Transparency Rules Research Articles

Victims of their own success abroad? Why the withdrawal of US transparency rules is hindered by diffusion to the EU and Canada

ABSTRACTRecent years have seen significant efforts to reduce corruption in the oil, gas and mineral industries. Under the Obama administration, rules were adopted obliging stock-exchange-listed extraction companies to disclose payments to domestic and foreign governments, an initiative which soon spread to the European Union and Canada. Under Trump, however, policy preferences changed, and the disclosure requirements were withdrawn. This article investigates how diffusion of United States (US) disclosure rules has mitigated the effects of the withdrawal process through insights on norm diffusion, market power and rules applicable beyond states’ territorial borders. It is argued that when (1) rules with broad external applicability (2) diffuse to multiple influential jurisdictions and (3) address large multinationals in (4) an internationally interdependent sector, global standards of regulation may emerge. As these conditions are largely (although not entirely) fulfilled, it is likely that most large US multinationals will remain at least partially subject to payment disclosure obligations.

Clouds or Sunshine in Katowice? Transparency in the Paris Agreement Rulebook

This article identifies outstanding issues regarding the adoption of MPGs for the transparency framework of the Paris Agreement at the Conference of the Parties in Katowice in December 2018. The article first offers a definition of the concept of transparency, and reviews certain salient elements in the literature. This includes a warning that adopting transparency rules that elude questions of accountability of Parties for their domestic policies and equity in burden sharing may fail the objective of building the trust and confidence for which the transparency framework was adopted. The article next offers a brief overview of the requirements of Article 13 of the Paris Agreement, before assessing three key matters raised by the August 2018 draft of the MPGs in light of the literature and recent submissions by Parties. The article underscores the relevance of including a focus on ex ante accountability for climate policies in the way the transparency framework is set to operate, in view of the overall focus of the Paris Agreement on prevention of environmental harm. Comparing the potential of transparency rules to promote accountability of reporting and accountability of implementation of Parties’ commitments, it further argues for the inclusion of both foci in the modalities. Lastly, the article highlights that the Paris Rulebook presents a unique opportunity to craft specific roles for non-Party stakeholders in the operation of the transparency framework, thereby developing the links between the United Nations Framework Convention on Climate Change and transnational climate governance initiatives.

Integrity of the public sector and controls: A new challenge for global administrative law?

There are many rules and measures governing the integrity of public administrations. They concern the quality of actions taken by public servants, measured on the basis of fundamental rules and public values. In particular, transparency rules, risk management programs, and codes of conduct for public officials aim to promote accountability, fairness, and discipline in public administrations; others, instead, correspond to limits and sanctions, such as restrictions (e.g., definitions of potential conflicts of interest), administrative responsibilities, and disciplinary sanctions. All these integrity rules and measures are established by global regimes and implemented by both national systems and the global regimes themselves. Global regimes set standards and oversee the compliance of national systems with global integrity rules. At the same time, they are themselves subject to administrative constraints and diversified integrity controls. Global regimes therefore play a dual role, as both controllers and controlled. This raises some questions, including how the application of integrity rules and measures can be controlled, the differences between integrity controls related to national systems and those pertaining to global regimes, and how integrity controls can contribute to the development of global administrative law. All these come together in a central question of why these controls represent a new challenge in global administrative law.

How transparency affects investment-linked insurance products

Investment-linked insurance products exhibit a series of advantages versus direct investments, such as accumulation of retirement funds, tax benefits, and waiver of premiums in the case of disability. However, they are perceived as more complex and difficult compared to plain investments. Consequently, there is a need for disclosures, so that retail investors - insured can make well-informed decisions. Such disclosures have so far been uncoordinated. The EU has identified the need for uniform transparency rules in the packaged retail and insurance-based investment products market. The EU made an effort to enhance protection for investors - insured via a regulation effective in 2017. Such an effort is expected to restore retail investor confidence lost in the aftermath of the crisis. In this paper we attempt to quantify the effect of the existing transparency rules in the various member states to have an indication of what to expect as soon as the new uniform rules are implemented. We use customer satisfaction and trust so as to measure the effect of transparency. We find that increased transparency positively affects both measures.

