Publications:

 
 

Agreed Settlement v. Unfavourable Award in Investment Arbitration*

Sergey A. Voitovich

Partner, Law and Patent firm Grischenko & Partners, Kiev, Ukraine, Candidate of Legal

Science (Kiev University), PhD (EUI, Florence); counsel  to Ukraine in six ICSID arbitrations

and several non-ICSID investment arbitrations

SVoitovich@gp.ua

 

Abstract

Settlement of a dispute by an agreement is something that in many cases remains behind the curtain. It is axiomatic that if a party has weak chances to obtain a favourable award, it needs to think of a settlement. Settlement may occur at three major phases of dispute evolution as pre-arbitration, pre-award, and post-award settlement. About 30-40 per cent of the concluded ICSID cases have been discontinued by means of an agreed settlement. Only in rare cases the terms of such discontinuance become known to public. The advantages of settlement are: predictability of the outcome, confidentiality, non-admission of liability, saving costs, finality of settlement, possibility of continued cooperation of the parties. The major concerns about settlement are: amount of compensation, disclosure of confidential terms of a failed settlement, responsibility for payment of the settled amount without an award.

Keywords

agreed settlement; investment arbitration; pre-arbitration settlement; pre-award settlement; post-award settlement; “waiting/cooling off” period; pre-hearing conference; settlement agreement; advantages of settlement; concerns about settlement; settlement-facilitating role of arbitrators

Settlement of a dispute by an agreement is something that in many cases remains behind the curtain. Although, reaching an agreed settlement is a process parallel to arbitration as such, settlement is an issue of a general interest for the arbitration specialists.

It is axiomatic that if a party has weak chances to obtain a favourable award, it needs to think of a settlement. It is also hardly disputable that a settlement agreement may be the most safe and efficient mode of a dispute resolution.

Settlement may occur at three major phases of dispute evolution as pre-arbitration, pre-award, and post-award settlement.

In certain cases to achieve a settlement is extremely complicated, and if this process succeeds, a party may feel happy about this not less, than when it wins a case.

1. Pre-Arbitration Settlement

Most treaties on investment protection contain provisions on the so-called “waiting” or “cooling off” periods normally lasting from three to six (or even more) months, during which a dispute potentially could be resolved by virtue of negotiations. Cost considerations suggest that settlement is preferable at an early stage of a dispute evolution. It is difficult to say how many investment disputes were really settled within “waiting” periods, which apparently are often used for “waiting” rather than for negotiation and settlement[1]. At the same time, the express language of certain treaties obliges the parties to at least make reasonable efforts that a dispute be settled amicably within the “waiting” period[2]. A manifest failure of a party to the dispute to comply with such treaty requirement of seeking an amicable settlement may give rise to a separate complaint by the opponent party.

The parties may seek a resolution of a dispute through consultation, negotiation or mediation long before the “waiting” period starts under an investment protection treaty. It is interesting to note that a conciliation body called the Chamber of Independent Experts on Foreign Investment at the President of Ukraine[3] had considered at least, a part of one investment dispute, Generation Ukraine v. Ukraine, at the pre-arbitration phase, which entire dis­pute subsequently was resolved at the ICSID arbitration[4]. In this case the US investor generally followed the requirement of Article VI(2) of the US-Ukraine BIT to initially seek an amicable settlement of an investment dispute. The Chamber’s panel dealt with a limited aspect of the entire claimant’s Parkview project, which was in dispute, in a way quite favourable for the claimant. However, the Chamber’s findings were not taken by claimant as a satisfactory settlement[5], and it filed a more expanded claim to the ICSID.

 2. Agreed Settlement in ICSID

At the web-site of the ICSID one can see how many cases (about 30-40 per cent of the concluded ICSID cases) have been discontinued by means of an agreed settlement. For example, the first ICSID claim against Germany for 1,6 billion Euro, filed by the Swedish company Vattenfall in 2009 (ICSID case No. ARB/09/6), was rather promptly settled in 2011[6]. Only in rare cases the terms of such discontinuance become known to public. The ICSID website reports of 4 published settlement agreements and 5 published orders of discontinuance[7].

