Originally from Enforcement of Arbitral Awards Against Sovereigns

I. INTRODUCTION: WHO’S AT RISK? SAFEGUARDING AGAINST INJUSTICE AND THE POSSIBLE ABUSE OF THE ICSID ANNULMENT SYSTEM

Article 53(1) of the ICSID Convention provides that “[t]he award shall be binding on the parties. . . .” and that “[e]ach party shall abide by and comply with the terms of the award. . . .”

As observed some twenty years ago by Aron Broches, the principal drafter of the ICSID Convention and ICSID’s first Secretary-General, the language restates the customary international law concepts of pacta sunt servanda and res judicata. 1 Thus, in an article in one of the early volumes of the ICSID Review, Mr. Broches recalled that Article 37 of the Hague Convention for the Pacific Settlement of International Disputes of 1907 expressed the effect of pacta sunt servanda in the following terms: “Recourse to arbitration implies an engagement to submit in good faith to the award.”2 Mr. Broches also recalled the finding of the Permanent Court of International Justice in the Socobel case to the effect that “Recognition of an award as res judicata means nothing else than recognition of the fact that the terms of that award are definitive and obligatory.”3

In making the above observations Mr. Broches cautioned that State practice had undermined these principles insofar as the losing party in State to State arbitrations often failed to comply with the award, claiming a right to declare the award a nullity. This had in effect meant that the losing party took it upon itself to act as the “final judge” and that the binding effect of an arbitral award was tenuous at best. As a stark example of such an outcome, Mr. Broches drew attention to Argentina’s 1978 repudiation of the Award in the Beagle Channel case.4

In that case, following the rendition of the award, the Argentine government had issued a Declaration of Nullity stating that the decision “has been handed down in violation of international rules by which the Court had to abide in its task. Therefore, that decision and the subsequent Award of Her Britannic Majesty are null and void.”