The UNCITRAL Rules on Transparency as a tool against institutional corruption

In this paper Nikolaos I. Theodorakis suggests that transparency will enjoy a leading role in investor-state dispute settlement in the forthcoming years. In particular, it will act as the spearhead against institutional corruption since all the documents and discussions can be made available to the broader public. Scrutinising every part of the arbitral process will render corporations and states more vigilant towards any illicit behaviour. Granting open access, save for exceptions, to the documents relevant to the arbitral procedure increases transparency, and subsequently minimises the danger of an incident of corruption arising.In particular the paper discusses the nexus between transparency and institutional corruption through the lenses of investment arbitration. The new path that the UNCITRAL Transparency Rules pave is inviting a long debate as to whether this effort will yield the aspired fruits of increased accountability and openness. In doing so, we will discuss how these notions interconnect, how transparency can be key to effective arbitral proceedings in the future, and what is the way forward.

The Changing Landscape of Transparency in Investor-State Arbitration: The UNCITRAL Transparency Rules and Mauritius Convention

This article examines the recent developments in transparency in investor-State arbitration. Part II begins with a brief definition of “transparency” as the term is used in discussions about investor-State arbitration. It then proceeds to provide an outline of the principal normative arguments which explain the recent drive for increased transparency in investor-State arbitration. Part III analyses recent global trends on transparency in treaty-based investment arbitration. Part IV elaborates on the application of the 2014 UNCITRAL Rules on Transparency and their key provisions. Finally, Part V addresses the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (“the Mauritius Convention”), which opened for signature in April 2015.

Disclosure rules in eu public procurement: Balancing between competition and transparency

The paper examines the disclosure of information within public contract awards under EU law. EU Public Procurement rules have several objectives that may at some times be conflicting with each other. A certain level of transparency of public procurement procedure is necessary in order to fight corruption, enhance trade opportunities and ensure effective legal remedies. On the other hand, too much transparency may have certain anti-competitive effects. The national laws regarding disclosure of information vary in different EU member states. In Finland the EU law principle of effective remedies has been interpreted as requiring full transparency among the bidders. The transparency rules under EU law and certain Member States' national laws are analysed. As a conclusion, it is suggested that the rules on disclosure should not be left solely to the discretion of member states as the over-transparent approach taken by certain member states may negatively affect the markets both on a national and EU level.

Regulating Proxy Advisors Through Transparency: Pros and Cons of the EU Approach

This article outlines potential pros and cons of a future European regulation of proxy advisory firms, as set forth in the Commission’s Proposal for a Directive amending Directive 2007/36/EC. After summarizing criticisms concerning the proxy advisory industry, and findings regarding its de facto influence on investors’ voting conduct both in the US and in the European context, the article adverts to why the power of proxy advisors appears to be overestimated. Uncertainty on the status quo of the industry’s actual impact on key decisions in listed companies, as well as costs associated with a regulation, need to be considered for assessing the suitability of the rules drafted to ensure adequate levels of independence and quality of voting recommendations. While transparency rules may be preferred to stricter legal constraints or requirements in a first stage, possible shortcomings of the Draft Directive exist that may undermine its effectiveness. Analyzing the amendments to the Proposal adopted by the European Parliament, and the Council’s Presidency compromise text, may suggest a preferable approach as regards single rules still making their way through the European legislative process.

Sustainable governance and regulation of banks and public companies: A study of the concept “acting in concert”

This Article explores the main convergences and divergences among the different notions of “persons acting in concert” adopted by certain EU and US regulations concerning financial institutions and public companies, for the purpose of identifying a common set of principles governing the interpretation and application of such legal concept. This analysis shows that while under the regulations on the ownership structure of banks and financial institutions the legal notion of “persons acting in concert” is widely applied and extensively interpreted – since the operation of such companies must be protected also from potential (and not only actual) risks – both the takeover bids’ and transparency rules mainly look at the actual exercise of governance rights over listed targets, for the purpose of expanding, respectively, the list of bidders and the information provided to the public on the ownership structure of such companies. As a consequence of the above, we conclude that the notion of “persons acting in concert” should remain flexible and adaptable to the different goals pursued in the various sets of rules as the case may be.