Rule 21(2) of the ICSID Arbitration Rules provides that at the request of the parties, a pre-hearing conference between the tribunal and the parties duly represented by their authorized representatives may be held “with a view to reaching an amicable settlement”[8]. The rules of the other major international arbitral institutions are generally silent on such issue.

In principle, a pre-hearing conference may serve a facilitating role for the purpose of reaching a settlement. Such conference is capable of allowing the parties to conduct settlement discussions in the presence of the tribunal. At least in one case with participation of Ukraine, a pre-hearing conference with the view to reach an amicable settlement of a dispute was provided by the agreement of the parties in the minutes of the first session of the tribunal, but actually never used in that arbitration. It seems that a pre-hearing conference may be helpful for the parties to start settlement negotiations before the hearing or, what is less likely, to inform the tribunal on the status of such negotiations. It is hardly practical for the parties to burden the tribunal with the participation in the settlement discussions as such.

A settlement agreement may result from a decision of the tribunal, as shown in Antoine Goetz v. Republic of Burundi, ICSID case ARB/95/3. The tribunal in its Decision on Liability of 2 September 1998 offered an option to the respondent State: either give the effective and adequate indemnity to the claimant, meaning “the market value of the investment concerned the day before the measure was taken”, or, alternatively, to terminate the ministerial order on revocation of the free zone certificate to the claimant. The choice should have been done by the respondent state within four months[9]. The outcome of such tribunal’s decision was a settlement agreement of the parties, which was recorded in the award[10].

In Impregilo S.p.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/3, a settlement agreement, as such, was not published, but certain terms of this settlement may be inferred from the Order of the discontinuance issued by the tribunal at the request of the claimant[11].

In several cases orders of discontinuance were issued by the ad hoc commit­tees in the annulment proceedings. In Joy Mining Machinery Limited v. Arab Republic of Egypt, ICSID Case No. ARB/03/11, the ad hoc committee took note of the amicable settlement of the dispute reached by the parties and of the discontinuance of the proceeding in accordance with Arbitration Rule 43(1)[12]. In ATA Construction, Industrial and Trading Company v. Hashemite Kingdom of Jordan, ICSID Case No. ARB/08/2, the ad hoc committee issued an order taking note of the discontinuance of the proceeding pursuant to ICSID Arbitration Rule 44 on July 11, 2011 in the course of the annulment proceeding, where the applicant withdrew its annulment application “as moot”[13].

3. Agreed Settlement in the Investment Disputes with Participation of Ukraine

The issue of settlement had emerged this or that way in most of the investment disputes in which our law firm represented Ukraine as counsel. And only two of these cases were really resolved by a settlement: the first case Joseph Lemire v. Ukraine, ARB(AF)/98/1 under the ICSID Additional Facility (1998-2000) and Western NIS Enterprise Fund v. Ukraine, ARB/04/2 in the ICSID (2004-2006). Both cases were settled after a substantial part of the proceedings on jurisdictional objections was over.

In the first Lemire case the Settlement Agreement of 2000 was recorded upon the parties’ request into the final award and published[14], and several years later this Settlement Agreement was discussed in the second Joseph Lemire v. Ukraine case, ARB/06/18 in 2006-2011. The award in this case was not favourable to Ukraine and is now subject to the annulment proceeding. But the tribunal unanimously found that the Settlement Agreement of 2000 was not breached by Ukraine[15]. This Settlement Agreement turned to be quite successful for the respondent State. First, it did not provide for any monetary com­pensation in the US$15 million claim. Second, it established a number of soft obligations for the respondent, like, for example, the best efforts obligation in clause 13(b) of the Settlement Agreement, which in the tribunal’s opinion, was not breached by the respondent[16]. It can be concluded that despite the second claim filed by the same claimant to the ICSID, the Settlement Agreement of 2000 has met the respondent’s expectations as to the effectiveness and finality of the agreed settlement in this case.

