In the context of globalization today, international law involves almost every aspect of modern governance, from multi-level, all-round economic relations and transactions to climate change, public health, environment, security, human dignity, human rights etc. Under such circumstances, how to achieve effective governance in a world which lacks a unified institution has become an essential challenge. The international community has accordingly put forward the establishment of the rule of law at the international and national levels as a response achieving effective governance of the world. The idea of formulating the international and national rule of law is based on the reality of the interaction between international law and domestic law. The principle of transparency is at the heart of the international and national rule of law. The contents and outer limits of the principle of transparency in international law and its application are bound to have a profound impact on the construction of the rule of law in all countries. Based on this, this article will briefly discuss the provisions and practices of the principle of transparency in international trade and investment to learn from the experts.
I. International Law Provisions on the Principle of Transparency
The contents of the principle of transparency mainly include the disclosure of information, opportunities and possibilities of obtaining information, the disclosure of decision-making procedures, and the disclosure of the reasons for decisions made. The reason why the principle of transparency has become a recognized principle of international rule of law involves many factors, including: (1) the informationization and digitization of the world have reduced the cost of providing information, disseminating and obtaining information; (2) With the continuous development of globalization, some powers and responsibilities that traditionally belonged to states have been transferred to international organizations, and the operation of international organizations are subject to the supervision of its members; (3) Most of the contemporary treaties stipulate that the contracting parties shall fullfil their commitments (including the degree of implementing such commitments) in transparent ways and methods; (4) With the wide application of information and communication technology, the non-governmental organizations (hereinafter "NGOs") that constitute the international civil society have enhanced their means and strength for supervising international affairs and hence made the operation of international organizations as well as national governments (including their implementation of treaties) subject to external supervision. In addition, in this highly globalized world, many actions and omissions within a state will have extraterritorial effects; as a consequence, all national governments, even NGOs and enterprises, such as business associations, Internet companies, etc., when making decisions, must consider their possible international impacts. At the same time, all national governments, NGOs and businesses need to pay attention to the actions and omissions of other countries, NGOs, etc. This mutual, multi-faceted and multi-leveled interaction of needs constitutes the incentives and basis for the formulation of the principle of transparency.
As for the status of the principle of transparency in international law, such as whether it should be recognized as part of customary international law, some commentators believe that it is still difficult to regard it as "hard law", whilst maintaining that this does not affect its use as a standard for evaluating the rule of law in the international arena.[1] Others consider the principle of transparency has not yet been crystallized into customary international law.[2] Notwithstanding, an indisputable fact is that transparency is already a component of many international treaties including the WTO Agreement and the Paris Agreement on Climate Change, etc.; the WTO panels and Appellate Body (hereinafter "AB") and international investment tribunals have repeatedly affirmed the status of the principle of transparency in international law. Additionally, the United Nations has adopted the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (hereinafter "Mauritius Convention on Transparency")[3] and the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (hereinafter "Transparency Rules")[4] with respect to investor-state dispute settlement.
II. Practice of the WTO
Transparency is one of the WTO's core principles. Under the WTO Agreement, transparency is an essential obligation of the Members. Due to differences in culture, history, tradition and legal system, the laws and norms of nations may be interpreted differently, and the interpretation methods, decision-making procedures and reasoning thereof may differ as well. In the circumstance, different states may have different views on how to meet the requirements of transparency in international law. In Argentina—Poultry Anti-Dumping Duties, for example, Argentina argued that its decisions relating to anti-dumping investigation were with valid grounds and provided on the spot evidence in support of its investigating authorities' decisions; nevertheless, the WTO Panel held such arguments as ex post rationalization, which should not be considered.[5] Argentina—Poultry Anti-Dumping Duties evidences that the WTO pays more attention to the procedure, decision-making process and the rationale on which the decision is based, and the reasoning of decision-makers, including the admission of evidence, all of which must be recorded, and otherwise it may violate the principle of transparency. Decisions that are not in compliance with the principle of transparency can hardly meet the standards of fairness, impartiality and objectivity of the WTO.
In Japan — Agricultural Products II, Japan required for quarantine test for all imported agricultural products to prevent the invasion of codling moth (Cydia pomonella). The United States, as complainant, claimed that the varietal testing requirement had not been published, making it inconsistent with Article 7 and the provisions of Annex B of the Agreement on the Application of Sanitary and Phytosanitary Measures (hereinafter "SPS Agreement").[6] According Article 7 (Transparency) of the SPS Agreement, "[M] embers shall notify changes in their sanitary or phytosanitary measures and shall provide information on their sanitary or phytosanitary measures in accordance with the provisions of Annex B". Article 1 of Annex B provides that "[M]embers shall ensure that all sanitary and phytosanitary regulations which have been adopted are published promptly in such a manner as to enable interested Members to become acquainted with them"; Article 2 of Annex B provides "[E]xcept in urgent circumstances, Members shall allow a reasonable interval between the publication of a sanitary or phytosanitary regulation and its entry into force in order to allow time for producers in exporting Members, and particularly in developing country Members, to adapt their products and methods of production to the requirements of the importing Member".
