Addressing corruption allegations in international commercial arbitration and investment arbitration
Friday 21 October 2022
Stephane de Navacelle
Navacelle, Paris
Salome Garnier
Navacelle, Paris
David Duran-Hernandez
Navacelle, Paris
Introduction
1. Corruption is as disapproved as it is widespread, both in the public and private sectors.[1]
2. To that extent, international organizations have adopted several instruments aimed at preventing and repressing corruption. Such is the case of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, signed on 17 December 1997[2] and the United Nations Convention against Corruption signed on 31 October 2003[3], which both condemn corruption in all its forms and entail specific commitments for signatory States.
3. Similarly, individual countries have adopted regulations to combat corruption, such as the Foreign Corruption Practices Act in the United States, [4] the United Kingdom Bribery Act [5] and lately, the Sapin II Law in France.[6]
4. Notwithstanding, the International Monetary Fund estimated that the cost of corruption accounted for 2% of the world's gross domestic product (“GDP”) in 2016, given that up to US$ 2 trillion may have been paid on bribes alone.[7]
5. In this regard, and in view of the persistence of corruption in business and trade, the treatment of corruption in commercial and investment arbitration is of particular interest. Indeed, corruption allegations may be used as a “gateway issue” to prevent access to the arbitral tribunals for the parties involved in the dispute[8] or as a substantial defense based on the violation of international public policy.[9]
6. To address such issue, the nature and scope of each of these dispute mechanisms must be clarified. On the one hand, investment arbitration refers to the mechanism between a “host state” and investors, in which, through the signing of bilateral investment treaties (“BIT”), the host state commits to grant investors procedural (access to a neutral forum) and substantive (protection standards) protection.[10]
7. On the other hand, commercial arbitration is an alternative dispute resolution method, contractually agreed upon[11] between two parties engaged in an international economic activity,[12] which allows them to choose a reliable legislation and a neutral venue, guided by contractual provisions.[13] In this sense, the scope, content, limitations and applicable standards do not derive from any international treaty, but rather from contractually expressed intentions.[14]
8. In view of this summa divisio, it is worth analyzing the treatment given to allegations of corruption in each of these types of arbitration. To this end, we will analyze the different approaches to corruption in investment arbitration (I) in contrast with commercial arbitration (II).
The treatment of corruption in investment arbitration proceedings
9. Investment activities entail a considerable source of risk, as they may involve interaction with public agents.[15] As a result, when disputes arise in the execution of a venture, allegations of corruption may appear, leading to consequences that depend, among other things, on the procedural stages at which they are raised, the elements of the act of corruption, the party alleging it and when it is discovered.[16]
Procedural consequences of corruption allegations in investment arbitration
10. First, well-founded allegations of corruption before an arbitral tribunal may have procedural effects and notably be ground for lack of jurisdiction or lack of admissibility of the investor’s claims, depending on the specificities of the dispute.[17] Yet, to avoid prohibiting the investor from its right to a neutral legal forum, procedural sanctions have been considered applicable only to the initial corruption aimed at making the investment, and not to subsequent acts of corruption.[18]
11. All in all, the rationale for barring jurisdiction or dismissing the investor's claim may be found in different legal principles, such as the legality of the investment, whether explicit or implicit, the “clean hands” doctrine or the concept of international public order.[19]
12. Usually, BIT's impose compliance with the host state law when concluding the investment as a condition for granting effects and protection of said investment.[20] Such clause is considered an explicit legality condition of the investment and it is often used as grounds to decline jurisdiction.[21] In this sense, in the face of an initially corrupt investment, it has been considered that arbitrators are not competent, although in practice tribunals have regarded it as a sanction, which must be proportionate to the violation committed.[22]
