INTRODUCTION

Art. 34 is the Convention's core Article on conciliation. Under the Convention's general scheme, conciliation and arbitration are equivalent methods of dispute settlement. This equivalence was maintained despite doubts concerning the usefulness or effectiveness of conciliation during the Convention's drafting (History, Vol. II, pp. 263, 265, 415). The Convention has separate Chapters on Conciliation (Chapter III, Arts. 28–35) and Arbitration (Chapter IV, Arts. 36–55). Other parts of the Convention are common to both types of procedures. These common provisions include Art. 25, dealing with jurisdiction, Chapter V, dealing with the replacement and disqualification of conciliators and arbitrators, Chapter VI, dealing with the cost of proceedings, and Chapter VII, dealing with the place of proceedings.

Conciliation is not based on an adversarial procedure resulting in a binding third party decision. Rather, it is directed towards an agreed settlement. The procedure is relatively informal. Conciliation requires a certain degree of flexibility and goodwill from the parties.

Conciliation is particularly appropriate where the parties are prepared to continue their cooperation on the investment. Arbitration will, typically, be used where the parties have reached the end of their business relationship. Conciliation has also been regarded as particularly attractive for cultures that are less favourably disposed towards adversarial procedures such as China.