Skip to main content
SpringerLink
Log in

The Importance of Transparency for Legitimizing Investor-State Dispute Settlement

  • Living reference work entry
  • First Online:
Handbook of International Investment Law and Policy

Abstract

Investment arbitration has been at the center of both strong support and vivid debate: many praise its efficient process for dispute resolution, whereas others lament the lack of transparency and raise doubts about its legitimacy and consistency, due to, respectively, the possible contrast between democratically issued laws and investment protection and the lack of predictability of the outcome of awards. In fact, not only did voices of criticism emerge from civil society: they originated also within the framework of the UNCITRAL Working Group III negotiations on ISDS reform. The chapter reflects on the advantages that confidentiality offers to both parties and on the close connection between transparency demand and the perceived crisis of legitimacy of investment arbitration emerged from a multiplicity of stakeholders. In particular, the chapter highlights the main arguments currently questioning the legitimacy of investment arbitration, and finds that a proper balance between transparency and confidentiality can protect the arbitration proceedings from external pressure and at the same time create confidence among all stakeholders.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution

Institutional subscriptions

Similar content being viewed by others

Notes

  1. 1.

    Bühring-Uhle C, Kirchhoff L, Scherer G (2006) Arbitration and mediation in international business, 2nd edn. Kluwer Law International; O’Kane R (2010) Proportional pragmatism: a defense of international arbitration agreements in the face of asymmetrical paternalism. Northwestern J Int Law Bus 30(1):263, 277

  2. 2.

    Alvarez JE (2011) Public international law regime governing international investment. Martinus Nijhoff Publishers, 451

  3. 3.

    United Nations Commission on International Trade Law Working Group III (Investor-State Dispute Settlement Reform) Thirty-fourth session Vienna, 27 November-1 December 2017 Possible reform of investor-State dispute settlement (ISDS) Note by the Secretariat, A/CN.9/WG.III/WP.142 (18 September 2017), http://undocs.org/A/CN.9/WG.III/WP.142

  4. 4.

    Roberts A, Bouraoui Z (2018) UNCITRAL and ISDS reforms: concerns about consistency, predictability and correctness (EJIL: Talk!, 5 June 2018), https://www.ejiltalk.org/uncitral-and-isds-reforms-concerns-aboutconsistency-predictability-and-correctness

  5. 5.

    Hess B (2015) Legitimacy, transparency and a consistent jurisprudence are the benchmarks for an arbitration system (Max-Planck-Gesellschaft, 10 December 2015), https://www.mpg.de/9789900/ttip-interview-arbitrationsystem

  6. 6.

    Lauder v Czech Republic (2001) Final Award, 3 September 2001, para. 313, https://www.italaw.com/cases/documents/611; CME Czech Republic BV v Czech Republic (2001) Partial Award, para. 575 (13 September 2001), https://www.italaw.com/sites/default/files/case-documents/ita0178.pdf, and Final Award, 14 March 2003, paras. 446–47, https://www.italaw.com/sites/default/files/case-documents/ita0180.pdf

  7. 7.

    LG&E Energy Corp. v Argentine Republic (2006) ICSID case no. ARB/02/1, Decision on Liability, 3 October 2006) 21 ICSID Rev.-FILJ 269

  8. 8.

    CMS Gas Transmission Company v Argentine Republic (2005) ICSID case no. ARB/01/8, Award, 12 May 2005, 44 ILM 1205

  9. 9.

    Enron Creditors Recovery Corp. v Argentine Republic (2007) ICSID case no. ARB/01/3, Award, 22 May 2007

  10. 10.

    Sempra Energy Int’l v Argentine Republic (2007) ICSID case no. ARB/02/16, Award, 28 September 2007

  11. 11.

    Born G (2009) International commercial arbitration, vol I, 2nd edn. Wolters Kluwer, 70

  12. 12.

