Enhancing the Procedural Legitimacy
of Investor-State Arbitration Through
Transparency and Amicus Curiae
Participation
J. Anthony VanDuzer*
intended
to achieve
though a process
Investor-state arbitration under NAFTA and the
other investment treaties to which Canada is a party has
been controversial. There are concerns that investor-
state arbitration allows investors to challenge laws of
important
general application
that is
public-policy objectives
lacking in transparency and democratic accountability.
This critique of investor-state arbitration is diminishing
tribunals have
in potency, however, as arbitral
recognized the need for greater openness in promoting
legitimacy of the process and have adopted
the
practices intended to achieve that goal. For example,
tribunals have ordered open hearings and permitted
amicus curiae participation. While all three NAFTA
party states have strongly endorsed these practices, they
to amend NAFTA to guarantee them.
have failed
Developments outside of NAFTA indicate that the
move toward transparency is part of a larger trend, the
strength of which may indicate that the recent changes
in practice will be enduring. However, in the absence of
comprehensive and predictable rules, concerns about
the legitimacy of the NAFTA process are likely to
remain.
fait
la
L’arbitrage
investisseur-ttat dans
tribunaux arbitraux ont reconnu
le cadre de
I’ALtNA et des autres traits d’investissement dont le
l’objet de maintes
Canada est signataire a
I’arbitrage
que
craignent
controverses. Certains
investisseurs de
investisseur-ttat ne permette aux
contester des lois d’application g6n6rale, comportant
d’importants objectifs de politique publique, par le biais
transparence
d’un processus qui manque de
d&mocratique. Cette critique perd cependant de sa force
la
depuis que les
n6cessit& d’une plus grande ouverture en vue de
promouvoir la l6gitimit du processus et qu’ils ont, par
consequent, adopt6 certaines pratiques afin de r6aliser
cet objectif. Par exemple, les tribunaux ont ordonn6 la
tenue de proc6s publics et ont permis la participation
trois Etats
d’amici curiae. Quoique chacun des
signataires de I’ALENA ait vivement appuy6 ces
pratiques, aucun amendement n’a 6t fait pour en
assurer leur permanence. Les d6veloppements externes
‘ALtNA sugg&rent que cette ouverture A la
A
transparence s’inscrit dans une tendance plus large,
dont l’ampleur pourrait 6tre indicative de l’endurance
les pratiques.
probable des
r6gles
N6anmoins,
exhaustives et pr6visibles, les pr6occupations quant i la
16gitimit6 du processus de I’ALtNA pour le r6glement
des diff&rends risquent de persister.
changements
F’absence
dans
continue
de
en
* Associate Professor, Common Law Section, Faculty of Law, University of Ottawa. Email:
American States Workshops on International Law at the Faculty of Law, University of Ottawa, 25
October 2005.
J. Anthony VanDuzer 2007
To be cited as: (2007) 52 McGill L.J. 681
Mode de r6f6rence : (2007) 52 R.D. McGill 681
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Introduction
1. Overview of Investor-State Arbitration
A. A Brief History of Bilateral Investment Treaties
B. Statistics on Investor-State Claims
II. The Nature of Legitimacy Concerns Regarding
NAFTA Chapter 11
III. Rules on Transparency in Investor-State Arbitrations
A. The NAFTA Rules
Introduction
1.
2. FTC Interpretive Note on Transparency
3. NAFTA Practice
4. Gaps in NAFTA Transparency Rules
a. Disclosure Prior to Commencement of the
Arbitration
b. Disclosure of Arbitration Claim
c. Disclosure After Commencement of Arbitration
B. Recent Improvements in Transparency Rules
IV. Rules on the Participation of Amlci Curiae In Investor-State
Introduction
Arbitrations
A.
B. NAFTA Practice
C. Recent Improvements in Amicus Curiae Rules
Conclusions
683
688
688
690
691
697
697
697
698
698
701
701
702
703
706
708
708
710
717
720
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Introduction
When Canada became a party to the North American Free Trade Agreement in
1992, it adopted investor-state arbitration as part of its foreign investment policy.’
Investor-state arbitration is provided for in Chapter 11 of NAFTA and in nineteen
bilateral foreign investment protection agreements entered into by Canada that follow
the NAFTA model.2 Investor-state arbitration provisions in a treaty permit a private
1 North American Free Trade Agreement Between the Government of Canada, the Government of
Mexico and the Government of the United States, 17 December 1992, Can. T.S. 1994 No. 2, 32 I.L.M.
289 (entered into force 1 January 1994) [NAFTA].
the Republic of Trinidad and Tobago (Agreement Between
2 Canada has entered into bilateral foreign investment protection agreements (entitled Agreement
Between the Government of Canada and the Government of [State] for the Promotion and Protection
of Investments unless otherwise indicated) with the following states: Ukraine (24 October 1994, Can.
T.S. 1995 No. 23 (entered into force 24 July 1995)); the Republic of Latvia (26 April 1995, Can. T.S.
1995 No. 19 (entered into force 27 July 1995)); the Republic of the Philippines (Agreement Between
the Government of Canada and the Government of the Republic of the Philippines/for the Promotion
and the Reciprocal Protection of Investments, 9 November 1995, Can. T.S. 1996 No. 46 (entered into
the
force 13 November 1996));
Government of Canada and the Government of the Republic of Trinidad and Tobago for the
Reciprocal Promotion and Protection of Investments, 11 September 1995, Can. T.S. 1996 No. 22
(entered into force 8 July 1996)); Barbados (29 May 1996, Can. T.S. 1997 No. 4 (entered into force 17
January 1997)); the Republic of Ecuador (Agreement Between the Government of Canada and the
Government of the Republic of Ecuador for the Promotion and Reciprocal Protection of Investments,
29 April 1996, Can. T.S. 1997 No. 25 (entered into force 6 June 1997)); the Arab Republic of Egypt
(13 November 1996, Can. T.S. 1997 No. 31 (entered into force 3 November 1997)); the Republic of
Venezuela (1 July 1996, Can. T.S. 1998 No. 20 (entered into force 28 January 1998)); the Kingdom of
Thailand (17 January 1997, Can. T.S. 1998 No. 29 (entered into force 24 September 1998)); the
Republic of Panama (12 September 1996, Can. T.S. 1998 No. 35 (entered into force 13 February
1998)); the Republic of Armenia (8 May 1997, Can. T.S. 1999 No. 22 (entered into force 29 March
1999)); the Eastern Republic of Uruguay (29 October 1997, Can. T.S. 1999 No. 31 (entered into force
2 June 1999)); the Lebanese Republic (11 April 1997, Can. T.S. 1999 No. 15 (entered into force 19
June 1999)); the Republic of Costa Rica (18 March 1998, Can. T.S. 1999 No. 43 (entered into force 29
September 1999)); the Republic of Croatia (3 February 1997, Can. T.S. 2001 No. 4 (entered into force
30 January 2001)); the Republic of Romania (Agreement Between the Government of Canada and the
Government of the Republic of Romania for the Promotion and Reciprocal Protection of Investments,
17 April 1996, Can. T.S. 1997 No. 47 (entered into force 11 February 1997)); Peru (14 November
2006 (entered into force 20 June 2007)); El Salvador and South Africa (not yet in force). Negotiations
are currently underway with China, India, and Jordan. The Free Trade Agreement Between the
Government of Canada and the Government of the Republic of Chile, 4 December 1996, Can. T.S.
1997 No. 50 (entered into force 5 July 1997) contains a chapter (Chapter G) that is modelled on
NAFTA Chapter 11. Canada is also negotiating free trade agreements with South Korea, Singapore,
and four Central American countries (El Salvador, Guatemala, Honduras, and Nicaragua), and is
participating in negotiations regarding the Free Trade Agreement of the Americas. Each of these
agreements may have an investment chapter. Texts of all these agreements and the status of the
negotiations can be found online: Foreign Affairs and International Trade Canada
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investor from a state that is a party to the treaty to seek compensation for injuries that
the investor suffers as a result of measures of another party state that are not
consistent with the substantive obligations
treaty. While investor-state
arbitration procedures are not new, increasingly they are being used to challenge
government measures, especially under NAFTA. The burgeoning case law under
NAFTA is redefining the standards of protection for investors.3
in the
Investor-state arbitration has been controversial,’ especially in Canada.’ While
concerns about the investor-state process are multiple and varied,6 one of the most
frequently heard complaints is that investor-state arbitration is not transparent. 7
Investor-state arbitration involves challenges to government measures, sometimes
measures of general application intended to promote or achieve important public
policy goals such as environmental protection. To the extent that issues of public
3 See J. Anthony VanDuzer, “NAFTA Chapter I 1 to Date: The Progress of a Work in Progress” in
Laura R. Dawson & Donald M. McRae, eds., Whose Rights? The NAFTA Chapter 11 Debate (Ottawa:
Centre for Trade Policy and Law, 2002) 42 at 47.
4 Mainstream papers in Canada and the United States have been among the critics of the process in
this regard. See “NAFTA Cone of Silence”, Editorial, The Globe and Mail (26 August 1998) A14
(contrasting NAFTA Chapter 1I and the Canadian judicial process in terms of transparency); “Can We
Talk?”, Editorial, The Globe and Mail (1 September 1998) A14; Anthony DePalma, “Nafta’s Powerful
Little Secret; Obscure Tribunals Settle Disputes, but Go Too Far, Critics Say” The New York T7rnes (11
March 2001) BUI.
Canada
5 In its December 2002 report, the Standing Committee on Foreign Affairs and International Trade
came to the following conclusion regarding investor-state arbitration: “[S]omething is seriously wrong
with the status quo and [there is] pressing unfinished business with the NAFTA framework” (Partners
in North America: Advancing Canada s Relations with the United States and Mexico (Ottawa:
Standing Committee on Foreign Affairs and Intemational Trade, 2002) at 146, online: House of
Commons
Chapter 11. See Council of Canadians v. Canada (A.G), 277 D.L.R. (4th) 527, 149 C.R.R. (2d) 290
(Ont. C.A.), aff’g [2005] O.J. No. 3422 (Sup. Ct.) (QL), leave to appeal to S.C.C. refused, 31842 (26
July 2007). The applicants, unsuccessful at trial and on appeal, argued that investor-state arbitration
usurps the “core or inherent jurisdiction” of Canadian superior courts and is incompatible with the
Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982, being Schedule B to
the Canada Act 1982 (U.K.), 1982, c. 11 (Council of Canadians v. Canada (A.G), ibid. at para. 33).
6 For scholarly critiques of the legitimacy of NAFTA Chapter 11, see Chris Tollefson, “Games
Without Frontiers: Investor Claims and Citizen Submissions Under the NAFTA Regime” (2002) 27
Yale J. Int’l L. 141 at 163, 184-85; Charles H. Brower, II, “Structure, Legitimacy and NAFTA’s
Investment Chapter” (2003) 36 Vand. J. Transnat’l L. 37 [Brower, “Structure, Legitimacy”]; Naveen
Gurudevan, “An Evaluation of Current Legitimacy-Based Objections to NAFTA’s Chapter 11
Investment Dispute Resolution Process”, Comment, (2005) 6 San Diego Int’l L.J. 399; Jeffirey Atik,
“Repenser NAFTA Chapter 11: A Catalogue of Legitimacy Critiques” (2003) 3 Asper Review of
International Business & Trade Law 215; Susan D. Franck, “The Legitimacy Crisis in Investment
Treaty Arbitration: Privatizing Public International Law Through Inconsistent Decisions” (2005) 73
Fordham L. Rev. 1521; Charles N. Brower, “A Crisis of Legitimacy” National Law Journal (7
October 2002) B9.
7 See Tollefson, ibid.; Brower, “Structure, Legitimacy”, ibid. at 56-57, 68, 71-73; Gurudevan, ibid.
at 425-27; Atik, ibid. at 224, 231-33; Franck, ibid. at 1544-45.
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policy are, in effect, being resolved in investor-state arbitration, it is argued that a
high level of public access to the dispute settlement process is necessary to ensure
public acceptance of the result and the democratic accountability of the process.’
investor-state procedures, however, are based on private
NAFTA and other
commercial-arbitration models, which typically operate free from public scrutiny.
In light of recent events, a critique of investor-state arbitration based on a lack of
transparency is becoming harder to sustain. NAFTA Chapter 11 tribunals rendering
decisions in individual cases have shown themselves to be responsive to concerns
about transparency. Beginning in the late 1990s, tribunals in NAFTA cases have
developed a set of procedural practices that significantly contribute to the openness of
the investor-state process under Chapter 11. For example, NAFTA tribunals have
ordered hearings to be open to the public in three cases.’ Three NAFTA tribunals
have even recognized that it is appropriate to permit the participation of public
interest groups as amici curiae in some cases. 0 Amicus participation may contribute
to decisions that are more likely to be informed by, and responsive to, a wide range of
interests. Non-governmental organizations may provide additional information or
perspectives that neither of the parties can bring to the dispute. Both these procedural
innovations as well as other transparency practices developed in NAFTA cases have
8 Julie A. Soloway describes the problem as follows: “Th[e] lack of transparency seems to run
counter to ‘the values and views’ integral to the post-war trading system and indeed democratic
principles, where transparency of legal process is a fundamental norm” (“NAFTA’s Chapter 11: The
Challenge of Private Party Participation” (1999) 16:2 J. Int’l Arb. 8 at 10).
9 See United States Parcel Service ofAmerica v. Canada, Notice of Arbitration under the Arbitration
Rules of the United Nations Commission on International Trade Law and the North American Free
(19 April 2000), online: Foreign Affairs and Intemational Trade Canada
Trade Agreement
[UPS, Arbitration Notice]; Methanex v. United States, Notice of Arbitration under the Arbitration
Rules of the United Nations Commission on International Trade Law and the North American Free
Trade Agreement (2 December 1999), online: NAFTA Claims
States, Notice of Arbitration and Statement of Claim (9 July 2002), online: NAFTA Claims
10 See Methanex v. United States, Decision of the Tribunal on Petitions from Third Persons to
Intervene as “Amici Curiae” (15 January 2001) (Arbitrators: William Rowley, Warren Christopher,
VV Veeder), online: U.S. Department of State
Tribunal on Petitions for Intervention and Participation as Amici Curiae (17 October 2001) at para. 70
(Arbitrators: Dean Ronald A. Cass, L. Yves Fortier, Justice Kenneth Keith), online: Foreign Affairs
and International Trade Canada
Procedural Order No. 1 (3 March 2005) (International Centre for the Settlement of Investment
(Additional Facility)), online: U.S. Department of State
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now been endorsed in statements of the three NAFTA party states sitting as the Free
Trade Commission.”
