The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states in the mid 20th century. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states.
Preparing to rebuild the international economic system as World War II was still raging, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, for the United Nations Monetary and Financial Conference. The delegates deliberated upon and signed the Bretton Woods Agreements during the first three weeks of July 1944.
Setting up a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank Group. These organizations became operational in 1945 after a sufficient number of countries had ratified the agreement.
World Bank is a term used to describe an international financial institution that provides leveraged loans to developing countries for capital programs. The World Bank has a stated goal of reducing poverty.
The World Bank differs from the World Bank Group, in that the World Bank comprises only two institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), whereas the latter incorporates these two in addition to three more: International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), and International Centre for Settlement of Investment Disputes (ICSID).
The World Bank is one of two institutions created at the Bretton Woods Conference in 1944. The International Monetary Fund, a related institution is the second. Delegates from many countries attended the Bretton Woods Conference. The most powerful countries in attendance were the United States and United Kingdom which dominated negotiations.
The World Bank's (i.e. the IBRD and IDA's) activities are focused on developing countries, in fields such as human development (e.g. education, health), agriculture and rural development (e.g. irrigation, rural services), environmental protection (e.g. pollution reduction, establishing and enforcing regulations), infrastructure (e.g. roads, urban regeneration, electricity), and governance (e.g. anti-corruption, legal institutions development). The IBRD and IDA provide loans at preferential rates to member countries, as well as grants to the poorest countries. Loans or grants for specific projects are often linked to wider policy changes in the sector or the economy. For example, a loan to improve coastal environmental management may be linked to development of new environmental institutions at national and local levels and the implementation of new regulations to limit pollution.
Together with four affiliated agencies created between 1956 and 1988, the IBRD is part of the World Bank Group. The Group's headquarters are in Washington, D.C. It is an international organization owned by member governments; although it makes profits, these profits are used to support continued efforts in poverty reduction.
Technically the World Bank is part of the United Nations system, but its governance structure is different: each institution in the World Bank Group is owned by its member governments, which subscribe to its basic share capital, with votes proportional to shareholding. Membership gives certain voting rights that are the same for all countries but there are also additional votes which depend on financial contributions to the organization. The President of the World Bank is nominated by the President of the United States and elected by the Bank's Board of Governors. As of November 1, 2006 the United States held 16.4% of total votes, Japan 7.9%, Germany 4.5%, and France and the United Kingdom each held 4.3%. As changes to the Bank's Charter require an 85% super-majority, the US can block any major change in the Bank's governing structure.
The President of the Bank, currently Robert B. Zoellick, is responsible for chairing the meetings of the Boards of Directors and for overall management of the Bank. Traditionally, the Bank President has always been a US citizen nominated by the United States, the largest shareholder in the bank. The nominee is subject to confirmation by the Board of Governors, to serve for a five-year, renewable term. The Executive Directors, representing the Bank's member countries, make up the Board of Directors, usually meeting twice a week to oversee activities such as the approval of loans and guarantees, new policies, the administrative budget, country assistance strategies and borrowing and financing decisions.The Vice Presidents of the Bank are its principal managers, in charge of regions, sectors, networks and functions. There are 24 Vice-Presidents, three Senior Vice Presidents and two Executive Vice Presidents.
The International Bank for Reconstruction and Development (IBRD) has 186 member countries, while the International Development Association (IDA) has 168 members. Each member state of IBRD should be also a member of the International Monetary Fund (IMF) and only members of IBRD are allowed to join other institutions within the Bank (such as IDA).
Poverty reduction strategies
For the poorest developing countries in the world, the bank’s assistance plans are based on poverty reduction strategies; by combining a cross-section of local groups with an extensive analysis of the country’s financial and economic situation the World Bank develops a strategy pertaining uniquely to the country in question. The government then identifies the country’s priorities and targets for the reduction of poverty, and the World Bank aligns its aid efforts correspondingly.
