The PCA in Model State Contracts

A number of States have recognized the PCA’s experience in the field of contract-based arbitration involving States and State entities and have entrusted the PCA with roles in their model State contracts, in particular those relating to natural resources and infrastructure projects.

For example, in the past three years, government agencies in Argentina, Brazil, and Mexico have published model contracts and agreements concerning oil and gas exploration and exploitation, providing for a role for the PCA in their dispute settlement clauses. Previously, Ecuador also included the PCA in its 2010-2011 model petroleum and mining services contracts. Mozambique and Seychelles, which are not yet PCA Contracting Parties, likewise published model agreements in 2016 and 2013 respectively with arbitration clauses referring to the PCA. Such examples also follow the adoption by the Energy Charter Secretariat of its Model Intergovernmental and Host Government Agreements for Cross-Border Pipelines and Electricity Projects, which also provide for PCA arbitration.
Such models are meant to be used in the context of negotiations regarding State-sponsored projects that take into account the public interest involved. The selection of the arbitral institution that will be competent to administer disputes arising out of such State contracts may therefore be a sensitive subject. States have often been reluctant to submit disputes to a foreign, private arbitral institution. On the other hand, investors engaging in capital-intensive natural resource and infrastructure projects may be reluctant to submit disputes to unfamiliar or unproven dispute resolution methods. There are a number of reasons that explain the PCA success in bridging this divide, and the PCA’s consequent inclusion in a multitude of State contracts.

Governance structure and transparency

States which are PCA Contracting Parties are also members of the PCA’s Administrative Council. As such, these States participate in the governance of the organization, with full visibility of the PCA’s policies and finances.

Intergovernmental nature

In many cases, the fact that a State is a Contracting Party of the PCA may obviate legal requirements to conduct tender processes prior to designating an arbitral institution in the context of State contracts. Regardless, the PCA’s intergovernmental nature has made it an ideal option in this context.

Immunities

The PCA enjoys privileges and immunities pursuant to its founding conventions, headquarters agreement with the Kingdom of the Netherlands, host country agreements, and customary international law. Accordingly, the PCA’s premises and archives are inviolable and its bank accounts are immune from arrest or attachment, ensuring certainty in complex or politically-sensitive disputes.

Reputation

The PCA has a long track record of fair and efficient handling of mixed arbitrations under State contracts since its first such case in 1934. This is in addition to its activities in relation to inter-State and investor-State dispute settlement. In addition, the roles granted to the PCA under the UNCITRAL Arbitration Rules since 1976 have made the PCA a unique repository of experience even in international commercial arbitrations beyond State contracts. Aware of the PCA’s unique nature and experience, a number of States, including Bolivia, Ecuador, Nigeria and Mauritius, have entrusted the PCA Secretary-General with exercising certain powers under national arbitration laws.

Building on its 120 years of experience in settling disputes involving States and State entities, the PCA is uniquely prepared to deal with all the particularities that arise out of the participation of a public entity in an arbitral proceeding. Such aspects include the: (1) organization of proceedings and procedural timetables which take into account the internal functioning of public entities; (2) availability of an online repository to publish information as required by the applicable transparency regime; (3) preparation and publication of press releases in different languages; (4) organization of the logistical aspects of hearings and other meetings, taking into consideration the sensitivity of the case and the possible participation of high-level public officials.

Because of its extensive experience in administering disputes involving State entities, the PCA has also built up notable expertise in appointing appropriate individuals as arbitrators who have recognized experience in disputes involving both commercial and public interests.

The PCA also has developed procedural rules specifically designed for mixed arbitrations. In 1962, the PCA enacted its Rules of Arbitration and Conciliation for Settlement of International Disputes between Two Parties of Which Only One Is a State. This set of procedural rules was later superseded by a more modern version in 1993 and eventually by the current PCA Arbitration Rules 2012. The PCA Arbitration Rules 2012 are based on the 2010 UNCITRAL Arbitration Rules, but with amendments to reflect the special characteristics of disputes involving a State, State-controlled entity, or intergovernmental organization.

Notwithstanding the additional demands posed by dispute resolution proceedings involving a State, State-controlled entity, or intergovernmental organization, the costs of PCA dispute resolution services have remained competitive as compared to all other public and private dispute resolution providers. The PCA charges neither a registration nor annual maintenance fee. As a general rule, the PCA is remunerated only in respect of work actually performed, according to the rates published in its schedule of fees and costs. Moreover, hearing and meeting rooms at the Peace Palace and certain other facilities around the world – such as in its international offices in Buenos Aires, Mauritius and Singapore or other facilities made available under conditions set out in PCA’s Host Country Agreements and cooperation agreements with other institutions – are available free of charge to arbitral tribunals in PCA proceedings.