13. Similarly, arbitrators have considered, even in the absence of an express provision, that compliance with host state legislation was implicit in the BIT[23] and thus have deemed the investors claim inadmissible.[24] Some awards, nonetheless, have opted for barring jurisdiction.[25]
14. However, to avoid situations in which the host state knew of the illegality but still endorsed the investment, tribunals have used the estoppel principle. Thus, a host state may find itself estopped (“under estoppel”) from using the exception of illegality.[26]
15. Another possibility for arbitral tribunals to bar investor's claims has been to apply the “clean hands” doctrine, which requires that the claimant should have a proper conduct. Indeed, “if some form of illegal or improper conduct is found on the part of the investor, his or her hands will be “unclean,” his claims will be barred and any loss suffered will lie where it falls.”[27] This doctrine was used by arbitrators to avoid granting access “to International Arbitration to resolve disputes, because it is evident that its act had a fraudulent origin and, as provided by the legal maxim, “nobody can benefit from his own fraud to absence of fraud in his conduct at the time of formulating his claims”.[28]
16. Finally, arbitrators have also used the violation of international public policy as grounds for inadmissibility of a claim, notably when the host-state is the one claiming the corruption of the original investment[29] without prejudice to the fact that some awards have considered that, in this instance, jurisdiction should be declined.[30]
The analysis of corruption at the merits phase
17. If corruption allegations do sometimes bar access to arbitral tribunals, most often these allegations are dealt with during the merits phase of arbitration[31], thus preserving investors’ right to a neutral forum.[32]
18. In practice this may occur in the case of reparations claimed by the investor, leading to the reduction of the amount claimed according to the analysis of its conduct,[33] or when attributing the costs of the proceeding to one of the parties.[34]
19. However, the one aspect that is essential to mention when considering allegations of corruption at the merits phase of investment arbitration is the standard of proof applied by arbitrators when characterizing the existence of an act of corruption by one of the parties.
20. Yet, establishing a clear approach regarding the standard of proof applied to corruption allegations is difficult. Firstly, because there are no standards of proof applicable to the commission of unlawful acts defined by the BITs, nor by any international regulations[35], and secondly, because arbitral tribunals have not taken a uniform approach.[36]
21. Traditionally, a lot of investment arbitral tribunals applied the heightened standard of “clear and convincing evidence”[37], which seems to be a middle ground between the standard of proof found in criminal law matters “beyond a reasonable doubt” and the “balance of probabilities” often found in civil cases.[38] In practice, such standard is mostly applied to corruption allegations used as a defense against investor claims, as such allegation were considered very serious[39] and host states were deemed to have the necessary tools and powers to conduct an investigation and could therefore meet its burden of proof with relative ease.[40]
22. Yet, such heightened standard may be difficult to meet as corruption is often concealed. In addition, there is always a risk that public officials may dispose of evidence or interfere with the relevant investigations.[41]
23. With that in mind, some investment arbitral tribunals have adopted a more flexible approach, not basing themselves on any standard of proof[42], but rather adopting a pragmatic approach involving reasonable degree of certainty of the corruption, by using notably the red flag methodology (and admission of circumstantial evidence)[43], whereas others, more recently, based themselves on the “balance of probabilities” as starting point in determining corruption claims.[44]
24. Therefore, without it being possible to confirm an absolute standard, it seems that arbitral tribunals have more recently abandoned their historical heightened standard of proof when considering corruption allegations in investment arbitration.
The treatment of corruption in international commercial arbitration proceedings
25. In commercial arbitration, the treatment of corruption is substantially different compared to investment arbitration. Indeed, commercial arbitration is based on the will of the parties and thus on private contract law, whereas investment arbitration applies standard rules of public international law. In commercial arbitration, allegations of corruption do not deprive either party of jurisdiction or admissibility of the claim but are rather analyzed on the merits of the dispute, as a potential violation of international public policy.
