As I have noted earlier, there is a pitched battle between victims of Pan Am 73 terrorist hijacking over the distribution of treaty funds secured by the United States for American victims in a 2008 diplomatic settlement with Libya. The treaty and Executive Order stipulate that the money shall be distributed solely for the benefit of United States nationals, but foreign nationals are claiming that they are entitled to the overwhelming majority of the funds pursuant to a Joint Prosecution Agreement signed among the passengers of Pan Am 73, most of whom were non-Americans. The American terrorist victims argue that the contract is inapplicable to a diplomatic settlement, and alternatively, that it is void for public policy because the contract cannot contravene the federal policy designed to distribute these funds for American victims, and only American victims. They contend that the JPA places an obstacle in the way of the United States’ efforts to effectuate the comprehensive settlement on behalf of U.S. nationals and undermines the essential purpose of applicable federal law.

Last week, a federal district court judge in Washington, D.C. heard oral arguments on a motion to compel arbitration of this dispute pursuant to an arbitration clause in the Joint Prosecution Agreement. Press reports of the developments are here, here, and here.

One of the most unusual twists in the case is that the implementing statute, the Libyan Claims Resolution Act (“LCRA”), immunizes the assets from “attachment or any other judicial process” before, during, and after the assets are held by the U.S. Department of Treasury for distribution to the American victims. In other words, when Treasury cuts a check to the American victims who succeed before the Foreign Claims Settlement Commission, those assets remain immune from attachment or any judicial process. How then can non-American victims attempt to seize those assets pursuant to a contract claim? The answer should be that they cannot. Consistent with the arbitrability doctrine, a competing federal statute overrides the general requirements of the FAA, precluding arbitration of the contract claims.

Serving as an expert consultant on the case on behalf of the American victims, I read this statute as precluding “any judicial process” whatsoever, which includes court proceedings to compel arbitration. Section 4 of the LCRA states that “[n]otwithstanding any other provision of law, any property described [below] … shall be immune from attachment or any other judicial process.” The property is defined as “any property that relates to the [U.S.-Libya] claims agreement” and “for purposes of implementing the claims agreement” is “held by,” “transferred to,” or “transferred from” the Department of Treasury. See 73 Fed. Reg. 50666 (Aug. 27, 2008). Thus, it seems clear that the assets the non-Americans are seeking to attach were immunized by law from “attachment or other judicial process” under the LCRA in order to guarantee that they would reach the intended recipients after they were “transferred from” the Department of Treasury.

During the hearing Judge Bates was very intrigued by the argument, but frankly it was impossible to tell which way he would rule on the arbitrability question. He was particularly interested in hearing that the Department of State was considering filing a Statement of Interest in the case to articulate the federal policy interests that are at stake. The American victims argued that one of the reasons the case should not go to arbitration is that there are clearly established rules requiring federal courts to give deference to such Executive Branch concerns, whereas in arbitration there is no obvious means for the United States to intervene in the arbitration, nor any guarantee that the panel would give the government’s Statement of Interest any weight.

Roger Alford

It is not easy to get a grip on the vast amount of case-law being churned out by investment treaty arbitration panels. However, if law students wanted examples of the ultimate slap-dash arguments being put together by claimant lawyers, then go no further than to sample some of arguments launched in this case. It is important enough to warrant a timely re-appraisal. In the case of FW Oil Interests, a distinguished tribunal (comprised of Sir Franklin Berman and Lord Mustill), subtly warn of lazy broad arguments where the credibility of Government officials is questioned with foundationless allegations of corruption. (The tribunal in the recent EDF case (ICSID Case No. ARB/05/13) tried to cut down the law of corruption to at least relate ‘fault’ to evidential basis). If one were to approach litigation in the English Bar in similar vein, serious disciplinary action would no doubt ensue. The worrying aspect is that in not exercising their discretion appropriately in tailoring claims lawyers are undermining the long-term viability of the system and weakening its credibility. This approach is partial result of the endemic conflict in the system between a correct approach founded in public international law and, the more popular of, reducing the sovereign state to a mere private entity in commercial arbitration governed by private law.

The claim itself was based on losses that the supposed investor had suffered through pre-contractual expenditure, prior to acquiring a bid and forming a contract. The tribunal rejected the claim on the basis that such pre-contractual expenditure could not amount to an ‘investment’ for the purposes of the ICSID Convention or the USA- Trinidad & Tobago Bilateral Investment Treaty. A different position had been reached by a tribunal in the Mihaly v. Sri Lanka (ICSID Case No. ARB/00/2, 15/03/02). The tribunal did not seek to explain in detail why the present case was justifiably different from Mihaly (FWO at para 126). The tribunal made it clear that a state changing its position on the offer of a successful tender with reason did not amount to a lack of good faith (FWO at para 179). It did not, however, sadly give any qualification as to what justifiable ‘reasons’ might be, and implicitly left a broad right to states to withdraw with no compensation for the investor. It is not clear on the facts how in this case such a decision by the partially state controlled bodies was not arbitrary. Not having put the Mihaly distinction to bed, the case still leaves open the question: Under what circumstances is pre-contractual expenditure a justifiable ‘investment’ for the purposes of the ICSID Convention and a similarly worded investment treaty to the US-Trinidad & Tobago BIT?

The answer to this question depends on one’s views of the purpose of ICSID and investment treaties. Staying true to their aims of providing capital for sustainable economic development (the aims of the World Bank’s ICSID project), judicial constructions of ‘investment’ have to mirror this. Thus unnecessary loss of capital through pre-contractual expenditure should generally be wastage as far as Contracting Parties are concerned. Taking the facts as the FWO tribunal has narrated them, there was no clear basis why the state controlled entities withdrew the tender after it had been acquired by the claimant causing it loss. The oil fields that the investor sought to exploit were left unused up to the date of the decision. As far as the overarching policy of ICSID is concerned this is waste. Where the tribunal got lost is drawing parallels between how rights are created as a matter of domestic law, with the mutually exclusive conceptualization of public international treaty obligations. To put it simply, it does not follow that a lack of a cause of action for pre-contractual expenditure in domestic law leads to no rights of action on the same facts in treaty law. It is simply irrelevant whether one or more jurisdictions do or do not recognize pre-contractual liability to liability in public international law. One way to look at it might be to say that the aims of the treaties consumes all such distinctions.

