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Kawharu, Amokura -- Public Participation and Transparency in Investment Arbitration: Recent Developments and Future Challenges [2007] IHLRes 2 (1 July 2007)

Last Updated: 19 November 2007

PUBLIC PARTICIPATION & TRANSPARENCY IN INVESTMENT ARBITRATION: Recent Developments and Future Challenges

Amokura Kawharu

Faculty of Law

The University of Auckland

A. INTRODUCTION

Regulation of FDI occurs at both the domestic and international levels. At the international level, the provision of investor-state arbitration in BITs and state contracts extends a “rule of law” approach to those participating in the global economy. (In this context, impartial decision making to resolve disputes over BIT or contract terms.)

Public participation and transparency in investment arbitration

Arbitration rules developed for commercial arbitrations envisage a private process which can conflict with citizens’ demands to voice concerns over government dealings with investors and for transparency of those dealings.

Relevant context:

• investments in public services, and in businesses that impact on environmental or public health or otherwise have a public interest element
• increasing regulation of trade and sustainable development at the international level
• increasing case load involving both developed and developing respondent-states
• scrutiny of the effects of globalisation and the legal / institutional frameworks within which it is fostered
  

2. PUBLIC PARTICIPATION THROUGH “AMICUS CURIAE” OR NON- PARTY SUBMISSIONS
   

Amicus can represent wider public interest goals in foreign investment arbitrations and assist tribunals with perspectives different to those of the parties. An application of global administrative law principles?

An overview of the developments in this area

NAFTA Chpt 11 arbitrations:

• amici admitted in Methanex and UPS in 2001 (applying UNCITRAL Rules)

• FTC’s 2003 guidelines applied in Methanex, UPS and Glamis Gold

ICSID arbitrations:

• no power to admit amicus as a party: Aguas del Tunari v Bolivia (2003)

• c.f. power is implicit in residuary procedural discretion: Suez/Vivendi v Argentina (2005) and Suez v Argentina (2006)

• amended ICSID rules (2006) applied in Biwater v Tanzania (Feb. 2007)

The present legal situation

• legal basis is beyond doubt for ICSID arbitrations under the amended rules

• in NAFTA arbitrations, Methanex and UPS precedents, and support of the NAFTA parties

• but, UNCITRAL and private institutional rules lack provisions governing non-party participation
  

What are the challenges?

• relevance of human rights submissions to quantifying the state’s liability? Challenged in recent arbitrations Suez/Vivendi and Biwater but rejected by tribunals; NGOs claim Methanex tribunal relied on submissions in reaching decision (but has to be inferred)
• lack of accountability of amici to anyone for the dispute settlement outcomes they contribute to: depends whether amici are representatives (Mourré) or “policy entrepreneurs” (Charnovitz)
  
• clarifying the status of the amicus: limited right to participate at tribunal’s discretion confers no formal status (Biwater) – should focus on potential intellectual contribution and not on status issues

• procedural issues – how to minimise the additional burden imposed

• strengthening the legal basis for amicus participation under UNCITRAL and private institutional arbitration rules

C. TRANSPARENCY

Covers access to documents produced in the proceedings (confidentiality issues) and access to the actual hearings themselves through the holding of the hearings in public (privacy of the arbitration).

Why transparency?

• facilitates amicus participation

• respects principles of open government and governmental accountability

• improves consistency in development of substantive law on foreign investment – Frank’s “legitimacy crisis” arising from inconsistency and opacity
  

Does the law meet the transparency ideal?

• arbitration rules say little about access to documents

• rules usually provide for confidentiality of the award

• courts/legislatures of different countries take different approaches to confidentiality

• rules require hearings to be held “in camera” unless parties agree

(a) Access to documents:

“[W]ithout doubt, there is now a marked tendency towards transparency in treaty arbitration” (Biwater tribunal, Sept. 2006, para [114]):

• rejection of any general confidentiality rule (e.g. Biwater; Metalclad)

• voluntary publication of pleadings, orders and other documents

• amended ICSID rules require publication of tribunal reasoning

• increasing publication of awards by private institutions e.g. ICC, AAA

(b) Open hearings:

Note the beginnings of a trend towards more openness in oral hearings:

• agreements to open hearings in NAFTA arbitrations (UPS, Methanex, and Canfor) and standing agreement of the NAFTA parties to consent to open hearings
• amendments to ICSID Arbitration Rules to empower the tribunal to open hearings

• BIT practice (Canada and US model BITs (on transparency generally))

The present legal situation

Transparency has been improved but remains limited:

• access to some documents

• open hearings only with consent of parties

The challenge is how to balance the competing interests of transparency and procedural integrity: concerns with trial by media, witness intimidation etc.

What further changes are desirable?

(a) ICSID rules: open hearings, and publish transcripts and full awards in public interest cases, subject to the protection of confidential information

(b) UNCITRAL rules: develop a separate protocol for investor-state disputes (NB: NGO observer status in working group negotiations)

(c) Other rules: similar protocol to ensure consistency between the rules (Legum)– forum shopping to avoid publicity creates negative impressions

D. CONCLUSIONS

The political feasibility and practicality of (further) amendments to the key arbitration rules may well be questioned. This said, there have been moves towards making progress within UNCITRAL, and developments on a case-by- case basis are likely to continue given the widespread interest in the regulation of foreign investments and the democratic pressures states are properly subject to.