The need for transparency in international arbitration – especially investor treaty arbitration is a popular, developing and essential concept. As confidentiality is inherent in arbitration, it makes arbitral proceedings all the more open to abuse. One key risk is that providing confidentiality implies equivalence to secrecy, which gives parties the impression that such cases must not be put under scrutiny, even if there are criminal elements at play. This could prove extremely dangerous as such confidentiality is often used to violate the basic principles of international justice, international public policy and the procedure.  Not only does it make it make complicated arbitral procedures more reliable and open but provides an easier path for the concerned stakeholder to access information. 

As transparency, good governance and ultimately the rule of law are interrelated concepts – this article explores how arbitration can be misused as well as how it can be used to strengthen these concepts in the international arena. By examining key aspects that affect transparency in arbitrations, with case law as examples, this article shall assess how transparent arbitration processes should be allowed to develop further to create a good balance between confidentiality and transparency.

In order to effectively answer the research question, this investigation has been categorized into three broad arguments, which analyze transparency in the rules applied to arbitration, issues of corruption and finally, the ethical and moral role of arbitrators to guide the arbitration in a transparent manner.


Transparency is a core requirement in international treaty arbitration as investment disputes almost always raise numerous intricate legal issues.An investment treaty arbitration typically involves the resolution of a foreign investor’s claim against a respondent country for alleged breaches of investor protections contained in an investment treaty involving public international law to a large degree. Given the unsettled nature of public international law – transparency is at the heart of any dispute resolution process to enable a logical conclusion. As former president of the International Court of Justice (ICJ) in The Hague, Dame Rosalyn Higgins has  argued, international law is best described as ‘adynamic decision-making method’, involving a variety of participants.  The participants include state and non-state actors such as individuals, international organizations (such as the IMF, ILP or the UN), multinationals, and often various private, non-governmental groups.

In recent times, there has been criticism of the use of arbitration as a dispute resolution process especially due to its inability to manage transparency risks. Some experts see it as inappropriate for dispute resolution between states and corporations due to the potential resource imbalance between the parties. There is also the likelihood of states having the inherent advantage of being“repeat players”. For instance, analysis has been raised against a ‘venture settlement court’ for neglecting the assessment of ecological or common freedomsguidelines and other objections about lacking   straightforwardness comparable to procedures that frequently ensnare significant public interest matters. There are limitations to this freedom, which is where the need for transparency arises, even while it is commonly acknowledged that parties to an international business agreement are free to choose for themselves the law (or legal standards) applicable to that agreement. When a state and a foreign private corporation enter into contractual ties, it is typical for them to agree to international arbitration in the event of a dispute.

The private party could theoretically be a person. He will, however, likely have less clout than a foreign firm as a result, and he might even be forced to accept the local judicial system rather than a mention of international arbitration. A national legal system may be mentioned in the applicable law clause, but more frequently, it may employ language like “generic principles of law” or “the law of country X and the relevant principles of general international law” or any other variant. Public international law derives from a variety of sources, such as international treaties and customs, but the most important ones for non-state parties are “the broad principles of law acknowledged by civilised nations.” So that all stakeholders are on the same page from the start, transparency is maintained.

Consequently, this wide discretion has many highlights that make it appropriate for the goal of ESG-related questions, which directly correspond with transparency.

International arbitrators have somewhat demonstrated proficiency at settling questions, including scope for relevant regulations and, at times, ‘delicate regulation’ guidelines. In 2019 a gathering of discretion and fundamental liberties professionals producedthe Hague Rules on Business and Human Rights Arbitration expecting to hold these useful highlights and to additionally furnish a set of rules expected to resolve issues prone to emerge with regards to business and common freedoms questions. These incorporate a Code of Conduct, cultivating completely honest intentions and cooperation, focusing on the advantages of multi-jurisdictional jurisprudence and empowering strengthening and straightforwardness and ultimately transparency.

Transparency in Legal Systems to be used 

The potential limits on freedom of choice of law have become a transparency issue in a lot of investment treaty arbitration. The problem with using public international law as the body of law governing a business transaction is not one of concept but rather one of application. Due to its focus on the interactions between states, public international law is not particularly well suited to handle complex contractual concerns like error, misrepresentation, time of performance, and so forth. The same objection applies when “generic rules of law” are chosen to govern a business contract. The problem with the general principles is that they simply deal with broad topics such as the principle of good faith in treaty relations, abuse of rights, and the concept of state and individual responsibility. These often lack sufficient and necessary details for contractual relations, as they are, at best good generalizations. In such a vacuum, the problem arises when a party without knowledge of some national mandatory rules conducts business only to learn at the dispute resolution stage that such laws were indeed applicable – which often has serious repercussions. 