To protect capital expenditure and the aims of investment treaties and ICSID an approach closer to the overall goals of the system is need of judicial elucidation. One approach may be to couple protection in this issue with the existing doctrine of legitimate expectations. Thus the definition of investment may include: ‘Where an investor as made legitimate expenditure in the pursuit of real expectation of contract’. This would remove mere expenditure where the award of contract is speculative from protection. The tribunal rightly intimated this as the commercial risk of contractual relations (FWO at para 141). However risk cannot be so broad as to include all expenditure in all circumstances of pre-contractual relations. Otherwise it would undermine the purpose of the investment treaty to encourage cross-border commercial venture. There will be a point were state behaviour reduces commercial risk by increasing likelihood of the contract being awarded. It needs to then be determined whether excess expenditure in this regard, beyond a mere speculative input of capital, justifies protection as an ‘investment’. There are many cases less clear than direct inducement as in Mihaly, where this will be so. The remarkable aspect of FWO is that the tender for contract had been awarded, and only the formality of formation was left. Adequate focus on the expenditure in this period or the likelihood of being awarded the tender (which must in my view give rise to a treaty right) was not carried out by the tribunal. The latter is no doubt still speculative. There may be a case for different approaches to the pre-contractual expenditure issue between cases of tendering process and the investor as a sole negotiator for the contract. The latter may justify a greater degree of protection where the state’s conduct is tantamount to inducement. However judicial tests need to be carefully construed to meet these exigencies, to ensure appropriate investor protection. My example based on expectations is merely suggestive, however it is clear that a better balance than in FWO needs to be struck between risk and protection. At the moment the approach in Mihaly is far closer to overall aims of the investment treaty system.

This week the good folks at Kluwer have launched a new blog, Kluwer Construction Blog. According to the press release,

Managing Editor of the blog, Sarah Thomas, partner and international projects expert at Pinsent Masons, will draw contributions from a panel of pre-eminent construction lawyers and barristers covering Europe, the United States, Canada, Africa, South America, Asia Pacific, India and the Gulf. The blog will have a discussion forum and an “Ask the Expert” feature that will give readers the chance to add their comments and raise questions.

Now truth to be told, construction is not my area, and I will not frequent that particular blog. But I love what it represents nonetheless. Kluwer is one of the most respected publishers in the world, and the fact that it has launched two blogs in 2009 means that it is betting big that this new media format is the wave of the future. As the managing editor of this blog, I know from first-hand experience how serious and professional they take this endeavor.

In the beginning blogs were marginal at best. Then young upstarts began posting new, fresh, and insightful content that quickly gathered a following. Two or three years ago law blogs moved from being marginal to acceptable. Now with the likes of Kluwer jumping into the arena, we can safely say that blogs are mainstream. There are still plenty of septuagenarians who just don’t get it and will never be converts. But for every one of those, I suspect there are a half dozen who are open and receptive to the new medium.

And why not? It is perfectly acceptable to spend hours on an airplane to attend one of a dozen international arbitration conferences and present your ideas to an audience of fifty. Why not spend one hour in the comfort of your home and reach an audience of several hundred? Blogs will never replace the human touch that one experiences at conferences. Blogs are horrible as a means of networking and making friends. A mile wide and an inch deep when it comes to building relationships. But as a medium for expressing ideas, blogs are a killer app, and Kluwer gets it.

Roger Alford

The relationship between human rights and investment law is all the rage these days in academia. It seems like every week I come across a PhD student or a young academic who is tackling some aspect of the topic.

But, while there are many scholars and writers looking to bridge the two fields, it’s rarer to come across adjudicators with experience in the two realms.

However, Judge Pedro Nikken is one of the rare individuals who straddles the two fields. He’s a former Judge on the Inter-American Court of Human Rights (IACHR) and he’s also sitting as arbitrator in a trio of ICSID cases against Argentina which may touch upon the relationship of human rights law and investment law.

So, it was with particular interest that I read Judge Nikken’s brief contribution to a recent edited collection on human rights and investment law.

Judge Nikken’s article surveys the jurisprudence and practice of the Inter-American human rights system and concludes that investment protection has been handled rather delicately and timidly by that region’s human rights institutions.

He goes on to examine whether protections owed to foreign investors might be considered to be legitimate limitations on human rights in some circumstances. While this is not a question that the Inter-American Court of Human Rights has grappled with squarely, or at length, he does highlight several cases where tensions arise between human rights obligations and foreign investor protections.

Rather than canvas each of them here, I thought I’d focus on a case which I discussed on this blog some months ago: the so-called Trillium case (Claude Reyes v. Chile).

In a 2006 judgment, the Inter-American Court of Human Rights held Chile liable for breaching the rights of Chilean activists who had been stonewalled by Chile’s Foreign Investment Commission following a request for information about a major forestry development in the Patagonia region.

As noted in an earlier blog posting, the Court’s judgment has been hailed for its ringing endorsement of the public’s right to receive information and to exercise informed democratic control over political and bureaucratic institutions.

However, in his recent article, Judge Nikken also wonders if the Court’s disclosure-friendly approach might, in fact, conflict with the “fair and equitable treatment” owed to foreign investors.

Judge Nikken acknowledges that the Chilean Government had not framed its defence in the Claude Reyes case in these terms; however, a Chilean bureaucrat did testify during the hearings before the Inter-American Court of Human Rights that one reason for refusing to disclose certain categories of information sought by public petitioners had been because it was “not reasonable that foreign companies applying to the Foreign Investment Committee should have to disclose … financial information … that could be very important to them in relation to their competitors”.

Judge Nikken suggests that the Inter-American Court failed to consider whether “access to confidential information was in conflict with the right of a foreign investor to a certain standard of treatment, which could involve respect for the confidentiality of some financial information that it had given to the government” – either as a matter of the “fair and equitable treatment” obligation found in many investment protection treaties or in the “right to privacy” contained in the American Convention on Human Rights.

Regrettably, Judge Nikken follows the Court in declining to analyze the potential friction between these norms. However, he does point to a suggestive line of inquiry – one which I hope some of the legions of budding investment & human rights scholars will examine in more detail.

Doubtless much can be said about what expectations of confidentiality are legitimate in a given domestic context; local laws on access to information (which Chile did not have when the Claude Reyes claim was initiated) will also prescribe certain categories of information which need not be disclosed.

In the Claude Reyes case, Chile’s behaviour was sanctioned by the Court, in part, because the absence of a law on access to information meant that too much discretion was given to bureaucrats.

However, where so-called sunshine or access to information laws are in place – but prescribe certain categories of information which need not be disclosed to the public – it would be interesting to see how much leeway the Inter-American Court is prepared to give to government bureaucrats who use such exceptions to thwart disclosure of information about FDI projects.

Certainly, the Court used very bold rhetoric in its 2006 judgment: speaking of the need for “maximum disclosure”, and stipulating that restrictions on disclosure must serve a “compelling public interest”.

For this (admittedly lay) observer, it’s hard to imagine that a human rights Court would deem a very ambiguous “fair and equitable treatment” obligation contained in a BIT to be the type of compelling public interest that could override the principle of maximum disclosure. (Were an arbitral tribunal to go so far as to read the fair and equitable treatment in such a manner, that might give the Court something more tangible than the treaty text to grapple with).