Da privacidade à transparência: desafios da interação entre agentes públicos e privados na gestão de informações pessoais

Preocupações com a proteção da privacidade marcaram a construção da jovem democracia brasileira. Regras de transparência e publicidade complementam as garantias presentes na Constituição Federal visando garantir controle social sobre as atividades do Estado e prevenir abusos como os ocorridos durante a ditadura militar. Contraditoriamente, porém, com o avanço das tecnologias digitais e da internet assim como das iniciativas de cidades inteligentes, a balança parece estar invertida: as atividades do Estado - inclusive na área de segurança pública e vigilância - seguem secretas e pouco sujeitas a escrutínio público, enquanto cidadãos encontram-se cada vez mais expostos a agentes públicos e privados. Ao mesmo tempo, crescem as preocupações com o poder de vigilância adquirido pelas empresas de tecnologia da informação e comunicação. Esta nota discutirá a questão, trazendo exemplos de como a interação público-privada traz novos riscos à privacidade, inclusive no que diz respeito a seu aspecto de bem social.

Transparency in Investor State Arbitration

International trade and investment agreements have become the most recent battleground for the apparently conflicting views the arbitration community and civil society have on confidentiality and transparency. This article aims to clarify the debate and, exploring the concept of confidentiality in international commercial arbitration, explain the rationale for the increased transparency in Investor State Dispute Settlement (ISDS). It gives specific consideration to the rules of major institutions and their national legal environments while also considering the practical differences between investor state and commercial arbitration. In this light, the increasing trend for transparency in ISDS, codified by the 2013 UNCITRAL Transparency Rules, are argued not only to be acceptable but intelligent, considered changes which adroitly balance current public policy demands within the existing norms of commercial arbitration.

Investment Arbitration under Mega-Regional Free Trade Agreements: A 21st Century Model

Investment obligations and investor-State arbitration provisions normally have been negotiated under BITs; in recent years, however, and with increasing frequency, such provisions have been negotiated in the larger context of FTAs. For investment provisions, the movement from BITs to FTAs recently has taken an additional, significant step: the negotiation of such provisions in the even larger context of mega-regional FTAs.This shift in context — from BITs to FTAs, and now from FTAs to mega-regional FTAs — will significantly affect the content and operation of investment provisions. Indeed, investment arbitration under mega-regional FTAs likely will be distinctive in several important respects. This chapter addresses five distinctive characteristics of investment arbitration under mega-regional FTAs. First, a significant number of claims likely will require tribunals to address distinctions between trade and investment activities. Such claims would arise in the context of international production networks, which mega-regional FTAs are intended to encourage and support. By clarifying the outer limits of “investor” activities, tribunals constituted under mega-regional FTAs could build upon the groundbreaking guidance provided by the TPP, which limits damages under the investment chapter to those incurred by a claimant in its “capacity” as an investor.Second, mega-regional FTAs could provide particularly good opportunities for the development of effective appellate mechanisms. Appellate tribunals tied to individual mega-regional FTAs could have a systemic impact on the international investment law regime (given the active investment arbitration practice likely to develop under each treaty); at the same time, such tribunals - each of which would oversee the interpretation of only one treaty - could avoid the temptation to understate the significance of textual distinctions across treaties (which can arise from a perceived need to achieve greater consistency in the case law). Third, mega-regional FTAs likely will increase the availability of investment liberalization commitments. By offering compelling trade benefits (in particular, enhanced access to regional and global value chains), mega-regional FTAs could encourage developing States to agree to robust investment commitments that otherwise would be difficult to secure. Fourth, mega-regional FTAs can encourage investment liberalization in another respect: by relying on existing momentum for trade liberalization to create momentum for investment liberalization (particularly when combining the negotiation of reserved sectors that apply both to trade and investment commitments). Fifth, mega-regional FTAs that include a large number of signatories could give rise to coordination challenges. Such coordination challenges could weaken the effectiveness of joint interpretation mechanisms — a form of control mechanism on which States can rely to limit the independence of tribunals constituted under a particular treaty. In response to the risk of coordination challenges, policymakers should consider a wide range of alternative control mechanism options, including soft law options, which recently have been used effectively by the NAFTA Parties (when developing non-binding “Statements” on arbitral procedure) and UNCITRAL (when developing transparency rules that apply largely on a voluntary, opt-in basis). With the conclusion of the TPP, and likely conclusion of an RCEP agreement, these distinctive characteristics of investment arbitration under mega-regional FTAs ultimately could be seen, more generally, as characteristics of 21st century investment arbitration.