Forty-five countries pledged US$25.1 billion in "aid for the world's poorest countries", aid that goes to the World Bank International Development Association (IDA) which distributes the gifts to eighty poorer countries. While wealthier nations sometimes fund their own aid projects, including those for diseases, and although IDA is the recipient of criticism, Robert B. Zoellick, the president of the World Bank, said when the gifts were announced on December 15, 2007, that IDA money "is the core funding that the poorest developing countries rely on".
Clean Technology Fund management
The World Bank has been assigned temporary management responsibility of the Clean Technology Fund (CTF), focused on making renewable energy cost-competitive with coal-fired power as quickly as possible, but this may not continue after UN's Copenhagen climate change conference in December, 2009, because of the Bank's continued investment in coal-fired power plants.
Country assistance strategies
As a guideline to the World Bank's operations in any particular country, a Country Assistance Strategy is produced, in cooperation with the local government and any interested stakeholders and may rely on analytical work performed by the Bank or other parties.
Criticism on World Bank’s Activities
The World Bank has long been criticized by non-governmental organizations, such as the indigenous rights group Survival International, and academics, including its former Chief Economist Joseph Stiglitz who is equally critical of the International Monetary Fund, the US Treasury Department, US and other developed country trade negotiators. Critics argue that the so-called free market reform policies which the Bank advocates are often harmful to economic development if implemented badly, too quickly ("shock therapy"), in the wrong sequence or in weak, uncompetitive economies.
In Masters of Illusion: The World Bank and the Poverty of Nations (1996), Catherine Caufield argued that the assumptions and structure of the World Bank harms southern nations. Caufield criticized its formulaic recipes of "development". To the World Bank, different nations and regions are indistinguishable and ready to receive the "uniform remedy of development". She argued that to attain even modest success, Western practices are adopted and traditional economic structures and values abandoned. A second assumption is that poor countries cannot modernize without money and advice from abroad.
A number of intellectuals in developing countries have argued that the World Bank is deeply implicated in contemporary modes of donor and NGO imperialism and that its intellectual contribution function to blame the poor for their condition.
One of the strongest criticisms of the World Bank has been the way in which it is governed. While the World Bank represents 186 countries, it is run by a small number of economically powerful countries. These countries choose the leadership and senior management of the World Bank so their interests dominate the bank.
The World Bank has dual roles that are contradictory: that of a political organization and that of a practical organization. As a political organization the World Bank must meet the demands of donor and borrowing governments, private capital markets and other international organizations. As an action-oriented organization, it must be neutral, specializing in development aid, technical assistance and loans. The World Bank’s obligations to donor countries and private capital markets have caused it to adopt policies which dictate that poverty is best alleviated by the implementation of "market" policies.
In the 1990s the World Bank and the IMF forged the Washington Consensus, policies which included deregulation and liberalization of markets, privatization and the downscaling of government. Though the Washington Consensus was conceived as a policy that would best promote development, it was criticized for ignoring equity, employment and how reforms like privatization were carried out. Many now agree that the Washington Consensus placed too much emphasis on the growth of GDP and not enough on the permanence of growth or on whether growth contributed to better living standards.
Some analysis shows that the World Bank has increased poverty and been detrimental to the environment, public health and cultural diversity. Some critics also claim that the World Bank has consistently pushed a neoliberal agenda, imposing policies on developing countries which have been damaging, destructive and anti-developmental.
It has also been suggested that the World Bank is an instrument for the promotion of US or Western interests in certain regions of the world. even South American nations have established the Bank of the South in order to reduce US influence in the region. Criticism of the bank, that the President is always a citizen of the United States, nominated by the President of the United States (though subject to the "approval" of the other member countries). There have been accusations that the decision-making structure is undemocratic as the US has a veto on some constitutional decisions with just over 16% of the shares in the bank; decisions can only be passed with votes from countries whose shares total more than 85% of the bank's shares. A further criticism concerns internal management and the manner in which the World Bank is said to lack accountability.
Criticism of the World Bank often takes the form of protesting as seen in recent events such as the World Bank Oslo 2002 Protests, the October Rebellion, and the Battle of Seattle. Such demonstrations have occurred all over the world, even amongst the Brazilian Kayapo people.