If we assume, for the sake of argument, that the Court sticks to its guns on information disclosure – even in the face of arguments that BIT obligations should shelter foreign investors from the full brunt of such a principle – one wonders if the disclosure of particularly-sensitive information about a foreign investment project would give rise to a BIT arbitration claim?

A preliminary question might be whether there is a protected investment under most investment protection treaties? Recall that many such treaties only apply once an investment has been established. So, if we are talking about information submitted by a foreign investor to a government agency as part of the screening and review phase of an investment (i.e. prior to the establishment of an actual investment), has the investor made an investment that will be protected under the treaty?

Assuming, however, that there is a protected investment at stake, I wonder if arbitrators would go so far as to declare that it is unfair or inequitable for government officials to disclose information about proposed projects, particularly where governments do so in a good faith effort to maximize disclosure of information under a relevant domestic law (and under the watchful eye of the Inter-American Human Rights Court).

I’m not sure. However, the fact that at least one arbitrator thinks there is a possible conflict here should give pause – and perhaps even an idea for a PhD dissertation.

Luke Eric Peterson is Editor of InvestmentArbitrationReporter.com an on-line news service tracking and analyzing investor-state arbitrations.

For many years, no broad international consensus emerged on the existing protection for foreign investors as a result of differences of approaches between developed and developing States. As a result of this perceived lack of established customary principles, States concluded thousands of bilateral investment treaties in the 1990s for the promotion and the protection of investments (BITs). The number of BITs is now so overwhelming (over 2,500 according to UNCTAD, Recent Developments in International Investment Agreements (2006-June 2007), IIA Monitor No. 3, 2007) and their scope so comprehensive that a new debate has recently arisen in doctrine about the impact of these treaties on the existence of custom in the field of international investment law. The controversial question is whether these BITs represent the “new” customary international law in this field. It has been recently argued that the content of both custom and BITs is now simply just the same. For instance, according to Professor Lowenfeld “taken together, the [BITs] are now evidence of customary international law, applicable even when a given situation or controversy is not explicitly governed by a treaty.” (Andreas F. Lowenfeld, International Economic Law, 2nd ed., Oxford, 2008, p. 584).

There is no doubt that the content of contemporary customary international law has been shaped by the numerous BITs entered into by States as acknowledged by tribunals in cases such as CME Czech Republic B.V. v. Czech Republic (UNCITRAL, Award, 14 March 2003, para. 498) and Mondev v. United States (ICSID, Award, 11 October 2002, para. 125). However, while it is certainly true that BITs will influence the development of customary international law, it is quite another thing to simply say that BITs now represent the new custom in international investment law. The better view is that custom in the field of international investment law does not correspond to the total sum of more than 2,500 BITs. In this respect, the approach was adopted by the Pope & Talbot Tribunal must be rejected (UNCITRAL, Award, 31 May 2002, para. 62: “applying the ordinary rules for determining the content of custom in international law, one must conclude that the practice of States is now represented by those treaties [i.e. BITs].”).

The main weakness of the proposition equalling BITs to new custom is its basic failure to meet the definition of customary international law. Custom has two constitutive elements: a “constant and uniform” (but not necessarily unanimous) practice of States in their international relations and the belief that such practice is required by law (opinio juris).

State practice. In theory, BITs can serve as evidence of the element of State practice required to establish the existence of a rule of customary international law (see, Camuzzi v. Argentina, ICSID, Award, 11 May 2005, para. 144). At the same time, as explained by the recent work of the International Law Association (ILA) on customary international law “[t]here is no presumption that a succession of similar treaty provisions gives rise to a new customary rule with the same content.” (p. 47). The undeniable reality is that BITs are very diverse in their content and scope. They are certainly not consistent enough to constitute the basis for any rule of customary international law. For instance, the inconsistency of State practice is undeniable with respect to the type and scope of legal protection offered to different types of shareholders (minority, indirect) as well as for holding (or “shell”) companies (see: T. Gazzini, “The Role of Customary International Law in the Protection of Foreign Investment”, 8(5) Journal of World Investment & Trade, 2007, at p. 707-710). This is also the position held by many authors in doctrine who have undertaken the analysis of BITs to determine whether specific substantive rights contained in these treaties represent custom (see: M. Sornarajah, The International Law on Foreign Investment, 2nd ed., Cambridge U.P., 2004, p. 206, 220-227, 436, 441-443 ; B. Kishoiyian, “The Utility of Bilateral Investment Treaties in the Formulation of Customary International Law”, 14(2) Northwestern Journal of International Law & Business, 1994, at p. 343-346, 363-373; A. Al Faruque, “Creating Customary International Law Through Bilateral Investment Treaties: A Critical Appraisal”, 44 Indian J. Int’l L., 2004, at p. 304-305, 356-363).

Opinio juris. As explained by the Tribunal in UPS v. Canada, there is no evidence of any “general sense of obligation” by States entering into BITs (UNCITRAL, Award, 22 November 2002, para. 97). In fact, the evidence suggests that the decision of States to enter into BITs is solely based on their (perceived) economic interest. Clearly, developing States sign BITs to attract foreign investments. BITs are the result of trade-offs and mutual concessions between States. Their content depends on the political and economic bargaining power of each party to the negotiations. BITs are the product of a compromise between conflicting interests; they are not entered into by States based on any perceived legal obligation.

It is noteworthy that the proposition that customary law is coterminous with BITs has been explicitly rejected by States. This is clearly the case in the context of NAFTA arbitration where unambiguous statements to that effect have been made by Mexico (submission filed in the context of Loewen v. United States, para. 33 & 39), by the United States (submission filed in: Glamis v. United States, p. 142 et seq.) and by Canada (submissions filed in: Chemtura v. Canada, at para. 269-273, and in: Loewen v. United States, at para. 18).

In sum, the content of custom and the thousands of BITs are simply not the same. Does this mean, as recently concluded by the ADM v. Mexico Tribunal (ICSID, Award, 21 November 2007, para. 117) that BITs only create lex specialis rules solely applicable between the countries which are party to these BITs? conclusion is not entirely satisfactory either, as it wrongly excludes the role that these treaties might play in the development of custom. Thus, these numerous BITs will necessarily influence customary international law.

The impact of BITs on customary international law is twofold. First, some of the standards of protection systematically contained in BITs will certainly contribute to the consolidation of already existing rules of custom in international investment law (see Generation Ukraine v. Ukraine, ICSID, Award, 16 September 2003, para. 11.3). Second, the common features to investment protection resulting from BITs will also contribute to the crystallisation of new rules of customary international law in the future. By their very nature, customary rules evolve over time. The repetitive enunciation of some of the standards of protection existing under BITs may be the starting point of State practice which will eventually become custom. A treaty provision may, indeed, provide the impulse for the formation of new custom.

