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15 Harv. Negot. L. Rev. 31
Harvard Negotiation Law Review
Spring 2010
Article
PUBLIC PROTESTS, PRIVATE CONTRACTS: CONFIDENTIALITY IN ICSID ARBITRATION AND THE
COCHABAMBA WATER WAR
Amanda L. Norris1 Katina E. Metzidakis2
Copyright (c) 2010 Harvard Negotiation Law Review; Amanda L. Norris; Katina E. Metzidakis
Abstract
The confidentiality of international commercial arbitration can be particularly controversial when one party is a government,
as is the case in all arbitrations before the World Bank-associated International Centre for the Settlement of Investment
Disputes (“ICSID”). This article examines such issues of confidentiality within the purview of one case before ICSID
involving multinational conglomerate Bechtel and the government of Bolivia. The case arose from events labeled by the
media as the “Cochabamba Water War.” The contract at issue provided for Bechtel to increase water supply to the city of
Cochabamba, the third largest in South America’s poorest country. Ultimately, public protests by the Bolivian people led to
the contract’s rescission by the government, and Bechtel responded by going before ICSID, seeking damages of more than
US$25 million. This, in turn, sparked worldwide protests over the secrecy of the arbitration. This article analyzes views on
both sides of the confidentiality debate against the background of ICSID’s unique role in foreign investor protection through
bilateral investment treaties and private arbitration.
*32 Contents
I.
II.
III.
IV.
V.
VI.
Introduction
Public Opposition Ends a Contract
A. Negotiating the Contract
B. The Concession Takes Effect
C. The Aftermath
Confidentiality Revisited
A. ICSID’s Approach to Confidentiality
B. Arguments for Confidentiality
1. Contract Principles
2. Protected Information
3. Rendering Arbitration Superfluous
4. Gathering Evidence
5. Effect on Other Investment Contracts
6. Facilitating Settlement
C. Arguments Against Confidentiality
1. Hampering the Quality of Arbitration Awards
2. Legitimacy of the Institution Itself
3. Principles of Governance and Democracy
4. Facilitating Corruption
Frustrating ICSID’S Goals
ICSID Flirts with Greater Transparency
Conclusion
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I. Introduction
On March 11, 2002, the New York Times led an article with the following:
Their meetings are secret. Their members are generally unknown. The decisions they reach need not be fully disclosed. Yet
the way a group of international tribunals handles disputes between investors and foreign governments can lead to national
laws being revoked and environmental regulations changed. And it is all in the name of protecting foreign investors . . . . 3
The newspaper article voiced concerns over the adjudication of disputes between foreign investors and countries before
international arbitration tribunals.4 Such arbitration proceedings are generally *33 kept confidential, but that confidentiality
has given rise to numerous concerns over the legitimacy of the process.
This article examines those concerns within the purview of one case before the International Centre for the Settlement of
Investment Disputes (“ICSID”), which was formed by the Convention on the Settlement of Investment Disputes Between
States and Nationals of Other States.5 ICSID, which began operations on October 14, 1966, is the only international
arbitration tribunal specifically designed to address complex disputes over foreign investment contracts where one party is a
national government.6
Events leading up to the case Aguas del Tunari v. Bolivia created controversy over confidentiality even before the dispute
reached ICSID, and controversy continued to persist long after. When Bolivia decided to privatize its water services in its
third largest city, Cochabamba, a consortium of companies called Aguas del Tunari, S.A. 7 (“AdT”) answered the call. AdT
and Bolivia finalized a contract on September 2, 1999; however, after significant public opposition to the agreement, the
government canceled this contract nearly five months after it took effect. In response, AdT sued Bolivia before ICSID. 8
This article begins with a background of the controversy surrounding the water privatization project that led to the dispute.
Second, it surveys the specific confidentiality protections afforded to parties before ICSID. Third, the article analyzes
arguments from both sides of the confidentiality debate and discusses how each argument relates to the Aguas del Tunari
case. Finally, the article examines potential harms to ICSID as a result of this case and proposals for addressing future
concerns over confidentiality within the institution.
*34 II. Public Opposition Ends a Contract
The claim brought by AdT before the ICSID tribunal cannot be understood properly without understanding the historical
context of the underlying contract between AdT and Bolivia. From the negotiation of the contract through the eventual
arbitral proceedings, demands for transparency and public participation influenced what the parties considered to be,
essentially, a private contract. Thus, concerns about secrecy colored the debate over the eventual proceedings and brought the
issue of confidentiality in ICSID arbitrations under heavy scrutiny. The following sections recite the events that led up to the
dispute.
A. Negotiating the Contract
AdT stepped into a political minefield when it decided to bid for a contract to privatize and improve water services in part of
Bolivia. The political climate in Bolivia was not generally in favor of privatization, especially of natural resources. At the
time, “[t]he selling-off of public enterprises to foreign investors ha[d] been a heated economic debate in Bolivia for over a
decade, as . . . the airline, the train system, [and] electric utilities” were privatized.9 In fact, in previous years, protestors had
specifically targeted water privatization.10
However, the need to improve water services in Bolivia was urgent, and the government was ill-equipped to address the
problem. Prior to privatization, Bolivia had “achieved major progress in improving access to piped water supply and
sanitation between 1992 and 1997.”11 Even with these advances, the water supply reached only seventy-two percent of
Bolivians as of 1997.12 As South America’s poorest nation,13 the country simply could not afford to *35 provide needed
improvements in services. Even if it could have afforded improvements, the government water agency was “notoriously
plagued with acts of corruption.”14
Given its inability to provide needed services, the Bolivian government began soliciting bids in 1998 to privatize its water
and sewage services and to issue a license for generating electricity in Cochabamba. 15 AdT made the only bid in April 1999
but fell short of complying with the requirements of the tender process. 16 The company then entered into concession
negotiations with Bolivian representatives, who were part of a negotiation committee formed by government decree. 17
For AdT, the situation presented a profitable opportunity to improve delivery of a desperately needed commodity - water - to
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consumers in Bolivia. However, in one writer’s opinion, “Aguas del Tunari seemed to have given little thought to how its
plans would be received in Cochabamba.”18 The company’s representatives on the ground included “engineers, not marketers
. . . newly arrived from abroad,” who were arguably “not attuned to the problems or passions of the Bolivian public.”19
Thus, AdT may have been surprised when some citizens immediately raised concerns about the transparency of the
negotiation process. While Bolivian citizens were “aware generally” of the negotiation process, they “sought more specific
information concerning that process.”20 A news article dated September 3, 1999, criticized the apparent secrecy of the
negotiation process and demanded that the Bolivian government “publicize the true rates that would govern before it
concluded the Concession.”21
Unbeknownst to those wanting more information, the Bolivian government had already approved the text of the contract the
day before, on September 2, 1999.22 On September 3, the same day a newspaper article argued for more transparency in the
apparently ongoing negotiation process, the Concession was concluded and *36 signed by representatives of both the
Bolivian government and AdT.23 As a result, earlier concerns about the perceived secrecy surrounding the project were
certainly not assuaged.
The contract granted AdT a forty-year “relationship” with the Bolivian Water and Electricity Superintendencies.24 This
relationship required AdT to provide a regulated volume of water of a certain quality for the city of Cochabamba in exchange
for a negotiated sixteen percent return on its investment. 25 This return “would be adjusted annually to the consumer price
index in the United States.”26
Once the final contract’s existence became known to the public, reaction to the agreement was swift and strong. The Bolivian
government admitted that “[i]n fairness, no one negotiating the Concession agreement could have anticipated the intensely
hostile reaction that greeted [AdT] immediately upon the Agreement’s signing.”27 This hostility would only continue to grow
over the coming months, fueled in large part by the discovery that the majority shareholder in AdT was Bechtel, a
multinational conglomerate. From that point on, opposition forces and the media used the terms “AdT” and “Bechtel”
interchangeably.
Several days after the parties finalized the agreement, further calls for transparency regarding the specific terms of the
contract were made. However, details of the agreement were not disclosed to the public at that time. A news article dated
September 14, 1999, published the Bolivian government’s statements and citizen groups’ concerns as to what the new rates
for water services under the contract would be. 28 Scarce on details, the article did note that the new, presumably higher rates
for water service in the city would take effect December 1, 1999.29 Pursuant to the contract, the water concession itself would
take effect on November 1, 1999.30
*37 B. The Concession Takes Effect
Amid ongoing criticism for the lack of transparency surrounding the entire project, the protests by citizen groups spiked after
the Concession came into effect early in November 1999.31 After scattered initial protests, on November 12, 1999 many
disparate groups opposed to the contract organized themselves into one representative organization called La Coordinadora
para la Defensa del Agua y Vida (The Organization for the Defense of Water and Life) (“La Coordinadora”).32 The
organization was comprised of members of “the local factory workers union, irrigators and farmers, environmental groups,
local economists, progressive members of Congress, and a broad base at the grassroots.”33 La Coordinadora became the
predominant voice of the growing opposition movement.
The group staged its first organized protest that November. Protestors blocked highways in and out of Cochabamba for
twenty-four hours.34 A newspaper article echoed the calls of some citizen groups that the Concession agreement be nullified
entirely, although La Coordinadora had initially only sought a decrease in water rates. 35 In response to these concerns,
“representatives of the Water Superintendency held meetings and discussions with Cochabamba community groups in an
attempt to clarify the scope of AdT’s authority within the concession area.”36 However, further anger mounted when it
“became clear that Bechtel would not expand service to the impoverished South, where the company had no profits to gain
from an expensive expansion.”37
AdT made several attempts to pacify its critics. On November 29, 1999, several Bolivian newspapers, including those in
Cochabamba, published an “Open Letter” from the company stating its goals related to the project.38 Despite this and other
efforts, public opposition increased. Various labor organizations from Cochabamba contemplated claims of
unconstitutionality in Bolivian courts. Such *38 claims would challenge the law authorizing the Concession39 and demand its
rescission.40
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Notwithstanding increasing opposition, the new rates under the Concession agreement took effect December 1, 1999.41 AdT
increased the water rates sufficiently to cover the “costs of a $35,000,000 inherited debt,” to “finance an anticipated water
engineering pipe project,” and to earn a sixteen percent annual return on its investment. 42 While Bechtel asserted that the rate
increases for the poorest citizens were “barely ten percent,”43 La Coordinadora compiled evidence that rates for some citizens
increased over two hundred percent.44 In effect, water costs for some residents constituted up to one-quarter of their incomes
at minimum wages.45
Politicians, unionists, and neighborhood leaders of Cochabamba vociferously protested the rate increases.46 Those affected
received no relief from the higher rates. The Bolivian Superintendent of Waters stood fast and informed the public that the
new rates would “remain in force unless a new Administrative Resolution was adopted.”47
The World Bank had already instructed the country “not to subsidize the imminent rate and bill increases.”48 Its firm position
was that “[n]o public subsidies should be given to ameliorate the increase in water tariffs in Cochabamba.”49 James
Wolfensohn, then President of the World Bank, explained the Bank’s stance on subsidies in *39 terms of economic theory:
“It’s just a fact that if you give public services away, that does lead to certain waste.”50 In other words, market prices would
limit waste of water by making waste expensive.51
In various parts of Bolivia, including Cochabamba, intense opposition increased in January 2000. 52 That month, a strike
crippled the city for three days, blocking roads, closing airports, and crowding the central plaza with protestors. 53 After
initially refusing to meet with representatives of the opposition movement, the government agreed to review its contract with
AdT on the condition that the protests cease.54 Further, it proposed “a temporary rollback in the rate hikes.”55 However, AdT
opposed any temporary rollback.56
While the protests did somewhat subside after the government’s proposal to decrease rates, they quickly resumed when,
according to some, the government failed to lower the rates. 57 Others, including Bechtel,58 insisted that the rates were
reduced. After several weeks, residents began “refusing to pay their bills to Bechtel.”59 The company responded to such
actions via a statement released by Geoffrey Thorpe, AdT’s manager, expressing that “if people didn’t pay their water bills
their water would be turned off.”60 Predictably, the vehemence of opposition voices only grew in response. 61
*40 La Coordinadora resumed large-scale protests on February 4, 2000. The government responded by sending “more than
1,000 heavily armed police and soldiers” who “took control of the city’s center.”62 The riot police attempted to “control the
movement with tear gas, rubber bullets and live ammunition.”63 During the February protests, which lasted two days, more
than 175 people were injured,64 including two people who were blinded.65
Meanwhile, opposition leaders sought to examine the closely-guarded contract between AdT and Bolivia but found doing so
to be very difficult.66 After eventually obtaining a copy, the people became aware of the provision guaranteeing the company
a sixteen percent profit, which had not been disclosed previously. 67 Partially as a result of this discovery, La Coordinadora
refocused its efforts from curbing the rate hikes to demanding cancellation of the contract entirely. 68 To show that there was
widespread support for its demand, the group conducted a survey of over sixty thousand Cochabamba residents, ninety
percent of whom agreed that the contract should be canceled. 69
La Coordinadora planned a self-termed “La Ultima Batalla,” or the “Ultimate Battle,” for April 4, 2000.70 According to the
organization, this final protest and strike was intended to continue indefinitely until the organization’s demand for the
cancellation of the contract was met.71 After two days of protests and strikes, the government agreed to negotiate with the
organization.72 However, when opposition leaders arrived at the agreed-upon site to negotiate, they were arrested.73 They
were released the following day,74 but news of the arrests attracted more than ten thousand people to the city center. 75
*41 Despite the vehement protests, AdT refused to depart from Bolivia. 76 Bechtel explained that the company’s expected rate
of return “was common for utility contracts of this type in high-risk countries” due to the expectations of banks providing
funding.77 Meanwhile, the protests began to claim some political casualties: the Governor of Cochabamba’s province of
Cercado spoke to the people on live television and resigned, citing that he did not want to participate in what he termed a
“blood bath.”78
As a last-ditch effort to quell the violence, President Hugo Banzer declared a state of emergency and instituted martial law on
Saturday, April 6, 2002.79 The government blocked television and radio broadcasts, imposed a curfew, and banned meetings
of more than two people.80 That afternoon, the level of violence increased. As Shultz tells the story,
Protestors set fire to a vacant state office building, sending a huge plume of black smoke into Cochabamba’s clear blue sky.