Jurisdiction of arbitrators to assess corruption allegations
26. The arbitrability of allegations of corruption was not always evident. Traditionally, arbitrators refused jurisdiction to assess such claims, as they considered that these issues went beyond their scope of authority.[45] Arbitrators were hesitant to address criminal matters due to their lack of power to impose criminal penalties but also due to their inability to compel parties to produce evidence, etc.[46]
27. Nevertheless, such reluctance has been gradually overcome with the generalization of the fight against corruption.[47] Thus, arbitral tribunals no longer decline jurisdiction over corruption issues.[48] With time, it has even evolved from a recognition of arbitrators’ jurisdiction to rule on allegations of corruption, to an obligation to rule on such allegations.[49]
28. Effectively, as arbitrators have become increasingly active in the fight against corruption, they need to be careful in rendering enforceable awards that do not violate international public policy. Therefore, an award in which allegations of corruption are ignored or in which an unlawful act is legitimized in contravention of these principles runs the risk of being overturned.[50]
29. Such is the case when national judges control arbitral awards if asked either to enforce an arbitral award or to set it aside[51] and specifically verify that arbitral awards do not endorse an illegal enterprise. To do so, French courts verify that the enforcement of such award does not violate international public policy. As an example, the Belokon,[52] the Alstom[53] and the Sorelec[54] cases are good illustrations of the red flags techniques used by French judges to identify “serious, precise and concordant indications” of corruption and prevent the enforcement in France of an award rendered abroad judged to be in “manifest, effective and concrete” violation of the French conception of international public policy.[55] However, recent decisions now seem to only verify if enforcing such award would result in a “significant” breach on international public policy.[56]
The sanctioning of corruption at the merits phase of the dispute
30. The incidence of corruption at the merits phase of a dispute, necessarily depends on the applicable law of the contract, in particular to determine the sanction applicable on the merits of the dispute.[57]
31. The first type of sanction is to render the contract null and void. Nullity of the contract is used as a sanction when the purpose of the contract was the payment of bribes. Such is often the case in consultancy contracts.[58]
32. Yet, in the case in which bribery or corruption practices were performed in order to obtain the said contract, the sanction depends on whether we are in a common or civil law environment. If Common Law is applicable, the contract is voidable at the request of the non-corrupt party.[59] Under French law, it was decided that the contract was null and void as it's “cause” violated international public policy.[60] Nevertheless, arbitrators will decide the possible outcome regarding restitutions, depending on specificities of each case.[61]
33. At this point, it is necessary to mention the disadvantages that may result from the application of such strict sanction. Indeed, depriving the contract of its effects due to corruption may, in some cases, end up benefiting the party having benefited from the bribes (i.e., having obtained substantial contracts thanks to the bribes) which may sometimes be inequitable.[62] In fact, a defaulting debtor may claim corruption to justify its non-performance, even though he himself benefited from the corruption scheme. In such cases, the application of such sanction is a deviation from the purposes of international public policy, namely the protection of the common and general principles or values that are essential to international trade.[63]
34. In addition to the nullity of a contract, arbitrators may be called upon to rule on damages sustained by the un-corrupt party when an act of corruption is committed by one of the parties during the performance of a contract. If this issue has not yet been widely developed in arbitration, the use of anti-corruption clauses and the inclusion of compliance programs in different international trade contracts, may lead to assess these situations under the contractual liability perspective. Such is already the case in French case law, where compliance clauses may justify the application of contractual civil sanctions.[64]
Conclusion
35. It can be concluded that allegations of corruption in commercial arbitration, contrary to investment arbitration, may not lead to the application of “gateway issues” as presented above, taking into account the differences between these two dispute resolution mechanisms. In other words, while in investment arbitration corruption may be an obstacle to adjudicate the dispute or to consider the investor's claims admissible, in commercial arbitration it is the duty of arbitrators to ascertain and sanction acts of corruption to ensure the effectiveness of the award.
36. As for the analysis of corruption at the merits phase, the trend in both types of arbitration seems to be the evolution towards the application of more pragmatic standards. However, arbitrators are free to assess these situations and apply the appropriate consequences.
37. Finally, both types of arbitration highlight the need to modulate the applicable sanctions to prevent the party claiming an act of corruption from evading its duties.
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[1] “Droit Strict et relativisme”, Bruno OPETIT, in Droit et Modernité, Presses Universitaires de France, 1998, p. 23 (“The phenomenon of corruption arouses fascination, so much so that the contradiction, consubstantial, it seems, which affects it, raises it to the level of a true paradox, in that it is at the same time unanimously disapproved and universally spread”).