Patrick Dumberry
Assistant Professor
University of Ottawa (Civil Law Section)

The question of the existence of legal protection for foreign investors under customary international law has always been controversial. States have indeed entered into BITs precisely because of the lack of development of relevant custom rules in the field of international investment law. It is nonetheless largely agreed today that some rules of customary law have emerged. For instance, one such rule is the obligation for the host State of an investment to provide foreign investors with the “minimum standard of treatment”. Another is that the host State cannot expropriate a foreign investor’s investment unless four conditions are met: the taking must be for a public purpose, as provided by law, conducted in a non-discriminatory manner and with compensation in return. Professor Sornarajah in the second edition of his book The International Law on Foreign Investment (at p. 213), generally denies that such custom rules have emerged in international investment law and further argues that, in any event, developing State could always claim the status of so-called “persistent objectors” in order not to be bound by these rules.

Is this right? Can a State successfully claim the status of persistent objector in investor-State arbitral proceedings to prevent the application of a specific rule of customary international law to its conduct?

The argument was for the first time raised in the recent 2007 case of BG Group v. Argentina. BG Group Plc (BG), a U.K. company, commenced arbitration proceedings alleging that measures taken by Argentina in the context of its financial crisis were contrary to the U.K.-Argentina BIT. In defence, Argentina invoked the state of necessity doctrine to exclude its international responsibility under both the BIT and custom as codified in Article 25 of the ILC’s Articles on State Responsibility.

The Claimant objected to this argument on the ground that the ILC Articles were a “non-binding codification of customary international law” and that, in any event, the United Kingdom had been “formally opposed to the inclusion by the ILC of a provision on ‘necessity’” and was, therefore, a persistent objector to any such alleged principle of necessity under custom (Award, para 400). The Tribunal held that Argentina could not invoke the doctrine of necessity under customary international law to excuse its liability under the BIT and that even if it were to apply Article 25 of the ILC Articles, Argentina would not have met the restrictive conditions for its application. The Tribunal did not further discuss the persistent objector argument.

The very existence of the concept of persistent objector is controversial in general international law. This is because, as a matter of principle, a rule that has already crystallised to become customary international law is binding upon all States. No State is allowed to opt out unilaterally. The persistent objector theory would allow for an exemption: when a State objected to a rule in the early stage of its formation and actively, unambiguously and persistently maintain such an objection thereafter. The concept of persistent objector has been criticised by several leading scholars. They argue that judicial findings in support of the concept of persistent objector do not represent the strongest authorities and that actual State practice does not support its existence.

I submit that there are other fundamental reasons specific to international investment law why an arbitral tribunal should reject a persistent objector defence. This analysis is based on the “test” adopted by Professor Schachter in his General Course to determine when the status of persistent objector may be permissible:

“It would be germane to consider a variety of factors including the circumstances of adoption of the new principles, the reasons for its importance to the generality of States, the grounds for dissent, and the relevant position of the dissenting States. The degree to which new customary rules many be imposed on recalcitrant States will depend, and should depend, on the whole set of relevant circumstances.”
These three criteria will be now briefly examined.

First, what are the circumstances of the adoption of customary rules? Some authors argue that custom rules have been imposed on developing States which have always rejected them (Sornarajah, p. 92-93). The better view is that while these rules may be “Western” in origin, they are not strictly “Western” in nature; they are truly universal. The fact that developing States are now signing BITs which typically contain the type of provisions they have historically rejected (such as the “Hull formula” on compensation for expropriation) clearly undermines the claim that customary rules have been imposed upon them. Moreover, recent empirical studies show that the same types of provision have also found their way in recent BITs entered into between developing States themselves. Thus, the content of these “South-South” BITs (representing 26% of the total number of BITs in 2008 according to UNCTAD, Recent Developments in International Investment Agreements (2007-June 2008) is therefore not significantly different from those other treaties entered into by developing States with developed States (UNCTAD, South-South Cooperation in International Investment Arrangements, p. 45). Since these rules represent universally-recognised values and are not biased against developing States, there are no reasons why any State should be allowed to opt out unilaterally from them.

Second, why are these customary rules so important in international investment law? The few existing rules which can be said to have crystallised to the rank of customary law in investor-State arbitration are important because they represent the last bastion of international legal protection against unlawful conduct by States. This is because custom is the residual applicable legal regime between a foreign investor and the host State in the absence of any BIT. These rules can therefore be invoked by any foreign investor in any country. To allow a State the benefit of the status of persistent objector would means, in practical terms, that there would simply be no minimum standard existing for the protection of foreign investors in that country. The coherence of the system of international investment law requires that a set of basic legal protections be applicable to any foreign investors at all time. This strongly militates against allowing any State the status of persistent objector to be able to opt out from such basic requirements that must be binding on all states.

Third, what could be the grounds for dissent of a State seeking the status of persistent objector? One can hardly think of any reasons persuasive enough to prevent the application of, for instance, the requirement for the host State to provide foreign investors with the minimum standard of treatment under international law. There is simply no reason why an arbitral tribunal should reward a “free rider” on the entire international legal order. The objector would, indeed, not provide certain very basic legal protections to foreign investors while expecting that its own nationals and companies doing business abroad be accorded that standard of protection by all other States.

In conclusion, for all these reasons I believe that to allow a State to claim the status of persistent objector would not be beneficial to the international community and to the further development of international investment law.

Patrick Dumberry
Assistant Professor
University of Ottawa (Civil Law section)

How should tribunals apply investment treaties to measures adopted during times of crisis? Recognizing crisis as the point at which foreign investors become most vulnerable (and therefore require the most protection), should tribunals guard against any temptation to dilute the rigor of external discipline? Conversely, recognizing crisis as the point at which states can lay their strongest claims to autonomy, should tribunals moderate the demands of international governance by exercising deference in the application of treaty norms, the assessment of defenses, or the formulation of remedies?
In recent years, tribunals and publicists have addressed the effects of crisis on state responsibility in the context of Argentina’s gas sector cases. While differing fundamentally in their conclusions, tribunals have emphasized the customary international law doctrine of necessity and analogous treaty provisions as tools for probing the relationship between power and principle during hard times. Scholarship reflects a predictably similar orientation. However, for the reasons stated below, the doctrine of necessity represents a poor tool for balancing national interests and the rule of law during periods of turmoil. In fact, one can strike that balance more readily in the process of defining rights and formulating remedies.

