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    1996 ANNUAL REPORT International Centre for Settlement of Investment Disputes

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    Table of Contents Page Letter of Transmittal Introduction by the Secretary-General Membership Disputes before the Centre Panels of Conciliators and of Arbitrators Publications and Advisory Activities Conferences Twenty-Ninth Annual Meeting of the Administrative Council Finance

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    International Centre for Settlement of Investment Disputes September 6, 1996 Dear Mr. Chairman: Pursuant to Administrative and Financial Regulation 5(4),I hereby submit to the Administrative Council for its approval the Annual Report on the Operation of the International Centre for Settlement of Investment Disputes required by Article 6 ( l )(g) of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. This Annual Re- port covers the fiscal year July 1 , 1995 to June 30, 1996. The Report includes the audited financial statements of the Centre, presented pursuant to Administrative and Financial Regulation 19. Sincerely yours, Ibrahim EI. Shihata Secretary-General Mr. James D. Wolfensohn Chairman Administrative Council International Centre for Settlement of Investment Disputes

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    Introduction by the Secretary-General During fiscal year 1996, there was further These trends were reflected in the Centre's growth in ICSID 's membership. Three Arab caseload during 1996. The number of cases countries-Algeria, Bahrain and Oman- brought under the ICSID Convention has, in joined the Centre, bringing to 13 the number just five years, increased by one-third. About of Arab members of ICSID. The Bahamas, one-half of the new cases have been brought to Panama and St. Kitts & Nevis also became tlie Centre on the basis of provisions in invest- ICSID members during the year. They brought ment laws and treaties such as those men- to 20 the number of Western Hemisphere tioned above. Another interesting aspect of the members. In addition, Guatemala began the current caseload of the Centre is that it in- process of joining ICSID by signing the ICSID cludes the first ICSID arbitration proceedings Convention while Uzbekistan completed that involving Latin American countries. During the process by ratifying the Convention. Alto- year, one Latin American country also depos- gether, there were, at the close of the fiscal ited with the Centre a unilateral consent to year, 139 signatory States of the Convention submit to ICSID arbitration a series of expro- and 126 member countries of ICSID. priation claims. In addition, the Centre re- ceived several requests for me to act under Investment treaties continued to proliferate arbitration arrangements designating -the during the year. There are now over one thou- ICSID Secretary-General as the appointing sand treaties of this lund. Most of these treaties authority of ad hoc arbitrators. In one case, the provide for the settlement by ICSID arbitration request was followed by an amicable settle- of disputes arising out of investments covered ment of -the dispute, suggesting that under this by the treaties. Several recent investment laws type of arrangement, as under agreements contain similar references to ICSID arbitration. providing for recourse to ICSID's regular Some of the laws and treaties also provide for conciliation and arbitration facilities, the Cen- the possibility of submitting such disputes to tre can play a role in promoting amicable ad hoc arbitration under the Arbitration Rules settlements. of the United Nations Commission on Interna- tional Trade Law, with the ICSID Secretary- As in past years, tlie Centre also carried General as the designated appointing out research, publications and advisory work authority of arbitrators. During the year, the in the fields of arbitration and investment law. members of the Organisation for Economic The staff commenced a major study of contem- Co-operation and Development also continued porary approaches to the legal treatment of to work towards the conclusion, in 1997, of a foreign investment. Two issues of the ICSID Re- Multilateral Agreement on Investment which is view-Foreign Investment Law Journal were expected to contain dispute-settlement provi- published, including the twentieth issue of this sions referring to, among other mechanisms, now well-established and highly respected ICSID arbitration. periodical. Staff efforts in the collection of in- vestment laws and treaties were reflected in the publication of three new releases for the

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    Centre's multivolume Investment Laws of the World and Investment Treaties.Advisory work included advice to countries upon their re- quest on five draft investment laws and advice to governments and foreign investors on draft arbitration provisions of a dozen international investment contracts. Anotlier noteworthy ac- tivity was ICSID's participation in meetings of an Expert Group convened by the OECD to help develop the dispute-settlement provisions of the projected Multilateral Agreement on Investment In suni, 1996 was another fruitful year for the Centre in which it continued to play a sig- nificant role in legal matters relating to interna- tional investment. Ibrahim F.I. Shihata Secretary-General

