circumstances to be considered in the tribunal’s decision-making process. It also governs the implications of failing to comply with an order for security for costs (suspension and ultimately discontinuance of the arbitral proceedings).
[1] Natural Resources in Ghana – https://myhealthbasics.site/list-of-natural-resource-in-ghana/
[2] Investment Dispute Settlement Navigator (Ghana): https://investmentpolicy.unctad.org/investment-dispute-settlement/country/79/ghana/respondent
[3] Investor-State Dispute Settlement Cases: Facts and Figures 2020: Issue 4, September 2021
[4] ICSID Rule 41(5) – Effective with the 2006 modifications to the ICSID Arbitration Rules
[5] ICSID Case No. ARB/07/25
[6] Cost of Proceedings: https://icsid.worldbank.org/services/content/cost-of-proceedings
[7] Article 52 of the ICSID Convention
[8] Investor-State Dispute Settlement by Gary Clyde Hufbauer – https://www.piie.com/publications/chapters_preview/7137/11iie7137.pdf
[9] The Standard of National Treatment in the Investor-State Dispute Settlement Practice by Andrea Sesin: http://cilj.co.uk/2017/02/05/the-standard-of-national-treatment-in-the-investor-state-dispute-settlement-practice/
[10] Maria José Alarcon, “ICSID Reform: Balancing the Scales?,” Kluwer Arbitration Blog, January 28, 2022, http://arbitrationblog.kluwerarbitration.com/2022/01/28/icsid-reform-balancing-the-scales/
[11] ICSID Convention Article 47 and ICSID Arbitration Rule 29
Kwabena's Musings 