The Panel in Japan — Agricultural Products II held that the obligation of publication under Annex B applies to any "phytosanitary measure such as a law, decree or ordinance", which is "applicable generally". At the same time, the panel noted that Japan's testing requirements are not in fact mandatory or legally binding, but only as a way to prove the safety of imported fruit. Due to the non-mandatory nature of the requirements, the panel ruled that the measures implemented by the Japanese government should not be considered as "phytosanitary regulations" under Annex B. Nevertheless, based on widely recognized principles of transparency, the panel ultimately concluded that the obligations in Annex B of the SPS Agreement included quarantine requirements, as exporters would benefit from complying with the measure.[7] The panel went on to point out that the "reply to inquiries service" provided by the Japanese government could not be regarded as fulfilling its obligation to publish regulations. In addition, the panel also considered that the "highly technical nature" of quarantine requirements prevented Japan from using the "response inquiry service" as an excuse for fulfilling its obligation to issue regulations.[8]
On appeal, the AB agreed with the panel's broad interpretation of the transparency obligations in Annex B and strengthened the persuasiveness of the panel's interpretation by invoking the purpose of the relevant provisions.[9] The AB also ruled that "laws, decrees or orders" under Annex B were merely examples and not enumerations of the duty of transparency. The AB further pointed out that the purpose of Annex B is to "familiarize interested members" with relevant regulations on food safety, and the provisions of Annex B must be interpreted according to its purpose. Based on the aforementioned principle of treaty interpretation, the AB concluded that Japan's non-mandatory testing requirement fell within the scope of the transparency obligation of the SPS Agreement.[10]
Ⅲ. The Practice re International Investment
Arbitration is an important means to resolve disputes between investors and host states. Investors who initiate investment arbitration must first prove that they have a legal basis. Bilateral investment treaties and investment chapters of free trade agreements, etc. signed between the investor's home country and the host country usually specify how investment disputes to be resolved and which institutions will conduct arbitration or mediation. Such treaty provisions are, in practice, regarded as the host country's offer to resort to international arbitration. Once an investor submits its dispute to arbitration, it is deemed to have accepted the host country's offer, that is, an acceptance is made, so that the disputing parties have agreed on that basis to submit their dispute to international arbitration.[11] In practice, in addition to institutional arbitration conducted by the International Center for Settlement of Investment Disputes under the World Bank[12] and other arbitration institutions, ad hoc arbitral tribunals and some arbitration institutions mostly apply the "United Nations Commission on International Trade Law Arbitration Rules" (hereinafter "UNCITRAL Arbitration Rules"). Given that the UNCITRAL Arbitration Rules are often included in bilateral investment treaties and free trade agreements on investment dispute settlement, UNCITRAL has continuously revised them, including the application of the principle of transparency, in an effort to keep them up to date.
The reason why the principle of transparency is valued in the investment field is that one of the parties to international investment arbitration is the national government, which inevitably involves public interests. As part of the rule of law requirement, national government actions should be open to the public, including why investment disputes arose and how they were handled, which is in conflict with confidentiality in traditional arbitration. To address this issue, the UNCITRAL Transparency Rules were adopted. As stated in the UN General Assembly resolution that adopted the UNCITRAL Transparency Rules, the "rules on transparency in treaty-based investor-State arbitration would contribute significantly to the establishment of a harmonized legal framework for a fair and efficient settlement of international investment disputes, increase transparency and accountability and promote good governance".[13] Based on this, Article 3 of the UNCITRAL Transparency Rules stipulates that all documents related to investment arbitration, including arbitration notices, replies, petitions, defenses, other representations or written materials, third-party opinions, and opinions of the investor's home country, etc., shall be made available to the public.[14] In addition, expert reports and witness statements shall be published whenever a request is made to the arbitral tribunal, whether or not the requester is a party to the case. [15]
The Mauritius Convention on Transparency, which was opened for signature a few months after the adoption of the UNCITRAL Transparency Rules, made it clear that "this Convention applies to arbitration between an investor and a State or a regional economic integration organization conducted on the basis of an investment treaty concluded before 1 April 2014".[16] In other words, if both the investor's home country and the host country are parties to the Mauritius Convention on Transparency and have made no reservations, the concerned disputes are governed by the UNCITRAL Transparency Rules. Based on Article 2(2) of the Mauritius Convention on Transparency, even if the investment arbitration is not initiated under the UNCITRAL Arbitration Rules, where the applicant agrees, the UNCITRAL Transparency Rules can still apply, provided that the host country as the respondent has not made reservations on the application of the Mauritius Convention on Transparency. In other words, as long as the host country, as the respondent, agrees, the UNCITRAL Transparency Rules may be applied to any dispute with an investor through the Mauritius Convention on Transparency. Undoubtedly, the Mauritius Convention on Transparency has thus greatly broadened the scope of application of the UNCITRAL Transparency Rules, the only exception being that the investors may not, via the MFN clause, apply the UNCITRAL Transparency Rules.[17] This exception is not surprising, given the debates triggered by investment arbitration in applying the MFN clauses to dispute settlement procedures and the responses of states through consequent treaty practices.
