Substantive Transparency Requirements in International ... · tional Regulation,...

[ 179 ]Noviembre 2017 - ISSN: 0122-0799 - Bogotá, Colombia - pp. XX - XX

Substantive Transparency Requirements in International Investment Law

Requisitos sustantivos de transparencia en el Derecho Internacional de Inversión

Requisitos de Transparência Substantiva na Lei de Investimento Estrangeiro

Jens Hillebrand Pohl1

Para citar este artículo/To reference this articleEleonora Lozano Rodríguez & Santiago Eduardo Gómez Cifuentes. La consolidación de

la obligación tributaria a partir del pago en exceso y de lo no debido. Revista Instituto Colombiano de Derecho Tributario 77. Noviembre de 2017. At. 179.

Fecha de recepción: 27 de febrero de 2017Fecha de aprobación: 03 de abril de 2017

Página inicial: 179Página final: 212

Abstract

Few concepts in public governance evoke a more positive sentiment than trans-parency. Whether ultimately grounded in expediency or morality, transparency has emerged out of its municipal origins and been received at the international plane. This article examines the current state of evolution of the idea of government trans-parency in international investment law for the purpose of seeking to understand its underlying drivers and, on that basis, to interpret the practices associated with it. The article sets forth two arguments. First, transparency is old wine in a new bottle; the substance of the norms that the language of transparency is associated with is well known and long predates the emergence of transparency as a concept.

1 LL.M. (Harvard); Visiting Researcher, Max Planck Institute for Procedural Law; Lecturer and PhD Candi-date at Maastricht University, Faculty of Law; Doctoral Fellow at the Institute of Globalization and Interna-tional Regulation, [email protected]

« Jens Hillebrand Pohl »

[ 180 ] Revista Instituto Colombiano de Derecho Tributario - Núm. 77 - Año 54

Second, preliminary evidence from treaty and arbitral practice support the proposi-tion that substantive transparency serves to promote normative guidance.

Keywords

International investment law; transparency; investment arbitration.

Resumen

Pocos conceptos en la gestión pública evocan un sentimiento más positivo que la transparencia. Ya sea que en últimas se base en la conveniencia o la mora-lidad, la transparencia ha surgido de sus orígenes municipales y ha sido recibida en el plano internacional. Este artículo examina el estado actual de la evolución de la idea de la transparencia del gobierno en el derecho internacional de las inversiones con el fin de tratar de comprender sus impulsores subyacentes y, sobre esa base, interpretar las prácticas asociadas con este. El artículo establece dos argumentos. Primero, la transparencia es vino viejo en una botella nueva; la esencia de las normas a las que se asocia el lenguaje de la transparencia es bien conocida y es anterior a la aparición de la transparencia como concepto. En segundo lugar, la evidencia preliminar del tratado y la práctica de arbitraje respaldan la proposición de que la transparencia sustantiva sirve para promover la orientación normativa.

Palabras clave

Derecho internacional de inversión; transparencia; arbitraje de inversión.

Resumo

Poucos conceitos na gestão pública evocam um sentimento mais positivo que a transparência. Seja baseada em última instância na convivência, seja na mora-lidade, a transparência tem surgido de suas origens municipais e tem sido rece-bida no plano internacional. Este artigo examina o estado atual da evolução da ideia da transparência do governo no direito internacional de investimentos com o fim de tentar compreender suas causas subjacentes e, sobre essa base, inter-pretar as práticas associadas com ela. O artigo estabelece dois argumentos. Em primeiro lugar, que a transparência é vinho velho em uma garrafa nova; o conteúdo das normas com as que se associa a linguagem da transparência é bem conhecido e é muito anterior à aparição da transparência como conceito. Em segundo lugar,

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« Substantive Transparency Requirements in International Investment Law »

Noviembre 2017 - ISSN: 0122-0799 - Bogotá, Colombia - pp. XX - XX

a evidência preliminar dos tratados e a prática arbitral apoia a proposta de que a transparência substantiva serve para promover a orientação normativa.

Palavras-chave

Direito internacional de investimentos, transparência, arbitragem de investimento.

Table of contents

Introduction; 1. Interpretive Premises; 1.1. Emergence of Transparency in Inter-national Investment Law; 1.1.1. Origin of Transparency as a Legal Concept; 1.1.2. Transparency as a Concept of International Investment Law; 1.2. Tenta-tive Conceptual Delimitation of Substantive Transparency; 1.2.1. Personal Scope: Who Must Disclose Information?; 1.2.2. Material Scope: What Information Must be Disclosed?; 1.2.3. Modal Scope: How, Where and to Whom Must Information be Disclosed?; 1.2.4. Temporal Scope: When Must Information be Disclosed?; 2. Inter-pretation of Substantive Transparency Requirements; 2.1. Finding a Good Fit; 2.2. Justifying Promotion of Normative Guidance as the Best Fit; 2.2.1. Transpar-ency and Normative Guidance in Economic Theory; 2.2.2. Normative Guidance in Legal Theory: The Hart-Fuller Debate; 2.3. Modeling Substantive Transparency as Normative Guidance; 2.4. Conceptualizing Substantive Transparency Requirements; 2.4.1. Possibility Test; 2.4.2. Rationality Test; 2.4.3. Acceptability Test; 2.5. Adapting the Conceptual Delimitation of Substantive Transparency; 3. Conclusions

Introduction

In the past few years, investment treaty clauses relating to government transpar-ency have become increasingly common, as the proportion of treaties signed with such clauses has grown exponentially. According to UNCTAD, 82 % of all treaties with investment provisions2 signed in 2015 contained transparency provisions, compared to 50 % for the first half of the decade, up from 20 % in the previous decade and 9 % in the period from when records began till the end of the last century. A closer look reveals that an inflexion point occurred around 2014, when treaties signed with such clauses surged to 71 %, up from 50 % the year before.3 The proportion has remained at that level.

2 Including bilateral investment treaties (BITs), other international investment agreements (IIAs), free trade agreements (FTAs) and other treaties with investment provisions (TIPs). Retrieved from investmentpolicy-hub.unctad.org (Jan. 18, 2017).

3 The data also reveals that this trend appears closely correlated with the recent wave of TIPs in the form of comprehensive FTAs that include provisions on trade, investment and a broad range of other economic



Recent years have also witnessed an increasingly frequent assertion of claims relating to government transparency in investment arbitration, which has resulted in a steady stream of arbitral awards. So far, some 30 odd such cases have been decided and published, worth more than $19 billion in damages claims, of which 69 % have been decided in favor of investors, resulting in more than $3 billion worth of damages awarded.4 Most of the cases relate to events that took place when express transparency clauses were not nearly as common as they are today. In only half of the cases the relevant treaty included such a clause, but they were all of early types that were too narrow to cover the alleged transparency breach, and, in half of these cases in turn, the transparency clause was not even subject to investor-state dispute settlement (ISDS). Instead, the cases so far have characterized the lack of transparency as a breach of the fair and equitable treat-ment (FET) standard. While none of these cases reflects the recent wave of trans-parency clauses, future cases can be expected to increasingly involve matters arising out of the new generation of transparency clauses.

However, while figuring prominently in both treaty and arbitral practice, not infrequently is there a great divergence in opinion on the exact meaning of trans-parency as a substantive requirement. Early cases derived a requirement to act ‘totally transparently’.5 By contrast, another early strand of cases identified merely a requirement not to act with ‘complete lack of transparency’.6 This seem-ingly diametrical divergence of views has yet to be decisively resolved. To make matters worse:

“[t]he language of transparency is used to designate different matters, some-times criticizing conduct for being in apparent breach of domestic law or justified only by sparse reasoning, and sometimes addressing the choice of different means, matters that may be reasonably expected, or procedural improprieties.”7

Against this backdrop, a restrictive approach can be discerned from recent treaty practice. A notable step in that direction is the Canada-EU Comprehensive Economic and Trade Agreement (CETA), which introduced a ‘closed-end’ list of

matters, which amounted to 25 % of all new investment related treaties signed since 2010, compared to only a fraction of percent in the previous decade. More than three-quarters of all such TIPs signed 2000-2015 and all such TIPs signed in 2016 have included transparency clauses.

4 UNCTAD. Retrieved from investmentpolicyhub.unctad.org (Jan. 24, 2017).5 Técnicas Medioambientales Tecmed, S.A. v. United Mexican States, ICSID Case No. ARB(AF)/00/2,

Award, p. 154 (May 29, 2003).6 Waste Management, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/00/3, Award, p. 98 (Apr. 30,

2004).7 Martins Paparinskis, The International Minimum Standard and Fair and Equitable Treatment 248

(2013) [Footnotes omitted].

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what constitutes an FET violation, comprising, among other things, a ‘fundamental breach of due process, including a fundamental breach of transparency, in judi-cial and administrative proceedings’. These words appear to closely resemble the restrictive strand of caselaw.

So, what exactly is the meaning of government transparency in international investment law today? Who is responsible for providing transparency about what? How and when should transparency be provided? How do the different notions of transparency, as elucidated in treaty and arbitral practice and within the different strands of caselaw, relate to each other and can they be reconciled? How is the recent restrictive trend towards transparency to be understood? These questions, which have not been addressed comprehensively before, are of fundamental importance to states seeking to understand the level government transparency expected under international investment law and to investors seeking to gauge the nature and extent of the political risk of foreign investment.

This article will proceed (1) to identify the main elements of general practices associated with the concept of transparency and propose a tentative delimitation of its scope on the basis of treaty and arbitral practice (Part 1), (2) to determine the reason for treating the identified practices as relevant to the concept of trans-parency, and, then, to explore how to adapt the conceptual delimitation to better accommodate this reason (Part 2), and, finally, (3) to address the research ques-tions in light of these findings (Part 3).

1. Interpretive premises

International investment law is fraught with meaningful terms, concepts and notions that cannot be exhaustively defined. It is, as Friederich Nietzsche famously observed, “only that which has no history that can be defined”, and legal concepts do have histories. So too does ‘transparency’.8 Rarely used in treaty text (except in headings), ‘transparency’ is a familiar and well-used term in scholarly fields of enquiry concerned with public governance. Its recent emergence and use has earned it the label ‘neologism’, ‘buzzword’ and ‘catchphrase’. Delimiting its conceptual scope is thus a matter of interpretation.

8 For an account of the emergence of transparency as term unrelated to its original association with vision, see Greg Michener & Katherine Bersch, Identifying Transparency, 18 Info. Polity 233, 234-36 (2013), who trace its current figurative use to an academic article by Danish economist, Knud Erik Svendsen in 1962.