Soldiers switched from using just tear gas to live rounds. A local television station captured footage of an army captain . . .
disguised in plain clothes as he shot live rounds into a crowd of protestors. At that same time an unarmed seventeen-year-old
boy, Victor Hugo Daza, was shot and killed with a bullet through the face . . . . His companions brought his bloody body to
the plaza and held an angry, emotional wake.81
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Finally, on Monday, Bechtel officials left the country.82 The government announced its unilateral cancellation of the contract
barely five months after it had taken effect.83
C. The Aftermath
Although the government yielded to the will of its people in canceling the contract, its actions gave rise to potential financial
and legal consequences. Many felt that the negative impact on the country’s reputation with foreign investors would inhibit
future flows of foreign investment to Bolivia: “Bolivia had signed a lucrative, *42 long-term contract. Renouncing it would
be a blow to the confidence of foreign investors in a region where national government and economies depend on such
confidence for their survival.”84 In fact, the situation became “‘You can’t trust Bolivia.”’85 The United States Embassy
agreed: “It was a pretty significant blow.”86
Not long after the contract was breached, AdT decided to pursue a claim in arbitration against Bolivia before ICSID; it filed
November 12, 2001, seeking to recover its costs and obtain damages for loss of expected profits.87 The company sought at
least US$25 million.88 Some commentators noted a well-founded doubt that Bolivia could afford such a judgment should
AdT succeed in its claim.89 At least one source claimed that the “Bolivian government offered to pay the equivalent of what
was actually invested in 6 months, less than US$1 million, but Aguas del Tunari did not accept that sum and resorted to
ICSID instead.”90 By the time the ICSID dispute was resolved, Bolivia had spent US$1.6 million in legal fees for its
defense.91
AdT, for its part, framed the dispute in purely contractual terms: “This is a matter of the shareholders in [AdT] seeking
compensation for an investment that was abrogated by the government of Bolivia.”92 Others viewed the dispute as an
essential issue of broad public concern. After AdT made its decision to pursue ICSID arbitration in the case, more than one
hundred people directly petitioned Bechtel’s Chief Executive Officer, Riley Bechtel, to drop his company’s case against
Bolivia.93
*43 As with previous concerns over transparency, the coming battle over the confidentiality of the arbitration proceedings
would come to infuriate observers further and shine a spotlight on the issue of confidentiality in international arbitration. In
fact, over three hundred citizen groups from forty-one different countries, represented primarily by attorneys from
Earthjustice, participated in a petition to ICSID requesting, among other things, that the tribunal allow public participation in
the case and make public all documents, proceedings and hearings, and any decisions of the Tribunal generated during the
process.94 According to Earthjustice, World Bank officials refused to disclose when or where the first hearing in the case
would take place.95 The petitioners’ efforts focused scrutiny on ICSID’s policies concerning confidentiality.
III. Confidentiality Revisited
Certainly one of the most attractive features of arbitration, as opposed to litigation, is that the parties to a dispute can settle
their differences privately.96 Some commentators have described confidentiality as the principal fundamental characteristic of
international arbitration, upon which parties “place the highest value.”97 Generally, “documents produced during, or in
preparation for, an arbitration, as well as evidence introduced during the arbitration, are protected by a duty of
confidentiality.”98
However, in the realm of international arbitration, institutions differ on approaches to confidentiality. Indeed, there is a
distinct “lack of consensus.”99 For example, the London Court of International Arbitration strictly provides for the
confidentiality of arbitral *44 proceedings.100 Alternatively, while the International Chamber of Commerce provides no
blanket guarantee of confidentiality,101 its rules do state that “persons not involved in the proceedings” cannot be privy to
hearings unless the parties consent.102 The American Arbitration Association provides that arbitral proceedings are
confidential103 and imposes a duty of confidentiality on arbitrators. 104 In some cases, the very existence of disputes can be
kept confidential.105
Even where the rules of an arbitral tribunal do not specifically protect confidentiality, courts, in some cases, hold that a duty
of confidentiality is assumed.106 However, significant exceptions to notions of confidentiality have emerged in recent cases.
English courts generally favor a presumption of confidentiality but allow for exceptions where certain convincing reasons
justify disclosure.107 Other courts have adopted a “business efficacy” test, under which a breach of confidentiality is justified
if it is “reasonably necessary for the establishment or protection of an arbitrating party’s legal rights vis-à-vis a third
party.”108 Some courts have curbed confidentiality of arbitral *45 proceedings on other grounds.109 These varied approaches
demonstrate the additional considerations faced by parties to arbitration should a dispute ultimately be adjudicated in a court
system.
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Parties to international arbitration can and often do contract for confidentiality, adding protections beyond the rules of the
arbitral tribunal or any general presumption in the law. However, even where parties have contracted for confidentiality in the
arbitration agreement, some tribunals are willing to set aside such provisions under certain conditions.110 Additionally, the
laws of some countries explicitly provide for confidentiality in alternative dispute resolution.111
Many commentators have thoroughly compared the different approaches to confidentiality among the prominent international
arbitration institutions.112 Additionally, other commentators have examined these same issues and made many of the same
arguments presented in the following sections with respect to other forms of alternative dispute resolution, such as
mediation.113 However, to analyze the considerations facing the parties in Aguas del Tunari, one must refer to the specific
approach taken by ICSID, as its rules governed the relevant proceedings.
A. ICSID’s Approach to Confidentiality
As Professor Benjamin Tahyar points out, “because ICSID arbitration is largely a matter of contract between the parties to
the dispute, it is not unreasonable for the parties to assume that the public should be excluded from the arbitral
proceedings.”114 As such, “the *46 ICSID Arbitration Rules, and those of many other permanent arbitration institutions, do
create a presumption in favor of confidentiality.”115 The ICSID Convention and its Arbitration Rules (“ICSID Rules”)
specifically provide for confidentiality of the proceedings. Where the Rules are silent, each tribunal is left to determine its
own procedures governing confidentiality.
Questions of confidentiality protections fall into two distinct categories: First, what protections exist to prohibit the disclosure
of confidential information by the tribunal or institution itself? Second, do parties themselves have a duty of confidentiality
as to one another? This article addresses the first question, as those protections featured most prominently in the debate over
Bechtel’s actions leading to its case before ICSID.
The confidentiality protections preventing disclosure by the institution itself are comprehensive. First, ICSID may not publish
an award without the consent of the parties.116 The existence of a dispute is regularly published on its website. 117
Additionally, prior to or at the initial hearing of the dispute, each arbitrator must sign a declaration that “[he or she] shall keep
confidential all information coming to [his or her] knowledge as a result of [his or her] participation in this proceeding, as
well as the contents of any award made by the Tribunal.”118 Furthermore, “the deliberations of the Tribunal shall take place
in private and remain secret.”119 Only members of the Tribunal may participate in deliberations, unless the Tribunal decides
otherwise.120 Lastly, no one may be present at the hearings other *47 than the parties, their representatives, members of the
Tribunal, and witnesses, unless both parties approve. 121
Although the Rules are silent on this point, three ICSID tribunals have considered whether an implied duty of confidentiality
exists between the parties to a proceeding where one party objects to the dissemination of information by the other. For
example, the tribunal in AMCO v. Indonesia122 faced a request by Indonesia to prohibit AMCO from disseminating
information to the press that Indonesia deemed to be a “one-sided” version of the events leading up to the dispute and
“presenting their case selectively outside the proceeding.”123 The AMCO tribunal concluded that, while nothing in the ICSID
Convention Rules prohibited a party from disseminating information relevant to ongoing proceedings, “both parties should
refrain, in their own interest, from doing anything that could aggravate or exacerbate the dispute.”124
In a different case, an ICSID tribunal faced a State party’s request to prevent the CEO of the opposing party from providing
information concerning the case to the company’s shareholders and investment analysts. 125 In such situations, parties to a
dispute may be under affirmative obligations to release information concerning an arbitration. The tribunal noted that “a
public company traded on a public stock exchange could, under domestic law, be ‘under a positive duty to provide certain
information about its activities to its shareholders, especially regarding its involvement in a process the outcome of which
could perhaps significantly affect its share value.”’126 As in AMCO, the tribunal affirmed that, at least under the ICSID
Rules, parties are free to speak publicly about arbitral proceedings “unless the agreement between the parties incorporates
such a limitation [requiring confidentiality].”127
Finally, at least one ICSID tribunal has affirmatively rejected a party’s claim that parties to ICSID cases were under a general
duty *48 of confidentiality in regard to the proceedings. 128 Specifically, the tribunal held that, because the Convention and
the Rules and Regulations did not explicitly refer to any such general duty, it could not be assumed that any implied duty
existed.129 In any case, the tribunal noted that any such implied duty, especially as applied to a State party, might “[deprive]
the public of knowledge and information concerning the government and public affairs.”130 The same tribunal nonetheless
recommended that “the parties limit public discussion of the case to what is necessary.”131
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As a practical matter, at least the key legal holdings of all ICSID awards are now published. 132 Parties to ICSID arbitration
generally consent to publication.133 Furthermore, even where one party does not consent, the other party “commonly releases
it for publication by such other sources as International Legal Materials, the Journal du Droit International, or ICSID
Reports.”134 Additionally, parties often disseminate information concerning an award to media and other third parties. 135
Even if an award remains unpublished by any source, ICSID regularly publishes excerpts from the legal holdings of the
award.136
Against this backdrop, interested parties petitioned the Aguas del Tunari tribunal on August 29, 2002, for permission to
intervene, and requested that the tribunal make public documents and hearings related to the case. 137 Specifically, petitioners
sought to formally intervene on the merits of the case in the arbitral proceedings and to *49 participate as amici curiae if
formal intervention were denied. Further, petitioners requested that documents generated during the proceedings and hearings
be open to the public.138 Finally, the petitioners requested that “the Tribunal visit Cochabamba, Bolivia and hold public
hearings concerning the facts underlying this claim.”139
B. Arguments for Confidentiality
Many well-founded arguments support the concept of general confidentiality in arbitral proceedings. Of course, these
arguments are not without important criticisms. The following section discusses the most widely advocated arguments in
favor of confidentiality and how each argument is relevant to the dispute in Aguas del Tunari.
