The ICSID (International Centre for Settlement of Investment
Disputes, "Centre") Arbitration is a popular alternative
dispute settlement system for disputes that arise between the
states/the administrative bodies of states and the companies which
contain foreign capital.
Considering the conventional systems for arbitration, the most
significant point of the ICSID Arbitration is that it does not
require an arbitration agreement between the parties of the
dispute. As it is known, in order to initiate the arbitral
procedure, the parties need to express their will in this regard
and conclude an arbitration agreement/clause; however, ICSID
constitutes an exception to this canon.
Having been established pursuant to the "Convention on the
Settlement of Investment Disputes Between States and Nationals of
Other States" ("Convention") of year 1965, ICSID is
affiliated with the World Bank, but with having an autonomous
structure. Its headquarters is located in Washington D.C., just
like the World Bank. The Centre covers its expenses with its own
financial means and the contribution margins which are determined
by the shares of capital of the member states of the World Bank.
From this aspect, ICSID has its autonomous mechanism that is
independent from local legal systems, which supports the view that
a dispute settlement procedure conducted by ICSID Arbitration would
As of today, spring 2016, ICSID has 147 members, though there
are members that are yet to ratify the Convention. The Republic of
Turkey has ratified the Convention with the law dated 27.05.1988
and numbered 3460. Within this direction, an award given by the
ICSID Arbitration may be executed in Turkey after the recognition
and enforcement procedures have been duly implemented. Pursuant to
the Article 54 of the Convention, The Signatory States are obliged
to execute the ICSID award in their own state , whether they be a
Party of the original dispute or not.
In order to apply for the ICSID Arbitration, an investment
contract is required. Considering other international contracts,
the difference of the investment contracts is that one of the
Parties of the Contract is a State, or a public body. With this
respect, for the applicability of the ICSID Arbitration, it
is essential to determine the scope of the term
The word "investment" is left undefined in the
Washington Convention intentionally in order to include the both
conventional methods of investment such as capital grants and the
modern methods of investment such as transfers of technology and
the service contracts.
Besides, the presence of foreign capital is a necessity for
applying to ICSID Arbitration. The companies that are considering
application should therefore make the necessary changes in their
shareholder structure accordingly. The bilateral investment
agreements of the State which is a Party to the dispute should also
be taken into account. Considering these, the support of a
competent attorney that is proficient with the legal and taxational
structure of this system is also advised.
For the companies that contain foreign capital/foreign investors
and that are in conflict with States or State-owned administrative
bodies, the ICSID Arbitration comes into view as a valuable dispute
resolution alternative in comparison to the conventional
litigation, thanks to the reasonably short duration of time in
which the award is given and the internationally acclaimed fair and
impartial exercise of the institution. When the increase in the
number of disputes of the companies with foreign capital with the
Republic of Turkey, and the portfolio of foreign investors in
Turkey is taken into account, it is apparent that ICSID Arbitration
is a preferable choice for the companies with foreign
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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