Foreign investors and host States started to conclude 'State contracts' towards the start of the 20th century to regulate specific operations. Those contracts served notably to establish the jurisdiction of arbitration tribunals. The disputes they had to decide often related to public interest considerations, but the number of disputes was still scarce as they concerned a very limited number of contractual operations.
The situation changed towards the end of the 1980s, as a result of two landmark decisions: SPP v Egypt and AAPL v Sri Lanka. In these decisions, the Tribunals found that the consent of the host State to arbitration could be established based on the domestic law of Egypt, in the first case, and on the international Investment agreement between the United Kingdom and Sri Lanka, in the second case.
It is important to realize the consequences of these decisions which are now largely accepted in practice. They have meant that the conclusion of a contract between the investor and the host State is no longer a prerequisite to the initiation of arbitration proceedings. As for the AAPL v Sri Lanka the decision, this entails that all the private persons to whom international investment agreements are applicable can rely on their dispute settlement provisions within which the consent of the host State to arbitrate is contained, provided that the jurisdictional conditions are satisfied.
Besides, this also means that those private persons can challenge the legality of any state measure which is allegedly in breach of these agreements. And, those measures are often tinged with public interest considerations.
And so, the number of private persons and the type of measures which are now 'in the sphere' of investor-state arbitration has increased significantly in the aftermath of the AAPL v Sri Lanka revolution.
The effect of this revolution has been multiplied by the growing treaty practice in the field of international investment law. The first international investment agreement was concluded in 1959 between Germany and Pakistan; today 2671 such agreements are in force.
This means that under the great majority of those 2671 agreements, the private persons to whom they are applicable can directly initiate proceedings, following the conditions that these agreements set out, to challenge the legality of any state measure that they consider breaches of those agreements.
All of this contributes to explain why the number of investor-state disputes has drastically increased, for instance from one dispute registered by the ICSID in 1972 to 48 in 2016, with a total of 597 disputes registered since the creation of the Centre. All in all, the past few decades have given rise to an important change as regards public interest considerations.
Of course, it has always been the case that the measures which are challenged in investor-state disputes are tinged with these public interest considerations.
On the other hand, the change which has taken place is a quantitative one - the number of measures challenged and, as a result, the number of disputes settled by arbitration tribunals has multiplied.
However, it should not be inferred from this that States can no longer regulate freely under international investment law. First of all, this is because the findings of arbitration tribunals cannot be equated with the claims of foreign investors.
Second of all, the way that most arbitration tribunals have notably applied the fair and equitable treatment and indirect expropriation provisions have not annihilated the right of States to regulate.
Nonetheless, of course, the possibility given to foreign investors to initiate proceedings can be seen as a 'Sword of Damocles' which has a 'chilling effect' on host States, causing them to refrain from regulating to avoid such costly challenges.
In this respect, host State authorities must acquire a better knowledge of arbitration practice: this would help them to realize that often the measures that they contemplate, conform with international investment agreements. That being said, the fact that arbitration tribunals are so often called to rule over the legality of state measures tinged with public interest considerations raises for many an issue of legitimacy.
Initially, investor-state arbitration was very similar to commercial arbitration. In addition to the traditional features of arbitration explained, something they also had in common was the confidentiality of the proceedings.
This confidentiality is applied to both the process and its output. The process, meaning the written and the oral phases, was kept confidential notably in the sense that no document or memorial was made available to the public; in the same vein, the hearings took place beyond closed doors.
The output of the proceedings, meaning the final award, was not released. Such a degree of confidentiality is not criticized in commercial arbitration; in fact, it is seen as normal that disputes relating to commercial transactions between private persons be kept secret.
In international investment law, however, such a level of confidentiality has been debated and criticized because one party to the dispute is a State acting as a sovereign and because the measure at stake is tinged with public interest considerations. Many have viewed this level of confidentiality as unacceptable, in particular when the number of investor-state disputes and the awareness of local populations of these disputes has increased.