1.1. Emergence of Transparency in International Investment Law

1.1.1. Origin of Transparency as a Legal Concept

An evolutionary interpretation of the emergence of the concept of transparency in international investment law must initially recognize that the legal conceptions, with which the word ‘transparency’ was only subsequently associated, originated in domestic law and was only later received at the international plane. The U.S. Freedom of Information Act (FOIA) 1966 is commonly regarded as the trigger9 of the waves of ‘transparency laws’ that swept the world starting in the period 1978-1991 (France, Australia, New Zealand, Canada, Colombia, etc.), continuing in the 1990s (the Netherlands, Belgium, South Korea, Japan, etc.) and well into the current century (South Africa, United Kingdom, Romania, Angola, Zimbabwe, Ecuador, Argentina, Germany, India, China, Russia, Indonesia, Brazil, etc.).10 By 2014, upwards 100 states had, in one form or another, adopted transparency legislation.11

By the early 2000s, the notion of ‘open government’ had become entrenched, of which freedom of information laws are but one characteristic. More generally, proponents of transparency as a policy ideal have successfully advocated for—and in the process bestowed the label of ‘transparency’ on—not just ‘open records’ or ‘open access’, but also the notion of ‘open meetings’, in which official delibera-tions are made in public; openness in public procurement; conflict of interest rules, codes of ethics, professional conduct standards and disclosure of financial interest applicable to politicians and public servants; protection of journalistic sources and

9 The realization that disclosure inhibits wrongdoing and promotes good governance is age old. U.S. Su-preme Court Justice Louis Brandeis famously captured this idea: “Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman”, Louis D. Brandeis, Other People’s Money and How the Bankers Use It 92 (1914). The earliest example of statutory initiative to this effect appears to be the Swedish Freedom of the Press Act 1766, which, in a bid to thwart royal usurpation of parliamentary power, established a presumption for publicity, whereby official documents could only by way of exception be withheld from public availability. This principle of publicity (Sw. offentlighetsprincipen) later obtained constitutional status in Swedish law, but was not widely emulated, not even in other Scandinavian legal systems. The FOIA and similar later initiatives did not introduce anything akin to a full principle of publicity, but established orderly administrative procedures and criteria for granting access to government documents. On the international plane, an oft-quoted precursor is Article 19 Universal Declaration of Human Rights, which provides that “[e]veryone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regard-less of frontiers.” [emphasis added]

10 List maintained by freedominfo.org, retrieved from www.freedominfo.org (Jan. 17, 2017). See also, Da-vid Banisar, Freedom of Information around the World 2006: A Global Survey of Access to Government Information Laws, retrieved from www.freedominfo.org (Jan. 17, 2017). For a historical overview, see Daniel J. Metcalfe, The History of Government Transparency, in Research Handbook on Transparency 247, 247-50 (Padideh Ala’i & Robert G. Vaughn eds., 2014).

11 Cf. list maintained by freedominfo.org, supra note 10.

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whistleblowers; anti-corruption legislation, corporate transparency, etc.12 In a broad sense, the language of transparency is extended to cover such and similar initiatives.

The broad and diverse range of policies promoted under the banner of ‘transparency’ is not without precursors and reflects, in many instances, existing practices or requirements. It is arguable that the earliest form of public sector ‘transparency’ is the essence of the very idea of law, that to serve as law, the law must be known by those to whom it purports to apply. Indeed, the earliest laws known to humankind, such as Rome’s Law of the Twelve Tables, were displayed at prominent places, ensuring that they were widely known. In modern history, the importance of publicity of laws can be seen in Article 1 of the Napoleonic Code, which provides that laws shall take effect only after their promulgation and publi-cation. Closely associated is the idea codified in Article 2 of the Code, that laws ordain for the future only and shall have no retrospective effect.

Similarly, another practice associated with transparency follows from the notions of due process and fair procedure, including the right to be informed, the right of access to the file, the principle of equality of arms and the right to be heard (audi alteram partem).13 Early parliamentary procedure shared several traits in common with judicial procedure.14 Disclosure as central pillar of legislative due process thus evolved into the requirement of an orderly and timely dissemination of draft laws to allow parliamentary consultation before their enactment.15

The idea of transparency involving the linking together of this diversity of notions into one comprehensive conceptual framework, centered on the disclo-sure of information by various branches of government, is a process of evolu-tion. Transparency can therefore be usefully thought of as an umbrella term that

12 See, e.g., Frederick Schauer, Transparency in Three Dimensions, 2011 U. Ill. L. Rev. 1339, 1349 (2011). OECD, Managing Conflicts of Interest in the Public Sector: A Toolkit (2005), cf. Suzanne J. Piotrowski & Erin Borry, An Analytic Framework for Open Meetings and Transparency, 15 Pub. Admin. & Mgmt. 138, 141 (2010), Michael Schudson, The Rise of the Right to Know: Politics and the Cul-ture of Transparency, 1945-1973, at 260 (2015).

13 See, e.g., Carol Harlow, Global Administrative Law: The Quest for Principles and Values, 17 EJIL 187, 190 (2006); Elizabeth Fisher, Transparency and Administrative Law: A Critical Evaluation, 63 Curr. Leg. Probs. 272, 290 (2010); Sabino Cassese, Global Standards for National Administrative Procedure, 68 Law & Contemp. Probs. 109, 111 (2005); Robert G. Vaughn, The Associations of Judicial Transparency with Administrative Transparency, in Research Handbook on Transparency 247, 247-50 (Padideh Ala’i & Robert G. Vaughn eds., 2014).

14 Darwin Patnode, A History of Parliamentary Procedure, 18, 65 (4th ed. 2013); John Waldeck, Legal Nature of Parliamentary Procedure, 21 Clev. St. L. Rev. 85 (1972); Saul Levmore, Parliamentary Law, Majority Decisionmaking, and the Voting Paradox, 75 Va. L. Rev. 971 (1989), 976.

15 Consultation open to the public or sections thereof is arguably a later evolution, although legislative com-missions involving external experts and certain representatives of the general public appear to have been well known in 17th century Sweden, which can be gleaned from the King’s Resolution ratifying the Law of the Swedish Realm 1734 (1736) (Sw. Konungens stadfästelseresolution till Sveriges rikes lag (1734 års lag) (1736)) and may stretch as far back as the Late Middle Ages, see Thomas J. Lockwood, A History of Royal Commissions, 5 Osgoode Hall L. J. 172, 197 (1967).



has emerged to denote a broad range of pre-existing legal practices related to the openness of the legal regime and its procedures.

1.1.2. Transparency as a Concept of International Investment Law

In international investment law, the language of transparency became associated with the requirement to publish laws and regulations pertaining to investments, beginning in the 1980s. A clause entitled ‘transparency of laws’ was introduced in Australia’s first BIT, Article VI Australia-China BIT (1988). A similar clause, without the ‘transparency’ label, had been a consistent feature of U.S. BIT practice since first introduced in the original U.S. model BIT (1981)16 and pioneered in the second ever BIT signed by the United States, Article II(10) U.S.-Senegal BIT (1983) in a wording that became standard:

“Each Party shall make public all laws, regulations, administrative practices and procedures, and adjudicatory decisions that pertain to or affect invest-ments in its territory of nationals or companies of the other Party.”

The U.S. model BIT was influential in other states’ bilateral negotiations as well, and clauses modeled on its requirement to publish laws and regulations appeared in a number of treaties of the 1980s.17 By the early 2000s, basic trans-parency clauses providing for the publication of laws and regulations became increasingly common, and by the mid-2010s they had emerged as a standard clause appearing in the vast majority of new treaties.18 Meanwhile, the scope of government transparency clauses has steadily grown wider, as will be further explored in the next section.19

16 Pre-cursors had existed in the earlier practice of signing friendship, commerce and navigation treaties (FCNs), e.g. Article XVII(1) U.S.-Republic of China FCN (1946) and Article XV(1) U.S.-Nicaragua FCN (1956), but were rare. There appears to be no examples of such clauses prior to the negotiations leading up to the Havana Charter, Article 38 of which included the elaborate blueprint for subsequent treaty practice, which reappeared with minimal changes as Article X GATT (1947) and is retained in Article X GATT (1994).

17 See, e.g., Article XVI(2) Canada-Philippines BIT (earlier Canadian BIT practice had provided for exchange of information between the contracting parties on laws and regulations). A similar provision was later elabo-rated in the OECD draft Multilateral Agreement on Investment. By contrast, transparency provisions of this type were not common in European BITs until the EU began concluding investment treaties following the Lisbon Treaty. Other states, including Canada, began to include this type of transparency provision from the mid-1990s.

18 See supra note 3.19 More recently, another dimension of transparency has emerged in international investment law, relating to

procedural transparency requirements in ISDS. Unlike substantive transparency requirements that apply to the treatment of international investments on the municipal plane, procedural transparency require-ments apply entirely on the international plane. As such, these requirements do not relate to government transparency or public governance transparency in the treatment of foreign investors outside of arbitration and thus fall outside the research questions of the present enquiry.

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In arbitral caselaw, transparency began being referred to in abstract as an aspect of the core standards of protection—FET20 and the customary international minimum standard of treatment (IMT)—in the early 2000s.21 In all but one case, later tribunals have uniformly affirmed such interpretation.22 By the 2010s, arbi-tral practice reflected the consensus view that transparency had emerged as an essential aspect of the FET standard, including in cases where such standard applied with reference to the IMT standard.23 Where tribunals have differed is in the degree of transparency required. Here, two lines of precedent exist. In Tecmed v. Mexico, the tribunal concluded that FET required ‘total transparency’:

“The Arbitral Tribunal considers that this provision of the Agreement, in light of the good faith principle established by international law, requires the Contracting Parties to provide to international investments treatment that does not affect the basic expectations that were taken into account by the foreign investor to make the investment. The foreign investor expects the host State to act in a consistent manner, free from ambiguity and totally transparently in

20 See further Roland Kläger, ‘Fair and Equitable Treatment’ In International Investment Law 227 (2011).

21 Metalclad Corporation v. United Mexican States, ICSID Case No. ARB(AF)/97/1, Award, pp. 76, 88, 99 (Aug. 30, 2000) (set aside by a municipal court noting that “[n]o authority was cited or evidence introduced to establish that transparency has become part of customary international law”, Mexico v. Metalclad Cor-poration, [2001] B.C.S.C. 664, Supreme Court of British Columbia, Reasons for Judgment, p. 68 (May 2, 2001)); Emilio Agustín Maffezini v. Kingdom of Spain, ICSID Case No. ARB/97/7, Award, p. 83 (Nov. 30, 2000); S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Partial Award (Separate Opinion by Dr. Bryan Schwartz, concurring except with respect to performance requirements, in the partial award of the tribunal), pp. 249-58 (Nov. 12, 2000); Tecmed v. Mexico, supra note 5, p. 154; Waste Management v. Mexico, supra note 6, p. 98; MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Award, p. 114 (May 24, 2004); Occidental Exploration and Production Company v. Republic of Ecuador, UNCITRAL (LCIA Case No. UN3467), Final Award, pp. 184-7 (July 1, 2004); Saluka Invest-ments BV v. Czech Republic, UNCITRAL, Partial Award, pp. 307, 309, 360 (Mar. 17, 2006); LG&E Energy Corp., LG&E Capital Corp. and LG&E International Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability, pp. 127-31, 137 (Oct. 3, 2006); Champion Trading Company and Ameritrade Interna-tional, Inc. v. Arab Republic of Egypt, ICSID Case No. ARB/02/9, Award, p. 4.3.2 (Oct. 27, 2006). It should also be noted that occasionally transparency has been analyzed indirectly under other principles, such as non-discrimination (Champion Trading v. Egypt, above), or arbitrariness, Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/8, Award, p. 295 (Sept. 11, 2007).

