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Feb 16, 20215 min read

The Emergence of the Presumption of Transparency in Investment Arbitration

Preksha Mehndiratta*

Introduction

In view of the recognition of the public interest involved in investment arbitration, there have been efforts over the past decade to improve the procedural transparency in such proceedings. However, most of these efforts matured in the form of optional instruments such as the United Nations Commission on International Trade Law (‘UNCITRAL’) Rules on Transparency or the United Nation Convention on Transparency in Treaty-based Investor-State Arbitration (‘Mauritius Convention on Transparency’), which account for only a small number of investment treaty claims. For most of the other claims, in the absence of a party agreement determining the transparency regime, tribunals are tasked with deciding the appropriate transparency regime under their discretionary powers. This has led to controversy as to the existence of a presumption of transparency in investment arbitration.

This post analyses the applicable presumption in cases where the applicable rules are silent on prescribing a transparency regime and points to developments which could lead to the emergence of a presumption of transparency in investment arbitration.

Transparency under Applicable Rules

Under the Mauritius Convention on Transparency, claims under BITs involving the state parties to the Convention would be subject to the transparency regime therein. However, due to the limited number of ratifications to the Mauritius Convention on Transparency, it would not apply to most of the cases. For these cases, neither the International Centre for Settlement of Investment Disputes (‘ICSID’) framework nor the UNCITRAL Arbitration Rules specify a comprehensive transparency regime, but rather provide for only limited provisions such as Article 48(5) of the ICSID Convention, which prohibits the publication of an award without the consent of the parties to the dispute. However, on most of the other issues such as the disclosure of evidentiary documents, record of the proceedings, and briefs submitted by the parties, the applicable rules are silent.

In view of this silence of the procedural rules, BITs such as the Indian Model BIT and the Canada Model BIT have started to provide the transparency regime. However, there are still hundreds of BITs, where there is no transparency regime specified, thus putting the burden on the tribunals to decide the transparency regime on a case by case basis.

The Shift from Confidentiality Towards Transparency

The perception of arbitration as a private dispute settlement mechanism led to various jurisdictions adopting a presumption of confidentiality in the context of commercial arbitration. This view influenced investment arbitral tribunals such as in the Amco Asia Corp. & Ors. v. Republic of Indonesia where the tribunal recognized that an arbitration proceeding possesses a ‘spirit of confidentiality.’ However, the tribunal still held that in absence of a provision in the applicable rules restricting the parties from themselves disclosing documents, the tribunal would not interfere with one party unilaterally disclosing documents while stating that it was in the parties’ own interest to not disclose documents in order to ensure that the dispute between the parties is not exacerbated. A similar view was also taken in Churchill Mining PLC v. Republic of Indonesia where the tribunal opined that the right to engage in public discussions on the subject matter of the dispute is subject to the qualification of the party’s duty to not exacerbate the dispute or impact the integrity of the arbitration proceedings.

However, the Amco tribunal’s view of investment arbitration having a ‘spirit of confidentiality’ is a view which has been questioned by subsequent tribunals due to the public interest involved in investment arbitration. The tribunal in S.D. Myers Inc. v. The Government of Canada opined that the arguments in favour of confidentiality in arbitration may hold well in the context of commercial arbitration, but would not be relevant for an investment arbitration arising out of a BIT. The tribunal thus denied the inherent notion of confidentiality arising from treaty-based arbitration.

Rejecting the Notion of Confidentiality

Since the increase in public interest considerations was bringing the legitimacy of investment arbitration into question, the discussion of balancing the demand for transparency and the need for confidentiality in investment arbitration became significant in Biwater Gauff (Tanzania) v. United Republic of Tanzania. The tribunal noted that in light of the lack of provisions imposing confidentiality under the applicable rules, there is no presumption in favour of either confidentiality or the transparency of arbitration proceedings. Thus, the Biwater tribunal preferred a system where the tribunal would have to use its discretion while keeping the interests of all parties in deciding the transparency regime for each case.

While the lack of presumption against confidentiality or transparency became the standard followed by most investment arbitration tribunals, tribunals such as in Abaclat and other v. The Argentine Republic still restricted the disclosure of parties’ documents and exhibits based on the inherent risks associated with disclosing such materials. The view in Abaclat has become a basis for even broader restrictions being set by tribunals on transparency. However, certain tribunals such as the tribunal in Philip Morris Asia Ltd. v. The Commonwealth of Australia attempted to strike a balance between transparency and confidentiality by prescribing a differential approach to the disclosure of documents with different confidentiality regimes for different types of documents.

Rise of the Trend of Transparency

While the prevalent view among investment arbitral tribunals has been to deny the existence of either a presumption of confidentiality or a presumption of transparency in investment arbitration, there has been a trend in favour of transparency by tribunals such as in Rand Investments Ltd. and Ors. v. Republic of Serbia. The tribunal in Rand Investments relied on developments such as the adoption of UNCITRAL transparency rules and the United Nations General Assembly Resolution 69/109 to state that there is a “strong trend in favour of transparency” in investment arbitration. Using this reasoning and considerations of procedural economy, the tribunal applied a transparency regime for a claim under a BIT which was silent on the considerations of confidentiality and transparency.

Though the tribunal primarily based its decision on considerations of procedural economy, the recognition of a strong trend in favour of transparency refutes the idea of the ‘spirit of confidentiality’ that the tribunal in Amco had recognized. Further, this recognition signals the newfound willingness of tribunals to push for procedural transparency even if the applicable rules are silent on the matter. Thus, Rand Investments decision signals a shift in the perspective of investment tribunals which could lead to more tribunals pushing for procedural transparency albeit in cases where other factors such as procedural economy also warrant procedural transparency.

Conclusion

The increased awareness of public interest considerations in investment arbitration has had the effect of waning the notion of arbitration as a confidential dispute settlement mechanism. Certain recent decisions of investment tribunals, particularly Rand Investments show the increased appetite of investment tribunals in shifting from a presumption of confidentiality, to a trend in the favour of transparency. Combined with increased efforts of states and arbitral institutions to promote a culture of transparency within investment arbitration, it is likely that tribunals would begin relying on the presumption of transparency, thus opening a new phase for the legitimacy of investment arbitration.

*The author is a student of Gujarat National Law University, Gandhinagar.

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