In 2008, a World Bank report which found that biofuels had driven food prices up 75% was not published. Officials confided that they believed it was suppressed to avoid embarrassing the President of the United States, George W. Bush.
The World Bank has been criticised for the manner in which it engages in “the production, accumulation, circulation and functioning” of knowledge. The Bank’ production of knowledge has become integral to the funding and justification of large capital projects . The Bank relies on “a growing network of translocal scientists, technocrats, NGOs, and empowered citizens to help generate data and construct discursive strategies”. Its capacity to produce authoritative knowledge is a response to intense scrutiny of Bank projects resulting from the successes of growing anti-Bank and alternative-development movements. “Development has relied exclusively on one knowledge system, namely, the modern Western one. The dominance of this knowledge system has dictated the marginalization and disqualification of non-Western knowledge systems”. It has been remarked, that in these alternative knowledge systems researchers and activists might find alternative rationales to guide interventionist action away from Western (Bank) produced ways of thinking . Knowledge production has become an asset to the Bank and “it is generated and used in highly strategic ways” to provide justifications for development.
The effect of structural adjustment policies on poor countries has been one of the most significant criticisms of the World Bank. The oil crisis in the late 1970s plunged many countries into economic crises. The World Bank responded with structural adjustment loans which distributed aid to struggling countries while enforcing policy changes in order to reduce inflation and fiscal imbalance. Some of these policies included encouraging production, investment and labour-intensive manufacturing, changing real exchange rates and altering the distribution of government resources. Structural adjustment policies were most effective in countries with an institutional framework that allowed these policies to be implemented easily. For some countries, particularly in Sub-Saharan Africa economic growth regressed and inflation worsened. The alleviation of poverty was not a goal of structural adjustment loans and the circumstances of the poor often worsened due to a reduction in social spending and an increase in the price of food as subsidies were lifted.
By the late 1980s, international organizations began to admit that structural adjustment policies were worsening life for the world’s poor. The World Bank changed structural adjustment loans allowing for social spending to be maintained and encouraging a slower change to policies such as transfer of subsidies and price rises. In 1999 the World Bank and the IMF introduced the Poverty Reduction Strategy Paper approach to replace structural adjustment loans. The Poverty Reduction Strategy Paper approach has been interpreted as an extension of structural adjustment policies as it continues to reinforce and legitimize global inequities. Neither approach has addressed the inherent flaws within the global economy that contribute to economic and social inequities within developing countries. By reinforcing the relationship between lending and client states, many believe that the World Bank has usurped indebted countries' power to make economic policy.
Sociologist Michael Goldman has argued that “Industry analysts predict that private water will soon be a capitalized market as precious, and as war-provoking, as oil”. Goldman says “These days, an indebted country cannot borrow capital from the World Bank or IMF without a domestic water privatization policy as a precondition”. The Bank is utilizing “the 'Washington Consensus' model of "development" to promote water privatization. Following this model the World Bank is forcing many countries to commodify their water resources, rather than using their expertise in the public sector to acknowledge water as a universal human right and an essential public service”. The push for water privatization development plays upon “the shocking tragedy that much of the world lacks affordable clean water”. This image creates “new opportunities in development though it may have little to do with ultimately quenching” the needs of impoverished countries. “The problem of water scarcity for the world’s poor has been analyzed by the World Bank as one in which the public sector has failed to deliver and has therefore prevented development from “taking off” and the economy from modernizing. If the state cannot deliver something as basic as water and sanitation, the argument goes, it is a strong indication of a general failure of public-sector capacity”. However, “with the sale or lease of a public good comes more than simply a privatized service; alongside it comes a wide set of postcolonial institutional forces that intervenes in state-citizen relations and North-South dynamics”.
Business and political interests of main stakeholders
Although controversial and far from proven, there is criticism that World Bank and IMF are used as a means to fulfill business (interests of large corporations to enter the natural resource markets of the country and obtain the legal guarantees that it can stay there) or political needs of the main IMF donors (mostly USA), that were previously historically obtained by more direct activity - war, economic blockade, espionage. See for example Confessions of an Economic Hit Man.
