The main elements of the Washington Convention 1965 on arbitration

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20 December 2015

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The main elements of the Washington Convention 1965 on arbitration


            Many trade contracts on an international scale feature a clause in the arbitration process; it is the process taken in the incidence of a dispute.One main reason for opting for arbitration is that it allows the parties to the contract to select the legal principles and the rules to govern their contractual relations. This aspect of the trade agreements is commonly referred as the autonomy of the parties to the agreement.It is one of the central issues covered by the 1965 Washington Convention (Redfern et al., 2009). Some of the debates surrounding the arbitration process include the views of the parties, regarding the sets of laws and regulations selected.There is a variety of reasons behind the disputable nature of the legislation and the regulations chosen. One is that, many of the parties to the contract do not accept the reality that the change of circumstances can force the parties to seek the regulations offered by alternative legal regimes.However, there is also the issue that there are restrictions that restrict the options to choose different sets of laws, among the parties to the agreements. Through this paper, the writer will explore the main and the most significant elements of the 1965 convention, towards clearing some of the debates and contentions mentioned above, among others.

Main Elements of the scope of the Convention

            At the core of the 1965 conference, was the goal of widening international investment-flow, especially among developing nations, through the fashioning of a framework for the enforcement of contractual rights. The objective of expanding the participation of countries and states in international trade was also at the core of the formation of the ICSID. It was supposed to play the oversight role of checking the compliance of the partieswith the directives developed by the convention (Reinisch, 2011).However, at the core of the enforcement of the principles, there are the frameworks used for other purposes and uses at the national level of administration. For example, as a member of the convention,the UK enforced the directives of the convention, though its English Law framework of the processes covered by the instructions of the meeting, including arbitration. The Act to which the directives were pegged was the 1966 Act on the methods of conflict resolution. In a similar way, the US became a party to the ICSID after it gained force in the country, during the October of 1966.

            There is the highly significant element of the convention that the centre for settling disputes is a major piece to the resolution of conflicts. The importance of the ‘center’ is evident from its role as the provider of the facilities needed for the process of arbitrating the agreements of nationals and states. In the working of the ‘center’, some paramount actors to represent and enforce the principles of the center include the Secretariat and the oversight council. As important players in the process of the process of administration, the panel is admitted to executing its duties through a panel comprised of its selectees. These selectees are ordinarily a set of arbitrators and conciliatory staffs for facilitating the negotiation process to be taken under the ‘center’s jurisdiction (Lalive, 2010). The composition of the secretariat is also similar to that of the center, in that it is comprised of the secretary general, a single or numerous vices and the staffs to represent different factions in meetings. In the selection of the individuals to represent each arm of the center, there is a condition that all should be highly qualified and credible to meet the demands of the role. The funding needed to facilitate the working on the center is drawn from the charges collected from the parties in conflict, in accordance with a variety of rules. The rules that are applicable include those formulated and enforced by the Administrative Council.

            As a fundamental to international arbitration, the principle of party self-sufficiency is a major determinant of the choices made by the substantive laws to be used. In thelight of the principle of party independence, it is clear that it is in most cases a conflict policy. This position implies that, in the event that there is a lack of consensus on the laws to be used, it offers the directives on the legislation to be used. With respect to the principle explored, as a conflict principle, modern legal systems accord the arbitrating panels, uncontrolled freedom. This phenomenon is manifest from the fact that the arbitrators choose the conflict rules they can employ, depending on their assessment of their levels of appropriateness. In some cases, the judgesenjoy the freedom of opting not to use any of the conflict rules available to them, depending on their assessment of the situation.The powers of the arbitrating panels, in the cases, explained above, are likely to compromise the quality and the standards of the decisions made by the processes.This is one issue that has not been explored in an in-depth manner.The indication arising from the issue is that there is a need to explore the area, so as to eliminate any enforcement weaknesses that may impair the working of the entire system / framework (Reinisch, 2011).