Transparency Rules and the Mauritius Convention: A Favourable Haircut of the State’s Sovereignty in Investment Arbitration?

This paper investigates whether the United Nations Commission on International Trade Law (UNCITRAL) Transparency Rules on treaty-based investor-state arbitration (Transparency Rules) increases transparency in investment arbitration fairly for all the participants. The hypothesis is that the Transparency Rules and the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (Mauritius Convention), work together as a mechanism that is more favourable for the host states than for the investor, and thereby anticipate the different roles of all participants in treaty-based arbitration. Transparency brings pressure for a level playing field among disputing parties. In Detroit International Bridge Company v Government of Canada, UNCITRAL, PCA Case 2012-25, the tribunal accepted the prevalence of the in camera obligation in the procedural rules upon a general treaty obligation, and against the state’s arguments. In Philip Morris Asia Limited v The Commonwealth of Australia, UNCITRAL, PCA Case 2012-12, the tribunal accepted Australia’s need to disclose certain information under their national laws, but to exclude confidential business information as determined by the arbitral tribunal. Other decisions exist in which tribunals decide similarly. This paper explores the actual principle of equality as applied by arbitral tribunals. Thereafter, it considers the legal nature of transparency under the Transparency Rules, standing alone and in combination with the Mauritius Convention. It concludes by determining how this discretion affects the level playing field of all the participants.

Regulation and Firm Value: Curious Case of Transparency and Disclosure Laws in Russia

We provide novel evidence on the effectiveness of mandated changes in Russian transparency and disclosure (henceforth T&D) rules in boosting shareholder welfare. We focus on the staggered implementation of these T&D reforms initiated in 2002 and implemented during 2003-07. Using difference in difference method, we find that the reforms improved earnings quality, which on average reduced the operating performance (i.e., EBIT/Assets) of treated domestically-listed (relative to our control group of cross-listed) Russian firms, but had no significant impact on their market valuation. We argue that low tax alignment, where financial statements are not used for tax purposes, made it possible for managers of domestically-listed firms to inflate pre-reforms earnings, which became difficult post-reforms, leading to a drop in operating earnings. Yet, firm values, on average, remained unchanged because the drop in earnings was roughly offset by a decrease in the required market return due to more reliable accounting information post reform. Also, T&D reforms had negligible effects on cross-listed firms that act as our control group. Further, for domestically listed firms without a domestic controlling shareholder, post-reform reported earnings did not drop, while firm value increased significantly. For the domestically listed firms with a controlling shareholder, just the opposite occurred. Thus, a key finding of our study is that a strong governance structure is a prerequisite for significant gains in shareholder wealth following improved reliability of firm accounting information.

The land grabbing in the international scenario: the role of the EU in land grabbing

The worldwide increase in population and consumption has produced a growing demand for food and energy in the rich and developing Countries. The resulting intensification of land investments, to cope with this need, has in many cases produced investments without transparency rules and it hasn’t created real development for local people. The aim of this paper is to identify, through a cluster analysis, homogeneous groups of investor Countries in order to understand the role of the EU Member States in the context of land grabbing. The results show that the strategies adopted by the investors are driven by the need to achieve energy security and reduce CO2 emissions in order to cope with the problems of food security and to adopt the proposals and the objectives of the European Union Policy for Sustainability. In particular, the acquisitions of EU Member States are driven by the need to provide enough food for the exponential growth of the population and to reduce the energy deficit in view of the achievement of the objectives set out in the “Europe 2020”.