Despite claiming goals of “good governance and anti-corruption″ the World Bank requires sovereign immunity against countries it deals with. Sovereign immunity waives a holder from all legal liability for their actions. It is proposed that this immunity from responsibility is a “shield to which [The World Bank] wants resort to for escaping accountability and security by the people.” As the United States has veto power, it can prevent the World Bank from taking action against its interests.
International Bank for Reconstruction and Development (IBRD)
The International Bank for Reconstruction and Development (IBRD) is one of five institutions that comprise the World Bank Group. The IBRD is an international organization whose original mission was to finance the reconstruction of nations devastated by World War II. Now, its mission has expanded to fight poverty by means of financing states. Its operation is maintained through payments as regulated by member states. It came into existence on December 27, 1945 following international ratification of the agreements reached at the United Nations Monetary and Financial Conference of July 1 to July 22, 1944 in Bretton Woods, New Hampshire.
The IBRD provides loans to governments, and public enterprises, always with a government (or "sovereign") guarantee of repayment subject to general conditions (pdf). The funds for this lending come primarily from the issuing of World Bank bonds on the global capital markets—typically $12–15 billion per year. These bonds are rated AAA (the highest possible) because they are backed by member states' share capital, as well as by borrowers' sovereign guarantees. (In addition, loans that are repaid are recycled, or relent.) Because of the IBRD's credit rating, it is able to borrow at relatively low interest rates. As most developing countries have considerably lower credit ratings, the IBRD can lend to countries at interest rates that are usually quite attractive to them, even after adding a small margin (about 1%) to cover administrative overheads.
Commencing operations on June 25, 1946, it approved its first loan on May 9, 1947 ($250m to France for postwar reconstruction, in real terms the largest loan issued by the Bank to date).The IBRD was established mainly as a vehicle for reconstruction of Europe and Japan after World War II, with an additional mandate to foster economic growth in developing countries in Africa, Asia and Latin America. Originally the bank focused mainly on large-scale infrastructure projects, building highways, airports, and powerplants. As Japan and its European client countries "graduated" (achieved certain levels of income per capita), the IBRD became focused entirely on developing countries. Since the early 1990s the IBRD has also provided financing to the post-Socialist states of Eastern Europe and the republics of the former Soviet Union.
3.2.2. International Development Association (IDA)
The International Development Association (IDA) , is the part of the World Bank that helps the world’s poorest countries. It complements the World Bank's other lending arm — the International Bank for Reconstruction and Development (IBRD) — which serves middle-income countries with capital investment and advisory services.
IDA was created on September 24, 1960 and is responsible for providing long-term, interest-free loans to the world's 80 poorest countries, 39 of which are in Africa. IDA provides grants and credits (subject to general conditions (pdf)), with repayment periods of 35 to 40 years. Since its inception, IDA credits and grants have totaled $161 billion, averaging $7–$9 billion a year in recent years and directing the largest share, about 50%, to Africa. While the IBRD raises most of its funds on the world's financial markets, IDA is funded largely by contributions from the governments of the richer member countries. Additional funds come from IBRD income and repayment of IDA credits.
IDA loans address primary education, basic health services, clean water supply and sanitation, environmental safeguards, business-climate improvements, infrastructure and institutional reforms. These projects are intended to pave the way toward economic growth, job creation, higher incomes and better living conditions.
The International Development Association (IDA) is the part of the World Bank that helps the world’s poorest countries reduce poverty by providing no- interest loans and grants for programs aimed at boosting economic growth and improving living conditions. IDA funds help these countries deal with the complex challenges they face in striving to meet the Millennium Development Goals. They must, for example, respond to the competitive pressures as well as the opportunities of globalization; arrest the spread of HIV/AIDS; and prevent conflict or deal with its aftermath.
