Enhancing the Procedural Legitimacy of Investor-State Arbitration through Transparency and Amicus Curiae Participation

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Investor-state arbitration under NAFTA and the other investment treaties to which Canada is a party has been controversial. There are concerns that investor-state arbitration allows investors to challenge laws of general application intended to achieve important public-policy objectives though a process that is lacking in transparency and democratic accountability. This critique of investor-state arbitration is diminishing in potency, however, as arbitral tribunals have recognized the need for greater openness in promoting the legitimacy of the process and have adopted practices intended to achieve that goal. For example, tribunals have ordered open hearings and permitted amicus curiae participation. While all three NAFTA party states have strongly endorsed these practices, they have failed to amend NAFTA to guarantee them. Developments outside of NAFTA indicate that the move toward transparency is part of a larger trend, the strength of which may indicate that the recent changes in practice will be enduring. However, in the absence of comprehensive and predictable rules, concerns about the legitimacy of the NAFTA process are likely to remain.

L'arbitrage investisseur-Etat dans le cadre de l'ALENA et des autres traites d'investissement dont le Canada est signataire a fait l'objet de maintes controverses. Certains craignent que l'arbitrage investisseur-Etat ne permette aux investisseurs de contester des lois d'application generale, comportant d'importants objectifs de politique publique, par le biais d'un processus qui manque de la transparence democratique. Cette critique perd cependant de sa force depuis que les tribunaux arbitraux ont reconnu la necessite d'une plus grande ouverture en vue de promouvoir la legitimite du processus et qu'ils ont, par consequent, adopte certaines pratiques afin de realiser cet objectif. Par exemple, les tribunaux ont ordonne la tenue de proces publics et ont permis la participation d'amici curiae. Quoique chacun des trois Etats signataires de l'ALENA ait vivement appuye ces pratiques, aucun amendement n'a ete fait pour en assurer leur permanence. Les developpements externes a l'ALENA suggerent que cette ouverture a la transparence s'inscrit dans une tendance plus large, dont l'ampleur pourrait etre indicative de l'endurance probable des changements dans les pratiques. Neanmoins, en l'absence continue de regles exhaustives et previsibles, les preoccupations quant a la legitimite du processus de l'ALENA pour le reglement des differends risquent de persister.


  I. Overview of Investor-State Arbitration
     A. A Brief History of Bilateral Investment Treaties
     B. Statistics on Investor-State Claims

 II. The Nature of Legitimacy Concerns Regarding
     NAFTA Chapter 11

III. Rules on Transparency in Investor-State Arbitrations
     A. The NAFTA Rules
        1. Introduction
        2. FTC Interpretive Note on Transparency
        3. NAFTA Practice
        4. Gaps in NAFTA Transparency Rules
           a. Disclosure Prior to Commencement of the
           b. Disclosure of Arbitration Claire
           c. Disclosure After Commencement of Arbitration
     B. Recent Improvements in Transparency Rules

 IV. Rules on the Participation of Amici Curiae in Investor-State
     A. Introduction
     B. NAFTA Practice
     C. Recent Improvements in Amicus Curiae Rules



When Canada became a party to the North American Free Trade Agreement in 1992, it adopted investor-state arbitration as part of its foreign investment policy. (1) Investor-state arbitration is provided for in Chapter 11 of NAFTA and in nineteen bilateral foreign investment protection agreements entered into by Canada that follow the NAFTA model. (2) Investor-state arbitration provisions in a treaty permit a private investor from a state that is a party to the treaty to seek compensation for injuries that the investor suffers as a result of measures of another party state that are not consistent with the substantive obligations in the treaty. …