[2] Article 1.1 of the Convention on Combating Bribery of Foreign Public Officials, adopted by the Organization for Economic Cooperation and Development (OECD) on 17 December 1997, (“Each Party shall take such measures as may be necessary to establish that it is a criminal offence under its law for any person intentionally to offer, promise or give any undue pecuniary or other advantage, whether directly or through intermediaries, to a foreign public official, for that official or for a third party, in order that the official act or refrain from acting in relation to the performance of official duties, in order to obtain or retain business or other improper advantage in the conduct of International business”).
[3] Article 1 of the United Nations Convention against Corruption signed on 31 October 2003, (“The purposes of this Convention are: (a) To promote and strengthen measures to prevent and combat corruption more efficiently and effectively; (b) To promote, facilitate and support International cooperation and technical assistance in the prevention of and fight against corruption, including in asset recovery; (c) To promote integrity, accountability and proper management of public affairs and public property”).
[4] “Répertoire de Droit International- Entreprise multinationale”, Laurence DUBIN, in Répertoire Dalloz, Dalloz, November 2021, § 81 (“Among the anti-corruption laws that have extraterritorial reach is the U.S. Foreign Corrupt Practices Act, adopted in 1977, whose effectiveness has been largely determined by the adoption of a decisive multilateral mechanism, the OECD Convention. Promoted by the United States, this Convention has made it possible to envisage the fight against corruption in a way that aims to establish a level playing field between the member States of the OECD, so that each one prosecutes acts of corruption”).
[5] “Répertoire de Droit International- Entreprise multinationale”, Laurence DUBIN, in Répertoire Dalloz, Dalloz, November 2021, § 81 (“[…] the United Kingdom Bribery Act (UKBA), applies to any company doing business in the United Kingdom, or any part of it, and "any associated person". In addition, the UKBA criminalizes not only bribery, but also the lack of a compliance program to prevent bribery within the targeted companies”).
“Répertoire de Droit International- Entreprise multinationale”, Laurence DUBIN, in Répertoire Dalloz, Dalloz, November, 2021, § 82 (“ […] It was only after being heavily criticized by the OECD Working Group on the Convention for the low number of proceedings and sanctions initiated in France that France adopted the Sapin 2 law and adapted its legal culture to the Anglo-Saxon logic of compliance. Like the United Kingdom, France considers the scope of the offence of bribery of a foreign public official to be broad, as it can be committed by a French person or by a person habitually residing or exercising all or part of his or her economic activity on French territory”).
“Corruption: Costs and Mitigating Strategies”, International Monetary Fund, IFM Discussion Note publicly disclosed, May 2016, p. 9 (“The costs of corruption are substantial. Although these costs are hard to measure properly, a sense of the size of this phenomenon can be gauged from bribes paid every year in both developing countries and advanced economies. A recent estimate put the annual cost of bribery alone at about $1.5 to $2 trillion (roughly 2 percent of global GDP).6 The overall economic and social costs of corruption are likely to be even larger, since bribes constitute only one aspect of the possible forms of corruption”).
“Corruption Issues in the Jurisdictional Phase of Investment Arbitrations”, Hiroyuki TEZUKA, in Addressing Issues of Corruption in Commercial and Investment Arbitration, Dossiers of the ICC Institute of World Business Law- Kluwer, Volume 13, 2015 p. 54 (“Corruption issues are generally introduced into arbitral proceedings when one party raises the complaint that another party has availed itself of corruption in its Investment or business activities. This complaint is intended not merely to taint the other side, but is raised with an explicit procedural goal in mind. In the ‘gateway’ phase, typically, the party bringing the charges is the respondent Host State with the goal to end the proceedings”);
“The Impact of Corruption on “Gateway Issues” of Arbitrability, Jurisdiction, Admissibility and Procedural Issues”, Yas BANIFATEMI, in Addressing Issues of Corruption in Commercial and Investment Arbitration, Dossiers of the ICC Institute of World Business Law- Kluwer, Volume 13, 2015 p. 16 (“There are at least four difficulties with the notion of ‘gateway’. First, it means different things to different people, ranging from any issue that a reluctant respondent might invoke to try to stop an Arbitration from proceeding to only those issues affecting party consent that a seized national court will decide at the outset. Second, it may result in standardization, namely consideration of the matter that is always the same in every case, in the same order, and on the same basis. However, a lot will depend on the instrument on the basis of which a claim is brought and on the factual matrix of each case. Third, the ‘gateway’ debate is beset by a managerial mindset in an attempt to reconcile efficacy and legitimacy. It creates a contest between national courts and arbitrators, often by presuming that central matters are for the courts to decide. Yet parties chose Arbitration precisely because it is not litigation. Finally, there is no dearth of concepts on offer”).