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    Membership Disputes before the Centre In the past fiscal year, the Convention was During the year, there were ten cases be- signed by the Bahamas, Bahrain, Guatemala fore the Centre. Developments in these cases and Panama. Instruments of ratification were are summarized below. deposited by Algeria, the Bahamas, Bahrain, Oman, Panama, St. Kitts and Nevis, and ( 1) American Manufacfuring & Trading, Inc. v. Uzbekistan. As of June 30, 1996,there were 139 Republic of Zaire (Case ARBI931l) signatory States of the Convention; of these, 126 had also ratified the Convention. A com- November 24, 1995-The Tribunal plete list of Contracting States and Other Sig- meets in Geneva. natories of the Convention as of June 30, 1996 appears in Annex 1 (2) Phiiippe Gruslin v Government of Malaysia (Case ARBl9411) February 8, 1996-The parties inform the Sole Arbitrator that they have settled the dispute and request the Sole Arbitra- tor to issue an order taking note of the discontinuance of the proceeding under Arbitration Rule 43 (1). April 24, 1996-The Order of the Sole Arbitrator taking note of the discontinu- ance of the proceeding is notified to the parties. (3) SEDITEX Engineering Bera tungsgesell- schait fiir die Texfilindustrie m.b.H. v. Gov- ernment ofMadagascar (Case CONCl9411) August 22, 1995-SEDITEX files its observations on -the Republic of Madagascar's proposals. September 19, 1995-The Concilia- tion Commission meets with the parties in Paris.

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    December 2 1, 1995 and February 14, (6) Cable Television of Nevis, Ltd. and Cable 1996-The Conciliation Commission Television of Nevis Holdings, Ltd, v. Fed- meets in Brussels. eration of St.fitts and Nevis (CaseARBI9512) May 20, 1996-The Conciliation Com- November 14, 1995-The Secretary- mission meets with the parties in Paris. General registers a request for the institu- tion of arbitration proceedings. (4) Tradex Hellas S.A, v. Republic of Albania (Case ARBl9412) February 16, 1996-The Tribunal is constituted.Its members are: Mr.Woodbine January 3, 1996-The Tribunal is con- A. Davis (Barbadian), President, Mr. stituted. Its members are: Professor Karl- Arthur Maynard (Barbadian) and Mr. Rex Heinz Bockstiegel (German), President, McKay (Guyanese). Mr. Fred E Fielding (U.S.)and Professor Andrea Giardina (Italian) March 12, 1996-The Tribunal holds its first session with the parties in Barbados. April 10, 1996-The Tribunal holds its The Respondent files its Objections to first session with the parties in Frankfurt. Jurisdiction. April 19, 1996-The Respondent files April 2, 1996-The Claimants file their its Objections to Jurisdiction. Response to the Objections to Jurisdic- tion. June 10, 1996-The parties file their Observations on the Objections to Juris- April 23, 1996-The Respondent files diction. its Observations on the Claimants' Re- sponse to the Objections to Jurisdiction. (5) Leaf Tobacco A. Michaelides S.A. and GreekAlbanian Leaf Tobacco & Co. S.A.v. ( 7 ) Antoine Goetz and others v. Republic of Republic of Albania (Case ARBl9511) Burundi (Case ARBl9513) June 10, 1996-The Claimants inform December 18, 1995-The Secretary- .the Centre that they choose .the formula General registers a request for the institu- provided for in Article 31(2)(b) of the tion of arbitration proceedings. Convention for the Coiistitution of an Arbitral Tribunal, that is, one arbitrator June 26, 1996-The Tribunal is appointed by each party and a third, pre- constituted. Its members are: Professor siding, arbitrator appointed by agree- Prosper Weil (French),President, Judge ment of the parties. Mohammed Bedjaoui (Algerian) and Pro- fessor Jean-Denis Bredin (French).

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    Panels of Conciliators and of Arbitrators (8) Compariia del Desarrollo d e Santa Elena Pursuant to Article 3 of the Convention, the S.A. v. Government of Costa Rica (Case Centre maintains a Panel of Conciliators and a ARBI96Il) Panel .of Arbitrators. Each Contracting State may designate to each Panel up to four per- March 22, 1996-The Secretary- sons, and the Chairman of the Administrative General registers a request for the institu- Council may designate up to ten persons to tion of arbitration proceedings. each Panel. (9) Misima Mines Pty. Ltd. v. Independent In the course of the fiscal year, 23 designa- State ofPapua New Guinea (CaseARB19612) tions were made to the Panels. These are listed below. With these designations, the Panels April 29, 1996-The Secretary- comprise 379 names. General registers a request for the institu- tion of arbitration proceedings. CHAIRMAN'S LIST Panels of Conciliators and of Arbitra- ( 10) Fedax N.V /: Republic of Venezuela (Case tors-Designation effective as of March 22, ARBl9613) 1996:Professor Philippe Fouchard (Univer- sity of Paris). June 26, 1996-The Secretary- General registers a request for -theinstitu- BARBADOS tion of arbitration proceedings. Panels of Conciliators and of Arbitra- tors-Designations effective as of Febru- ary 27, 1996: Messrs. Woodbine A. Davis, Trevor Carmichael, Ken Hewitt (re- appointments) and Mr. Edward Bushell. CYPRUS Panels of Conciliators and of Arbitra- tors-Designations effective as of January 3, 1996: H.E.Ambassador Andreas Jacovides (re-appointment), Messrs. Alecos Markides, Georgios Pikis and Theofilos Theofilou. EGYPT Panel of Conciliators-Designations ef- fective as of April 23, 1996: Dr. Ahmed Sadek El Kosheri and Dr. Mahmoud Samir El-Sharkawy (re-appointments).

