ICSID Updates Guidance on Annulment of Investment Arbitration Awards


On 11 March 2024, the World Bank's International Center for Settlement of Investment Disputes ("ICSID") released the third edition of its Background Paper on Annulment ("Updated Background Paper"). First published in 2012 and previously updated in 2016, the Updated Background Paper provides a thorough examination of the annulment mechanism under the ICSID Convention.

In its revised third edition, the paper includes new data and updated charts and tables with respect to relevant case law on annulment proceedings from 16 April 2016 through 31 December 2023. Specifically, the latest update incorporates 104 new annulment proceedings, 73 new annulment decisions, and 78 new decisions on the stay of enforcement of an award issued since the last iteration of the Background Paper published in May 2016.

Regarding the grounds for annulment, the Updated Background Paper confirms that the tribunal's "(b) manifest excess of powers", "(d) serious departure from a fundamental rule of procedure" and the "(e) failure to state the reasons" continue to be the most frequently invoked grounds and are usually invoked cumulatively. Out of the 125 annulment decisions reviewed for the Background Paper ground (b) was invoked 121 times, ground (e) was invoked 115 times and the third most popular ground (d) was invoked 99 times.

Source: Updated Background Paper on Annulment, dated 11 March 2024, at p. 82

The Updated Background Paper also confirms that recourse to annulment remains an exceptional mechanism with a very low success rate. In its history (until 31 December 2023) ICSID has registered 885 Convention arbitrations and rendered 434 awards. Out of these, 194 annulment proceedings have been instituted, of which 102 applications were refused and 42 have been discontinued. Only 7 awards have been annulled in full and a further 16 awards have been partially annulled. This means that a mere 1.6 percent of all ICSID awards have led to full annulment and only 3.7 percent have led to partial annulment.

While the number of annulment applications fluctuates from year to year, the increase in applications within the past 7 years reflects the significant rise in registered cases and awards at ICSID in this same timeframe.

If you require advice on annulment of ICSID awards or investor-state arbitration more generally, please reach out to the undersigned or your regular contact at Schellenberg Wittmer.


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