“The Arbitral Tribunal’s Duty and Power to Address Corruption Sua Sponte”, Domitille BAIZEAU and Tessa HAYES, in International Arbitration and the Rule of Law: Contribution and Conformity, ICCA Congress Series, p. 232 (“The starting point for the arbitral tribunal in assessing the validity of claims in light of anti-corruption norms is to consider what qualifies as corruption under the law applicable to the merits of the case. The tribunal may also consider transnational principles of public policy. The condemnation of corruption is indeed now widely accepted to be a matter of “truly international” or “transnational” public policy: that is, part of the “global consensus on fundamental economic, legal, moral, political, and social values [...]”).
“Droit de l’Arbitrage - Théorie et Pratique”, Jalal EL ADHAB and Daniel MAINGUY, LexisNexis, 2021, p.157, §157 (“Investment Arbitration is indeed very specific: it opposes a sovereign State against a foreign Investor, a private person, and involves disputes whose subject matter is limited to the treatment of Investments and of that Investor in and by the said State. The particularity of Investment Arbitration, as compared to Commercial Arbitration involving a State, lies in the nature of the dispute and the applicable law: it deals with alleged violations of standards of protection for foreign Investments which have their source in International economic law, most often in a bilateral Investment treaty (BIT)”).
“L'office de l'arbitre d'investissement: le cas particulier de l’investissement illicite”, Eric TEYNIER, Revue de l’arbitrage, 2019, p. 118 (“Through the signing of BITs, states undertake to grant investors protection that is both procedural, through the offer of arbitration providing access to a neutral forum, and substantive, through the applicability of protection standards”).
“Fouchard, Gaillard, Goldman on International Commercial Arbitration”, Emmanuel GAILLARD and John SAVAGE, Kluwer Law International, 1999, p. 9 (“Arbitration is a device whereby the settlement of a question, which is of interest for two or more persons, is entrusted to one or more other persons–the Arbitrator or arbitrators–who derive their powers from a private agreement, not from the authorities of a State, and who are to proceed and decide the case on the basis of such an agreement”).
“Fouchard, Gaillard, Goldman on International Commercial Arbitration”, Emmanuel GAILLARD and John SAVAGE, Kluwer Law International, 1999, p. 35 (“In International Arbitration, a broad interpretation of Commerciality should therefore be adopted: any International Arbitration between companies where the dispute is economic in character will be considered to be Commercial”).
“Fouchard, Gaillard, Goldman on International Commercial Arbitration”, Emmanuel GAILLARD and John SAVAGE, Kluwer Law International, 1999, pp. 31 – 32 (“The contract between the parties is the fundamental constituent of International Arbitration. It is the parties' common intention which confers powers upon the arbitrators […] In International Arbitration, party autonomy extends beyond the choice of a national law to govern the procedure or merits of a case. The parties themselves determine the procedure to be followed, directly or by reference to Arbitration rules”).
“La notion d'« intérêts » du commerce International”, Philippe LEBOULANGER, in Revue de l'Arbitrage, 2005, p. 489 (“[…]. It is therefore the "substantially International reality of the economic transaction that gives rise to the Arbitration" that allows the Arbitration to be qualified. In fact, between the contract and the Arbitration, there is the dispute, and it too is necessarily International. Even more than for the contract itself, the purely economic conception of International Arbitration disregards any element of connection. Thus, the place of Arbitration, the rules applicable to the constitution of the arbitral tribunal, the nationality of the parties or of the arbitrators, or the place of enforcement of the award, are totally irrelevant”).
