Procedural Transparency in Investor-State Arbitration

Abstract

The aim of this thesis is to contribute to a paradigm shift from confidentiality to greater transparency in investor-state arbitration by providing a theoretical framework for that paradigm shift and by demonstrating how greater transparency could be achieved in practice. It is argued that, if there is a general principle of open justice, rooted in the principle of self- governance, and if arbitrators are making law for all states participating in the investment treaty arbitration system, thus governing in a system of self-government, arbitral hearings should be presumptively open to the public. This thesis unwraps this argument in three steps. First, it is argued that there is a general principle of open justice within the meaning of Article 38(1)(c) of the ICJ Statute. An empirical study of the constitutions of the world demonstrates the ubiquity of the principle of open justice. It is also shown that open justice is protected at common law. Secondly, it is argued that arbitrators are making law by specifying the meaning of vague treaty norms and following a flexible doctrine of stare decisis. This activity of arbitral law-making is comparable to the activity of a highest court in a domestic legal system. Just as a highest court in a domestic legal system is not absolutely bound by its prior decisions, so are tribunals in the investment arbitration system not absolutely bound by prior arbitral decisions. Yet, both types of adjudicative bodies consider ‘their own’ prior decisions to be binding with conditional authority, meaning that neither would depart from the ratio decidendi of ‘their’ prior decisions unless in exceptional cases and for pertinent reasons. Thirdly, this thesis argues that by making law, arbitrators govern in a system of self-government which contains all states participating in the investment arbitration system. In sum, it is suggested that the principle of open justice is applicable to investment arbitration. Given its applicability, the implementation of the principle of open justice is also examined. It is argued that domestic courts, on their own initiative, could implement the principle of open justice by refusing to enforce those awards that are based on proceedings that were wrongly closed to the public – irrespective of whether enforcement is sought under the New York Convention or the ICSID Convention. Even if courts only contemplated the non-enforcement of arbitral awards on the ground that the arbitral hearings violated the principle of open justice, this could motivate disputing parties to pre- emptively open their hearings to the public. This rights-based approach to greater transparency offers the benefits of immediacy and flexibility in implementation, while being efficient and cost-effective. What is more, its success does not depend on states taking active steps towards greater transparency, a hurdle that is slowing down the success of the UNCITRAL Rules on Transparency and the Mauritius Convention. Last, it is shown that it is preferable to implement open justice under the existing structure rather than seek the establishment of an open World Investment Court. This is because of the loss of government control under the latter system. The implementation of open justice in the existing system would have the added benefit of rendering investment arbitration more legitimate and sustainable while being compatible with all other benefits of arbitration such as the parties’ right to choose their own arbitrators.