(Feb. 22, 2021) On January 28, 2021, the International Centre for the Settlement of Investment Disputes (ICSID) published its caseload statistics for the first six months of 2020 (FY2020). Some had predicted that disruptions due to the COVID-19 pandemic would have a significant impact on the number and type of investment disputes brought to ICSID during this period. Indeed, the number of new cases registered under the ICSID Convention and Additional Facility Rules is down compared with FY2019 from 52 to 40; however, the number of investor-state arbitrations administered by ICSID under United Nations Commission on International Trade Law (UNCITRAL) rules increased from 12 to 16 in FY2020.
In both years, and in ICSID’s history, the economic sector that was subject to the most disputes was the oil, gas, and mining sector, and the second most highly disputed sector was electric power and other energy. Meanwhile, the statistics also reveal that several persistent trends in investment arbitration have endured, including the lack of diversity in arbitral appointments and the regional distribution of cases.
Lack of Arbitrator Diversity
While the lack of gender and geographic diversity among adjudicators in international investment arbitration, sometimes referred to as a “diversity deficit,” is well-documented, the FY2020 caseload statistics do not reflect much progress in increasing diversity among ICSID arbitrators. For example, from 1966–2020, 88% of arbitrators appointed in cases registered under the ICSID Convention and Additional Facility Rules were male and 12% were female. In FY2020, the gender gap has largely held, with 86% of such adjudicators being male and 14% female.
The distribution of appointments by geographic region has also remained similarly unbalanced, although some progress has been made. From 1966–2020, two-thirds of arbitrators were from either Western Europe (47%) or North America (20%). In FY2020, appointments of arbitrators from Western Europe and North America still accounted for 57% of all appointments, but South America, South & East Asia & the Pacific, the Middle East & North Africa, and Sub-Saharan Africa saw slight increases in arbitrators appointed from their region.
The lack of diversity in gender and geographical origins among international arbitrators is an area that the UNCITRAL Working Group III (Investor-State Dispute Settlement Reform) has recognized, and the group is currently discussing reforms that could be implemented. One international arbitration scholar has argued that the benefits of more inclusive decision-making bodies are two-fold: (1) more diversity among decision-makers helps to avoid groupthink and/or cognitive biases, and (2) more diversity would enhance the sociological and/or normative legitimacy of the regime, because the process and the outcome would be perceived as “fair.”
Regional Distribution of Cases
Similarly, the regional distribution of cases has remained highly skewed toward arbitrations against countries in Eastern Europe & Central Asia and South America. These two regions (out of eight regions defined by ICSID) continue to account for approximately half the cases registered under the ICSID Convention and Additional Facility Rules, over time and also in FY2020. Quantitative empirical studies on the regional distribution of cases and on claims of bias are ongoing among international political scientists and international lawyers.
Longer Term Impact of COVID-19 on Investment Arbitration
The most recent caseload statistics cover the first six months of 2020; thus, the longer-term impact that COVID-19 may have on investment arbitration remains to be seen. In general, the United Nations Conference on Trade and Development (UNCTAD) notes that the pandemic has caused a dramatic drop in foreign direct investment (FDI), especially in low- and middle-income countries. Despite a decrease in new FDI, cases may emerge regarding the protection of existing investments where governments have taken (or plan to take) measures to respond to the pandemic that arguably breach their obligations under international investment agreements. In response to this concern, some international nongovernmental organizations have called for a moratorium on investment disputes when the claim is in response to pandemic-related measures. The next ICSID caseload statistics may reveal what, if any, impact the pandemic has on investment arbitration going forward.