Should Mexico Join ICSID?
Clinic: Graduate Institute, Spring 2012
Full report available here
As of 8 June 2012, 158 countries are parties to the ICSID Convention. ICSID represents a “quintessential framework for investor-state arbitration” and its role in resolving investment disputes is continuously increasing. In 2011, the ICSID Secretariat received the highest number of requests for registration of investment claims under its rules.
This project addresses the question of whether Mexico should join ICSID. It does so by way of a comparative analysis between the ICSID system and the arbitration rules mostly referred to in Mexico’s IIAs to resolve investor-state disputes.
Our premise in support of Mexico’s adherence to the ICSID Convention is based on the following considerations: 1) Mexico has an extensive practice of investment arbitration 2) Mexico is familiar with investor-State arbitration under UNCITRAL, ICSID/AFR and other arbitration rules, and 3) Mexico has a well-developed legal regime on foreign investment, composed of BITs and FTAs which already contain ICSID as an option for dispute resolution.
The project is divided in three main parts. Part I deals with the status quo of Mexico’s International Investment Agreements (IIAs) and gives an overview of the investment protection discipline adopted by Mexico. Each BIT and FTA signed by Mexico has been scrutinized in order to confirm that there are no formal impediments to Mexico’s ICSID membership and to evaluate the possible impact of the ratification of the Convention on the current framework.
Part II analyses several procedural issues by comparing the discipline contained in the ICSID Convention with other arbitration rules, mainly ICSID/AFR, UNCITRAL, ICC and PCA. The conclusions of this part demonstrate that ICSID offers several procedural advantages when compared to other Dispute Settlement Mechanisms. The main areas where a substantive difference exists are those related to the role of the secretariat, the annulment and enforcement of awards, transparency, costs, appointment and challenge of arbitrators. Other issues, which do not present disadvantages and would not give rise to concerns, are those related to applicable law, definition of investment and predictability of the awards. Some issues, to the contrary, may cause concern, for instance provisional measures.
Part III considers the reasons for and the impact of ICSID membership. It confirms a) the relevance of ICSID as an additional dispute settlement mechanism to protect Mexican investors abroad, and b) the non-direct link between the ICSID membership and the increase of investment claims against a member state. In addition, part III addresses the recent denunciations of the ICSID Convention and Mexico’s experience as a respondent State in investment arbitration to date.
Balancing the advantages with the disadvantages of the ICSID Convention and taking into consideration that ICSID membership sends a positive signal of effective protection to foreign investors, Mexico should consider becoming a party to the Convention. Joining ICSID would expand the range of options in investor-State dispute settlement, both for Mexico acting as a respondent State and, more importantly, for Mexican investors acting as claimants. This choice would contribute to Mexico’s emerging economy and would increase its regional and global competitiveness.