ICSID, the arbiter of major contracts
Established in 1966 under the auspices of the World Bank, the International Centre for Settlement of Investment Disputes (ICSID) is today the leading forum for disputes between states and foreign investors.
Based in Washington, ICSID operates under the 1965 Washington Convention, which has been ratified by more than 150 countries. By acceding to the Convention, states undertake to recognise and enforce arbitral awards automatically, as if they were judgments of their own courts.
ICSID therefore provides a framework regarded as neutral and highly specialised, in which disputes relating to mining, oil or energy contracts are settled outside national jurisdictions. Its awards, enforceable in a large number of countries, make it a particularly powerful instrument—yet also a controversial one.
For African governments, bringing a case before ICSID, or being taken there, poses a dilemma: defending national sovereignty at the risk of alienating investors, or negotiating under the threat of compensation awards that are often colossal.
SOME RECENT HIGH-PROFILE ARBITRATIONS
ConocoPhillips v. Venezuela (oil, 2019–2025)
ICSID ordered Venezuela to pay approximately US$8.5 billion (nearly CFA 5,100 billion) for expropriation. In January 2025, the state’s application for annulment was rejected, leaving it obliged to pay.
Tethyan Copper Company (Barrick/Antofagasta) v. Pakistan – Reko Diq (copper-gold, 2019–2022)
In 2019, Pakistan was ordered to pay close to US$5.9 billion (around CFA 3,540 billion). Following a settlement in 2022, the penalty was lifted in exchange for the relaunch of the mining project under Barrick’s control.
Perenco v. Ecuador (oil, 2019–2021)
After an initial award of US$449 million (≈ CFA 269 billion), the amount was reduced on appeal to US$412 million (≈ CFA 247 billion). Ecuador ultimately paid around US$374 million (nearly CFA 224 billion) after environmental offsets.
ICSID awards can sometimes reach levels equivalent to several years of an African state’s budget. Between the confirmation of record fines (Venezuela), pragmatic settlements (Pakistan) and partial reductions (Ecuador), each arbitration becomes a financial and diplomatic battleground.
When a state refuses to comply with an award, the winning party may initiate proceedings to seize its assets abroad, relying on the courts of Convention member states. Similarly, when a private investor loses and refuses to comply, its international assets may be targeted. In both cases, the financial cost is compounded by diplomatic and reputational damage, which almost always pushes the parties towards a settlement or negotiated resolution.
In practice, some states (Argentina, Venezuela) have resisted for long periods, but this strategy almost invariably leads to diplomatic pressure, high-profile asset seizures and, sooner or later, negotiation.
By T.Z.