1.1 Transparency and the hybrid nature of investment arbitration
1. The topic of transparency in international investment arbitration has gained, and continues to gain, increased attention. The heightened public awareness is justified: investment disputes between foreign investors and host States before international tribunals typically involve highstakes – usually financial, but often also political. Host State governments have much at stake in the political equations arising out of these often sensitive disputes. Sometimes, it may be a population within the host State that most directly bears the effects of a foreign investment project, rather than the host State's government.
2. It is in these circumstances that the concept of transparency in investor-State arbitration has gained increased visibility as a topic of concern. Because of the involvement of a State, investment arbitration has the potential to affect ‘public interest’ issues, i.e. issues that concern a broader public than just the parties to the dispute. Commentators and civil society groups have thus called for increased public involvement in investment arbitration proceedings, in order to incorporate broader policy considerations into the dispute resolution process. The perception of ‘secrecy’ in investor-State proceedings has been a contributing factor in the growing dissatisfaction with this type of dispute resolution mechanism as a whole, which has, in some cases, culminated in States’ denunciation of bilateral investment treaties.
3. This ‘legitimacy crisis’ of investment arbitration, of which the transparency debate forms an important part, can be explained, in part, by the hybrid nature of investment arbitration at the crossing of the public and private spheres. On the one hand, investment arbitration is a creature of public international law. The dispute involves a State, and the parties’ substantive rights, as well as the agreement to arbitrate (in treaty-based investment arbitration), arise out of an instrument of public international law, i.e. the treaty. On the other hand, arbitration is a private form of dispute resolution, away from State courts, and proceeds under procedural rules shaped and chosen by the parties.