What is the Value of Increasing Transparency in Investment Arbitration?

16 Янв

Статья посвящена актуальным вопросам международного коммерческого, в частности, инвестиционного, арбитража. Так, автор раскрывает содержание прозрачности инвестиционного арбитража. Вообще, особое внимание уделяется автором прозрачности арбитража. Причем отмечается определенное противоречие в отношениях сторон спора, с одной стороны, и публики, с другой стороны, к открытости коммерческого арбитража. В этом плане большой интерес вызывает вопрос об оптимальном соотношении открытости и конфиденциальности международного коммерческого арбитража. Комиссия ООН по праву международной торговли (ЮНСИТРАЛ) предприняла попытку урегулировать такие отношения путем издания в 2013 году правил относительно открытости арбитража.

Transparency is a popular trend in in­vestment arbitration (hereinafter — IA) which is intensively debated by arbitration special­ists. Transparency is a concep­tual, rather than legal issue, which affects the state and operation of the modern sys­tem of IA.

The involvement of a so­vereign state in arbitration determines greater transpar­ency. This is true not only for investment disputes, but also for inter-state arbitration and international courts with the participation of states. Trans­parency begins with the in­vestment protection treaties which are openly published, unlike confidential commercial contracts.

The value of transparency does not seem to be absolute. Transparency should not be im­posed on the parties in the sys­tem of arbitration which is based on the parties’ consent — a cor­nerstone of IA. The supporters of transparency should persuade investors and host states of the benefits of increasing transpar­ency.

In turn, confidentiality is a traditional concept in IA. There should be a reasonable balance between transparency and con­fidentiality. The requirements to transparency should be such, as the disputing parties can realis­tically afford.

How does the present day level of transparency affect the system of investment arbitration?


— ensures better knowledge of the IA system;

—   makes the IA system more predictable and potential­ly more trusted by the parties;

—  creates more uniformity in IA;

—     adds criticism, which may be helpful for the system’s viability;

—     stimulates the partici­pants, including the arbitrators, to perform their work with bet­ter quality.

It is obvious that transpar­ency provides knowledge and information about IA develop­ments, gives rise to hundreds of publications and regular statis­tics on the subject. All of this is highly appreciated by arbitra­tion specialists. For example, according to a UNCTAD study, by 2013 the total number of concluded cases in IA reached 244 (the number of known cases was 514). Of these, ap­proximately 42% were decided in favor of the state and ap­proximately 31% in favor of the investor. Approximately 27% of the cases were settled.

In order to be a powerful tool, trusted by the parties, IA must be predictable. The states and investors seek to get in­formation on how the arbitral tribunals apply international treaties, created by the states, and develop legal concepts. Both investors and states wish to receive highly profession­al services of arbitrators and counsel, and, therefore, they want to know of their deci­sions and achievements in the previous cases. However, only the ICSID keeps a public regis­try of arbitrations. According to the UNCTAD study, of 85 cases under the UNCITRAL Rules admi­nistered by the PCA only 18 were public as of the end of 2012.

Transparency helps to build a more harmonized arbitra­tion practice. Speedy publica­tion of arbitration decisions in investment disputes and com­ments to them promotes more uniformity in IA. The dynamic exchange of information in IA facilitates uniform approaches to procedural matters and sub­stantive rules. The develop­ment of substantive law rules and standards by the tribunals is of fundamental importance. In the course of the decades in the last century and before in­ternational investment law had been evolving rather gradually by sovereign states. Over the last two decades we have seen rapid developments in the in­ternational investment law by the arbitral tribunals. No doubt, the tribunals must apply and interpret the rules of interna­tional investment law without going beyond the scope of the agreement and without distort­ing the substance of the agree­ment of the sovereign states as the creators of the rules of in­ternational law.

Transparency facilitates criticism of arbitral awards. This is normal, especially if awards deal with new issues. At the same time, some com­mentators note the increasing disagreements between arbitra­tors «undermine predictability of the system»1.

On the one hand, the grounded criticism of IA hope­fully forces the existing system to be reviewed and reformed. On the other hand, the severe criticism of the existing system over the last years2 is hardly beneficial for the trust of par­ties in such a system.

