Introduction
Arbitration has emerged as a significant forum of public international law, having previously been limited to resolving conflicts between private parties or between investors and nations. Public International Law (“PIL”) has a more constrained scope than one may assume for arbitration, given the growing involvement of non-state players and the overlapping public and private incentives in global governance. Arbitration, once confined to resolving private disputes, has emerged as an essential mechanism in PIL, especially as non-state actors like corporations and non-governmental organisations (“NGOs”) increasingly participate in public interest matters. This shift has necessitated re-evaluating PIL’s role in arbitration to balance efficiency with public accountability. Historically, PIL has concentrated on the administration of collective interests and the relationships between sovereign states, largely excluding arbitration from private business disputes.
However, arbitration is increasingly used to resolve matters of public interest, especially in its investor-state form. To properly reflect the interests of the community, this change necessitates rethinking the role of PIL in arbitration, both as a tool that can influence the procedures and results of arbitration hearings and as a normative framework.
This blog discusses the relationship between PIL and arbitration. It looks at instances in which private parties interfered with the arbitral process and provides solutions for protecting the public interest. Reimagining is crucial to preserving the equilibrium between the legitimacy of public accountability and the effectiveness of private actors.
The Blurring Lines Between Public and Private Interests
The distinction between the public and private spheres has grown increasingly blurred in the modern, globalised world. Private organisations now engage in areas traditionally governed by public law, such as security, human rights, and environmental preservation previously governed by public legislation. Private law is no longer their exclusive domain. Consequently, non-state actors are increasingly involved in international arbitration, particularly investor-state conflicts. PIL has been controlled by state actors, who represent the public in international forums. However, the issue of who advocates for the public interest arises since nations have historically been responsible for the actions of private actors. These players’ involvement in arbitration as private enterprises raises questions about their accountability when managing issues that affect the greater international community.
Private companies may file claims against states for alleged violations of international investment treaties, for example, under Investor-State Dispute Settlement (“ISDS”). Human rights, public health, and environmental protection are among the many public interests regularly in jeopardy. This issue was raised in the 2001 Methanex case, where a Canadian business challenged California’s prohibition on the fuel additive MTBE, which negatively impacted Methanex’s business. The tribunal dismissed Methanex’s claim, finding the ban was a legitimate public health measure, not a violation of investor rights.
Recognising that the case contained significant public interest about environmental and health dangers, the tribunal allowed non-governmental organisations to file amicus curiae statements. This ruling raised questions about how PIL may better protect the public interest in these conflicts, even as it set a precedent for non-state bodies to participate in arbitration processes.
The Role of NGOs and Private Entities in Arbitration
Private and non-profit groups are increasingly participating in arbitration, particularly regarding issues of public interest. NGOs are often allowed to join cases as amicus curiae to highlight aspects of a case that concern the public interest. For example, the tribunal acknowledged that the fight for water privatisation in Argentina involved human rights and public health issues and let NGOs intervene in the Suez/Vivendi case. This decision greatly enhanced the arbitration community’s comprehension of public interests. The growing involvement of the corporate sector in arbitration also raises concerns. While NGOs may represent public interest groups, private organisations with profit-driven goals include businesses and philanthropists.
This could lead to conflicts between the defence of the public interest and the pursuit of personal benefit. When public utilities like electricity or water are privatised, the interests of private companies may conflict with the public interest in ensuring access to necessary services. The involvement of private entities challenges the traditional state-centric paradigm of PIL. It also urges a re-examination of arbitration’s role as a forum for resolving disputes that affect the parties involved and the greater international community.
Instances of Public-Private Tensions in Arbitration
Several arbitration cases demonstrate the tension between public and private interests. The Biwater Gauff case raised serious concerns about how private companies impact public assets and involved Tanzania’s privatisation of water services. In this instance, the tribunal permitted five non-governmental organisations to submit amicus curiae statements, recognising the broader public interest in privatising water services. The panel agreed that the Tanzanian people and the global debate over the privatisation of basic services were both impacted by the case.
Another example is the Glamis Gold case, in which a Canadian mining company sought damages after being denied a mining permit in California. The lawsuit raised issues about the rights of Indigenous peoples and environmental preservation because the mining project was located in an area that Native American tribes held in high regard. By permitting the Quechan Indian Nation to submit an amicus curiae brief, the tribunal acknowledged the public interest in protecting the environment and defending Indigenous rights. These cases show the growing recognition of the public interest in arbitration. They also highlight the need to make PIL applications in arbitration more consistent and understandable.