1. Contract Principles
Arbitral proceedings are largely a matter of private contract between the parties to a dispute. From Professor Tahyar’s
perspective, this private choice deserves respect and deference: “[A]rbitral awards should . . . be kept confidential as they
constitute, by inference, a contract between the parties.”140 Under this view, the public should be excluded from all aspects of
arbitral proceedings.141
The concept of confidentiality as inherent to the contract derives primarily from the notion of party autonomy. 142 In choosing
arbitration, parties “privatize their dispute and take a form of market ownership of their disputing procedure.”143 In Professor
Edward Brunet’s estimation,
[i]f parties value privacy and confidentiality above financial efficiency, they should be able to resolve their disputes in a
manner that respects their priorities. This is an especially valid justification for a confidentiality rule since international
commercial *50 arbitration is a private regime in the sense that private parties - not taxpayers - pay for use of the system. 144
From a business perspective, privacy and confidentiality make arbitration an attractive option for contractual dispute
resolution. Approval of confidential arbitration practices is widespread among the international investment community. In
one survey, “three out of four top lawyers at multinational companies would prefer to settle cross-border commercial disputes
by arbitration rather than litigation.”145 Reasons cited in that survey include “more flexible procedures” and “the lack of
publicity surrounding hearings.”146 Companies cited “concern about lack of confidentiality” as a persuasive reason for
shunning traditional litigation in favor of arbitral proceedings. 147 In fact, at least one commentator conceives of a party’s
choice to arbitrate as an affirmative “rejection of the public courts.”148
Additionally, the flexibility of arbitration proceedings is often cited with approval by foreign investors, and at least some
have argued that this flexibility depends at least in part on guarantees of confidentiality. 149 As well-known Malaysian
arbitrator Sundra Rajoo states, “Arbitration is much preferred nowadays among businessmen for its flexibility. The parties
can appoint their arbitrators, and the proceedings are private and confidential - it is held behind closed doors . . . .”150 Given
the particularly fractious environment surrounding the entire process, AdT might very well have valued the privacy of the
arbitration process to solve what it viewed primarily as a private contract dispute.
However, petitioners in Aguas del Tunari argued that the subject of the dispute was not essentially private in nature. The
petitioners acknowledged that most arbitral proceedings, even those involving a public entity, generally concern issues that
“are of primary, if not exclusive, concern to the immediate parties to the proceeding.”151 However, petitioners argued that
because this dispute governed “public order and access to water,” the circumstances distinguish Aguas del *51 Tunari from
other proceedings and justify breaching the traditional confidentiality of proceedings. 152
Some courts have accepted similar arguments and created a “public interest exception” to any general duty of confidentiality
implied from contract principles, especially in sovereign entity proceedings:
Where one of th[e] parties is a government, or an organ of government, neither the arbitral agreement nor the general
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procedural powers of the arbitrator will extend so far as to stamp on the government litigant a regime of confidentiality or
secrecy which effectively destroys or limits the general governmental duty to pursue the public interest. 153
However, Weixia notes that carving out this exception, even where parties have agreed to confidentiality, begs the question
of
how in the future any party dealing with a governmental entity could sensibly agree to refer any dispute arising out of those
dealings to arbitration in the knowledge that the public entity will have almost unfettered right to disclose any information
that might arise during the course of the arbitration, no matter how commercially sensitive it may be, simply by labeling it as
a matter of ‘public interest.’154
However, not all states permit broad disclosure. One French court even fined a party that sought to overturn an arbitral award
in open court because the party “permitted a public debate of facts which should have remained confidential.”155
Petitioners also sought to ensure that “their concerns [were] represented to the Tribunal” and argued that, without public
scrutiny, the tribunal’s consideration of the matter would lack “an important perspective not represented by either Aguas del
Tunari or the Government of Bolivia.”156 Without explicitly alleging outright collusion, the petitioners warned the Tribunal
against creating a situation where “heavily indebted developing countr[ies]” would “fac[e] strong pressure to attract foreign
investment, [which] could create incentives that run contrary to mounting the most vigorous defense against Aguas del
Tunari’s claims.”
*52 Francisco Orrego Vicuña, former President of the World Bank Administrative Tribunal and a member of the ICSID
Panel of Conciliators and Arbitrators,157 argues otherwise. He dismisses arguments of those who call for increasing
transparency in arbitral proceedings in the interest of the public, stating that “highly respected professional arbitrators will, in
any event, be aware of the public interests involved in the cases before them.”158 While Orrego at least contemplates that
arbitrators will be aware of public issues that may be involved in a given dispute, some contend that the proper role of an
arbitrator is to “simply resolve the dispute inter partes without looking at the wider political and economic impact of the
issues in debate.”159 As such, “arbitrators are not guardians of the public interest.”160 The arbitrator is simply a “creature of
contract,” without which “the arbitrator would have no authority to act.”161
Of course, the public itself also has a legitimate interest in investor protection. Providing alternative means outside of
national courts in which to resolve investment-related conflicts encourages cross-border investment by depoliticizing
state-party investment disputes.162 Thus, “the foreign investor’s interest is only guaranteed by a direct right of access to a
neutral and effective dispute resolution procedure to enforce the specific rights afforded to their investment by the relevant
treaty.”163 Presumably, providing an attractive alternative dispute procedure for businesses - which may mean providing for
confidentiality - also serves the public interest.
The public has a more specific interest in the confidentiality of arbitration proceedings in some instances. For example, “the
public interest may at times require arbitration proceedings to remain confidential” in cases of “national security, relations
with foreign countries or the ordinary business of government.”164 One could imagine such a situation between a foreign
investor with a defense contract *53 concerning a sensitive military apparatus and the government-expropriated factory in
which the item was constructed.
The tribunal in Aguas del Tunari took the side of party autonomy. In its answer denying the petitioners’ requests, the tribunal
found that, due to “the consensual nature of arbitration,” the tribunal “does not, absent the agreement of the Parties, have the
power to join a non-party to the proceedings; to provide access to hearings to non-parties and, a fortiori, to the public
generally; or to make the documents of the proceedings public.”165 The tribunal failed to address other grounds, such as
human rights, upon which petitioners argued for transparency. At least in this case, principles of contract and party autonomy
would guarantee confidentiality, despite any arguments to the contrary.
2. Protected Information
Businesses also argue that confidentiality is necessary to protect intellectual property, trade secrets, or business information
that may be disclosed as part of the arbitration proceedings.166 Many investments subject to ICSID arbitration “involve
transfers of technical data and know-how.”167 Easing restrictions on confidentiality in such arbitrations might “cause public
disclosure of secret technical data and expertise.”168 For example, in Aguas del Tunari, AdT “refused to disclose the financial
model behind its price [increases] on the grounds that the model itself was a commercial secret.”169
Some commentators have pointed out that such concerns could be easily addressed by providing for procedures whereby
such information would be redacted or excluded entirely from publication. 170 Some dispute resolution systems already have
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procedures in place to protect such information. The International Chamber of Commerce, *54 for example, directs arbitral
tribunals to “take measures for protecting trade secrets,” although it does not prescribe a specific method for doing so. 171
ICSID does not take a formal position on this issue. However, the general provisions ensuring confidentiality would appear to
cover this type of information. Even if ICSID were to provide non-party access to arbitral proceedings, as has been urged,
any amendments to the current provisions “should make clear the authority of the tribunal to prescribe the conditions (for
example, to protect proprietary information)” at each stage of the arbitral proceedings.172 Therefore, I find it reasonable to
infer that the institution would be cognizant of these concerns in any event.
3. Rendering Arbitration Superfluous
Confidentiality is one of the primary reasons parties choose to arbitrate rather than litigate. If arbitration becomes transparent,
then the process may begin to look more like traditional litigation, depriving the parties of one of the primary benefits of the
arbitral process.173 Mr. Orrego emphatically asserts that rescinding confidentiality in arbitral proceedings would be “fatal for
the role of arbitration”174 because arbitration “would become more closely related to ordinary public court proceedings.”175
Such a move that melds arbitration with ‘judicial adjudication . . . . should by all means be avoided.‘176 Such strong
opposition reflects practical concerns that were confidentiality protections to be abridged, “there might be a flight by the
arbitration community.”177
Even if confidentiality is traditionally one of the benefits of arbitration, the protection of confidentiality in such proceedings
is already subject to significant exceptions.178 The current state of legal confidentiality provisions is shaky at best. As Yves
Fortier, President *55 of the London Court of International Arbitration, states, “what is evident today is that, with respect to
confidentiality in international commercial arbitrations, nothing should be taken for granted.”179 Indeed, “parties’
expectations about the privacy and confidentiality of their arbitral proceedings are often disappointed, or even negated by the
courts.”180
Furthermore, confidentiality is often practically unachievable. Even if the parties do not permit the publication of an award,
the details of an award are frequently discovered when winning parties seek to enforce the award in a national court. 181 That
is, “[w]hen enforcement of an award is sought, either at the place of arbitration or in another country, the imprimatur of
judicial confirmation may be unavoidable.”182
However, one can reasonably assume that even wholly transparent arbitration would still present attractive benefits to parties.
For example, arbitration proceedings provide independent, arguably unbiased adjudication that perhaps would not be possible
in either party’s state courts. Arbitral judgments are also widely regarded as easier to enforce than traditional court
judgments.
Because ICSID is such a specialized forum, specifically designed to handle complex foreign investment disputes where one
party is a State,183 it seems reasonable to say that the potential for investor flight from arbitration due to greater transparency
would be an unlikely occurrence as the advantages provided by such a specialized forum are not currently elsewhere
available. Surely, the other benefits of the forum would continue to offer attractive options over the courts of a host state.
4. Gathering Evidence
Because arbitrators may lack the power to subpoena witnesses or otherwise compel discovery of evidence, confidentiality of
the proceedings may be an important inducement in securing testimony and *56 evidence.184 Arguably, witnesses may not
provide testimony or admit certain facts if their testimony will be subject to public scrutiny. Thus, the parties may wish to
provide confidentiality to such statements in order to entice witnesses to voluntarily participate in the proceedings.
Furthermore, the powers of a state could interfere with the ability to access witnesses, such as a state’s refusal “to issue . . .
visas for witnesses in order to handicap the commercial party’s preparation or presentation of its case.”185
If witnesses are guaranteed confidentiality, they may be willing to provide fuller, more truthful recitations of fact in cases
where those facts might lead to criminal or civil sanctions for the witness should they become public. However, the integrity
of a witness’s statement may be suspect where it can be disclosed behind closed doors with little or no opportunity for those
that would contradict the truthfulness of the disclosures to do so.
Petitioners in Aguas del Tunari similarly argued that the integrity of the tribunal’s fact-finding could not be ensured if the
proceedings were not open to public scrutiny and participation. 186 The tribunal, they argued, required their participation by
necessity, as they “ha[d] unique expertise and knowledge that would contribute to the Tribunal’s resolution of the claim.”187
In the instant case, this knowledge included “important factual information that the other parties may not have.”188
As an example of potential misinformation, petitioners cited the increase in water rates alleged by the people of Cochabamba:
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while Bechtel claimed that the water rates went up “little, barely 10 percent,” petitioners claimed to have evidence
“demonstrating that the average rate increase in Cochabamba was 50%, with many poor residents’ rates increasing by
significantly more.”189 As such, the Tribunal could potentially make factual findings at odds with the truth if only the formal
parties were allowed to present their versions of the facts.
The tribunal disagreed. In its letter denying the petitioners’ requests, it stated that “there is not at present a need to call
witnesses *57 or seek supplementary non-party submissions.”190 However, the tribunal also “[held] this view without in
anyway prejudging the question of the Tribunal’s authority to . . . receive information from non-parties on its own
initiative.”191 Given the vehemence and scale of the public opposition in the instant case, though, it is hard to imagine under
what circumstances or authority the tribunal would accept such information.
5. Effect on Other Investment Contracts
Parties may have a legitimate interest in not wanting certain admissions or allegations disclosed to the public, or the loss of a
case publicized, “especially if the party is involved in other cases with similar claims and defenses.”192 Such a party may be
adversely affected by admissions before one tribunal or the persuasive value of one tribunal’s decision in a different case
arising from similar facts. Further, publicity of the arbitral proceedings may more broadly affect a party’s perceived
reputation in the field of foreign investment, creating financial impacts far beyond the instant dispute.