22 Cargill, Incorporated v. United Mexican States, ICSID Case No. ARB(AF)/05/2, Award, p. 290 (Sept. 18, 2009). 23 Joseph C. Lemire v. Ukraine, ICSID Case No. ARB/06/18, Decision on Jurisdiction and Liability, pp. 284,

418 (Jan. 14, 2010); Frontier Petroleum Services, Ltd. v. Czech Republic, UNCITRAL (PCA), Final Award, p. 285 (Nov. 12, 2010); Ioan Micula and others v. Romania, ICSID Case No. ARB/05/20, Award, pp. 530-33 (Dec. 11, 2013); Gold Reserve Inc. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/09/1, Award, pp. 569-70 (Sept. 22, 2014); Mamidoil Jetoil Greek Petroleum Products Societe Anonyme S.A. v. Republic of Albania, ICSID Case No. ARB/11/24, pp. 599, 613-17; William R. Clayton, Bilcon of Delaware and others v. Government of Canada, UNCITRAL (PCA Case No. 2009-04), Award on Jurisdiction and Liability, pp. 442-44 (Mar. 17, 2015), cited favorably by Mesa Power Group, LLC v. Government of Canada, UNCITRAL (PCA Case No. 2012-17), Award, pp. 501-2 (Mar. 14, 2016); Crystallex International Corpora-tion v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/11/2, Award, pp. 543, 545, 579 (Apr. 4, 2016); Philip Morris Brand Sàrl (Switzerland) and others v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, Award, pp. 320, 324, 486 (July 8, 2016).



its relations with the foreign investor, so that it may know beforehand any and all rules and regulations that will govern its investments, as well as the goals of the relevant policies and administrative practices or directives, to be able to plan its investment and comply with such regulations.”24

By contrast, in Waste Management v. Mexico the tribunal held that only ‘complete lack of transparency’ was actionable, and only in the context of an administrative process:

“Taken together, the S.D. Myers, Mondev, ADF and Loewen cases suggest that the minimum standard of treatment of fair and equitable treatment is infringed by conduct attributable to the State and harmful to the claimant if the conduct is arbitrary, grossly unfair, unjust or idiosyncratic, is discriminatory and exposes the claimant to sectional or racial prejudice, or involves a lack of due process leading to an outcome which offends judicial propriety—as might be the case with a manifest failure of natural justice in judicial proceedings or a complete lack of transparency and candour in an administrative process.”25

The Waste Management standard has been cited in all cases where the FET standard is subject to the IMT standard,26 such as in the U.S. model BITs 2004 and 2012 and NAFTA. Of all other cases, 67 % have followed the Tecmed standard.27 Overall, the choice of precedent is thus correlated with the formulation of the FET clause. Among the cases involving an autonomous FET formulation, the choice of precedent is strongly correlated with outcome. Of such cases, 77 % of cases

24 Tecmed v. Mexico, supra note 5, p. 154.25 Waste Management v. Mexico, supra note 6, p. 98.26 Cargill v. Mexico, supra note 22; Railroad Development Corporation (RDC) v. Republic of Guatemala,

ICSID Case No. ARB/07/23, Award, p. 219 (Jul. 29, 2012); Adel A Hamadi Al Tamimi v. Sultanate of Oman, ICSID Case No. ARB/11/33, Award, pp. 384, 396 (Nov. 3, 2015); Clayton v. Canada and Mesa Power v. Canada, supra note 23.

27 MTD v. Chile, Occidental v. Ecuador, and Saluka v. Czech Republic, LG&E v. Argentina, supra note 21; PSEG Global Inc. and Konya Ilgin Elektrik Üretim ve Ticaret Limited Sirketi v. Republic of Turkey, ICSID Case No. ARB/02/5, Award, pp. 173-4, 246 (Jan. 19, 2007); Siemens A.G. v. Argentine Republic, ICSID Case No. ARB/02/8, Award, pp. 297-9, 308 (Feb. 6, 2007); Rumeli Telekom A.S. and Telsim Mobil Tele-komunikasyon Hizmetleri A.S. v. Republic of Kazakhstan, ICSID Case No. ARB/05/16, Award, pp. 584-5; Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Award, pp. 168-70, 178-9; and Lemire v. Ukraine, Frontier v. Czech Republic, Micula v. Romania, Gold Reserve v. Venezuela, and Crystallex v. Venezuela supra note 23; compare Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3, Award, pp. 7.4.31 (Aug. 20, 2007); Biwater Gauff (Tanzania) Limited v. United Republic of Tanzania, ICSID Case No. ARB/05/22, Award, pp. 597, 602 (July 25, 2008); Nordzucker AG v. Republic of Poland, UNCITRAL, Sec-ond Partial Award, pp. 12, 14, 84-5 (Jan. 28, 2009); Bosh International, Inc. and B&P, LTD Foreign Invest-ments Enterprise v. Ukraine, ICSID Case No. ARB/08/11, Award, pp. 210, 212 (Oct. 25, 2012); Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/09/2, Award, p. 420 (Oct. 31, 2012); Renée Rose Levy de Levi v. Republic of Peru, ICSID Case No. ARB/10/17, Award, pp. 327-8 (Feb. 26, 2014); and Mamidoil v. Albania and Philip Morris v. Uruguay, supra note 23.

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where a transparency breach was found cite Tecmed,28 compared to only 37 % of cases citing Waste Management.29 It suffices here to re-emphasize that the cases differ only as to the degree of transparency required, not as to the acceptance in principle of transparency as a standard.

1.2. Tentative Conceptual Delimitation of Substantive Transparency

At its core, substantive transparency obligations prescribe who must make what information available to whom, where, how and when. As will be apparent below, the scope of transparency, as elucidated in the two sources of law examined in the present enquiry, can be more precisely delimited in treaty practice than in caselaw as it until now has developed. This results in the overarching interpretive consid-eration how the references to transparency in these different sources of law relate to each other.

1.2.1. Personal Scope: Who Must Disclose Information?

International investment law is part of the law of nations, and investment trea-ties create obligations among contracting states. The treatment standards thus concern the treatment by the host state of the foreign investor. In caselaw, it has long been recognized that a state may violate customary international law by surprising a foreigner with a sudden and unexpected change in the government’s conduct without public proclamation.30 Likewise, treaty transparency provisions are principally addressed to states, which for all practical purposes must be under-stood as the host state.31 Corporate transparency falls outside transparency as

28 MTD v. Chile, Occidental v. Ecuador, supra note 21; LG&E v. Argentina, PSEG v. Turkey, Siemens v. Ar-gentina, and Rumeli v. Kazakhstan, supra note 27; Lemire v. Ukraine, Micula v. Romania, Gold Reserve v. Venezuela, and Crystallex v. Venezuela, supra note 23; compare Vivendi v. Argentina, Nordzucker v. Poland, and Deutsche Bank v. Sir Lanka, supra note 27.

29 Biwater v. Tanzania, Bosh v. Ukraine, and De Levi v. Peru, supra note 27; Mamidoil v. Albania and Philip Morris v. Uruguay, supra note 23; compare Saluka v. Czech Republic, supra note 21; Bayindir v. Pakistan, supra note 27; and Frontier v. Czech Republic, supra note 23. At first glance, this does not, in itself, appear very surprising, given that the latter standard is much more stringent. However, it might also be that the choice of precedent is predictive of the outcome. If it is the precedent cited that determines the outcome, then what determines the choice of precedent? Or is it the outcome that determines the choice of prece-dent and if so, what can be discerned from the facts of the cases to explain what determined the outcome? For present purposes, this discrepancy is merely noted for methodological purposes as lending credence to a skeptical-critical approach to judicial argumentation and will be revisited later.

30 Jesse Lewis (U.K. v. U.S.), 11 R. Int’l Arb. Awards 85, 92 (U.K.-U.S. Arb. Trib. 1921).31 A question of tentative delimitation is to whether express transparency clauses apply to the home state,

absent a specific limitation of the applicability to the host states. A literal interpretation would not exclude the application of the clause to home states, yet it could be argued that such an interpretation is devoid of practical significance for several reasons. First, due to the mutuality of treaty obligations, the transparency obligations anyway apply to both contracting states in their respective capacity as host states in relation to the other state’s investors. Second, the definition of ‘investor’ and ‘investment’ normally exclude domestic



a concept of public governance and may more appropriately be analyzed in the context of investor conduct requirements.

1.2.2. Material Scope: What Information Must be Disclosed?

a. Treaty Practice

The material scope of express transparency provisions falls into three broad cate-gories: (1) disclosure of existing law, (2) disclosure of prospective law, and (3) disclosure in the administration of law.32

First, at its core, these provisions cover disclosure of information about laws, regulations, judicial decisions, administrative rulings, procedures, practices and policies and, sometimes, international agreements; in short, various ‘measures of general application’ of a contracting state that are in force.33 This is the orig-inal type of transparency clause, which traces its origins to the first U.S. BITs as described above. The obligations are normally limited to measures that concern covered investments. Various formulations are used, such as ‘pertaining to or affecting investments’ or ‘respecting any matter covered by this Agreement’. The practical added value of these qualifications appears limited.34

Less clear is whether the material scope ought to be understood to comprise customary law, such as common law, and general principles of law, while another important question is if the notion also covers international agreements. Another matter for interpretation is whether the publication requirement applies to unwritten procedures, practices and policies that neither constitute laws or regulations, nor are affirmed in judicial decisions or administrative rulings—thus obliging the state to enunciate and codify its procedures, practices and policies such that they can be

investors and investments. Third, ISDS is normally unavailable to domestic investors. Fourth, transparency clauses normally provide for wide dissemination of information, which makes it difficult to imagine how a domestic investor might be aggrieved, except perhaps in relation to transparency in the administration of the law, but even then only to the extent domestic investors were to enjoy more limited due process rights than foreign investors.