With respect to enhancing legitimacy, the practices of NAFTA tribunals regarding
transparency and amicus participation, and their acceptance by the Free Trade
Commission, are encouraging.12 Unfortunately,
remains
incomplete. Neither NAFTA tribunal decisions nor the statements of the Free Trade
Commission create comprehensive obligations that are binding on future tribunals.’3
To date, Canada, the United States, and Mexico have not amended NAFTA to
guarantee the ad hoc transparency protections and amicus curiae procedures adopted
in NAFTA cases.
the NAFTA regime
Nevertheless, the trend toward improved transparency and openness to amicus
participation is clear. There is increasingly compelling evidence in the NAFTA
context and in other investor-state forums that transparency and the possibility of
amicus participation are accepted by states and arbitrators as essential to the ongoing
legitimacy of investor-state dispute settlement. Protections like those adopted on an
ad hoc basis in NAFTA Chapter 11 cases have been incorporated as mandatory
provisions in the new model bilateral investment treaties (“BITs”) that Canada and
the United States use as the basis for their negotiations with other countries.’4 Treaties
following these models will include these new norms for investor-state procedures.
” See NAFTA Free Trade Commission, “Notes of Interpretation of Certain NAFTA Chapter 11
Provisions” (31 July 2001), online: Foreign Affairs and International Trade Canada
(FTC Interpretive Note on Transparency]; NAFTA Free Trade Commission, “Statement of the Free
Trade Commission on Non-disputing Party Participation, 7 October 2003” (2004) 16 W.T.A.M. 167
[FTC Statement].
12 See Craig Forcese, “Does the Sky Fall?: NAFTA Chapter 11 Dispute Settlement and Democratic
Accountability” (2006) 14 MSU-DCL J. Int’l L. 315.
“13 NAFTA provides that awards “have no binding force except between the disputing parties and in
respect of the particular case” (supra note 1, art. 1136(1)). Interpretations of NAFTA by the Free Trade
Commission are binding (ibid., art. 1131(2)). As discussed in this article, the Free Trade Commission’s
commitments regarding
transparency and amicus curiae participation do not create binding
requirements, either because they are not interpretations of NAFTA or because of limitations in the
commitments themselves.
Trade
Canada
14 See Canada, Agreement Between Canada and ———- for the Promotion and Protection of
Investments (Model Foreign Investment Protection Agreement) (2004), online: Foreign Affairs and
International
Government of the United States of America and the Government of [Country] Concerning the
Encouragement and Reciprocal Protection of Investment (Model Bilateral Investment Treaty) (2004),
online: United States Department of State
[U.S. New Model BIT]. These have been called “the new generation of BITs” (United Nations
Conference on Trade and Development, Recent Developments
in International Investment
Agreements, UN Doc. UNCTAD/WEB/ITE/IIT/2005/1 (30 August 2005) at 6, online: UNCTAD
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Some of the practices in NAFTA cases are beginning to be adopted by investor-
state tribunals applying other investment treaties. More importantly, in April 2006, the
International Centre for the Settlement of Investment Disputes (“ICSID”) amended its
rules to facilitate greater transparency and to expressly authorize tribunals to allow
participation by amici curiae.’5 These rules apply to a large proportion of investor-
state disputes worldwide, including some under NAFTA Chapter 11. Consequently,
while more could be done to put transparency and amicus curiae participation in
investor-state arbitration under NAFTA and other existing treaties on firmer legal
ground, the potency of legitimacy critiques of investor-state arbitration based on the
lack of transparency and openness to amicus participation is diminishing. 16
This paper examines the essential nature of concerns about the legitimacy of the
NAFTA Chapter 11 process based on a lack of transparency and openness to third-
party participation. It then surveys the evolving practices related to transparency and
amicus curiae participation in investor-state arbitration under NAFTA Chapter 11
with a view to assessing the progress to date and identifying what remains to be done.
In order to provide some context for this analysis, the paper will begin with a brief
introduction to the process of investor-state arbitration.
15 The ICSID arbitration rules are contained in the Convention on the Settlement of Investment
Disputes between States and Nationals of Other States, 18 March 1965, 575 U.N.T.S. 159, 4 I.L.M.
532 (entered into force 14 October 1966) [ICSID Convention] and the rules created by the ICSID
Administrative Council pursuant to arts. 6(l)(a) to (c) of the ICSID Convention, ibid. (Administrative
and Financial Regulations, Rules of Procedure for the Institution of Conciliation and Arbitration
Proceedings (Institution Rules); Rules of Procedure for Arbitration Proceedings (Arbitration Rules)
[ICSID Arbitration Rules]). These rules are published in ICSID, ICSID Convention, Regulations and
for the
Rules, Doc. ICSID/15
Administration of Conciliation, Arbitration and Fact-Finding Proceedings was created by the ICSID
Administrative Council on 27 September 1978 (ICSID Additional Facility for the Administration of
Conciliation, Arbitration and Fact-Finding Proceedings, Doc. ICSID/l 1 (Washington: ICSID, 1979)
[ICSID Additional Facility]). Schedule C of the ICSID Additional Facility, ibid. sets out the
the
Arbitration (Additional Facility) Rules [Additional Facility Rules]. On 5 April 2006,
Administrative Council approved amendments to the ICSID Arbitration Rules and the Additional
Facility Rules. These amendments came into effect on 10 April 2006. See ICSID, News Release,
“Amendments to the ICSID Rules and Regulations” (5 April 2006), online: ICSID
ICSID, 2006). The ICSID Additional Facility
(Washington:
16 This is not to say that other legitimacy critiques may not be compelling. See Brower, “Structure,
Legitimacy”, supra note 6; Gurudevan, supra note 6; Atik, supra note 6; Franck, supra note 6.
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I. Overview of Investor-State Arbitration
A. A Brief History of Bilateral Investment Treaties
Beginning in the 1990s, foreign direct investment, especially in developing
countries, began to increase significantly.’7 Many developing countries were turning
away from reliance on the state as the sole engine of development and becoming
more interested in attracting private foreign investment.’ 8 These states became more
willing to consider committing to a set of international rules safeguarding foreign
investors. 19 At the same time, investors from developed countries were attracted by
investment opportunities in developing countries but were concerned about being
subject to arbitrary and discriminatory treatment by developing-country governments,
including expropriation.2″ This community of interest has been the basis for a
proliferation of BITs incorporating standards of behaviour for host states and
investor-state dispute settlement. In total, by the end of 2006, over 2,500 BITs had
been concluded worldwide, of which more than 1,700 were in force.2′
Investor-state dispute settlement procedures were first introduced into BITs in the
1960s and had emerged as virtually a standard provision by the 1990s.22 Both the U.S.
and Canadian model investment treaties that each country uses as a template for its
negotiations with other countries contain investor-state procedures based on NAFTA’s
Chapter 11.23
While investor-state procedures vary to some extent, they essentially give an
investor from a state party to the treaty the right to initiate binding arbitration against
another state party when the investor has suffered an injury as a consequence of a
measure of the other state party that is inconsistent with the treaty’s substantive
obligations. A successful claim results in an award of financial compensation to be
paid by the state to the investor. Proceedings take place under a set of international
arbitration rules chosen by the investor from among several permitted under the
17 See United Nations Conference on Trade and Development, World Development Report 1999:
Foreign Direct Investment and the Challenge of Development (New York: United Nations, 1999) at
10.
18 See generally Jeswald W. Salacuse & Nicholas P. Sullivan, “Do BITs Really Work?: An
Evaluation of Bilateral Investment Treaties and Their Grand Bargain” (2005) 46 Harv. Int’l L.J. 67 at
77-79.
‘9 See ibid.
“20 See ibid. at 76-77.
21 See United Nations Conference on Trade and Development, The Entry into Force of Bilateral
(2006), online: UNCTAD
Investment Treaties (BITs) UN Doc. UNCTAD/WEB/ITE/IIA/2006/9
22 See Luke E. Peterson, “All Roads Lead Out of Rome: Divergent Paths of Dispute Settlement in
Bilateral Investment Treaties”
in Nautilus Institute for Security and Sustainable Development,
International Sustainable and Ethical Investment Rules Project (2002) at 5, online: International
Institute for Sustainable Development
23 See Canadian New Model FIPA, supra note 14; U.S. New Model BIT, supra note 14.
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treaty, as modified by the provisions of the treaty itself. Under NAFTA and many
other investment treaties, an investor may choose one of the following sets of arbitral
rules:
(a)
the arbitration rules under the ICSID Convention (“ICSID Arbitration
Rules”);24
(b) the arbitration rules under the ICSID Additional Facility (“Additional
Facility Rules”);25 or
(c)
the United Nations Commission on International Trade Law Arbitration
Rules (“UNCITRAL Rules”). 6
The International Center for the Settlement of Investment Disputes was
established in Washington in 1965 under the auspices of the World Bank to provide a
process for the resolution of investor-state disputes. ICSID provides facilities as well
as the ICSID Arbitration Rules for the resolution of disputes between investors from
states party to the ICSID Convention and other states party to the convention.27 The
center has jurisdiction over a dispute only where both the investor and the state party
complained against consent.28
In 1978, the Administrative Council of ICSID created an “Additional Facility”
that permitted ICSID to provide its facilities and a set of rules for disputes that were
outside its jurisdiction because either the investor’s state or the state complained
against was not a party to the ICSID Convention.29 Parties consenting to arbitration
under the Additional Facility Rules participate in an arbitral process similar to the
process under the ICSID Convention.
24 ICSID Arbitration Rules, supra note 15.
25 Additional Facility Rules, supra note 15. There is a substantial literature describing each of the
three sets of arbitral rules referred to in Chapter 11 and other investment treaties. See Thomas L.
Brewer, “International Investment Dispute Settlement Procedures: The Evolving Regime for Foreign
Direct Investment” (1995) 26 L. & Pol’y Int’l Bus. 633. For an excellent table comparing the three
sets of rules and indicating the changes made by Chapter 11, see Cheri D. Eklund, “A Primer on the
Arbitration of NAFTA Chapter Eleven Investor-State Disputes” (1994) 11:4 J. Int’l Arb. 135 at 159-
71. Under the Canadian New Model FIPA, the parties may select any other dispute resolution rules
approved by the commission established under the agreement (supra note 14, art. 27(1)(d)).
26 Arbitration Rules of the United Nations Commission on International Trade Law, GA Res. 31/98,
UN GAOR, 31 st Sess., Supp. No. 17, UN Doc. A/31/17 (1976) 46 [UNCITRAL Rules].
27 The mandate of ICSID is set out in ICSID Convention, supra note 15, art. 1(2) (“The purpose of
the Centre shall be to provide facilities for conciliation and arbitration of investment disputes between
Contracting States and nationals of other Contracting States in accordance with the provisions of this
Convention”).
“28 Ibid., art. 25.
29 ICSID Additional Facility, supra note 15.
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Until recently, these processes had been used infrequently.3” No award was made
under the ICSID Additional Facility until 1999.’ Now that NAFTA and many BITs
provide that state parties give their consent to participate in ICSID or Additional
Facility arbitration at the option of investors, the procedures governed by both the
ICSID Arbitration Rules and especially the Additional Facility Rules have begun to
be used more frequently, as described in the next section. Resort to both ICSID
procedures remains limited, however, because some countries, including Mexico, are
not parties to the ICSID Convention.32
The final set of rules that may be chosen by an investor initiating an investor-state
claim under NAFTA are the UNCITRAL Rules, a general set of arbitral rules
designed to be used for all manner of commercial disputes, not only those relating to
investment. Where an investor chooses UNCITRAL arbitration, there is no body
responsible for providing institutional support. Unlike ICSID and Additional Facility
arbitrations, the parties themselves must make all the administrative arrangements.
B. Statistics on Investor-State Claims
One measure of the growing importance of investor-state dispute settlement
procedures is the dramatic increase in the number of investor-state cases being
arbitrated. As discussed in more detail below, it is impossible to obtain a reliable
estimate of the number of investor-state cases or to find out about the disposition of
all cases because there is no complete public record. The United Nations Conference
on Trade and Development recently reported that, as of the end of 2005, 219 treaty-
based investment arbitration claims had been initiated.33 While this may seem like a
relatively modest total, there has been a significant increase in resort to investor-state
procedures in the past few years. Seventy per cent of treaty-based investor-state
30 From 1965 to 2000, ICSID had been used for only fifty-six arbitrations and most of the completed
cases were settled before an award was rendered. See ICSID, List of Concluded Cases, online: ICSID
“3′ Azinian v. Mexico (1999), ARB(AF)/97/2, 14 ICSID Rev. 538, 39 I.L.M. 537 (International
Centre for Settlement of Investment Disputes (Additional Facility)), online: ICSID
32 As of 4 November 2007, 155 countries had signed ICSID Convention, supra note 15, of which
143 had ratified it. See ICSID, “List of Contracting States and Other Signatories of the Convention”,
Doc. ICSID/3, online: ICSID
signed the ICSID Convention. Full implementation will be delayed until all of the provinces pass
legislation to do so. See Foreign Affairs and International Trade Canada, News Release, “Canada
Signs International Convention on Investment Dispute Resolution” (19 December 2006), online:
Foreign Affairs and International Trade Canada
3 See United Nations Conference on Trade and Development, International Investment Arrangements:
Trends and Emeiging Issues (New York: United Nations, 2006) at 14, online: UNCTAD
only claims that have actually been submitted to arbitration. It does not include cases in which only a notice of
an intention to submit a claim to arbitration has been filed.
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claims have been filed since 2000. UNCTAD’s data show that more than sixty per
cent of claims to date have been filed with ICSID. Prior to 1995, there had only been
three treaty-based arbitrations submitted to ICSID.34
The first NAFTA claim was filed in 1996.15 As of 5 February 2008, forty-five
notices of intent to submit a claim had been filed with NAFTA party states and made
public. 36 At least thirteen of these have led to arbitrations under the Additional
Facility Rules. New cases filed annually average about four.37
The growth in claims is likely the result of the increasingly dense international
network of treaties providing for investor-state arbitration combined with growth in
international investment activity.38 As well, increased awareness regarding
the
existence and nature of investor-state proceedings resulting, in part, from increased
transparency along with a few large high-profile awards may also be responsible.
Whatever the cause, increased use of the procedures renders concerns about the
transparency and openness of investor-state arbitration an important issue. In the
following section, the relationship between legitimacy of investor-state procedures
and their transparency is discussed.