IDA’s long-term (streched over 35 to 40 years), no-interest loans pay for programs that build the policies, institutions, infrastructure and human capital needed for equitable and environmentally sustainable development. IDA’s goal is to reduce inequalities both across and within countries by allowing more people to participate in the mainstream economy, reducing poverty and promoting more equal access to the opportunities created by economic growth.IDA also provides grants to countries at risk of debt distress. TOPIK METAO
The International Bank for Reconstruction and Development (IBRD), better known as the World Bank, was established in 1944 to help Europe recover from the devastation of World War II. The success of that enterprise led the Bank, within a few years, to turn its attention to the developing countries. By the 1950s, it became clear that the poorest developing countries needed softer terms than those that could be offered by the Bank, so they could afford to borrow the capital they needed to grow.
With the United States taking the initiative, a group of the Bank’s member countries decided to set up an agency that could lend to the poorest countries on the most favourable terms possible. They called the agency the "International Development Association." Its founders saw IDA as a way for the "haves" of the world to help the "have-nots." But they also wanted IDA to be run with the discipline of a bank. For this reason, US President Dwight D. Eisenhower proposed, and other countries agreed, that IDA should be part of the World Bank (IBRD).
IDA's Articles of Agreement became effective in 1960. The first IDA loans, known as credits, were approved in 1961 to Chile, Honduras, India and Sudan.IBRD and IDA are run on the same lines. They share the same staff and headquarters, report to the same president and evaluate projects with the same rigorous standards. But IDA and IBRD draw on different resources for their lending, and because IDA’s loans are deeply concessional, IDA’s resources must be periodically replenished (see "IDA Funding" below). A country must be a member of IBRD before it can join IDA; 169 countries are IDA members.
3.2.3. International Finance Corporation (IFC)
The International Finance Corporation (IFC) promotes sustainable private sector investment in developing countries as a way to reduce poverty and improve people's lives.IFC is a member of the World Bank Group and is headquartered in Washington, DC. It shares the primary objective of all World Bank Group institutions: to improve the quality of the lives of people in its developing member countries.
Established in 1956, IFC is the largest multilateral source of loan and equity financing for private sector projects in the developing world. It promotes sustainable private sector development primarily by:
- Financing private sector projects and companies located in the developing world.
- Helping private companies in the developing world mobilize financing in international financial markets.
- Providing advice and technical assistance to businesses and governments.
IFC has 182 member countries , which collectively determine its policies and approve investments. To join IFC, a country must first be a member of the International Bank for Reconstruction and Development (IBRD). IFC's corporate powers are vested in its Board of Governors, to which member countries appoint representatives. IFC's share capital, which is paid in, is provided by its member countries, and voting is in proportion to the number of shares held. IFC's authorized capital (the sums contributed by its members over the years) is $2.45 billion; IFC's net worth (which includes authorized capital and retained earnings) was $9.8 billion as of June 2005.
The Board of Governors delegates many of its powers to the Board of Directors, which is composed of the Executive Directors of the IBRD, and which represents IFC's member countries. The Board of Directors reviews all projects.The President of the World Bank Group, Robert Zoellick, also serves as IFC's president. IFC's CEO and Executive Vice President, Lars H. Thunell, is responsible for the overall management of day-to-day operations. He was appointed on January 15, 2006.Although IFC coordinates its activities in many areas with the other institutions in the World Bank Group, IFC generally operates independently as it is legally and financially autonomous with its own Articles of Agreement, share capital, management and staff.
The IFC's equity and quasi-equity investments are funded out of its paid-in capital and retained earnings (which comprise its net worth). Strong shareholder support, triple-A ratings, and a substantial capital base allow the IFC to raise funds on favorable terms in international capital markets. As of June 30, 2006, retained earnings represented almost three-quarters of the IFC's $9.8 billion net worth.
Within the World Bank Group, the World Bank finances projects with sovereign guarantees, while the IFC finances projects without sovereign guarantees. This means that the IFC is primarily active in private sector projects, although some projects in the public sector (at the municipal or sub-national level) have recently been funded.
Private sector financing is IFC's main activity, and in this respect is a profit-oriented financial institution (and has never had an annual loss in its 50-year history). Like a bank, IFC lends or invests its own funds and borrowed funds to its customers and expects to make a sufficient risk-adjusted return on its global portfolio of projects.
