UNCITRAL Transparency Rules applied for the first time in investor-State arbitration

Iberdrola, S.A. and Iberdrola Energia. S.A.U. v. Bolivia (PCA Case No. 2015-05) is the first case to apply the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration ("Rules on Transparency").  On 7 August 2015, the arbitral tribunal issued the first procedural order (available in Spanish only) disclosing the fact that the parties to the arbitration had agreed to the application of the Rules on Transparency to their proceeding.  About a month later, a second procedural order in the case BSG Resources Limited v. Republic of Guinea (ICSID Case No. ARB/14/22) was published on ICSID's website revealing that the parties had also agreed on the application of the Rules on Transparency.  The application of the Rules on Transparency in these cases represents not only a significant change in the way investor-state disputes are resolved, but the agreement of the parties to their application also suggests a change in the way states and investors view the public interest in the process.

The Rules on Transparency were adopted by UNCITRAL on 11 July 2013 and came into effect on 1 April 2014.  As reported in a previous blog post, on 17 March 2015, seven states have signed the UN Convention on Transparency in Treaty-based Investor State Arbitration ("Transparency Convention").  Under the Transparency Convention, the Rules on Transparency apply to claims arising under treaties "providing for the protection of investments or investors" concluded after 1 April 2014, unless the relevant treaty expressly opts out of the Rules.  However, for treaties concluded before 1 April 2014, the Rules on Transparency only apply in two circumstances: (i) where the parties to an arbitration have expressly agreed on their application; or (ii) where the states parties to the treaty have opted to abide by the Rules after the conclusion of that treaty.  The arbitration initiated by Iberdrola, against the Bolivian state, falls within the second category of treaties; that is, treaties concluded before 1 April 2014.  On the other hand, the transparency provisions that will be applied to the BSG Resources Limited ("BSGR") arbitration derive from article 1(9) of the Rules on Transparency, which foresees the application of the Rules to non-UNCITRAL arbitration proceedings, such as arbitrations administered by the ICSID.

Iberdrola v. Bolivia: UNCITRAL arbitration  

Iberdrola filed its Request for Arbitration in July 2014 under the Bolivia-Spain bilateral investment treaty (BIT) alleging, amongst other claims, direct expropriation of its investments by the Bolivian state without just compensation.  The claim arose in respect of Iberdrola's investments in four Bolivian companies operating in the electricity distribution sector in Bolivia.  In accordance with the Supreme Decree No. 1448 of 2012, the Bolivian government nationalized all of the shares held by Iberdrola in its local Bolivian companies.  Iberdola argues that the Bolivian government has not compensated it for these alleged expropriations.

Under the Bolivia-Spain BIT, the UNCITRAL Rules of Arbitration apply to these proceedings.  The parties have agreed that the Permanent Court of Arbitration (PCA) will administer the case and that the language of the arbitration will be Spanish.  The parties did not agree on the seat of the arbitration, leaving this matter for the tribunal to decide.

Since the Bolivia-Spain BIT entered into force in 2001 (thus before the 1 April 2014 commencement date for the Rules on Transparency), the Rules on Transparency could only apply to the arbitration if the parties to the arbitration so consented, which the parties did.  Accordingly, the Tribunal decided that: (i) the PCA would assume the role of Repository under Article 8 of the Rules on Transparency; (ii) the PCA would make the information and documents of the arbitration available to the public; and (iii) the hearings would be open to the public unless the Tribunal ruled otherwise.  Under Article 6 of the Rules on Transparency, an arbitral tribunal may close proceedings to the public, if it is necessary to prevent the disclosure of confidential information or it is necessary for logistical reasons (such as space limitation of the arranged hearing facilities).

BSG Resources Limited v. Republic of Guinea: ICSID arbitration

BSGR, a multinational mining company incorporated under the laws of the British Crown Dependency of Guernsey, filed its Request for Arbitration in September 2014.  According to the Claimant, the dispute arose from the alleged rescission of BSGR’s mining titles by the Government of Guinea on 24 April 2014. Interestingly, the arbitration does not originate from an investment treaty, rather it is a result of specific provisions contained in the Guinean Investment Code that establish that any disputes between the Guinean Government and foreign nationals should be settled by arbitration conducted according to the ICSID Convention.  Both Guinea and the United Kingdom have signed and ratified the ICSID Convention.  Furthermore, this dispute arises in the context of accusations of bribery committed by BSGR in order to obtain its mining license rights in Guinea back in 2013.

In its Procedural Order No. 2, the Tribunal addresses the transparency regime agreed by the parties. The parties decided to modify some of the provisions of the Rules on Transparency to align them to their interests concerning the conduct of the arbitration.  The parties agreed that: (i) all parties' written submissions, including the request for arbitration, memorials, exhibits, legal authorities, witness statements, expert reports, transcripts of hearings, orders, decisions and award of the Tribunal would be made available to the public; (ii) hearings would be publicly accessible by video link on the ICSID website and physical attendance by third persons at hearings should be subject to the Tribunal's approval; (iii)  each party should give notice within 21 days from the filing of any document that it wishes that document to remain confidential and protected; (iv) the ICSID Secretariat would act as Repository.  Finally, in order to protect confidential information during hearings, the parties agreed that the broadcast would be delayed by thirty minutes.

ICSID has been live streaming hearings for a few years in cases under the North American Free Trade Agreement (NAFTA) and the Central America Free Trade Agreement (CAFTA).  The latest webcast was made in Spence International Investments et al. v. Republic of Costa Rica (ICSID Case No. UNCT/13/2) on 20 April 2015. Upon the disagreement of the parties on the appropriate modality for enabling the hearing to be open to the public; the Tribunal determined that the hearing should be webcast.  In 2011, ICSID provided to the UNCITRAL's Working Group II (Arbitration and Conciliation) an estimate of the costs related to holding an open hearing within the World Bank premises.  The estimate for the webcast of an 8-hours hearing was calculated to be of US$ 4,750 for a day and US$ 15,750 for five week days.  Thus, the considerable cost of live streaming is certainly a matter that the parties should contemplate when opting for public access to hearings.     


These decisions are significant because in neither case could either of the parties or the Tribunal insist on transparency in the proceedings. It was the parties' consent to the application of the Rules on Transparency that permitted the tribunals' procedural orders to be made available to the public.  Both cases represent the first time parties to an investor-state arbitration publicly adopt the opt-in provisions of article 1(2)(a) of the Rules on Transparency.     

Furthermore, the decision in BSGR is a good example of how parties can take advantage of flexibility afforded to them by international arbitration.  In the one hand, ICSID's legal framework allows parties to agree on a greater degree of transparency than the one provided by the ICSID Convention and Rules of Arbitration.  On the other hand, the Rules on Transparency allow parties to agree on their application even if the arbitration is not initiated under the UNCITRAL Arbitration Rules, such as ICSID or ad hoc arbitrations.  Thus, parties in international arbitration can benefit from the choice of procedural rules that are narrowly tailored to its specific needs.  

The Transparency Convention and the Rules on Transparency are discussed by partner Christian Leathley in a short video blog post here.

For more information, please contact Christian Leathley, Partner, Daniela Paez, Associate, or your usual Herbert Smith Freehills contact.

Christian Leathley
Christian Leathley
Email | Profile
+1 917 542 7812

Daniela Paez
Daniela Paez
+1 917 542 7829

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