Arbitration awards issued by a tribunal pursuant to party settlement agreements—commonly called awards by consent, or simply “consent awards”—can serve as a valuable tool for parties in both international commercial arbitration or investor-state dispute settlement (“ISDS”) proceedings.  They function in international arbitration as a sort of subspecies of arbitral awards in which the tribunal records the terms of the disputing parties’ settlement agreement in the form of an arbitral award.  In so doing, the consent award transforms a settlement agreement, i.e., an otherwise standard contract, into an arbitral award with all the enforceability benefits that that designation entails.

The recent example of Nachingwea U.K. Ltd. v. Tanzania,1Nachingwea U.K. Limited (UK), Ntaka Nickel Holdings Limited (UK) and Nachingwea Nickel Limited (Tanzania) v. United Republic of Tanzania, ICSID Case No. ARB/20/38.X1 an ISDS arbitration that proceeded under the auspices of the International Centre for Settlement of Investment Disputes (“ICSID”) and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID Convention”),2Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Mar. 18, 1965, 17 U.S.T. 1270, T.I.A.S. 6090, 575 U.N.T.S. 159.X2 provides an interesting, albeit nuanced, case study on the possible use (or in that case, non-use) of consent awards.  

This article will first survey the source of tribunals’ authority to issue consent awards in the form of arbitral rules that commonly govern such proceedings.  Then it will discuss the possible benefits of consent awards when it comes to the enforcement of party settlements.  The Article will further dive into the publicly available information on Nachingwea U.K. Ltd v. Tanzania with an eye toward the decision-making process as to whether to memorialize the parties’ settlement in a consent award, before finally concluding.

Consent awards reflect a core principle of arbitration:  party autonomy.  In both international commercial arbitration and ISDS, parties may settle their dispute during the proceedings and request that the arbitral tribunal record their agreement in the form of a binding award.  Institutional rules provide the procedural framework for doing so.

In international commercial arbitration, institutional rules expressly authorize tribunals to issue awards on agreed terms.  For example, Article 33 of the International Chamber of Commerce (ICC) Rules provides that, if the parties reach a settlement after the file has been transmitted to the tribunal, the settlement shall be recorded as a consent award at the parties’ request and with the tribunal’s agreement.1ICC Rules of Arbitration (2021), art. 33.X1  Similarly, Article 26.9 of the London Court of International Arbitration (LCIA) Rules permits a tribunal to issue a “Consent Award” upon the parties’ joint written request; absent such a request, confirmation of settlement results in termination of the proceedings.2LCIA Arbitration Rules (2014), art. 29.6.X2  These provisions demonstrate how commercial arbitral institutions facilitate settlement while preserving the enforceability and finality of arbitral outcomes.

Consent awards are equally recognized in ISDS. Here the 2006 and 2022 Arbitration Rules of the International Centre for Settlement of Investment Disputes (ICSID) state that a tribunal may record a settlement as an award if the parties submit the full, signed text of their agreement.3See 2006 ICSID Rules, Rule 43(2) (emphasis added).X3  The 2022 amendments apply to arbitrations where consent was given on or after July 1, 2022,4ICSID Convention, art. 44.X4 and maintain this mechanism.5See ICSID Rules of Procedure For Arbitration Proceedings (2022), Rule 55(b)(2), available at https://icsid.worldbank.org/sites/default/files/documents/ICSID_Convention.pdf.X5  Unlike most international arbitrations, ICSID proceedings do not have a legal seat;6Savić Milica & Ugale Anastasiya, Seat of Arbitration,  Jus Mundi Wiki Notes, June 19, 2023, available at https://jusmundi.com/en/document/publication/en-seat-of-arbitration.X6 awards are not subject to set-aside by domestic courts but may be challenged only through the Convention’s internal annulment mechanism before an ad hoc committee.  Consent award provisions also apply in that context.