IFC's activities, however, must meet a second test of contributing to a reduction in poverty in line with its mandate. In practice, this is broadly interpreted, but considerable time and effort is devoted to both (i) selecting projects with positive developmental outcomes, and (ii) improving the developmental outcome of projects by various means.
IFC provides both investment and advisory services. IFC also carries out technical cooperation projects in many countries to improve the investment climate. These activities may be linked to a specific investment project, or, increasingly, to broader goals such as improving the legislative environment for a specific industry. IFC's technical cooperation projects are generally funded by donor countries or from IFC's own budget.
IFC's Advisory Services focus on five core areas: Access to Finance, Business Enabling Environment, Environmental & Social Sustainability, Infrastructure Advisory, and Corporate Advice. Advisory services to expand access to finance (A2F) often accompanies IFC's financial investments, and includes assistance to banks and specialized financial institutions in improving their ability to provide financial services to micro, small, and medium enterprises.
Critics have questioned the sustainability of some IFC-funded projects. The IFC recently invested $9 million in the upgrading of a slaughterhouse facility in the Amazon region owned by Brazil's biggest beef producer, despite opposition from local NGOs and the Sierra Club. On the other hand, after successful pilots in several countries, the WorldHotel-Link project was successfully spun off from the IFC on 31 March 2006 and is now a private company with global reach helping locally-owned small scale travel service providers in developing-world destinations overcome market access barriers.
3.2.4.Multilateral Investment Guarantee Agency (MIGA)
The Multilateral Investment Guarantee Agency (MIGA) is a member of the World Bank group. It was established to promote foreign direct investment into developing countries. MIGA was founded in 1988 with a capital base of $1 billion and is headquartered in Washington, DC. MIGA's shareholders are its 175 member countries.MIGA promotes foreign direct investment into developing countries by insuring investors against political risk, advising governments on attracting investment, sharing information through on-line investment information services, and mediating disputes between investors and governments. MIGA's strength compared to private providers of political risk insurance is its membership of the World Bank Group, which allows it to intervene with host governments to resolve claims before they are filed.
MIGA provides guarantees against noncommercial risks to protect cross-border investment in developing member countries. Guarantees to protect investors against the risks of Currency inconvertibility and transfer restriction; Expropriation; War, civil disturbance, and terrorism; Breach of contract (for contracts between the investor/project enterprise and the authorities of the host country); and Non-honoring of sovereign financial obligations. These coverages may be purchased individually or in combination.
MIGA can cover only new investments. These include:
- new, greenfield investments;
- new investment contributions associated with the expansion, modernization, or financial restructuring of existing projects; and
- acquisitions involving privatization of state enterprises.
Izumi Kobayashi joined MIGA as Executive Vice President on November 24, 2008. James Bond occupies the position of Chief Operating Officer; Aradhana Kumar-Capoor is the Acting Chief Counsel; Kevin Lu is Chief Financial Officer; Daniel Villar is Acting Chief Economist; and Edith Quintrell is Director of Operations.
3.2.5. International Centre for Settlement of Investment Disputes (ICSID)
The International Centre for Settlement of Investment Disputes (ICSID), an institution of the World Bank group based in Washington, D.C., was established in 1966 pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention or Washington Convention). As of May 2005, 155 countries had signed the ICSID Convention.
ICSID has an Administrative Council, chaired by the World Bank's President, and a Secretariat. It provides facilities for the conciliation and arbitration of investment disputes between member countries and individual investors.
During the first decade of the twenty-first century, with the proliferation of bilateral investment treaties (BITs), most of which refer present and future investment disputes to the ICSID, the caseload of the ICSID substantially increased. As of March 30, 2007, ICSID had registered 263 cases more than 30 of which were pending against Argentina– Argentina's economic crisis in the late 1990s and subsequent Argentine government measures led several foreign investors to file cases against Argentina. Bolivia, Nicaragua, Ecuador, and Venezuela have announced their intention to withdraw from the ICSID
On a number of occasions in the past, the World Bank as an institution and the President of the Bank in his personal capacity have assisted in mediation or conciliation of investment disputes between governments and private foreign investors. The creation of the International Centre for Settlement of Investment Disputes (ICSID) in 1966 was in part intended to relieve the President and the staff of the burden of becoming involved in such disputes. But the Bank's overriding consideration in creating ICSID was the belief that an institution specially designed to facilitate the settlement of investment disputes between governments and foreign investors could help to promote increased flows of international investment.