Turning to the cases and recent scholarship, one may illustrate how the emphasis on necessity drives analysis towards unpalatable extremes. Thus, according to the Enron tribunal, the Sempra tribunal, and Professor José Alvarez, states may invoke necessity only to pursue the sole means required to safeguard their “very existence” or “independence” from grave and imminent peril. To cast doubt on this proposition, one may cite the Nuclear Weapons case, in which the International Court of Justice held open the possibility that states could lawfully use nuclear weapons in extreme cases of self-defense involving their very survival. From my perspective, it seems unlikely that the threshold for modifying gas transport licenses and the justification for nuclear exchange should lie on similar planes.
By contrast, the LG&E tribunal and Professor William Burke-White would have us believe that the collapse of the national currency and the rapid succession of five presidential administrations threatened essential interests and, thus, supported pleas of necessity under international law. To cast doubt that proposition, one may observe that necessity could also justify uncompensated takings, arbitrary arrest, or long-term detention without process in remote or, possibly, secret locations. From my perspective, it seems unlikely that fear, hardship and instability should become the recognized gateways for descent into otherwise lawless behavior. If anything, Argentina’s Dirty War and later wars against security threats reinforce the need for vigilance against legal opinions and the application of doctrine in ways that reflect an eagerness to travel that terrible path.
Taken together, these two examples suggest that the doctrine of necessity does not provide a calibrated tool for assessing national interests. To the contrary, it functions like a doomsday button; difficult to engage, but filled with the potential to unleash terrible force. Building on this analogy, one may observe that states keep a variety of weapons to defend their national interests. While the heaviest weapons provide assurance against the worst case, lighter ones perform most of the work even during crises and, thus, become more useful in advancing national interests for the vast run of cases. Likewise, investment treaty tribunals possess a variety of tools to accommodate the national interests of host states. Knowledge of that inventory can help to avoid the high costs of overreliance on necessity while still affording states room to maneuver during crisis and other moments of national importance.
Turning to that inventory, one may draw distinctions among tools designed to permit derogation, to define rights, and to formulate remedies. With respect to derogation, one must start with the customary doctrine of necessity, which suspends the rule of law when absolutely required for self-preservation. In other words, during the last throes of starvation or the panicked swim to a lifeboat, one returns to a state of nature in which ends justify means, and one does what it takes to survive. However, the pursuit of survival imposes profound costs on the legal process by undermining the general transition from a power-based to a rules-based system of international relations, by undermining the goal of investment treaties to elevate principle over expedience even in hard times, and by undermining the obligation of tribunals to resolve controversies according to law. Given the specificity of the national interest in self-preservation and the potential systemic costs, one must start from the presumption that necessity operates like most doomsday buttons: available in theory but practically beyond reach even in periods of crisis and turmoil.
Moving from custom to treaty, it remains possible that states may wish to preserve more leeway for derogation, especially when undertaking new obligations on matters of secondary importance likely to collide with strong national interests during times of crisis. For example, Professor Alvarez explains that the U.S.-Argentina BIT includes an article on non-precluded measures designed to immunize the exercise of executive powers during emergencies like Iran’s seizure of 52 American hostages in 1979, which (though serious) threatened neither the existence nor the independence of the United States. While the explicit consent to such provisions signals acceptance of systemic costs in exchange for discretion, one must recall that investment treaties aim to provide meaningful safeguards even during hard times. Under these circumstances, one may still regard treaty-based derogations as exceptional tools that address a somewhat broader range of national interests, but whose application requires both caution and strict adherence to the exigencies of the situation.
Turning to the definition of rights, we find a lighter but more useful tool for balancing interests, including the national interests of host states. Just as the interests of neighbors play an important role in defining the limits of my property rights, so do the national interests of host states play an important role in defining the limits of rights granted to foreign investors. Thus, some recent treaties and awards expressly recognize that expropriation generally excludes nondiscriminatory regulations designed to protect public welfare objectives, including public health, safety and the environment. Likewise, as recognized in National Grid PLC v. Argentina, one should accept that the requirements of fairness and equity can shift to accommodate a range of steps that host states might reasonably take during national emergencies, unless of course a state notoriously prone to emergency (like Argentina) has adopted stabilization measures specifically designed to protect foreign investors against the inevitable cycles of turmoil.
To round out discussion, tribunals may finally consider the respondents’ interests when formulating remedies. For example, in Prosecutor v. Erdemovic, an ethnic Croat serving with Serbian forces first objected and, then, personally killed 70 civilians during the Srebrenica massacre after superiors made clear that his alternative was to join the victims in their dark fate. While refusing to accept that they excused liability, the International Criminal Tribunal for the Former Yugoslavia considered the circumstances when imposing a sentence of only ten years, about the same awarded to a Croatian military police commander for tacitly encouraging a single rape during interrogation. Likewise, even where national interests do not rise to the level of necessity and cannot tip the balance in the definition of norms, investment treaty tribunals should still consider the circumstances in deciding if host states bear sole responsibility for the economic losses of foreign investors. As demonstrated by the Argentine gas sector cases, tribunals can pay due regard to the interests of host states by awarding compensation only for unlawful management, and not for inevitable losses caused by the proper management, of national emergencies.
In closing, as Professor Andrea Bjorklund observes, the question remains one of risk allocation and determining who should bear the burden in situations of economic crisis. While she correctly states that the answer “is likely to differ from treaty to treaty, and . . . from case to case,” I would submit that the answer also depends on the tools that one selects for conducting the inquiry.

Charles H. Brower, II
Croft Associate Professor of International Law
University of Mississippi

Professor Roger Alford’s recent posting, “The Arbitrator as Diplomat”, discusses the role of “diplomatic arbitration,” a concept with a long historical pedigree. Some of that history (and much more) is contained in the late Professor Douglas M. Johnston’s posthumous opus, The Historical Foundations of World Order: The Tower and the Arena (2008). The book was awarded the ASIL’s 2009 Certificate of Merit for a Preeminent Contribution to Creative Scholarship and was the subject of a panel discussion at the ASIL Annual Meeting in March 2009. It was feted as an extraordinary work of scholarship. As Professor W. Michael Reisman discusses in the book’s preface, Professor Johnston’s work is “the most detailed account of the history of international law.”

Although the treatment of international arbitration in The Historical Foundations of World Order: The Tower and the Arena is brief, there are some treasures. Prof. Johnston notes that legend in primitive and classical antiquity suggests that arbitration was favoured by the gods, although the gods retained a “fickle attachment to war as an honorable course of action to settle issues.” From arbitration in Sumer, Greece and Rome, Johnston turns to the Jay Treaty of 1794 as “the first early modern experiment in the peaceful settlement of international disputes” and “the modern foundation of the adjudicative model of world order.” Historical tidbits abound. For instance, when the US House of Representatives demanded access to documents relating to the Jay Treaty negotiations, President Washington asserted “executive privilege,” a precedent that “still reverberates within the American constitutional system.”

Johnston’s discussion of the 1899 Hague Peace Conference exemplifies his approach. As Professor Reisman describes in the preface:

Great history is far more than a chronological narrative. It requires a contextualization of events in their cultural, economic and technological milieu and an appreciation of their contingency. It must account for the impacts of exceptional individuals, without, as Harold Lasswell put it, rendering them taxidermical specimens. Yet it must also account for collective actions and path-driven results, the so-called “great historical forces.”