    Schill SW (2015) Conceptions of legitimacy of international arbitration. In: Caron DD, Schill SW, Smutny AC, Triantafilou EE (eds) Practising virtue inside international arbitration. Oxford University Press, 106, 118

  13. 13.

    Ibidem, at 120

  14. 14.

    Ibidem, at 121

  15. 15.

    Youssef K (2009) The death of inarbitrability. In: Mistelis LA, Brekoulakis SL (eds) Arbitrability: international and comparative perspectives. Wolters Kluwer, 47

  16. 16.

    Paulsson J (2013) Universal arbitration – what we gain, what we lose, Alexander Lecture, 29 November 2012. Arbitration 79:184

  17. 17.

    von Bogdandy A, Dann P, Goldmann M (2010) Developing the publicness of public international law: towards a legal framework for global governance activities. In: von Bogdandy A, et al. (eds) The exercise of public authority by international institutions. Springer, 3, 11

  18. 18.

    Schill, supra note 12, at 112

  19. 19.

    Adeleke F (2014) Investor-state arbitration and the public interest regulation theory. In: Fourth Biennial global conference of the society of international economic law (SIEL) working paper no. 2014/12

  20. 20.

    EnCana Corporation v Ecuador, LCIA Case No UN3481 (formerly EnCana Corporation v Government of the Republic of Ecuador), https://www.italaw.com/cases/393

  21. 21.

    Glamis Gold Ltd. v United States of America, UNCITRAL, https://www.italaw.com/cases/487

  22. 22.

    Vattenfall AB, Vattenfall Europe AG, Vattenfall Europe Generation AG v Federal Republic of Germany (I) (ICSID Case No. ARB/09/6) (formerly Vattenfall AB, Vattenfall Europe AG, Vattenfall Europe Generation AG & Co. KG v The Federal Republic of Germany), https://www.italaw.com/cases/1148

  23. 23.

    Kulick A (2012) Global public interest in international investment law. Cambridge University Press, 1

  24. 24.

    UNCTAD, UNCTAD Report (2013) Reform of investor-state dispute settlement: in search of a roadmap, IIA Issues Note No. 2, June 2013, 25–26

  25. 25.

    UNCTAD, World Investment Report 2015 (WIR2015) Reforming the international investment regime: an action menu, chapter IV, http://unctad.org/en/PublicationChapters/wir2015ch4_en.pdf

  26. 26.

    G20 Guiding Principles for Global Investment Policymaking, http://www.oecd.org/daf/inv/investmentpolicy/G20-Guiding-Principles-for-Global-Investment-Policymaking.pdf

  27. 27.

    Viñuales JE (2006) Human rights and investment arbitration: the role of amici curiae. Int Law: Revista Colombiana de Derecho Internacional 8:231, 255

  28. 28.

    Eberhardt P, Olivet C (2012) Profiting from injustice. How law firms, arbitrators and financiers are fuelling an investment arbitration boom. Corporate Europe Observatory and the Transnational Institute, 7

  29. 29.

    Cotula L (2015) Democratising international investment law. Recent trends and lessons from experience. IIED, 6

  30. 30.

    Choudhury B (2008) Recapturing public power: is investment arbitration’s engagement of the public interest contributing to the democratic deficit? Vanderbilt J Transnational Law 41:775, 782

  31. 31.

    Pateman C (1975) Participation and democratic theory. Cambridge University Press

  32. 32.

    Kittrie NN (1993) Democracy: an institution whose time has come – from classical Greece to the modern pluralistic society. Am Univ J Int Law Policy 8:375, 379

  33. 33.

    Pateman, supra note 31

  34. 34.

    Pateman, supra note 31

  35. 35.

    Ortino F (2013) Transparency of investment awards: external and internal dimensions. In: Nakagawa J (ed) Transparency in trade and dispute settlement. Routledge, 119, 132

  36. 36.

    Knahr C, Reinisch A (2007) Transparency versus confidentiality in international investment arbitration – the Biwater Gauss Compromise. Law Pract Int Courts Tribunals 6:97, 109

  37. 37.