32 Occasionally, obligations to combat corruption and other types of requirements related to good governance that do not involve disclosure of information may be categorized together with transparency provisions of the kind just described. However, such obligations that do not normally involve disclosure or directly relate to the treatment of investors. They are thus better analyzed as separate categories of obligations.

33 Treaty provisions normally do not distinguish between different levels of government. Although reference is occasionally made to central government measures, such as Article 26.2(4) TPP, clauses are normally silent on this point, in which case all levels of government would implicated in line with general rules of interpretation.

34 It is difficult to imagine that a claim alleging breach of transparency requirements would anyway be arbitrable without a demonstrated link of relevance between the alleged breach and the investment or the subject matter of the treaty. Moreover, it is difficult to imagine what matters might not conceivably be considered to ‘pertain to or affect’ investments, let alone what matters might not be ‘covered by’ an investment treaty or FTA, unless specifically excluded, given the breadth of circumstances that might give rise to ‘treatment’ of an investor.

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published—or whether only procedures, practices and policies that already exist in written form are covered, and, finally, whether the ‘binding nature’ of the proce-dures, practices and policies is a relevant criterion for the question of coverage. These interpretive general issues are, for now, left within the scope of the concept of transparency to be revisited below.

Second, provisions requiring disclosure of certain information with respect to prospective measures also fall within the material scope of treaty transpar-ency requirements. Pre-publication clauses normally consists of two elements: (i) a requirement to publish or make public in advance proposed measures of general application (often defined symmetrically with the requirement to publish existing laws, regulations, etc.) and (ii) a requirement to provide investors, inter-ested persons or the other contracting state an opportunity to provide comments on such proposed measures. The following wording is illustrative:35

“To the extent possible, each Party shall:(a) publish in advance any measure referred to in Article 10(1)(a) that it proposes to adopt; and(b) provide interested persons and the other Party a reasonable opportunity to comment on such proposed measures.”36

Third, transparency provisions comprise disclosure in the administration of law, notably in respect of procedures in which such measures are applied to an individual case. Clauses requiring administrative transparency normally set forth three requirements, as illustrated by Article 27.3 CETA:

“To administer a measure of general application affecting matters covered by this Agreement in a consistent, impartial and reasonable manner, each Party shall ensure that its administrative proceedings applying measures referred to in Article 27.1 to a particular person, good or service of the other Party in a specific case:(a) whenever possible, provide reasonable notice to a person of the other Party who is directly affected by a proceeding, in accordance with domestic

35 Cf. Article 11(2) U.S. model BIT (2012). Most treaties qualify the obligation with words such as ‘to the extent possible’ or ‘the Contracting Parties shall endeavor’. Some commentators are quick to characterize any such qualification as rendering the requirement non-binding. However, from a procedural perspective, and particularly with respect to burden of proof, caution is warranted, and attention must be given to the precise formulations used. Proving impossibility is significantly less straightforward than demonstrating a reasonable endeavor to do so. Nevertheless any type of such a qualification provides a defense, the scope and potency of which is a matter of interpretation.

36 The reference to Article 10(1)(a) is to ‘laws, regulations, procedures, and administrative rulings of general application’.



procedures, when a proceeding is initiated, including a description of the nature of the proceeding, a statement of the legal authority under which the proceeding is initiated and a general description of the issues in controversy;(b) provide a person referred to in sub-paragraph (a) a reasonable opportu-nity to present facts and arguments in support of its position prior to any final administrative action, when permitted by time, the nature of the proceeding, and the public interest; and(c) are conducted in accordance with its law.”

The clause requires ‘reasonable notice’, which must include a prescribed minimum of content.37 The clause also obliges states to afford persons concerned a ‘reasonable opportunity’ to present facts and arguments in support of their posi-tions prior to any final administrative action.38 The right to be heard is not absolute; it applies only to the extent a host state does not allege and cannot demonstrate that time, the nature of the proceeding or public interest does not permit a hearing. Finally, a host state’s administrative proceedings must be conducted in accor-dance with its law.

The second standard clause on adjudicatory transparency concerns appel-late review of final administrative acts. The clause requires the contracting states to establish an adjudicatory appeals mechanism with impartial and independent tribunals and to ensure that appellate decisions are implemented. It also contains a transparency rule:39

“Each Party shall ensure that, in any tribunals or procedures referred to in paragraph 1, the parties to the proceeding are provided with the right to:(a) a reasonable opportunity to support or defend their respective posi-tions; and(b) a decision based on the evidence and submissions of record or, if required by its law, the record compiled by the administrative authority.”

The fundamental due process requirements codified in this clause must be ensured to apply in any adjudicatory proceeding instituted as appellate review. It

37 The duty to give notice applies ‘whenever possible’, which as discussed earlier allows for strict interpreta-tion. Exceptional situations where (advance) notice may not be possible are commonly known in the mu-nicipal plane, such as the implementation of freezing orders and other cases where an element of surprise is necessary and appropriate.

38 Not much room is left for third-party participation in the proceedings. The requirement of being ‘directly affected by a proceeding’ does not exclude third-party intervention, but leaves little room for amici curiae. The absence of an obligation to give public notice of the proceedings means that third parties that are not directly affected would not be guaranteed to gain knowledge of the proceedings.

39 Cf. Article 27.4(2) CETA.

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guarantees, firstly, that parties to such proceedings are entitled to a ‘reasonable opportunity to support or defend their respective positions’ and, secondly, that the appellate decision be based on the ‘evidence and submissions of record’. While the wording does not spell out that access to the evidence and submissions of record must be granted to the parties to the proceedings, a party must be afforded a reasonable opportunity to support or defend its position, which is impeded when denied access. It is hard to imagine how a position can be defended without knowing what evidence or submissions to defend against. The second sub-clause is therefore integral to the interpretation of the first sub-clause.

In recent treaties, a tendency can be detected to limit the material scope of transparency obligations. For example, Article 8.10 CETA, mentioned above, limits the concept of FET to a finite number of situations, including a ‘fundamental breach of due process, including a fundamental breach of transparency, in judicial and administrative proceedings’. Similar examples abound in the most recent invest-ment treaties;40 prompting the question of how such practices should be interpreted.

b. Arbitral Practice

Looking first at the reasoning of arbitral tribunals, caselaw reveals that the material scope of the concept of transparency has until now evolved in a manner that correlates with the main elements identified in treaty practice. In Metalclad v. Mexico, the tribunal understood ‘transparency’ to mean that:

“all relevant legal requirements for the purpose of initiating, completing and successfully operating investments made, or intended to be made, under the Agreement should be capable of being readily known to all affected inves-tors of another Party. There should be no room for doubt or uncertainty on such matters. Once the authorities of the central government of any Party (whose international responsibility in such matters has been identified in the preceding section) become aware of any scope for misunderstanding or confusion in this connection, it is their duty to ensure that the correct position is promptly determined and clearly stated so that investors can proceed with all appropriate expedition in the confident belief that they are acting in accor-dance with all relevant laws.”41

40 See, e.g., EU-Kazakhstan ECPA (2016), which subjects the transparency chapter to a catalogue of general exceptions modeled on Article XX GATT (1994).

41 Metalclad v. Mexico, supra note 21, p. 76.



The Metalclad tribunal thus understood the material scope to encompass all legal requirements relevant to investments. This is similar in essence to the first category of material transparency requirements in treaty practice, as identi-fied above. The tribunal also understood transparency to include an obligation to clarify any legal uncertainties. Such a broad requirement is not typically seen in treaty transparency clauses. Rather, that task is a function of an efficient admin-istration of justice. It is therefore possible to find here a link to the third category of material treaty transparency requirements relating to the administration of law. The Metalclad definition was echoed by the Tecmed tribunal, which understood the transparency requirement to ensure:

“that [the foreign investor] may know beforehand any and all rules and regu-lations that will govern its investments, as well as the goals of the relevant policies and administrative practices or directives, to be able to plan its investment and comply with such regulations.”42

The Tecmed tribunal thus identified transparency with the material scope of the first category of treaty transparency clauses, interpreted broadly to also cover policies, practices and directives. It made no mention of a duty to clarify. Another aspect was added by the tribunal in Frontier v. Czech Republic, which stated:

“Transparency means that the legal framework for the investor’s operations is readily apparent and that any decisions of the host state affecting the investor can be traced to that legal framework.”43

By emphasizing that transparency covers the legal basis of state decisions, the Frontier tribunal incorporated the principle of legality, corresponding to the final limb of the treaty clause on administrative transparency, discussed above. Its inclusion was a further step towards affirming transparency in the administration of law by highlighting the notice requirement of due process, i.e. that an admin-istrative act that adversely affects a person must be proceeded by notice, setting forth, among other the legal basis of the act.