II. The Nature of Legitimacy Concerns Regarding NAFTA
Chapter 11
Charles Brower suggests that in order for an international legal regime like
to be perceived as legitimate it must “operate predictably,
NAFTA Chapter 11
conform to historical practice, and incorporate fundamental values shared by the
governed community.”39 Based on these criteria, many scholars have expressed
doubts regarding the legitimacy of NAFTA Chapter 1I “4 It is beyond the scope of this
“3 See ibid.
35 Ethyl v. Canada, Notice of Arbitration under the Arbitration Rules of the United Nations
Commission on International Trade Law and the North American Free Trade Agreement (14 April
1997), online: Foreign Affairs and International Trade Canada
36 This figure treats the 107 identical claims by individual members of the Canadian Cattlemen for
Fair Trade as one claim. See Foreign Affairs and International Trade Canada, “Current Arbitrations to
Which the United States of America Is a Party”, online: Foreign Affairs and International Trade
Canada
“3′ This estimate is calculated from the public record of notices of intent to submit a claim to
arbitration that is maintained by Foreign Affairs and International Trade Canada (online: Foreign
Affairs and International Trade Canada
Website]), and the private website NAFTA Claims (online:
[Foreign Affairs and
38 See UNCTAD, International Investment Arrangements, supra note 33 at 16.
39 “Structure, Legitimacy”, supra note 6 at 51. Brower justifies these criteria at 52-58.
40 See Brower, “Structure, Legitimacy”, ibid.; Atik, supra note 6; Tollefson, supra note 6;
Gurudevan, supra note 6; Franck, supra note 6.
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article to develop a thorough critique of NAFTA Chapter I l’s legitimacy. For present
purposes, it is sufficient to identify legitimacy concerns related to the transparency
and openness of Chapter 11 proceedings. Leaving aside the issue of predictability of
outcome, which turns largely on the application of the substantive standards,4″ one
can
the
standpoint of how the investor-state dispute settlement process under NAFTA Chapter
11 conforms to historical practice, incorporates fundamental values, and operates
predictably.
look at transparency and openness of investor-state arbitration from
In terms of conforming to past practice, it must be acknowledged that investor-
state dispute settlement has a long pedigree. As noted above, institutionalized
investor-state dispute settlement has been available under ICSID with the consent of
both parties since 1965. As well, special tribunals have been established as needed to
adjudicate disputes between investors and states arising out of particular situations.
For example, the Iran-U.S. Claims Tribunal was established to deal with complaints
by American investors arising out of the revolution in Iran and the overthrow of the
Shah’s regime.42 The specific provisions in NAFTA Chapter 11 were based on those
that had been previously used by the United States in its standard BIT.43
Despite this pedigree, however, NAFTA Chapter 11 was a significant departure
from past BIT practice in one important sense. It marked the first time that two
developed countries with extensive and well-developed regulatory regimes and
highly integrated economies had agreed to a comprehensive code governing state
behaviour toward foreign investors that was backed up by investor-state dispute
settlement. Prior to NAFTA, most investment treaties had been negotiated between a
developed and a developing country. While these investment treaties typically dealt
with both countries and their investors in the same way, the principal, if not exclusive,
beneficiaries of the treaty were expected by both parties to be investors from the
developed country. As discussed
in the preceding section, developed-country
investors feared capricious actions of host governments in developing countries and
sought protection
in the form of BITs, which provided substantive standards
supported by a process for the adjudication, outside local courts, of their claims for
compensation when these standards were breached. The possibility of seeking redress
in local courts was often unattractive to foreign investors because of a perception that
local institutions would be prejudiced against foreigners, were not independent of the
government whose actions the investor wanted to challenge, or were otherwise
41 For an extensive treatment of this element of legitimacy, see Brower, “Structure, Legitimacy”,
ibid. at 59-63.
42 See Charles N. Brower, “The Ian-United States Claims Tribunal” (1990) 224 Rec. des Cours
123. See generally Jonathan I. Charney, “Third Party Dispute Settlement and International Law”
(1997) 36 Colum. J. Transnat’l L. 65.
“41 U.S., North American Free Trade Agreement Act Statement of Administrative Action, 103d Cong.
(H.R. Doc. No. 103-159) (1993) at A.2.
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unreliable.” For their part, developing countries sought to attract foreign investment
by offering these guarantees. In most cases, there would be few, if any, investors from
the developing-country party that would need the protection of BIT standards from
actions of the developed country.45
Consistent with this conventional conception of the function of BITs, in
negotiating NAFTA’s investment rules, Canada and the United States were most
concerned about protecting their current and future investors against uncompensated
expropriation of their investments or other unfair treatment by the Mexican state,
concerns that had some basis in historical precedent.46 Neither Canada nor the United
States could have anticipated substantial increased investment from Mexico on the
basis of their own investment commitments. Foreign investors already benefitted
from open, trangparent, and, with some exceptions, nondiscriminatory treatment in
the two countries. Also, there was a relatively small pool of investment capital
available for foreign investment in Mexico. Mexico, for its part, was most interested
in signalling its commitment not to engage in the kind of behaviour that Canada and
the United States were worried about in order to promote Canadian and U.S.
investment in Mexico.47 It is not likely that the Canadian or American governments
were relying on NAFTA investment commitments to attract investment from the other
country.48 Cross-border Canada-U.S. investment was already substantial prior to
NAFTA’s entry into force49 and already benefited from the admittedly weaker
protection that existed under the Canada-U.S. FTA.5″
While the rationale for, and form of, NAFTA Chapter 11 are consistent with past
BIT practice, the context in which it operates is very different. The combination of an
enormous bilateral investment relationship between Canada and the United States5″
44 See United Nations Conference on Trade and Development, World Investment Report 2003: FDI
Policies for Development: National and International Perspectives (New York: United Nations, 2003)
at 114-18.
45 See generally Salacuse & Sullivan, supra note 18.
46 See Maureen A. Molot, “NAFTA Chapter 11: An Evolving Regime,” in Dawson & McRae, supra
note 3, 155 at 177-81; Maxwell A. Cameron & Brian W. Tomlin, The Making of NAFTA: How The
Deal Was Done (Ithaca: Cornell University Press, 2000) at 100.
“47 See Molot, ibid.; Cameron & Tomlin, ibid.
48 Cameron and Tomlin suggest that, in fact, Canada was not interested in stronger disciplines on
investment in NAFTA than existed in the Free Trade Agreement Between the Government of Canada
and the Government of the United States of America, 22 December 1987, Can. T.S. 1989 No. 3
(entered into force 1 January 1989) [Canada-US. FTA], and that Canada continued to have an
ambivalent attitude toward U.S. investment in Canada (Cameron & Tomlin, ibid. at 101).
“49 In 1992, the year that NAFTA was signed, U.S. investors held over sixty per cent of foreign direct
investment in Canada and over sixty per cent of the stock of Canadian direct investment abroad was in
the United States. See Statistics Canada, CANSIM Table 376-0051, online: Statistics Canada
50 Supra note 48.
5 At the end of 2005, the stock of Canadian investment abroad exceeded C$465 billion compared to
a stock of inward foreign direct investment of almost C$415 billion. The total stock of foreign direct
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with complex and dense regulation in each country means that investor-state claims
against Canada and the United States from investors from the other state are likely to
be frequent and more likely to challenge “core activities of host governments.”52
Sophisticated and well-advised investors on both sides of the border have sought to
indeterminacy”53 of the substantive
exploit what has been called the “textual
provisions in NAFTA Chapter 11 to challenge a very wide range of government
action under the agreement,54 including actions of municipalities,55 courts,56 and a
number of government agencies. 7 By substantially increasing the likelihood of
challenges to state action in Canada and the United States, NAFTA Chapter 11 does
not conform to any historical practice of investor-state dispute settlement under other
BITs negotiated by Canada and the United States. 8
investment in Canada represented over thirty per cent of Canadian GDP. About sixty-four per cent of
the total stock of direct investment in Canada is from the United States and forty-six per cent of the
stock of Canadian investment abroad is in the United States. See Statistics Canada, supra note 49.
52 Brower, “Structure, Legitimacy”, supra note 6 at 69. In 2003, Charles N. Brower suggested that,
with one possible exception, all the cases that had been initiated by that date raised important public
policy concerns (“NAFTA’s Investment Chapter: Dynamic Laboratory, Failed Experiments and
Lessons for the FTAA” (2003) 97 Proc. Amer. Soc. of Internat. L. 251 at 251-52). See e.g. Pope &
Talbot v. Canada, Award on the Merits of Phase 2 (10 April 2001), online: Foreign Affairs and
International
(Arbitrators: Hon. Lord Dervaird, Hon. Benjamin J.
Greenberg, Murray J. Belman) (challenge to the allocation of the softwood lumber quota).
53 Brower, “Structure, Legitimacy”, ibid. at 61.
54 Indeed, Brower characterizes the textual indeterminacy of NAFTA Chapter 11 as a threat to the
legitimacy of the treaty, though, in his view, this threat has been mitigated by the decisions of tribunals
in Chapter 11 claims. These judgments have provided greater certainty to Chapter 11 rules (ibid. at 63-
65).
Canada
Trade
55 See Mondev International Ltd. v. United States (2002), ARB(AF)/99/2, 42 I.L.M. 85, 6 ICSID
Rep. (International Centre for Settlement of Investment Disputes (Additional Facility)), online: U.S.
Department of State
v. Mexico (2000), ARB(AF)/97/1, 16 ICSID Rev. 168, 40 I.L.M. 36 (International Centre for
Settlement of Investment Disputes (Additional Facility)), online: ICSID
56 See Azinian, supra note 31; The Loewen Group v. United States (2001), ARB(AF)/98/3, Decision
on Hearing of Respondent’s Objection
to Competence and Jurisdiction, 7 ICSID Rep. 421
(International Centre for Settlement of Investment Disputes), online: U.S. Department of State
5′ See Crompton v. Canada, Notice of Arbitration under the Arbitration Rules of the United Nations
Commission on International Trade Law and the North American Free Trade Agreement (17 October
2002 and 10 February 2005), online: NAFTA Claims
States, Notice of Arbitration under the Arbitration Rules of the United Nations Commission on
International Trade Law and the North American Free Trade Agreement (2 August 2002), online: U.S.
Department of State
Agency). See also supra note 52.
58 Brower suggests that various other systemic characteristics of the investor-state process, such as
the reliance on ad hoc arbitrators, the absence of stare decisis, as well as the confidentiality of
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In light of this deviation from historical practice, a failure of the NAFTA Chapter
11 process to guarantee the kind of transparency and openness that characterizes
judicial proceedings in Canada and the United States is argued to imperil the
legitimacy of the process.” The basic model for NAFTA Chapter 11 and other
investor-state procedures is private international commercial arbitration, which can
operate in complete secrecy. Indeed, the confidentiality of arbitration is often touted
as a benefit that pursuing a claim in court does not offer.6″ Despite the common
practice of secrecy, however, there is no consensus on whether there is a general legal
duty of confidentiality that binds the parties in a commercial arbitration, prohibiting
itself or the
them from disclosing information regarding either the arbitration
materials produced for the arbitration.6″ Even if there were such a duty in private
commercial arbitration, the break with historical practice represented by NAFTA
Chapter I I’s application to Canada and the United States strongly suggests that it
should not apply, at least in some investor-state arbitrations.62 Moreover, a high
degree of transparency is recognized as a “fundamental valure]'” 61 of the international
economic regime and a failure to satisfy such a norm would mean that Chapter 11
would not meet Brower’s second criterion for legitimacy.61
proceedings, render it prone to attack on the basis of its likely deviation from historical practice
(“Structure Legitimacy”, supra note 6 at 65).
59 See Howard Mann & Konrad von Moltke, NAFTA s Chapter 11 and the Environment: Addressing
the Impacts of the Investor-State Process on the Environment (Winnipeg: International Institute for
Sustainable Development, 1999) at 7, 60, online: IISD
von Moltke, Impact on the Environment]; International Institute for Sustainable Development &
World Wildlife Fund, Private Rights, Public Problems: A Guide to NAFTA s Controversial Chapter on
Investment Rights (Winnipeg: International Institute for Sustainable Development, 2001) at 37, 44,
online: IISD
ibid. at 56; Soloway, supra note 8 at 10; Forcese, supra note 12.
60 See Alain Prujiner, “L’arbitrage unilat6ral: Un coucou dans le nid de l’arbitrage conventionnel?”
(2005) Rev. Arb. 63 at 83; J.-G Castel et al., The Canadian Law and Practice of International Trade
with Particular Emphasis on Export and Import of Goods and Services, 2d ed. (Toronto: Emond
Montgomery, 1997) at 724.
61 Noted Canadian arbitrator L. Yves Fortier has said that there is a “definite lack of consensus” on
the existence of general duty of confidentiality (“The Occasionally Unwarranted Assumption of
Confidentiality” (1999) 15:2 Arb. Int’l 131 at 132 [emphasis omitted]). The conclusion was confirmed
by Fulvio Fracassi based on a survey of case law from around the world (“Confidentiality and NAFTA
Chapter 11 Arbitrations” (2001) 2 Chicago J. Int’l L. 213 at 213-17). The absence of consensus was
also confirmed in UNCITRAL Notes on Organizing Arbitral Proceedings at paras. 31, 32, online:
UNCITRAL
adopted in Report of the United Nations Commission on International Trade Law on the Work of its
Twenty-Ninth Session, UN GAOR, 51 st Sess., Supp. No. 17, UN Doc. A/51/17 (1996) at paras. 31-32.
Eric Loquin has argued that limited confidentiality is an implicit undertaking of the parties in their
agreement to arbitrate (“Les obligations de confidentialit& dans l’arbitrage” [2006] Rev. Arb. 323).
62 See Fracassi, ibid. at 217-21.
63 Brower, “Structure, Legitimacy”, supra note 6 at 51. Prujiner also suggests that transparency is
essential (supra note 60 at 84-85).
64 Accord Soloway, supra note 8 (“Th[e] lack of transparency seems to run counter to ‘the values
integral to the post-war trading system and indeed democratic principles, where
and views’
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The precise degree of transparency required to provide legitimacy is not obvious.
