By Toby McIntosh
New transparency rules at the World Bank’s international arbitration body may not result in disclosure of many more documents.
Although the changes tilt toward transparency, they don’t remove the biggest roadblock to transparency. The mutual consent of the parties is still necessary for the release of key documents such as the final decisions.
More redacted decisions could be released, but the level of transparency will depend on the interpretation of 10 broadly worded justifications for confidentiality.
The same justifications for confidentiality will determine the level of disclosure for other documents, such as filings by the parties and orders issued by the arbitrators while cases are pending.
Interim orders are of public interest, as was recently demonstrated in a case involving Malta.
Another new rule will require parties to reveal if their litigation is financed by a third party, an increasingly common and opaque occurrence. But these disclosures will not be made public.
The new rules affect cases brought since July 1, 2022, before the International Centre for Settlement of Investment Disputes (ICSID). Often involving millions of dollars the cases typically are brought by corporations alleging that they were harmed by government actions in violation of the terms of investment treaties. Almost 300 international disputes matters are pending.
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Veto Power Remains
The fundamental inhibition on transparency at ICSID will stay in place.
A clause in the founding Convention, Article 48(5), allows either party to veto disclosure of the final decision and award. Most of the governments that are parties to the Convention, and who negotiated the rules changes, prefer to keep this veto provision in place for tactical or political reasons.
As a result, that veto power is not altered by ICSID’s new rules of procedure, which were developed during a five-year process. The rules went into effect on July 1, 2022, applicable to ICSID arbitrations commenced from that date onwards.
With the veto provision continuing, the rate at which final awards get published may stay where it has been. They are disclosed roughly half of the time. (The terms of settlement are rarely revealed.)
By late November, according to an EYE search of ICSID’s website, 15 matters were concluded in 2022 with an award. Of these, six are available. In 2021, 14 out of 24 final ICSID decisions were officially published, according to a search on a database maintained by the United Nations Conference on Trade and Development (UNCTAD).
New Rules Come With Caveats
The new ICSID rules may raise the level of disclosure for documents created while cases are pending, such as for the filings by the parties and orders by the tribunals.
Currently, the ICSID website provides limited information about the cases except in the rare instances when the parties have agreed to disclosure.
Always released are the names of the litigants and of the three arbitrators. The dates of key filings and orders are recorded. But normally undisclosed is the substance of the claim, the rebuttals, evidence, testimony or the arbitrators’ interim orders.
While the new rules offer some prospect that more information be disclosed, this will depend crucially on the interpretation of 10 broad justifications for confidentiality provided in the rules. They will be interpreted the ICSID Secretary-General or the three-judge tribunals, depending on the type of document.
Justifications for Continuing Secrecy Included
The 10 justifications for confidentiality are laid out in Rule 66. They provide a variety of rationales for the parties to argue for confidentiality.
One justification, 66(e), is a likely large umbrella for seceecy. It could prevent release of information covered “by agreement of the parties.” This clause “is notable for the power it gives to the parties,” wrote Gary J. Shaw, an attorney with Pillsbury Winthrop Shaw Pittman in Washington, DC, in The 2022 ICSID Rules: A Leap Toward Greater Transparency in ICSID Arbitration, ICSID Review, June 2022.
Another justification provision says a government party can protect against disclosures that “would be contrary to its essential security interests.” This clause is worded to make it “self-judging” by the government party, Shaw observed, thus not subject to Tribunal review.
Other protections could apply to “confidential business information” and “protected personal information.” Nondisclosure even could be allowed if “public disclosure would aggravate the dispute between the parties.”
Application to Decisions and Awards
ICSID’s previous rules, adopted in 2006, allowed the Secretary-General to publish excerpts of tribunal decisions and awards, Rule 48(4), as long as the parties agreed to waive their Convention right to nondisclosure.
If so, the new rule on publication of decision and awards (Rule 62) sets out a procedure to determine what will be published. The ICSID Secretary-General could propose to publish “excerpts.” The parties could then comment, including on “whether any information in the proposed excerpts is confidential or protected as defined in Rule 66.”
The rule says that the Secretary-General “shall consider“ the comments.
Another small wrinkle added in the new rule, termed as “a presumption of publication” seems unlikely to come into play. The clause, 62(3), says decisions will be published if neither party objects within 60 days of notification of the award.
Overall, one practitioner told EYE that the new Rule 62 “mostly clarifies and codifies practice that’s evolved over the years, especially by specifying the process to be followed in the publication of excerpts.” She said, “The effect of the new Rule is not likely to be huge, but it arguably moves the dial further in favor of the presumption of publication.”
Disclosure of Orders Also Covered by Confidentiality Justifications
Another new rule (Rule 63) would allow for publication of “orders and decisions” made by the tribunals during the course of a proceeding. The Convention does not require the consent of the parties for publication such orders.