Mandatory rules, which are those that “cannot be derogated from by way of Contract,” are frequently used in the resolution of a contractual dispute as an addition to or substitute for the applicable law chosen by the parties. For instance, even though the actual supply contract in question is governed by Emirati law, theUS International Trade in Arms Regulations were very much applicable to the transaction in an ICC Paris case involving the commercial export of defense-related technology from the US to the Persian Gulf region. Similarly, a listed American company may not be permitted to exclude the operational application of the Foreign Corrupt Practices Act of1977 by signing an investment agreement in Kazakhstan, subject to the national law of Kazakhstan. 

Issues of transparency often arise when a mandatory set of laws applies to a situation, where the mandatory laws of a country change with respect to socio-political situations which were not intended to affect the original transaction. A commonly used method to address such an issue in long term agreementsis introduction of a ‘freezing’ clause, which inevitably take the form of stabilization clauses. These stabilization clauses are undertakings on the part of the relevant contracting state not to change or annul contractual terms by administrative or legislative procedures without the prior consent of the other contracting party. Stabilization clauses attempt to preserve the status quo of a certain legal regime, most likely for a considerable time period, regardless of any other political, social, and economic change in the country concerned. Traditionally, lenders in investment projects have always viewed stabilization clauses as an essential aspect [often standard terms], particularly in developing countries where political risk is deemed to be considerably high. Similarly, countries looking to attract foreign investment have often viewed stabilization clauses as a valuable collateral to assure investors of a stable investment environment. Nonetheless, these stabilization clauses have come under increasing objection and scrutiny from numerous civil society groups, who often argue that powerful investors [such as MNC’s, UHNWI’s] may be able to use these clauses as an instrument to exert undue influence over smaller, poorer states by holding a host states ability to modernize its laws, subject to their discretion- thereby infringing upon state sovereignty and violating other values of international law.

In one of the key arbitrations arising out the nationalization of Libyan Oil, the arbitrator held that the nationalization of petroleum assets by the then Libyan government was an act committed in clear breach of some stabilization clauses and hence was rendered illegal under the principles of international law. This gave rise to a claim to restitution of concessions to the companies involved. This is a classical arbitral decision which is often criticized as overstepping or infringing Libyan Sovereignty. It was criticized not just for rejection of the relevant national Libyan laws as the core law governing the agreement in its so-called internationalization of the petroleum concession agreement, but even in its adjudication in favor of restitutio in integrum. As a better example, in the Kuwaiti Aminoil arbitration, the tribunal found by a majority (with another opinion annexed to the arbitral award) that, when correctly interpreted, the stabilization clause in the concession agreement (covering a term of six decades) did not impede any nationalization process by the government of the State of Kuwait. Hence investment treaty arbitrations can give rise to sovereignty issues, especially in implementing national policies, but neither a state nor a private entity should avoid its international obligations. Transparency is thus vital from the outset.

Corruption – The Ultimate Transparency Issue 

One issue of increasing concern in international commerce is bribery and corruption. These issues can arise in at least three distinct circumstances: firstly, with regards to standing of the arbitrator [this is primarily covered in section D of this article]; secondly, that the very purpose of the dispute is manufactured in a manner intended to enable, facilitate or conceal bribery of some kind; and finally, that the contract in question was procured by a bribe.

The duty of an arbitrator, when confronted with possible criminal activity concerning an arbitration, is an important balance to be struck. It is not the task of an arbitrator to look to uncover crime but instead to adjudicate on the contentious issues that come within the remit of the agreement to arbitrate. In respect of this,a Directive of the European Union lays down a self-reporting requirement on instances of money laundering for ‘auditors, external accountants and tax advisors’, including ‘notaries and other independent legal professionals’, including providing any necessary information required by the relevant authorities. It is to be noted that a particular reference has been made to the legal profession with regard to the assistance of clients in transaction implementation. Notably, further a 2005 Directive was aimed at regulating the financial system, particularly the abuse and manipulation with regards to terror financing and money laundering.

In any event, it should go without saying that among the several duties of an arbitrator – especially the ethical duties – is to be able to adjudicate fairly in the absence of corruption and bribery. Unfortunately, like many legal systems which have been tainted by corruption, arbitration and ADR in general is no exception. Of the many anti-corruption initiatives in the field of international arbitration, a key initiative which supplemented the 2002 Criminal Law Convention on Corruption of the Council of Europe, ratified by thirty six member states of the Council by October 2014, was the ‘Additional Protocol to the Criminal Law Convention on Corruption’. The Protocol mandates the creation of bribery as a criminal offence covering both domestic and foreign arbitrators – regardless of whether it is instigated by an arbitrator (‘passive bribery’) or instigated by an individual (‘active bribery’).