    Bevilacqua D, Spagnuolo F (2015) Transparency and participation in the global polity: lessons learned from food and water governance. Glocalism: J Culture Polit Innov, http://www.glocalismjournal.net/ImagePub.aspx?id=239786

  38. 38.

    Ruscalla G (2015) Transparency in international arbitration: any (concrete) need to codify the standard? Groningen J Int Law 3:1, 1, 6

  39. 39.

    Ortino, supra note 35, at 132

  40. 40.

    Ortino, supra note 35, at 132; Buys CG (2003) The tensions between confidentiality and transparency in international arbitration. Am Rev Int Arbitr 14:121, 123, 137; Schreuer CH, Malintoppi L, Reinisch A, Sinclair A (2009) The ICSID convention: a commentary. Cambridge University Press, p 826; Delaney J, Magraw Jr. DB (2008) Transparency and public interest. In: Muchlinski P, Ortino F, Schreuer C (eds) The Oxford handbook of international investment law. Oxford University Press, 721, 762–763

  41. 41.

    Ortino, supra note 35, at 132; Buys CG (2003) The tensions between confidentiality and transparency in international arbitration. Am Rev Int Arbitr 14:121, 123, 137; Schreuer CH, Malintoppi L, Reinisch A, Sinclair A (2009) The ICSID convention: a commentary. Cambridge University Press, 826; Delaney J, Magraw Jr. DB (2008) Transparency and public interest. In: Muchlinski P, Ortino F, Schreuer C (eds) The Oxford handbook of international investment law. Oxford University Press, 721, 762–763

  42. 42.

    Horn N (2014) UNCITRAL transparency rules 2013 for investment arbitration. In: Sabahi B et al. (eds) A revolution in the international rule of law: essays in honour of Don Wallace Jr. Juris Publishing, Inc., 335, 339

  43. 43.

    Loquin E (2006) Les Obligations de Confidentialité dans l’Arbitrage. Revue de l’Arbitrage 2:323, 344

  44. 44.

    Knahr and Reinisch, supra note 36, at 109

  45. 45.

    Knahr and Reinisch, supra note 36, at 109

  46. 46.

    The availability of conciliation under Articles 28–35 of the ICSID Convention stresses this aspect.

  47. 47.

    See Shihata IFI (1986) Towards a greater depoliticization of investment disputes: the roles of ICSID and MIGA. ICSID Rev 1:1, 5

  48. 48.

    See Rubins N (2006) Opening the investment arbitration process: at what cost, what benefit? Transnational Dispute Manag 3:3. http://www.transnational-dispute-management.com/article.asp?key=798

  49. 49.

    Bevilacqua and Spagnuolo, supra note 37, at 21

  50. 50.

    Gómez KF (2012) Rethinking the role of amicus curiae in international investment arbitration: how to draw the line favorably for public interest. Fordham Int Law J 35:510, 553

  51. 51.

    Ortino, supra note 35, at 132

  52. 52.

    Blackaby N (2002) Public interest and investment treaty arbitration. In: Kaufmann-Kohler G, Stucki BD (eds) Investment treaties and arbitration. Association Suisse de l’Arbitrage. Special Series n. 19, 145, 149

  53. 53.

    Ortino, supra note 35, at 132

  54. 54.

    Risse J (2015) A new ‘investment court system’ – reasonable proposal or nonstarter? Global Arbitration News, http://globalarbitrationnews.com/investment-court-system-20150925/

  55. 55.

    See European Commission, White Paper on European Governance, COM (2001) 428 final, [2001]OJ C 287/1; Harlow C (2006) Global administrative law: the quest for principles and values. EJIL 17:187, 195, 202

  56. 56.

    Schreuer, Malintoppi, Reinisch and Sinclair, supra note 41, at 697–698

  57. 57.

