Australia ratifies convention to increase transparency in investor-State arbitration process

Australia has this month ratified the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (Mauritius Convention). The Mauritius Convention extends the application of the UNCITRAL Rules on Transparency in Treaty-based investor-State Arbitration (Transparency Rules), which applied to investment treaties concluded after 1 April 2014 and aim to promote greater transparency and public accessibility in investor-State dispute settlement (ISDS) proceedings.

The ratification of the Mauritius Convention means that the Transparency Rules now apply to all of Australia's investment treaties, including those concluded before 1 April 2014. This brings Australia's investment treaties concluded prior to 1 April 2014 into line with the transparency arrangements included in Australia’s more recent free trade agreements, such as the Australia-Hong Kong Free Trade Agreement and associated Investment Agreement.^[1]

Of critical importance to investors is that, going forward, investor-State arbitrations commenced under the ISDS provisions in Australia's investment treaties and under the UNCITRAL Arbitration Rules, will have hearings and documents made public, effectively just as they would in domestic courts, subject to some confidentiality exceptions discussed in greater detail below.

The Transparency Rules

The Transparency Rules are procedural rules that aim to increase transparency in ISDS, which is traditionally confidential in nature. The Transparency Rules supplement the applicable arbitration rules that apply to a dispute, and take precedence in the event of any conflict.

The key provisions in the Transparency Rules are as follows:

• mandatory disclosure of arbitration documents, including the notice of arbitration, the response to the notice of arbitration, and all pleadings (witness statements and expert reports are available upon request by any person);^[2]
• following consultation with the parties, the arbitral tribunal may allow for a third party to make written submissions on matters relevant to the dispute;^[3] and
• hearings will be open to public, with limited exceptions where there is a need to protect confidential information or the integrity of the arbitral process.^[4]

Notably, the Transparency Rules contain exceptions to protect confidential information, expressly providing that such information shall not be made available to the public.^[5] To facilitate this, the arbitral tribunal has the ability to make:

• arrangements to prevent any confidential or protected information from being made available to the public, for example, putting in place procedures for holding hearings in private to the extent required; and
•  determinations as to what constitutes confidential or protected information.

Public interest focus in ISDS

Importantly, the ratification of the Mauritius Convention signals the increased importance of transparency in ISDS, and the increased public interest in the conduct of investor-State arbitrations.

A common observation made in respect of investor-State arbitrations is around the perceived 'secrecy' of tribunals, and decisions made behind 'closed doors' encroaching on matters of public policy. This concern is particularly pronounced for disputes relating to issues of public health or the environment, which commonly feature in ISDS.^[6]

This concern has been addressed in the Preamble to the Mauritius Convention, which provides that the signatories to the Mauritius Convention recognise the "need for provisions on transparency in the settlement of treaty-based investor-State disputes to take account of the public interest involved in such arbitrations".

Ultimately, greater transparency will increase public understanding of, and engagement with, ISDS and will also promote consistent decision-making across investor-State arbitrations.

Comment

It is important to note the Transparency Rules only apply to ISDS, not international commercial arbitration, and only those ISDS proceedings commenced under the UNCITRAL Arbitration Rules. Currently, none of the other parties to Australia's international investment treaties potentially affected by the Mauritius Convention are signatories to it, which means the parties would need to opt-in to the Transparency Rules for them to apply.

The ratification of the Mauritius Convention coincides with the Federal government’s review into the bilateral investment treaties to which Australia is a party, in which ISDS provisions commonly feature. In its review, the Federal government is considering a range of policy options, including whether to continue, amend, renegotiate, terminate or replace Australia’s existing bilateral investment treaties.

It remains to be seen whether a move towards greater transparency will increase the take up of ISDS proceedings globally. Nevertheless, the ratification of the Mauritius Convention is a progressive move for Australia, one which might see it take a greater role in the Asia-Pacific region as a modern and competitive arbitral jurisdiction.