In conclusion, the principle of transparency is now part of international law and is affirmed in the dispute settlement practices in international trade and investment. The feature of the WTO's treaty interpretation is consistency and continuity. Therefore, the interpretation of the transparency principle by the panels and the AB will have important implications for future cases. The WTO Dispute Settlement Body, through its treaty interpretations, emphasizes that the competent authorities of each Member must provide reasons for making decisions when handling matters involving the WTO, such as investigations and decisions relating to anti-dumping, countervailing and safeguard measures, etc. The result is the integration of the principles of good governance of international law into the legal system, law and enforcement of the law of the Members. Some investment arbitral tribunals have also invoked the rulings of the WTO AB and panels; this makes the interpretation of treaties in the field of investment and trade mutually informative and complementary. Although investment chapters of free trade agreements and bilateral investment treaties rarely contain provisions on the principle of transparency, the interpretation of provisions on fair and equitable treatment, etc. in practice involves the principle of transparency. In addition, investment dispute resolution itself, including the transparency of arbitration procedures, has long been a topic of concern of the international community. The adoption of the Mauritius Convention on Transparency and the UNCITRAL Transparency Rules will further promote the application of the principle of transparency in the investment sector.
[1] Anne-Sophie Tabau, ‘Evaluation of the Paris Climate Agreement According to a Global Standard of Transparency’ (2016) 10 Carbon & Climate Law Review 23, 24-25.
[2] Antonios Tzanakopoulos, ‘Transparency in the Security Council’ in Andrea Bianchi and Anne Peters (eds), Transparency in International Law (CUP 2013) 381.
[3] United Nations Convention on Transparency in Treaty-based Investor-State Arbitration ("the Mauritius Convention on Transparency") was adopted by the General Assembly on 10 December 2014 through the Resolution 69/116. The text of the Mauritius Convention on Transparency is available at https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/transparency-convention-e.pdf.
[4] The UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration was effective on 1 April 2014. For the text, please access https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/rules-on-transparency-e.pdf .
[5] Argentina – Definitive Anti-Dumping Duties on Poultry from Brazil (22 April 2003) WT/DS241/R, para. 7.306. See Wang Guiguo, ‘Globalization Leading to Harmonization – Argentina’s Poultry Anti-Dumping Case’ (2003) 4 The Jurist 20.
[6] See Japan–Measures Affecting Agricultural Products II, Panel Report (27 October 1998), WT/DS76/R, para. 8.108.
[7] Ibid, para. 8.11-12.
[8] Ibid, para. 8.115.
[9] See Japan–Measures Affecting Agricultural Products II, Appellate Body Report (19 March 1999) WT/DS76/AB/R, para. 105.
[10] Ibid, para. 106.
[11] For further discussions on this matter, see Guiguo Wang, International Investment Law: A Chinese Perspective (Routledge 2015), Chapter 5.
[12] The International Centre for Settlement of Investment Disputes was established according to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, available at https://icsid.worldbank.org/sites/default/files/ICSID%20Convention%20English.pdf.
[13] The UNGA Resolution A/RES/68/109, adopted on 16 December 2013, available at https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/zh/rules-on-transparency-c.pdf.
[14] The repository of published information, either the Secretary-General of the United Nations or an institution named by UNCITRAL, is responsible for releasing such information. See Articles 2 and 8 of the UNCITRAL Transparency Rules.
[15] See Article 3.2 of the UNCITRAL Transparency Rules.
[16] Article 1.1 of the Mauritius Convention on Transparency.
[17] Ibid, Article 2.5.