18 October 2017 marks the entry into force of the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration, more commonly known as the "Mauritius Convention". While the Convention has the potential to significantly affect the way most investment-treaty arbitrations are conducted, it appears that, at least for now, its practical impact will be limited.
What does the Convention do, and when does it apply?
The Convention aims to promote more widespread application of the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration. The Transparency Rules comprise a set of procedural rules dealing with, among other things, the disclosure of case-related documents, public access to hearings, and submissions by amici curiae and non-disputing State parties. The Transparency Rules apply by default to all investor-State arbitrations conducted under the UNCITRAL Arbitration Rules pursuant to treaties concluded on or after 1 April 2014 (i.e., the effective date of the Transparency Rules). The application of the Transparency Rules to arbitrations under earlier treaties requires further expressions of consent.
As most investment treaties pre-date 1 April 2014, the Convention provides States with an efficient mechanism through which they can express their consent to the application of the Transparency Rules to arbitrations arising out of such earlier treaties. Of course, States may also express their consent outside of the Convention's framework, by amending individual existing treaties.
The Convention applies to investor-State arbitrations conducted pursuant to investment treaties, whether or not initiated under the UNCITRAL Arbitration Rules, in which the respondent is a Party to the Convention and the claimant is "of a" State that is a Party to the Convention. When these conditions are satisfied, the Convention provides for the mandatory application of the Transparency Rules, unless either the respondent Party or the claimant's home State has made a "relevant reservation". By making a reservation, a Party may exclude the application of the Convention from arbitrations under a specific treaty, or conducted using a specific set of arbitration rules (other than the UNCITRAL Arbitration Rules).
Pursuant to the Convention, the Transparency Rules will also apply to investment-treaty arbitrations in which only the respondent is a Party to the Convention (and has not made a relevant reservation), but the State of the claimant's nationality is not, provided that the claimant agrees to the application of the Transparency Rules.
What impact might the Convention have?
The Convention's authors have hailed it "a powerful instrument to enhance transparency in investor-State dispute settlement" and expressed hope that it would allow States to apply the Transparency Rules to arbitrations arising under some 3,000 treaties concluded before 1 April 2014. Academics have praised it as an innovative example of how the investment-law regime could be multilaterally reformed through an incremental opt-in approach.
The Convention no doubt could contribute to a significant shift in the way investment-treaty arbitrations are conducted. Were it to be widely adopted, "transparent" treaty-based arbitrations between investors and States would become much more common. Moreover, the Convention has a number of features that increase the scope of its potential impact: it applies to arbitrations conducted under any set of arbitration rules, not just the UNCITRAL Arbitration Rules; it is not limited to States, but also allows "economic integration organizations" (such as the EU) to be a Party; and, through careful drafting, it seeks to minimise the risk of States denouncing the Convention or narrowing their commitments after learning of a potential dispute.
Nevertheless, there are reasons to think that, at least in the short-term, the impact of the Convention may be limited.
First and most importantly, States have shown limited willingness to ratify the Convention: so far, it has been signed by 22 States but ratified by only three (namely, Canada, Mauritius and Switzerland). Consequently, as of today, the Convention applies to only one of the thousands of investment treaties pre-dating 1 April 2014: the Mauritius-Switzerland BIT. (Canada has not entered into a BIT with either Mauritius or Switzerland).
Second, the Convention does not apply to investor-State arbitrations initiated pursuant to contracts or domestic investment-protection laws. Such arbitrations constitute almost one-sixth of all cases initiated at ICSID to-date*; due to the Convention's focus on treaty-based arbitration, similar cases arising in the future will fall outside its scope.
Third, while an "economic integration organization" may become a Party to the Convention, the Convention will apply only where such an organisation itself—rather than any of its member States—is a respondent. Similarly, in order for the Convention to apply, the claimant's home State must be a party to the Convention—not any economic integration organisation of which that State is a member.
It remains to be seen whether, with time, more States express interest in ratifying the Convention, thereby contributing to the Convention's intended aim: increasing transparency and accessibility to the public of investor-State arbitration.
* According the author's calculations, out of some 640 arbitrations ICSID has administered to date, over one hundred were based on a contract and/or an investment-protection law (excluding cases where a treaty was also invoked as an instrument of consent).
This article first published in Investment Claims.
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