It is likely impossible to specify definitively what transparency guarantees would
meet legitimacy concerns in practical terms.65 Since rights are adjudicated and issues
of public policy are often implicated in Chapter 11 cases, it could be argued that the
appropriate benchmark
judicial proceedings. Certainly,
transparency and openness equivalent to that found in Canadian judicial proceedings
would address concerns about legitimacy. In general terms, judicial proceedings are
characterized by
should be domestic
“* a public record of claims and documents filed by the parties;
“* hearings open to the public;66 and
“* published decisions with reasons.67
Another element of judicial procedures in both Canada and the United States
where public interests are at stake is the participation of intervenors or, as they are
more commonly described in the context of investor-state dispute settlement, amici
curiae.6″ The rationale for permitting nonparties to participate is that the overall
fairness of decisions may be enhanced by the participation of a wide range of
intervenors, who may contribute perspectives to the issues under consideration
beyond what
for amicus curiae
participation in judicial proceedings exist to ensure that participation is permitted in
appropriate cases and not abused.7″ An investor-state dispute settlement system that
permitted access on similar terms would address legitimacy concerns.
the parties provide.69 Well-developed rules
An argument in support of using the relatively high standard of domestic judicial
proceedings as a benchmark is that, unlike domestic judicial decisions, investor-state
arbitration tribunal awards are subject to judicial review on very narrow grounds,
such as a fundamental error in procedure, inappropriate exercise of jurisdiction, and
conflict with public policy.7″ In this context, the need for high standards of
transparency of legal process is a fundamental norm” at 10). Prujiner has written that investor-state
arbitration and private commercial arbitration are fundamentally different and that one should not look
to private commercial arbitration for guidance regarding the appropriate procedures for investor-state
arbitration (ibid. at 98-99).
65 Gurudevan suggests that it is possible to imagine a sliding scale for transparency (supra note 6 at
426).
66 See Gerald A. Gall, The Canadian Legal System, 3d ed. (Calgary: Carswell, 1990) at 128-34.
67 See Peter McCormick, Canada s Courts: A Social Scientist:s Ground-Breaking Account of the
68 See Ian Brodie, Friends of the Court: The Privileging of Interest Group Litigation in Canada
Canadian Judicial System (Toronto: James Lorimer, 1994) at 136.
(Albany: Albany SUNY Press, 2002) at 20-28.
69 See Ian Brodie, “Intervenors and the Charter” in Frederick L. Morton, ed., Law, Politics and the
Judicial Power, 3d ed. (Calgary: University of Calgary Press, 2002) 295; Frederick L. Morton,
“Access to Judicial Power” in Morton, ibid., 255 at 264-65.
70 See e.g. B.A. Crane & H.S. Brown, Supreme Court of Canada Practice 2005 (Toronto: Thomson,
2005) at 274-97. See especially ibid. at 276-78, 284-85.
71 Review of NAFTA Chapter 11 decisions is discussed in Eklund, supra note 25.
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transparency and amicus curiae participation in the arbitral process is more
compelling.
to a degree
that
is comparable with
The next sections review NAFTA’s rules and the practices developed by NAFTA
tribunals. Tribunals now typically provide transparency and an openness to amicus
that of domestic judicial
participation
proceedings. Indeed, there is mounting evidence of a strong trend toward improved
in investor-state arbitration. This trend suggests that, despite the
transparency
remaining gaps in the NAFTA regime, NAFTA states and tribunals are unlikely to
revert readily to lower levels of transparency and openness in practice. Nevertheless,
in the continuing absence of detailed and specific rules in NAFTA or the applicable
arbitral rules guaranteeing transparency and openness, a degree of uncertainty
remains regarding how transparent and open the process will be in any particular
case. As a consequence, Brower’s third criterion for legitimacy of an international
regime, that it operate predictably, is not fully achieved in NAFTA investor-state
arbitration.
III. Rules on Transparency in Investor-State Arbitrations
A. The NAFTA Rules
1. Introduction
There are some minimal transparency provisions in NAFTA Chapter 11. NAFTA
article 1126(13) requires that a public register of arbitration claims be maintained by
the NAFTA Secretariat, a trinational organization established under the agreement
primarily to provide support for the trade-remedies dispute-settlement process under
Chapter 19 and the general dispute-settlement process under Chapter 20.72 NAFTA
also provides for disclosure of arbitral awards. Under the three sets of arbitral rules
contemplated under NAFTA, publication of an arbitration award may only take place
with the consent of both parties.73 This publication rule is maintained for awards
against Mexico, but Canada and the United States are permitted to disclose awards
against them without the consent of the investor and investors may similarly make
awards public.74 There are no other
in NAFTA’s
investment chapter.
transparency requirements
72 NAFTA, supra note 1, art. 2002.
73 ICSID Arbitration Rules, supra note 15, r. 48(4); UNCITRAL Rules, supra note 26, art. 32(5). The
Additional Facility Rules, supra note 15 do not address publication but it has been suggested that
agreement of the parties would be required. See e.g. Eklund, supra note 25 at 157.
74 NAFTA, supra note 1, ann. 1137.4.
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2. FTC Interpretive Note on Transparency
In 1998, the Canadian government presented an issues paper to the other NAFTA
parties advocating an agreed-upon interpretation of Chapter 11 that would permit
disclosure of the existence and basic nature of each Chapter 11 claim.75 There was no
consensus at the time, but in July 2001, the Free Trade Commission adopted the FTC
Interpretive Note on Transparency, which provides in part:
1. Nothing in the NAFTA imposes a general duty of confidentiality on the
disputing parties to a Chapter Eleven arbitration, and, subject to the application
of Article 1137(4), nothing in the NAFTA precludes the Parties from providing
public access to documents submitted to, or issued by, a Chapter Eleven
tribunal.
2. In the application of the foregoing:
a) In accordance with Article 1120(2), the NAFTA Parties agree that
nothing in the relevant arbitral rules
imposes a general duty of
confidentiality or precludes the Parties from providing public access to
documents submitted to, or issued by, Chapter Eleven tribunals, apart from
the limited specific exceptions set forth expressly in those rules.
b) Each Party agrees to make available to the public in a timely
manner all documents submitted to, or issued by, a Chapter Eleven tribunal,
subject to redaction of:
i. confidential business information;
ii. information which is privileged or otherwise protected from
disclosure under the Party’s domestic law; and
iii. information which the Party must withhold pursuant to the
relevant arbitral rules, as applied.76
The effect of this note on the practice before NAFTA tribunals is discussed below.
3. NAFTA Practice
Several NAFTA Chapter 11 tribunals have recognized that greater openness of
investor-state proceedings would contribute significantly
improved public
perceptions regarding the legitimacy of the Chapter 11 process.77 In this sense, the
FTC Interpretive Note on Transparency confirmed prior tribunal practice. In
Metalclad, for example, the tribunal had determined that nothing in NAFTA, the
Additional Facility Rules, or the UNCITRAL Rules prevented parties from making
to
75 The Canadian Government issues paper has not been officially made public, but was reproduced
in “Canadian Memo Identifies Options for Changing NAFTA Investment Rules” Inside U.S. Trade
17:6 (12 February 1999) 1 at 21-23 [Canadian Paper on Transparency].
76 Supra note 11.
77 See Methanex, Amicus Decision, supra note 10; UPS, Amicus Decision, supra note 10.
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information regarding the arbitration publicly available.78 In Loewen, the tribunal
determined that, in the absence of an express provision precluding disclosure to the
public by a party, no such duty should be implied, because it would deprive “the
public of knowledge and information concerning government and public affairs.”79
Despite their confirmation that there is no general obligation in NAFTA or the
applicable arbitral rules to ensure that all matters related to the proceedings remain in
confidence, tribunals have been somewhat cautious about allowing transparency,
reflecting commercial arbitral practice. The Metalclad tribunal, for example, offered
the following observation:
[I]t still appears to the [Arbitral Tribunal] that it would be of advantage to the
orderly unfolding of the arbitral process and conducive to the maintenance of
working relations between the Parties if during the proceedings they were both
to limit public discussion of the case to a minimum, subject only to any
externally imposed obligation of disclosure by which either of them may be
legally bound. 8t
Tribunals have also cautioned that openness must be balanced against the legitimate
concerns of investors about disclosure of their confidential information and the
burden it could place on them.t
The practice regarding disclosure in NAFTA Chapter 11 cases to date has been
for tribunals to issue an order near the beginning of the arbitration, typically based on
the consent of the parties, regarding what information and documents relating to the
proceedings may be publicly disclosed.82 In early cases like Ethyl, disclosure was
78 Metalclad v. Mexico, Decision on a Request by the Respondent for an Order Prohibiting the
Claimant from Revealing Information Regarding ICSID Case ARB/(AF)197/1 (27 October 1997) at
10, online: NAFTA Claims
Order No. 16 (Concerning Confidentiality in Materials Produced in the Arbitration) (13 May 2000) at
paras. 8-9, online: Foreign Affairs and International Trade Canada
Order No. 16].
79 Loewen, Decision on Jurisdiction, supra note 56 at para. 26. In S.D. Myers, the tribunal noted that
in the few private commercial arbitration cases that had found a duty of confidentiality binding on
parties, the courts had relied on there being an implied term in the arbitration agreement between the
parties. The tribunal found that there is no such implied term in treaty-based arbitration as state
consent is given in advance in the treaty itself. See S.D. Myers, Procedural Order No. 16, ibid.
80 Metalclad, Order, supra note 78 at para. 10.
81 See The Loewen Group v. United States (2003), ARB(AF)/98/3, 42 I.L.M. 811 at paras. 231-33, 7
ICSID Rep. 442 (International Centre for Settlement of Investment Disputes), online: U.S.
S.D. Myers,
Department of State
Procedural Order No. 16, supra note 78 (emphasizing the relationship between limited disclosure of
written arguments and evidence to be presented at a hearing and the efficient organization of
proceedings). Fracassi is critical of this conclusion (supra note 61 at 219).
82 In practice, Canada has sought the investor’s consent to disclosure and a tribunal order on
disclosure. See Ethyl v. Canada, Procedural Order (2 July 1998), online: Foreign Affairs and
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limited to the notice of intent to file a claim to arbitration, the investor’s statement of
claim, the respondent state’s statement of defence, as well as any orders of the
tribunal. Transcripts of hearings, evidence, and any other submissions of the parties to
the tribunal were kept confidential.83 In later cases, such as Pope & Talbot v.
Canada,” disclosure has tended to be more extensive, including, in addition to the
documents made available in Ethyl, all the parties’ written submissions, transcripts of
oral submissions, correspondence from the tribunal, evidence, formal responses of the
parties to tribunal questions, and all submissions from non-disputing state parties.
Following the issuance of the FTC Interpretive Note on Transparency, hearings have
been open via closed-circuit television in at least three cases,”5 and in other cases
transcripts of hearings have been made public.86 Typically the tribunal order will
establish a process to deal with the protection of information that is sensitive for
commercial or other reasons. Disclosure of such information is only permitted to
certain people, such as counsel and witnesses. Each person receiving the information
is subject to the restrictions on disclosure in the order and must sign a confidentiality
agreement.,7
Based on recent cases, it seems the overall result of the note has been that the
public has had substantial access to information and documents related to Chapter 11
cases. This includes the parties’ submissions, evidence, communications between the
tribunal and the parties, orders of the tribunal on procedural and other matters,
transcripts of oral proceedings, and awards. The websites of Department of Foreign
Affairs and International Trade Canada, the U.S. State Department, and Mexico’s
Secretaria de Economia88 contain many of the documents related to the cases to date,
Trade
Canada
International
online: Foreign Affairs and International Trade Canada
83 Ethyl v. Canada, Procedural Order (28 November 1997), online: Foreign Affairs and International
Trade Canada
[Pope & Talbot, Amended Procedural
Order]. Participation by non-disputing NAFTA party states is permitted by NAFTA, supra note 1, art.
1128.
85 See UPS, Arbitration Notice, supra note 9; Methanex, Arbitration Notice, supra note 9; Canfor,
supra note 9. In Glamis, the tribunal issued a procedural order providing for open hearings, though in
that case, both parties had consented (Procedural Order No. 1, supra note 10).
86 See e.g. ADF Group v. United States (2003), ARB(AF)/00/1, 18 ICSID Rev. 195 (International
Centre for Settlement of Investment Disputes), online: ICSID
[ADF9.
87 See e.g. Pope & Talbot, Amended Procedural Order, supra note 84.
88 Foreign Affairs and International Trade Canada Website, supra note 37; U.S., Department of
State, “NAFTA Investor-State Arbitrations”, online: U.S. Department of State
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though there is sometimes a time lag between the date of the documents and the date
on which they are posted. As well, a wealth of information is available on various
private websites maintained by investors’ counsel89 and others. In practice, access to
interim
pleadings, communications between the
procedural orders is often better than in domestic court proceedings. Nevertheless,
despite this level of disclosure, the legitimacy of the investor-state process based on
Brower’s criteria has not been fully attained because such disclosure is not guaranteed
through predictable rules binding on investors and states. The gaps in both the rules
and tribunal practice are discussed below.
the parties, and
tribunal and
4. Gaps in NAFTA Transparency Rules
There are few legal guarantees regarding public access to information about
Chapter 11 proceedings. In particular cases, a state party or the investor may seek a
tribunal order to limit disclosure and they may be successful. In this sense, the current
transparency practices in NAFTA cases lack the more robust character of the rules
governing judicial procedures. In the remainder of this section, the gaps in the legal
framework for transparency are discussed.
a. Disclosure Prior to Commencement of the Arbitration
The FTC Interpretive Note on Transparency does not address disclosure in
relation to the early stages of a Chapter 11 case. It speaks only to disclosure after the
arbitration has been commenced and the tribunal appointed. Several steps in an
investor-state arbitration occur prior to this point in the process.
The first step in a Chapter 11 arbitration is the delivery by an investor from one
state party of a “Notice of Intent to Submit a Claim to Arbitration” to another state
party that the investor claims has breached its treaty obligations causing a loss to the
investor.9′ The investor and the state party may then engage
in consultations.
Consultations are not mandatory and may occur before or after a notice of intent is
delivered. Because the notice of intent to submit a claim to arbitration is filed and any
consultations occur before the arbitral process is formally begun, the arbitration rules
that will be applied once the process has begun have no effect on whether the state
party complained against may disclose the notice on the nature of any consultations,
nor is there any restriction in NAFTA.92 Undoubtedly, disclosure of the substance of
Investment Disputes, online: ICSID
Economia, online: Secretaria de Economia
89 See e.g. “NAFTA Investor-State Arbitrations”, online: Appleton & Associates
90 See e.g. NAFTA Claims, supra note 37; Investment Treaty Arbitration, online: University of
Victoria Faculty of Law
91 NAFTA, supra note 1, art. 1119.
92 In the past, Canada has expressed some concern that disclosure would be contrary to Canadian
domestic law. See Canadian Paper on Transparency, supra note 75 at 22.