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    Publications and Advisory Activities Panel of Arbitrators-Designations ef- News from ICSID fective as of April 23, 1996: Mr. Mahmoud Fahmy and Dr. Ahmed Esmat Abdel This newsletter provides information on Meguid (re-appointments) . activities of the Centre and on disputes pend- ing before ICSID, as well as articles on topics Panels of Conciliators and of Arbitra- of current interest. During the fiscal year, two tors-Designations effective as of April 23, issues of News from ICSID were pub1ished:Vol. 1996:Dr. Mohie El Din Ali Ashmawi and Dr. 12, No. 2 (Summer 1995) and Vol. 13, No. 1 Moufid Sliehab. (Winter 1996). The Summer 1995 issue in- cluded articles on foreign direct investment INDONESIA and the Asia Pacific region and on multilateral Panels of Concilia tors and of Arbitra - approaches to the settlement of investment dis- tors-Designations effective as of October putes. The Winter 1996 issue included a paper 21, 1995: Mr. Mardjono Reksodiputro, Dr. on the rights and duties of ICSID arbitrators. Albert Hasibuan and Professor Sudargo Gautama. ICSID Review-Foreign MALAYSIA Investment Law Journal Panels of Conciliators and of Arbitra- tors-Designations effective as of Febru- Appearing twice yearly, the ICSID Review ary 14, 1996: Hon. Justice Dato' Faiza publislies materials on domestic and interna- bin Tamby Chik, Hon. Justice Ian tional law relating to foreign investments. The H.C. Chin and Hon. Justice Thiagrajah twentieth (Fall 1995) and twenty-first (Spring Selventhiranathan (re-appointment) 1996) issues of the Review were completed during the year. The Fall 1995 issue featured articles on the development of a new interna- tional agreement on foreign direct investment, on the lex mercatoria and on arbitration under investment laws and treaties. The Spring 1996 issue included articles on German bilateral investment treaties, on ex aequo et bono decision-making under the ICSID Convention and on the jurisdiction of ICSID.

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    Conferences Investment Laws of the The Centre co-sponsored three arbitration World conferences in fiscal year 1996. These in- cluded the twelfth joint ICSIDlAmerican Arbi- During the year, ICSID issued a new re- tration AssociationlInternational Chamber of lease (95-5) of its ten-volume collection of In- Commerce Court of Arbitration colloquium on vestment Laws of the World. This release international arbitration. This colloquium was contained the texts of the basic investment leg- held in Paris on November 17, 1995. At the islation of Chile, Costa Rica, Haiti, the Feder- colloquium, which was devoted to the topic of ated States of Micronesia and Peru, and the status of the arbitrator, the ICSID Secre- supplements related to such legislation of tariat presented a paper on the rights and du- Ecuador, Thailand and Tunisia. The collection ties of ICSID arbitrators. now contains the text of the basic investment laws of some 95 countries. ICSID also co-sponsored, with the Asian- African Legal Consultative Committee'sRegional Investment Treaties Centre for Commercial Arbitration in Cairo, a conference on the Settlement of Energy Petro- In the course of the year, two new releases leum and Gas Disputes. At the conference, (Releases 95-4 and 96-2) of the Centre's col- which was held in Cairo on November 16-1 7 , lection of Investment Treaties were published. 1995, the Secretariat made presentations on These releases contained the texts of 46 bilat- arbitrating disputes under oil and gas agree- eral investment treaties concluded by 31 coun- ments and on ICSID and the drafting of ICSID tries in the period 1993-1 995. The collection arbitration clauses. The third conference co- now contains some 600 bilateral investment sponsored by ICSID in the fiscal year was a treaties entered into by over 100 countries. Conference on Dispute Resolution in the Americas organized by the Inter-American Advisory Activities Commercial Arbitration Commission and the The Secretariat continued in 1996 to pro- Center for Conciliation and Arbitration of St. vide advice on arbitration and investment law, Mary's University School of Law in San Antonio, Such advisory activities included reviewing Texas. Held in San Antonio on September 20- and commenting on draft investment laws and 22, 1995, the Conference included a session draft arbitration provisions of investment con- on foreign investment arbitration at which the tracts, at the request of governments and for- ICSID Secretariat presented a paper on ICSID eign investors. During FY96, ICSID Secretariat and the Americas. staff provided such advice in respect of five draft investment laws and on the draft arbitra- During the year, the Centre also took part tion provisions of twelve investment contracts. in an Investment Symposium in Bangkok orga- nized by the Asia Pacific Economic Coopera- tion forum. The symposium took place on