    See, for example, Article 20 Energy Charter Treaty: “2. Laws, regulations, judicial decisions and administrative rulings of general application made effective by any Contracting Party, and agreements in force between Contracting Parties, which affect other matters covered by this Treaty shall also be published promptly in such a manner as to enable Contracting Parties and Investors to become acquainted with them. [. . .].” 34 ILM 360 (1995); See also UNCTAD, Transparency, Series on Issues in International Investment Agreements (2004)

  58. 58.

    See Muchlinski P (2003) Human rights, social responsibility and the regulation of international business: the development of international standards by intergovernmental organisations. Non-State Actors Int Law 3:123; Tapscott D, Ticoll D (2003) The naked corporation: how the age of transparency will revolutionize business. Free Press

  59. 59.

    See Johnson L, Sachs L, Sachs J (2015) Investor-state dispute settlement, public interest and US domestic law. Columbia Center on Sustainable Investment. http://ccsi.columbia.edu/files/2015/05/Investor-State-Dispute-Settlement-Public-Interest-and-U.S.-Domestic-Law-FINAL-May-19-8.pdf; Kaj Hóber C () Arbitration involving states. In: Newman LW, Hill RD (eds) The leading arbitrators’ guide to international arbitration, 3rd edn, Juris, 927

  60. 60.

    This policy aspect was highlighted in the famous Australian case of Esso/BHP v Plowman, (1995) 128 ALR 391. See also Tweeddale A (2005) Confidentiality in arbitration and the public interest exception. Arbitr Int 21:59, 61, http://corbett.co.uk/wp-content/uploads/Confidentiality-in-Arbitration-The-Public-Interest-Exception1.pdf

  61. 61.

    See Mistelis L (2005) Confidentiality and third party participation. Arbitr Int 21:211

  62. 62.

    Plagakis S (2013) Transparency of investment awards: a tool to increase transparency in judicial proceedings. In: Nakagawa J (ed) Transparency in international dispute settlement. Routledge, 84, 88–89

  63. 63.

    Ibidem

  64. 64.

    Ibidem

  65. 65.

    Delaney J, Magraw Jr. DB (2008) Transparency and public interest. In: Muchlinski P, Ortino F, Schreuer C (eds) The Oxford handbook of international investment law. Oxford University Press, 721, 724

  66. 66.

    Delaney and Magraw, ibidem, at 724

  67. 67.

    Plagakis, supra note 62, at 88

  68. 68.

    Bevilacqua and Spagnuolo, supra note 37, at 4

  69. 69.

    Ruscalla, supra note 38, at 1

  70. 70.

    An example thereof is the case Suez, Sociedad General de Aguas de Barcelona S.A., and Vivendi Universal S.A. (Claimants) and The Argentine Republic (Respondent) ICSID Case No. ARB/03/19.

  71. 71.

    Cassese S (2012) The global polity. Global dimensions of democracy and the rule of law. Global Law Press, 160

  72. 72.

    Bevilacqua and Spagnuolo, supra note 37, at 20

  73. 73.

    Bevilacqua and Spagnuolo, supra note 37, at 20

  74. 74.

    Bevilacqua and Spagnuolo, supra note 37, at 20

  75. 75.

    Bobbio N (2005) Prefazione. In: Kant I (ed) Per la pace perpetua. Editori Riuniti, 6

  76. 76.

    Balcerzak F, Hepburn J (2015) Publication of investment treaty awards: the qualified potential of domestic access to information laws. Groningen J Int Law 3:1 147, 153

  77. 77.

    Magraw D, Amerasinghe NM (2008–2009) Transparency and public participation in investor-state arbitration. ILSA J Int Comp Law 15:337, 345

  78. 78.

    Knahr and Reinisch, supra note 36, at 112

  79. 79.

    Knahr and Reinisch, supra note 36, at 112

  80. 80.

    Delaney and Magraw, supra note 41, at 761–762

  81. 81.

    Buys, supra note 41, at 134–135

  82. 82.

