By Erica Duffy, University of Groningen, firstname.lastname@example.org
There is a current trend in investor-State dispute settlement (ISDS) towards ensuring more transparent and open proceedings. This development is a direct response to the backlash in recent years from civil society, who often considers investment arbitration to lack legitimacy. One such initiative to increase transparency in ISDS are the UNCITRAL Rules on Transparency which were adopted in order to provide for a straightforward mechanism for States to apply consistent standards in investor-State proceedings. The UN Convention on Transparency in Treaty-based Investor-State Arbitration (“The Mauritius Convention on Transparency”) will soon enter into force. The Convention makes the UNCITRAL rules compulsory for BITs and trade agreements with investment chapters that have been concluded in the past, thus, having the potential to simultaneously amend thousands of international investment agreements. In the first two years of its existence very few countries seem willing to ratify or even sign the Convention.
Transparency in International Arbitration: Any (Concrete) Need to Codify the Standard?
The Groningen Journal of International Law has dealt with the subject of international arbitration and procedure in the past. In one of the contributions Gabriele Ruscalla wrote of the lack of codified transparency standards in international investment arbitration. He highlights the current need give access to the public to international dispute settlement proceedings, and studies the role transparency plays in ISDS mechanisms.
Ruscalla considers four key focal points. First he discusses the difficult relationship between transparency and confidentiality in arbitral proceedings, highlighting the conflict between private actors’ desire to keep their sensitive business information secret, and the demands of civil society to have an open dispute settlement mechanism, particularly regarding issues of public interest.
Next, Ruscalla discusses that as a result of respecting confidentiality in arbitral proceedings, there is a lack of consistency in the publication of arbitral awards. The author highlights that no general rule exists regarding the publication of awards, at times hindering the development of consistent jurisprudence. Subsequently, he discusses the role of amicus curiae briefs, and how they could act as a potential source to counteract inconsistency in arbitral proceedings, discussing the adoption of the UNCITRAL Rules on Transparency, which facilitate participation by amicus curiae and non-disputing State Parties. Finally, he reviews the new approach taken by the United States and Canada towards codifying transparency rules in arbitration, indicating that ongoing treaty negotiations suggest a tendency toward stricter rules on transparency in the North American tradition.
The author concludes the article with a look toward the future of transparency in investment arbitration, postulating over its potential relevance to the future of investor-State dispute settlements and attributing the development of this doctrine to Western countries, who have pioneered its use in recent international investment treaties. Now, two years later, pending the entry into force of the Mauritius Convention, it is interesting to review recent developments related to transparency in ISDS.
UNCITRAL Rules on Transparency and the “Mauritius Convention”
The UNCITRAL Rules on Transparency comprise a set of procedural rules which provide for transparency and accessibility to the public in treaty-based investor-State arbitration. There are a number of circumstances under which the Rules on Transparency can be applied. The rules came into effect on the 1st of April 2014. Any BIT or trade agreement with an investment chapter concluded on or after that date which, as its rules of procedure, applies the UNCITRAL Model Rules will also apply the rules on transparency by default. Moreover, any Treaties concluded after the 1st of April 2014 which use procedural rules, other than those provided for in UNCITRAL, can also explicitly decide to apply the rules on transparency in a given case. For any dispute arising from a Treaty concluded before the 1st April 2014, the Parties must explicitly agree to their application.
As of the 1st of April 2014, over 3000 BITs had been concluded globally, meaning that any time a dispute arises from any of these agreements, the Parties will have to expressly “opt-in” to apply the UNCITRAL Rules on Transparency. In order to circumvent the certain exertion that that would entail, UNCITRAL finalised and adopted the Mauritius Convention.