Commentators noted that there is no better method against the criticism of IA to overcome the shortages of pub­lic trust than to show the high­est standards in conducting the arbitration.

II. The value of increasing transparency in the eyes of the public and disputing parties

Transparency is the issue in which States, investors and the public may have substantially diverse interests.

1 UNCTAD. IIA Issues Note, April 2012. No 1. p. 14

2 See e g. the criticism of the existing system of IA in the Public Statement of 2010 of more than 50 professors of Law On the In­ternational investment Regime Act — http:// wwwosgoode.yorku.ca/public_statement. and in the 2012 study entitled «Profiting from injustice» (How law firms, arbitrators and financiers are fuelling an investment arbitration boom) — http://corporat.eeu-rope.org/sttes/default/files/publlcations/ profiting-from-injustice.pdf.

It is often noted that public interest is the major factor of transparency in IA. Investment disputes deal with public health, environmental protection and other areas where public inter­est prevails. The supporters of transparency say that in cases where the dispute involves matters of public interest the proceeding should not be kept fully confidential, even if both parties so wish. Also, it is noted in this regard that substantial taxpayer funds are used in the IA that affects the budgets of states. So, the public is appar­ently most interested in having such investment cases taking place not behind closed doors.

What is beneficial for the public may not be necessarily equally good for the disputing parties.

States take different views on transparency. Some of them declare their strong support of transparency in IA. On the US Department of State’s website one can find both the decisions of the tribunals and the sub­missions of the parties in the investment disputes with its participation3. Transparency and accountability are declared as the key objectives of the new European Union investment policy.

Certain states take a more reserved position with respect to transparency in IA. It was reported in 2012 that at least 7 awards in the investment disputes with participation of the Czech Republic remained unpublished4, while about the same number was published. It is interesting to note that some of the unpublished awards were favorable to the state, like the UNCITRAL case Binder v. Czech Republic.


Article 29 of the U.S. Model BIT of 2012 provides that the parties’ submissions, tran­scripts of hearings, orders and decisions of the tribunal shall be available to the public, and that the tribunals shall conduct open hearings. The exceptions are provided for «protected information», i.e. information not designated for disclosure.

4 Investment Arbitration Reporter, 11 June 2012.

Apparently, Ukraine is get­ting somewhat less transparent with respect to its investment arbitration cases. Over the last couple of years several awards unfavorable to Ukraine were not published (the award in Rem­ington case, the award in In-maris case5; the decision of the ad hoc committee in the second Lemire case). At the same time, over the last 15 years the first wave of the IA cases against Ukraine has been repulsed with prevailingly positive results for the respondent state. From 1998 till 2010 Ukraine had an unbroken record of cases. There have been no new reported in­vestment cases in almost the last 3 years. Now Ukraine is having no ICSID cases and a few remaining non-ICSID cases. At least 13 awards and deci­sions on jurisdiction have been published in 15 concluded cases with Ukraine’s participation.

As regards investors, gen­erally, they may benefit from transparency obtaining infor­mation about the developments in IA, the activities of arbitra­tors and counsel. At the same time, an investor may not be in­terested in the publication of a particular award not only when it loses a case. An investor or its counsel may be disappointed by the award which is formally favorable to their party, but in fact discloses a number of its weak points in the proceedings.

III. Where is the balance between transparency and confidentiality?

The balance between trans­parency and confidentiality can be found in the degree of open­ness in the proceedings. There may be several levels of trans­parency.

(1). Publication of awards. At a minimum, it is desirable that awards should be pub-

5 In Inmaris case only the excerpts of the award of 2012 were published under Rule 48(4) of the ICSID Arbitration Rules. The decision on jurisdiction of 2010 in this case was published in full upon the permission of the disputing parties.

lished. In some cases it is un­clear whether publication of an award was blocked by a state party or by an investor. Publica­tion of the excerpts of an award in ICSID is better than nothing, but it is hardly a proper substi­tution for the publication of the entire award.

According to the UNCTAD study, at least 42 arbitral deci­sions were issued in 2012; 31 of these decisions are in the public domain.