Conversely, parties may foreclose favorable effects of transparency, such as beneficial publicity following a positive award
and the res judicata effect of particular findings or holdings made by the tribunal before other forums. 193 In fact, “protecting
the confidentiality of arbitral proceedings can produce inconsistent resolutions of disputes arising out of the same
transaction.”194 International investments often involve consortiums of companies from several countries. As such, several
arbitration clauses arising out of differing contracts or international treaties could result in multiple disputes before different
institutions of adjudication. Thus, “the same dispute may be resolved in inconsistent ways.”195 At least some feel that “[t]he
prestige of the arbitration institution risks severe erosion if such inconsistencies occur.”196
For Bechtel, the impact of negative publicity on the arbitration proceedings was undeniable. Protestors outside of Bolivia put
the dispute with Bechtel on the international news map:
*58 Protestors targeted the Washington D.C. house of [AdT] president Michael Curtin in February 2004 to demand that
Bechtel and its associates drop their [ICSID] case against Bolivia. A September 2002 protest outside Bechtel headquarters in
San Francisco resulted in the arrest of 15 people. This followed San Francisco’s [B]oard of [S]upervisors approving a
resolution calling on Bechtel headquarters to renounce the case with Bolivia in July 2002 . . . . Company executives in San
Francisco and Spain faced protests outside their houses, and demonstrations at major water industry events led Bechtel
chairman and CEO Riley Bechtel to personally intervene . . . due to the negative publicity the company received. 197
In addition, demonstrations were held in front of the offices of Bechtel’s three partners in Europe. 198
Incendiary images of these protests reached the first world. In San Francisco, the drama of “police and fire officials [using]
electric saws to separate and remove about a dozen protestors who chained themselves together in Bechtel’s lobby”199 caught
widespread attention after the protestors were arrested. New Zealand activists “got hold of a fire truck, covered it with
anti-Bechtel and anti-[President] Banzer signs, drove to the local Bolivian government consulate and before the amazed eyes
of local media, hosed it down at high pressure.”200 Foreign heads of state also pressured Bechtel to end arbitration
proceedings.201
Furthermore, the negative publicity created at least some economic costs for Bechtel. Jonathan Marshall, Bechtel’s media
relations manager at the time, insisted that “[g]iven how poor Bolivia is, Bechtel’s intent was not to squeeze money out of the
country. We simply couldn’t accept blame for what happened.”202 This explanation for the company’s case before ICSID
failed to assuage the company’s critics, leading to losses in both reputation and financial prospects. For example, following
protests in San Francisco, the city’s Board of Supervisors canceled a management contract with *59 Bechtel worth
US$45,000,000, under which Bechtel was to reconstruct and improve the public water system. 203
6. Facilitating Settlement
If arbitration is not confidential, parties may be unwilling to admit certain facts or negotiate towards settlement, especially in
the case of state-parties, who answer to many constituencies and may have other objectives, such as staying in power. Thus,
parties may be more likely to waste efforts and expense going to a final verdict as opposed to negotiating a mutually
agreeable outcome.204
Many argue that the confidentiality of the proceedings facilitates settlements by allowing the free flow of information that
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may otherwise remain hidden. Moreover, at least one commentator has noted in the parallel context of mediation that
confidentiality is necessary to instill the parties’ trust in one another and the tribunal, such that the free flow of information
can occur.205 However, governments may not have the ability to tap into the greater and freer exchange of information
ostensibly offered by confidential arbitral proceedings; “people are very good at trading information [,] but developing
country governments can’t tap into this world.”206
Even foreign investors, most of whom come from developed nations, have adverse reactions to the lack of transparency when
parties find themselves before arbitration panels. In many arenas, representatives of corporate investor interests warn that
lack of transparency is a primary concern for companies in the global climate. 207 Commercial disputes between companies
and foreign governments “are indicative of larger institutional problems that American companies face when they go into
these countries, like a lack of transparency, corruption and a legal system that doesn’t provide any kind of a level playing
field.”208
Even so, parties to a case have compelling interests in negotiating mutually beneficial outcomes. The ability to resort to
confidential *60 arbitration focuses on the “continuing interests of the parties in safeguarding their mutual relationship and
not just in settling a past dispute as may happen in arbitration. Such a continuing relationship is essential for pursuing
corporate business in a global environment.”209 In fact, some even argue that “publicizing the existence of a dispute may also
jeopardize the long-cooperation envisioned by the parties.”210
However, others also note that “there is little incentive for investors to settle disputes amicably given the highly favorable
outcomes for corporations which have initiated proceedings under such [bilateral investment treaties].”211 One recent
analysis has found that “ICSID tribunals have ruled in favor of the investor and ordered the government to pay compensation
in nearly 70 percent of cases.”212 For a state’s part, at least some contend that, because “pure financial interests rarely
dominate a state’s agenda in arbitration,” arbitrations involving states as parties “usually cannot be resolved by a financial
settlement.”213
C. Arguments Against Confidentiality
Many well-founded arguments also support the concept of general transparency in arbitral proceedings. These arguments are
not without important criticisms. The following section discusses the most widely advocated arguments in favor of
transparency and how each argument was relevant to the dispute in Aguas del Tunari.
1. Hampering the Quality of Arbitration Awards
Lack of transparency in arbitral proceedings protects arbitrators and their efforts from public scrutiny. As such, parties may
lack important information when choosing an arbitrator. Additionally, without access to the awards themselves, no precedent
is created whereby parties may have greater predictability and guidance in disputes.
As arbitrators are chosen by the parties, this lack of information can obscure the quality of the adjudication from future
parties and the public, who are accepting an arbitral decision in lieu of a judicial *61 adjudication.214 Furthermore,
confidentiality may inhibit a unique opportunity to train current and future arbitrators. 215 This confidentiality of awards may
affect the quality of the awards themselves. For example, “are international arbitrators applying the law consistently, and in
such a way as to foster a certainty of and predictability in international business transactions?”216 When awards are not
published, it is difficult to analyze how the law was applied.
Lack of transparency in arbitral proceedings also inhibits the creation of precedent in international law, creating inefficiencies
for parties who may settle if outcomes are more predictable, for parties and adjudicators who may have to duplicate efforts of
those in other proceedings on the same issue at greater expense, and for academics and practitioners attempting to evaluate
and clarify international law.217 In response to one law professor’s request to use information in his course materials from an
arbitration in which he sat on the tribunal, counsel for the parties emphatically denied him permission: “Tempting as it must
be for a professor of law to use the materials in class,” one of the lawyers to whom the request had been made claimed to be
“somewhat surprised by [the professor’s] suggestion to use the details of the case for what must be considered public
purposes.”218 Here, the parties’ desire for confidentiality trumped any other considerations. At least one commentator has
advocated that confidentiality interests would trump the interests of all scholars: “[T]he law is here more for the parties than
for its students. The true interest in favor of confidentiality overrides the curiosity of the public and of scholars.”219 The lack
of judicial review or an effective appeals process further exacerbates the absence of established international law. As one
commentator notes in the context of first-world arbitrations, “[t]he absence of significant judicial review of arbitration awards
reinforces the creation of private law in a privatized arbitration system.”220 Thus, this privately-established and specialized
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law is kept secret from the very analysis required to make it consistent and legitimate.
The lack of precedent can also complicate the planning process for businesses contemplating investment in a certain country.
As *62 Alexis Brown aptly notes: “How can business people be expected to set prices and allocate risk, without certainty and
predictability as to the law governing their deal?”221 The availability of even persuasive precedent would create economic
benefits for investors and businesses by allowing the evaluation of consistency among international arbitrators and their
decisions. This predictability in international business transactions would create a body of experience with respect to
investing in a particular country and resolving disputes with that state, increasing the information available to potential
investors prior to a transaction.222
Petitioners in Aguas del Tunari argued that, although the tribunal’s award in the present case would not carry precedential
value, the case nonetheless was “likely to carry persuasive weight with other arbitral tribunals resolving similar claims.”223
As such, petitioners claimed that transparency of the proceedings was necessary to ensure a solid foundation for potential
“global implications.”224
Of course, the process of arbitration is arguably not designed to influence the outcome of disputes beyond the instant case.
Unlike an international court or other tribunal, arbitral decisions are limited only to the circumstances of the parties resorting
to such a method purposefully in lieu of a court decision. As court decisions may be more predictable in the sense that bodies
of law in those forums are usually well-developed, parties who choose to arbitrate do so in lieu of that predictability. Further,
arbitral proceedings attempt to resolve disputes for parties who may wish to maintain a mutually beneficial relationship,225
such that the focus of the decision or the award is not merely a recital of international law, but rather an agreeable outcome to
the dispute at hand.
2. Legitimacy of the Institution Itself
Lack of transparency may harm the legitimacy of the institution itself. For example, upon confronting ICSID’s confidentiality
strictures, a party new to ICSID might attribute “ICSID’s reluctance to publish awards . . . to the unreliability of the tribunals’
decisions.”226 *63 Thus, some argue that the confidentiality rules “contribute to the mystification of ICSID.”227
The petitioners explicitly claimed that the confidentiality of the proceedings in the case negatively impacted the legitimacy of
the tribunal itself, as well as any award that might be forthcoming.228 First, petitioners argued that, simply by virtue of its ties
to the World Bank, the Centre could not be “an objective arbiter of this dispute.”229 They cited potential conflicts of interest
that “could call into question the integrity of the process.”230 ICSID is an “autonomous international organization,” but
admits that it “has close links with the World Bank.”231 The World Bank, in turn, closely works with multinational
corporations, particularly in the sector of water privatization, “helping them to acquire the water assets of debtor nations.”232
The World Bank can influence governmental decisions about public resources by withholding loans or investment in that
country.
In this case, the Bolivian government’s own decision to privatize its water system was not made absent international
influence or pressure. The President of Bolivia decided to support privatization only after the World Bank conditioned a
two-year extension of a loan to the country on the outcome of Bolivia’s decision to privatize.233 Additionally, the
International Monetary Fund and the World Bank required the government to privatize its water system in order to secure
further development loans.234
Because of the broad impact on public interests of any award rendered by the tribunal, “the legitimacy of the Tribunal’s role
in th[e] arbitration depend [ed] in part on ensuring full public access to the Tribunal’s proceedings, obtaining a complete
understanding of public concerns arising out of the claim and giving those concerns real consideration.”235 Petitioners cited
in support of this argument *64 what they characterized as the “strong and wide-spread public skepticism concerning the
legitimacy of this Tribunal’s resolution of Aguas del Tunari’s claim, based in large part on the secrecy of the Tribunal’s
proceedings and their potentially broad impacts.”236 Seen from this perspective, the “skepticism could weaken public
acceptance of this Tribunal’s award, as well as the operations of other arbitral tribunals.”237
Moreover, the pressure upon states as parties is arguably greater because they must answer to many constituencies. In order
to safeguard the perceived value and validity of an ICSID tribunal’s decision, particularly given its unique structure and
associations with the World Bank and other multinational entities, “it is vital to states that they feel that the tribunal treated
them fairly and that their domestic constituencies perceive that the tribunal treated them fairly.”238
3. Principles of Governance and Democracy
Unlike traditional international commercial arbitrations, disputes that involve governments as parties often give rise to
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objections that transparency is justified by virtue of the need for good governance. As Nigel Blackaby explains:
Citizens of Mexico, India or Russia ought not simply to be told: “your money has just been used to satisfy an international
arbitration award,” the details of which cannot be divulged. Democratically elected governments are accountable to their
electorate and should come under scrutiny in the political process if they are engaged in conduct contrary to their
international obligations. Transparency through access to the record and to hearings ought therefore to discourage
governments from acting in an arbitrary way towards foreign investors. 239
The United States government argues that “[investor-State disputes are] to be distinguished from a typical commercial
arbitration on the basis that a State [is] the Respondent, the issues [have] to be decided in accordance with a treaty and the
principles of public international law and a decision on the dispute could have a significant effect extending beyond the two
Disputing Parties.”240 In these situations, “conducting arbitrations implicating the public interest in conditions *65 of secrecy
is unacceptable.”241 Moreover, as cases concerning provisions of bilateral investment treaties increasingly are adjudicated by
arbitration, confidentiality “limits scrutiny of government decision-making.”242
Other organizations have been even more vehement. The World Wildlife Fund and the Institute for Sustainable Development
both publicized a report that found that such arbitrations “are ‘one-sided,’ lack ‘transparency,’ and are ‘shockingly unsuited
to the task of balancing private rights against public goods.”’243 One television show aired views that “secret NAFTA
tribunals can force taxpayers to pay billions of dollars in lawsuits,” causing democracy to “[go] out the window.”244
Conversely, some contend that a government itself sufficiently represents the interests of its people. After all, in a democracy
the representatives of government are chosen to do just that. However, the petitioners contended that the government of
Bolivia could not adequately represent the interests of the Bolivian public, not only in this case, but well into the future. They
argued that, in the event of a potential award against Bolivia, the government “will have a strong disincentive to try to protect
the public interest in future cases in which doing so might affect foreign investments.”245 Thus, because many developing
countries depend on foreign investment, the government could not “avoid this obstacle to fulfilling its democratic
responsibility to protect the interests of Bolivian citizens.”246 While this may be true when considered in view of a singular
case, such as the instant one, where a segment of the population’s interests - here, the water consuming public of
Cochabamba - may be adversely affected without its input, when considered more broadly, a government’s attempts to
protect foreign investment in general could be seen to promote the public’s best interests more generally.
