The purpose of this paper is to introduce ICSID Arbitration and the Washington Convention which have not been known well in Korea, to examine the advantages and disadvantages of the Arbitration System, and to recommend the Model Arbitration Clause to be included in the Investment Agreement. The ICSID's record of activity is extremely low compared to the ICC Arbitration in which in six years from 1986 to 1991, the annual average number of request for arbitration was more than 300. The reason for ICSID's low level of activity lies in the limited jurisdiction including its jurisdiction ratione personae and ratione materiae. The second reason is the fact that the ICSID Arbitration was not well-known. And the parties to investment agreements generally do not like to publicize their disputes, preferring to settle them amicably. The third reason might be dependent upon the fact that the investors were reluctant to play the role of pioneers for a new institution. Finally, a fundamental reason relates to the state sovereignty, In this respect, the submission of concrete disputes may prove worrisome for a number of LDCS. In spite of the above disadvantages, the ICSID Arbitration has very significant positive points. First, in so far as ICSID's jurisdiction ratione personae is influenced by the number of ratification, with over than 130 signatories of the Convention all over the world, which gives grounds for relative optimism in the future. Second, We need not have any fear of arbitration biased by the policies of a bureaucratic international organization. Therefore there is no reason that ICSID Arbitration should not present the same fairness and quality as other international arbitration proceedings. Third, The Additional Facility may be available where either the sovereign party or the private investor does not qualify for arbitration under the Convention because it or its nation is not a party to the Convention. Under the Additional Facility, the arbitration may also be available for the settlement of disputes that do not directly arise out of an investment. The annulment of the ICSID award by an ad hoc committee must be considered as jeopardizing ICSID Arbitration because it clearly depart from the current trends of international commercial arbitration which limits any kinds of judicial review and excludes any kinds of review on the merits. I hope that the future decisions of the ad hoc committees will restore a narrow scope to the ICSID procedure of annulment in order not to jeopardize the ICSID Arbitration mechanism. The ICSID Secretariat provides various publications including model clauses. I would like to recommend Model Clause I as follow; "The parties hereby consent to the International Centre for Settlement of Investment Disputes any dispute in relation or arising out of this Agreement for settlement by conciliation arbitration pursuant to the Convention on the Settlement of Investment Disputes between States and Nations of other States". By the Model Clause 1, all proceeding would be regulated by the Convention and the ICSID "Arbitration Rules" including the major issues, such as the applicable law of the rules governing the arbitral proceedings.

The purpose of this paper is to introduce ICSID Arbitration and the Washington Convention which have not been known well in Korea, to examine the advantages and disadvantages of the Arbitration System, and to recommend the Model Arbitration Clause to be included in the Investment Agreement. The ICSID's record of activity is extremely low compared to the ICC Arbitration in which in six years from 1986 to 1991, the annual average number of request for arbitration was more than 300. The reason for ICSID's low level of activity lies in the limited jurisdiction including its jurisdiction ratione personae and ratione materiae. The second reason is the fact that the ICSID Arbitration was not well-known. And the parties to investment agreements generally do not like to publicize their disputes, preferring to settle them amicably. The third reason might be dependent upon the fact that the investors were reluctant to play the role of pioneers for a new institution. Finally, a fundamental reason relates to the state sovereignty, In this respect, the submission of concrete disputes may prove worrisome for a number of LDCS. In spite of the above disadvantages, the ICSID Arbitration has very significant positive points. First, in so far as ICSID's jurisdiction ratione personae is influenced by the number of ratification, with over than 130 signatories of the Convention all over the world, which gives grounds for relative optimism in the future. Second, We need not have any fear of arbitration biased by the policies of a bureaucratic international organization. Therefore there is no reason that ICSID Arbitration should not present the same fairness and quality as other international arbitration proceedings. Third, The Additional Facility may be available where either the sovereign party or the private investor does not qualify for arbitration under the Convention because it or its nation is not a party to the Convention. Under the Additional Facility, the arbitration may also be available for the settlement of disputes that do not directly arise out of an investment. The annulment of the ICSID award by an ad hoc committee must be considered as jeopardizing ICSID Arbitration because it clearly depart from the current trends of international commercial arbitration which limits any kinds of judicial review and excludes any kinds of review on the merits. I hope that the future decisions of the ad hoc committees will restore a narrow scope to the ICSID procedure of annulment in order not to jeopardize the ICSID Arbitration mechanism. The ICSID Secretariat provides various publications including model clauses. I would like to recommend Model Clause I as follow; "The parties hereby consent to the International Centre for Settlement of Investment Disputes any dispute in relation or arising out of this Agreement for settlement by conciliation arbitration pursuant to the Convention on the Settlement of Investment Disputes between States and Nations of other States". By the Model Clause 1, all proceeding would be regulated by the Convention and the ICSID "Arbitration Rules" including the major issues, such as the applicable law of the rules governing the arbitral proceedings.

ICSID, Arbitration, Washington Convention.