The 2014 UNCITRAL Transparency Rules and Transparency Convention are a good first step toward greater transparency in investor-state arbitrations. This Perspective encourages other institutions to follow suit and discusses how the Rules and Convention can be a model for broader reforms of the investment regime

Johnson, Lise

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Columbia University Academic Commons

 Columbia FDI Perspectives Perspectives on topical foreign direct investment issues by the Columbia Center on Sustainable Investment No. 126   July 21, 2014 Editor-in-Chief: Karl P. Sauvant (Karl.Sauvant@law.columbia.edu) Managing Editor: Shawn Lim (shawnlwk@gmail.com)   The Transparency Rules and Transparency Convention: A good start and model for broader reform in investor-state arbitration by Lise Johnson*  In July 2013, after nearly three years of work, the United Nations Commission on International Trade Law (UNCITRAL) adopted a set of arbitration rules that will help open some investor-state arbitrations to public view. The UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (Transparency Rules) were crafted with input from governments, academics, arbitration practitioners, and non-governmental organizations, and approved by consensus by the member states. When applied, the Transparency Rules will require disclosure of information submitted to, and issued by, arbitral tribunals throughout proceedings, mandate open hearings and expressly allow for participation by non-parties to a dispute.1 The Transparency Rules also guard against disclosure of confidential information and establish a repository in which all information will be published.2   But while the Transparency Rules are an important first step in efforts to shed light on the often-opaque investor-state arbitrations, they still leave much work to be done.   The problem is not in their content but in their application. In particular, Article 1(2) of the Transparency Rules carves out from their coverage all treaties concluded before the Transparency Rules entered into force on April 1, 2014, unless states or disputing parties specifically take steps to “opt in” to the Transparency Rules by clear agreement. For these thousands of existing treaties, this provision effectively turns the Transparency Rules into optional guidelines.  In July 2014, UNCITRAL took a step to help close this large loophole3 by finalizing the Mauritius Convention on Transparency (Transparency Convention).   In brief, the Transparency Convention establishes two main routes for the Transparency Rules to apply to existing treaties. First, if both the respondent state and the home country of the claimant are parties to the Transparency Convention (and have not taken relevant reservations), any arbitration initiated by a claimant—whether under the UNCITRAL arbitration rules or not—will be governed by the Transparency Rules.   2  Second, there is an option for states to make binding unilateral offers to arbitrate under the Transparency Rules. Even if the home country is not a party to the Transparency Convention, or is a party but has taken a specific reservation for the relevant investment treaty, the Transparency Rules will apply if the respondent state has given its advance consent under the Transparency Convention and the investor agrees to apply the Transparency Rules.   The Transparency Convention will go to the United Nations General Assembly for approval in Fall 2014 and enter into force once ratified by three states.   But as efforts to ensure wide adoption of the Transparency Convention proceed, efforts should also be made for broader and deeper reforms.   First, both the Transparency Rules and Transparency Convention leave gaps enabling states and investors to continue to avoid disclosure. Reform is thus needed in other institutions such as the International Centre for Settlement of Investment Disputes (ICSID).4   Indeed, ICSID, an early leader on transparency, has recently signaled that it will revisit the issue. When it does, it should ensure any reforms reflect commitment to transparency in disputes arising under existing as well as future treaties.   Second, and also relevant for ICSID, reforms need to move beyond investment treaty disputes and require disclosure of information relating to investor-state disputes arising under contracts. Particularly in an era when transparency of investor-state contracts is increasingly recognized within the United Nations and the World Bank as a fundamental element of good governance, it makes little sense to allow those disputes to remain behind closed doors.    Third, states should consider the Transparency Convention as a model for implementing broader reforms. Through its use of reciprocal commitments, unilateral offers and reservations, it shows how states can achieve changes in the investment-treaty system in addition to ensuring transparency. A similar convention could, for example, create a new standing judicial body or appellate mechanism for investor-state arbitrations.   