Further, petitioners argued that a confidential award in the case could “undermine, and perhaps even reverse . . . legislative
victories *66 that have provid[ed] legal protection for the rights of these communities.”247 This concern that potential
international awards could hamper a government’s ability to provide legitimate legislation governing its own people is
significant. One United States Congressman expressed concern about “sacrificing state and local laws at the altar of
ill-defined international investor rights.”248 In these cases, “a claimant who brings an arbitration against a state on tenuous
grounds may ask for monetary damages when in reality that claimant seeks a shift in policy, or a change in law or
regulations.”249
Moreover, even if the government could fully represent the interests of its people, the very nature of international arbitration
such as that governed by ICSID may create an unequal bargaining position between governments and foreign investors so
that governments cannot practically advocate for their positions. For example, not every award is publicized and can be used
to a state-party’s benefit. But for investors, who generally patronize one of the select large law firms that specialize in this
arena, they benefit as members “of that ‘magic circle”’ whereby “those firms . . . have a wider array of jurisprudence with
which to fight their case.”250 While it is true that client permission might be necessary to facilitate such information-sharing,
such practical obstacles may not be particularly inhibitive where it is arguably to any major foreign investor’s benefit that
such bodies of jurisprudence be maintained and utilized with respect to a jurisdiction or state-party with which it is already or
may contemplate doing business. As such, some of the multinational companies involved in ICSID disputes have become
“veteran[s]” of the tribunal such that they have accumulated “considerable expertise in conducting lawsuits against states.”251
Additionally, the government’s need to foster a reputation as an attractive environment for foreign investors may weaken its
bargaining power. In one case, a United States Ambassador issued the following warning for a Mexican region in a dispute
with a multinational investor: “If this is the way you do business in San Luis Potosi, we’re going to tell other businesses in
the United States who want to invest in Mexico, you can invest here, but don’t invest in *67 San Luis Potosi.”252 The
president of the foreign corporation involved insisted that, as long as an investor could pressure a government to agree to an
investment deal, “you don’t have to worry about [the] local community.”253
The process arguably could be abused by investors to threaten comparatively weaker national governments. Investment
treaties are “an open invitation to unhappy investors, tempted to complain that a financial or business failure was due to
improper regulation, misguided macroeconomic policy or discriminatory treatment by the host government and delighted by
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the opportunity to threaten the national government with a tedious expensive arbitration.”254 In fact, at least “twenty percent
of the companies [before ICSID] are on the Global 500” while “93 percent of the cases involve low-or-middle-income
developing countries.”255
In the instant case, petitioners argued that “an award against Bolivia [would] harm the direct interest of all the Bolivian
petitioners in ensuring that the Government of Bolivia can implement legitimate measures to maintain public order and
guarantee access to services and resources essential to the lives of all Bolivians without fear of major financial penalties for
doing so.”256 The very claim, they argued, “requires this Tribunal to decide whether an international investment agreement
requires Bolivia to upset the balance, established by Bolivia’s democratic political processes, between property rights and
governmental authority to implement public health and sanitation regulations.”257
In a somewhat alarmist call to arms, a spokesman for the Bolivia-based Democracy Center claimed that “local governments
from Alaska to Chile will be dragged before secret panels as multinational corporations, like Bechtel, seek to undo local
environmental, health, worker and consumer protections, branded as barriers to free trade.”258 Developed countries, from
which most investors come, are *68 not immune to similarly vehement consternation at this prospect. 259 However, at least
some United States government representatives have “actually argued that the ability of investors to use legal threats to
influence legislative debates is a healthy innovation that will prevent governments from passing laws that violate
international agreements.”260
4. Facilitating Corruption
Confidentiality of proceedings can also cover up abuse by foreign governments. Incidents of “kickbacks, payoffs, bribery,
embezzlement, and collusive bidding” have been documented by news organizations in relation to projects funded by the
World Bank in various locations around the world. 261 As World Bank President, Paul Wolfowitz “encourag[ed] government
openness” in response to these problems.262 In the past six years, the World Bank received more than 2,000 allegations of
corruption and found “a recurring pattern of bribery, kickbacks, front companies, and shell companies.”263
For example, in 2004, Lahmeyer International, a German engineering contractor, was convicted in Lesotho, an African
country, of “paying more than $500,000 in bribes to the former chief executive of the Lesotho Highlands Water Project,
which was designed to transfer water from Lesotho to South Africa,” a project funded by the World Bank.264
In such an environment where the risk of corruption is plainly evident, although certainly not omnipresent, secrecy of arbitral
proceedings raises the possibility that governments could collude with foreign companies to defeat local opposition. For
example, in Metalclad v. Mexico, Metalclad claimed that the Mexican government urged them to take the case before ICSID
in order to “force” the government to open a waste disposal plant opposed by environmentalists. 265 Observers noted that “this
case raises the disturbing *69 possibility that investors can use their rights to collude with governments to force unpopular or
even dangerous investments on unwilling populations.”266
The World Bank has found Latin America to be “the region with the greatest wealth inequality in the world.”267 Within that
framework, “Bolivia is considered one of the most corrupt, per Transparency International’s annual index of political
dishonesty.”268 Therefore, the possibility remains that confidentiality provisions not only protect governments from scrutiny
in their decision-making, but in some cases may facilitate corrupt or illegal practices.
While there is no direct evidence of corruption in the Aguas del Tunari case, circumstances certainly lent to those suspicions,
further undermining the public’s faith that its needs were being considered. For example, at the ceremony for the contract’s
signing, “the President of Bolivia and the mayor of Cochabamba drank champagne with consortium executives.”269 Shortly
thereafter, rumblings of concern amongst the public grew in fervor. Additionally, the “Bolivian Times suggested that the
[contract’s] generosity was most likely due to political connections - the local partner in Aguas del Tunari, ICE Ingenieros,
was owned by one of the most affluent and influential men in Bolivia.”270 While such events and information may not have
directly led to the public’s concern and negative perception of the project, they certainly could not have helped.
IV. Frustrating ICSID’s Goals
When creating ICSID, the Convention delegates thought that “an institution specially designed to facilitate the settlement of
investment disputes between governments and foreign investors could help to promote increased flows of international
investment.”271 Part of the original motivation for creating the institution was to “remove investment disputes from the realm
of diplomatic protection through *70 direct access to an international remedy.”272 In doing so, “[t]he dispute settlement
process is depoliticized and subjected to objective legal criteria.”273 However, protecting confidentiality may frustrate these
goals and inhibit the usefulness of the institution itself.
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Certainly, petitioners argued that confidentiality in arbitral proceedings could actually hamper the expansion of foreign
investment globally. Growing public suspicion “could affect other arbitrations and the efforts of many governments to
expand foreign investment worldwide.”274 At least in Bolivia, their prediction appears to be coming true. Current Bolivian
President Evo Morales has signaled the country’s reluctance to submit itself to ICSID jurisdiction at all, despite its obligation
under many bilateral investment treaties to do so.275
While President Morales has suggested doing away with any current and future participation before the institution entirely,276
he has also alternately suggested picking and choosing in which particular cases his country will appear. 277 In May 2006, he
stated that “the Bolivian State could refuse to respond to an international court of arbitration.”278 More recently, President
Morales encouraged Venezuela and Nicaragua to leave ICSID entirely, along with Bolivia: “We emphatically reject the legal,
media, and diplomatic pressure of some multinationals that . . . resist the sovereign rulings of countries, making threats and
initiating suits in international arbitration.”279 Morales offered little explanation for his stance, other than that “[t]he
governments of Latin America, and . . . the world, never win the cases. The multinationals always win.”280 Of course, one
could argue that the great expense of bringing a claim before ICSID might mean that claimants generally only bring those
claims that have a likely chance of winning under the law.
Argentina has already “challenged the entire [bilateral investment treaty] arbitration regime administered by [ICSID].”281 Its
*71 challenge is due in large part to the influx of cases brought by investors to ICSID following that country’s economic
crisis in 2001. A country so recently near the precipice of bankruptcy might reasonably fear the possible financial
consequences of collective judgments.
Conversely, publicity of a case may inhibit parties from even attempting to settle arguably legitimate disputes. While Bechtel
denied that the negative publicity it was receiving as a result of the dispute was the reason behind its decision to withdraw its
petition against Bolivia before ICSID, others felt sure that this was the primary motivation behind the company’s decision.282
A statement included in the final agreement ending the dispute read that “the concession was terminated only because of the
civil unrest and the state of emergency in Cochabamba and not because of any act done or not done by the international
shareholders.”283
Some commentators claim that, should an institution “mitigate or diminish . . . strict insistence on confidentiality” in
arbitration, “this would constitute a significant deterrent” such that parties “would refrain from submitting their dispute to
arbitration . . . thus exacerbating problems related to international trade and investment.”284 In fact, “erosion of the right to
confidentiality will, in time, serve only to erode the value of the arbitration process to the international business
community.”285
However, such disputes have hardly slowed multinational corporate investment in water privatization, even after the lessons
of Aguas del Tunari. For its part, Bechtel “has closed two major water deals [after Aguas del Tunari], winning a thirty-year
concession for the port city of Guayaquil, in Ecuador, and a controlling stake in the water company of Tallinn, the capital of
Estonia.”286 Even prior to the dispute, Bolivia had arguably “nationalized its oil industry” three times, “[y]et investors keep
coming back.”287 In fact, “many investors will acquiesce as long as they are still given some profit potential.”288 Thus, fears
that ICSID will become irrelevant seem, amid calmer inspection, to be unfounded.
*72 V. ICSID Flirts with Greater Transparency
On October 22, 2004, the ICSID Secretariat published a Discussion Paper that contemplated greater access to ICSID
arbitrations by third parties.289 The paper urged three specific changes to then-current ICSID arbitration practices.
First, the paper noted that legal holdings in ICSID awards were often not published until several months after the awards
were rendered, even where the parties had consented to the publication of the awards. 290 While Rule 48(4)291 authorized
ICSID to publish excerpts of the legal holdings of a decision even where parties had not consented to publication, the paper’s
author advocated amending the rule “to make it mandatory for ICSID to publish the extracts.”292 This, the author reasoned,
would benefit parties with cases pending before ICSID that involve similar issues to cases already decided but perhaps not
published.293
Second, the paper urged the amendment of Rule 34 294 and Article 41 of the Additional Facility Arbitration Rules,295 rules set
aside *73 to be used only for the adjudication of disputes arising under the North American Free Trade Agreement, to clearly
grant an ICSID tribunal the authority to “accept and consider submissions from third parties.”296 At the time the paper was
published, two tribunals governing disputes between investors and states held that they had “broad authority to accept and
consider submissions from third parties” under the UNCITRAL rules.297 However, several ICSID arbitration tribunals ruled
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to the contrary.298 The author urged these amendments in light of cases “where the process could be strengthened by
submissions of third parties,” and specifically referred to “civil society organizations” and business groups.299
Finally, the paper called for the amendment of Rule 32(2)300 and Article 39(2),301 which together require the consent of both
parties before a tribunal can make hearings in a case open to the public. 302 The paper advocated amending the relevant
provisions “so that the consent of both parties would no longer be required for decisions of the tribunal to permit additional
categories of persons to attend the hearings or even to open them to the public.”303 However, “such amendments should
require the tribunal, before making the decisions, to consider the views of the disputing parties, as well of those of the third
parties concerned, and to consult with the Secretariat of ICSID on the administrative arrangements involved.”304
Following the publication of these suggestions, the ICSID Secretariat “sought comments on the Paper from business and civil
society groups and from arbitration experts and institutions around the *74 world.”305 As a result, the Centre published a new
paper that suggested specific amendments to the language of the Rules that would implement the aforementioned
suggestions.306 The Secretariat then again received comments concerning the provisional language. 307 Thereafter, “[i]n
December 2005, the ICSID Secretariat submitted to the members of the ICSID Administrative Council for vote amendments
to the ICSID Rules and Regulations.”308 The final version of the proposed amendments “reflect, in particular, comments
received in response to the Secretariat’s Working Paper of May 12, 2005” as well as the original Discussion Paper.309
On April 10, 2006, these amendments came into effect. 310 The new amendments adopted two of the original suggestions.