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consultations would reduce the prospect of a settlement of the dispute at this early
stage. For this reason, such disclosure may be impractical and there is no practice of
disclosure of information regarding consultations. 3 Notices of intent in cases against
Canada and Mexico have been made available on government websites, though not
always on a timely basis. For U.S. cases, notices of intent are not published by the
NAFTA party states though in most cases they can be found on private sites.94 In
some early cases, the existence of the case was not made public until long after it had
begun.95 While this somewhat inconsistent practice regarding disclosure of notices of
intent to arbitration goes some way toward promoting the legitimacy of the process, a
binding and specific requirement to promptly disclose all notices of intent received
would enhance the predictability and certainty under which the Chapter 11 process
operates. Just as with judicial proceedings, a publicly available record should be
created once the first step in an investor-state arbitration is taken.
b. Disclosure of Arbitration Claim
Under NAFTA article 1120, the arbitration is commenced by the investor
submitting a claim to arbitration
in accordance with the requirements of the
arbitration rules chosen by the investor, subject to certain conditions established in
NAFTA.96 There is no requirement to maintain confidentiality in relation to a claim to
arbitration. Indeed, as noted above, article 1126(13) contemplates that arbitration
claims will be made available in a publicly accessible register maintained by the
NAFTA Secretariat. No interpretation or further provision in the agreement is
required to create a disclosure obligation.97 Currently, the NAFTA Secretariat does
maintain such a register in compliance with this obligation, though it can be accessed
only by visiting the Secretariat office in the state complained against. In practice,
more effective disclosure of arbitration cases is achieved by publication of arbitration
claims on a government website, though there is often a lag between the filing of the
claim and publication. Delays may occur because NAFTA party states are reluctant to
93 The websites of Foreign Affairs and International Trade Canada (supra note 37) and the United
States Department of State (supra note 88) provide brief descriptions of the claims in each case. The
U.S. Department of State also typically adds that it plans to defend the claim vigorously.
94 See e.g. NAFTA Claims, supra note 37.
95 See Howard Mann & Konrad von Moltke, “Protecting Investor Rights and the Public Good:
Assessing NAFTA’s Chapter 11′” (Background Paper to the International Institute for Sustainable
Development Tri-National Policy Workshops, Mexico City (March 13 2002), Ottawa (March 18,
2002), Washington (April 11 2002)), online: IISD
96-Six months must have passed since the events giving rise to the claim (NAFTA, supra note 1, art.
1120) and the investor must file a consent to arbitration in accordance with the requirements of art.
1121. The submission of a claim is referred to as a notice of arbitration under the UNCITRAL Rules
(supra note 26, art. 3) and the Additional Facility Rules (supra note 15, art. 2), and as a request for
arbitration under the ICSID Convention (supra note 15, art. 36(1)).
97 In the Canadian Paper on Transparency, it was suggested that an agreed interpretation should be
adopted on this point (supra note 75 at 22).
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widely disseminate investors’ claims to arbitration until the proceedings have moved
considerably along and the respondent state has had an opportunity to make its
defence to a claim in a public way. Publication of the investor’s claim to arbitration
unaccompanied by the state’s response allows the investor to define both the issues
related to the claim and how the claim is perceived by the public.9″ One problem
resulting from delays in disclosure is that delays impair the ability of public-interest
NGOs to participate in a case. Without prompt public disclosure of the existence of a
case and some information regarding its nature, such organizations may miss an
opportunity to apply to the tribunal for permission to participate as amici curiae.”
Enshrining a more effective requirement in NAFTA to disclose filed claims on a
timely basis would contribute to the legitimacy of the Chapter 11 process.
c. Disclosure After Commencement of Arbitration
Once
the FTC
the arbitration has commenced,
Interpretative Note on
Transparency commits the NAFTA party states to disclosing all documents submitted
to or issued by an arbitral tribunal. However, it acknowledges “limited specific
In fact, these exceptions may be
exceptions” in the applicable arbitral rules.10
significant in relation to proceedings subsequent to the initiation of the arbitration but
prior to the issuance of the final award. The UNCITRAL Rules, the Additional
Facility Rules, and the ICSID Arbitration Rules all provide that procedural matters
are to be dealt with by the tribunal.”‘ Under the Additional Facility Rules and the
ICSID Arbitration Rules, the views of the parties are to be considered and any
agreement between them applied, but otherwise the procedure is left to the tribunal.
the UNCITRAL Rules.’ 2 Thus,
Tribunals have even more flexibility under
notwithstanding the commitment of the NAFTA party states in the FTC Interpretative
limit disclosure. Orders
Note on Transparency,
tribunals retain discretion
to
98 This concern is raised in the Canadian Paper on Transparency, ibid.
99 In Glamis v. United States, the tribunal issued Procedural Order No. 1, supra note 10 on 3 March
2005. It provided that non-disputing parties would have until March 2006 to apply to file an amicus
submission. On 26 August 2005, the tribunal moved the deadline up to 30 September 2005
(Procedural Order No. 4, online: U.S. Department of State
September 2005. In response to complaints from a number of NGOs, the tribunal agreed, in a letter
written to the NGOs on 30 September 2005, to extend the deadline to 26 October 2005. In UPS,
Arbitration Notice, supra note 9, counsel for some prospective intervenors succeeded in getting put on
the service list so that his clients would not miss their opportunity to apply for leave to file an amicus
submission.
1oo Supra note 11 at para. 1.b.i.
1o1 UNCITRAL Rules, supra note 26, art. 15; Additional Facility Rules, supra note 15, arts. 27-35;
ICSID Arbitration Rules, supra note 15, r. 20.
102 The UNCITRAL Rules provide that “[s]ubject to these Rules, the arbitral tribunal may conduct
the arbitration in such manner as it considers appropriate, provided that the parties are treated with
equality and that at any stage of the proceedings each party is given a full opportunity of presenting
his case” (ibid., art. 15(1)).
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prohibiting disclosure of documents filed with or issued by arbitral tribunals may be
made where requested by the investor or the state complained against.
NAFTA cases disclose examples of both. In Karpa, prior to the FTC Interpretive
Note on Transparency, Mexico sought a tribunal order barring the investor from
publicly discussing the case and prohibiting the disclosure of all evidence, testimony,
and documents. The investor opposed the issuance of the order. The tribunal ruled
that there was nothing in NAFTA, or in international commercial arbitration practice
generally, that prohibited a party from discussing an ongoing case. In support of its
conclusion, the tribunal noted that the investor was a public company that had a legal
obligation to provide a certain level of public disclosure of its affairs under U.S.
securities laws.’3 The tribunal also ordered, however, that all evidence, testimony,
and documents be kept confidential.” In other cases, the investor has sought to limit
disclosure.’0 5 As noted, in most of the cases to date, tribunals have issued an order on
the consent of the parties permitting disclosure of pleadings, other communications
between the parties and the tribunal, orders, and awards.’0 6 Nevertheless,
the
commitment of the NAFTA party states to disclosure of all documents submitted to or
issued by a tribunal may be better understood as a commitment to seek the consent of
the investor to disclosure and to seek an order from the tribunal permitting disclosure.
The FTC Interpretive Note on Transparency is limited in one other important
way. It only addresses disclosure of documents, not the openness of oral hearings.
This may be because, in relation to oral hearings, article 25(4) of the UNCITRAL
Rules provides that all hearings must be in camera unless the parties consent to a
more open process. Rule 32 of the ICSID Arbitration Rules and article 39 of the
Additional Facility Rules are similar in effect. The tribunal must decide, with the
consent of the parties, who, in addition to the parties, may attend oral hearings. These
rules give either party a veto over the attendance of the public, the press, or public-
103 Karpa v. Mexico, ARB(AF)/99/1, Procedural Order No. 5 Concerning Questions Raised in
Connection with Procedural Order No. 4 (6 December 2000) at para. 10 (International Centre for
Settlement of Investment Disputes), online: NAFTA Claims
similar application in the form of a request for an interim measure of protection in Metalclad, Order,
supra note 78. The request was rejected.
‘o Karpa, Procedural Order No. 5, ibid. at para. 11.
105 See e.g. Waste Management v. Mexico (2004), ARB(AF)/00/3, 43 I.L.M. 967 (International
Centre for the Settlement of Investment Disputes (Additional Facility)), online: NAFTA Claims
106 See e.g. Methanex v. United States, Minutes of Order of the First Procedural Meeting Held by
Telephone Conference on Thursday, 29 June 2000 at item 15:2, online: U.S. Department of State
of orders, awards, and pleadings).
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interest representatives at oral hearings.’7 The most that a NAFTA party state can do
is seek agreement from the investor to open the oral hearings.’0 8
In 2003, Canada affirmed that in Chapter 11 disputes to which it is a party, it will
consent to hearings being open to the public and will request the consent of disputing
investors. However, the hearings would be subject to the protection of confidential
information, including confidential business information. Both Mexico and
the
United States joined Canada in this commitment in 2004.”‘9 Hearings that were open
to the public by closed-circuit television have been held in UPS,1` Methanex,” ‘ and
Canfor,”2 and hearing transcripts have been made public in a number of more recent
cases.’13
in order
in practice,
transparency
Despite this substantial
to establish a
transparency regime that provides durable support for the legitimacy of NAFTA
Chapter 11, the investor-state process must be reformed. NAFTA should guarantee
prompt, systematic disclosure of all preliminary proceedings, submissions of all
including non-disputing states and amici curiae, evidence, hearings,
parties
communications between the parties and the tribunal, and all tribunal orders and
awards. All of the above would be subject to the protection of confidential
information. An unwillingness among Canada, the United States, and Mexico to
tinker with the NAFTA rules seems likely to prevent the occurrence of such reforms
through an amendment to NAFTA itself. The next section describes how slight
progress has been made through changes to the arbitration rules that govem Chapter
107 This interpretation of the Additional Facility Rules, supra note 15 was recently confirmed in
Aguas Provinciales de Santa Fe v. Argentina, ARB/03/17, Order in Response to a Petition for
Participation as Amicus Curiae (17 March 2006) (International Centre for Settlement of Investment
Disputes), online: ICSID
108 See also ICSID Arbitration Rules, supra note 15, r. 32. Amendments to these rules that
contemplate but do not require open hearings are discussed in more detail below. See text
accompanying note 123.
109 See NAFTA Free Trade Commission, “Joint Statement” (16 July 2004), online: Foreign Affairs
and International Trade Canada
110 Arbitration Notice, supra note 9.
1 ” Arbitration Notice, supra note 9.
n12 Supra note 9.
“13 See GAMI Investments v. Mexico (2004) (Arbitrators: W. Michael Reisman, Julio Lacarte Mur6,
Jan Paulsson), online: NAFTA Claims
Additional Facility for the Administration of Proceedings by the International Centre for Settlement of
Investment Disputes and the North American Free Trade Agreement (30 October 2001), online:
Mexican Ministry of the Economy
International Thunderbird Gaming v. Mexico, Notice of Arbitration and Statement of Claim (1 August
2002), online: Mexican Ministry of the Economy
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11 arbitrations when the investor chooses the ICSID Additional Facility Rules.” 4 It
also outlines how some of the identified defects in the NAFTA process have been
remedied in the new model investment treaties adopted by Canada and the United
States.
B. Recent Improvements in Transparency Rules
There has been increasing recognition of the need for greater transparency in
investor-state arbitration.” 5 This view is reflected in certain amendments in 2006 to
the ICSID Arbitration Rules and the Additional Facility Rules designed to expedite
publication of excerpts from the legal holdings in awards and to give tribunals the
express power to permit additional categories of people and even the general public
to attend or observe hearings.”16 The amendments condition the tribunal’s power to
open up hearings on the absence of an objection from either of the parties.”‘ The
ICSID Secretariat’s 2005 proposals regarding these amendments did not contain this
limitation. Only consultation with the parties was required.” 8 Nevertheless, even the
watered-down amendments may improve the prospects for greater transparency.
Previously, article 32 of the ICSID Arbitration Rules and article 39 of the Additional
Facility Rules provided that a tribunal could only act with the consent of the parties.
The 2006 amendments require an objection from the parties to prevent access to
hearings as opposed to a positive consent to access. This requirement represents a
subtle shift in emphasis intended to make clear that tribunals have the power to admit
114 The same changes were made to the ICSID Arbitration Rules, supra note 15.
“‘ In June 2005, the OECD Investment Committee issued a statement endorsing enhanced
transparency and specifically linking improved transparency to the legitimacy of investor-state
procedures. See Organisation for Economic Co-operation and Development, Transparency and Third
Party Participation in Investor-State Dispute Settlement Procedures: Statement by the OECD
Investment Committee (June 2005), online: OECD
116 Proposals for reform were made initially by the ICSID Secretariat in Possible Improvements of
the Framework for ICSID Arbitration: ICSID Secretariat Discussion Paper (22 October 2004),
online: ICSID
amended in March 2005 following comments from various constituencies and a revised working
paper was issued by the ICSID Secretariat (Suggested Changes to the ICSID Rules and Regulations:
Working Paper of the ICSID Secretariat (12 May 2005), online: ICSID
submitted
in the fall of 2005. On 5 April 2006, the
Administrative Council approved amendments of the ICSID Arbitration Rules, supra note 15 and the
Additional Facility Rules, supra note 15 [ICSID Amendments]. These amendments to arts. 32 and 48
of the ICSID Arbitration Rules and arts. 39 and 53(3) (formerly 54(3)) of the Additional Facility Rules
came into effect on 10 April 2006. See ICSID News Release, supra note 15. Pursuant to art. 44 of the
ICSID Convention, supra note 15, unless otherwise agreed upon by the parties, an ICSID arbitration
proceeding is conducted in accordance with the arbitration rules in effect on the date on which the
parties consented to arbitration.
to the ICSID Administrative Council
“t’ ICSID Arbitration Rules, ibid., r. 32; Additional Facility Rules, ibid., art. 39(2).
“118 ICSID Secretariat Proposals, supra note 116 at 10.
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members of the public and other interested third parties and that it may be “useful” to
do so in certain cases.” 9 The new provisions also provide that rules should be put in
place to ensure the protection of confidential information of the parties.
