The ICSID Under Siege: UNASUR and the Rise of a Hybrid Regime for International Investment Arbitration

Abstract

The legitimacy and effectiveness of the International Centre for Settlement of Investment Disputes (ICSID) — a dispute resolution body established in 1966 under the auspices of the World Bank — is a matter of spirited debate. It has been argued by some that ICSID’s ideological and procedural bias impedes fairness and by others that its complexity and cost restrict access to justice; many contend that the absence of an appeal process has exacerbated uncertainty and unpredictability. In 2009, in the wake of rampant dissatisfaction and ideological challenge, especially on the part of Latin American states, Ecuador proposed the creation of a regional arbitration centre, as a new component of the Union of South American Nations (UNASUR). This article consolidates the myriad of criticisms launched against ICSID and qualitatively assesses the relative likelihood and desirability of the UNASUR Arbitration Centre as a successful alternative to ICSID and addition to the arbitration system. As analyzed in this article, a combination of comprehensive reform efforts to ICSID can address a majority of the issues at hand. However, as situated in a unique geopolitical context, the UNASUR Arbitration Centre will continue to gain momentum, resulting in a hybrid regime for international investment law, at least in the short- to medium-term. This hybrid regime will be functional, serve an important purpose for Latin American countries, and advance the goals of investment liberalization as a valid agenda.

Keywords: Dispute resolution, ICSID, international investment arbitration, international law, Latin America, UNASUR

JEL Classification: K00, K20, K33, K41