First, the new rules amended Rule 48(4) to make the publication of “excerpts of the legal reasoning of the Tribunal”
mandatory and prompt.311 Additionally, Rule 37 was amended to allow submissions of non-disputing parties “[a]fter
consulting with both parties” and subject to several requirements.312 No other amendments relevant to confidentiality were
made.
*75 VI. Conclusion
As of December 15, 2005, half of Cochabamba’s population remained without water, while others had water service for
between two and fourteen hours per day. 313 Some who have access to water receive it not through pipes or from wells, but
rather “through deliveries made two or three times a week by freelance water dealers.”314 Semapa, the local authority now
charged of providing water services in Bolivia, “cannot secure big international loans, and it cannot raise rates, since few here
could pay them.”315
Some commentators have suggested that the failure of water privatization in Cochabamba, while perceived as a popular
victory for the Bolivian people, actually constituted a “major missed opportunity for residents.”316 According to one study,
“the evidence suggests that the lowest five deciles of the urban population stood to gain [the] most from the successful
implementation of the contract.”317 Even former Bolivian President Jorge Quiroga admitted that, “in the end . . . it will be
‘necessary to bring in private investment to develop the water.”’318 Thus, even after Aguas del Tunari, it seems that Bolivia,
at least with respect to its water, is back to square one.
Footnotes
1
J.D., 2007, Northwestern School of Law of Lewis and Clark College; B.A., 2004, Political Science, Arizona State University.
Associate Professor of International Law at the School of Law of Pontifica Universidad Católica de Chile (2008). Foreign
Associate of Guerrero, Olivos, Novoa y Errázuriz, Santiago, Chile (2007-2008). The author thanks Professor Edward Brunet at
Lewis & Clark Law School for his advice and assistance with earlier drafts. The author also thanks Vice-Dean Roberto Guerrero
Valenzuela at the School of Law of Pontificia Universidad Católica de Chile for his support and stewardship during the author’s
visiting professorship at the University.
2
J.D., 2008, Benjamin N. Cardozo School of Law of Yeshiva University; B.A., 2004, Spanish and French, Washington University.
Equity Research Analyst, J.P. Morgan, Santiago, Chile.
3
Anthony DePalma, NAFTA’s Powerful Little Secret; Obscure Tribunals Settle Disputes, but Go Too Far, Critics Say, N.Y.
Times, Mar. 11, 2001, at BU1.
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4
Id. at BU1, BU13.
5
World Bank, About ICSID, http:// icsid.worldbank.org/ICSID/ICSID/AboutICSID_Home.jsp (last visited Feb. 24, 2010).
6
Id.
7
At the relevant date, September 1999, Aguas del Tunari, S.A., was a Bolivian company organized under Bolivian laws. Twenty
percent of the shares were owned by four Bolivian companies: Constructora Petricevic, S.A.; Compañia Boliviana de Ingeniería,
S.R.L.; ICE Agua y Energía, S.A.; and Sociedad Boliviana de Cemento, S.A. Aguas del Tunari v. Republic of Bolivia, 20 ICSID
Rev. Foreign Investment L.J. 450, 470 n.29 (2005) [hereinafter Tunari]. Twenty-five percent of the shares were owned by a
Uruguayan company, Riverstar International, S.A. Id. at 471. The final fifty-five percent of the shares were owned by a Cayman
Islands company, International Water (Tunari) Ltd., which itself was a wholly owned subsidiary of Bechtel Enterprise Holding,
Inc., a United States company. Id.
8
ICSID accepted jurisdiction pursuant to a bilateral investment treaty between Bolivia and the Netherlands, where an AdT
subsidiary was domiciled. Id. at 456.
9
Bolivian Uprising Reverses Water Privatization, Earth First!, July 31, 2000, at 14.
10
In October 1998, “3,000 farmers organized a march protesting a draft law to charge for water.” Peter H. Gleick et al., The New
Economy of Water: The Risks and Benefits of Globalization and Privatization of Fresh Water 32 (2002).
11
World Bank, Bolivia Public Expenditure Review Report No. 19232-BO 133 (1999).
12
Id.
13
United
Nations
Development
Program,
Human
http://hdr.undp.org/en/media/HDR_2006_Tables.pdf.
14
Jim
Shultz,
The
Democracy
Center,
The
Right
to
Water
Fulfilling
the
Promise,
http://democracyctr.org/bolivia/investigations/water/righttowater.htm [hereinafter Shultz, Right to Water] (last visited Feb. 24,
2010).
15
Tunari, supra note 7, at 468.
16
Id.
17
Id.
18
William Finnegan, Leasing the Rain, The New Yorker, Apr. 8, 2002, at 43.
19
Id.
Development
Report
292
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(2006),
available
at
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20
Tunari, supra note 7, at 471.
21
Id. at 471-72.
22
Id. at 468.
23
Mr. Luis Guillermo Uzin Fernández, Superintendent of Water, signed the Concession agreement on behalf of the Bolivian
government. Mr. Geoffrey Richard Thorpe signed the agreement on behalf of AdT. The Concession agreement was then formally
ratified by Administrative Resolution SA No. 39/99. Tunari, supra note 7, at 468-469 n.24.
24
Id. at 469.
25
The contract also contemplated expansion of AdT’s water services to other areas of Bolivia and referred to related contracts
between AdT and Bolivian authorities that “involved AdT in water projects with electricity generation components.” Id.
26
Finnegan, supra note 18.
27
Tunari, supra note 7, at 472.
28
Id.
29
Id.
30
Id. at 468.
31
Id. at 472.
32
Jim
Shultz,
The
Democracy
Center,
Bolivia’s
War
Over
Water,
http://
www.democracyctr.org/bolivia/investigations/water/waterwar.htm [hereinafter Schultz, Bolivia’s War Over Water] (last visited
Feb. 24, 2010).
33
Id.
34
Id.
35
Tunari, supra note 7, at 472.
36
Id.
37
Juan Forero, Who Will Bring Water to the Bolivian Poor?, N.Y. Times, Dec. 15, 2005, at C1, C7.
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38
Tunari, supra note 7, at 472.
39
Id.
40
Id.
41
Id.
42
Nicole Duciaume, Against All Odds: Bolivia’s Water War, Monday Developments, Sept. 22, 2003, at 21. In a news release
following the conflicts, Bechtel asserted that the government itself raised the rates to meet its own requirements under the
contract. Bechtel, Bechtel Perspective on the Aguas del Tunari Water Concession in Cochabamba, Bolivia, Mar. 16, 2005,
http://www.bechtel.com/2005-03-16_38.html.
43
Bechtel
vs.
Bolivia:
Cochabamba’s
Water
Bills
from
Bechtel,
The
Democracy
Center,
http://
democracyctr.org/bolivia/investigations/water/waterbills_index.htm (last visited Feb. 24, 2010) [hereinafter Bechtel vs. Bolivia]
(quoting Gail Apps, Spokeswoman for Riley Bechtel). Bechtel itself asserted that the increases in water bills were mostly due to
increases in water usage, not increases in the water rates: “[A]lthough water rates had not changed dramatically for most users, the
change in consumption resulted in substantially higher bills for many users.” Bechtel Corp., Cochabamba and the Aguas del
Tunari Consortium 4 (2005), http://www.bechtel.com/assets/files/PDF/Cochabambafacts0305.pdf.
44
Bechtel vs. Bolivia, supra note 43.
45
Shultz, Right to Water, supra note 14.
46
Tunari, supra note 7, at 472.
47
Id. at 473.
48
Duciaume, supra note 42.
49
World Bank, supra note 11.
50
Jim Shultz, Behind the New Globalization Protests Lies an Old Demand, Democracy, Pac. News Serv., May 4, 2000, http://
www.democracyctr.org/bolivia/investigations/water/waterwar.htm#global.
51
Id.
52
Tunari, supra note 7, at 475.
53
Shultz, Bolivia’s War Over Water, supra note 32.
54
Id.
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55
Shultz, Right to Water, supra note 14.
56
Letter to the Democracy Center from Didier Quint, Managing Director, Int’l Water Ltd. (Bechtel subsidiary) (Apr. 30, 2000),
available at http:// democracyctr.org/bolivia/investigations/water/bechtel_letters.htm (“[The Water Regulator]...roll[ed] back the
tariff to previous levels .... [T]his was a clear beach [sic] of our contract.”).
57
Shultz, Bolivia’s War Over Water, supra note 32.
58
Bechtel asserts that the government did roll back water rates during the second week of February: “The uprisings spurred the
government water superintendent to roll back the higher rates during the second week in February ... Aguas del Tunari refunded
the difference to those people on their next bills.” Bechtel Corp., supra note 43, at 4. See also Finnegan, supra note 18.
59
Shultz, Bolivia’s War Over Water, supra note 32.
60
Finnegan, supra note 18.
61
Shultz, Bolivia’s War Over Water, supra note 32. At the time of the company’s statement, supra note 60, protests had temporarily
ceased by agreement between La Coordinadora and the Bolivian government. However, after the company began actively
shutting off service due to non-payment, La Coordindora announced plans to resume the protests by staging a “takeover of the
city’s symbolic central plaza” on February 4, 2000. Id.
62
Shultz, Bolivia’s War Over Water, supra note 32.
63
Duciaume, supra note 42.
64
Shultz, Bolivia’s War Over Water, supra note 32.
65
Jim Shultz, Blame the Bechtel Corp. Not Narcotraffickers for Bolivia Uprising, Pac. News Serv., Apr. 12, 2000, http://
www.democracyctr.org/bolivia/investigations/water/waterwar.htm#blame.
66
Shultz, Bolivia’s War Over Water, supra note 32 (“It was like a state secret.”).
67
Id.
68
Id.
69
Id.
70
Id.
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71
Id.
72
Id.
73
Id.
74
Some protestors were held longer in a remote jail in the country’s eastern Amazon jungle. Id. See also Finnegan, supra note 18.
75
Shultz, Bolivia’s War Over Water, supra note 32.
76
Id.
77
Bechtel Corp., supra note 43, at 6.
78
Shultz, Bolivia’s War Over Water, supra note 32.
79
Id.
80
Id.
81
Id.
82
Shultz, Bolivia’s War Over Water, supra note 32. According to one source, the company demanded, but did not receive,
US$12,000,000 as a condition of its departure.
83
Tunari, supra note 7, at 473.
84
Finnegan, supra note 18.
85
Id.
86
Id.
87
Tunari, supra note 7, at 456.
88
Finnegan, supra note 18.
89
“[N]obody seems to believe that the Bolivians can afford that kind of money.” Id.
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90
Emanuele Lobina & David Hall, Problems with Private Water Concessions: A Review of Experiences in Latin America and Other
Regions, in Water Pricing and Public-Private Partnership in the Americas 41 (Cecilia Tortajada & Asit K. Biswas eds., 2003),
available at http:// www.iadb.org/sds/doc/Water_Pricing_and_Pub-Pri_Partnership-2.pdf.
91
Paul Harris, Bechtel, Bolivia Resolve Dispute: Company Drops Demand Over Water Contract Canceling, S.F. Chron., Jan. 19,
2006, available at http:// www.bilaterals.org/article.php3?id_article=3612.
92
Ryan Kim, Bechtel to Meet Critic of Its Bolivian Project, S.F. Chron., Apr. 24, 2002, at A15.