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    Twenty-Ninth Annual Meeting of the Administrative Council October 2-3, 1995 and included a session at The Twenty-Ninth Annual Meeting of the which the ICSID Secretariat contributed a pa- Administrative Council took place on October p e r on multilateral approaches to the settle- 10-12, 1995, in Washington, D.C. on the occa- ment of investment disputes. sion of the Annual Meeting of the Board of Governors of the World Bank. At the meeting, the Council re-elected Mr. Ibrahim EI. Shihata to the post of Secretary- General for a full tern1 of six years. The Council also considered a report by .the Secretarjr- General on recent developments in ICSID and approved the Centre's 1995 Annual Report and its Budget for fiscal year 1996.The Resolutions adopted at the Meeting are set forth in Annex 2.

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    Finance - The Financial Statements of ICSID for fis- cal yeas 1996 are set forth in Annex 3 . The administrative expenditures of ICSID were, again, entirely covered by the World Bank pursuant to the Memorandum of Admin- istrative Arrangements concluded between the World Bank and ICSID in February 1967, and by income from the sale of publications. It was therefore, not necessary to assess any excess expenditures on Contracting States pursuant to Article 1'7 of the Convention. ICSID expenditures relating to pending ar- bitration proceedings are borne by the parties in accordance with ICSID's Administrative and Financial Regulations.

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    Annexes Page 14 1. List of Contracting States and Other Signatories of the Convention 11 2. Resolutions of the Administrative Council 18 3. Report and Financial Statements 22 4. Publications of ICSID

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    Annex 1

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    15 Deposit of Entry into Force State Signature Ratification of Convention Guinea-Bissau Sep. 4, Guyana Jay. 3, Aug. 10, 1969 Haiti Jan. 30, . Honduras May 28, Mar, 16,. 1989 Hungary „Oct. 1, Mar... 6, 1987 ; Iceland = . ca July 28, Oct. 4, 1966 “Indonesia a Feb. 18, Oct. 28, 1968 ( : May. 7,“ 1981 “July 22; 1983 Apr. 28, 1971 Oet, 1966 „Sep. - 1967.

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    Entry into Force of Convention ; St. Kittsand Sep. 3, 1995 Jay. 4, 1984 May 9, 1973 +, July: 14, 1971 Jan. :28,..

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    Annex 2 Resolutions of the Administrative Council The following resolutions were adopted by AC(29)/RES/82-Adoption of Budget for the Administrative Council at its Twenty-Ninth F i s c a l Year 1996 Annual Meeting on October 10-12, 1995: The Administrative Council RESOLVES To adopt, for the period July 1, 1995 to AC(29)/RES/81-Approval o f t h e Annual Report June 30, 1996, the budget set forth in para- The Administrative Council graph 2 of Document ACl9512. RESOLVES To approve the 1995 Annual Report on AC(29)/RES/83-Election of the Secretary- the Operation of the Centre as set forth in General the attachment to Document AC/95/3. The Administrative Council RESOLVES (a) that Mr. Ibrahim E I . Shihata b e re- elected to the post of Secretary-General for a full term of six years, that is, until the close of the 2001 Annual Meeting of the Administrative Council of the Centre; (b) that lie b e permitted to continue his employment by the World Bank Group; and (c) that while so employed he receive no remuneration from the Centre.