Turning next to the facts of the cases, a pattern that can be discerned is that material scope broadly falls into four categories. First, the most commonly alleged fact pattern, accounting for 72 % of all cases (and 94 % of cases where lack of trans-parency was found), concerns failure to disclose information prior to an administrative

42 Tecmed v. Mexico, supra note 5, p. 154.43 Frontier v. Czech Republic, supra note 23, p. 285.

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act.44 This corresponds to the treaty requirement of transparency in the administra-tion of law. Second, some cases have raised lack of transparency of existing legal requirements, comprising 14 % of the cases (and one case where lack of transpar-ency was found).45 This corresponds to the treaty requirement to publish measures of general application. Third, in a few cases, 8 %, the question of transparency concerned the absence of clear and comprehensible rules or procedures, i.e. where transparency was treated as a quality of the relevant legal framework, rather than as failure to disclose norms.46 In one of those cases, lack of transparency was found. Fourth, in 6 % of the cases (but no case where lack of transparency was found), the transparency issue related to the government’s failure to inform about prospec-tive changes to rules and procedures.47 This is equivalent to the treaty requirement of consultation prior to enactment of measures of general application. The relative scarcity of cases alleging breach of the requirements to publish existing or prospec-tive measures of general application—laws, regulations, adjudicatory decisions and administrative procedures and practices—lends support to the proposition that such requirements reflect a general practice.48

1.2.3. Modal Scope: How, Where and to Whom Must Information be Disclosed?

Investment treaties normally indicate how, i.e. by which modality, the relevant infor-mation must be communicated, such as by publication or notification or by other-wise making it available, publicly or to relevant addressees.49 Occasionally in BITs, but often in TIPs, the treaty will set out where the information is to be published, made available or otherwise disclosed, including the name of official publications or websites.50 Treaty provisions will also normally indicate to whom the required

44 Tecmed v. Mexico, supra note 5, Maffezini v. Spain, MTD v. Chile, Occidental v. Ecuador, and LG&E v. Argentina, supra note 21, Lemire v. Ukraine, Micula v. Romania, Gold Reserve v. Venezuela, Clayton v. Canada, Crystallex v. Venezuela, supra note 23, PSEG v. Turkey, Siemens v. Argentina, Vivendi v. Argentina, and Rumeli v. Kazakhstan, Nordzucker v. Poland, Deutsche Bank v. Sri Lanka, supra note 27, where lack of transparency was found, as well as Waste Management v. Mexico, supra note 6, Frontier v. Czech Republic, Mesa Power v. Canada, Philip Morris v. Uruguay, supra note 23, RDC v. Guatemala and Al Tamimi v. Oman, supra note 26, and Biwater v. Tanzania, Bayindir v. Pakistan, Bosh v. Ukraine, De Levi v. Peru, supra note 27.

45 Champion Trading v. Egypt, supra note 21, Cargill v. Mexico, supra note 22, Mamidoil v. Albania, supra note 23, De Levi v. Peru, supra note 27, and Occidental v. Ecuador (where lack of transparency was found), supra note 21.

46 Metalclad v. Mexico (where lack of transparency was found) and Saluka v. Czech Republic, supra note 21, and Mamidoil v. Albania, supra note 23.

47 S.D. Myers v. Canada, supra note 21, and Cargill v. Mexico, supra note 22.48 While it cannot be excluded that the absence of cases is due to reasons other than general compliance

with the requirements, it does suggest that no serious deviations have occurred that would have resulted in sufficiently serious harm to warrant enforcement through arbitration.

49 See, e.g., Article 10(1) U.S. model BIT (2012), cf. Article 12.3 EU-Korea FTA.50 See, e.g., Article 26.2(4) TPP, which is based on Article 11(3) U.S. model BIT (2012), cf. Annex 19-8 CETA.



information must be conveyed, which is normally the investor, the home state or the public at large.51 The pattern that can be discerned in these provisions is that the manner in which disclosure is communicated depends on the type of informa-tion; whether it is disclosure of existing measures of general application, proposed measures or administrative or adjudicatory transparency. The types of communi-cation are either unidirectional (publication, making publicly available, or notifica-tion) or interactive (consultation, exchange of information, or response to queries). Main elements left to interpretation include the precise scope of the duty to ‘make publicly available’ otherwise than by publication and the scope of addressees of notification in administrative proceedings.

By contrast, caselaw has not been specifically concerned with the modal scope of transparency. This is unsurprising given that all published cases involve allega-tions of breach of a general treatment standard, where the concern for modality is viewed more from the perspective of whether information has been effectively conveyed than the precise means and methods for providing transparency.

1.2.4. Temporal Scope: When Must Information be Disclosed?

A crucial aspect of transparency is the timing of disclosure. In order to be effec-tive, disclosure normally would have to precede, with some margin, a critical date and may also not be premature, such that not all relevant elements are in place. Again, treaty practice offers distinctions depending on the types of infor-mation to be disclosed. With respect to transparency of laws, regulations and other measures of general application, the normal wording is that they must be disclosed ‘promptly’, which obviously is subject to interpretation. With respect to proposed measures disclosed with a view to public consultation, the timing is usually expressed in a two-fold manner: (1) the proposed measures must be made public ‘in advance’, which must be understood as in advance of their adoption, and (2) interested persons and the other contracting state must be given a ‘reasonable opportunity’ to comment on the measure in question. This results in a flexible, but not nugatory, interval within which the right to comment may be exercised. With respect to transparency in administrative and adjudica-tory proceedings, the timing of the relevant disclosure is given by the locutions ‘reasonable notice’, ‘reasonable opportunity to present facts and arguments prior to any final administrative action’ and ‘reasonable opportunity to support or defend [one’s position]’. These terms are open to interpretation.

51 See, e.g., definition of “interested persons” in Article 281 EU-Ukraine Association Agreement, cf. Article 10 China-Japan-Korea Trilateral Investment Agreement.

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Questions of the adequate timing for providing information have been raised as a decisive factor in several arbitral awards.52 However, there is insufficient indication of a norm based on a textual analysis of these cases or based on a discernible fact pattern. The precise temporal scope thus remains a matter open to interpretation.

2. Interpretation of substantive transparency requirements

It was initially concluded that transparency is a word associated with a range of meanings that have changed, and mostly expanded, over time and thus represents an evolutive concept that is inherently contestable and cannot be exhaustively defined without reference to context. An attempt to instead delimit the scope of the concept on the basis of treaty and arbitral practice has resulted in a tentative outline of the main elements of the practices associated with transparency. What is evident so far is that the norms that fall within the conceptual scope of transpar-ency are known since well before the emergence of transparency as a concept. Yet, such delimitation is likewise fraught with difficulty and reveals significant room for interpretation. For each of the main elements of the identified practices falling within the delimitation, a number of general questions of interpretation were iden-tified. What remains is to determine the reason for treating these practices as rele-vant to the concept of transparency, and, then, leveraging that reason as a means of interpretation, to look critically at each general question in turn and explore how to adapt the conceptual delimitation to better accommodate that reason.

2.1. Finding a Good Fit

In light of the emergence and evolution of transparency as a legal concept it is plain that no intending originator can be identified, at least not at the conceptual plane. The adoption, use and gradual adaptation of transparency as an umbrella term may be an example of spontaneous, rather than deliberate action. Thus, using a purposive approach to interpretation, proceeding ‘top-down’ from known first principles, is a closed avenue. The reason for treating practices as relevant to the concept of transparency must instead be inferred from the concept’s in-scope instantiations, i.e. its tentative conceptual delimitation. In other words, a good explanation must be found that ‘best fits’ the identified practices, even though, as in all abductive reasoning, such explanation cannot be guaranteed to imply

52 See, e.g., Saluka v. Czech Republic, p. 360, supra note 21, PSEG v. Turkey, p. 246, supra note 27, Sie-mens v. Argentina, p. 308, supra note 27, and Micula v. Romania, p. 872, supra note 23.



their one-and-only true reason. Assuming that the practices identified as transpar-ency requirements give effect to an underlying concept of transparency, a good fit would be an effective fit, meaning an explanation that produces the same conse-quences as those of the identified practices.

In overview, the tentative delimitation suggests that government transpar-ency requirements, as pronounced in treaty and arbitral practice, comprise the disclosure of information (1) by host states (2) with respect to (a) the existence of legal requirements (publication requirement), (b) prospective legal requirements (advance notice and consultation requirement), (c) the administration of existing legal requirements (administrative and adjudicatory transparency), and (d) the substance of existing legal requirements (transparency as a legislative quality), (3) in such manner as to make the information effectively known by investors, and (4) at such time as to make the information useful to them.

If effective, these transparency requirements would indeed have the proxi-mate consequences of ensuring that investors are in a position to readily and timely understand what the legal requirements are, how they applied and what their legal basis is. Such understanding, in turn, has the effect of enabling and facilitating for investors (I) to predict the consequences of compliance (and non-compliance), and (II) thus to deliberately comply (or not), with the relevant legal requirements. By contrast, without such understanding, investors would be not be able, or only with difficulty, to anticipate whether their conduct were in line with legal requirements and would not be able, without taking chances, to deliberately satisfy those require-ments. In addition, the home state would not have reason to anticipate that its legal requirements would be faithfully reflected in a general practice accepted as law. In other words, the normative effect of the legal requirements would not realize its full potential, i.e. the requirements would fail to provide effective normative guidance.53

53 This depends on an assumption of effectiveness; that the law as practiced (as evidenced e.g. in investment disputes and in the absence of disputes) gives effect to the law as pronounced (transparency requirements laid down in treaties and arbitral caselaw), which in turn gives effect to the law as a concept and reflec-tion of societal realities (the concept of transparency). If the transparency requirements were deemed ineffective in realizing policy in practice, they could be expected to evolve, or to be fine-tuned, over time. Transparency requirements have in fact evolved, but if anything the trajectory of evolution has been to reinforce the impression that transparency requirements indeed serve to promote normative guidance. The expansion of the material scope of transparency clauses from a mere publication requirement (until the early 2000s) to an advance notice and consultation requirement (early 2000s) to administrative and adjudicatory transparency (from 2010s onwards) seems to suggest that the law as pronounced in treaties has added successive aspects all pointing in the same direction, i.e. to promote knowledge of legal re-quirements, their application and legal basis.

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2.2. Justifying Promotion of Normative Guidance as the Best Fit

Having adduced the promotion of normative guidance as a provisional reason, it remains to be determined if no other reason is likely to provide a better explana-tion. The starting point is to consider how transparency relates to underlying soci-etal realities, which in turn are reflected in the law as pronounced and practiced. With respect to societal preferences for normative guidance, including the need for certainty, predictability and stability, this could be approached from a number of different dimensions, including from a sociological,54 anthropological55 and psycho-logical56 perspective, just to name a few,57 but because of the apparent connec-tion between international investment and economics, an economic description of societal reality is opted for here.

However, while important, the effect of social realities on law formation is anything but straightforward. While few would contest that law is, in principle, adaptive to societal change in one way or another, wide-ranging rational disagree-ment characterizes the theoretical legal approaches to conceptualizing law’s rela-tion to these realities, ranging from denial or oblivion of such relation (e.g. ‘hard’ positivism) to complete identity of law and politics (e.g. some strands of CLS). However, one element generally recognized is that of law’s adaptive rigidity; that law lags behind social change to a greater or lesser degree. The significance of this seemingly mundane observation is to give lease of life to the idea of law as an autopoietic system—as a self-sustained autonomous process and branch of knowledge. This will be explored in the following section.