93
The Democracy Center, Bechtel v. Bolivia: Riley Bechtel is the 51st Most Wealthy Man in the U.S., http://
democracyctr.org/bolivia/investigations/water/bechtel_corp.htm (last visited Feb. 24, 2010).
94
Earthjustice, Three Hundred Citizen Groups Call on Secret World Bank Court to Open Up Bechtel Case Against Bolivia, (Aug.
29,
2002),
http://
www.earthjustice.org/news/press/002/three_hundred_citizen_groups_call_on_
secret_world_bank_court_to_open_up_bechtel_case_against_bolivia.html.
95
Id.
96
Benjamin H. Tahyar, Confidentiality in ICSID Arbitration after Amco Asia Corp. v. Indonesia: Watchword or White Elephant?,
10 Fordham Int’l L.J. 93 (1986).
97
Stephen Bond, Expert Report of Stephen Bond, Esq., 11 Arb. Int’l 273 (1995). “When enquiring as to the features of international
commercial arbitration which attracted parties to it as opposed to litigation, confidentiality of the proceedings and the fact that
these proceedings and the resulting award would not enter the public domain was almost invariably mentioned.” Id.
98
Alexis C. Brown, Presumption Meets Reality: An Exploration of the Confidentiality Obligation in International Commercial
Arbitration, 16 Am. U. Int’l L. Rev. 969, 1004 (2001).
99
L. Yves Fortier, The Occasionally Unwarranted Assumption of Confidentiality, 15 Arb. Int’l 131, 132 (1999). This lack of
consensus is not limited to international arbitration. In the United States, where arbitration is popular, “arbitration policy is
presently in flux regarding the extent of privacy protection that ought to be achieved by private contractual measures.” Edward
Brunet et al., Arbitration Law in America 12 (2006).
100 London Ct. of Int’l Arbitration, Rules, Art. 30 (“Unless the parties expressly agree in writing to the contrary, the parties undertake
as a general principle to keep confidential all awards in their arbitration, together with all materials in the proceedings created for
the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public
domain - save and to the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal right or to
enforce or challenge an award in bona fide legal proceedings before a state court or other judicial authority.”).
101 Int’l Chamber of Commerce, Rules of Arbitration art. 20(7) (“The Arbitral Tribunal may take measures for protecting trade
secrets and confidential information.”).
102 Id. art. 21(3) (“The Arbitral Tribunal shall be in full charge of the hearings, at which all the parties shall be entitled to be present.
Save with the approval of the Arbitral Tribunal and the parties, persons not involved in the proceedings shall not be admitted.”).
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103 Am. Arbitration Ass’n, Int’l Arbitration Rules art. 20(4) ( “Hearings are private unless the parties agree otherwise or the law
provides to the contrary.”).
104 Id. art. 34 (“Confidential information disclosed during the proceedings by the parties or by witnesses shall not be divulged by an
arbitrator or by the administrator. Unless otherwise agreed by the parties, or required by applicable law, the members of the
tribunal and the administrator shall keep confidential all matters relating to the arbitration or the award.”).
105 Nigel Blackaby, Public Interest and Investment Treaty Arbitration, Oil, Gas & Energy Law Intelligence, Mar. 2003.
106 Brown, supra note 98, at 988.
107 Gu Weixia, Confidentiality Revisited: Blessing or Curse in International Commercial Arbitration?, 15 Am. Rev. Int’l Arb. 607,
624 (2004).
108 Hassneh Ins. Co. of Israel v. Stuart J. Mew, [1993] 2 Lloyd’s Rep. 243.
109 For a discussion of these precedents, see Weixia, supra note 107, at 624.
110 For example, in Europe, the Privy Council of the United Kingdom invalidated a confidentiality provision in a contract between
two insurance companies, partly to protect “the legitimate use of an earlier award in a later, also private, arbitration between the
same two parties.” Herbert Smith, United Kingdom: Privy Council Curtails Obligation of Confidentiality in International
Arbitration, Mondaq Bus. Briefing, June 11, 2003.
111 See, e.g., Ellen E. Deason, Enforcing Mediated Settlement Agreements: Contract Law Collides with Confidentiality, 35 U.C.
Davis L. Rev. 33, 40 (2001). In the United States, “the Alternative Dispute Resolution Act of 1998 ... directed all courts to adopt
court-sponsored ADR programs and singled out confidentiality protection as a required element in these programs.” Id.
112 See, e.g., Weixia, supra note 107. See also Brown, supra note 98.
113 See, e.g., Ellen E. Deason, The Need for Trust as a Justification for Confidentiality in Mediation: A Cross-Disciplinary Approach,
54 U. Kan. L. Rev. 1387, 1393 (2006).
114 Tahyar, supra note 96, at 109.
115 Id.
116 The International Centre for Settlement of Investment Disputes [hereinafter “ICSID” ] was created in 1965 by the Convention on
the Settlement of Investment Disputes Between States and Nationals of Other States [hereinafter “ICSID Convention” ]. It opened
for signature on March 18, 1965. 17 U.S.T. 1270, T.I.A.S. No. 6090, 575 U.N.T.S. 159, 4 I.L.M. 532 art. 48(5). Article 48(5)
states that “The Centre shall not publish the award without the consent of the parties.” Id.
117 ICSID,
List
of
Pending
Cases,
http://
requestType=GenCaseDtlsRH&actionVal=listPending (last visited Feb. 24, 2010).
icsid.worldbank.org/ICSID/FrontServlet?
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118 ICSID, Arbitration Rules, R. 6(2) [hereinafter “ICSID Rules” ] (providing, in pertinent part: “Before or at the first session of the
Tribunal, each arbitrator shall sign a declaration of the following form .... ‘I shall keep confidential all information coming to my
knowledge as a result of my participation in this proceeding, as well as the contents of any award made by the Tribunal.”’).
119 Id. R. 15(1) (“The deliberations of the Tribunal shall take place in private and remain secret.”).
120 Id. R. 15(2) (“Only members of the Tribunal shall take part in its deliberations. No other person shall be admitted unless the
Tribunal decides otherwise.”).
121 Id. art. 32(2) (“Unless either party objects, the Tribunal, after consultation with the Secretary-General, may allow other persons,
besides the parties, their agents, counsel and advocates, witnesses and experts during their testimony, and officers of the Tribunal,
to attend or observe all or part of the hearings, subject to appropriate logistical arrangements ....”).
122 See Margrete Stevens, Confidentiality Revisited, News from ICSID, Spring 2000, at 1, 9 (citing case).
123 Id.
124 Id.
125 Id.
126 Id.
127 Id.
128 Id. at 10.
129 Id.
130 Id.
131 Id.
132 ICSID Secretariat, Possible Improvements of the Framework for ICSID Arbitration 8 (Discussion Paper, 2004), available at http://
icsid.worldbank.org/ICSID/FrontServlet?
requestType=casesRH&actionVal=openPage&PageType=announcementsFrame&FromPage=newsReleases&
pageName=archive_%20Announcement25 (follow “Discussion Paper” hyperlink).
133 Id.
134 Id.
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135 Francois Dessemontet, Arbitration and Confidentiality, 7 Am. Rev. Int’l Arb. 299, 302-83 (1996).
136 ICSID Secretariat, supra note 132, at 8.
137 Petition of La Coordinadora para la Defensa del Agua y Vida, La Federación Departamental Cochabambina de Organizaciones
Regantes, Semapa Sur, Friends of the Earth-Netherlands, Oscar Olivera, Omar Fernandez, Father Luis Sánchez, and Congressman
Jorge Alvarado to the Arbitral Tribunal, Tunari, 20 ICSID Rev. Foreign Investment L.J. 450, 457 (2005) available at http://
www.earthjustice.org/library/legal_docs/Bechtel.pdf [hereinafter Petition].
138 Id. at 458. Petitioners sought “public disclosure of the statements of claim and defense; memorials and counter-memorials;
pre-hearing memoranda; supplemental submissions; witness statements and expert reports; transcripts of hearings; appendices and
exhibits to any submissions made to the Tribunal; and any other submissions made to the Tribunal.” Id. at 3.
139 Id.
140 Tahyar, supra note 96, at 109 (citing Jerzy Jakubowski, Reflections on the Philosophy of International Commercial Arbitration
and Conciliation, in The Art of Arbitration 182 (Jan C. Schultsz & Albert Jan van den Berg eds., 1982)).
141 Id.
142 Brown, supra note 98, at 1019.
143 Brunet, supra note 99, at 7-8.
144 Id.
145 Nikki Tait, Arbitration Preferred in Cross-border Disputes, Fin. Times, May 16, 2006, at 6.
146 Id.
147 Id.
148 Brunet, supra note 99, at 8.
149 Gerald Chuah, Due Process, New Straits Times, Oct. 19, 2004, at 8.
150 Id.
151 Id.
152 Petition, supra note 137, at 8.
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153 Australia v. Cockatoo Dockyard Pty Ltd., (1995) 120 F.L.R. 171, 189-90 (Austl.)
154 Weixia, supra note 107, at 623.
155 Bond, supra note 97.
156 Petition, supra note 137, at 3-4.
157 Francisco Orrego Vicuña, Arbitration in a New International Alternative Dispute Resolution System, News from ICSID, Fall
2001, at 1. Mr. Orrego delivered the paper at the Eighteenth ICC International Court of Arbitration/American Arbitration
Association/ICSID Joint Colloquium on International Arbitration, at the session on “Arbitration and ADR: Partners or
Adversaries?”, held in Paris, France, on November 16, 2001. Id.
158 Id. at 12.
159 Blackaby, supra note 105.
160 Id.
161 Martin H. Malin, Privatizing Justice - But by How Much? Questions Gilmer Did Not Answer, 16 Ohio St. J. on Disp. Resol. 589,
615 (2001).
162 Blackaby, supra note 105.
163 Id.
164 Dessemontet, supra note 135, at 312.
165 David D. Caron, President of the ICSID Tribunal, Letter in Response to Petition, Jan. 29, 2003, http://
www.earthjustice.org/library/references/ICSIDResponse.pdf.
166 Michael V. Forrestal, Examples of and Reasons for Increased Use of International Arbitration, in International Arbitration
between Private Parties and Governments 15, 55 (Gerald Aksen & Robert B. von Mehren eds., 1982).
167 Georges Delaume, ICSID Arbitration: Practical Considerations, 1 J. Int’l Arb. 101, 119 (1984).
168 Tahyar, supra note 96, at 115.
169 Lobina & Hall, supra note 90, at 44.
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170 Weixia, supra note 107, at 632.
171 Int’l Chamber of Commerce, supra note 101, at art. 20(7) (“The Arbitral Tribunal may take measures for protecting trade secrets
and confidential information.”).
172 ICSID Secretariat, supra note 132, at 11.
173 See Phillip Rothman, Psst, Please keep it confidential: Arbitration Makes it Possible, Disp. Resol. J., Sept. 1994, at 69.
174 Orrego, supra note 157, at 12.
175 Id.
176 Id. at 13.
177 Weixia, supra note 107, at 630.
178 Hans Smit, Breach of Confidentiality as a Ground for Avoidance of the Arbitration Agreement, 11 Am. Rev. Int’l Arb. 567, 578
(2000).
179 Stevens, supra note 122, at 2.
180 Brown, supra note 98, at 975. See also Fortier, supra note 99, at 138.
181 Tahyar, supra note 96, at 113.
182 Henry P. de Vries, International Commercial Arbitration: A Contractual Substitute for National Courts, 57 Tul. L. Rev. 42, 62
(1982).
183 This specialization of arbitral tribunals is important in other industries as well. See, e.g., Brunet, supra note 99, at 9. “Some
arbitrations are private in a different sense, that of constituting secret disputes between members of a particular culture who seek
to confine or cabin their dispute by placing it within the boundaries of a particular culture of industry.” Id.
184 Smit, supra note 178, at 578.
185 Barry Leon & John Terry, Special Considerations When a State is a Party to International Arbitration, Disp. Resol. J., Feb.-Apr.
2006, at 69, 74.
186 Petition, supra note 137, at 2.
187 Id.
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188 Id. at 12.
189 Id.
190 Caron, supra note 165.
191 Id.
192 Weixia, supra note 107, at 630.
193 Brown, supra note 98, at 1018.
194 Brown, supra note 98, at 1017.
195 Id. See also Stewart R. Shackleton, Global Warming: Milder Still in England: Part 2, 2(4) Int’l Arb. L. Rev. 117, 126 (1999).