Johnston highlights the efforts of legal internationalists and the European and American peace movements in advocating for the process of international arbitration in the late 19th century. He also details the role of individuals, including Léon Victor Auguste Bourgeois, who presided over the Third Commission (and who later became President of the League of Nations), and state policy resulting in the establishment of the Permanent Court of Arbitration.

Johnston’s functionalist, multi-model approach to international law “commits the historian – and his reader – to a long story of slow and uneven human development.” At 772 pages this is not a short summer time read. Yet it remains accessible to the general reader and expert alike. It is a richly rewarding discussion of the historical foundations of the international legal system.

In submitting his instructions to the American delegation attending the 1907 Second Hague Conference, Secretary of State Elihu Root argued that the Permanent Court of Arbitration system needed radical improvement. In his instructions he wrote:

There can be no doubt that the principal objection to arbitration rests, not upon the unwillingness of nations to submit their controversies to impartial arbitration, but upon an apprehension that the arbitrations to which they submit may not be impartial. It has been a very general practice for arbitrators to act, not as judges deciding questions of fact and law upon the record before them under a sense of judicial responsibility, but as negotiators effecting settlements of the questions brought before them in accordance with the traditions … of diplomatic agents. The two methods are radically different, proceed upon different standards of honorable obligation, and frequently lead to widely differing results.

The arbitrator as diplomat. What an interesting concept, and one that appears utterly lost in history. One of the best examples of the “arbitrator as diplomat” is in the so-called Casablanca Case. In 1908, the PCA was presented with a claim by Germany that French soldiers had used excessive force against German nationals who deserted the French Foreign Legion in Morocco. The German Dr. M. Kriege and the Frenchman Louis Renault, both prominent international lawyers in their day, drafted the terms of arbitration on behalf of their respective governments. They then promptly turned around and became members of the tribunal. Five days after the hearing, the five-member panel of arbitrators decided the case by rendering a most perfunctory opinion that was palatable to both France and Germany but devoid of legal reasoning. The arbitrators ruled that “the circumstances did not warrant, on the part of the French soldiers, either the threat made with a revolver or the prolongation of the shots fired at the Moroccan soldiers of the consulate.”

An editorial published in the American Journal of International Law remarked that the decision was inoffensive, obscure, inadequate and artificial. “We should not close our eyes to the fact that … the decision is a compromise, a triumph of diplomacy transferred from the foreign office to the permanent court of arbitration at The Hague. It is not a judgment such as one would expect from a court of justice.”

The use of arbitration to resolve matters applying the traditions of diplomacy is in complete and utter disuse. But one wonders whether certain disputes that are so politically sensitive might profit from recourse to diplomatic arbitration. Using today’s standards, almost certainly it would require the parties to request an unreasoned award using principles of ex aequo et bono. Presumably it also would be useful only in those circumstances when the parties needed political cover by transferring the dispute to third party decisionmakers. I have difficulty imagining a scenario where this would be appropriate. But I am sure there are instances when we could profit from its use.

Roger Alford

1. Is Arbitral Jurisprudence anything more than a myth?
2. How does persuasiveness of past awards operate?
3. Is Precedent the product of the intrinsic qualities of one or more particularly well-reasoned awards?
4. Why do arbitral awards need to be available?
5. Why is reliance on arbitral precedents not frequent?
6. Should all awards be published?
7. Should awards be published with the names of the arbitrators?
8. How could a mass publication of complete, unabridged awards be achieved?
9. Is confidentiality a valid objection to the publication of arbitration awards?
10. Is there really an overriding principle of confidentiality?

1. Is Arbitral Jurisprudence anything more than a myth?

At the core of the question raised in the title of this blog is the much debated question of the existence of precedent in international commercial arbitration, the answer to which is in turn dependent on different philosophical conceptions of that means of dispute resolution. Do international arbitrators apply the law chosen by the parties in the same way a national court would do? Or is international arbitration a free-standing system of international justice relying on a body of legal rules of its own? Are international arbitrators only concerned with the case before them, or do they feel compelled to adhere to past arbitral solutions for the sake of consistency? In sum, is arbitral jurisprudence anything more than a myth? (see on these issues the seminal lecture of G. Kauffmann-Kohler, Arbitral Precedent: Dream, Necessity of Excuse? The 2006 Freshfields Lecture, Arb. Intern. 2007, Vol. 23, n°3, p. 357). One point in respect to which almost all authors seem to agree is that “persuasive precedent”, rather than precedent in the meaning of the doctrine of stare decisis, is the concept that can be applied to arbitration. Persuasive precedent can be defined as the de facto tendency for an international arbitrator to accept what has been consistently decided in a significant number of past arbitral decisions. It would therefore be misconceived to apprehend the concept of precedent in arbitration with the same perspective as that applied to courts. The jurisprudence of state courts present characteristics of homogeneity in a hierarchical system that arbitral case law does not and cannot have. Yet, international commercial arbitration produces decisions which are not the product of a given municipal judicial system: they are autonomous decisions issued by tribunals which have no forum and which are not rooted in the judicial system of the seat of the arbitration (see the recent Putrabali decision of the French Supreme court of 29 June 2007 which defines international arbitration award as an “international decision of justice, Rev. Arb. 2007.507 note E. Gaillard). These decisions are referred to by other arbitrators, and they may in certain cases persuade future tribunal to adhere to previous solutions. Arbitral precedent is no more and no less than this capacity of past arbitration awards to convince future tribunals to adhere to the solution they embody. The proper question should therefore not be whether arbitral precedent exists, but how and when it does operate.

2. How does persuasiveness of past awards operate?

The persuasiveness of past arbitration awards implies to a certain extent that international arbitrators see themselves as part of a group of international adjudicators which role and raison d’être is to fulfil the particular needs of the international business community, and perceive arbitration as a free-standing and autonomous system of international justice. If the idea of such a free-standing system of international justice is accepted, it is perfectly understandable that international arbitrators try to be as consistent as possible with past decisions of other international tribunals. Such effort of consistency is not driven by a structural homogeneity of arbitration as a dispute resolution system, or by the hierarchical situation in which arbitrators would find themselves. There is no such homogeneity or hierarchy in international arbitration. The driving force of arbitral precedent is rather the arbitrators’ desire to meet the parties’ legitimate expectation that their dispute will be resolved by international adjudicators according to internationally accepted procedures and from an international perspective. That is to say: resolved in a way that is not a mere imitation of what municipal judges would do. The idea that opting for arbitration as an international means of resolving business disputes implies the adhesion to a justice which is to a certain extent different from that of courts not only as regards procedure but also as to the perspective adopted for the resolution of substantive law issues. Accepting the dynamics of arbitral precedent as a tool for consistency and as a rule-making instrument cannot go without accepting the specificity of arbitration, not only as regards procedure, but also the way substantive issues are dealt with. On the other hand, arbitration cannot be thought as a truly autonomous system of justice without accepting the role and existence of arbitral precedent. Precedent in arbitration and arbitral autonomy are two closely intertwined concepts.