Overall, UNCITRAL’s recent steps recognize the importance of transparency in promoting good governance and accountability and show how the content and structure of the existing investment regime can be reformed. All eyes are now on other institutions like ICSID and treaty negotiators to follow suit.                                                            * Lise Johnson (ljj2107@columbia.edu) is a legal researcher at the Columbia Center on Sustainable Investment and leads its work on Investment Law and Policy. The author wishes to thank Anna Joubin-Bret, Sophie Nappert and Gus Van Harten for their helpful peer reviews, as well as Lisa Sachs for her comments. The views expressed by the author of this Perspective do not necessarily reflect the opinions of Columbia University or its partners and supporters. Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed series.  3                                                                                                                                                                       1 For more information, see Columbia Center on Sustainable Investment, Submissions to UNCITRAL Working Group II on Arbitration and Conciliation, http://ccsi.columbia.edu/2013/02/05/submissions-to-uncitral-working-group-ii-on-arbitration-and-conciliation/. 2 See UNCITRAL, Transparency Registry, http://www.uncitral.org/transparency-registry/registry/index.jspx. 3 States and disputing parties can also use other paths to signal their agreement to apply the Transparency Rules to disputes arising under treaties carved out by Article 1(2). For more on this, see Lise Johnson and Nathalie Bernasconi-Osterwalder, “New UNCITRAL arbitration rules on transparency: Application, content and next steps,” August 2013, pp. 23-25, available at http://ccsi.columbia.edu/files/2014/04/UNCITRAL_Rules_on_Transparency_commentary_FINAL.pdf.  4 For a comparison of the UNCITRAL and other arbitration rules, see Johnson and Bernasconi-Osterwalder, supra note 3, pp. 6-7.   The material in this Perspective may be reprinted if accompanied by the following acknowledgment: “Lise Johnson, ‘The Transparency Rules and Transparency Convention: A good start and model for broader reform in investor-state arbitration’ Columbia FDI Perspectives, No. 126, July 21, 2014. Reprinted with permission from the Columbia Center on Sustainable Investment (www.ccsi.columbia.edu).” A copy should kindly be sent to the Columbia Center on Sustainable Investment at ccsi@law.columbia.edu.  For further information, including information regarding submission to the Perspectives, please contact: Columbia Center on Sustainable Investment, Shawn Lim, shawnlwk@gmail.com or shawn.lim@law.columbia.edu.  The Columbia Center on Sustainable Investment (CCSI), a joint center of Columbia Law School and the Earth Institute at Columbia University, is a leading applied research center and forum dedicated to the study, practice and discussion of sustainable international investment. Our mission is to develop and disseminate practical approaches and solutions, as well as to analyze topical policy-oriented issues, in order to maximize the impact of international investment for sustainable development. The Center undertakes its mission through interdisciplinary research, advisory projects, multi-stakeholder dialogue, educational programs, and the development of resources and tools. For more information, visit us at www.ccsi.columbia.edu.   Most recent Columbia FDI Perspectives   No. 125, Anna De Luca, “Withdrawing incentives to attract FDI: Can host countries put the genie back into the bottle?” July 7, 2014.  No. 124, Rafael Tamayo-Álvarez, Maria Alejandra Gonzalez-Perez and Juan David Rodriguez-Rios, “How to enhance labor provisions in IIAs,” June 23, 2014.   No. 123, James Nicholson and John Gaffney, “Cost allocation in investment arbitration: Forward toward incentivization,” June 9, 2014.  No. 122, Miguel Pérez Ludeña, “The rise of FDI income, and what it means for the balance of payments of developing countries,” May 26, 2014.  No. 121, Karl P. Sauvant and Victor Z. Chen, “China needs to complement its “going-out” policy with a “going-in” strategy,” May 12, 2014.  All previous FDI Perspectives are available at http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/.  

The Transparency Rules and Transparency Convention: A good start and modelfor broader reform in investor-state arbitration

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The Transparency Rules and Transparency Convention: A good start and modelfor broader reform in investor-state arbitration

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