Western NIS Enterprise Fund case was discontinued by the tribunal’s order in 2006 at the joint request of the parties to the ICSID tribunal. The joint application and the agreement signed by the parties were not published. Since neither party subsequently raised any issue with this agreed settlement, it may be deemed efficient for the parties.

4. Advantages of Settlement

Predictability of the outcome. An agreed settlement is preferable in terms of predictability of the outcome. The parties lack such predictability before the award is rendered at least with respect to the amount of compensation. By entering into a settlement agreement the parties in dispute keep control over the case and reach their own solution. Such parties’ control over the dispute is substantially lost, when a solution is imposed by arbitrators.

Confidentiality. One of the evident advantages for a potentially losing party is confidentiality. This is especially sensitive in investment arbitration where most awards become public.

Non-admission of liability. A settlement agreement in itself does not constitute an acknowledgement or admission of liability in any way. Typically, the parties provide this expressly[17]. If not, there is every reason to suggest that “non-admission of liability” is implied unless otherwise stated by the parties. Non-admission of liability is an essential benefit for a potentially losing party to a dispute.

Saving costs. Saving costs of the arbitration is the other major advantage for the parties, especially, if discontinuance takes place at an early stage. For example, in the first Lemire case and in the Western NIS Enterprise case, which were settled and discontinued at relatively early stages, the respondent’s budgets were substantially lower compared to the Generation Ukraine or Tokios Tokelйs cases, which lasted for several years and were successful for Ukraine.

Finality of an agreed settlement. The purpose of a respondent party is to achieve a final settlement of the dispute to the extent possible in the terms of a settlement agreement. A typical language would be that “the parties withdraw all the existing claims and shall refrain from filing against each other any new claims on the same subject”[18]. A res judicata effect of the provisions on finality of an agreed settlement may be disputed in subsequent proceedings[19].

Settlement and continued cooperation of the parties. Some commentators observe that settlement is preferable, compared to an award, for a continued cooperation of the parties[20]. It is difficult to disagree to this as a general matter, although, in some cases, even an agreed settlement does not make possible for the parties to continue their interrupted cooperation.

5. Concerns about Settlement

Amount of compensation. This is a typical guess what would be more beneficial, an agreed settlement amount or an amount of award. A definite answer to this question can be obtained only if the settlement efforts fail, and the amount of awarded compensation becomes known to the parties[21]. It is unlikely that the parties ever learn about the intended amount of award if settlement is successful. At the same time, a losing party in investment dispute must realize that a confidential settlement agreement, at least to some extent, saves it of a reputational harm which it may have in case of the award, which becomes known to public. A losing party must decide what price it can afford to pay for avoiding this kind of reputational damage.

A legal counsel may face a conceptual difficulty of giving a professional advice to a client with respect to an amount in the settlement negotiations if it is likely that the amount of an award may be substantially more beneficial to the client. It is commercially not easy to advise what price should be paid for settlement if this is just a matter of bargaining. Also, it is questionable whether an advice on such a price would stay within the professional knowledge of a legal counsel if there is no precise legal and/or financial basis for reliable calculations. What is the value of an advice which is not based on specific professional knowledge, but constitutes a speculation? Should a party itself evaluate its interest and possibilities in such a situation? Precise answers to these questions appear to be uneasy.

Disclosure of confidential terms of a failed settlement. Parties may be concerned about a possibility of disclosure of the terms of failed settlement to the tribunal. Would such information affect the award? Needless to say that the members of the tribunal shall disregard any confidential information on the failed settlement provided to them improperly, in breach of the requirement of due process. The other thing is whether such information may have a de facto impact on the views of the arbitrators. This can hardly be completely excluded.

Responsibility for payment of the settled amount without an award. It is especially sensitive to a state party and its decision-making people to have a clear basis for settlement, particularly for payment of compensation without an award. More realistically, a settlement agreement with a state party may be achieved if its terms do not include a monetary compensation. However, a mere non-monetary obligation (e.g. to cancel a wrong regulatory decision) may be insufficient for a claimant.