3. Is Precedent the product of the intrinsic qualities of one or more particularly well-reasoned awards?

The precedential effect of arbitral awards is a phenomenon which analysis is fraught with difficulties. However, arbitral case law is a reality in practice, albeit an imperfect one. Past solutions have some impact on the thinking of arbitrators having to resolve future cases, even though they may not be referred to in their awards. In this respect, the quality of the reasoning of a particular award may of course play a role in the thinking of future tribunals. Yet, in the views of the authors, good reasoning is no driving factor of arbitral precedent. Precedent in international arbitration is not – or not only – the product of the intrinsic qualities of one or more particularly well-reasoned awards. It is not, either, the product of the arbitrators’ own will, although some show a certain tendency to include obiter dicta in their awards. Arbitral precedent is a pure phénomène d’entraînement. And it is all the more difficult to define that it is most of the times difficult to analyse the exact role that reference to past cases played in the arbitral tribunal’s reasoning. While an arbitral tribunal might refer to a given solution adopted in one or two particularly well reasoned awards as a mere illustration of its reasoning, the same solution will, if adopted in similar terms by five, six or more awards rendered in comparable cases, have not only an illustrative value but also a compelling effect. This is not to say that solutions given in a consistent line of awards will always be perceived as binding in future cases. Their relevance will of course depend from the rules of law applicable to the case. From this perspective, procedural issues should be distinguished from questions of substance.

As far as issues of procedure are concerned, it is beyond doubt that solutions adopted in past arbitration awards are likely to be considered as precedents by arbitrators. Decisions on procedural issues or questions of arbitral jurisdiction are the natural ground for the emergence of arbitral jurisprudence because arbitral tribunals have the first say on these issues and, arbitral tribunals having no forum, will generally not resolve them by reference to any particular national law. A similar conclusion may be drawn as far as issues of applicable law are concerned, as it is generally admitted that, in absence of a choice of law, arbitral tribunals can resolve the dispute by referring to the rules of law they believe to be appropriate. As far as issues of substance are concerned, reference to arbitral precedents will be possible when, absent a choice-of-law, the arbitral tribunal decides to apply transnational principles, trade usages. If non-national rules of law are to play any role in the adjudication of international trade disputes, arbitral precedents cannot but be an important source – albeit not exclusive – of the same. Even in presence of a choice-of-law may arbitral precedents play a role in the resolution of the dispute? For instance, arbitral precedent may well play a role when a particular legal issue has not yet been settled in the particular applicable law. International conventions providing for substantive rules of law will also be the natural field for the application of arbitral jurisprudence. This is all the more so when said conventions, like the CISG, present the characteristic of being detached of national laws as far as their interpretation is concerned. The assumption that reference to arbitral precedents would not be conceivable in respect to substantive issues in presence of a choice-of-law is therefore incorrect. Arbitral jurisprudence may be a source of legal rules in a number of different fields, including in respect to issues of substantive law and when a national law is applicable to the dispute.

4. Why do arbitral awards need to be available?

The concept of arbitral precedent naturally raises the issue of the availability of arbitration awards. The fundamental importance of the publication of arbitration awards derives from the fact that, absent of a doctrine of stare decisis in arbitration, arbitral precedent will only operate in presence of a repetition of identical solutions in a number of different cases. Precedent in arbitration is, from that perspective, a rule-making mechanism comparable to that of trade usages. For that rule-making mechanism to operate, it is necessary that arbitration awards be available in sufficient quantity to permit the emergence of trends and the distinction of lines of identical or similar solutions. In other words, in order for past awards to be perceived as binding, there needs to be something close to what has been defined as path dependency for state courts, i.e. the accumulation of identical or similar solutions able to generate a phenomenon of imitation. The persuasiveness, which supposes an exemplary value and, as a consequence, a judgement on the value of a particular decision, often needs to be combined with quantity. Precedential value could only be given to a consistent line of decisions. The same applies to arbitral awards. In order for arbitral awards to have precedential effect, it is therefore necessary that awards be known and available. The main condition for arbitration awards to have a precedential effect is therefore that such awards be known and accessible in sufficient quantity, in other words that they be systematically published. If arbitration is to remain the normal avenue for resolving business disputes, it needs to provide the business community with greater predictability of the possible outcome of trade disputes. In turn, better knowledge of arbitral jurisprudence would allow the business community to have a clearer idea of the realities and advantages of arbitration. This is of course not to say that arbitrators should be deprived of their discretion in the resolution of each particular case. But such discretion in assessing the facts and determining the appropriate rules of law is in no way incompatible with the availability of a body of arbitral precedents upon which tribunals could rely if appropriate.

Yet, and although a precise study remains to be made on the question, it would appear from a superficial survey of published arbitration awards that arbitrators rarely rely on arbitral precedents.

5. Why is reliance on arbitral precedents not frequent?

The reason is in our view to be found in the lack of transparency of commercial arbitration as a dispute resolution system. How can an arbitral tribunal ever conclude that consistent past arbitration awards express a rule of law or a trade usage when the overwhelming majority of arbitration awards are unknown? The proportion of court decisions which are made available to the public through publications in official bulletins, legal publications and on the internet is quite representative of the overall jurisprudential production of a given judicial system. The same cannot be said of arbitration. Save a very limited number of exceptions, almost no ad hoc commercial awards are published, whereas such awards probably represent a very consistent part of the total volume of arbitration decisions rendered each year in the world. Arbitral institutions are therefore the exclusive source of published arbitration awards. Yet, only a small minority of arbitral institutions do publish awards. Yet, this publication policy of some institutions only covers a small minority of the total volume of awards rendered each year.

6. Should all awards be published?

It is of course true that an important part of rendered awards may not present any interest, as they only settle issues of fact. Likewise, decisions rendered in commodity arbitrations or in ex aequo et bono (amiable composition) do not present any interest to the effect of setting a precedent. It is nonetheless out of doubt that the volume of published cases is not representative of the global reality of international arbitration. Awards are published randomly, depending on whether they have been rendered under the aegis of one of the institutions having a publication policy. In addition, the availability of information depends on the editorial policy of these arbitral institutions. The issue is however not how arbitration awards are selected for publication, but whether there should at all be any such selection, except for awards that are manifestly deprived of any interest. Publications that are driven by the desire to treat certain specific issues of general interest that the editor has sought to cover will not, because of the subjectivity of the editor’s policy and the limited range of issues covered, allow the creation of a data base sufficient to treat a wider range of questions. It should also not be overlooked that awards are frequently published under the form of summaries or in extracts, which frequently happens to be insufficient to make a finding possible.