            There is an implied aspect of the conventions principles and formulations, and this is related to the equitability of the partners in a contractual agreement and the fairness of the arrangement.This element is exerted on all the parties engaging in international trade and demands that they meet the minimum standards. However, because international commerce and investments are groundedin economic and legal frameworks that differ from those of the respective parties to the agreement, national laws prove inadequate (Lalive, 2010). The differences in the legal frameworks of the contracting members are further complicated by the work of arbitration tribunals because they evaluate the needs of cases on a case-to-case basis. For example, during one instance of arbitration, Czech Republic, and the trading partner Saluka investments BV, the resolution tribunal took the position that the legitimate expectations of the investors took center-stage in the negotiation process. In enforcing this principle of fairness, the ICSID has taken positions that demonstrated that it plays an overarching role in the management of negotiation processes. One such case was that of Maffezini, where the ICSID took the position that the case resulted from the inability of the partners – to guarantee that they had served the due process. The position adopted from the case was that the parties had compromised the fairness of the case.

            There is the overarching element of ensuring the security of the contracting partners, as well as their uninhibited protection. These duties are warranted in the functions of contracting states, as expressly communicated through the treaties that bind the trade framework. Under this area, states have the legal obligation of safeguarding any ventures made within its borders. However, there is the element by requiring that due diligence takes precedence over other responsibilities that may breach the standard. However, it is placedonthe necessity that the contracting states take the steps that meet the scope of the functions of the government in the areas of policing. For example, the duties encapsulated under this element are that of avoiding any activities that may destroy the property of investors. Further, these functions reach beyond the physical properties in question, to cover other aspects of the investment, including the property rights of the contracting parties.

            The availability of arbitration as an alternative mechanism for dispute resolution offered a better option for the parties conflicting on trade matters, who would otherwise need to face the court process. The aspects of the directives formulated by the convention, which make the new option a more efficient and preferred one include that it allows the parties a range of choices (Laborde, 2010). The choice that remains open to the determination of the process, which makes the directives of the convention an appealing option include the arbitration forum to be engaged.The arbitrator representatives to oversee the process, and also the laws to employ throughout the process.Another winning aspect of the working of the convention’s model and principles ofarbitration is the openness of the framework to the costs of conflict resolution. Apart from the element of the costs, the times that the process can take is another opportunity that allows the parties to conflict to select the options availed by the models provided by the convention. Due to the extensive nature of the frameworks developed during the conference, there are wide arrays of benefits, including those related to the security of contracting parties. For example, the ICSID avails the forum needed for the parties toagreements to sign the investment agreements and the treaties required to protect their investors (Reinisch, 2011). One of the frameworks put into place by the convention, for this purpose was the options offered by the clause of dispute resolution. The provision allows the arbitration to take place between the non-state investing agents together with the states in the contractual agreement.


            In almost every case, international trade deals feature a clause on arbitration, which is supposed to give away to be taken during the resolution of the problem, during the incidence of a dispute. Some of the major elements of the 1965 convention that mediate the arbitration process with other aspects of international trade are the autonomy principle. Some of the elements that are core to the contractual agreements, enteringthe contractual arrangements include the autonomy principle, which seeks to guarantee the independence of the parties to the trade. Other elements that are evident from the scope of the convention include that it tried to increase the flow of international trade, by safeguarding the interests of trading partners. There is also the element that the center for dispute resolution is a partaker in all decision processes, through its various functional areas. Arising from the principle of self-sufficiency is the component of the laws to be enforced during the contracting and the arbitration process. Due to the insufficiency of domestic laws, the arbitrator chooses the principles to take force, which are determined on a case-to-case basis. In the enforcement of its guidelines, the ICSID implies and enforces the elements of equality and fairness, otherwise breaches of the two attract determinative directives.


Laborde, G. (2010). The Case for Host State Claims in Investment Arbitration. Journal of International Dispute Settlement, 1 (1), 97-122.

Lalive, P. (2010). On the Reasoning of International Arbitral Awards. Journal of International Dispute Settlement, 1 (1), 55-65.

Redfern, A., Hunter, M., Blackaby, N., & Partasides, C. (2009). Law and Practice of International Commercial Arbitration. Oxford:Oxford University Press.

Reinisch, A. (2011). How narrow are Narrow Dispute Settlement Clauses in Investment Treaties? Journal of International Dispute Settlement, 2 (1), 115-174.

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