New UNCITRAL Arbitration Rules on Transparency and Investment Arbitration in the CIS Region

uncitralThe April UNCTAD report on recent developments in investor-state dispute settlement shows that arbitrations under the UNCITRAL Arbitration Rules constitute 28% of the total investment disputes conducted by the end of 2013.

The findings are even more important for the CIS region as many of its countries, such as the Russian Federation, Kyrgyzstan, Moldova and Tajikistan have either not signed or not ratified the ICSID convention. For example, they were used in 4 Russian, 3 Ukrainian and 5 Kyrgyz cases.

Although a higher degree of transparency is considered to be a distinguishable feature of investor-state arbitration, the previous (1976) and current (2010) editions of the UNCITRAL Arbitration Rules do not contain any specific articles about transparency. Moreover, article 34(5) of the current edition of the Rules even restricts possibilities for the publication of arbitral awards, stating that they can only be published with the consent of both parties. The fact that they were drafted primarily for commercial disputes, which are usually kept confidential may explain that.

Therefore, if the state or investor is unwilling to publish certain documents concerning the dispute, it is almost impossible to do it. For example, in Cesare Galdabini v Russian Federation, the award, made in May 2011, was not published. Similarly, in the Yukos v Russia dispute only the Interim Award on Jurisdiction is available, while the other 24 documents, involving legal and expert opinions remain closed to the general public.

The new Rules on Transparency radically change this situation.

Applicability of the Rules

The Rules will be used in investor-state arbitrations conducted under the UNCITRAL Arbitration Rules under BITs which are concluded after 1 April. They can also be applied to arbitrations under any other rules if the parties decide to do so and under treaties concluded prior to April 2014 if both the respondent state and the claimant’s state agree on that.

The upcoming UNCITRAL Convention on transparency in treaty-based investor-state arbitration may further broaden the applicability of the Rules. The current draft of it, published by the working group, states that it will make these Rules applicable to all existing BITs and multilateral treaties concluded both before and after 1 April 2014.

The Rules have already gained support of various states and organisations. Most notably the EU has already declared that they would be incorporated in all of its future BITs.

Publication of Documents

Contrary to the situation that existed prior to the adaptation of the Rules, they provide for full disclosure of the majority of the documents to the public.  For example, the awards shall be published in all cases. The other documents are divided into 3 main categories:

  1. Documents that shall be made available to the public automatically (Art. 3.1) such as the notice of the arbitration and the response to it, any written submissions by the parties, tables of exhibits to these documents, transcripts of hearings and any awards and interim awards;
  2. Documents that shall be available to the public at the request of any person to the tribunal (Art. 3.2) – expert and witness statements; and
  3. Documents that shall be available to the public upon the discretion of the tribunal (Art. 3.3) – exhibits and other documents not mentioned above.

The tribunal is obliged to promptly forward these documents to the repository, which would make them publicly available in their original form and language. This repository, in accordance with article 8 of the Rules, is the Secretary-General of the UN, which would publish the documents through the UNCITRAL Secretariat.

The drafters of the Rules also reserved several exceptions, for example, in relation to confidential business information and information publication of which is not allowed by the laws of the host state.

Participation of Third Parties and Amicus Curiae

The Rules describe the circumstances in which the tribunal should allow the participation of third parties. Such parties should have a significant interest in the proceedings, their submissions should assist the tribunal in the determination of questions of law or fact and not disrupt or unduly burden the proceedings. Only in this case can their written submissions be accepted by the tribunal.

Article 5(1) authorises the tribunal itself to invite such submissions from the non-disputing parties to participate in the proceedings. The scope of the submissions of these parties goes beyond mere treaty interpretation – under 5(2) they can be about “further matters within the scope of the dispute”. This has raised concerns that this provision may be used by home states of the investors for diplomatic protection. In order to address this, the final edition of Article 5(2) of the Rules specifically states the need to avoid submissions which would “support the claim of the investor in a manner tantamount to diplomatic protection”.

The Confidentiality of the Hearings

All the hearings conducted in accordance with the UNCITRAL rules on transparency shall be public even if both parties disagree with it. The rules provide only a limited set of circumstances in which some parts of the hearings may be held privately. This includes cases when there is a need to protect confidential business information, the integrity of the process or when it is necessary due to logistical purposes.

Consequences of the Adoption of the Rules on Transparency

The adoption of the new Rules and possible adoption of the Convention will significantly increase the degree of transparency of investment arbitration proceedings and will address the widespread criticism of investor-state arbitration for its lack of openness and even secrecy of its process. Now almost all procedural documents (with exception to confidential business information) will be easily accessible and open to the general public.

Moreover, as investment disputes tend to be very complex, they frequently involve a significant number of expert opinions and witness statements (the abovementioned Yukos as well as the Hulley Enterprises v Russia cases involved 24 main such documents). The disclosure of such documents may create issues regarding the protection of an expert’s work product or even intimidation of witnesses. In addition to it, as the Rules directly allow the tribunals to invite amicus curiae to participate in the arbitral proceedings, this means that a wider range of non-governmental organisations will be able to participate in the disputes.

For investors working in the CIS region this means that they should pay particular attention to these rules before initiating arbitration under the UNCITRAL Rules (and, potentially all other rules) and be ready for almost all hearings to be public and most of the procedural documents to be published (contrary to the current situation where in many cases even the details of the claims are often not disclosed).

Ivan Philippov


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