The question of the contract, the object of which is the exercise of influence over state officials, was addressed in a famous decision of Judge Gunnar Lagergren, acting as arbitrator. Although neither party had alleged the nullity of the contract based on its purpose, the arbitrator raised the issue of his own motion and concluded, on the basis of the evidence before him, that the trafficking in influence was the agreement’s intended purpose. As a result, he denied the claim on the grounds that the contract was unenforceable. The issue of the contract obtained through a bribe was considered by the arbitral tribunalin the ICSID case [The International Centre for the Settlement of Investment Disputes] World Duty-Free v Kenya. In this case, the arbitral tribunal was shown evidence that the contract upon which the arbitration was based was procured by the payment of a bribe. The tribunal had no hesitation in dismissing the claim, which it considered in clear breach of international public policy. The arbitral tribunal came to the following conclusion: It was convinced that bribery is against the international public policy of the majority, if not all, States, or, to use another phrase, against transnational public policy, in light of domestic laws and international conventions relating to corruption, as well as in light of the decisions made in the matter by courts and arbitral tribunals. As a result, claims based on corrupt contracts or contracts acquired through corruption cannot be maintained. These rulings have strongly implied that international arbitration cannot be used to support illegal contracts. Any party that uses bribery to obtain a contract will probably discover that it no longer has access to the international arbitral justice system.

Opinions nevertheless appear to be split on whether the arbitrators should inform appropriate authorities. According to a Task Force established by theInternational Chamber of Commerce, “it seemed contradictory to the nature of arbitration, contrary in particular to the trust that the parties place in the arbitrator, for an arbitral tribunal to submit to the authorities the offences found.” However, it should not be accepted if the parties’ faith is limited to the arbitral tribunal acting as a passive observer of a criminal offence. It seems unfair that transnational criminals could take advantage of the secretive nature of arbitration processes and the final enforcement of a judgement. Each party should be given the chance to explain themselves if an arbitrator has reason to believe that a criminal offence has been committed. The tribunal may assess the facts once it determines that it has sufficient justification. Fraud or corruption cases are likely to have an effect on how the dispute is resolved. The tribunal should end the proceedings on the grounds that there is no real disagreement where there has been money laundering or other process manipulation by the parties. The tribunal may rule in consent award instances that the settlement should not be accepted. Therefore, the arbitration community must exercise caution so as not to unintentionally aid in such aims.

Issue Conflicts and Arbitrators’ Ethics in International Treaty Arbitration – The Arbitrator’s Dilemma and Need for Transparency

Furthermore, a key issue on transparency in international investment arbitration pertains to the conflict that arbitrators face in participating in two or more sets of proceedings simultaneously, known asthe issue conflict. When a lawyer serves as an arbitrator in one case where a legal issue is being debated and represents the same party as counsel in another case, this situation is known as a “issue conflict.” There is no suggestion that the arbitrator has any connections to the parties; rather, it is alleged that the arbitrator would not be able to act impartially when making a decision on a legal issue that could be crucial in a case in which the arbitrator is acting as counsel and defending the interests of a client. This scenario—sometimes referred to as the ‘double-hat dilemma’— is particularly common in investment arbitration cases because there are a limited number of recurrent legal concepts at stake, investment arbitration awards are widely publicised, and renowned international attorneys frequently serve as both counsel and arbitrator.

This arose in the Telekom Malaysia arbitration, wherein, according to the bilateral investment agreement between Ghana and Malaysia, Telekom Malaysia asserted claims against the Republic of Ghana regarding an alleged expropriation of its investment in Ghana Telecommunications Co. Ltd.

The arbitration was held in accordance with the UNCITRAL Rules and administered by the Permanent Court of Arbitration. Following a successful challenge by each party as to the other’s selected arbitrator, Telekom Malaysia appointed an eminent French practitioner and academic as the replacement arbitrator. Ghana contested the arbitrator’s appointment because he served as the investor’s attorney in a related investment arbitration. Ghana claimed that because the arbitrator was also representing an investor on related legal issues, he was more likely to take a stance in Telekom Malaysia’s favour. As a result, he lacked independence and impartiality as an arbitrator. While the other members of the tribunal and the Secretariat of the PCA, both, rejected challenges brought by Ghana, Ghana brought the matter for review to the Dutch courts, The Hague being the agreed seat of the arbitration. In its decision of 18 October 2004, the District Court of The Hague emphasized the ‘incompatibility’ of the arbitrator’s role as attorney and arbitrator, placing much weight on the appearance rather than the actual existence of bias. As stated by the Hague Court, even if the arbitrator were able to sufficiently distance himself from his role as an attorney in the reversal proceedings while in chambers, consideration should be given to the appearance that he was unable to maintain the distance. Since he must play both roles, he cannot avoid giving the impression that he finds it difficult to keep the two roles strictly separate.