An Analysis of the New Trade Regime for State-Owned Enterprises under the Trans-Pacific Partnership Agreement

I. INTRODUCTIONThe negotiation for the Trans-Pacific Partnership (TPP) Agreement, a mega regional trade agreement among 12 countries, was concluded on 5 October 2015.1 One of the new features of this regional trade agreement is that it contains a standalone chapter on state-owned enterprises (SOEs). Some of the rules contained therein are not completely new, as it draws upon related disciplines that already exist. However, there had never been a separate, integrated discipline specifically covering SOEs before. In particular, the restriction on what is called non-commercial assistance is a significant new addition to what the current trade agreements provide. The TPP SOE discipline therefore sets a new standard, a minimum floor, which will affect other negotiations such as TISA, TTIP and RCEP that are still on-going. Since many prominent SOEs are engaged in the services sector, its ramifications for services trade rules are potentially great. So far, there are no comprehensive discipline governing subsidies in services. Given such significance, it is worthwhile to analyze the substantive rules of the TPP SOE discipline and understand the background from which they were born.Three distinct sources of influence on the TPP SOE discipline can be traced. First of all, the TPP SOE discipline integrates and further strengthens relevant rules in the existing trade regimes such as the WTO and bilateral FTAs. The TPP therefore has a consolidating role. The main multilateral instrument on SOEs in the WTO is the GATT Article XVII on state trading enterprises (STEs), which was inspired by the fear that some government-sanctioned monopolies might play fast and loose by manipulating markets (Hafbauer and Cimino-Isaacs, 2015: 686). However, the article applies only to STEs that are monopolies or those that have special rights and privileges, and are limited to trade in goods. The article is rarely invoked these days.2Since NAFTA, many bilateral trade agreements the US has pursued typically contain provisions regarding SOEs under competition chapters. Here again, main concern is about those state controlled entities that have special privileges and designated monopolies rather than SOEs in general. In the NAFTA, the SOE provision has been specifically included to address state dominated energy and telecommunication sectors in Mexico. Mexico had not liberalized these sectors under the NAFTA, and the US sought to discipline possible anti-competitive actions of state enterprises through the competition chapter (Yun, 2007). In the KORUS FTA, the concern with state enterprises were minimal and only non-discrimination obligation was introduced with respect to state enterprises. The pinnacle of SOE discipline is embodied in the very one-sided US-Singapore FTA, where Singapore's state enterprises are subject to extensive transparency rules.3 The TPP SOE discipline draws upon all these existing regimes, building on them by extending the scope of coverage and sometimes re-organizing existing obligations to overcome what is seen to be shortcomings of the current regime in dealing with past trade disputes.Second, as described above, it has broken the tradition of placing SOE rules under the competition chapter, and set up a stand-alone chapter on SOEs and designated monopolies. In this, it is firmly based on the principle of what is known as neutrality. The competitive neutrality concept provides an explanation as to why SOEs may behave differently from private firms, and offers a justification for setting up a separate regulatory mechanism apart from competition law.No doubt, frustration with increasingly aggressive use of SOEs for industrial policy by China, allegedly propped up with subsidies, has probably played a big role in this attempt to create an international regime on SOEs. Whether or not China is a member of the TPP, the TPP SOE regime will significantly pressure China, as the new SOE regime is set to become the model for developing international trade regime regulating commercial activities of SOEs. …

On recent advances in human engineering.

