For many years, critics have complained that there was not enough transparency in investor-State arbitration. Last week, Canada made headlines by becoming only the second State to ratify the 2015 United Nations Convention on Transparency in Treaty Based Investor-State Arbitration (the Mauritius Convention).
The Convention confirms and extends the applicability of the 2014 UNCITRAL Rules on Transparency in Treaty Based Investor-State Arbitrations. The UNCITRAL Rules on Transparency were only applicable to disputes arising from treaties which entered into force after April 1st, 2014, whereas Article 1 of the Mauritius Convention clearly states that the rules on Transparency also extend to treaties concluded before that date, expanding the scope of transparency in investment arbitration:
“This Convention applies to arbitration between an investor and a State or a regional economic integration organization conducted on the basis of an investment treaty concluded before 1 April 2014 (“investor-State arbitration”).”
Interestingly, through the Mauritius Convention, the UNCITRAL Rules on Transparency will be applicable even to disputes not initiated under the UNCITRAL Arbitration Rules according to Article 2, expanding the scope of the Mauritius Convention to investment disputes under the ICC, SCC, ICSID and other arbitral rules:
“The UNCITRAL Rules on Transparency shall apply to any investor-State arbitration, whether or not initiated under the UNCITRAL Arbitration Rules, in which the respondent is a Party that has not made a relevant reservation under article 3(1)(a) or (b), and the claimant is of a State that is a Party that has not made a relevant reservation under article 3(1)(a).”
The UNCITRAL Rules on Transparency contain a number of substantive provisions that import changes to the traditional characteristics of an arbitration. Mainly, they reduce confidentiality by providing for public access to the proceedings and materials. More specifically, Articles 2 and 3 call for the publication of information about ongoing proceedings and the publication of arbitration-related documents. Articles 4 and 5 allow third persons or non-disputing treaty Parties to also make submissions. Article 6 provides that hearings will be public.
There are two restrictions: First, all the above are subject to the broadly-drafted Article 7 exception, whereby “confidential or protected information” will not be available to the public. Second, the Convention is not applicable to all investor-State Arbitrations. Instead, it only applies to Treaty-based arbitrations, excluding from its scope cases where the instrument of consent is legislation or contract.
Transparency is a topical concern in investor-State arbitration, where critics have decried the lack of legitimacy of arbitral awards, because of the ability of one-off tribunals to make binding decisions that affect States and their citizens. For example, investment arbitrations may concern the ability of States to legislate in the public interest or to discuss issues that affect local communities. The UNCITRAL Rules on Transparency are intended to ensure that these proceedings are accessible to affected persons, enabling them to participate or monitor the progress of a case, in hopes that this will lend more legitimacy to arbitral awards dealing with such delicate matters.
Contrary to early predictions, however, only 17 States signed the Convention after its adoption by the UN in 2015. Prior to Canada, Mauritius was the only other State to ratify the treaty, which will require at least three ratifications before entering into force.
The reluctance of more States to participate in the Mauritius Convention suggests that confidentiality is still considered an important tool for resolving investment disputes by States. It seems that States are more likely to settle a case when not risking an outcry for the amounts of tax-payer money that may be spent compensating an investor, or perhaps they are wary of revealing embarrassing conduct on the part of the State.
US President Obama’s current attempt to convince the Senate to ratify the Mauritius Convention before the end of his presidency is important for the future of transparency in investor-State arbitration and would allow the treaty to enter into force.