UNCITRAL Working Group II Standards on Transparency in Treaty-Based Investor-State Arbitration : How do they relate to existing IIAs?

Recent investment tribunals have adopted a variety of transparency standards in investor-state arbitral practice. The requirements for openness in investment dispute settlements have included: considering amicus briefs, publishing memoranda, awards, and witness statements and allowing for access to parties' pleadings, transcripts and public hearings either digitally or physically. This practice leads actors to reconsider their positions on transparency as set out in international investment agreements (IIAs), annexes to arbitral rules or memoranda of state. Under pressure to keep further arbitration proceedings open to the public, some actors are now eager to create a new multilateral standard of transparency. The United Nations Commission on International Trade Law (UNCITRAL) Working Group II (WG) has proposed a standard (Standard) which, to some extent, may find consensus within the mandate of the WG and the arbitral community. However, it is uncertain how such a standard will interact with existing IIAs and contractual obligations of host-states and investors. This paper examines the likely effects of applying the proposed Standard in investor-state disputes arising from existing IIAs and investigates how the proposed Standard should be implemented in order to overcome potential obstacles. It argues that a multilateral memorandum of understanding, including commitments from both investors and home-and host-states, is necessary to ensure participation from the maximum number of investors and states

Breaking the Bond: Vulture Funds and Investment Arbitration

The recent decision on jurisdiction and admissibility in Abaclat and others v. Argentina has brought to the public’s attention the issue of sovereign defaults and restructuring. Whilst in the Abaclat case, claimants were mostly individual retirees who then assembled to file a class action, a more frightening protagonist is made up of “vulture” funds. These are hedge funds, or other financial vehicles, which purchase sovereign (or corporate) bonds on secondary markets when their prices are extremely low due to the debtor’s repudiation or inability to pay back. They then litigate before national courts or international arbitral tribunals in order to recover the entire sums accrued. The analysis in this article begins with an overview of the process of sovereign debt restructuring. We then explore the case of a vulture fund which does not participate in a debt restructuring, and proceeds to enforce an award condemning a State to pay on its bonds, outside of the ICSID framework. Art. V(2) of the New York Convention offers two potential grounds to the State: non-arbitrability and public policy. We examine the interpretations given to the two notions in several cases most relevant to our research. Arguably, the interests involved in debt restructuring proceedings do appear to be sufficient to preclude arbitrability of the subject matter, and thus the enforcement of the award may be prevented. Secondly, the permeability of the public policy exception to economic considerations of fundamental importance – such as those involved in sovereign debt restructuring – finds supporting evidence in a host of jurisdictions. The two grounds might thus be used by States to “break the bond” and prevent non-participating vulture funds from obtaining an unfair advantage over the rest of the creditors. The recent decision on jurisdiction and admissibility in Abaclat and others v. Argentina has brought to the public’s attention the issue of sovereign defaults and restructuring. Whilst in the Abaclat case, claimants were mostly individual retirees who then assembled to file a class action, a more frightening protagonist is made up of “vulture” funds. These are hedge funds, or other financial vehicles, which purchase sovereign (or corporate) bonds on secondary markets when their prices are extremely low due to the debtor’s repudiation or inability to pay back. They then litigate before national courts or international arbitral tribunals in order to recover the entire sums accrued. The analysis in this article begins with an overview of the process of sovereign debt restructuring. We then explore the case of a vulture fund which does not participate in a debt restructuring, and proceeds to enforce an award condemning a State to pay on its bonds, outside of the ICSID framework. Art. V(2) of the New York Convention offers two potential grounds to the State: non-arbitrability and public policy. We examine the interpretations given to the two notions in several cases most relevant to our research. Arguably, the interests involved in debt restructuring proceedings do appear to be sufficient to preclude arbitrability of the subject matter, and thus the enforcement of the award may be prevented. Secondly, the permeability of the public policy exception to economic considerations of fundamental importance – such as those involved in sovereign debt restructuring – finds supporting evidence in a host of jurisdictions. The two grounds might thus be used by States to “break the bond” and prevent non-participating vulture funds from obtaining an unfair advantage over the rest of the creditors