17 June, 2017
Devika Khanna and Richard Power recently addressed the issue of transparency in arbitration – Devika as Chair of a panel at the London Centre of International Law Practice Annual Conference on Energy Arbitration & Dispute Resolution in the Middle East & Africa and Richard at the 2017 Cambridge Arbitration Day. Although the general view is that increasing transparency is a good thing, in this interview Devika and Richard share their thoughts on why the issue isn't quite that straightforward.
What do we mean when we talk about transparency in arbitration?
Richard: Transparency covers a wide range of topics, all of which are related to how much visibility the parties and the general public has regarding the constitution of the arbitral tribunal and the tribunal's handling of the case before it. So transparency would cover the publication of information regarding a potential arbitrator's background, previous case history and maybe even views on certain topics, as well as the question of whether awards should be published, whether hearings should be confidential or held in public, and whether interested parties should be allowed to make submissions at proceedings.
Devika: I agree, transparency is a broad topic and I think that when entering into any debate about it at a conference or with colleagues it is important to be clear about the 'type' of transparency you are discussing. Recent English court decisions on challenges to arbitrators have brought that element of transparency to the fore in commercial arbitration but in the context of investor-state arbitration, questions of transparency are usually more focussed on the public interest in the state's activities. In that arena, access to information is key and decisions must not be seen to be made behind closed doors.
Why is transparency such a hot topic for international arbitration?
Richard: The starting point for any arbitration was that it was a private and confidential dispute resolution process, outside the ambit of the national courts. Proceedings were conducted privately, third parties generally couldn't join in and awards were not published. Demands for transparency were a reaction to that. While that's still largely the case for commercial arbitrations, investor-state arbitrations have become much more transparent. However, the recent backlash against globalisation has led to increased public awareness of investor-state arbitrations and there has been widespread criticism of 'secret tribunals', composed of a small band of 'elite, non-elected' lawyers, 'undermining democracy' by imposing awards in favour of multinational corporations. Consequently there have been calls for increased transparency in investor-state arbitrations. The EU-Canada trade deal almost collapsed because of public concerns about this. At a commercial arbitration level, there's been an increasing call for diversity on arbitral tribunals – not just in terms of gender and race, but also in terms of new arbitrators getting a break to kick-start their careers. Consequently, there's increased pressure for transparency regarding appointments.
Devika: It's important to recognise that this debate is not just being held in the arbitration community but in the press at large. Investor-state dispute settlement (ISDS) is increasingly in the mainstream press and is usually under attack as being a 'secret process' damaging to the citizens and communities affected by the activities in dispute. Some feel that the process is no longer fit for purpose and alternatives are being sought such as the Investment Court System (ICS) included in the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU signed in 2016. The ICS provides for a two-tier system with a first instance tribunal composed of judges who may not act in other capacities in investment disputes during their terms, full transparency and awards within 24 months. While the debate is usually centred on the need for additional transparency in investor-state arbitration, there is a feeling that the criticisms of ISDS may also taint the reputation of commercial arbitration too.This public interest in arbitration has fuelled the debate on transparency which in my view is healthy and can be used to positively direct the evolution of both investor-state and commercial arbitration.
In your view should there be more transparency?
Richard: There is a legitimate need for enhanced transparency in investor-state arbitrations – justice should be seen to be done, in order to get public buy-in. However, I'm not sure that increasing transparency is either necessary or desirable. The key rules for investment arbitration such as ICSID, UNCITRAL, the SCC Rules and the ICC Rules already ensure that information about claims (including awards) is publically available; and interested third parties may become involved in the arbitration, usually by making written submissions. The UNCITRAL Transparency Rules even provide for submissions and evidence to be publically available, and for hearings to take place in public. Taking that any further – e.g. by allowing full joinder of third parties, or conducting all hearings in public even where trade secrets are being discussed – runs the risk of causing delay, increasing cost and allowing the process to become a forum for political showboating. That could scare parties away from using arbitration as a dispute resolution mechanism and even act as a barrier to trade and investment. I think we've got enough transparency. Public disquiet should be resolved by education, not changing the system.
Devika: Moves to address concerns over transparency in investor-state arbitration have been under consideration for some time and UNCITRAL in particular has worked to address and balance users' concerns. The "Mauritius Convention" came into on 1 April 2014 and applies to investor-state disputes conducted after that date. Key features include the publication of information, public hearings, submissions by non-parties, and a repository for the publication of information. Likewise, the ICSID Rules contain rules on the publication of awards (or excerpts thereof) with party consent, the possibility of open hearings, and amicus briefs. The rationale for such rules is to improve the public's perception of investor-state arbitration and to increase the consistency (and hence quality) of awards. I believe that with the current framework in place, the tools are there to enable transparency to be progressed and in a balanced way. Should transparency increase even further, my concern would be to ensure that any moves toward greater transparency are for the benefit of the right people or group. We, as arbitration practitioners, naturally have an academic interest in investment-treaty cases and the ability to follow and analyse them (which we cannot in commercial arbitration) enables us to better prepare for the cases in which we act. But transparency in this context is not just about benefits for the direct users but benefits for the people to whom the state parties are accountable. We must be clear who any enhanced transparency really benefits and how.
Should international commercial arbitration adopt similar transparency measures?
Richard: Put simply: no. I'd say confidentiality and privacy of the process are up there with neutrality and ease of enforcement as factors which attract parties to international commercial arbitration. If you take those away, you risk undermining international arbitration, especially when some national courts (like England's Commercial Court) offer pretty attractive, taxpayer-funded alternatives. Unlike investor-state arbitrations, the award won't have an impact on state funds and so the public interest in the arbitration isn't there.Again, while I'm all for diversity in the appointment of arbitrators, I don't really think transparency is a problem. I think we already have sufficient information about arbitral candidates, and what is needed is a change of mind-set from arbitration lawyers and in-house counsel, to be more creative in their appointments.
Devika: I can't give such a clear-cut answer as Richard as I think there may be more work to do.I think the current drive towards additional transparency – even in commercial arbitration – is to be welcomed, albeit it must take a different form to respect the confidentiality and privacy of the process which is held dear by users. We are also likely to see the arbitral institutions taking a more active role in driving this agenda forward in response to this debate. Increased transparency regarding the process of arbitration can and should of course be achieved to an extent through the publication of anonymised information and data. Such publication should help satisfy the growing desire among arbitration users to base decisions on real data rather than habit and anecdote.
For further information, please contact:
Devika Khanna, Partner, Clyde & Co