Challenges to Public Accountability in Arbitration
Increasing participation of private entities in arbitration over public interest matters presents significant accountability as an obstacle, primarily due to limited transparency and inconsistent enforcement of arbitral decisions aligned with public welfare. States are subject to a different public accountability standard than corporations or private entities. When private parties get involved in conflicts that affect public interests, their profit goals will take precedence. The confidentiality of arbitration proceedings often hinders public oversight and transparency. Increased transparency in arbitration processes is necessary to prevent the public from losing faith regarding issues involving public commodities or services like electricity or water. Transparency was enhanced, for example, when the tribunal decided to allow NGOs to get involved in the Suez/Vivendi case. However, a consensus is still required on the more significant issue of ensuring public accountability in arbitration.
An additional obstacle is the implementation of arbitral verdicts. Public interests are often not prioritised when courts enforce arbitration rulings. This may result in the enforcement of awards by private parties that oppose governmental policies or human rights. The Chevron v. Ecuador case, in which Chevron sought to avoid paying penalties for environmental contamination, clearly illustrates how arbitration can be used to avoid public accountability.
The Way Forward: Re-imagining PIL in Arbitration
Several reforms and innovations could be implemented to fully realise PIL’s potential in arbitration.
Greater Transparency and Public Participation
The key reform in the arbitration process is increased transparency. Where public goods or services are involved or where there is a significant public interest, arbitration processes should be more open to the public. This could be achieved by requiring the publication of arbitral decisions and granting the general public greater access to arbitration processes. Adopting the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration is a step in the right direction. More work needs to be done to ensure transparency in each arbitration procedure. It is advisable to promote increased public involvement in arbitration. This may mean allowing neighbourhood groups, NGOs, and other interested parties to serve as amicus curiae on public interest issues. By involving a broader range of voices in arbitration, the process can become more inclusive and better reflect the international community’s concerns.
Strengthening the Role of PIL in Arbitral Decisions
Another important change is to give PIL more weight in arbitral decisions. When making decisions, arbitrators must consider the public interest and relevant PIL principles, particularly regarding human rights, environmental protection, and the delivery of basic services. In the Methanex case, for example, the tribunal acknowledged the public interest in environmental protection; however, PIL in arbitration needs to be applied more uniformly. Arbitrators should be instructed on PIL and encouraged to utilise it to protect the public interest. This may mean creating guidelines or best practices to consider PIL when rendering arbitral decisions.
Developing a Clear Framework for Public-Private Partnerships
Public-private partnerships (“PPPs”) need a clear framework in arbitration. As more states participate in PPPs with private enterprises, it is imperative to establish guidelines for arbitration that balance the interests of the public and private sectors. The framework should also cover the enforcement issue, ensuring that arbitral rulings respect human rights and do not conflict with governmental policies. This may mean requiring governments and private entities to protect public goods and give the public interest top priority in arbitration procedures. To guarantee that arbitral decisions uphold human rights and do not contradict official policies, the framework should also address the enforcement issue. Public interest litigation can be more significant in defending the public interest by establishing a precise structure for PPPs in arbitration.
Conclusion
Since arbitration is essential for resolving disputes, re-evaluating PIL’s role in arbitration offers an opportunity to bridge the gap between private interests and public accountability. Arbitration can grow into a more reputable and inclusive process for resolving disputes in the public interest by strengthening public participation, encouraging transparency, and strengthening accountability protocols for private companies. PIL must adapt to the growing involvement of private businesses in the global governance of public goods to guarantee the protection of public interests in arbitration proceedings. The increasing participation of NGOs and other non-state actors in arbitration is illustrated by cases such as Methanex and Suez/Vivendi, underscoring the necessity of increased openness and public involvement in arbitral proceedings. Including amicus curiae statements in these instances challenges the conventional view of arbitration as a strictly private matter. It represents a substantial movement towards acknowledging the wider public consequences of arbitration.
This blog is written by Arjun Kapur, IVth Year Student Maharashtra National Law University Mumbai and Saru Kapur, Director, Department of Military Affairs India.