Confidentiality of investment arbitration – pros and cons

White Industries awakened foreign investors to the possibilities of actively using investment arbitration against the Indian government. Moreover, recent Supreme Court of India jurisprudence has made it easier to enforce foreign arbitral awards in general, which makes international investment arbitration even more attractive for foreign investors engaged with India. The combined effect of these outcomes is a near deluge of claims by companies that include Sistema, ByCell, Deutsche Telekom, Khaitan Holdings, and the much-discussed Vodafone.“National treatment” clauses prohibit the host government from stacking the deck against foreign investors.In 2007, Vodafone bought Indian cell provider Hutchinson India’s assets for $11 billion. The parties structured the sale through an entity in Mauritius to take advantage of an India- Mauritius tax treaty. This was fairly common practice at the time. But the Indian tax authorities decided they would still assess the Vodafone transaction as requiring $2 billion in taxes. Vodafone filed suit in India in the Bombay High Court, and many other foreign investors watched the suit carefully.The Bombay High Court held in favor of the Indian government, but the Supreme Court of India reversed in early 2012, favoring Vodafone. This might have been actively overturn the Supreme Court’s decision.In response, Vodafone filed an investment arbitration claim based on the Netherlands-India BIT because the company is incorporated in the Netherlands. India and Vodafone entered conciliation talks shortly thereafter, but the negotiations seem to have fizzled and Vodafone is pursuing the arbitration.The Vodafone case and others have prompted a reaction in India and other countries concerned about how the rise of investment arbitration may constrict their ability to formulate policy. India is already reworking its “model” BIT and taking a cautious stance in current bilateral negotiations over potential investment treaties. For instance, progress on the highly anticipated India-United States BIT has been hampered because of India’s reluctance to include dispute settlement provisions. Then finance minister of India, P. Chidambaram, commented:We think that international arbitration is hijacking the domestic judicial system. There are two major concerns. In commercial arbitrations between Party A and Party B, [the] sovereign is being dragged into [them] quite unnecessarily and [it is] unjustified The second concern is that the judgements of the highest court in the country are being made subject to international arbitration. We believe in the efficacy of bilateral investment protection agreements. We want such international agreements. But we want to guard against the ingeniously interpreted to enlarge the jurisdiction of international arbitrations. And you would agree with me that there are numerous cases of jurisdiction hopping and jurisdiction shopping in international arbitration today.Australia and South Africa also have new arbitration policies, and Bolivia, Ecuador, and Venezuela have all denounced the ICSID Convention.Despite this friction, the increase in global business and the absence of general agreement on how to resolve disputes means that international investment arbitration will continue to be in the news. Some of the most interesting developments are probably just over the horizon. Confidentiality of investment arbitration applies to claims brought against a sovereign nation by foreign firms who have invested there under the auspices of an investment treaty. An investment treaty, in turn, is an agreement between nations to establish an arrangement to encourage and protect foreign investment.BibliographyPress Trust of India, Intl. Arbitration Is Hijacking Domestic Judicial System: FM, Bus. Standard, Oct. 11, 2013, available at www.business-standard.com/article/pti-stories/intl-arbitration- is-hijacking-domestic-judicial-system-fm-113101100067_1.html.The full text of the award is available at www.italaw.com/ sites/default/files/case-documents/ita0906.pdfDoing%20Business/Documents/Annual-Reports/English/DB15- Chapters/DB15-Report-Overview.pdf; www.doingbusiness.org/ reports/global-reports/~/media/GIAWB/Doing%20Business/ Documents/Annual-Reports/English/DB15-Chapters/DB15- Country-Tables.pdf.World Bank Grp., Doing Business 2015, at 192 (2014), available atwww.doingbusiness.org/~/media/GIAWB/World Investment Report 2014, supra, at xxv.Bharat Aluminium Co. v. Kaiser Aluminium Technical Servs. Inc., [2012 (3) ARBLR 515 (SC)]; Shri Lal Mahal Ltd. v. ProgettoGrano Spa, [2013 (3) ARBLR 1 (SC)