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Understanding the Direction of Investor-State Dispute Settlement in 2020: By the Numbers

The World Bank’s International Centre for Settlement of Investment Disputes (ICSID), the leading arbitration venue for investor-State arbitration, has released its FY2020 caseload statistics.

This information indicates that, despite a year-to-year dip in cases, the use of investor-State arbitration generally remains strong and available for both investors and States to resolve their disputes.

What are the trends for dispute settlement?

Over the past ten years, the number of ICSID cases administered by the Secretariat has significantly increased. This broader trend shows generally increasing utilization rates, but the increases have not been uniform. For instance, the ICSID press release notes that “ICSID administered 303 cases under the ICSID Convention and Additional Facility Rules in FY 2020, marking the second highest number of cases administered in a single year.” This is a significant caseload that shows continued interest in the dispute settlement process, though it falls slightly short of the high watermark set in FY2019 when ICSID administered 306 cases.

In addition to the number of cases administered, the report also provides information regarding the distribution of cases registered in FY2020. For instance, based on geographic distribution, 65% of cases registered in FY2020 involved a State Party from Europe, Central Asia, or South America, with South America comprising nearly one-third of all cases. Including North America and Central America raises the percentage of cases registered to 77%. In comparison, during FY2019, only 56% of new cases involved Europe, Central Asia, or South America, with South America accounting for one quarter of all cases. Even including North America and Central America, the total was only 66%. Thus, the geographic distribution of newly registered cases has become more concentrated among these regions, and especially South America, from FY2019 to FY2020.

Although FY2020 brought increased concentration in the distribution of new cases by geographic region, this does not mean that Parties availing themselves of investor-state dispute settlement will face a lack of diversity among the arbitrators, conciliators, or ad hoc committee members appointed to their case. In fact, the data shows increasing diversity of appointments under the ICSID dispute settlement system. In FY2020, 44 nationalities were represented, which marks the greatest diversity for any single year since ICSID’s creation.

The FY2020 report also provides information on the distribution of new cases according to nine economic sectors. In FY2020, the three largest economic sectors involved in new ICSID cases accounted for 67% of cases. Respectively, these sectors were oil, gas & mining (30%), electric power & other energy (20%), and construction (17%). In comparison, for FY2019, these same economic sectors accounted for the largest share of new cases, but only made up 57% of new cases. Interestingly, this concentration has been increasing since FY2018, when the three largest sectors only made up 50% of total new cases. Accordingly, the economic sector distribution data shows an increasing concentration of cases arising out of these sectors from FY2018 to FY2020. By contrast, the finance sector has declined in terms of new cases from 12% in 2018 to 7% in 2020.

Key Takeaway

The 2020 data published by ICSID’s report indicates a significant continued use of ICSID to resolve investor-State disputes, in spite of the fact that the number of cases has decreased slightly from FY2019 to FY2020. It remains to be seen in the coming years whether the pace continues in the face of developments in the field, including significant changes to the availability of investor-state arbitration under the United States-Mexico-Canada Agreement (USMCA) (as compared to the NAFTA), and the issues surrounding intra-EU BITs. The continued use of the system globally, and in particular in South America and Africa, will more than likely offset any possible downturn in Europe or between the United States, Mexico, and Canada over time. 

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