“State of integrity a guide on conducting corruption risk assessments in public organizations”, in The United Nations Office on Drugs and Crime (UNODC), 2020, p. 1 (“Notwithstanding the fact that the vast majority of public servants perform their duties honestly, all organizations and government institutions face the risk of corruption. Whether through the awarding of public contracts, collection of taxes or other revenues, payment of social benefits, or in any of the other ways in which a government interacts with its citizens, there is the ever-present chance that a public official will engage in corruption through the misuse of specific powers, insights and access to information. Likewise, persons interacting with government institutions and public officials might try to use corruption to, for example, influence or circumvent rules, procedures and decisions”).
“Claims of Corruption in Investment Treaty Arbitration: Proof, Legal Consequences and Sanctions”, Utku COSAR, in Legitimacy: Myths, Realities, Challenges, ICCA Congress Series, 2015, pp. 549 - 550 (“The stage of the proceedings at which allegations of corruption are made or evidence of corruption emerges will impact how a tribunal handles the matter [...] Another significant factor is timing and, more specifically, the approach to claims of corruption that pre-date or post-date the initiation of the investment. A number of tribunals have found that investor wrongdoing during the course of the investment does not fall within the scope of the legality requirement and, thus, will be an issue for admissibility or the merits irrespective of the existence of an “in accordance with law” clause. There is also the issue of how relevant corruption is to the investment, and whether illicit payments were made to obtain and/or retain business or an improper advantage; in other words, the degree to which the bribe caused the investment. It may also be the case that bribes were paid to induce officials to perform their normal duties, a practice described as “facilitation payments”, which are generally considered as less severe than bribes to obtain an investment or improper advantage. If the corrupt acts are found to be irrelevant to the dispute, the tribunal will have to determine the weight, if any, to give such a finding [...]”).
“Jurisdiction and Admissibility in International in Investment Law”, August REINISCH, in The Law and Practice of International Courts and Tribunals, 2017, p. 8 (“The ICSID Convention and most IIAs do not use the term “admissibility” at all. Thus, no clear guidance stems from them. Instead, tribunals have resorted to the concept of “admissibility” when declining to exercise their jurisdiction and refraining to decide particular claims. This concept has been particularly relied upon when claims were considered not to be “ripe” yet, such as when local remedies were not exhausted or when time limitations or negotiation periods before submitting a claim have not been respected”) and p.20 (“When one reviews the case law to date, the corruption defence may be argued and may lead to a tribunal’s lack of jurisdiction or it may lead to the inadmissibility of a claim, as a result of the clean hands doctrine or for other similar reasons”).
Hulley Enterprises Limited (Cyprus) v. The Russian Federation, PCA, Award, Case No. 2005-03/AA226 18 July 2018, §1355 (“There is no compelling reason to deny altogether the right to invoke the ECT to any Investor who has breached the law of the Host State in the course of its investment. If the Investor acts illegally, the Host State can request it to correct its behavior and impose upon it sanctions available under domestic law, as the Russian Federation indeed purports to have done by reassessing taxes and imposing fines. However, if the Investor believes these sanctions to be unjustified (as Claimants do in the present case), it must have the possibility of challenging their validity in accordance with the applicable Investment treaty. It would undermine the purpose and object of the ECT to deny the Investor the right to make its case before an arbitral tribunal based on the same alleged violations the existence of which the Investor seeks to dispute on the merits”).
“On Corruption’s Peremptory Treatment in International Arbitration”, Aloysius LLAMZON, in Addressing Issues of Corruption in Commercial and Investment Arbitration, Dossiers of the ICC Institute of World Business Law- Kluwer, 2015 p. 34 (“There are three principal legal doctrines through which cases of corruption are analyzed: (1) the Legality Doctrine, derived but not fully moored to the ‘in accordance with law’ clauses founded in many treaties which qualify the definition or circumstances of admission of foreign Investment; (2) the ‘unclean hands’ doctrine; and (3) the concept of transnational public policy […]”).