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    18 Annex 3 Report andFinancialStatements

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    Annex 3 (continued)

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    Annex 3 (continued) These expenditures represent only the amounts identified by the Bank as being directly re- lated to tlie Centre. The Centre does not have resources of its own. The Centre's expenses which are attributable to arbitration proceedings are borne by the parties in accordance with the Centre's Administra- tive and Financial Regulations. In accordance with these Regulations, the Secretary-General calls on the parties to make advance deposits wi-th the Centre from time to time to defray these ex- penses. If, after the completion of an arbitration proceeding, it is determined that there is a cash surplus, such surplus shall b e refunded to the parties in proportion to the amounts advanced to the Centre.

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    Annex 3 (continued) Report of Independent Accountants 130 1 K Street, N . W Washington, D.C. 20005 July 26, 1996 To International Centre for Settlement of Investment Disputes In our opinion, the accompanying statement of net assets for ICSID proceedings and the related statement of changes in cash and investments for ICSID proceedings present fairly, in all material respects, the financial position of the International Centre for Settlement of Investment Disputes at June 30, 1996 and June 30, 1995, and changes in its cash and investments for the years ended June 30, 1996 and June 30, 1995, in conformity with generally accepted accounting principles in the United States and with International Accounting Standards, and in accordance with the Adminis- trative Arrangements between the International Bank for Reconstruction and Development (the Bank) and .the International Centre for Settlement of Investment Disputes (the Centre).These finan- cial statements are the responsibility of the Bank's and the Centre's management; our responsibil- ity is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards, including International Standards on Auditing, which require that we plan and perform the audit to obtain reasonable assurance about whether .the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. dI- Price Waterhouse (International Firm) Washington, D. C.

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    Annex 4 Publications of ICSID (Publications available from the Centre free of charge unless otherwise indicated) Convention on the Settlement of Investment Disputes between States and Nationals of Other States, and Accompanying Report of the Executive Directors of the International Bank for Reconstruction and Developn~ent,Doc. ICSID12 (English, French and Spanish) List of Contracting States and Other Signatories of the Convention, Doc. ICSIDl3 (periodic up- dates) (English, French and Spanish) ICSID Regulations and Rules, Doc. ICSID/4/Rev. 1 (May 1915) (contains the texts of the Centre's Regulations and Rules in effect from January 1, 1968 to September 26, 1984) (English, French and Spanish) ICSID Model Clauses, Doc. ICSID/S/Rev. 2 (February 1, 1993) (English, French, and Spanish) Contracting States and Measures Taken by Them for the Purpose of the Convention, Doc. ICSIDl8 (periodic updates) (English, French and Spanish) Members of the Panels of Conciliators and of Arbitrators, Doc. ICSIDIlO (periodic updates) (English) ICSID Additional Facility for the Administration of Conciliation, Arbitration and Fact-Finding Pro- ceedings, Doc. ICSID111 (June 1979) (English, French and Spanish) ICSID Bibliography Doc. ICSIDI13IRev. 3 (July 15, 1994) (English) ICSID Basic Documents, Doc. ICSIDl15 (January 1985) (contains the texts of the Centre's Regula- tions and Rules in effect from September 26, 1984 and the text of the ICSID Convention) (English, French and Spanish) ICSID Cases, Doc. ICSID/lG/Rev. 4 (July 3 1, 1995) (English) ICSID Annual Report (19 61- ) (English, French and Spanish) News from ICSID (semi-annual) (English) Towards A Greater Depoliticization of Investment Disputes: The Roles of ICSID and MIGA by Ibrahim EI. Shihata (January 1992) (English and Spanish)

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    Annex 4 (continued) Documents Concerning the Origin and Formulation of the Convention on the Settlement of Invest- ment Disputes between States and Nationals of Other States (1967) (English,French and Spanish) (available from the Centre at US$40) Investment Laws of tlie World (ten looseleaf volumes) and Investment Treaties (six looseleaf vol- umes) (available from Oceana Publications, Inc., 75 Main Street, Dobbs Ferry, N.Y. 10522, U.S.A. at US$] ,500 for both sets of volumes, US$950 for the ten Investments Laws of the World volumes only and US$595 for the six Investment Treaties volumes only) ICSID Review-Foreign Investment Law Journal (semi-annual) (available on a subscription basis. at US$50 per year for those with a mailing address in an OECD country and US$25 for others, plus postal charges, from Journals Publishing Division, The Johns Hopkins University Press, 27 15 North Charles Street, Baltimore, Maryland 2 12 18-4319, U.S.A.) Bilateral Investment Treaties by Rudolf Dolzer and Margrete Stevens (Martinus Nijhoff Publishers, 1995) (US$124).

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    ICSID 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. Telephone: (202) 477-1234 Fax: (202) 522-2615

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