6. No International Effect of a Settlement Obtained under Coercion

A settlement agreement has no international effect if obtained by duress. Such finding was made by the tribunal in Desert Line Projects LLC v. Republic of Yemen, ICSID Case No. ARB/05/17. The settlement agreement, reached before the ICSID was seized, was the most acute controversy of this case. Respondent asserted that the settlement agreement was a final settlement in discharge of all claims between the parties. The claimant took the position that the settlement agreement was obtained by duress, and as such was null and void and/or rescinded, and therefore not entitled to international recognition. The tribunal made a number of interesting general observations[22], and found “that the Settlement Agreement was imposed onto the Claimant under physical and financial duress. It [was] not the result of a fair and sincere negotiation among the Parties”[23]. Further, the tribunal concluded that the settlement agreement was entered into by the claimant under financial and physical duress and that the conclusion of the settlement agreement contravened the respondent's obligations under the BIT. Therefore, the tribunal declared that the settlement agreement was “not entitled to international effect”[24]. Generally, this finding of the tribunal is hardly subject to any doubt.

7. Post-Award Settlement

As a matter of principle an agreed settlement is possible even after an award[25]. No doubt, the parties are free to further pursue the possibility of reaching an agreement after the award is rendered. Rule 43 of the ICSID Arbitration Rules specifically addresses settlement “before the award is rendered”[26]. However, ICSID cases have been discontinued during proceedings for revision, supplementation or rectification, and even annulment[27].

What sense of a post-award settlement might be? Future cooperation between the parties, or a perspective of annulment of an award, or even negotiating a discount for prompt payment potentially may be viewed as reasons for post-award settlement. However, certain advantages of pre-award settlement (e.g. non-admission of liability) are likely to be lost in post-award settlement.

8. Should Arbitrators Facilitate Settlement?

It is generally known that the views of arbitrators on this issue are not uniform. In some cases from our firm’s practice, the arbitrators proposed that the parties should consider a possibility of settlement. This was done without record in the presence of both parties, in the situations where the arbitrators realized the complexity of the case. On the contrary, in one case, the president of the tribunal clearly avoided any discussions on settlement and repeatedly stated that settlement was the issue for the parties, and not for the tribunal to deal with.

Whether or not this is permissible for the arbitrators (who are not mediators or conciliators) to facilitate settlement efforts of the parties may be disputable among the arbitration practitioners[28]. At the same time, the provisions on a settlement-facilitating role of arbitrators can be found in some arbitration rules. A pre-hearing conference provided under Rule 21(2) of the ICSID Arbitration Rules clearly presupposes a possibility of participation of the tribunal in the settlement talks of the parties.

Further, the 2012 ICC Arbitration Rules note the following examples of case management techniques that can be used by the arbitral tribunal and the parties: “(i) informing the parties that they are free to settle all or part of the dispute either by negotiation or through any form of amicable dispute resolution methods such as, for example, mediation under the ICC ADR Rules; (ii) where agreed between the parties and the arbitral tribunal, the arbitral tribunal may take steps to facilitate settlement of the dispute, provided that every effort is made to endure that any subsequent award is enforceable at law”[29].

Finally, the IBA Rules of Ethics for International Arbitrators establish that at the request or with the consent of the parties, an arbitral tribunal “may make proposals for settlement to both parties simultaneously, and preferably in the presence of each other” (Article 8).

Sometimes, a real compromise can be seen in the award. An example is Alpha Projektholding v. Ukraine ICSID case, ARB/07/16. The tribunal realized that the parties were unwilling or unable to reach a settlement in this case. At the same time, the tribunal understood that the contracts on joint activity were obviously unbalanced in favour of the claimant, and this was done manifestly contrary to the Civil Code of Ukraine. The tribunal took a decision to invalidate the contractual provision, which obliged the Ukrainian counterparty to make the fixed monthly payments to the claimant regardless of whether the joint activity had profits or losses[30]. In my view, this decision of the tribunal on invalidation of the contractual provision based on the domestic law of the host State, which per se is quite rare for arbitral tribunals, had an effect of the compromise, which the parties turned unable to reach without the tribunal.