“L'office de l'arbitre d'investissement: le cas particulier de l’investissement illicite”, Eric TEYNIER, Revue de l’arbitrage, 2019, p. 124 (“L'office de l'arbitre d'investissement: le cas particulier de l’investissement illicite”, Eric TEYNIER, Revue de l’arbitrage, 2019, p. 118 (“Case law seems more inclined to consider that the requirement of compliance of the investment with the law of the host State, which is the object of legality, constitutes an element of the definition of investment and that, in this respect, the failure to comply with the clause would result in the arbitral tribunal's lack of jurisdiction”).
Metal-Tech Ltd. v. Republic of Uzbekistan, ICSID, Award, Case No. ARB/10/3, 4 October 2013, §373 (“Uzbekistan’s consent to ICSID Arbitration, as expressed in Article 8(1) of the BIT, is restricted to disputes “concerning an investment.” Article 1(1) of the BIT defines Investments to mean only Investments implemented in compliance with local law. Accordingly, the present dispute does not come within the reach of Article 8(1) and is not covered by Uzbekistan’s consent. This means that this dispute does not meet the consent requirement set in Article 25(1) of the ICSID Convention. Accordingly, failing consent by the Host State under the BIT and the ICSID Convention, this Tribunal lacks jurisdiction over this dispute. […]”);
Quiborax S.A., Non-Metallic Minerals S.A. and Allan Fosk Kaplún v. Plurinational State of Bolivia, ICSID, Decision on Jurisdiction, Case No. ARB/10/3, 27 September 2012, §255 (“The Parties are in dispute as to whether the Claimants have met the Treaty's legality requirement. Article II of the Bolivia-Chile BIT limits its scope of application to Investments made "in accordance with the legal provisions” of the Host State. Similarly, Article I(2) of the Treaty defines "Investment" as one that was made "in accordance with the laws and regulations" of the Host State. The definition of Investment is relevant to determine the scope of the Contracting Parties' – and thus Bolivia's – consent to Arbitration under Article X of the Treaty. Hence, under the Bolivia-Chile BIT, the legality requirement is relevant to determine both the Treaty's scope of application and the scope of Bolivia's consent to Arbitration […]”).
Vladislav Kim and others v. Republic of Uzbekistan, ICSID, Decision on Jurisdiction, Case No. ARB/13/6, 8 March 2017, § 413(“In the Tribunal’s view, the interpretive task is guided by the principle of proportionality. The Tribunal must balance the object of promoting economic relations by providing a stable Investment framework with the harsh consequence of denying the application of the BIT in total when the Investment is not made in compliance with legislation. The denial of the protections of the BIT is a harsh consequence that is a proportional response only when its application is triggered by noncompliance with a law that results in a compromise of a correspondingly significant interest of the Host State”);
Quiborax S.A., Non-Metallic Minerals S.A. and Allan Fosk Kaplún v. Plurinational State of Bolivia, ICSID, Decision on Jurisdiction, Case No. ARB/10/3, 27 September 2012, §274 (“Neither view is consistent with the objectives of the BIT, the Preamble of which States that the Parties "recognize the need to promote and protect foreign Investments in order to support the economic prosperity of both States" and "wish to strengthen the economic cooperation to benefit both States." Accordingly, within the limits set by the applicable treaty interpretation rules, the Tribunal favours a balanced interpretation that takes account of the need to protect foreign Investments, on the one hand, and of the State's other responsibilities, on the other”).