By changing the arbitration rules that will apply in some NAFTA Chapter 11
arbitrations, the 2006 amendments help to consolidate the developing practice in
NAFTA cases regarding hearings. As well, they may herald increased openness for
investor-state arbitration hearings taking place under other investment treaties that are
subject to the ICSID Arbitration Rules or the Additional Facility Rules.’ 2
1
Much more comprehensive and explicit guarantees of transparency have been
included in the Canadian New Model FIPA12 ‘ and in the U.S. New Model BIT.’2 2 All
hearings must be open to the public and documents must be made available in
accordance with requirements that track the commitments undertaken by the NAFTA
states in the FTC Interpretive Note on Transparency. All of the following must be
made public:
“* notice of intent;
“* notice of arbitration;
“* pleadings, memorials, and briefs submitted to the tribunal by a disputing
party, and any written submissions by a non-disputing party state or by an
amicus curiae;
“* minutes or transcripts of hearings, where available; and
“* orders, awards and decisions of the tribunal.’23
Significantly, the new model treaty obligations overcome the main deficiency with
the NAFTA tribunal practices and the FTC Interpretive Note on Transparency by
providing that the contemplated level of transparency is mandatory. Transparency is
also not subject to any limitations imposed by the applicable arbitral rules, which, as
noted above, give significant discretion regarding disclosure to arbitral tribunals.
Critiques of investor-state procedures based on an absence of transparency are
hard to sustain in relation to this new generation of investment treaties. These new
119 Ibid.
12 It is conceivable that investors adverse to transparency may be encouraged to choose arbitration
under the UNCITRAL Rules, supra note 26 instead of under the Additional Facility Rules, supra note
15. There is no evidence to suggest that the UNCITRAL Rules will be amended to provide for greater
transparency. Following UNCITRAL’s July 2006 meetings, the UNCITRAL Secretariat identified
possible future amendments to the UNCITRAL Rules. Stronger transparency was not listed. In fact,
consideration was being given to a proposal to tighten restrictions on disclosure. The list of possible
amendments did not purport to be exhaustive. See UNCITRAL, Settlement of Commercial Disputes:
Possible Future Work in the Field of Settlement of Commercial Disputes: Revision of the UNCITRAL
Arbitration Rules: Note by the Secretariat, UN GAOR, 39th Sess., UN Doc. A/CN.9/610/Add.1 at
para. 6.
“121 Supra note 14.
.22 Supra note 14.
123 Ibid., art. 29(1); Canadian New Model FIPA, supra note 14, art. 38.
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model treaties evidence the recognition of the important role played by transparency
in contributing to the legitimacy of investor-state arbitration that is shared by Canada
and the United States. This is consistent with the position that they had earlier staked
out in the FTC Interpretive Note on Transparency and in both countries’ public
commitments to open hearings. The limited 2006 amendments
to the ICSID
Arbitration Rules and the Additional Facility Rules suggest that this recognition of
the legitimacy-enhancing role of transparency is increasingly broad based and that
there is a definite movement away from the private commercial arbitration model
with its traditions of secrecy. In this environment, it is difficult to imagine that
NAFTA tribunals will readily change direction to move away from the level of
transparency adopted in recent cases. Without further changes to the applicable
arbitral rules or to NAFTA itself, however, there are no guarantees in this regard and
the resulting lack of predictability means that some legitimacy concerns remain.
As described in the next section, parallel developments to those described above
with respect to transparency have occurred in relation to the participation by amici
curiae in investor-state arbitration.
IV. Rules on the Participation of Amici Curiae in Investor-State
Arbitrations
A. Introduction
None of the three sets of arbitral rules contemplated in NAFTA Chapter 11, nor
Chapter 11 itself, creates a right for third parties to participate in arbitrations. 2”
Participation by non-disputing third parties
is completely absent from private
arbitration proceedings. 25 There
is, however, some precedent for non-disputing
parties to participate in international forums in which the international responsibility
of states is adjudicated, such as the WTO126 and the Iran-U.S. Claims Tribunal (a
body charged with ruling on claims by U.S. investors against Iran under the
124 NAFTA party states other than the one complained against are entitled as of right to make
submissions regarding issues related to the interpretation of NAFTA (NAFTA, supra note 1, art. 1128).
This right has been widely used. See Martin Hunter & Alexei Barbuk, “Procedural Aspects of Non-
disputing Party Interventions in Chapter 11 Arbitrations” (2003) 3 Asper Review of International
Business and Trade Law 151.
125 See Patrick Dumberry, “The Admissibility of Amicus Curiae Briefs in NAFTA Chapter 11
Proceedings: Some Remarks on the Methanex Case, A Precedent Likely to be Followed by Other
NAFTAArbitral Tribunals”, Case Comment, (2001) Bulletin of the Swiss Arbitration Association 74
at 75.
126 In 1998, the WTO Appellate Body held that panels could receive amicus briefs from non-
governmental organizations (United States-Import Prohibition on Shrimp and Shrimp Products
(1998), WTO Doc. WT/DS58/AB/R (Appellate Body Report), online: WTO
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UNCITRAL Rules).127 NAFTA Chapter 11 tribunals have held that they have the
power to permit participation by non-disputing third parties
in several cases,
beginning in 2001 with rulings in Methanex’28 and UPS. 129 In both cases, the tribunals
determined that they could allow participation of third parties as amici curiae, or
friends of the court.’3 Subsequently, in 2003, the Free Trade Commission issued a
statement on non-disputing party participation
(“FTC Statement”), which
recommended a process for NAFTA Chapter 11 tribunals to follow when considering
applications for amicus participation and setting out criteria to be taken into account
in deciding whether to permit such participation.’ 3′ The procedures contemplated in
the FTC Statement are similar to those found in Canadian domestic judicial
proceedings.’32 While
these tribunal decisions and the FTC Statement are not
binding,’33 the consistent practice of tribunals to date suggests that applications for
leave to participate as amicus curiae will be dealt with in a manner consistent with the
FTC Statement. This was confirmed in 2006, when ICSID amended the ICSID
Arbitration Rules and the Additional Facility Rules to expressly provide that tribunals
have the power to permit participation by amici curiae, setting out procedures that are
similar to, though not as comprehensive as, those in the FTC Statement.
There is also some evidence of a trend toward permitting the participation of
amici in investor-state cases under other treaties.’34 Provisions in the new Canadian
127 See Stewart Baker & Mark Davis, UNCITRAL Arbitration Rules in Practice: The Experience of
the Iran-US Claims Tribunal (The Hague: Kluwer Law International, 1992) at 98; Charles N. Brower
& Jason D. Brueschke, The Iran-United States Claims Tribunal (The Hague: Kluwer Law
International, 1998).
128 Amicus Decision, supra note 10. More recently, in Glamis, the tribunal confirmed that it had
power to accept amicus curiae submissions (Procedural Order No. 1, supra note 10).
129 Amicus Decision, supra note 10.
130 This expression comes from American usage. Amicus participation is expressly provided for in
Fed. R. App. P. 29. The U.S. Federal Rules of Appellate Procedure can be accessed online: House of
Representatives,
Judiciary Committee
131 FTC Statement, supra note 11.
132 See Forcese, supra note 12 at 327. In order to obtain standing as an intervenor in Canada, a party
must show that (1) it has a direct legal interest in the outcome of the decision, (2) its rights will be
directly affected by the outcome, and (3) it will bring to the court a point of view different from those
of the parties. See Canadian Council of Professional Engineers v. Memorial University of
Newfoundland (1997), 135 F.T.R. 211 at para. 4, 75 C.PR (3d) 291 (T.D.). Rouleau J. cited these
criteria in dismissing a motion for leave to intervene in the judicial review of the arbitral award in S.D.
Myers v. Canada (A.G), 2001 FCT 317, [2001] F.C.J. No. 567 (QL) at para. 18 [Myers Decision on
Intervenors]. See also Canadian Taxpayers Federation v. Benoit, 2001 FCA 71, 55 D.T.C. 5242 at
para. 51.
133 See supra note 13 and accompanying text.
’34 See e.g. Aguas Argentinas v. Argentina, ARB/03/19, Order in Response to a Petition for
Transparency and Participation as Amicus Curiae (19 May 2005), online: ICSID
by the same panel in a related case Aguas Provinciales, Amicus Order, supra note 107.
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and U.S. model investment treaties expressly empower investor-state tribunals to
permit participation by amici curiae.
Thus, even though the NAFTA party states have not amended NAFTA to provide
rules to govern amicus participation, the 2006 amendments to the ICSID Arbitration
Rules and the Additional Facility Rules entrench the power of tribunals to accept
amicus submissions. In addition, the positions of the NAFTA states as expressed in
the FTC Statement and the apparent trend favouring the possibility of amicus
participation strongly suggest that amicus participation is becoming a fixture in
treaties.
investor-state arbitration under Chapter
to govern amicus
Nevertheless, the absence of binding and predictable rules
involvement means there are residual concerns regarding the legitimacy of the
NAFTA Chapter I I process.
and other
investment
11
In the next section, the practices of NAFTA tribunals regarding amicus
participation are surveyed. This is followed by a discussion of recent events that
demonstrate the broadening acceptance of amicus participation in investor-state
arbitration.
B. NAFTA Practice
The first two cases in which NAFTA tribunals recognized their power to admit
and consider amicus submissions were MethanexM35 and UPS.136 Both decisions were
issued in 2001.
In Methanex, Methanex Corporation challenged an executive order by the
Governor of the State of California requiring the removal of MTBE, a gasoline
additive, from gasoline by no later than the end of 2002. The ostensible purpose of
the order was to protect health and the environment. Methanex Corporation is a
Canadian producer of methanol, an ingredient of MTBE, and claimed that the order
was tantamount to expropriation of its business in breach of NAFTA article 1110 and
that the manner in which the order was enacted and implemented was a violation of
the minimum standard of treatment guaranteed by NAFTA article 1105. The
International Institute for Sustainable Development, Communities for a Better
International
Environment,
Environmental Law sought to participate in the arbitration, arguing that they could
provide an important and distinctive perspective on the environmental issues in the
case and that their participation would be important to the public acceptance of the
Chapter 11 process. It was strongly argued by the International Institute for
Sustainable Development that the case would have significant implications for the
NAFTA states’ ability to enact environmental protection legislation.
the Blue Water Network, and
the Center
for
135 Amicus Decision, supra note 10.
136 Amicus Decision, supra note 10.
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In UPS, United Parcel Service of America, a U.S. courier business, alleged that
Canada Post uses its monopoly in letter mail to compete unfairly against private-
sector courier and parcel services in breach of NAFTA articles 1502 and 1503.137 The
Canadian Union of Postal Workers and the Council of Canadians sought standing as
parties to the arbitration and, in the alternative, to participate as amici curiae on the
basis that (1) they had a direct interest in the proceeding that could be adversely
affected by the outcome, (2) they could offer a distinct perspective, and (3) their
participation would promote the openness of the process.
In both cases, the tribunals held that they had no power to add parties to the
arbitration. Recognizing that consent of the parties is the essence of the arbitral
process, the tribunals determined that neither the claimant investor nor the state had
consented to arbitrating with anyone except each other. Adding parties was not within
the tribunal’s power to control the arbitration’s procedure under the UNCITRAL
Rules that governed both arbitrations.’38
Nevertheless, both tribunals agreed that they could permit third parties to
participate as amici curiae. The tribunals stated that receiving written submissions
from third parties was within the powers of the tribunal to manage the procedure of
the arbitration with a view to facilitating “the Tribunal’s process of inquiry into,
understanding of, and resolving, that very dispute which has been submitted to it in
accordance with the consent of the disputing parties.”‘139 In both cases, the tribunals
acknowledged the importance of the public interest in relation to the issues before
them and the contribution that amicus participation would make to the legitimacy of
NAFTA investor-state arbitration.140 In Methanex, the need for the Chapter 11 process
to be perceived as open and transparent was also taken into account by the tribunal.1 41
In both Methanex and UPS, the tribunal determined that it would make a final
decision regarding whether to accept particular amicus briefs at the merits stage of the
proceedings in consultation with the parties.
The Methanex and UPS tribunals reached the conclusion that they could accept
amicus submissions despite objections from Mexico based, in part, on the ground that
such third-party participation was not permitted in domestic legal proceedings under
131 UPS is also alleging breaches of arts. 1102 (national treatment) and 1105 (minimum standard of
treatment required by international law). See UPS, Arbitration Notice, supra note 9.
138 Supra note 26, art. 15.
139 UPS, Amicus Decision, supra note 10 at para. 60. In UPS, Amicus Decision, neither the claimant
investor nor Canada argued that the tribunal was without power to allow amicus curiae participation.
Canada argued that the amicus participation should not extend to issues of jurisdiction, the place of
arbitration, or procedure. The United States supported the Canadian position. In Methanex, Amicus
Decision, supra note 10, the United States, with the support of Canada, did not argue against a finding
that the tribunal had power to allow amici curiae. The claimant investor, however, did. In both cases,
Mexico opposed amicus curiae participation.
140 Methanex, Amicus Decision, ibid. at para. 49; UPS, Amicus Decision, ibid. at para. 70. This
“141 Amicus Decision, ibid.
position was taken by the United States with the support of Canada in Methanex.
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Mexican law.’42 On this point, the tribunals noted that disputes under Chapter 11 are
to be resolved in accordance with international law, not domestic law. The tribunals
cited the practice before the Iran-U.S. Claims Tribunal and in the WTO dispute-
settlement process as supporting a power to receive third-party submissions.’43 The
tribunals also noted, however, the need to minimize the burden on the parties,
especially the investor, indicating that page limits and other procedural protections
might be imposed in relation to third-party participation.
The tribunals also held that third-party participation must be limited to submitting
written arguments on the issues raised by the parties unless the parties agree
otherwise. As noted above, article 25(4) of the UNCITRAL Rules provides that all
hearings must be in camera unless the parties consent to a more open process. Unless
the investor agrees, amici curiae cannot attend or otherwise participate in oral
hearings.'”
Neither the Methanex nor UPS tribunal provided much guidance as to how the
tribunal’s power to permit third-party participation should be exercised. In UPS, the
tribunal said that “[o]ne governing consideration will be whether the [third parties]
are likely to be able to provide assistance beyond that provided by the disputing
parties.”” 45 The tribunal went on to say that questions regarding jurisdiction, the place
of arbitration, and any procedural matters could all be resolved without the assistance
of third parties.”46
In 2003, following the UPS and Methanex orders on amicus participation, the
Free Trade Commission issued its statement recommending that NAFTA Chapter 11
tribunals adopt procedures specified in the statement to deal with participation by
“non-disputing parties”.’47 Essentially, the FTC Statement says that nothing in
NAFTA limits a tribunal’s discretion to decide to accept written submissions from a
person who is a not a disputing party. It makes detailed specific recommendations
142 See Methanex v. United States, Submission by Mexico Pursuant to NAFTA Article 1128 (10
November 2000), online: U.S. Department of State
NAFTA Article 1128 (11 June 2001), online: Foreign Affairs and International Trade Canada
See supra notes 126-27 and accompanying
text. It has been suggested that third-party
participation could also occur under NAFTA, supra note 1, since art. 1133 permits tribunals to seek out
experts. See Canadian Paper on Transparency, supra note 75 at 23; Mann & von Moltke, Impact on
the Environment, supra note 59 at 56.