Advances in embryology, genetics, and regenerative medicine regularly attract attention from scientists, scholars, journalists, and policymakers, yet implications of these advances may be broader than commonly supposed. Laboratories culturing human embryos, editing human genes, and creating human-animal chimeras have been working along lines that are now becoming intertwined. Embryogenic methods are weaving traditional in vivo and in vitro distinctions into a new “in vivitro” (in life in glass) fabric. These and other methods known to be in use or thought to be in development promise soon to bring society to startling choices and discomfiting predicaments, all in a global effort to supply reliably rejuvenating stem cells, to grow immunologically non-provocative replacement organs, and to prevent, treat, cure, or even someday eradicate diseases having genetic or epigenetic mechanisms. With humanity's human-engineering era now begun, procedural prohibitions, funding restrictions, institutional controls, and transparency rules are proving ineffective, and business incentives are migrating into the most basic life-sciences inquiries, wherein lie huge biomedical potentials and bioethical risks. Rights, health, and heritage are coming into play with bioethical presumptions and formal protections urgently needing reassessment.

Regulation and Firm Value: Curious Case of Transparency and Disclosure Laws in Russia

We provide novel evidence on the effectiveness of mandated changes in Russian transparency and disclosure (henceforth T&D) rules in boosting shareholder welfare. We focus on the staggered implementation of these T&D reforms initiated in 2002 and implemented during 2003-07. Using difference in difference method, we find that the reforms improved earnings quality, which on average reduced the operating performance (i.e., EBIT/Assets) of treated domestically-listed (relative to our control group of cross-listed) Russian firms, but had no significant impact on their market valuation. We argue that low tax alignment, where financial statements are not used for tax purposes, made it possible for managers of domestically-listed firms to inflate pre-reforms earnings, which became difficult post-reforms, leading to a drop in operating earnings. Yet, firm values, on average, remained unchanged because the drop in earnings was roughly offset by a decrease in the required market return due to more reliable accounting information post reform. Also, T&D reforms had negligible effects on cross-listed firms that act as our control group. Further, for domestically listed firms without a domestic controlling shareholder, post-reform reported earnings did not drop, while firm value increased significantly. For the domestically listed firms with a controlling shareholder, just the opposite occurred. Thus, a key finding of our study is that a strong governance structure is a prerequisite for significant gains in shareholder wealth following improved reliability of firm accounting information.

The Investment Chapters of the EU's International Trade and Investment Agreements in a Comparative Perspective

Investor-State Dispute Settlement (ISDS) clauses in international investment agreements have traditionally been based on an approach which may be termed ‘light touch regulation’ of investment protection. The avenue taken by the recently negotiated EU draft agreements, the Comprehensive Economic and Trade Agreement (CETA) and the EU-Singapore Free Trade Agreement (EUSFTA), can be described as ‘more comprehensive regulation’. Likewise, EUSFTA and CETA provide a rather detailed body of law on substantive standards for the protection of foreign investment. While this may add to the clarity and predictability of the current regime of international investment law, it may also lead to a reduced standard of protection. Compared with other agreements, EUSFTA and CETA have attempted to rebalance the protection of private property and the host state’s regulatory autonomy. In terms of the regulation of ISDS proceedings, EUSFTA and CETA preserve its principle characteristics but deliver moderate change in five areas: (1) consultation mechanisms, (2) the relationship between ISDS and domestic remedies, (3) the appointment and conduct of arbitrators, (4) cost allocation, and (5) transparency rules. This study proposes (1) further development regarding the coordination between effective domestic legal systems and ISDS and (2) the start of negotiations for the establishment of a permanent appeals mechanism in a regional or bilateral context.

United Nations Convention on Transparency in Treaty-based Investor-State Arbitration

On December 10, 2014, the United Nations General Assembly adopted the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration, also known as the Mauritius Convention on Transparency, which was prepared by the United Nations Commission on International Trade Law (UNCITRAL). The Mauritius Convention is intended to provide states with an efficient mechanism for applying the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (Transparency Rules) in investor-state arbitrations arising under investment treaties concluded before the Transparency Rules’ effective date of April 1, 2014. The Mauritius Convention was opened for signature on March 17, 2015, in Port Louis, Mauritius.