    Bevilacqua and Spagnuolo, supra note 37, at 13

  83. 83.

    Mollestad CN (2014) See no evil? Procedural transparency in international investment law and dispute settlement. PluriCourts Research Paper n 14–20, 13, http://www.jus.uio.no/pluricourts/english/publications/2014/mollestad-transparency-investment.html

  84. 84.

    Feliciano FP (2012) The ordre public dimensions of confidentiality and transparency in international arbitration. Philipp Law J 87:1 16, 20

  85. 85.

    Biwater Gauff (Tanzania) Ltd. v United Republic of Tanzania (2006) ICSID Case No. ARB/05/22, Procedural order no.3, 29 September 2006, para. 122

  86. 86.

    UNCITRAL Report of Working Group II (Arbitration and Conciliation) on the Work of Its Fifty-Third Session, A/CN.9/712, 7 (Vienna, October 4–8, 2010)

  87. 87.

    NAFTA, Annex 1137.4 Canada and the United States of America consented that the awards to which they were parties could be published. A more restrained stance of deference was adopted by Mexico regarding publication requirements of the arbitral rules that applied to each dispute.

  88. 88.

    Ethyl Corporation v Government of Canada, Procedural Order, 2 July 1998

  89. 89.

    SD Myers Inc v Government of Canada, Procedural Order No. 16, 13 May 2000, para. 8. See also Nadkarni N, Lim Tse Wei (2018) Reimagining transparency: enhancing systemic governance and actual legitimacy in investment arbitration. In: Hors Serie Volume XXII, Regional perspectives on contemporary and future harmonization agenda in international trade law. Victoria University of Wellington

  90. 90.

    Methanex Corporation v United States of America (2001) Decision of the tribunal on petitions from third persons to intervene as “amici curiae,” 15 January 2001.

  91. 91.

    Ibid para 49

  92. 92.

    United Nations Conference on Trade and Development (2016) Investor-state dispute settlement: review of developments in 2015 (IIA Issues Note, No 2, 2016) (UNCTAD/WEB/DIAE/PCB/2016/4); the relevant statistics have been conveniently compiled at United Nations Conference on Trade and Development at http://investmentpolicyhub.unctad.org/ISDS/FilterByRulesAndInstitution

  93. 93.

    ICSID, Arbitration Rules, rule 48(4) dated April 2006

  94. 94.

    ICSID, Arbitration Rules, rule 32 (April 2006)

  95. 95.

    ICSID, Arbitration Rules, rule 32 (January 2003)

  96. 96.

    ICSID, Proposals for Amendment of the ICSID Rules – Working Paper, Vol. 3, August 2, 2018; ICSID, Working Paper #2, Vol. 1, March 2019

  97. 97.

    ICSID, Proposals for Amendment of the ICSID Rules – Working Paper, Vol. 3, August 2, 2018

  98. 98.

    United Nations Conference on Trade and Development, supra note 92

  99. 99.

    UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration 2014, art 1(2).

  100. 100.

    Ibidem, article 6(3)

  101. 101.

    Kaufmann-Kohler G, Potestà M (2016) Can the Mauritius Convention serve as a model for the reform of investor-State arbitration in connection with the introduction of a permanent investment tribunal or an appeal mechanism? Analysis and roadmap, Geneva Center for International Dispute Settlement, 3 June 2016

  102. 102.

    United Nations Commission on International Trade Law Working Group III (Investor- State Dispute Settlement Reform) Thirty-seventh session, Possible reform of investor-State dispute settlement (ISDS) Submission from the European Union and its Member States, A/CN.9/WG.III/WP.159/Add.1, 24 January 2019

  103. 103.

    United Nations Commission on International Trade Law Working Group III (Investor-State Dispute Settlement Reform) Thirty-seventh session. Summary of the intersessional regional meeting on investor-State dispute settlement (ISDS) reform submitted by the Government of the Dominican Republic, A/CN.9/WG.III/WP.160, 27 February 2019

  104. 104.