The author’s personal sympathy is with those arbitrators, who do not refrain from the attempts to assist the parties in settlement of a pending dispute, especially if the case is not “black-and-white” and finding otherwise a fair and legally correct decision is difficult[31]. Arbitrators may do this in compliance with their professional duties without turning into mediators or conciliators. At a minimum, a tribunal may suggest settlement discussions to the parties without participating in such discussions. This suggestion of a tribunal may be helpful, for example, for a state party to better realize its perspectives in the dispute and take sometimes a difficult decision towards a fair and balanced solution. At the same time, such informal proposal of the tribunal to the parties may hardly affect the integrity of the arbitration process, and/or independence and impartiality of arbitrators.

 


* This article is based on the author’s presentation at the conference Kiev Arbitration Days 2011.

[1] See e.g. Investor-State Arbitration, Christopher F. Dugan, Don Wallace, Noah Rubins, Borzu Sabahi, Oxford University Press, 2008, p. 118.

[2] E.g. Article 26(1) of the Energy Charter Treaty reads: “Disputes between a Contracting Party and an Investor of another Contracting Party relating to an Investment of the latter in the Area of the former, which concern an alleged breach of an obligation of the former under Part III shall, if possible, be settled amicably”. In turn, Article 26(2) of the Energy Charter Treaty pro­vides for a three month period for such amicable settlement prior to recourse to arbitration. The tribunal in AMTO v. Ukraine case (SCC Arbitration No. 080/2005) found that a State party that considers the amicable settlement requirements of Article 26(2) of the Energy Charter Treaty have not been complied with by an investor, “has an obligation, as a matter of procedural good faith, to raise its objections immediately” (Final Award of March 26, 2008, §53)

[3] The Chamber established by the President of Ukraine of independent lawyers from various jurisdictions for settlement of investment disputes had operated in 1997-2001. On the attempts to re-establish a consulting body to the Government of Ukraine on resolving controversies see: Anton Skuratovskyy. Foreign Investors, Executive Bodies, and the Resurrected Ukrainian Commission. – In: Mealey’s International Arbitration Report, July 2008, Vol. 23, No.7, pp. 1-3.

[4] See Award of 16 September 2003 in ICSID case ARB/00/9, paras. 14.4-14.5; 18.32-18.33.

[5] The claimant treated the Conclusions and Recommendations of the Chamber dated October 31, 1999 in a dual way. On the one hand, the claimant made repeated references to those conclusions which were favourable to him (e.g. the Chamber’s confirmation of the investments made) and, on the other hand, criticised the Chamber’s decision as, a whole, in order to show that any hope of a mediated settlement in Ukraine was unrealistic (see e.g. Award of 16 September 2003 in ICSID case ARB/00/9, para. 18.33).

[6] The ICSID web-site reports of the award embodying the parties’ settlement agreement in this case.

[7] Published settlement agreements in the ICSID cases: Antoine Goetz v. Republic of Burundi, ICSID case ARB/95/3; Joseph C. Lemire v. Ukraine, ICSID case No. ARB (AF)/98/1; IBM World Trade corp. v. Republic of Ecuador, ICSID case ARB/02/10; Trans-Global Petroleum Inc. v. Hashemite Kingdom of Jordan, ICSID case ARB/07/25. Published orders of discontinuance of pro­ceeding in the ICSID cases: Impregilo S.p.A. v. Islamic Republic of Pakistan, ICSID case ARB/02/2; Impregilo S.p.A. v. Islamic Republic of Pakistan, ICSID case ARB/03/3; Joy Mining Machinery Limited v. Arab Republic of Egypt, ICSID Case No. ARB/03/11; Rail World LLC and others v. Republic of Estonia, ICSID case ARB/06/6; ATA Construction, industrial and Trading Company v. Hashemite Kingdom of Jordan, ICSID case ARB/08/2.

[8] Ch. Schreuer notes that a provision on a pre-hearing conference was introduced into the Arbitration Rules in 1984 in part “in order to promote the likelihood of agreement between the parties” (see Ch. Schreuer with Loretta Malintoppi, August Reinisch and Anthony Sinclair, The ICSID Convention: A Commentary, second edition, Cambridge University Press, 2009, p. 827).