196 Blackaby, supra note 105.
197 Paul Harris, NGOs: Public Pressure Forces Bechtel to Drop Water Case, Bus.News Americas, Jan. 19, 2006, http://
www.bnamericas.com/news/privatization/NGOs:_Public_pressure_forces_Bechtel_to_ drop_water_case.
198 Harris, supra note 91.
199 Id.
200 Shultz, Bolivia’s War Over Water, supra note 32.
201 “In Spain, both King Juan Carlos and Prime Minister Jose Luis Rodriguez Zapatero asked one of Bechtel’s partners, Abengoa SA,
to withdraw from the dispute.” Harris, supra note 91.
202 Id.
203 Harris, supra note 197.
204 Weixia, supra note 107, at 632.
205 See, e.g., Deason, supra note 113, at 1393 (“In terms of outcomes, trust-building activities were associated positively both with
reaching settlements and with improvements in parties’ relationships.”).
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206 Nikki Tait, Disputes in a Foreign Land, Fin. Express, Mar. 4, 2006.
207 Jane Bussey, Five Businesses Piggyback on Andes Trade Bill in Hopes of Winning Disputes, Miami Herald, May 5, 2002.
208 Id.
209 Orrego, supra note 157, at 13.
210 Tahyar, supra note 96, at 115.
211 Aziz Choudry, Sleeping Beauty and Prince Charming: Bilateral Deals Are No Fairytale, Scoop, June 16, 2003, http://
www.scoop.co.nz/stories/HL0306/S00104.htm.
212 Press Release, Common Dreams NewsCenter, Obscure World Bank Court Grants Too Much Power to Corporations (Apr. 30,
2007), http:// commondreams.org/news2007/0430-05.htm.
213 Leon & Terry, supra note 185, at 72.
214 Smit, supra note 178, at 578.
215 Brown, supra note 98, at 1019. See also Dessemontet, supra note 135, at 302.
216 Brown, supra note 98, at 1018.
217 Id.
218 Bond, supra note 97.
219 Dessemontet, supra note 135, at 313.
220 Brunet, supra note 99, at 10.
221 Brown, supra note 98, at 1018-19.
222 Id.
223 Petition, supra note 137, at 9.
224 Id.
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225 See, e.g., Brunet, supra note 99, at 11. Many arbitrations in the United States “involve disputants who often have a long-term
relationship and who have chosen arbitration as a means to help preserve that relationship.” Id.
226 Tahyar, supra note 96, at 116-17.
227 Tahyar, supra note 96, at 116. See also Gita Gopal, International Centre for Settlement of Investment Disputes, 14 Case W. Res. J.
Int’l L. 591, 597 (1982).
228 Petition, supra note 137, at 9.
229 Id.
230 Id. at 10.
231 “All of ICSID’s members are also members of the Bank. Unless a government makes a contrary designation, its Governor for the
Bank sits ex officio on ICSID’s Administrative Council. The expenses of the ICSID Secretariat are financed out of the Bank’s
budget ....” World Bank, General Information, http://icsid.worldbank.org/ICSID/StaticFiles/General% 20Information.html (last
visited Oct. 7, 2009).
232 Finnegan, supra note 18.
233 World Bank Operations Evaluation Dep’t, Bolivia Water Management: A Tale of Three Cities, Précis, Spring 2002, at 1.
234 Duciaume, supra note 42.
235 Petition, supra note 137, at 11.
236 Id. at 18.
237 Id.
238 Leon & Terry, supra note 185.
239 Blackaby, supra note 105.
240 Methanex Corp. v. United States (2001) (decision on petition to intervene as amicus curiae), available at http://
www.state.gov/documents/organization/6039.pdf.
241 Michael Goldhaber, Is NAFTA the Law of the Land?, Am. Law., Mar. 13, 2002 (quoting Barton Legum, attorney with the Office
of the Legal Adviser of the U.S. Department of State).
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242 Tait, supra note 206.
243 Howard Mann, Private Rights, Public Problems: A Guide to NAFTA’s Controversial Chapter on Investor Rights 46 (2001).
244 NOW
with
Bill
Moyers
(PBS
television
http://www.pbs.org/now/transcript/transcript_ tdfull.html).
broadcast
Jan.
2,
2002)
(transcript
available
at
245 Petition, supra note 137, at 9.
246 Id.
247 Id. at 7.
248 145 Cong. Rec. H7368 (daily ed. Aug. 5, 1999) (statement of Rep. Tierney).
249 Leon & Terry, supra note 185, at 60.
250 Blackaby, supra note 105.
251 Susan Spronk, Suez Strikes Back in Bolivia, ZNet, July 12, 2005, http://www.zmag.org/znet/viewArticle/5851.
252 NOW with Bill Moyers, supra note 244.
253 Id.
254 Choudry, supra note 211 (quoting William D. Rogers, Partner, Arnold & Porter LLP, Address at the Inter-American Development
Bank Conference (Oct. 26-27, 2000)).
255 Common Dreams, supra note 212.
256 Petition, supra note 137, at 7.
257 Id. at 8.
258 Earthjustice, Secretive World Bank Tribunal Bans Public and Media Participation in Bechtel Lawsuit Over Access to Water, Feb.
12,
2003,
http://
www.earthjustice.org/news/press/003/secretive_world_bank_tribunal_bans_public_
and_media_participation_in_bechtel_lawsuit_over_access_to_water.html.
259 “As the pace of economic globalization heightens, we should be very wary of sacrificing state and local laws at the altar of
ill-defined international investor rights.” 145 Cong. Rec. H7368 (daily ed. Aug. 5, 1999) (statement of Rep. Tierney).
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260 Fiona Beveridge, The Treatment and Taxation of Foreign Investment Under International Law 155 (2000).
261 Edward T. Pound & Danielle Knight, Cleaning Up the World Bank, U.S. News & World Report, Apr. 3, 2006, available at http://
www.usnews.com/usnews/biztech/articles/060403/3worldbank.htm.
262 Id.
263 Id.
264 Id.
265 Beveridge, supra note 260, at 155.
266 Global
Trade Watch, Public Citizen, Our Future Under the Multilateral
http://www.takebackthepower.net/print_ article.cfm?ID=1175 (last visited Feb. 27, 2010).
Agreement
on
Investment,
267 William Powers, Op.-Ed., Poor Little Rich Country, N.Y. Times, June 11, 2005, at A13.
268 Id.
269 Finnegan, supra note 18.
270 Lobina & Hall, supra note 90, at 31.
271 World Bank, supra note 5.
272 Blackaby, supra note 105.
273 Id.
274 Petition, supra note 137, at 10.
275 Franz
Chavez, Bolivia: The Story
http://ipsnews.net/news.asp?idnews=33227.
Behind
Gas
Nationalisation,
Inter
Press
Serv.,
May
13,
2006,
276 See id.
277 See id.
278 Id.
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279 Sadaf
Afzal, Latin Nations Suspending World Bank Arbitration, Money Times, Apr. 30,
http://www.themoneytimes.com/articles/20070430/latin_ nations_suspending_world_bank_arbitration-id-103414.html.
2007,
280 Id.
281 Leon & Terry, supra note 185, at 77.
282 Harris, supra note 197.
283 Harris, supra note 91.
284 Bond, supra note 97.
285 Id.
286 Finnegan, supra note 18.
287 Michael S. Goldberg & Dev Krishan, Resource-Rich Nations are Reshuffling the Deck, Nat’l L.J., Aug. 7, 2006, at 16, 49 (2006).
288 Id.
289 ICSID Secretariat, supra note 132.
290 Id. at 8.
291 ICSID Rules, supra note 118, art. 48(4) (“The Centre shall not publish the award without the consent of the parties. The Centre
may, however, include in its publications excerpts of the legal rules applied by the Tribunal.”).
292 ICSID Secretariat, supra note 132, at 9.
293 Id. at 8.
294 ICSID Rules, supra note 118, R. 34 (providing, in relevant part, that “(2) The Tribunal may, if it deems it necessary at any stage
of the proceeding: (a) call upon the parties to produce documents, witnesses and experts; and (b) visit any place connected with
the dispute or conduct inquiries there. (3) The parties shall cooperate with the Tribunal in the production of the evidence and in
the other measures provided for in paragraph (2). The Tribunal shall take formal note of the failure of a party to comply with its
obligations under this paragraph and of any reasons given for such failure.”).
295 ICSID, Arbitration (Additional Facility) Rules, art. 41 [hereinafter Additional Facility Rules] (providing, in relevant part, that “(3)
After consulting both parties, the Tribunal may allow a person or entity that is not a party to the dispute (in this Article called the
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“non-disputing party”) to file a written submission with the Tribunal regarding a matter within the scope of the dispute. In
determining whether to allow such a filing, the Tribunal shall consider, among other things, the extent to which: (a) the
non-disputing party submission would assist the Tribunal in the determination of a factual or legal issue related to the proceeding
by bringing a perspective, particular knowledge or insight that is different from that of the disputing parties; (b) the non-disputing
party submission would address a matter within the scope of the dispute; (c) the non-disputing party has a significant interest in
the proceeding. The Tribunal shall ensure that the non-disputing party submission does not disrupt the proceeding or unduly
burden or unfairly prejudice either party, and that both parties are given an opportunity to present their observations on the
non-disputing party submission.”).
296 ICSID Secretariat, supra note 132, at 9.
297 Id.
298 Id.
299 Id.
300 ICSID Rules, supra note 118, art. 32(2).
301 Additional Facility Rules, supra note 295, art. 39(2) (“(2) Unless either party objects, the Tribunal, after consultation with the
Secretary-General, may allow other persons, besides the parties, their agents, counsel and advocates, witnesses and experts during
their testimony, and officers of the Tribunal, to attend or observe all or part of the hearings, subject to appropriate logistical
arrangements. The Tribunal shall for such cases establish procedures for the protection of proprietary or privileged information.”).
302 Id.
303 ICSID Secretariat, supra note 132, at 11.
304 Id.
305 ICSID Secretariat, Suggested Changes to the ICSID Rules and Regulations 3 (Working Paper, 2005). “Although the reactions
were generally favorable, the suggestions regarding access of third parties in particular elicited some disagreement. Concerns
were expressed that any provisions on access of third parties to proceedings should subject such access to appropriate conditions
ensuring, for example, that the third parties do not by their participation unduly burden parties to the proceedings.” Id.
306 Id.
307 Update on the Amendments to the ICSID Rules and Regulations, News from ICSID, Winter 2005, at 16.
308 Id.
309 Id.
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310 Amendments to the ICSID Rules, News from ICSID, Summer 2006, at 1.
311 ICSID Rules, supra note 118, R. 48(4). Amended Rule 48(4) provides that “[t]he Centre shall, however, promptly include in its
publications excerpts of the legal reasoning of the Tribunal.” Id. (emphasis added).
312 Id. R. 37. Amended Rule 37 added the following language: “After consulting both parties, the Tribunal may allow a person or
entity that is not a party to the dispute (in this Rule called the “non-disputing party”) to file a written submission with the Tribunal
regarding a matter within the scope of the dispute. In determining whether to allow such a filing, the Tribunal shall consider,
among other things, the extent to which: (a) the non-disputing party submission would assist the Tribunal in the determination of
a factual or legal issue related to the proceeding by bringing a perspective, particular knowledge or insight that is different from
that of the disputing parties; (b) the non-disputing party submission would address a matter within the scope of the dispute; (c) the
non-disputing party has a significant interest in the proceedings. The Tribunal shall ensure that the non-disputing party submission
does not disrupt the proceeding or unduly burden or unfairly prejudice either party, and that both parties are given an opportunity
to present their observations on the non-disputing party submission.” Id.
313 Forero, supra note 37, at C1.
314 Id. at C7.
315 Id.
316 Clive Harris, Private Participation in Infrastructure in Developing Countries: Trends, Impacts, and Policy Lessons 26 (World
Bank Working Paper No. 5, 2003).
317 Id. (citing independent study on the Cochabamba concession, Andrew Nickson & Claudia Vargas, The Limitations of Water
Regulation: The Failure of the Cochabamba Concession in Bolivia, Bull. of Latin Am. Research, Jan. 2002, at 99).
318 Finnegan, supra note 18.
End of Document
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