The Mauritius Convention is a mechanism through which all Parties who ratify it will automatically update all treaty-based procedural rules governing investor-State Arbitration, concluded before the 1st of April 2014, regardless of whether or not the proceedings take place under UNCITRAL Arbitration Rules. Furthermore, the convention applies for mandatory application when both the respondent and the investor’s home State are parties to the convention (Johnson)
Status and Ratification
As of yet, there are only three Parties to the Mauritius Convention; Canada, Switzerland and Mauritius. Switzerland is the most recent to ratify the convention, which it did on the 18th of April 2017. As a result, the Convention will enter into force on the 18th of October 2017. However, at this time the Convention will only be applicable to one BIT between Switzerland and Mauritius, which entered into force on the 21 of April 2000. Canada has not concluded any bilateral investment treaties with either of the other two States Party to the Convention, rendering its global impact to be somewhat futile for the time being.
The Mauritius Convention has, generally speaking, received a positive response from both States and scholars alike. Because of its narrow scope of application, and the approach it takes to confront the fragmented structure of investment arbitration by adopting an “opt-in” mechanism, the Mauritius Convention is considered to be a pragmatic, multilateral solution to enhancing the legitimacy of investor-State dispute settlement (Schill).
So far there are fifteen States who have signed the Convention, nine of which are Member States of the European Union. Were those States to ratify the Convention, its applicability would cover a total of 26 BITs. There are currently 2369 BITs in force globally, meaning that if all of the current signatories were to ratify the Treaty, it would only have compulsory application to 1.1% of bilateral investment treaties.
The European Union has expressed its intention to ratify the Mauritius Convention and has already started to use the UNCITRAL transparency rules as a basis for the provisions on transparency in its trade agreements, all of which include investor-State dispute settlement chapters. However, ratification by the Union would achieve little more than a ceremonial endorsement of the Convention. The EU had not signed any investment treaties before the 1st of April 2014, meaning that their ratification would not result in the Convention actually ever being applied to any EU agreements.
Response of States
Despite being well-received, the Mauritius Convention has so far failed to attract a lot of interest from States. There is undoubtable consensus amongst nations that there is a need to raise the standard of transparency in investor-State proceedings, yet few seem willing to apply this seemingly logical solution. One can only speculate as to why States are hesitant to ratify, or even sign, the Convention.
One factor that may contribute to the States’ unwillingness to ratify the Convention could be the fact that as long as States are not Parties, they can choose to apply the UNCITRAL Rules on Transparency on an ad hoc basis. As a result, they may be reluctant to sign a treaty which binds them to apply the rules in every dispute arising out of an agreement with a State who is also Party to the Mauritius Convention.
Moreover, keeping proceedings confidential can often be in the State’s interest. By choosing not to “opt-in” to the compulsory application of the rules, States have a lot more flexibility when conforming to transparency standards. It is easy to see the appeal of being able to avail of the transparency rules while not formally constraining oneself to their mandatory application.
Furthermore, the lack of commitment in general from the global community naturally puts less pressure on States to bind themselves to the Convention; oftentimes it is the case that there is a certain interim period, where States observe the repercussions ratifying a treaty has on others before committing to it themselves. Although the Mauritius Convention is a very short and specific treaty, it is not impossible to imagine that States are unaware of the entirety of consequences a ratification entails. Their hesitation to do so may, thus, potentially be explained by a lack of knowledge.
Below is an interactive map indicating the BITs in force between countries who have either ratified or signed the Convention. The red line represents the BIT between Switzerland and Mauritius. The green lines represent the BITs which would be affected if all the States who have thus far signed the Convention actually ratified it. The north-south dynamic of International Investment Agreements is clearly visible, highlighting the need for more host and home States to participate in the Mauritius Convention for it to actually have any impact. The widespread application of the Convention will ensure a more institutionalised approach towards transparency in investor-State arbitration, something which may fail to develop unless States fully commit themselves to transparency standards in investor-State proceedings. Were the Convention to gain more traction over the coming years, it could stand as an exemplary model to be taken in the future by States in their approach toward reforming this field of international law.
Erica is a final-year bachelor student of International and European Law at the University of Groningen. Originally from Dublin, Ireland she moved to the Netherlands at the age of 18 to pursue her studies, and hopes to develop a career in the field of European external relations. She currently aids in editing for the blog “Global Health Law Groningen”.