[9] ICSID Reports 6, p. 45

[10] See the text of the Agreement on Settlement of 23 December 1998, including a special convention in: ICSID Reports 6, pp. 46-50. Pursuant to this Agreement, the respondent State undertook to reimburse about US$3 million plus commercial interest of 8% per year to the claimant.

[11] Pursuant to the Order of the discontinuance, the claimant agreed to “withdraw, discontinue and terminate all claims and disputes against the Respondent before ICSID”, provided that a payment of US$ 98 million was received by claimant and that respondent did not object to the discontinuance of the proceeding under ICSID Arbitration Rule 44. Further, the claimant con­firmed that the respondent had made the payment under the parties’ Settlement Agreement.

[12] See the Order of the Annulment Committee Pursuant to ICSID Arbitration Rule 43(1) dated 16 December 2005.

[13] See the ICSID website of the concluded cases. In this case the ad hoc Committee states that “[d]iscontinuance of ICSID arbitration proceedings is governed by Rules 43 and 45 of ICSID Arbitration Rules, which are applicable mutatis mutandis to annulment proceedings and deci­sions of ad hoc Committees by virtue of Rule 53” (Order taking note of the discontinuance of the proceeding, para. 36).

[14] Pursuant to Rule 50(2) of the ICSID Arbitration (Additional Facility) Rules of 1979. See ICSID Reports, Cambridge University Press, 2004, Vol. 6, pp. 59-66.

[15] Decision on Jurisdiction and Liability in ICSID case No. ARB/06/18, para. 513(2).

[16] Decision on Jurisdiction and Liability in ICSID case No. ARB/06/18, para. 159. In para. 193 of this Decision the tribunal found that “it is unfortunate for Claimant that he only bargained for such a weak commitment from the counterparty. But the terms agreed are lex contractus, and it is those terms which the Tribunal must apply”.

[17] See e.g. the “Settlement Agreement and Release”, Article 6, in Trans-Global Petroleum, Inc. v. Hashemite Kingdom of Jordan (ICSID Case No. ARB/07/25) recorded in the form of an award (see the ICSID website of the concluded cases).

[18] See e.g. Clauses 10 and 11 of the Settlement Agreement in the first Joseph Lemire case (ICSID Reports, Cambridge University Press, 2004, Vol. 6, p. 63). See also the “Settlement Agreement and Release”, Clause 1 “Withdrawal of Claims” and Clause 2 “Release of Further Claims”, in Trans-Global Petroleum, Inc. v. Hashemite Kingdom of Jordan (ICSID Case No. ARB/07/25) recorded in the form of an award (see the ICSID website of the concluded cases).

[19] In the second case Joseph Lemire v. Ukraine, ARB/06/18 arbitrator Jurgen Voss referred to res judicata in the 2000 Settlement Agreement (clauses 10, 11, 12 and 27) as one of the grounds to for his dissenting opinion: “The Tribunal thus exceeds its powers if it disregards the (negative) res judicata effect of the Settlement Agreement on a matter covered by it” (Dissenting Opinion of Arbitrator Dr. Jurgen Voss in ICSID case No. ARB/06/18, para. 35, also paras. 31, 37, 58).

[20] Ch. Schreuer with Loretta Malintoppi, August Reinisch and Anthony Sinclair, The ICSID Convention: A Commentary, second edition, Cambridge University Press, p. 827; M. Sornarajah, The International Law on Foreign Investment. Third Edition, Cambridge University Press, 2010, p. 320.

[21] At least in one case from our firm’s practice, the amount of the award was substantially lower than the amounts debated by the parties in the course of failed settlement talks.