Outside the ICSID system, ISDS proceedings frequently proceed under the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules.  Article 36(1) permits a tribunal, upon settlement, either to terminate the proceedings or—if requested by the parties and accepted by the tribunal—to record the settlement as an award on agreed terms.  Across these regimes, the process is consistent:  if both parties request it and the tribunal agrees, the settlement may be embodied in a binding consent award.7UNCITRAL Arbitration Rules (2013), art. 36(1).X7

The principal advantage of a consent award lies in its enforceability under international treaty regimes.  Most international commercial awards and non-ICSID investment awards are enforced under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).8U.S.T. United National Conference on International Commercial Arbitration, Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, June 10, 1958.X8  With 172 Contracting States,9The New York Convention, Contracting States, available at https://www.newyorkconvention.org/contracting-states.X9 the Convention obliges courts to recognize and enforce foreign arbitral awards under conditions no more onerous than those applied to domestic awards.10New York Convention, art. III.X10  This framework gives consent awards the same cross-border enforceability as any other arbitral award.

ICSID awards, by contrast, are enforced under the self-contained regime of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention).  Article 53 provides that ICSID awards are final and binding, subject only to the remedies provided within the Convention.11ICSID Convention, art. 53.X11  Article 54 requires Contracting States to recognize and enforce pecuniary obligations imposed by an ICSID award as if it were a final judgment of their own courts.122022 ICSID Rules art. 54.X12  Unlike awards governed by the New York Convention, ICSID awards are not subject to annulment or set-aside by domestic courts; challenges proceed exclusively through the Convention’s internal mechanisms.

In sum, across commercial arbitration and ISDS, consent awards translate negotiated settlements into enforceable arbitral awards.  Institutional rules confer authority; international conventions provide the enforcement regime.  Together, they ensure that settlements reached within arbitration retain both finality and global enforceability.

One recent ICSID case demonstrates the possible options when deciding whether to transform a regular settlement into a consent award.  Nachingwea U.K. Ltd. v. Tanzania1Nachingwea U.K. Ltd. (UK), Ntaka Nickel Holdings Ltd. (UK) & Nachingwea Nickel Ltd. (Tanz.) v. United Republic of Tanz., ICSID Case No. ARB/20/38 [hereinafter “Nachingwea U.K. Ltd. v. Tanzania”]X1 was initiated in 2020.  The dispute originated over a nickel mining development project in Tanzania.2Akinyi Agutu & Munia El Harti Alonso, Tanzania Hit by Second ICSID Dispute Related to Mining Retention Licenses, Afronomics Law, Nov. 23, 2020, available at https://www.afronomicslaw.org/2020/11/23/tanzania-hit-by-second-icsid-dispute-related-to-mining-retention-licenses.X2  The claimants were three subsidiaries of the Australian mining company, Indiana Resources (hereinafter referred to as “Indiana Resources”). They alleged that Tanzania canceled several retention licenses with them in breach of the UK-Tanzania bilateral investment treaty (the “UK-Tanzania BIT”).3Id.X3  The Tribunal found in favor of Indiana Resources and awarded US$109 million in damages and costs in July 2023 (the “Award”).4Nachingwea U.K. Ltd. v. Tanzania, Award, ¶ 413 (July 14, 2023).X4  Tanzania thereafter initiated proceedings before an ad hoc committee to annul the Award pursuant to article 52 of the ICSID Convention and rule 50 of the 2006 ICSID Rules.5Nachingwea U.K. Ltd. v. Tanzania, Decision on Preliminary Objections Pursuant to ICSID Arbitration Rule 41(5), ¶ 9 (Feb. 2, 2024).X5  During the course of the annulment proceedings, Indiana Resources and Tanzania agreed to settle for US$90 million.6Matthew Craig,   Indiana Resources complete US$90M settlement deal with Tanzania, The Market Bull, July 29, 2024, available at https://themarketbull.com.au/2024/07/29/indiana-resources-complete-us90m-settlement-deal-with-tanzania/. See also, Italaw, Claimant’s Press Release on Settlement, July 29, 2024, available at https://www.italaw.com/sites/default/files/case-documents/italaw182100.pdf.X6 

Notably, the ad hoc committee was not requested to issue a consent award pursuant to articles 52(4) and 44 of the ICSID Convention and Rules 43(2) and 53 of the applicable 2006 ICSID Rules.  Rather, the parties agreed to request that the ad hoc committee merely suspend the annulment proceedings and included in their settlement agreement an arbitration agreement referring any disputes to the LCIA.7Id.X7  According to press reports, Indiana Resources has since lodged an LCIA arbitration for breach of the settlement agreement, indicating an alleged breach of the settlement agreement.8Jack Ballantyne, July 18, 2023, Tanzania Liable Over Revoked Mining Licenses, https://globalarbitrationreview.com/article/tanzania-liable-over-revoked-mining-licenceX8 

Indiana Resources had the procedural option to seek a joint request (with Tanzania) for a consent award from the ad hoc committee.  The practical viability of such an approach would typically depend on the parties’ relative bargaining positions at the relevant stage of the proceedings.  In this case, several observable factors suggest that Indiana Resources may have possessed meaningful negotiating leverage.

