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Procedural Background
This document is an Order of Discontinuance issued by the Tribunal under Rule 53(6) of the ICSID Arbitration Rules (2022). The underlying dispute arose under the Energy Charter Treaty (ECT) and the ICSID Convention. On April 28, 2025, the Tribunal issued Procedural Order No. 3, directing the Claimant to post USD 2 million as security for costs (SFC). Despite being granted five extensions over an 11-month period, the Claimant failed to implement the required SFC. The Claimant had initially proposed an After-the-Event (ATE) insurance policy backed by reinsurance, which ultimately did not materialize after the Claimant's third-party funder withdrew its support. Consequently, the proceeding was suspended on December 18, 2025. Following the expiration of the 90-day suspension period, the Tribunal convened a case management conference on April 10, 2026, to determine whether to order the discontinuance of the arbitration.
Parties' Positions
The Claimant requested a further extension of time, arguing that its bankruptcy administrators were actively seeking alternative third-party funding and that informal settlement discussions were ongoing. The Claimant contended that discontinuance would amount to a denial of access to justice for its creditors, attributing its bankruptcy to the Respondent's alleged misconduct. Conversely, the Respondent opposed any further extensions and requested immediate discontinuance. The Respondent categorically denied the existence of any settlement negotiations and emphasized that the Claimant had been afforded ample opportunity to secure funding, arguing that further delays would cause undue prejudice and unnecessary costs.
Tribunal's Analysis and Reasoning
In exercising its discretion under ICSID Arbitration Rule 53(6), the Tribunal balanced the severe implications of discontinuance for the Claimant against the Respondent's right to an expeditious and cost-effective proceeding. The Tribunal acknowledged the diligent efforts of the Claimant's counsel and bankruptcy administrators but noted that the Claimant was no closer to posting the required SFC after 11 months. Furthermore, the Tribunal found the prospect of an imminent settlement highly unlikely given the Respondent's explicit denials. Recognizing that the arbitration was entering a cost-intensive phase involving document disclosure and hearings, the Tribunal concluded that it was no longer tenable to maintain the proceeding without the mandated security. The Tribunal also observed that a discontinuance under Rule 53(6) lacks res judicata effect, theoretically preserving the Claimant's right to recommence proceedings should it secure adequate funding in the future.
Decision and Operative Directives
The Tribunal ordered the immediate discontinuance of the proceeding effective April 14, 2026. Regarding the allocation of costs, the Tribunal directed that the parties share the costs of the Tribunal and the administration of the case on an equal basis. Taking into account the Claimant's bankrupt status and the serious ramifications of the discontinuance for its estate and creditors, the Tribunal ordered that each party bear its own legal costs and expenses incurred to date.