    United Nations Commission on International Trade Law Working Group III (Investor-State Dispute Settlement Reform) Thirty-seventh session, Possible reform of investor-State dispute settlement (ISDS) Submission from the Government of Morocco, A/CN.9/WG.III/WP.161, 4 March 2019

  105. 105.

    Ibidem

  106. 106.

    Nadkarni and Wei, supra note 89

  107. 107.

    See generally Steinitz M (2011) Whose claim is this anyway? Third party litigation funding. Minn Law Rev 95:1268.

  108. 108.

    Egerton Vernon J (2017) Taming the “Mercantile Adventurers”: third party funding and investment arbitration – a report from the 14th annual ITA-ASIL conference. Kluwer Arbitration Blog, 21 April 2017, http://arbitrationblog.kluwerarbitration.com/2017/04/21/taming-the-mercantile-adventurers-third-party-funding-and-investment-arbitration-a-report-from-the-14th-annual-ita-asil-conference/ (citing to the 2015 Queen Mary/White & Case International Arbitration Survey)

  109. 109.

    UNCTAD (2017) Special update on investor–state dispute settlement: facts and figures, IIA Issues Note, UNCTAD, Issue 3, http://unctad.org/en/PublicationsLibrary/diaepcb2017d7_en.pdf

  110. 110.

    IBA Subcommittee on Investment Treaty Arbitration Report on the Subcommittee’s Investment Treaty Arbitration survey May 2016 [hereinafter: the Survey]

  111. 111.

    The surveyed individuals belong to the following categories: counsels, arbitrators, academics, expert witnesses, arbitration users, and non-governmental organizations. The Survey, ibidem, at 1

  112. 112.

    Ibidem

  113. 113.

    Echandi R (2011) What do developing countries expect from the international investment regime? In: Alvarez JE, et al. (eds) The evolving international investment regime: expectations, realities, options. Oxford University Press, 3, 3

  114. 114.

    Maupin JA (2013) Transparency in international investment law: the good, the bad and the murky. In: Bianchi A, Peters A (eds) Transparency in international law. Cambridge University Press, 142, 151–152

  115. 115.

    da Silva Martins AM (2016) Challenges to transparency and ethics in alternatives to arbitration in the realm of international investments. Revista de Direito Internacional Economico e Tributario 11:1 321, 336

Author information

Authors and Affiliations

  1. Faculty of Law and Criminology, Ghent University, Ghent, Belgium

    Dr. Flavia Marisi

Authors
  1. Dr. Flavia Marisi
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Flavia Marisi .

Editor information

Editors and Affiliations

  1. School of Law, City University of Hong Kong, Kowloon, Hong Kong

    Julien Chaisse

  2. School of Business and Law, University of Portsmouth, Portsmouth, UK

    Leïla Choukroune

  3. Institute of Malaysia and International Studies, National University of Malaysia, Bangi, Selangor, Malaysia

    Sufian Jusoh

Rights and permissions

Reprints and permissions

Copyright information

© 2019 Springer Nature Singapore Pte Ltd.

About this entry

Check for updates. Verify currency and authenticity via CrossMark

Cite this entry

Marisi, F. (2019). The Importance of Transparency for Legitimizing Investor-State Dispute Settlement. In: Chaisse, J., Choukroune, L., Jusoh, S. (eds) Handbook of International Investment Law and Policy. Springer, Singapore. https://doi.org/10.1007/978-981-13-5744-2_20-1

Download citation

  • DOI: https://doi.org/10.1007/978-981-13-5744-2_20-1

  • Received:

  • Accepted:

  • Published:

  • Publisher Name: Springer, Singapore

  • Print ISBN: 978-981-13-5744-2

  • Online ISBN: 978-981-13-5744-2

  • eBook Packages: Springer Reference Law and CriminologyReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences

Publish with us

Policies and ethics

Search

Navigation