(2). It may be question­able whether the parties are prepared to disclose their set­tlement agreements which in most cases remain confidential. Rare settlements become pub­lic (e.g. Vattenfall v. Germany, ICSID Case No.ARB/09/6). On the ICSID web-site one can see that more than 30% of cas­es have been concluded by an agreed settlement though only a handful of them have been published.

(3). Open hearings (e.g. in ICSID) is a rather new trend. It is questionable whether it will become a prevailing prac­tice and whether the parties find substantial benefits in open hearings. It may be justified to have open hearings on highly politicized cases. In any case, it is likely that open hearings would stimulate the partici­pants (counsel, experts), includ­ing arbitrators, to perform their work with better quality and more discipline. On the other hand, certain fact witnesses may refrain from testimony based on various considerations if they realize that it will be made public.

(4). Publication of the writ­ten submissions. A party’s read­iness to publish its submissions demonstrates its confidence. However, cases are different, and it is difficult to expect that even the same party would be willing to publish its submis­sions in each case.

Generally, it does not seem that publication of submissions is necessary. It may be sufficient that a published award presents the positions of the parties on the major issues. If some states wish to publish their submis­sions, they are free to do this, but this requirement should not be imposed on those who are not prepared.

Apparently, transparency will influence the strategy and tactics of the parties. Trans­parency is likely to bring more discipline to the drafting of the pleadings. Transparency discloses mistakes, and it will probably make the competing counsel be more careful and less risky with the written sub­missions.

A personal factor is also im­portant. Some people taking de­cisions on IA are conservative, and it may be quite difficult to persuade a state official, for example, in a CIS country, that transparency is beneficial for his/her specific case.

IV. 2013 UNCITRAL Transparency Rules

The UNCITRAL Transpar­ency Rules of July 2013 demon­strate an unprecedented level of transparency. This is a result of nearly three years of negotia­tions in the UNCITRAL Working Group on Arbitration.

A new set of the UNCITRAL Arbitration Rules of 2013 (with a new Article 1, Para. 4 referring to the Transparency Rules) will come into effect on the same day as the Transparency Rules — 1 April 2014. The UNCITRAL Transparency Rules are avail­able for use in IA under other rules, but they will not apply to the contract-based investment arbitration, commercial arbitra­tion, or state-to-state arbitration under the UNCITRAL Rules.

The UNCITRAL Transpar­ency Rules will apply to inves­tor-state arbitration under a treaty which was concluded on or after 1 April 2014 referring to UNCITRAL arbitration (unless the parties to such treaty have expressly opted out); and for claims under a treaty which was concluded before 1 April 2014 (i) on agreement of the disput­ing parties; or (ii) if the State parties to the treaty have agreed after 1 April 2014 to their appli­cation.

The UNCITRAL Transpar­ency Rules provide public ac­cess to the majority of the documents generated during the arbitration (notice of arbi­tration, written submissions, lists of exhibits, transcripts of hearing), as well as public ac­cess to hearings (with certain exceptions as to confidential or protected information and pre­serving the integrity of the ar­bitral process). Arbitrators will have discretion to keep some documents confidential and «take measures to restrain or delay the publication of infor­mation where such publication would jeopardize the integrity of the arbitral process because it could hamper the collection or production of evidence, lead to the intimidation of witness­es, lawyers acting for disputing parties, or members of the arbi­tral tribunal, or in comparably exceptional circumstances» (Ar­ticle 7, paragraph 7). All deci­sions will be published.

Will the new UNCITRAL Transparency Rules become a model of how to conduct IA transparently? It will be inter­esting to observe whether or not these rules will be widely used after 1 April 2014; whether the states will refer to the new UNCITRAL Arbitration Rules (or alternatively to 1976 UNCITRAL Rules) in the new treaties and whether the disputing parties will agree to apply these new Rules in disputes under treaties concluded before 1 April 2014. Also, it will be seen whether the 2013 UNCITRAL Transparency Rules will apply in non-UNCITRAL arbitrations.


Автор: Dr. Sergei A. VOITOVICH

Источник: The Ukrainian Journal of Business Law. — 2014. — December. — Р. 26 — 28.