First, the company held an ICSID award of approximately US$109 million.  Second, the ad hoc committee had dismissed three of Tanzania’s four annulment grounds pursuant to 2006 ICSID Rule 41(5) on the basis that they were manifestly without merit,9Nachingwea U.K. Ltd. (UK), Ntaka Nickel Holdings Ltd. (UK) & Nachingwea Nickel Ltd. (Tanz.) v. United Republic of Tanz., ICSID Case No. ARB/20/38, Decision on Preliminary Objections Pursuant to ICSID Arbitration Rule 41(5), ¶ 166 (Feb. 2, 2024).X9 thereby narrowing the scope of potential annulment and potentially reinforcing the award’s stability.  These procedural developments may have strengthened Indiana Resources’ position in settlement discussions.

Further, Tanzania’s agreement to a reduction of less than 20% of the award amount, in exchange for payment in three tranches over eight months,10Matthew Craig, July 29, 2024, Indiana Resources complete US$90M settlement deal with Tanzania, https://themarketbull.com.au/2024/07/29/indiana-resources-complete-us90m-settlement-deal-with-tanzania/X10 may be indicative of a negotiated outcome reached under conditions of asymmetrical risk exposure.  While these factors do not establish that a consent award was either available or strategically optimal, they provide a basis for considering whether such an option was realistically within the range of procedural possibilities.

Even assuming that a consent award was procedurally available, the more salient question is why Indiana Resources may have declined to pursue that course.  Although a consent award would have provided Indiana Resources with the ability to immediately enforce the terms of the parties’ settlement as a domestic judgment in contracting states to the ICSID Convention, it would have limited Indiana Resources flexibility in dealing with the situation.  First, the effect of a consent award would have been to replace the terms of the award with those of the new consent award, effectively extinguishing nearly US$20 million in value.  Second, since the parties had merely suspended the annulment proceedings, if Tanzania had failed to pay either of the latter two payment tranches, then Indiana Resources could have simply requested the ad hoc Committee to resume the annulment proceedings.11Indiana Resource & Stockhead, July 30, 2024, Indiana Resources receives first payment in US$90m Ntaka Hill settlement with Tanzania, https://stockhead.com.au/resources/indiana-resources-receives-first-payment-in-us90m-ntaka-hill-settlement-with-tanzania/X11  Given that the ad hoc Committee had already dismissed 75% of Tanzania’s annulment claims as being manifestly without merit, the remaining claim for annulment would likely be rejected on the merits, and Tanzania would be on the hook for the full amount of the award.

In other words, it appears that Indiana Resources used its superior bargaining power to push through the payment of an overwhelming majority of the award, while maintaining the flexibility to pursue either the full award after obtaining a full dismissal of Tanzania’s annulment request or, in the event of a ‘lesser’ breach, an LCIA international commercial arbitration.

Overall, tribunal rules governing consent awards provide a clear roadmap where parties can take their private negotiated settlements and turn them into binding arbitral awards.  Without this procedural tool, parties risk the possibility that one side might not hold up their end of the private settlement.  If that occurs, litigation (or more arbitration) is the most likely path to enforce the privately negotiated settlement.  Parties will then either start again the whole arbitral process or be left at the mercy of a court.  Consent award rules simply provide procedural efficiency that incentivize parties to settle early.  If those rules are initiated, the tribunal acts as the facilitator helping to bring about a final award.  Once the private settlement becomes an arbitral award, challenges to the award are strictly limited.  To reiterate, consent awards not only allow parties to gain control over the outcome of their dispute, but institutional rules and arbitration laws provide binding and simplified enforcement mechanisms.  This minimizes disruptions in both day-to-day business as well as potential larger diplomatic issues.

The case discussed supra in Nachingwea U.K. Ltd. v. Tanzania provides a glimpse into the decisions being weighed by parties when initiating settlement options during the course of an arbitration or annulment proceeding.  While there is never one right answer in the legal field, the unique insights from the case provide food for thought when parties are considering settlement and the use—or not—of consent awards.