Permanent Court of Arbitration Financial Assistance Fund for Settlement of International Disputes Terms of Reference and Guidelines, 11th December 1995, OXIO 219
Permanent Court of Arbitration [PCA]
- Permanent Court of Arbitration (PCA) — Arbitration — Costs and expenses
1. The operation of the Financial Assistance Fund for Settlement of International Disputes (‘FAF’) of the Permanent Court of Arbitration.
2. Whether the FAF has been used and has facilitated access to the available means of dispute settlement under the 1899 Convention for the Pacific Settlement of International Disputes and the 1907 Convention for the Pacific Settlement of International Disputes.
The Financial Assistance Fund for Settlement of International Disputes (‘FAF’ or ‘Fund’) of the Permanent Court of Arbitration (‘PCA’) is relevant to the law of international organizations because it is one of the means of financial assistance available to parties in international dispute settlement proceedings. It was created at the initiative of the Secretary-General of the PCA, and later approved by the Administrative Council of the PCA, which is composed of the diplomatic representatives to the Netherlands of the Member States of this intergovernmental organization. The purpose of the FAF is to provide financial assistance to qualifying states to enable them to meet, in whole or in part, their expenses relating to arbitration or other means of dispute settlement offered by the PCA under the 1899 Convention for the Pacific Settlement of International Disputes (‘1899 Hague Convention’) and the 1907 Convention for the Pacific Settlement of International Disputes (‘1907 Hague Convention’). The FAF consists of ad hoc voluntary contributions.
The Permanent Court of Arbitration Financial Assistance Fund for Settlement of International Disputes Terms of Reference and Guidelines (‘Terms of Reference and Guidelines’) were first approved by the Administrative Council of the PCA on 3 October 1994 (PCA 94th Annual Report, Annex 10). In October 1995, an Asian state-owned enterprise involved in arbitration proceedings under the auspices of the PCA submitted a request for financial assistance. This request was granted in December 1995 and prompted an amendment to paragraph 5 of the Terms of Reference and Guidelines, clarifying that financial assistance is available not only to Member States of the PCA, but also to an institution or enterprise owned and controlled by a Member State that meets the qualifying requirements under the FAF (95th Annual Report of the PCA, page 9, para 19). On 11 December 1995, the Administrative Council of the PCA approved the amended Terms of Reference and Guidelines of the fund.
The FAF was established to assist developing countries to meet the costs involved in international arbitration or other means of dispute settlement offered by the PCA. The FAF relies on ad hoc voluntary contributions from Member States of the PCA, and represents a joint effort of an international organization and its Member States in facilitating access to international dispute settlement. The FAF is also open to voluntary financial contributions by intergovernmental organizations and national institutions, as well as by natural and legal persons, although to date contributions have only been made by Member States. [para 4]
The FAF is administrated by the International Bureau of the PCA, with the supervision of an external and independent Board of Trustees, which decides on each request for funding. [paras 7, 10] The Board of Trustees is composed of individuals with experience in international dispute resolution and who are of the highest moral standing. [para 8]
Together with the UN Secretary-General’s International Court of Justice Trust Fund and the International Tribunal for the Law of the Sea Trust Fund, the FAF is one of a handful of funding mechanisms available to parties that would not otherwise be able or willing to avail themselves of the available dispute settlement procedures due to the high costs involved. Around half of the current PCA Member States are eligible to apply for a grant under the Fund. Grants are available for the parties not only to meet their costs relating to arbitrator, counsel, or registry fees, but also to cover the expenses of implementing an award or other decision rendered in relation to the award. [para 2] Another interesting aspect of how the FAF is administered is that it is open to voluntary contributions by the PCA Member States, intergovernmental organizations, national institutions, and even natural and legal persons.
In order to qualify for assistance under the FAF, a requesting state must meet the following conditions: (i) it must be a member of either the 1899 Convention or the 1907 Convention; (ii) it must have concluded an agreement for the purpose of submitting one or more disputes, whether existing or future, for settlement by any of the means administered by the PCA; and (iii) at the time of requesting financial assistance from the Fund, it must be listed on the DAC List of ODA Recipients prepared by the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD). A qualifying state may seek financial assistance from the FAF by submitting a written request to the Secretary-General of the PCA. [paras 5–6] The request should include a copy of the dispute settlement agreement, an itemized estimate of costs for which financial assistance is sought, and an undertaking to submit an audited statement of account of the expenses made with the received funds. [para 6]
The FAF has facilitated developing states’ resort to arbitration. For example, both parties were able to use the FAF in the Abyei Arbitration between the government of Sudan and the Sudan People’s Liberation Movement. This arbitration concerned the delimitation of the Abyei area, a region divided between what is now Sudan and South Sudan. As South Sudan was not a state at the time of arbitration, and could not apply to the FAF, the government of Sudan made a request to the Fund on behalf of both parties to the arbitration. The Board of Trustees approved a grant of € 752,939 to partially cover the costs of the arbitration. This was made possible by contributions to the FAF by France, the Netherlands, and Norway.
To date, ten Member States, namely Costa Rica, Cyprus, France, Lebanon, the Netherlands, Norway, Saudi Arabia, South Africa, Switzerland, and the United Kingdom, have made voluntary contributions to the FAF. Eight Member States have received grants under the FAF to finance arbitration costs, including two Asian states, three African states, a Central American state, a South American state, and an Eastern European state (PCA’s 116th Annual Report, page 15).
