The UN General Assembly formally adopted the Convention on Transparency in Treaty-based Investor-State Arbitration (the Transparency Convention) on 10 December 2014. The Transparency Convention makes it easier for States to apply the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (the Transparency Rules) in relation to investment agreements concluded before the Transparency Rules came into force in April 2014. The impact of the Transparency Rules on investor-state dispute resolution is discussed in our previous blog post here, and the Transparency Convention and the Transparency Rules are discussed by partner Christian Leathley in a short video blog post here.

The Transparency Convention applies to arbitrations between an investor and a State or a regional economic integration organization conducted on the basis of an investment treaty concluded before 1 April 2014. It provides that the Transparency Rules will apply to any investor-state arbitration (whether or not initiated under the UNCITRAL Rules), in which the respondent state is party to the Transparency Convention and the claimant is of a state that is a party, where no reservations apply (Article 1). It also provides that the Transparency Rules may apply to situations not falling within Article 1 (i.e. where the claimant is of a state which is not a party to the Transparency Convention), where the claimant agrees to their application (Article 2).

Under Article 3, which contains the reservations, a state may carve out specific investment treaties to which the Convention shall not apply, or carve out arbitration proceedings in which it is a respondent which use a specific set of arbitration rules or procedures, or, more generally, to exclude investor-State arbitrations in which it is a respondent.

The Transparency Convention will be open for signature in March 2015 and will come into force 6 months after the deposit of the third instrument of ratification by a State. It will only apply to investor-State arbitrations that have been commenced after the date when the Transparency Convention enters into force or takes effect with respect of each party.

Herbert Smith Freehills’ Partner, Christian Leathley, comments: “The adoption of the Convention represents a positive development towards broadening the scope of application of the UNCITRAL Rules on Transparency. If the Convention receives broad acceptance by members of the UN, it will be a significant step in helping to secure the future of the investor-state dispute settlement process, which has long been subject to criticism for lack of transparency. As always, practitioners should be mindful of the reservations that signatory states introduce, if any.”