The Court agreed to let the arbitrator remain on the tribunal as long as he resigned from his position as counsel in the other arbitration within ten days in order to avoid creating “justifiable doubts” about his objectivity and independence. This decision raises questions about the compatibility of acting as arbitrator and counsel, particularly in investment arbitrations. In a more recent case,ICS v. Argentina, Argentina asked for the investor-appointed arbitrator to be dismissed because he was also representing another investor in the ICSID annulment proceedings in which Argentina was involved. In response, ICS claimed that since the annulment proceedings would soon be over, the arbitrator would not be representing his investor client while rendering judgement in the current arbitration.

Perhaps unsurprisingly, the appointing authority was unconvinced by such temporal distinctions and, referring to theInternational Bar Association Guidelines, held that the conflict was ‘sufficiently serious to give rise to objectively justifiable doubts as to [the arbitrator’s] impartiality and independence’. However, given the wide variation in the applicable legal systems, relevant facts, and legal issues, as well as the rarity of published final judgments, it is uncertain whether such issue conflicts will arise more frequently in purely commercial cases.

An arbitrator is generally thought to have certain moral or ethical obligations in addition to the specific duties that are imposed on them by the parties or the law. In the international arena,the International Bar Association established its Rules of Ethics for International Arbitrators in 1987. These guidelines are intended to help international arbitrators understand how to effectively apply the necessary arbitrator qualities of impartiality, competence, diligence, and discretion in order to ensure some degree of harmonization. IBA subsequently adoptedGuidelines on Conflicts of Interest in International Arbitration in 2004, which replaced the Rules of Ethics only to the extent that they covered the same ground, and the IBA issued a revised version of the Guidelines in 2014. The IBA acknowledged the issues that conflicts of interest present in international arbitration as well as the growing use of arbitrator challenges to postpone arbitrations or deny a party the arbitrator of their choice. This trend was exacerbated by the lack of precise instructions on the standards to use when disclosing information and by cultural differences in what was considered acceptable. The Guidelines attempted to make conflict and disclosure obligations more objective and clear, but they were unable to stop the rising tide of arbitrator challenges.


In conclusion, since arbitration continues to be the preferred dispute resolution method for the majority of major corporations in relation to cross-border commercial activities, it is critical to recognise transparency-related risks in the context of investment treaty arbitration. The rising public concern over ESG and associated regulatory change may also mean that ESG issues come up more frequently in investment treaty arbitration. Transparency risk also tends to fall under the ESG category. 

One of the ways in which companies are managing transparency risks isby the use of ESG conditions in commercial contracts. ESG-related terms are also being included more frequently in investment contracts, including those for the infrastructure and energy industries. A well-known example isParagraph 2(d) of the BTC Human Rights Undertaking from 2003, which provides that the Baku-Tbilisi-Ceyhan Pipeline Company shall “not seek compensation under the ‘economic equilibrium clause’ or other similar provisions […] in such a manner as to preclude any action or inaction by the relevant Host Government that is reasonably required to fulfil the obligations of that Host Government under any international treaty or human rights […], labour or HSE in force in the relevant Project State from time to time to which such Project State is then a party”. 

In order to respond proactively and adopt suitable arbitration procedures for investment-related disputes, it is still crucial that arbitrators and arbitration counsel become more familiar with transparency-related issues and ESG standards.


This document is solely for informational purposes. Nothing contained herein, purports to be, or is intended as legal advice. The reader should seek legal advice before acting on any information or view expressed herein. We endeavor to accurately reflect the subject matter, without any representation or warranty, express or implied, in any manner whatsoever in connection with the contents of this.

About the Authors 

Mr. Neil Dawes Bhutani is the Managing Partner of DawesCo. LLP.

Ms. Pragya S is a Paralegal at DawesCo. LLP.

Editorial Team 

Managing Editor: Naman Anand 

Editors-in-Chief: Muskaan Singh and Hamna Viriyam 

Senior Editor: Aribba Siddique 

Associate Editor: Charvi Devprakash

Junior Editor: Nupur Barman

Preferred Method of Citation  

Neil Dawes Bhutani and Pragya S, “The Need for Transparency in International Investment Arbitration” (IJPIEL, 2 September 2022) 


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