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UNCITRAL working group finalises draft rules on transparency
Practical Law UK Legal Update 1-524-2084 (Approx. 5 pages)
UNCITRAL working group finalises draft rules on transparency
by PLC Arbitration
| Published on 19 Feb 2013 • International |
The UNCITRAL Working Group II (Arbitration and Conciliation) continued its discussions in New York between 4-8 February 2013. At the 58th session, the working group finalised the draft rules on transparency in treaty-based investment arbitration.
Speedread
UNCITRAL has finalised the draft rules on transparency in investment treaty arbitration. Working Group II (Arbitration and Conciliation), which has discussed and formulated the new rules over a number of years, finalised the rules at its 58th session, which took place in New York between 4 and 8 February 2013. (For further background information about the group's discussions on transparency, see UNCITRAL working group II: tracker.)
The working group formulated a "revised compromise proposal" to address the remaining outstanding issues, namely:
- Article 1: Scope of application.
- Article 5: Submission by a non-disputing party to the treaty.
- Article 6: Hearings.
- Article 7: Exceptions to transparency.
The compromise proposal received formal and unanimous support, thereby finalising the draft rules.
The draft rules will apply to all treaties concluded after their adoption, and provide for public access to hearings and documents submitted in the arbitration. Interested parties will be able to make submissions to the proceedings, and there is also provision for a single institution to act as registry of published information.
The UNCITRAL Secretariat will now prepare a final draft of the rules which they will circulate to governments for their comments, with a view to adopting the rules in July 2013.
The draft rules have already been welcomed by the EU and it is expected that the rules will form the basis of transparency provisions in future EU investment treaties. Practitioners should note, further, that some amendments to the UNCITRAL Arbitration Rules will be required as a consequence of the adoption of the new transparency rules.
The UNCITRAL working group II (Arbitration and Conciliation) meets twice a year to report on arbitration issues. For background information, including on the working group's discussions on transparency, see UNCITRAL working group II: tracker.
At its 58th session, the working group finalised the draft rules on transparency in investment treaty arbitration. The working group put forward a "revised compromise proposal" on each of those issues, which received formal and unanimous support. The working group also considered the establishment of a registry of published information.
Outstanding substantive issues and the revised compromise proposal
Scope of application
Under the revised compromise proposal, the rules on transparency will apply to treaties concluded after the rules enter into force, unless parties to a treaty opt out of their application (Article 1). The rules on transparency will not apply to existing treaties. Where an investor-state arbitration is initiated under the UNCITRAL Arbitration Rules pursuant to a treaty concluded before rules on transparency enter into force, the rules will only apply:
- Where the parties agree to their application in respect of that arbitration.
- Where the parties to the treaty or, in the case of a multilateral treaty, the home state of the investor and the respondent state, have agreed to their application.
Where a treaty contains transparency rules which are drafted to prevail over the applicable arbitration rules, then the treaty provisions on transparency will prevail over the UNCITRAL rules on transparency.
It was agreed that the UNCITRAL Arbitration Rules would require an amendment in order to create a link with the rules on transparency and that this amendment would result in a new 2013 or 2014 version of the UNCITRAL Arbitration Rules.
Submission by a non-disputing party to the treaty
The working group agreed that the arbitral tribunal should accept submissions by a non-disputing party to the treaty, provided that this would not disrupt or unduly burden the arbitral proceedings, or unfairly prejudice any disputing party (Article 5.1) .
Hearings
The working group agreed that hearings for the presentation of evidence or for oral argument will be public, subject to the exceptions set out in paragraphs (2) and (3) which give the tribunal a discretion, after consultation with the disputing parties, to hold part or all of the hearings in private (Article 6).
Exceptions to transparency
Under the revised compromise proposal, the types of information that can be classified as confidential or protected , and therefore exempt from transparency requirements, are:
- Confidential business information (Article 7(2)(a)).
- Information that is protected against being made available to the public under the treaty (Article 7(2)(b)).
- Information that is protected against being made available to the public, in the case of the information of the respondent, under the law of the respondent, and in the case of other information, under any law or rules determined by the arbitral tribunal to be applicable to the disclosure of such information (Article 7(2)(c)).
- Information which would impede law enforcement if disclosed (Article 7(2)(d)).
A new Article 7.3 provides that nothing in the rules requires a respondent to make information public that would be contrary to its essential security interests.
Establishment of a registry of published information
The working group agreed that a single institution should undertake the registry function, and that the best institution to serve as the registry would be UNCITRAL. The International Centre for Settlement of Investment Disputes (ICSID) and the Permanent Court of Arbitration (PCA) have also expressed a willingness to undertake the function of a single registry should UNCITRAL not be in a position to take up that role.
The registry will only publish electronic documents.
Consideration of outstanding drafting issues
The working group also considered and agreed on amendments to Articles 2 and 3. Article 2 was amended to provide that the name of the disputing parties, the economic sector involved, and the treaty under which the claim is being made is made public at the commencement of arbitration.
Next steps
The draft rules have already received support from the EU (see Press release, EU backs new transparency standards for investor-state dispute settlement). EU Trade Spokesman John Clancy stated that the new transparency rules will "set a benchmark" for all future EU investment treaties, and it is expected that the new provisions will form the basis of transparency provisions in future EU investment treaties..
The working group has requested the Secretariat to:
- Prepare a draft of the revised rules based on the working group's deliberations and to make any necessary drafting adjustments to ensure consistency.
- Circulate the draft revised rules to governments for their comments, with a view to adoption of the draft rules by the UNCITRAL Commission at its 46th session in Vienna in July 2013.
- Prepare a note for the consideration by the Commission containing the draft text of a convention on transparency, draft recommendations and model declarations, regarding the question of application of the rules on transparency to disputes arising under investment treaties concluded before their adoption.