- UNCITRAL Rules on Transparency in Treaty-Based Investor- State Arbitration
- November 26, 2015
- Law Firm: Erdem Erdem Law Office - Istanbul Office
In July 2013 the United Nations Commission on International Trade Law (“UNCITRAL”) adopted rules for Treaty-based Investor- State arbitration to provide transparency (“Rules”). The rules came into force on April 1, 2014. The Rules are considered as an important step taken in the evolving field of investment arbitration considering that previous versions of UNCITRAL Arbitration Rules do not refer to issues of transparency even in cases of strong public policy.
The origins of the Rules came from the idea to amend the UNCITRAL Arbitration Rules; it was considered that a revision including transparency should be adopted. Following extensive debates the Working Group decided that commercial arbitration and investment arbitration differ from one another in certain aspects, which lead to the designation of separate rules for investment arbitrations in terms of transparency of the proceedings and the award. The Working Group further agreed that the amendments which were made to the UNCITRAL Arbitration Rules should be continued notwithstanding the transparency issues and further it was not desired to include investor state specific rules in the UNCITRAL Arbitration Rules and decided to address issues of transparency after completing the work on the UNCITRAL Arbitration Rules in depth.
The Rules include eight articles which govern the scope of application, publication of information and documents, submission of the third parties and by non-disputing party to the treaty, hearings, exceptions to transparency (confidential and protected information) and finally repository of published information.
Scope of Application
Pursuant to Article 1, the Rules apply to investor- state disputes based on a treaty concluded on or after 1 April 2014 unless Parties to the treaty opted out the Rules on transparency. Parties can “opt out” the application of the Rules by clearly stating that the Rules shall not apply or can refer to the UNCITRAL Arbitration Rules as adopted in 1976.
In order to apply the Rules to the treaties concluded before April 1, 2014, the Parties to an arbitration shall agree to apply such Rules or Parties to a treaty shall agree to their application after April 1, 2014. In other words in order to apply the Rules after April 1, 2014 Parties should “opt into” the Rules.
It should be noted that disputing parties are not allowed to derogate from the Rules by an agreement or in another way unless permitted by the treaty.
The Rules can also be adopted into the arbitrations which are not governed by UNCITRAL Arbitration Rules such as to the arbitrations governed by Permanent Court of Arbitration (PCA) and the International Centre for Settlement of Investment Disputes (ICSID).
Discretion of the Arbitral Tribunal
The Rules provide specific regulations on arbitral tribunals’ discretion. In using such discretion the arbitral tribunal must take into account certain measures, these are public interest as well as the interest of the disputing parties’ in a fair resolution. Pursuant to Article 3(b) of the Rules the arbitral tribunal by providing the consent of the disputing parties can adopt provisions of the Rules to the specific dispute in case such adoption is concurrent with the transparency regime that the Rules provide and ensures that the arbitration is carried in practical manner. This power is granted to the arbitral tribunal in addition to its discretionary power.
Applicable Rules in Case of Conflict
As mentioned in the above paragraph, Article 9 clarifies that the Rules can be adopted together with any applicable arbitration rules or in ad hoc proceedings. In case a conflict arises among the Rules and the applicable arbitration rules, Article 7 provides that the Rules should prevail. In case there is conflict between the treaty and the Rules the treaty should prevail.
Publication of Documents
The Rules aim to provide transparent proceedings through publication of documents, information and open hearings. It should be noted that the Rules also provide some exemptions by including provisions regarding confidential information and protected information. With regard to publication of the documents certain questions are addressed by the Rules such as access to the documents and types of these documents.
Pursuant to Article 3 of the Rules, documents shall be made accessible to the public. These documents are notice of arbitration, the response to the notice of arbitration, the statement of claim, the statement of defence, other additional written submissions or written statements by any disputing party, list of exhibits excluding the exhibits themselves, expert reports and witness statements.
The Arbitral Tribunal has the power to decide on the availability of the exhibits with its own initiative or upon request. In addition, transcripts of the hearing, if available, orders, decisions and awards are also publicly accessible.
Submission by the Third Parties and a Non Disputing Party to the Treaty
Pursuant to Article 4 of the Rules third persons are allowed to submit written submission related to the dispute, such persons shall apply to the arbitral tribunal. In considering whether to accept such submissions the arbitral tribunal shall consider the interest of the third party and the effect of that the submission upon the dispute.
Non- disputing parties to the treaty were excluded from the definition of the third party and regulated under Article 5 of the Rules. A non-disputing party to the treaty can submit a submission regarding issues on treaty interpretation. Such submission shall be allowed by the arbitral tribunal or may be invited after consulting with the disputing party by the arbitral tribunal.
Article 3 further provides that the submissions given by third persons or non-disputing Party (Parties) shall also be made publicly accessible. The Rules do not distinguish persons in the public, public in equal level is allowed to access information.
Pursuant to Article 6 of the Rules hearings held for the presentation of evidence or for oral arguments shall be public. Arbitral tribunal has the power to hold private hearings in case confidential information or the integrity of the arbitral proceedings needs to be protected. In order for the public to access to the hearings the arbitral tribunal shall make necessary logistical arrangements.
Exceptions to Transparency
The Rules provide certain exceptions in terms of confidential and protected information. Article 7 (2) regards “confidential business information, information that is protected against being made available to the public under the treaty, information that is protected against being made available to the public, in the case of the information of the respondent State, under the law of the respondent State, and in the case of other information, under any law or rules determined by the arbitral tribunal to be applicable to the disclosure of such information; or information the disclosure of which would impede law enforcement” as confidential or protected information. This article is regarded as balance mechanism within the Rules where a certain amount of confidence is given to the states with respect of the confidential information.
The Working Group further discussed that in case Parties agree on confidentiality of a document, such Parties should have the discretion to withhold such documents rather than the arbitral tribunal. Pursuant to Article 7(4) of the Rules any disputing party, non-disputing party to the treaty or third person is permitted to withdraw a document which is presented by him in case an arbitral tribunal determines that information shall not be redacted from a document or prevented to be made available to the public.
In order for the mechanism projected by the Rules to work there needs to be a repository. The information shall be published by a repository which is the Secretary-General of the United Nations or an institution named by UNCITRAL.
The discretion of a repository is limited in the Rules through Article 2 which provides that only the notice of arbitration shall be communicated with the repository which is regulated under Article 8 and further by providing that the arbitral tribunal will communicate the information and requests for documents to be made through the arbitral tribunal. The repository is responsible to inform the public regarding the name of the disputing parties and the economic sector involved.
The Rules which came into force on April 1, 2014 is an important step taken in investor state arbitration. Even though there have been some criticism from some NGOs, it is seen likely that many states will not opt out the Rules for the treaties concluded on or after April 1, 2014. It will be experienced through time whether states will prefer to opt in the Rules for the treaties concluded prior to April 1, 2014. The exceptions to transparency and the consent mechanism provided for the states are regarded as assurance given to the states with regard to their confidential and protected information. On the other hand regarding the strong public interest which can be a question in investment arbitrations, adoption of certain specific rules on transparency is seen as a promising step to achieve fair and transparent proceedings.
 See A/CN.9/646 para. 69
 For the text of the Rules, see http://www.uncitral.org/pdf/english/texts/arbitration/rules-on-transparency/Rules-on-Transparency-E.pdf
 See Article 1(3) of the Rules.
 See A/68/ 17 para. 18-22.
 See Article 4 of the Rules.
 See A/68/ 17 para. 18-22.
 See A/68/17 para. 71-74
 See Article 6(3) of the Rules.