Lawyers handling cases before ICSID have long wanted more information about the reasoning used by the tribunals. “The publication of procedural orders may facilitate the development of consistent jurisprudence with regard to procedural issues in ICSID arbitrations,” according to a commentary by the law firm Mayer/Brown.
The new rule says ICSID “shall publish orders and decisions, with any redactions agreed to by the parties and jointly notified to the Secretary-General within 60 days after the order or decision is issued.”
The parties may seek redactions based on the 10 justifications for confidentiality. If the parties disagree, “the Tribunal to decide any disputed redactions.” The rule specifies that the tribunal “shall ensure that publication does not disclose any confidential or protected information as defined in Rule 66.”
During the negotiations, “several countries” (unnamed) supported applying the more restrictive mutual consent standard to orders, but that view did not prevail, according to ICSID documents.
Tribunal Would Decide on Disputed Redactions for Party Documents
Regarding written submissions by the parties, Rule 64 would permit disclosure with redactions, “with consent of the parties.”
Disagreements over redactions would be resolved by the tribunal based on the 10 justifications for confidentiality in Rule 66.
The release of “supporting documents,” such as witness statements, is handled slightly differently. For these, the parties must consent before they will be published.
Third Party Financing Disclosures Won’t Be Public
Another new rule, Rule 14, was adopted because financial backing for the cases increasingly comes from third-party investors. This has raised concerns about potential conflicts of interest.
The existence of such third party funding arrangements must now be disclosed, but only to the parties and to the tribunal.
“It is expected that these enhanced disclosures will assist with the early identification of potential conflicts of interest, increase transparency, and potentially reduce conflict-related challenges,” wrote Mayer Brown about the rationale for new obligation.
The rule requires disclosure of the name and address of any non-party providing funding. Although it does not mandate that the funding agreement itself by provided, such disclosure could be ordered by an ICSID tribunal where deemed necessary.
However, information about the existence of third party funding is unlikely to become public, EYE has learned, because disclosure is not addressed in Rule 14 or the other transparency rules (Rules 62-64).
“You are correct that the rules do not have transparency provisions that are specific to third-party funding,” wrote ICSID spokesman Damon Dunbar. His opinion was confirmed by several private attorneys who have followed the development of the new rules.
Leak of Tribunal Decision in Malta Proceeding
A recent news story about an ICSID arbitration involving Malta is a rare instance of a leak about an ICSID proceeding. The tribunal decision had implications for an ongoing criminal case in the Maltese courts.
In a Sept. 17 exclusive article, Caroline Muscat, editor of The Shift, reported that ICSID “effectively ordering all related criminal proceedings by Malta to halt until the ICSID decides on Alpene’s case against Malta.”
On Nov. 7, a Maltese judge ordered that testimony in the case should be given behind closed doors to avoid contaminating the case before ICSID, The Shift further reported.
The criminal case in Malta concerns why officials of Pilatus Bank have not yet been prosecuted. The case before ICSID was brought by the bank’s former chairman, Ali Sadr Hashemi Nejad, owner of Alpene Ltd., a Hong Kong company. He invoked the 2009 bilateral investment treaty between Malta and China claiming an unfair expropriation and harassment by Malta.
The ICSID webpage on the case contains no documents. The Procedural Details tab has 17 entries beginning with July 2, 2021, when the matter was registered with ICSID. The procedural entries are barebones, although it appears sparring over the tribunal’s order. A Nov. 21 entry says, “The Respondent files observations on the Claimant’s renewed request for provisional measures.”
Transparency Gap Documented in Study
The large size of the transparency gap for all investment treaty arbitration cases, not just those at ICSID, was recently analyzed by academic researchers.
They documented that 31 percent of all the cases are missing claim information and 39 percent of concluded cases are missing award information.
Using “predictive modeling,” the authors valued the “transparency gap” at $186 billion in unreported claims and $15 billion in unreported awards.
The opacity rate around settlements was higher than that for awards. The settlement terms were not disclosed for 120 of 148 settled cases (81 percent).
The transparency gap “is non-trivial and persistent,” concluded the authors, Sebastian Puerta of Harvard University and Tim R. Samples of the University of Georgia. Their findings are detailed in Investment Law’s Transparency Gap, an article soon to be published in the Cornell International Law Journal.
The data were obtained from the Investment Dispute Settlement Navigator (IDS Navigator), a database created by UNCTAD. UNCTAD uses a variety of sources, including news accounts, to gather information about international arbitration cases. UNCTAD’s database, relying on unofficial sources, indicates who won in almost every case. Several subscription-based publications specialize in gathering news about arbitration proceedings.
UNCTAD database covers not only ICSID, the largest venue for investment treaty arbitration, but also smaller organizations, such as UNCITRAL, the United Nations Commission on International Trade Law, which has its own transparency rules.