Further analysis of Relevant Materials
- R Mackenzie et al Manual on International Courts and Tribunals (Oxford University Press 2013)
- DD Caron et al Practising Virtue: Inside International Arbitration (Oxford University Press 2015)
- B W Daly and S Melikian ‘Access to Justice in Dispute Resolution: Financial Assistance in International Arbitration’ in KN Schefer (ed), Poverty and the International Economic Legal System: Duties to the World’s Poor (Cambridge University Press 2013)
- 1907 Convention for the Pacific Settlement of International Disputes (18 October 1907) UKTS 6 (1907); 1 Bevans 577
- 1899 Convention for the Pacific Settlement of International Disputes (29 July 1899) 1 Bevans 230
Organisation for Economic Co-operation and Development
- DAC List of ODA Recipients (accessed 23 August 2017) [http://www.oecd.org/dac/stats/documentupload/DAC%20List%20of%20ODA%20Recipients%202014%20final.pdf]
Establishment of a Financial Assistance Fund
1. The Hague Conventions for the Pacific Settlement of International Disputes of 1899 and 1907 brought into being what is today the oldest existing global system for the peaceful settlement of international disputes. They established the Permanent Court of Arbitration, and provided for the settlement of such disputes by States Parties through arbitration and other peaceful means of their own choice.
2. States Parties to the Conventions undertake to use their best efforts to ensure the peaceful settlement of their disputes. However, there may be instances when States are deterred from recourse to international arbitration or other means of settlement offered by the Conventions because they find it difficult at the time to allocate funds to meet the costs involved. Such costs may include the fees and expenses of members of an arbitral or other body entrusted with settling the dispute; the expenses of implementing an award or other decision or recommendation of such a body; payments to agents, counsel, experts and witnesses; and operational or administrative expenses connected with oral or written proceedings. Making funds available to meet costs of this nature could facilitate recourse to arbitration or other means of settlement, thus advancing the aims and purposes of the Conventions, and promoting friendly relations and cooperation among States.
3. Accordingly, the Secretary-General of the Permanent Court of Arbitration (the ‘Secretary-General’) has, with the approval of the Administrative Council, established a Financial Assistance Fund for the Settlement of International Disputes (the ‘Fund’). The Fund will provide financial assistance to Qualifying States (as defined herein), in accordance with the terms and conditions specified herein, to enable them to meet, in whole or in part, expenses of the type referred to in paragraph 2.
Contributions to the Fund
Request for Financial Assistance from the Fund
5. For purposes of this document, ‘Qualifying State’ shall mean a State that is a party to the Convention of 1899 or 1907, or any institution or enterprise owned and controlled by such State, which has concluded an agreement for the purpose of submitting one or more disputes, whether existing or future, for settlement under the auspices of the Permanent Court of Arbitration by any of the means administered by the Permanent Court of Arbitration, and which State, at the time of requesting financial assistance from the Fund, is listed on the ‘DAC List of Aid Recipients’ prepared by the Organization for Economic Cooperation and Development (OECD).
6. Any Qualifying State may seek financial assistance from the Fund, by submitting a written request therefor to the Secretary-General, accompanied by:
(i) A copy of the abovementioned dispute resolution agreement, as well as, in the case of an agreement to submit future disputes, a brief description of the specific dispute concerned;
(ii) An itemized statement of the estimated costs for which financial assistance is sought from the Fund;
(iii) An undertaking that the requesting State shall supply a final statement of account providing details of the expenditures made from the approved amounts, audited by an independent accountant acceptable to the International Bureau of the Permanent Court of Arbitration.
7. The International Bureau of the Permanent Court of Arbitration shall be the implementing office for the Fund, and shall be responsible for the administration of the Fund. The International Bureau shall make no allocations or disbursements from the Fund, other than pursuant to a decision of the Board of Trustees, as set forth below.
Board of Trustees
8. For purposes of deciding on requests for financial assistance from the fund, there shall be a Board of Trustees (the ‘Board’), composed of no fewer than three and no more than seven members who have experience in international dispute resolution and are of the highest moral standing. Members shall be appointed by the Secretary-General with the approval of the Administrative Council, and shall serve for a term of four years, which may be renewed. The Secretary-General shall be entitled to fill any vacancy occurring in the membership of the Board with immediate effect, pending approval by the Administrative Council at its next following meeting.
9. The Secretary-General shall serve as chairman of the Board. He shall conduct and participate fully in meetings of the Board, but shall not vote on any request for financial assistance from the Fund.
10. The Board shall examine requests for financial assistance from the Fund, and shall determine the amount of financial assistance to be given, if any, the categories of expenses to which it may be applied, as well as any terms and conditions it deems appropriate.
11. After having consulted the Board of Trustees, the Secretary-General shall adopt rules governing, inter alia, the manner in which the work of the Board is to be con-ducted. The work of the Board shall be conducted in strict confidentiality.
12. In considering a request for disbursement, the Board shall be guided, inter alia, by the financial needs of the requesting State and the availability of funds.
13. Members of the Board shall not be entitled to receive fees for their services, or reimbursement of expenses incurred in that connection. The Secretary-General may, in exceptional cases and in his sole discretion, determine the amount to be paid to a member by way of reimbursement of expenses for travel and subsistence incurred in connection with the rendering of services to the Board.
14. Upon the approval of a request for financial assistance, the amount granted shall be disbursed to the requesting State out of the Fund, pursuant to the terms and conditions set forth by the Board in its decision.
16. The Secretary-General shall report to the Administrative Council at least once annually in detail on the activities and transactions relative to the Fund, including contributions pledged and received, and allocations and disbursements made. The Annual Report of the PCA shall contain a summary report on the activities of the Fund.