7. Should awards be published with the names of the arbitrators?

Most of the times, it is not the case. Yet, at the difference of court decisions, knowing the arbitrators’ identity may be relevant to the effect of a proper understanding of the decision’s reasoning. Judges are part of a hierarchical and unified judicial body, so that their decisions are more the emanation of the judicial system to which they belong than their individual creation: what matters is more the circuit, the court or particular section of the court which issued a decision. Conversely, awards are rendered by individuals selected for their personal credentials and reputation, who have no forum and whose decisions are not subject to the control of any superior court. Such individuals will frequently have published extensively, and expressed opinions in respect to issues addressed in their awards. Knowing who they are can therefore be important information for a proper understanding of their findings. The high reputation of certain arbitrators may enhance the value of an award in the eyes of their peers. It can of course be submitted that the publication of awards with the names of the members of the arbitral tribunal could have in turn entails a multiplication of obiter dicta by arbitrators desiring to promote their own “jurisprudence”. It could also be feared that the publication of arbitrators’ names could have the effect of dissuading arbitrators to take bold positions. Yet, the example of investment arbitration, were awards are made public with the names of the members of the tribunal, shows that these inconveniencies, as real as they may be, do not outweigh the advantages of putting a complete, unabridged information at the disposition of parties and arbitrators.

8. How could a mass publication of complete, unabridged awards be achieved?

A model could certainly be the CLOUT data base. CLOUT is an information system based on a 1988 Uncitral decision, established for collecting and disseminating information on court decisions and arbitral awards relating to conventions and model-laws that have emanated from the work of the Commission. The scope and purpose of such system, as explained by the Uncitral’s user guide, is “to promote international awareness of such legal texts elaborated or adopted by the Commission, to enable judges, arbitrators, lawyers, parties to commercial transactions and other interested persons to take decisions and awards relating to those texts into account in dealing with matters within their responsibilities and to promote the uniform interpretation and application of those texts“(Doc.A/CN.9/SER.GUIDE/1/Rev.14 February 2000). Why couldn’t a similar system be instated to promote the international awareness of arbitral precedent in commercial arbitration? A new data base with that precise scope could easily be organised under the aegis of the Uncitral, with the same successful system than that which has been used for CLOUT. Awards could be submitted to the secretariat, which would then ensure that the names of the parties and any non relevant or secret information be deleted, exactly in the same way as this is done for published decisions of the European Commission in the field of mergers. The secretariat would also ensure that there is no opposition from the parties to their award being published online a certain period of time after it was rendered. Such a system would allow the progressive constitution of a wide data base which, provided an efficient index and search system be available, would constitute the necessary basis of the elaboration of a true system of arbitral precedent.

9. Is confidentiality a valid objection to the publication of arbitration awards?

It may however be submitted that a systematic publication of complete awards would go against the privacy and confidentiality of arbitration. The argument is in our opinion not a decisive one.

Many arbitration rules provide that arbitration awards should not be published without the consent of the parties. (see Uncitral Rules at Article 32 § 5, Article 43 § 3) of the Swiss Rules, Article 27 § 4 of the AAA Rules, article 34 of the ICDR rules, Article 30 § 3 of the LCIA Rules). A similar provision can also be included in the arbitration agreement itself, or in the terms of reference. In presence of such a provision, it is out of doubt that requirement of consent has to be complied with prior to publication. This does not mean, of course, that publication will in practice be impossible. In fact, such rules do not in general provide that consent should be given in written form. Implied consent after proper notice to the parties may therefore be sufficient to the effect of permitting the publication of the award. Certain precautions should in any case be taken prior to any publication of an arbitration award. No publication should clearly take place if the parties are still litigating. A certain period of time should also have elapsed after the award is rendered (the ICC practice of waiting at least three years before publishing an award seems in this respect particularly healthy). In addition, the award, although published in its entirety, should be expurgated of any potentially confidential or secret information contained therein, which inclusion is not necessary to the comprehension of the decision. This certainly includes the names of the parties involved in the arbitration, the names of third parties, as well as – unless necessary to the understanding of the award, such as data relating to market shares and turnover in antitrust cases – most of the economical and financial information contained in the award.

10. Is there really an overriding principle of confidentiality?

In absence of a provision expressly requiring the parties’ consent to publish the award, the issue is whether a rule to that effect can be deducted from an express or implied rule of confidentiality applicable to the arbitration. Most arbitration statutes do not expressly provide for a general principle of confidentiality. Arbitration statutes may provide for rules applicable to the protection of business secrets, or the secrecy of deliberations (as Article 1469 of the French new code of civil proceedings), but they do not embody a general rule preventing the publication of arbitration awards. As to arbitration rules, those which do not provide for specific rules applying to the publication of awards do not either, in general, contemplate a general principle of confidentiality. The ICC Rules refer, in Article 20.7, to the protection of business secrets and, in Article 21.3, to the privacy of the hearings. The rules of arbitration of the Vienna Chamber also limit themselves to the protection of business secrets. These provisions would not, for themselves, stand in the way of the publication of awards. Certain authors have however submitted that arbitration would be subject to an implied general principle of confidentiality. Such an implied principle of confidentiality would be a necessary consequence of the parties’ consent to arbitrate, be part of the lex mercatoria, or constitute a transnational rule of international arbitration.

The fact however that most arbitration statutes do not embody such a general principle of confidentiality could be seen as an indication that there is no such general principle. Quite on the contrary, the solutions adopted with respect to confidentiality are very different from one jurisdiction to another. In fact, far from expressing a general acknowledgement of the implied confidentiality of arbitration, case law seems to be oriented on the opposite direction in many jurisdictions.

The principle according to which hearings are held in camera is for example justified by the parties’ desire to protect the serenity of the debates. The confidentiality of the documents produced in the arbitration is justified by the need to preserve business secrets, etc. From that perspective, one could wonder what would be the rationale of preventing the publication of an award years after it was rendered if the names of the parties and any potentially secret or confidential information has been removed. There is no uniform conception of confidentiality in arbitration. The notion varies with the situations and functions which it is supposed to cover and does not even apply equally to all participants in arbitral proceedings. Positing that arbitration is la chose des parties and that the award belongs to the litigants is clearly not sufficient to prevent its publication. An award is not only the ultimate product of the parties’ arbitration agreement. It is not solely a private document. It is also a jurisdictional decision which may, to a certain extent, affect the public, and in which the business community at large has an interest. There are many instances in which disclosure of information relating to arbitration is required and permitted. Statutes applicable to listed companies may require the parties to publish financial information or when parties are compelled to disclose the award for the purpose of enforcement or annulment proceedings. A party may find itself in the obligation to produce the award to defend a claim, or to protect its interest or image. These are cases in which a counterbalancing interest imposes disclosure rather than secrecy.

Likewise, the public interest in the development of arbitral case law, in the enhancement of the quality of arbitration, and in providing transparency and predictability to the business community should override the principle of confidentiality as far as the publication of arbitration awards is concerned.

Alexis Mourre/Alexandre Vagenheim