2.2.1. Transparency and Normative Guidance in Economic Theory

Economic analysis of transparency and normative guidance has struggled with diffi-culties of conceptualization. Terminologically, issues of ‘legal certainty’ have been analyzed as a quality of known rules or uncertainty in the application of known rules or in the assessment of facts,58 or more broadly as uncertainty about the ex ante

54 See Arthur L. Stinchcombe, Certainty of the Law: Reasons, Situation-Types, Analogy, and Equilibrium, 7 J. of Pol. Phil. 209, 209 (1999).

55 See Fernanda Pirie, The Anthropology of Law 88 (2013).56 See Stephen Tang & Tony Foley, The Practice of Law and the Intolerance of Certainty, 37 U.N.S.W. L. J.

1198, 1200 (2014)57 For a general treatise as well a broad analysis of legal certainty from diverse scholarly perspectives, see

Humberto Avìla, Certainty in Law, 49 (2016)58 Anthony D’Amato, Legal Uncertainty, 71 Cal. L. Rev. 1, 1 (1983), Helmut Wagner, Economic Analysis of

Cross-Border Legal Uncertainty – The Example of the European Union, in The Need for a European Contract Law. Empirical and Legal Perspectives (Jan Smits ed., 2005), Yannis Katsoulacos & David Ulph, The Welfare Effects of Legal Uncertainty and its Implications for Enforcement Procedures (Athens U. of Econ. & Bus. Disc. Paper No. 199, 2010), Kevin E. Davis, The Concept of Legal Uncertainty (draft paper, 2011), retrieved from SSRN: https://ssrn.com/abstract=1990813 (Feb. 27, 2017).



legality of a specific action, i.e. also including situations where the existence or substance of a rule might not be known.59 Transparency, or rather the lack of it, has been analyzed as information asymmetry and a transaction cost.60 The research aims of these contributions often concern the relative merits, benefits and costs, of the relevant conception of transparency. Some attempts to explain or economically interpret these phenomena from the perspective of their economic function can be found within the evolutionary and institutional schools of economics.

The importance of normative guidance was early noted by eminent sociol-ogist, economist and jurist Max Weber, who emphasized the role of the legal system in raising the probability of actions taking place and making economic life in modern capitalist societies more ‘calculable’.61 This required, according to him, that legal texts lend themselves to predictable application and that the adminis-tration of the law not be arbitrary.62 But, as Weber himself also noted, calculability is not a value free proposition, but essentially favors the economically powerful over the economically disenfranchised by being more useful to the former than the latter.63 These points were raised and developed by later scholars.64

In current economic theory there is heightened awareness that legal certainty involves costs as well as benefits, which, as Weber noted, may be unequally distributed.65 Recent research suggests that, where individuals benefit from infor-mation asymmetry vis-à-vis the state, an advantage of legal uncertainty could be to

59 Ehud Guttel & Alon Harel, Uncertainty revisited: LegaL Prediction and LegaL Postdiction, 107 Mich. L. Rev. 467 (2008), Yuval Feldman & Shahar Lifshitz, Behind the veiL of LegaL Uncertainty, 74 Law & Contemp. Probs. 133 (2011), Matthias Lang, LegaL Uncertainty as a WeLfare enhancing screen (CESifo Working Paper No. 6164, 2016), retrieved from SSRN: https://ssrn.com/abstract=2884596 (Feb. 27, 2017).

60 See Michener & Bersch, supra note 8, at 235.61 Richard Swedberg, Max Weber’s Contribution to the Economic Sociology of Law 12, 15 (CSES Working

Paper Series, Working Paper No. 31, 2006).62 Id.63 Id.64 See, e.g., John R. Commons, The Legal Foundations of Capitalism (1924), which is one of the earliest

works of the Law and Economics School and of evolutionary economics. Commons cautioned against the “illusion of certainty which makes legal reasoning seem like mathematics” (at 72) and emphasized legal and economic evolution as a ‘going concern’ of artificial selection of solutions that best ‘fit’ a given problem. ‘Fitness’ in turn he conceived as “harmony…[with the] perceived and habitually accepted” (at 366), thus apparently linking the process to a notion of customary acceptance.

65 Archon Fung et al., The Political Economy of Transparency: What Makes Disclosure Policies Sustainable?, (KSG Working Paper No. RWP03-039; John F. Kennedy School of Government, Harvard University OPS-02-03, 2004), retrieved from SSRN: https://ssrn.com/abstract=384922 (Feb. 27, 2017): “Though trans-parency is universally admired in principle, its particular applications frequently conflict with other societal values or powerful political interests. Disclosing information can clash with efforts to protect public safety and proprietary information, to guard personal privacy, or to limit regulatory burdens. It can also clash with the central economic and political objectives of target organizations that may view such disclosure as a threat to reputation, markets or political influence. At the same time, the benefits of disclosure are often diffuse. Beneficiaries may be consumers, investors, employees, and community residents. Such users are rarely organized to support and oversee transparency systems.”

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encourage action associated with high private benefit.66 Yet, lack of transparency normally means an information asymmetry benefitting the state, such as when legal requirements are unknown to individuals (e.g. unpublished laws, procedures etc.). Moreover, few lawyers would characterize uncertainty in the administration of law as a mathematically random process, as these models suggest. It seems more realistic to conceive legal uncertainty as rivaling jurisprudential or political inclinations and ideas or as deviations from procedure, whether caused by lack of attention, effort, training or irrational behavior, bias or ulterior motives. These are difficult to account for in economic modeling, let alone to define. An important limitation to the development of a better understanding of legal uncertainty in the administration of law is absence of reliable sources of empirical data. Corrupt local officials may be disinclined to report their transgressions to statistical agencies. Such methodological issues have impeded breakthrough in economic thinking on transparency. What economic analysis has demonstrated, however, is that trans-parency and legal certainty reflect complex and dynamic societal realities that are, currently and perhaps inevitably, beyond comprehensive understanding and thus beyond comprehensive control.

2.2.2. Normative Guidance in Legal Theory: The Hart-Fuller Debate

Although legal norms reflect societal realities, law’s adaptive rigidity serves, to some extent, to insulate it, or give it some respite, from societal change. The notion that rigidity lies at the heart of what distinguishes norms from instantaneous polit-ical commands may be obvious, but its central importance to the understanding of law cannot be overestimated. This was noted by, among others, Kelsen, who at the pinnacle of his highly structured conception of positive law identified a basic norm, Grundnorm, towering over the international legal system and from which all other rules of international law derived, which he famously formulated as follows: ‘States ought to behave as they have customarily behaved.’67 Kelsen represents a particular strand of positive legal thought, with which many a scholar would disagree, and even his sympathizers might easily overlook his seemingly anticli-mactic paramount rule. It nevertheless neatly captures the normative thrust of a central and defining feature of law, viz. law’s ‘stickiness’ relative to societal pres-sures. Even though scholars may disagree about the exact extent, few would consider law to be totally rigid (completely insulated from social realities) or totally lacking rigidity (immediately responsive to societal realities).

66 See Lang, supra note 59, at 16.67 Hans Kelsen, General Theory of Law and State 564 (2nd edn. 1967).



The rigidity of law has two important ramifications. First, as already mentioned, it grants the law a measure of systemic autonomy as a transmission mechanism for social change, meaning that law is capable of producing proximate answers to internally generated problems, i.e. problems of legal interpretation (although such ‘internal’ answers may not always be available or sufficient). This justifies doctrinal hermeneutics as an initial means of interpretation. Second, rigidity justi-fies the intertemporal assumption that the law as evidenced by sources of law, which are necessarily historical (even if very recent), can be projected as ‘current law’ (lex lata, the law ‘as it is’), i.e. the law expected to apply in the present (or in other words, the nearest future). Expressed differently, rigidity lies at the heart of—and is positively correlated with—the notions of legal stability, legal predictability and legal certainty, or in yet other words, law’s propensity for normative guidance.

In his famous debate with Lon Fuller on morality and law, Herbert Hart argued that legal certainty serves to protect against the arbitrary exercise of power, but that this goal involves a complex balancing act between predictability, which controls arbitrariness, and inflexibility, which undermines that control.68 The need to avoid arbitrariness requires judicial flexibility, but because judges can cloak their consid-erations in the appearance of rule-bound decision making, that flexibility weakens the ability to avoid arbitrariness and to guide conduct. Hart recognized that legal norms serve to guide the action of legal subjects, which is the essence of norma-tivity and which in turn has several different dimensions. In current discourse on normativity, these may be conceptualized as its directiveness and justification,69 or its publicity, constitutive/evaluative and systematic dimensions,70 or its persuasive-ness, indirect communication and constitutive obedience.71 For present purposes, attention is for simplicity focused on the minimum requirements of normative guid-ance such as they emerged from Fuller’s response to Hart.

Fuller, inspired by the work of Gustav Radbruch,72 took issue with what he saw as the incoherence of the dualistic position emerging from Hart’s struggle to, on the one hand, adhere to the positivist view of law as limited to a moral-free, source-bound system of rules, while, on the other hand, allow judicial flexibility to seek recourse from beyond those sources, including moral considerations. In his response, Fuller pioneered the view that positive law itself presupposes certain inherent moral principles reflected in the very nature of law. This view was a radical

68 H.L.A. Hart, Positivism and the Separation of Law and Morals, 71 Harv. L. Rev. 593 (1958) and Lon L. Fuller, Positivism and Fidelity to Law—A Reply to Professor Hart, 71 Harv. L. Rev. 630.

69 Stefano Bertea, The Normative Claim of Law 21 (2009).70 Gerald J. Potesma, Positivism and the Separation of Realists from their Scepticism: Normative Guidance,

the Rule of Law and Legal Reasoning, in The Hart-Fuller Debate in the Twenty-First Century, (Pe-ter Cane ed., 2010) 272.

71 Andre Santos Campos, An Inquiry into a Normative Concept of Legal Efficacy, 29 Ratio Juris 460 (2016).72 Stanley L. Paulson, Lon L Fuller, Gustav Radbruch and the ‘Positivist’ Theses, 13 Law & Phil. 313, 326,

359 (1994).

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departure from the position of the natural law tradition in that it addressed itself entirely to law’s effectiveness, not to ethical considerations. Fuller’s theory was a groundbreaking first step in bridging the longstanding divide between legal posi-tivism and natural law, a work carried forward by Fuller’s student, Ronald Dworkin, whose Interpretivist School, however, is not similarly restricted to effectiveness considerations. In its minimalism, Fuller’s theory still remains unsurpassed.

