ICSID (investor-state arbitration)
A World Bank Group institution created in 1965 that administers arbitration of disputes between foreign investors and states; its awards often serve the political risk insurer's recourse after paying a claim.
The 1965 Washington Convention created, within the World Bank Group, the International Center for Settlement of Investment Disputes. It administers arbitrations between a foreign investor and the host state, where the state's consent derives from a bilateral investment treaty, a multilateral treaty, a national law or a contract. Its distinctive feature is the force of its awards: states parties undertake to recognize and enforce them as a final judgment of their own courts, with no review on the merits, recourse being limited to an internal annulment procedure on narrow grounds. Hundreds of cases have been brought there, notably for expropriation, breach of state contracts, discriminatory treatment or denial of justice, and some states have been ordered to pay considerable sums. The system is also criticized: high costs, lengthy proceedings, pressure on states' public policies. For political risk insurance, it plays a central role after the loss. The insurer that has paid an expropriated investor is subrogated to its rights and can pursue or take over the arbitration against the state. The prospect of an enforceable award is an element of pricing, and the Multilateral Investment Guarantee Agency, of the same group, relies on that threat.
On July 12, 2019, an ICSID tribunal ordered Pakistan to pay nearly 6 billion dollars, including interest, to Tethyan Copper, a joint venture of Barrick and Antofagasta, for the 2011 refusal of a mining lease for the Reko Diq mine. The award was not paid as such: it served as a bargaining chip in the March 2022 agreement that gave Barrick back a stake in the project.
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