4 As noted above, the investor ultimately consented to open hearings and such hearings were held.
See Methanex v. United States, Final Award of the Tribunal on Jurisdiction and Merits (3 August
2005) at para. 8, online: U.S. Department of State
145 UPS, Amicus Decision, supra note 10 at para. 70.
’46Ibid. at 71.
14 7 FTC Statement, supra note 11 at para. A.3.
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regarding the form and content of an application for leave to submit a non-disputing
party submission and of the submission itself, which must be attached to the
application for leave. The FTC Statement also sets out certain nonexclusive criteria to
be applied by tribunals in deciding whether leave should be granted. The tribunal
should consider the extent to which
“* the non-disputing party submission would assist the
in the
determination of a factual or legal issue related to the arbitration by bringing
a perspective, particular knowledge, or insight that is different from that of
the disputing parties;
tribunal
“* the non-disputing party submission would address matters within the scope
of the dispute;
“* the non-disputing party has a significant interest in the arbitration; and
“* there is a public interest in the subject matter of the arbitration.”‘
The FTC Statement also recommends that tribunals should ensure that “any non-
disputing party submission avoids disrupting the proceedings” and that “neither
disputing party is unduly burdened or unfairly prejudiced by such submissions.”’49 In
accordance with the FTC Statement, granting leave to make a submission does not
entail permission to make subsequent submissions, nor is the tribunal obliged to take
the submission into account.
In 2004, the tribunal in Methanex adopted the procedures for the handling of
amicus submissions in the FTC Statement on the recommendation of both parties”5
and accepted written submissions from two non-disputing parties. Submissions by the
International Institute for Sustainable Development and by Earth Justice (on behalf of
itself, Blue Water Network, Communities for a Better Environment, and the Center
tribunal with the
for International Environmental Law) were accepted by the
agreement of both the United States and the investor.’5′ In light of the parties’
consent, the tribunal did not provide reasons for accepting the amicus submissions.
The investor and the United States had an opportunity to respond to the submissions.
The investor’s response was fifty-two pages long.’52 In the final award, the tribunal
referred to the amicus submission of the Intemational Institute for Sustainable
Development, describing it as “carefully reasoned”.’53
148 Ibid. at para. B.6.
14 Ibid. at para. B.7.
150 See Methanex v. United States, Disputing Parties’ Agreement on Amicus Participation (31
October 2003), online: NAFTA Claims
‘5’ See Methanex v. United States, Letter from V.V Veeder, Chair (6 April 2004), online: U.S.
Department of State
152 See Methanex v. United States, Claimant Methanex Corporation’s Reply to the Amicus Curiae
Submissions of Earthjustice and the International Institute for Sustainable Development (23 April
2004), online: U.S. Department of State
153 Methanex, Final Award on Jurisdiction and Merits, supra note 144 at para. 27.
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In UPS, an application for leave to file an amicus brief was filed by the same
parties who asked the tribunal to decide if it had power to accept amicus filings: the
Canadian Union of Postal Workers and the Council of Canadians.’54 The investor
filed a response to the application asking that the leave application be dismissed.’55
This was followed by a rejoinder by the applicants’56 and then a response by the
investor to the arguments raised in the amicus brief itself, which had been filed along
with the application for leave.”‘ In October 2005, the U.S. Chamber of Commerce
(“Chamber”) filed an application for leave to file an amicus brief’58 This marked the
first attempt to participate in a Chapter 11 case by a probusiness group. The
Chamber’s submission was restricted to arguments regarding the interpretation of the
NAFTA national treatment obligation and of certain provisions in NAFTA Chapter 15
relating to state responsibility. In late 2005, Canada filed a response to the Chamber’s
national treatment argument but indicated that it did not object to the Chamber’s
leave application being granted.’59 In its decision on the merits, the UPS tribunal
referred to these amicus applications in its overview of the proceedings but did not
further discuss them in its reasons.’ 60
Recently, in Glamis, a case involving mining claims and raising environmental
and aboriginal-rights issues, the tribunal accepted a submission from the Quechan
114 See United Parcel Services ofAmerica v. Canada, Application for Amicus Curiae Status by the
Canadian Union of Postal Workers and Council of Canadians (20 October 2005), online: Foreign
Affairs and International Trade Canada
15′ See United Parcel Services ofAmerica v. Canada, Investor’s Observations on the Application of
the Council of Canadians and the Canadian Union of Postal Workers for Leave to File Amicus Curiae
Submissions (1 November 2005), online: Foreign Affairs and International Trade Canada
15 See United Parcel Services ofAmerica v. Canada, Letter from Steven Shrybman, counsel for the
Canadian Union of Postal Workers and the Council of Canadians (3 November 2005), online: Foreign
Affairs and International Trade Canada
… See United Parcel Services of America v. Canada, Investor’s Reply to the Canadian Union of
Postal Workers and the Council of Canadians Amicus Curiae Submissions (10 November 2005),
online: Foreign Affairs and International Trade Canada
Trade
“‘ See United Parcel Services of America v. Canada, Application for Amicus Curiae Status by
Chamber of Commerce of the United States (20 October 2005), online: Foreign Affairs and
International
Canada
159 See United Parcel Services ofAmerica v. Canada, Response of the Government of Canada to the
Amicus Curiae Submission By the Chamber of Commerce of the United States of America (10
November 2005), online: Foreign Affairs and International Trade Canada
160 United Parcel Services of America v. Canada, Award on the Merits (24 May 2007) at para. 3,
online: Foreign Affairs and International Trade Canada
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Indian Nation, applying the process set out in the FTC Statement.”6′ The Quechan
Indian Nation is actively opposed to the development of the mining claims held by
Glamis and argued that it could bring a unique perspective to the Chapter 11
proceedings by providing expertise regarding the cultural, social, and religious value
of the area of the mine to the Quechan Indian Nation and regarding the severity of the
mine’s impact on the area and the nation. The tribunal’s order accepting the
submission did not provide reasons. The investor did not oppose or support the
application for leave but filed only a response seeking to challenge certain factual
assertions in the application.’62 Four environmental groups-Friends of the Earth,
together with Friends of the Earth Canada, and Sierra Club, together with
Earthworks-have filed applications for leave to file an amicus brief with their brief
attached.’63 The National Mining Association has also made a filing.’64 There has been
no response from the tribunal to these applications.
If third parties are able to participate as amici curiae, the documents they will be
given access to for the purpose of making their submissions will have a substantial
impact on how effective their submissions will be. Third parties’ participation will not
be meaningful if they are denied all access to the parties’ claims and submissions. In
Methanex, the tribunal had previously issued a consent order on the disclosure of
information.’65 The order reflected the parties’ interim agreement that orders, awards
(including interim awards), and pleadings could be made public by either party.’66 The
tribunal determined that if third parties were permitted to participate, they could
respond to any information properly in the public domain as well as to anything
disclosed under the order. The FTC Statement suggests that disclosure to non-
disputing parties should be made in accordance with the FTC Interpretive Note on
161 Glamis v. United States, Decision on Application and Submission by Quechan Indian Nation (16
September 2005), online: U.S. Department of State
Quechan Indian Nation. See Glamis v. United States, Application to File a Supplemental Non-Party
(16 October 2006), online: U.S. Department of State
162 Glamis v. United States, Response of Glamis Gold Ltd. to Application by the Quechan Indian
Nation for Leave to File a Non-Party Submission (15 September 2005), online: Department of State
163 Glamis v. United States, Amicus Curiae Application of Friends of the Earth Canada and Friends
of the Earth United States (30 September 2005), online: Department of State
Parties [Sierra Club and Earthworks] for Leave to File a Written Submission (16 October 2006),
online: Department of State
164 Glamis v. United States, Application for Leave to File a Non-Disputing Party Submission by the
National Mining Association (13 October 2006), online: Department of State
165 Methanex, Disclosure Order, supra note 106 at item 15:2. The tribunal in UPS, Amicus
Decision, supra note 10 took the same approach, though in that case the parties had not yet reached an
agreement on disclosure.
166 All these documents are available on the U.S. Department of State Website, supra note 88.
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Transparency. As discussed above, what will actually be available to prospective
amici curiae may vary from case to case depending on what disclosure is ordered by
the tribunal.'(cid:127) 7
The issue of amicus curiae participation has also been raised in the Canadian
judicial review proceedings relating to the investor-state arbitration tribunal awards in
S.D. Myers and Metalclad. In both review proceedings, based on the applicable
Canadian law, the courts refused to allow public-interest NGOs to participate. The
courts concluded that the NGOs would be unlikely to assist the court with the specific
issues relating to the review in ways that the parties could not. These issues included
various claims that the decision of the arbitral tribunal exceeded its jurisdiction and
was contrary to Canadian public policy. Costs of $2000 were awarded against the
applicants in the S. D. Myers case. The courts did not reject the possibility of third-
party intervention in a judicial review of a Chapter 11 arbitral award in an appropriate
case. 168 However, given the narrow scope of judicial review for arbitral awards in
Canada and elsewhere, there may be few cases in which amici curiae will be
successful in obtaining leave to participate.169
The courts have been much more welcoming to applications from governments in
other NAFTA states to participate as amici curiae. In S.D. Myers, the court permitted
the government of Mexico to participate as an amicus curiae with the consent of the
parties.170 In Metaleiad, the govemments of Canada and Quebec were permitted to
participate as amici.1″‘ In support of its conclusion, the court in Metalclad noted that
NAFTA states other than the one complained against have a right to participate in
investor-state arbitration under NAFTA article 1128.172
In short, notwithstanding the absence of any reference to amicus participation in
NAFTA Chapter 11 or any of the possibly applicable arbitral rules, investor-state
tribunals established under NAFTA Chapter 11 have demonstrated that they are open
to the possibility that submissions from NGOs of varying political orientations may
be of assistance in resolving the issues before them and have applied a process and
“t’ See Part IIH.A.4, above.
168 In the Myers Decision on Intervenors, supra note 132, the court denied the applications of the
Council of Canadians, the Sierra Club of Canada, and Greenpeace, while Mexico was granted
intervenor status with the consent of the parties. In the judicial review of Metalclad, Award, supra
note 55, the governments of Canada and Quebec were granted intervenor status, but some NGOs were
not (Mexico v. Metalclad, 2001 BCSC 1529, 89 B.C.L.R. (3d) 359, 14 B.L.R. (3d) 285 [Metalclad,
Judicial Review]).
169 The scope of judicial review of arbitral awards was discussed extensively in Canada v. S.D.
170 Myers Decision on Intervenors, supra note 132. Under Canadian law, non-disputing parties are
referred to as intervenors. See Forcese, supra note 12 at 327.
171 Metalclad, Judicial Review, supra note 168.
“172Ibid. (Transcript of 19 February 2001), online: The National Security Archive
making a claim against Canada in another case was rejected.
Myers, 2004 FC 38, [2004] 3 FC.R. 368 (T.D.).
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criteria for the acceptance of amici curiae submissions that follows the FTC
Statement. Undoubtedly, this openness to amicus participation, which is similar to
that in Canadian judicial proceedings, contributes to the legitimacy of NAFTA
investor-state arbitration. Nevertheless, neither the FTC Statement nor previous
NAFTA cases create a set of binding rules regarding the possible involvement of
in relation to amicus
amici.’73 In order to provide security and predictability
participation, either NAFTA or the arbitration rules applicable to investor-state
procedures would have to be amended to incorporate detailed rules such as those in
the FTC Statement. As discussed in the next section, recent amendments to the ICSID
Arbitration Rules and the Additional Facility Rules go some way in this direction.
C. Recent Improvements in Amicus Curiae Rules
In 2005, the ICSID Secretariat proposed that tribunals established under the
ICSID Arbitration Rules and the Additional Facility Rules be given the express
authority to accept and consider submissions of non-disputing parties.’74 The ICSID
Administrative Council adopted the amendments and they came into force effective
10 April 2006.175 The amendments establish criteria to be applied by tribunals
considering whether to accept a non-disputing party’s submission that are virtually
identical to those enumerated in the FTC Statement.17 6
As in the FTC Statement, the tribunal is also mandated to ensure that non-
disputing party submissions do not disrupt the proceedings or unduly burden either
party.177 Both parties must have an opportunity to respond to the non-disputing party
173 The FTC’s statement that “[n]o provision of the North American Free Trade Agreement
(“NAFTA”) limits a Tribunal’s discretion to accept written submissions from a person or entity that is
not a disputing party” may be regarded as a binding interpretation of the agreement that tribunals have
the authority to accept and consider amicus submissions (FTC Statement, supra note 11 at para. A. 1).
174 ICSID Secretariat Proposals, supra note 116 at 11.
175 See ICSID News Release, supra note 15; text accompanying note 15; supra note 116 and
accompanying text.
176 The amendments to r. 37 of the ICSID Arbitration Rules, supra note 15 and art. 41 of the
Additional Facility Rules, supra note 15 provide in part as follows:
(2) … In determining whether to allow [a submission by a non-disputing party], the
Tribunal shall consider, among other things, the extent to which:
(a) the non-disputing party submission would assist the Tribunal
in the
determination of a factual or legal issue related to the proceeding by bringing a
perspective, particular knowledge or insight that is different from that of the
disputing parties;
(b) the non-disputing party submission would address a matter within the
scope of the dispute;
(c) the non-disputing party has a significant interest in the proceeding.
It is curious that, unlike the FTC Statement, supra note 11, there is no reference to there having to be a
public interest in the dispute.
177 ICSID Amendments, supra note 116.
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submission. The detailed specific requirements of the FTC Statement regarding the
form of amicus submissions are not reproduced in the amendments. All new NAFTA
arbitrations in which the investor chooses the ICSID Arbitration Rules or the
Additional Facility Rules will be subject to these requirements.
While the amendments are only effective with respect to arbitrations commenced
after the date they came into force, it seems likely that ICSID tribunals will apply
these rules in ongoing cases. Even before these amendments, NAFTA practices
regarding amicus participation were beginning to find their way into other investor-
state proceedings.