Fuller later elaborated and systematized his response to Hart into a set of desiderata, which he conceived as minimum ‘internal morality’ necessary for legal norms to emerge and guide purposive conduct. These were: (1) generality, (2) promulgation, (3) non-retroactivity, (4) clarity, (5) non-contradiction, (6) substan-tive possibility of compliance, (7) constancy, and (8) congruence between norms as announced and their actual administration.73 Several attempts have been made to expand this minimum set.74 It is questionable, however, whether it is feasible to exhaustively anticipate the myriad ways in which law may be conducive to norma-tive guidance without going beyond minimum preconditions. Although he did not himself use the terms ‘legal certainty’ or ‘normative guidance’, Fuller’s desiderata serve as a useful starting point to unravel those concepts.

2.3. Modeling Substantive Transparency as Normative Guidance

Summarizing the discussion so far, it can be concluded that the emergence and evolution of the concept of transparency can be explained by an underlying societal preference for stability, predictability, certainty, and foreseeability of future expec-tations, which could be analyzed in a number of ways, including from an economic perspective. However, the precise nature of this preference is most important to understand insofar as an explanation of the substantive content of transparency requirements cannot be adequately inferred from the rationality and integrity of the process of legal reasoning. It remains to be ascertained whether this is the case. For that purpose a conceptual model of transparency will be formulated and then tested against facts discerned from treaty and arbitral practice.

With respect to treating the promotion of normative guidance as a justification for transparency, Fuller’s desiderata may be built on and somewhat rationalized from the perspective that transparency, at its core, broadly concerns disclosure

73 Lon L. Fuller, The Morality of Law 33 (rev edn. 1969).74 John Finnis, Natural Law and Natural Rights 270 (1980); Jeremy Waldron, The Concept and the Rule

of Law, 43 Ga. L. Rev. 1, 6-9 (2008). Cf. legal certainty seen an element of Dworkin’s notion of the ‘integrity of law’, Ronald Dworkin, Law’s Empire 367 (1986). It should be noted for clarity that emphasizing legal certainty as an ideal and quality of law should not be understood as necessarily contradicting the assertion that the law may in fact be indeterminable in so far as the ideal is not capable of being fully attained (contra James Maxeiner, Some Realism About Legal Certainty in the Globalization of the Rule of Law, 31 Hous. J. Int’l L. 27, 34 (2008)).



of information. The desiderata could therefore be abstracted as follows. Norma-tive guidance is promoted by providing information conducive to ensuring (1) that compliance with the relevant norm as pronounced is possible, (2) that the norm as pronounced is a rational means to realize compliance with the norm, and (3) that compliance with the norm is acceptable to its addressees, by providing infor-mation about the norm’s consequences to allow them to assess their compliance incentives and about its merits to enable them to participate in and influence the process leading to the adoption or administration of the norm.

The first test corresponds to a total failure to abide by Fuller’s first to seventh desideratum; including norms lacking generality that fail to inform as to if and to whom the law applies; non-promulgation or promulgation that is so untimely or impractical that knowing and complying with the pronounced norm is not practi-cally feasible; retroactivity in any form; lack of clarity so grave as to render the law incomprehensible; irreconcilable contradictions between norms; norms mandating the impossible or practically impossible; or norms that change so frequently that compliance is virtually impossible. Pronouncements that cannot be complied with do nothing to provide guidance or control arbitrariness.

The second test corresponds to the first, second, fourth to eighth desider-atum insofar as the compliance is possible, but unlikely to be in coherence with the norm as pronounced. In other words, these are cases where information conducive to ensuring the norm’s realization in enforcement and practice has not been provided. This includes insufficient generality that makes the norm’s appli-cability unpredictable and potentially arbitrary; promulgation that fails to ensure that the pronounced norm is readily knowable in time for compliance; confusion short of incomprehensibility as to the pronounced norm’s meaning; contradiction with existing norms that leaves a margin of harmful uncertainty as to what norm prevails; material, modal or temporal practical difficulties to comply with the norm’s requirements; instability or uncertainty as to the continued validity of the norm over a particular time horizon; and lack of congruence in the administration of the norm, which makes compliance potentially arbitrary and normative guidance weak. The more irrational the pronounced norm itself or the manner and timing of its disclosure, the less coherent an effect can be expected to follow and the weaker its normative guidance and its control over arbitrary exercise of power.

While the first two tests address the propensity for normative guidance from the perspective of the degree to which the norm may result in compliance, the third test looks again at all of the desiderata, but this time from the perspective of the incentive and inclination of the norm’s addressees and administrators to comply with and enforce the norm. Assuming that compliance is likely if attempted, the third test thus asks whether sufficient information has been provided to ensure that the norm’s addressees (in their capacity of ultimate enforcers) and those

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charged with the norm’s administration (as the norm’s intermediate enforcers) are likely to attempt compliance. In other words, the question is whether disincen-tives or disinclinations to comply means that the norm fails to provide guidance. This is a matter of whether additional information has been provided that is suffi-cient to allow the addressees to make an informed decision to comply or not and to allow them to accept the wisdom of the norm—viz. information regarding incen-tives to comply, i.e. the norm’s consequences (positive or negative), and infor-mation going to the merits of the norm. A deliberate decision to comply requires sufficient information to evaluate the consequences of compliance and non-com-pliance. The less readily available such information is, the weaker the guidance and the greater the appearance of arbitrariness in the exercise of power. Like-wise, the less of an opportunity to understand the rationale of, or to participate in shaping, the norm or its application—even if the influence does not amount to a veto or even a direct say—the more arbitrary it is likely to appear. Thus, the less information is provided about the merits of the proposed or pronounced norm, the lesser the opportunity to understand and influence the norm or its application and thus the lesser the guidance provided and the greater its perceived arbitrariness. In short, the less information is provided about the norm’s legal consequences and legal basis, the weaker the normative guidance.

Transparency thus conceived is a means of effective norm formation, whereby a norm as pronounced increases its likelihood of being coherently enforced and practiced, i.e. of resulting in a coherent general practice accepted as law—in other words, the norm’s likelihood of effectively guiding conduct.

2.4. Conceptualizing Substantive Transparency Requirements

To validate the hypothetical reason underpinning the concept of transparency, the ensuing interpretation aims to explore the propensity of the main elements of the legal practices associated with the concept of transparency to promote norma-tive guidance, which is taken as preliminary evidence of validity. In the following, normative guidance is thus identified as the hypothetical general justification of these practices and the reason for treating them as relevant to the concept of transparency. The next step then is to test that hypothesis by analyzing evidence of treaty and arbitral practice.

Analyzed from a textual perspective, investment treaties have occasion-ally paid homage to ‘legal certainty’, ‘legal predictability’ and words to the same



effect.75 Arbitral award also frequently sweepingly mention such language.76 The reliance on the Metalclad and Tecmed precedents incorporate an acceptance of the concept of legitimate expectations, which doctrinally relies on the principle of legal certainty.77 However, textually analyzing legal propositions (treaties, caselaw, etc.) has its limits and must be supplemented with looking at the application of the pronounced norms. Attention is therefore directed to discerning noticeable patterns in treaty practice and in the facts of arbitral caselaw.

2.4.1. Possibility Test

The first test suggests that, to provide effective normative guidance, information must have been provided to render compliance with legal requirements possible. At the most fundamental level this mandates that the legal requirements be know-able by those to whom they apply. Beyond absolute impossibility, the test implies a minimum level of knowability, or, in other words, the modality, cost, or effort of, or timeframe for, obtaining knowledge must not be practically impossible.

The publication requirement clearly meets this test; that host states must make their legal framework effectively known, which has been shown to be an indispensable element of treaty transparency clauses and arbitral caselaw, which traces the material scope of transparency to the definitions provided by the Metal-clad, Tecmed and Frontier awards. It is evident that these requirements in treaty practice and caselaw are attributes of the same substance; that they emanate from a common conception of transparency. They are thus ultimately necessary for normativity. The point raised in caselaw relating to transparency as a quality of legal norms is another emanation of compliance possibility, i.e. that the norms are sufficiently clear, unambiguous and consistent to make their contents know-able. All these instantiations lend credence to the proposition that transparency emanates from the idea of legal certainty.

2.4.2. Rationality Test

The second test requires information that effectively promotes the substantive rationality of legal requirements and of the mode and timing of their disclosure. By facilitating that legal requirements are themselves, and are employed as, an effective means to their pursued end, transparency promotes their realization in

75 See, e.g., Article 12.3(c) EU-Korea FTA, Article 24 EU-Ukraine Association Agreement, cf. preamble Bur-kina Faso-Canada BIT (2015).

76 See, e.g., Frontier v. Czech Republic, Micula v. Romania, Mesa Power v. Canada, Philip Morris v. Uruguay, supra note 23.

77 Metalclad v. Mexico, supra note 21, and Tecmed v. Mexico, supra note 5.

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enforcement and practice. Thus only knowable and realizable legal requirements can give rise to a general practice accepted as law. Unrealizable obligations, legal entitlements that cannot be enjoyed, and rights that cannot be exercised are extreme examples of such incongruence between legal requirements and legal practice. Beyond such extremes, realizability is a matter of degree, corresponding to the rationality of the norms and their application, and is promoted the more readily knowable the legal requirements are.

This test is met with respect to treaty provisions that require proposed legis-lation to be published in so far as that facilitates compliance and allows investors to plan and prepare to adjust their practice accordingly. Another example is treaty provisions that require the host state to publish proposed legal requirements in so far as this is done to allow investors to provide their comments on the proposals. Providing information with a view to inviting and obtaining critique also serves to promote the rationality of resulting legal requirements. Yet another is found in the notice and hearing requirements of administrative and adjudicatory due process. By disclosing relevant facts and the legal basis for a prospective administrative or adjudicatory decision, the state ensures that the resulting decision has been subjected to critique, which promotes rational decision-making.

2.4.3. Acceptability Test

The third test of the model conjectures that, to be conducive to normative guid-ance, information must be provided to effectively facilitate that a pronounced norm is accepted as law by its addressees. Even if compliance is possible and a likely result of the pronounced norm, it does not follow that compliance is likely, unless the addressees accept the pronouncement as a norm and act in accor-dance with it. Such acceptance is promoted by providing information about legal consequences that ensures that the addressees are aware of the incentives for complying. Acceptability is also promoted by information about the legal basis that enables the addressees to understand the wisdom of the legal requirements and affords them an opportunity to influence their adoption and administration.

