The Mauritius Convention: Canada Opens the Door to Transparency in Investor-State Arbitrations
In a decisive shift towards openness in investor-State arbitration, the Mauritius Convention entered into force in Canada in late 2017. The Convention sets out new default transparency obligations for disputes arising from current and future investment agreements between Canada and investor parties. These duties may have significant repercussions for investor-parties seeking to safeguard their strategic or reputationally-sensitive business information in the event of an arbitration with Canada. As such, it is vital that investor-parties understand how to meet their transparency obligations while also protecting commercially-sensitive information.
Adopted by the United Nations in 2014 and first entered into force in 2017, the Convention has currently only been ratified by four countries: Cameroon, Canada, Mauritius, and Switzerland. While the small number of party States betrays, at least to some extent, a hesitancy among nations to resolve investment disputes in the public forum, an additional nineteen States are signatories to the Convention. The proportion of these nations that will ratify remains to be seen, but their signatures nonetheless legitimise the Convention and signal an important global shift towards transparency in what have long operated as secretive proceedings.
Background: the transparency rules
The private and confidential character of investor-state arbitration has come under increased global scrutiny over the past decade. A scattered application of confidentiality in these proceedings, coupled with growing public concern for openness in State disputes, led UNCITRAL to bring a uniform set of transparency rules (the Rules) into force in April 2014.
The Rules apply specifically to investor-state arbitrations. They require hearings to be publically-accessible, and provide that pleadings, decisions, and awards must be published to an online open-access Transparency Registry. The Rules also facilitate the participation of interveners and non-disputing State parties in proceedings.
Despite introducing substantial transparency-forward measures, the Rules leave a significant gap in coverage since their application is limited to agreements entered into after April 1, 2014, and which designate UNCITRAL as the appropriate forum for dispute resolution.
The Mauritius Convention
The Mauritius Convention fills this gap by allowing parties, on agreement, to apply the Rules to treaties concluded prior to April 1, 2014. Parties may also limit application under the Convention by making prior relevant reservations, and application is not impacted by whether or not UNCITRAL was selected as the governing forum for disputes.
The Convention provides that the Rules can have bilateral or multilateral application, or unilateral application.
When both the respondent State and the investor are parties to the Convention, the Rules will apply automatically, subject to prior relevant reservations. In the case of a multilateral treaty, it would suffice that the respondent and a particular investor’s State be signatories in order for the Convention to apply between those parties.
If the respondent is a party State, the Rules will apply by unilateral consent of the investor-claimant regardless of whether or not the claimant’s state is party to the Convention. Here too, application may be limited by prior relevant reservations.
As a party to the Convention, Canada’s transparency obligations in investor-state arbitrations are significant. The Rules now apply automatically to investment treaties concluded since April 1, 2014, and apply by unilateral consent of investor-claimants for treaties entered into prior to that date.
Canada’s decision to ratify the Convention may emerge as somewhat of a puzzle given that many nations with similar economic frameworks remain non-parties. It seems that the Canadian decision was made not only in response to public concern, but also with a view to potential benefits for investors. As stated by the Honourable Chrystia Freeland, then Minister of International Trade:
Canada is proud of our contributions to the Mauritius Convention, and we encourage all of our trade and investment partners to ratify the Convention. Providing a predictable environment for investment and a transparent investor-state arbitration mechanism is an important element of Canada’s progressive trade agenda. It benefits Canadian companies that invest abroad and sends a clear message that Canada is an attractive destination for foreign investment.
Other noted advantages of increased transparency include clearer and more predictable rules as a result of more decisions being published, a proliferation of reliable statistics on common issues between investors and States, and greater systemic coherence in how these disputes are resolved.
Of course, a stark shift towards transparency may also present new challenges. Open hearings and the online repository will render investors’ business dealings ‘google-able’, making them widely accessible to the public. While the Rules protect commercially-sensitive information from being released, reputationally-sensitive information may still end up in the public forum. There is also a risk that settlement may become more difficult in light of increased public scrutiny over arguments raised in arbitration.
Increased application of the Convention will modify the underlying structure of investment treaty arbitration, shifting the process from a private form of dispute resolution controlled by the parties to a public forum that takes external interests and participants into account.
As the Convention continues to enjoy full application in Canada, investors should remain acutely aware of how to meet their transparency obligations while protecting their business strategies. Vigilance in this regard will help mitigate the risk of potential exposure that may very well be faced in this rapidly-evolving area of dispute resolution.
This blog post is adapted from the published article: J. Sirivar, L. Ostler, “The Mauritius Convention on Transparency: The Potential Impact on Canadian Investors” (Aug 2017) 6:30 C.L.A.R. 37