Bolivia’s Exit from ICSID

Bolivia’s Exit from ICSID:

Legal and Practical Consequences of
Denouncing the ICSID Convention –
The text and context of the Convention

A presentation to the
BIICL Investment Treaty Forum

20 June 2007
By Alejandro A Escobar

Latham & Watkins

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Background

• “On May 2, 2007, the World Bank received a written
notice of denunciation of the Convention on the
Settlement of Investment Disputes between States and
Nationals of Other States (the ICSID Convention) from the
Republic of Bolivia.” (ICSID News Release, 16 May
2007)

• Bolivia signed the ICSID Convention on 3 May 1991
• Became a Contracting State on 23 July 1995

• Bolivia has been a party to one concluded and one
pending ICSID arbitration proceeding

The Operative Provisions

Article 71

Any Contracting State may denounce this
Convention by written notice to the depositary of
this Convention. The denunciation shall take
effect six months after receipt of such notice.

The Operative Provisions (cont’d)

• Article 72
Notice by a Contracting State pursuant to Articles
70 or 71 shall not affect the rights or obligations
under this Convention of that State or of any of its
constituent subdivisions or agencies or of any
national of that State arising out of consent to the
jurisdiction of the Centre given by one of them
before such notice was received by the
depositary.

Application to Bolivia’s denunciation

• Bolivia’s denunciation:

• shall not affect its rights or obligations
• under the ICSID Convention
• arising out of consent given by it

(or by one of its subsdivisions, agencies or nationals)
• before its notice of denunciation was received by the World Bank

(i.e. before 2 May 2007)

Rights or obligations under the Convention

• Article 25: mutual consent may not be unilaterally
withdrawn

• Article 26: exclusion of other remedies
• Article 27: suspension of right of diplomatic protection
• Article 36: right to initiate proceedings
• Article 44: applicable Arbitration Rules
• Articles 50 – 52: post-award remedies
• Articles 53 – 55: effect and validity of an award
• Article 64: disputes concerning the ICSID Convention
• Article 66(2): effect of amendments to the Convention
• Articles 21-22: privileges and immunities re proceedings

Consent given by it prior to 2 May 2007

• Given by it as opposed to third parties

• Compare Article 66 (2)
• No continuing obligation to recognize or enforce awards deriving

from third party consent
• No continuing obligation to observe privileges and immunities in

connection with third party consent

• Arising out of its consent

• No continuing rights or obligations of membership
• E.g. Appointments to panels
• E.g. Representation at the Administrative Council

When does consent need to be perfected ?

• Does consent given by Bolivia need to have been
accepted by a national of another ICSID Contracting
State prior to 2 May 2007 for the Convention rights and
obligations arising out of that consent to be preserved?

• Is there a date at which certain rights and obligations
must arise from Bolivia’s consent?

• Three basic scenarios have been outlined

• Each of them may be plausible on the basis of Article 72

Scenario 1: Before notice is received

• Consent must be perfected before notice of denunciation to have any
legal effect (i.e. to survive denunciation)

• Pros:
A) consistent with what may reasonably be understood as "consent of
the parties" to the jurisdiction of the Centre
B) provides certainty and control to denouncing State

• Cons:
A) less certainty for investors who have invested on the basis of
ICSID membership and BIT obligations
B) would leave some BITs with no investor-State (Bolivia open to
allegation of breach of treaties?)
C) would mean no legal effect of consent in 6 months after notice

Scenario 2: Before denunciation takes effect

• Consent may be perfected as long as Bolivia remains an
ICSID Contracting State, i.e. until 3 November 2007

• Pros:
A) Consistent with possibility that parties may give
consent at different times
B) Consistent with exercise of rights by a Contracting
State until denunciation takes effect

• Cons:
A) Some uncertainty if there is still no dispute
B) Some uncertainty if State consent is given after date of
notice

Scenario 3: As long as offer is in place

• Consent may be perfected as long as the consent “given
by” Bolivia has not been withdrawn

• Pros:
A) Would avoid any allegation of breach of BITs
B) Would preserve expectations as time of investment

• Cons:
A) Would tie in effect of the ICSID Convention for years
beyond denunciation (even for post-denunciation
investments)
B) Would create uncertainty if consent is withdrawn
despite BIT language

Conclusions

• The text of the ICSID Convention could support variety of
possible solutions

• In the absence of some consensus and in the face of
possible disputes the definitive approach may need to be
settled as among ICSID Contracting States and Bolivia

• This will ultimately be a question of treaty interpretation
under the rules of public international law