This contributes to explain why the rules of arbitration have been revised since the 2000s to make arbitration proceedings more transparent. This is well illustrated by the 2006 revision of the ICSID Rules of procedure for arbitration proceedings.
Features of Transparency
Particular features of this evolution are the briefing of amicus curiae, the opening of hearings, and the publication of awards.
(a) Amicus Curiae
As for amicus curiae, arbitration tribunals can now, after consultation of the parties, allow a person or an entity to file a written submission with the tribunal regarding a matter within the scope of the dispute.
Rule 37 of the ICSID Rules of procedure for arbitration proceedings provides a non-exhaustive list of the elements that tribunals shall take into account in deciding to grant or not this authorization, including the extent to which the non-disputing party has a significant interest in the proceeding, the extent to which they would address a matter within the scope of the dispute, and the extent to which they would assist the tribunal in the determination of a factual or legal issue by bringing a perspective, a piece of particular knowledge or insight that is different from that of the disputing parties. As a result of this evolution, non-governmental organizations and international organizations have since been active in filing such amicus curiae.
For instance, the World Health Organisation did so in the case of Philip Morris v Uruguay in which Philip Morris challenged the legality of a plain packaging regulation adopted by Uruguay.
(b) Open Hearings
Concerning the hearings themselves, the tribunal can, after consultation with the Secretary-General, allow any person not involved in the proceedings to attend or observe all or part of the hearings, provided neither party objects to this.
In such a case, the tribunal shall establish procedures for the protection of proprietary or privileged information.
For instance, in BSG v Guinea, the hearings on jurisdiction and merits were open to the public via webcast from the 22nd of May 2017 to the 2nd of June 2017.
Finally, as for the awards, the Rules of procedure for arbitration proceedings provide that the ICSID shall not publish them without the consent of the disputing parties.
However, even if the parties oppose the publication, the ICSID shall promptly publish excerpts of the legal reasoning of arbitration tribunals.
This evolution, initiated in the 1984 amendment of the Rules, introduces an element of transparency in that it helps us to understand how these tribunals decide whether state measures conform with the relevant international investment agreements. It is also crucial for the formation of what is called 'jurisprudences constantes'.
In addition to the 2006 revision of the ICSID Rules of procedure for arbitration proceedings, we can also refer to the 2013 Rules on transparency in treaty-based investor-state arbitration published by the United Nations Commission on International Trade Law. This instrument contains a set of rules that provide transparency and accessibility to the public in investor-state arbitration.
 Southern Pacific Properties (Middle East) Limited v Arab Republic of Egypt (ICSID Case No ARB/84/3) Award (20 May 1992).  Asian Agricultural Products LTD (AAPL) v Republic of Sri Lanka (ICSID Cjase No ARB/87/3) Final Award (27 June 1990).  Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Democratic Socialist Republic of Sri Lanka (adopted 13 February 1980; entered into force 18 December 1980).  Ibid.  Rationae Persoane, Rationae Voluntatis, Rationae Materiae.  Supra note 2.  Treaty between the Federal Republic of Germany and Pakistan for the Promotion and Protection of Investments (adopted 25 November 1959; 28 April 1962).  ICSID Website List of BITs, available at https://icsid.worldbank.org/en/Pages/resources/Bilateral-Investment-Treaties-Database.aspx  ICSID Rules of Procedure for Arbitration Proceedings (2006).  Ibid.  Rule 37, ICSID Rules for Procedure of Arbitration Proceedings.  Philip Morris Brands SARL, Philip Morris Products S.A., and Abal Hermanos S.A. v Oriental Republic of Uruguay (ICSID Case No ARB/10/7).  BSG Resources Limited, BSG Resources (Guinea) Limited, and BSG Resources (Guinea) SARL v Republic of Guinea (ICSID Case No ARB/14/22) Public Hearing (16 May 2017).  ICSID 1984 Amendments  Supra note 8.  UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (1 April 2014)
New Law College, Bharati Vidyapeeth (Deemed University).