ICSID was established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States which came into force on October 14, 1966. ICSID has an Administrative Council and a Secretariat. The Administrative Council is chaired by the World Bank's President and consists of one representative of each State which has ratified the Convention. Annual meetings of the Council are held in conjunction with the joint Bank/Fund annual meetings.
ICSID is an autonomous international organization. However, it has close links with the World Bank. All of ICSID's members are also members of the Bank. Unless a government makes a contrary designation, its Governor for the Bank sits ex officio on ICSID's Administrative Council. The expenses of the ICSID Secretariat are financed out of the Bank's budget, although the costs of individual proceedings are borne by the parties involved.
Pursuant to the Convention, ICSID provides facilities for the conciliation and arbitration of disputes between member countries and investors who qualify as nationals of other member countries. Recourse to ICSID conciliation and arbitration is entirely voluntary. However, once the parties have consented to arbitration under the ICSID Convention, neither can unilaterally withdraw its consent. Moreover, all ICSID Contracting States, whether or not parties to the dispute, are required by the Convention to recognize and enforce ICSID arbitral awards.
Besides this original role, the Centre has since 1978 had a set of Additional Facility Rules authorizing the ICSID Secretariat to administer certain types of proceedings between States and foreign nationals which fall outside the scope of the Convention. These include conciliation and arbitration proceedings where either the State party or the home State of the foreign national is not a member of ICSID. Additional Facility conciliation and arbitration are also available for cases where the dispute is not an investment dispute provided it relates to a transaction which has "features that distinguishes it from an ordinary commercial transaction." The Additional Facility Rules further allow ICSID to administer a type of proceedings not provided for in the Convention, namely fact-finding proceedings to which any State and foreign national may have recourse if they wish to institute an inquiry "to examine and report on facts."
A third activity of ICSID in the field of the settlement of disputes has consisted in the Secretary-General of ICSID accepting to act as the appointing authority of arbitrators for ad hoc (i.e., non-institutional) arbitration proceedings. This is most commonly done in the context of arrangements for arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), which are specially designed for ad hoc proceedings.
Provisions on ICSID arbitration are commonly found in investment contracts between governments of member countries and investors from other member countries. Advance consents by governments to submit investment disputes to ICSID arbitration can also be found in about twenty investment laws and in over 900 bilateral investment treaties. Arbitration under the auspices of ICSID is similarly one of the main mechanisms for the settlement of investment disputes under four recent multilateral trade and investment treaties (the North American Free Trade Agreement, the Energy Charter Treaty, the Cartagena Free Trade Agreement and the Colonia Investment Protocol of Mercosur).
In addition to these activities, ICSID also carries on advisory and research activities, publishing Investment Laws of the World and of Investment Treaties, and collaborates with other World Bank Group units. Since April 1986, the Centre has published a semi-annual law journal entitled ICSID Review-Foreign Investment Law Journal.
ICSID proceedings do not necessarily take place in Washington, D.C. Other possible locations include the Permanent Court of Arbitration at The Hague, the Regional Arbitration Centres of the Asian-African Legal Consultative Committee at Cairo and Kuala Lumpur, the Australian Centre for International Commercial Arbitration at Melbourne, the Australian Commercial Disputes Centre at Sydney, the Singapore International Arbitration Centre, the GCC Commercial Arbitration Centre at Bahrain and the Frankfurt International Arbitration Center of German Institution of Arbitration (DIS) and the Frankfurt Chamber of Commerce and Industry.
Prepared by Biju P R,Assitant Professor in Political Science,Govt Brennen College,Thalassery.