The public-consultation requirement in treaty practice also meets the accept-ability test. By providing relevant information to investors on proposed legal measures, they are in a better position to evaluate the compliance incentives and the measures’ rationale, and, by allowing them to provide comments on proposed measures, they are capable of influencing the final adoption of the proposed measures. Information about legal consequences is also a present feature of transparency as a quality of legal requirements. The more clearly measures of general application set forth, not only their requirements, but also their legal conse-quences, the better the addressees’ ability assess their incentives for compliance.



The perhaps most important manifestation of the acceptability aspect is the requirements of both treaty and arbitral practice with respect to transparency in administrative and adjudicatory proceedings. As Hart already noted, the quest for predictable rules can go too far and result in inflexible rules that are arbi-trary in their application. Or the rules may not be sufficiently predictable to begin with. The remedy in each case is judicial and administrative flexibility, which in turn gives rise to the risk of arbitrariness and requires procedural rules to control that risk. The imposition of a transparency requirement in international invest-ment law, both in treaties and caselaw, with respect to the administration of legal requirements satisfies the acceptability test. The obligation to provide ‘reasonable notice’ ahead of a final administrative act, setting forth, inter alia, the legal conse-quences (‘a description of the nature of the proceedings’) and the legal basis (‘a statement of the legal authority under which the proceeding is initiated’) serves to enable the investor concerned to understand what is at stake (the incentives of complying) and to understand how the legal requirements are proposed to be administered and to influence how they will be administered (the merits of the case). By affording a ‘reasonable opportunity’ to be heard, these transparency provisions confirm that the affected investor is empowered to participate and exert influence over the administrative and judicial decision-making. The investor’s right to a ‘reasonable opportunity to support or defend’ its position means, in light of the requirement that the ensuing decision be ‘based on the evidence and submissions of record’, that the investor must be able to partake of such evidence and submis-sions. Thus, knowing the legal requirements, the legal consequences and the legal basis, as well as the evidence and submissions, the investor is in a position to provide comments. These comments could concern the veracity of evidence, but also the chain of relevance; between evidence and legal arguments, between arguments and requirements, between requirements and consequences, and finally, the anchoring of this chain in the legal framework.

2.5. Adapting the Conceptual Delimitation of Substantive Transparency

The interpretive exercise above has shown that all the main elements identi-fied in the tentative conceptual delimitation are consistent with the conceptual-ization of substantive transparency as serving to promote normative guidance. It now remains to use this explanation and apply it as a means of interpretation to address the general issues identified in the tentative conceptual delimitation.

First, with respect to the material scope, two general questions of interpreta-tion were identified: (1) whether unwritten sources of law and international agree-ments should be understood as being covered by treaty transparency clauses

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even where not specifically mentioned, (2) whether the publication requirement applies to unwritten procedures, practices and policies such that they must be codified by the host state, and (3) whether only ‘binding’ measures are covered. Applying the conceptual model, it is clear that normative guidance is promoted by providing information conducive to ensuring that these requirements can be complied with. It is clear therefore that the possibility of obtaining informa-tion about the existence and meaning of unwritten requirements is necessary if compliance is to be expected. Moreover, the more readily knowable the require-ments are, the more coherent can their enforcement and application in practice be expected to be. For these reasons, all norms affecting the rights and obligations of investors must be disclosed if they are to provide normative guidance and not give rise to arbitrariness in their application. With respect to international agreements, their disclosure thus appears dependent on whether they affect in an enforceable manner the investor’s legal status under municipal or international law. Finally, the material scope is not restricted to requirements designated as ‘legal’. Rather, in line with treaty practice, procedures, practices and policies may also be included to the extent that compliance with them affects the investor or the investment and thus is associated with consequences for the investor’s treatment by the host state. If that is the case with respect to unwritten procedures, practices or policies and the like, their codification or documentation in some form would be implied.

Second, with respect to the modal scope, the identified general issues included (1) the scope of the duty to ‘make publicly available’ and (2) the scope of addressees of notification in administrative proceedings. Making information available to the public otherwise than by publication shifts the initiative of disclo-sure from the host state to the public. The information is publicly available but has to be requested. This obviously requires knowledge of the existence of the requested information. To satisfy the possibility test, making information public without publication requires that the information is available from a known source, such as a document collection or archive that can be monitored and accessed on demand. Such monitoring could be very burdensome, time consuming and costly. The rationality test thus would require that the information be readily available in order for the relevant requirements to be coherently enforced and complied with. The information would, for example, be more readily available if the collection in which it is stored is searchable, readily accessible without the imposition of excessive fees and bureaucratic formalities or delays. In short, the transparency model would infer a requirement that relevant information be made readily available to the public.

With respect to the notification to a person ‘who is directly affected by a proceeding’, the mode of such notification requires interpretation. The host state’s initial assessment of who is ‘directly affected’ determines the disclosure



of information necessary to exercise due process rights. Since this is seldom entirely clear, the possibility test would imply that notifications at a minimum be traceable in publicly available documents. The rationality test would require making notifications of administrative actions or disputes readily available, such as by publication in an official gazette. This would also condition the applica-tion of the acceptability test, by enabling persons concerned to influence the administrative process, such as those who might be eligible to intervene in the proceedings or appear as amici curiae.

Third, with respect to the temporal scope, the tentative delimitation left behind two general matters for interpretation: (1) the notion of ‘prompt’ disclo-sure and (2) the meaning of ‘reasonable opportunity’ for purposes of commenting on proposed legal, regulatory or other general requirements as well as in the context of administrative and adjudicatory proceedings. The requirement that a law be published promptly beckons some questions: is ‘promptly’ used in its meaning of ‘quickly’ or in its meaning of ‘timely’? In relation to what is prompt-ness to be evaluated? Is the reference point the date of the law’s adoption or date of its effectiveness? Guided by the possibility test, the law would have to be published in time to enable compliance. Such an interpretation is compat-ible with publication promptly after adoption on the condition that the law does not take effect until published. On such condition, promptness so understood leaves flexibility to grant an adjustment period before effectiveness, which would satisfy the rationality test. Alternatively, publication promptly before taking effect would ensure against retroactivity but would not mandate an adjustment period, in which case only the possibility test but not the rationality test would be satis-fied. As minimum requirements, both interpretations could be sustained, but the former appears to have greater potential to promote normative guidance.

As regards an investor’s ‘reasonable opportunity’ to comment on proposed measures of general application, to present facts and arguments in support of its position prior to any final administrative action, and to support or defend its positions in adjudicatory proceedings, the timing issue has at least three dimensions: (a) the earliest point in time at which notice may be given and comments may be invited, (b) the latest point in time by which comments may be provided, and (c) the sufficiency of the period of time during which the investor may review relevant material and formulate and submit comments. These dimensions would have to be interpreted in casu. However, from the perspective of the possibility test, the comment period could not be briefer than to make it possible to review the relevant material in light of its complexity and volume and could not begin to run before all relevant informa-tion has been disclosed. Beyond that, the sufficiency of the comment period would rather be measured against the rationality and acceptability tests. With respect to the latest point in time to submit comments or observations, these tests indicate that

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the investor should be permitted sufficient time to contribute to a rational outcome of the process and to understand the information and influence the process. This would imply that sufficient time is reserved by the host state to process the comments or observations submitted by the investor. The comment period could thus not run right up to the time of decision.

3. Conclusions

The recent proliferation of transparency clauses in investment treaties and steady stream of transparency related arbitration claims have prompted an interest in ascertaining the meaning of substantive transparency requirements in international investment law. As a relatively recent addition to legal nomencla-ture, the meaning of transparency is easily regarded as diffuse and—not without irony—far from transparent.

This article has analyzed the emergence and evolution of transparency requirements with a view to delimiting the scope of substantive transparency as a concept. Analysis of treaty and arbitral practice suggests that this concept broadly comprises the disclosure of information by host states with respect to the exis-tence of legal requirements, prospective legal requirements, the administration of existing legal requirements, and the substance of existing legal requirements, in such manner as to make the information effectively known by investors, and at such time as to make the information useful to them. To be effective, these requirements must ensure that investors can readily and timely understand what the legal requirements are, how they applied and what their legal basis is in order to predict the consequences of compliance (and non-compliance), and to deliber-ately comply, with the relevant legal requirements.

Furthermore, it has been shown that the requirements associated with the concept of transparency are well known and long predate the emergence of that concept. Moreover, while transparency could be entirely explained by reference to societal preferences, the primary explanation is the preference to avoid arbitrari-ness, which underlies the use of norms to guide conduct. Normative guidance is promoted by providing information conducive to ensuring (1) that compliance with the relevant norm as pronounced is possible, (2) that the norm as pronounced is a rational means to realize compliance with the norm, and (3) that compliance with the norm is acceptable to its addressees, by providing information about the norm’s consequences to allow them to assess their compliance incentives and about its merits to enable them to participate in and influence the process leading to the adoption or administration of the norm. Preliminary evidence from treaty and arbitral practice suggests that faithful performance of substantive trans-parency requirements in international investment law is conducive to, and thus



serves to promote, normative guidance thus conceived. It has been concluded that treaty and arbitral practice is coherently related to this effect. It has been observed that the significant point of divergence relates to the degree of transpar-ency required, rather than to the conceptual scope of transparency, and that this point is correlated with the choice of precedent in the face of substantively similar treaty provisions. In light of all these findings, the article has proposed an adapted delimitation of the scope of the transparency concept.

Two final observations: First, as mentioned at the outset, a recent trend can be discerned to restrict substantive transparency requirement, exemplified by Article 8.10 CETA, which limits responsibility for lack of transparency to ‘funda-mental’ breaches of transparency in administrative proceedings. In light of the findings of this enquiry, it is submitted that this may seek to codify the Waste Management standard, but must at least satisfy the possibility test, i.e. mandate the transparency necessary to ensure the possibility to comply with the conditions for exercising due process rights. A more skeptical interpretation would ques-tion the efficacy of relying on the mere insertion of the adjective ‘fundamental’ to control judicial flexibility; particularly in administrative and adjudicatory proceed-ings, transparency appears to be a binary concept—either a party has been effec-tively and timely informed of all relevant facts, or not.

Second, it is useful to constantly recall the effect of relying on norms to guide conduct, viz. of minimizing arbitrary use of power, and that achieving this is a matter of seeking equilibrium between predictability and flexibility, but that, ultimately, the fight against arbitrariness is itself a political or moral aim. It favors the members of a political community—its citizens and enterprises—against whom power may be exerted and who may be vulnerable to abuse, at the expense of those among its members who might be in a position to exert, and abuse, such power.

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