Winter 2014

New UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration

On 11 July 2013, the United Nations Commission on International Trade Law (“UNCITRAL“) adopted the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (the “Transparency Rules“). The Transparency Rules resulted from three years of negotiations in the UNCITRAL Working Group on Arbitration (the “Working Group“). They constitute a set of procedural rules that will make investor-State arbitrations initiated under an investment treaty more open to the public and will also allow for third party submissions.

Background

After the 2010 revision of the UNCITRAL Arbitration Rules, and responding to criticism that these rules did not adequately address transparency in investment arbitration, the Working Group was given the task of developing a legal standard on transparency in treaty-based investor-State arbitration. The Working Group sought to balance the disputing parties’ rights for an efficient and swift resolution of their dispute against the public interest dimension of arbitrations involving State interests and State funds.

The Transparency Rules

The new Transparency Rules will come into effect on 1 April 2014 and will apply to treaty-based investor-State arbitration (i.e., they will not affect commercial or State-to-State arbitrations). The Transparency Rules will only apply to existing treaties if the parties to the dispute consent or where the contracting parties to a treaty have agreed to the application of the Transparency Rules under the specific treaty. Otherwise, the Transparency Rules will automatically apply only to investment treaties that come into force after 1 April 2014. Even in those cases, the parties may agree to opt out of their application.

Public Access
As a general matter, only limited information is available in treaty-based investor-State arbitrations; namely, the names of the disputing parties, the economic sector involved, and the treaty under which the claim is made is publicly available information. Under Article 3 of the Transparency Rules, in UNCITRAL treaty-based investor-State arbitrations, various documents created by the parties during the arbitration will also be accessible to the public. These include the notice of arbitration, response to notice of arbitration, statement of claim, statement of defence and any further written submissions. They also include any written submission provided by third parties or non-disputing parties to the relevant treaty and transcripts of the hearing. Hearings will be required to be public and all decisions, orders and awards will be published.
All of these materials will be stored in a central repository maintained by UNCITRAL. Expert reports and witness statements will not automatically be released, but they may be published based on either party’s specific request. The table of exhibits to the parties’ submissions will be publicly accessible, but not the exhibits themselves. The rules, however, give tribunals broad discretion to order disclosure of exhibits or to restrict disclosure to protect confidential or protected documents and the integrity of the arbitral process (Article 7).

Third Party Submissions
Under Articles 4 and 5 of the Transparency Rules, tribunals may, after consultation with the disputing parties, also allow submissions regarding matters within the scope of the dispute from (1) non-disputing parties to a treaty, and (2) third persons who are neither a disputing party nor a non-disputing party to the treaty. The parties are then also given a reasonable opportunity to comment on the third-party submissions.

Transparency Rules in Other Investor-State Proceedings
Most investor-State arbitrations take place under UNCITRAL rules or before the International Centre for Settlement of Investment Disputes (“ICSID“). The Permanent Court of Arbitration (“PCA“) and the International Court of Arbitration (“ICC“) also process a smaller number of investor-State cases. Finally, under the North American Free Trade Agreement (“NAFTA“), investor-State disputes among the three member states may be resolved through arbitration under UNCITRAL or ICSID Additional Facility rules.

In comparison to existing rules in other proceedings, the new Transparency Rules provide for more extensive transparency. The 2006 amendment of the ICSID Rules also allows for interested third parties to intervene in the arbitral proceedings, though doing so is at the discretion of the tribunal. However, there is no automatic public access right to the documents created as part of the proceedings before ICSID tribunals. The 2012 PCA Arbitration Rules allow for awards to be published, but only with the consent of the parties, and hearings are always private unless the parties agree otherwise. The PCA does not expressly allow for third party submissions and the rules are silent on third party access to documents. Under the 2012 ICC Rules, there are no provisions allowing for third party submissions or for the publication of the award or other documents. To date, NAFTA arbitration has achieved the greatest level of transparency where submissions, procedural orders and other decisions, as well as awards, are regularly made public. Many new bilateral investment treaties also address transparency in the arbitral process and call for open hearings, public access to case documents, and third party submissions. The new UNCITRAL Transparency Rules appear to reflect this trend.

Comments

As the new Transparency Rules will enter into force on 1 April 2014, it has yet to be seen how they will affect treaty-based investor-State arbitration. One of the main attractions of arbitration in the commercial setting is its confidential nature. The context is different, however, in investor-State arbitration. In these cases, the arbitration involves a State and issues of public interest, including taxpayer funds. The argument is that this public aspect necessitates greater transparency and public accessibility. The benefits to transparency are particularly apparent in cases where environmental or human rights issues are considered. At the same time, a requirement for greater transparency and public disclosure may lead to more settlements, with one or both parties preferring to keep details of the dispute out of the public eye.

Another general benefit of arbitration is the relative efficiency and speed of the proceeding. It is likely, however, that the new Transparency Rules will prolong proceedings due to the additional disclosure and publication requirements, as well as the additional time it will take to review and incorporate any third party submissions. Increased transparency may also have an effect on how parties draft their pleadings or limit the documents to which they refer in an attempt to avoid disclosure requests. Only time will tell whether the increased public access will influence a party’s decision to pursue an investment claim under a treaty or rather choose to pursue such a claim under contract (where the new Transparency Rules would not apply).

The Transparency Rules provide a clear list of disclosable documents, which may reduce the scope of procedural arguments regarding access to those documents. Nonetheless, the new rules still leave room for debate with regards to witness statements, expert reports and exhibits, which are not automatically disclosable. It seems likely that the new Transparency Rules will not prevent entirely the continuance of procedural arguments relating to the disclosure of such documents. Importantly, a tribunal continues to have discretionary power under the Transparency Rules to restrict disclosure to protect confidential or protected documents and the integrity of the arbitral process.