The tribunal in Aguas Argentinas, a dispute under BITs signed by Argentina with
Spain, France, and the United Kingdom, said it had the power to accept submissions
by non-disputing parties.”‘7 This case marked the first time that an ICSID tribunal had
decided that it had such a power. The dispute involves claims by Spanish, French, and
English shareholders in a concession to operate water and sewage facilities in Buenos
Aires. Some Argentine and U.S. NGOs sent a letter to the tribunal stating that the case
was likely to raise public-interest concerns, including issues related to consumer
protection and human rights. The tribunal agreed that the case was an appropriate one
for non-disputing party submissions because it could involve matters of public
interest. The tribunal noted that virtually all ICSID treaty-based arbitrations could be
said to involve some public-interest considerations because they deal with the
international responsibility of states. In this case, however, the tribunal concluded that
there was a significant, distinct public interest because the outcome could affect the
operation of basic public services delivered to millions of people,’ Like the tribunals
in Methanex and UPS, the Aguas Argentinas tribunal also considered that permitting
non-disputing party participation “would have the additional desirable consequence
of increasing the transparency of investor-state arbitration”
in the interests of
promoting greater public acceptance and understanding of investor-state arbitration,
contributing to “[p]ublic acceptance of the legitimacy of international arbitral
processes.”’80 The tribunal determined that it had power to accept arnicus filings
under its authority to deal with any question of procedure not covered by the rules.””
After referring to NAFTA and WTO practice, the tribunal in Aguas Argentinas
established a procedure to govem. amicus participation that is similar to that under the
FTC Statement, including a requirement to apply for leave to make a submission.’82
The tribunal determined that it should
consider all information contained in the petition; the views of [investors and
the state complained against]; the extra burden which the acceptance of amicus
curiae briefs may place on the parties, the Tribunal, and the proceedings; and
178AAmicus Order, supra note 134.
’79Ibid. at paras. 19-20.
180 Ibid. at para. 22.
181 Ibid. at paras. 10-16 (referring to the ICSID Convention, supra note 15, art. 44).
182 AguasArgentinas, Amicus Order, ibid. at para. 25.
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the degree to which the proposed amicus curiae brief is likely to assist the
Tribunal in arriving at its decision.’ 83
The tribunal decided that there would be no need for amicus submissions on the issue
of jurisdiction in that case.’84
Not all transparency concerns expressed by the NGOs were endorsed by the
Aguas Argentinas tribunal, however. In light of objections from the investor, the
tribunal refused to order that hearings be open to the public and deferred a request for
public disclosure of all documents.’85 This ruling illustrates the continuing fragility of
transparency-enhancing measures under the arbitration rules that govern investor-
state arbitrations in the absence of binding treaty provisions or reforms to the
arbitration rules themselves.
In March 2006, in a related case, the same tribunal once again addressed the issue
of amicus participation. In Aguas Provinciales de Santa Fe v. Argentina,’86 the
tribunal applied the same approach as it had in Aguas Argentinas. The tribunal went
on to dispose of an application for leave to participate as amici curiae on behalf of
three individuals claiming expertise in law, human rights, and development and on
behalf of one NGO, Fundaci6n para el Desarrollo Sustentable. The application for
leave was rejected on the basis that the applicants had failed to provide sufficient
information to establish that they had the expertise, experience, and independence to
be of assistance to the tribunal.’87
While one must be extremely cautious about making generalizations based on
two cases decided by one tribunal, the Aguas Argentinas and Aguas Provinciales
cases do suggest that the developing practice under NAFTA with respect to amicus
participation is spilling over into investor-state arbitrations under BITs involving
other states. The FTC Statement was the inspiration for the procedure adopted by the
tribunal in these cases for the participation of amici curiae.”‘8 With the added impetus
of the 2006 amendments to the Additional Facility Rules and the ICSID Arbitration
Rules, ICSID tribunals are more likely to appreciate and value amicus participation,
even in cases proceeding under the rules as they were before the amendments came
into force. These cases make clear as well that NGOs have been emboldened by their
success under NAFTA and are likely to seek permission to participate in investor-
Ibid. at para. 27.
“183
184 Ibid. at para. 28. In a subsequent order, the tribunal permitted five NGOs to file an amicus
submission. See Aguas Argentinas v. Argentina, ARB/03/19, Order in Response to a Petition by Five
Non-Governmental Organizations for Permission to Make an Amicus Curiae Submission (12
February 2007), online: ICSID
“’85 Ibid. at paras. 5-6, 30-31. This ruling is based on an interpretation of Additional Facility Rules,
supra note 15, art. 32(2). The tribunal’s interpretation confirms the argument made above. See supra
notes 107-14 and accompanying text.
186 Amicus Order, supra note 107.
“‘7 Ibid. at paras. 30-34.
188 See ibid. at para. 24; Aguas Argentinas, Amicus Order, supra note 134 at para. 25.
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state disputes under other BITs. Undoubtedly, this is a trend that will continue to
strengthen.
The importance of amicus participation to the
legitimacy of investor-state
arbitration has been recognized in other contexts as well.’89 The commitment of
Canada and the United States to amicus participation is clear in their new model
investment treaties. The Canadian New Model FIPA contains express provisions
dealing with nondisputing-party participation that mirror the recommendations in the
FTC Statement, though they are somewhat less detailed.”‘ A key difference is that
while the FTC Statement is a recommendation only, the new model treaty provisions
require tribunals to follow the rules prescribed. The U.S. New Model BIT, as well as
the recent free trade agreements entered into by the United States with Chile,
Singapore, Central America, the Dominican Republic, and Morocco all provide that
arbitral tribunals have the power to accept and consider submissions from a non-
disputing party.’9’ The process to be followed and the criteria to be applied are not
spelled out.
This broad trend in favour of the possibility of arnicus participation in appropriate
circumstances suggests that amicus participation is becoming an entrenched feature in
investor-state cases in which questions of public policy are at issue. Nonetheless,
concerns regarding the legitimacy of the investor-state process may continue to linger
in the absence of a well-developed, predictable set of rules binding on arbitral
tribunals that govern amicus participation in NAFTA Chapter 11 and other investor-
state procedures. The 2006 amendments to the ICSID Arbitration Rules and the
Additional Facility Rules are only a first step in this direction.
Conclusions
To be considered legitimate, investor-state dispute settlement under NAFTA
needs to satisfy high standards of transparency and openness to non-disputing party
participants. Such transparency and openness are fundamental values of the
189 Amicus participation in investor-state cases has been given a qualified endorsement by the
OECD Investment Committee: “Members of the Investment Committee generally share the view that,
especially insofar as proceedings raise important issues of public interest, it may also be desirable to
allow third party participation, subject however to clear and specific guidelines” (OECD Statement,
supra note 115 at 1).
‘ Canadian New Model FIPA, supra note 14, art. 39.
191 US. New Model BIT, supra note 14, art. 28(3); United States-Singapore Free Trade Agreement,
15 January 2003, Hein’s No. KAV 6376, art. 15.19(3) (entered into force 1 January 2004); United
States-Central America-Dominican Republic Free Trade Agreement, 5 August 2004, Hein’s No. KAV
7157, art. 10.20(3); United States-Morocco Free Trade Agreement, 15 June 2004, Hein’s No. KAV
7206, art. 10.19(3) (entered into force 1 January 2006). The United States-Chile Free Trade
Agreement, 6 June 2003, Hein’s No. KAV 6375, art. 10.19(3) (entered into force 1 January 2004) goes
on to require any non-disputing party to provide information regarding anyone providing financial
support. All of the treaties are available online: Office of the United States Trade Representative
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international economic order. As well, the significant exposure to challenge by
investors that U.S. and Canadian governments face as a result of NAFTA Chapter 11
represents a substantial change from the historical experience of both countries.
Concerns about transparency and openness in NAFTA are more compelling than in
investor-state procedures in other investment agreements with developing countries
where the likelihood of cases being brought to challenge important elements of public
policy in Canada and the United States is remote. While it is impossible to specify
definitively what procedures would be required to render the process legitimate in
this sense, one necessary characteristic is that requirements for transparency and
openness be governed by clear and predictable rules. NAFTA and most existing
investor-state procedures do not contain such rules.
the
level of transparency
With few exceptions,
in practice, however, is
comparable to that in domestic legal proceedings. Almost from the initiation of the
first investor-state case under NAFTA Chapter 11 in 1996, arbitration tribunals have
been developing practices providing for transparency in response to pressures from
NGOs and the NAFTA party states themselves. NAFTA tribunals now typically order
the disclosure of pleadings and other submissions of the parties, communications
between the parties and the tribunal, evidence, submissions of non-disputing states
and amici curiae, and interim orders and awards by tribunals. Open hearings are also
increasingly being ordered. This trend toward increased transparency has been
encouraged and consolidated by statements issued by the NAFTA Free Trade
Commission, expressing the commitment of the NAFTA party states to an open
process. In practice, NAFTA states provide direct and easy access to documents on
their websites, including most documents that relate to disputes before the arbitral
process has formally commenced.
Notwithstanding
these developments, however,
the NAFTA Chapter 11
procedures regarding transparency remain incomplete and uncertain. The procedures
to be followed in a Chapter 11 investor-state arbitration are largely determined in
accordance with a set of arbitration rules contemplated in the chapter and selected by
the investor. These rules are based on a model of international commercial arbitration
that contemplates very little disclosure to the public of information regarding the
process. NAFTA itself only requires a public record of claims and allows Canada and
the United States to decide whether they will disclose arbitral awards once made.1″2
Under the three sets of arbitral rules contemplated in NAFTA Chapter 11, as under
most arbitral rules, detailed procedural requirements are left to the tribunal and, in
practice, are established by the tribunal with the consent of the parties. While the
NAFTA party states have shown a strong commitment to transparency, they have a
limited ability to impose greater transparency requirements on tribunals. They cannot
prescribe detailed specific requirements. Most NAFTA tribunals have shown their
sensitivity to the need for transparency, but tribunal decisions are not binding. The
192 For Mexico, disclosure may only be made with the consent of the investor. See supra notes 73-
74 and accompanying text.
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2006 amendments to the ICSID Arbitration Rules and the Additional Facility Rules
make only marginal improvements in this regard, expediting publication of awards
and giving tribunals a power to permit additional categories of people and even the
general public to attend hearings conditional on the absence of an objection from one
of the parties. While the important role of openness is recognized, no guarantees are
provided. As a result, transparency required under NAFTA does not approach the
certainty and predictability achieved in domestic legal systems. Investors, states, and
prospective amici curiae cannot be sure about what procedures will be followed in a
particular case or what documents will be made public. The transparency of NAFTA
investor-state arbitration will continue to depend on the initiative taken by the state
complained against and the cooperation of the investor, as well as the attitude of the
tribunal. Thus, while transparency practices in recent cases should reduce attacks on
the legitimacy of the process, concerns will remain until transparency is put on a
firmer legal footing.
Unfortunately, the prospects for amending NAFTA accordingly seem remote. The
2006 ICSID amendments demonstrate that, for arbitrations under the Additional
Facility Rules, the amendment of the ICSID rules is an alternative way to fix rules on
transparency. However, the modesty of the changes effected by the amendments as a
result of the failure by
the
recommendations of the ICSID Secretariat suggests that amending the Additional
Facility Rules and the ICSID Arbitration Rules is unlikely to lead to strong mandatory
rules like those in the Canadian and American model investment treaties in the near
future. 193
the ICSID Administrative Council
to accept
Outside the NAFTA context, there has been increasing recognition of the
importance of transparency for public acceptance of investor-state arbitration. The
ICSID amendments and the new Canadian and U.S. model investment treaties are
both evidence of the strength of this trend toward enhanced transparency standards.
The reach of this trend will spread as Canada and the United States enter into new
BITs and free trade agreements that deal with investment and renegotiate existing
commitments to conform to their new models. With respect to this new generation of
investment treaties, a legitimacy critique based on a lack of transparency has little
potency. In the absence of a robust set of rules, some transparency concerns will
continue with regard to NAFTA Chapter 11. Nevertheless, one may be cautiously
optimistic that transparency will not be curtailed in practice given the broad-based
trend toward transparency and the recognition by the NAFTA states and tribunals of
the important role played by transparency in promoting public acceptance of investor-
state dispute resolution.
With respect to amicus participation, neither NAFTA practice nor rules in the
FTC Statement are binding on future tribunals, but the ICSID amendments setting out
a procedure and criteria for amicus participation apply to new cases under the
193 For a discussion of the
amendments to the UNCITRAL Rules, supra note 26, see supra note 120 and accompanying text.
improbability of greater transparency being achieved
through
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723
Additional Facility Rules, including NAFTA cases in which the investor has chosen
these rules. While an investor might seek to avoid amicus involvement by choosing to
arbitrate under the UNCITRAL Rules, such a strategy is unlikely to be successful.
The decisions regarding amici in Methanex, UPS, and Glamis were all in arbitrations
governed by the UNCITRAL Rules. Practically, it is difficult to imagine that a
tribunal would categorically deny that it had a power to allow amici to apply for leave
to make submissions.’ 94
Indeed, the trend in favour of amicus participation seems to be strengthening. The
two recent Aguas cases show a sensitivity to the legitimacy-enhancing role of amicus
participation and point to the approach likely to be taken in cases under other
investment treaties governed by the ICSID Arbitration Rules and Additional Facility
Rules in force prior to the date the ICSID amendments came into effect-l10 April
2006.(cid:127)’9 The new generation of model investment treaties adopted recently in Canada
and the United States specifically empower tribunals to accept amicus submissions. In
the case of the Canadian model, it imposes requirements for tribunals that track the
template set out in the FTC Statement.
All these developments suggest that amicus curiae participation is becoming a
fixture in investor-state arbitration in cases implicating important public policy
considerations. Nevertheless, while the basic possibility of amicus participation is
becoming entrenched, many second-level issues remain. Some relate to what process
should be followed by tribunals. What are the requirements for the form of amicus
applications? When should they be filed? Is there a right to respond to responses from
other parties to an amicus application? The criteria determining when an amicus
submission will be accepted and considered by a tribunal are also unclear. The small
number of cases to date provides some minimal guidance regarding the type of case
in which amicus participation will be permitted and what an aspiring amicus will
have to show to have its submissions accepted. The FTC Statement provides answers
to some of these questions and there appears to be a consensus building around use of
the procedures in the Statement. But even the FTC Statement is not a complete code.
Also, transparency and amicus participation are closely linked. More certain rules
regarding transparency are needed if amicus participation is to be informed and
effective. In sum, more clarity and predictability regarding the information to which
amici will have access and the other modalities of amicus participation are needed to
fully address the legitimacy concerns related to the involvement of amicus curiae in
investor-state arbitration.
194 See supra note 173 and accompanying text.
195 See supra note 116 and accompanying text. This is practically important since there are over one
hundred cases pending under the old rules and cases typically take a number of years to be finally
resolved. See ICSID, “List of Pending Cases”, online: ICSID