[22] Award: “151. The first general observation is that the fact that a party is objectively under financial pressure does not necessarily mean that any agreement reached with such a party is vulnerable to invalidation for duress. Such a notion might in fact compound the vulnerability of such a party by making it difficult if not impossible for it to make reliable commercial arrangements. A contractual excuse of duress requires some element of abuse by the other contracting party. The commentary to the well-known Harvard Draft of 1961, L. SOHN & R. BAXTER, CONVENTION ON THE INTERNATIONAL RESPONSIBILITY OF STATES FOR INJURIES TO ALIENS, p. 191, contains a passage which well describes the assessment the pre­sent Arbitral Tribunal must make: “Since economic duress of a sort may be present in virtually any settlement, it must rest with judicial decision to draw the line between, on the one hand, economic compulsion exercised by the respondent State over the claimant in order to force him to settle, and on the other hand, the normal operation of economic forces.” (Emphasis added.) 152. The second general observation is that a party may fail to make payments expected by another party without necessarily exposing itself to a claim of duress. Settlement agreements are routinely concluded by parties who believe that their cocontractant owes them more, but nevertheless accept a lesser amount because they wish, or indeed acutely need, to receive quicker payment. If all such agreements were voidable for duress, commercial relations would be chaotic”.

[23] Award,  para. 186.

[24] Award,  para. 194.

[25] Ch. Schreuer notes that “settlement is also possible after an award has been rendered” and refers to CMS v. Argentina, Award, 12 May 2005, para. 407, “contemplating a settlement on a form of restitution”, which, however, was not implemented by the parties (Ch. Schreuer with Loretta Malintoppi, August Reinisch and Anthony Sinclair, op. cit., p. 829, fn. 89).

[26] “Rule 43. Settlement and Discontinuance. (1). If, before the award is rendered, the parties agree on a settlement of the dispute or otherwise to discontinue the proceeding, the Tribunal, or the Secretary-General if the Tribunal has not yet been constituted, shall, at their written request, in order take note of the discontinuance of the proceeding. (2) If the parties file with the Secretary-General the full and signed text of their settlement and in writing request the Tribunal to embody such settlement in a n award, the Tribunal may record the settlement in the form of its award”. Similar provisions can be found in Article 32 of 2012 ICC Arbitration Rules, Article 36 of the 2010 UNCITRAL Arbitration Rules, Article 39 of the 2010 SCC Institute Arbitration Rules.

[27] Ch. Schreuer with Loretta Malintoppi, August Reinisch and Anthony Sinclair, op. cit., p. 829.

[28] See e.g. David W. Plant. ADR and Arbitration. – In: The Leading Arbitrators’ Guide to International Arbitration. Edited by Lawrence W. Newman, Richard D. Hill, Juirs Publishing, Inc., 2004, pp. 250-252. “The tribunal must encourage settlement. To quote an old English proverb, ‘A lean compromise is better than a fat lawsuit’” (David E. Wagoner. Managing International Arbitration: A Shared Responsibility of the Parties, the Tribunal, and the Arbitral Institution” – In: Handbook on International Arbitration & ADR. Thomas E. Carbonneau, Executive Editor, JurisNet, 2006, p. 76).

[29] ICC Arbitration Rules of 2012, Appendix IV, para (h).

[30] Alpha Projektholding v. Ukraine ICSID case, ARB/07/16, Award of November 8, 2010, paras. 457, 462.

[31] The observations of a distinguished US commercial arbitrator are of interest in this respect: “If a large number of international arbitrations settle without participation of the Tribunal, why be concerned with the fashioning the role of the Tribunal? One reason is that some of those disputes that would not otherwise settle might settle with appropriate facilitation. Often, it is the 50-50 disputes that continue through to an award. Facilitating settlement of these disputes could benefit the parties in significant respects. Also, those that would settle might settle earlier with some facilitation. In each case resources are likely to be saved, the real interests and needs of the parties are likely to be satisfied, and productive relationships are likely to be created or reconstructed” (David W. Plant. ADR and Arbitration. – In: The Leading Arbitrators’ Guide to International Arbitration. Edited by Lawrence W. Newman, Richard D. Hill, Juris Publishing, Inc., 2004, p. 256).



Author: Sergey A. Voitovich Partner, Law and Patent firm Grischenko & Partners, Kiev, Ukraine, Candidate of Legal Science (Kiev University), PhD (EUI, Florence); counsel to Ukraine in six ICSID arbitrations and several non-ICSID investment arbitrations