“The Impact of Corruption on “Gateway Issues” of Arbitrability, Jurisdiction, Admissibility and Procedural Issues”, Yas BANIFATEMI, in Addressing Issues of Corruption in Commercial and Investment Arbitration, Dossiers of the ICC Institute of World Business Law- Kluwer, Volume 13, 2015 p. 23 (“In the absence of an express treaty provision, lawfulness (which is typically engaged in the context of corruption and bribery) has been argued to be an implicit condition of Investment treaties”);
Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, ICSID, Award, Case No. ARB/07/24, June 18 2010, § 123 (“An Investment will not be protected if it has been created in violation of national or International principles of good faith; by way of corruption, fraud, or deceitful conduct; or if its creation itself constitutes a misuse of the system of International Investment protection under the ICSID Convention. It will also not be protected if it is made in violation of the Host State’s law […]”)
“The illegality objection in Investor-State Arbitration”, Caline MOUAWAD and Jessica BEESS UND CHROSTIN, in Oxford University Press, Issue 1, Volume 37, 2021, p. 57 (“While jurisdictional defects implicate a tribunal’s authority to adjudicate the case, challenges to admissibility concern defects in the claim. A successful objection to either will deprive the investor and its investment of treaty protection. The distinction, therefore, is arguably immaterial from a practical perspective, at least as it relates to the illegality objection”);
Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, 27 August 2008 §§138 - 139 (“Claimant, in the present case, is requesting the Tribunal to grant its investment in Bulgaria the protections provided by the ECT. However, the Tribunal has decided that the investment was obtained by deceitful conduct that is in violation of Bulgarian law. The Tribunal is of the view that granting the ECT's protections to Claimant's investment would be contrary to the principle nemo auditur propriam turpitudinem allegans invoked above. It would also be contrary to the basic notion of international public policy - that a contract obtained by wrongful means (fraudulent misrepresentation) should not be enforced by a tribunal”).
Phoenix Action, Ltd. v. The Czech Republic, ICSID Case No. ARB/06/5, 15 April 2009, §101 (“In the Tribunal’s view, States cannot be deemed to offer access to the ICSID dispute settlement mechanism to investments made in violation of their laws. If a State, for example, restricts foreign investment in a sector of its economy and a foreign investor disregards such restriction, the investment concerned cannot be protected under the ICSID/BIT system. These are illegal investments according to the national law of the host State and cannot be protected through an ICSID arbitral process. And it is the Tribunal’s view that this condition – the conformity of the establishment of the investment with the national laws – is implicit even when not expressly stated in the relevant BIT”).
Fraport AG Frankfurt Airport Services Worldwide v. The Republic of the Philippines, ICSID, Award, Case No. Arb/03/25, 16 August 2007, § 348 (“There is, however, the question of estoppel. Principles of fairness should require a tribunal to hold a government estopped from raising violations of its own law as a jurisdictional defense when it knowingly overlooked them and endorsed an investment which was not in compliance with its law”).
“Yukos Universal Limited (Isle of Man) v. The Russian Federation: The State of the “Unclean Hands Doctrine in International Investment Law: Yukos as Both Omega and Alpha,” Aloysius LLAMZON, in ICSID Review, ICSID, Volume 30, 2015, pp. 315 - 316
Inceysa Vallisoletana S.L. v. Republic of El Salvador, ICSID, Award, Case No. ARB/03/26, 2 August 2006, § 242 (“Applying the first principle indicated above to the case at hand, we can affirm that the foreign Investor cannot seek to benefit from an Investment effectuated by means of one or several illegal acts and, consequently, enjoy the protection granted by the Host State, such as access to International Arbitration to resolve disputes, because it is evident that its act had a fraudulent origin and, as provided by the legal maxim, "nobody can benefit from his own fraud.”);
“L’office de l’arbitre d’investissement: le cas particulier de l’investissement illicite” Eric TEYNIER, in Revue de l'Arbitrage, 2019, p. 131 (“We also observe that, if the principle of clean hands is invoked in Investment Arbitration, it is often accompanied by other rules. The case law thus shows a lack of consensus on the concept. However, even if a court were to recognize the applicability of the clean hands principle, there is no doubt in our view that the disregard of this principle would result, as a sanction, in the inadmissibility of the Investor's claims and not in the lack of jurisdiction of the arbitral tribunal. It is not, in fact, the Investment that is denied in this capacity, ratione materiae. It is the Investor's claim that cannot be heard because of its improper conduct”).
World Duty Free Company v Republic of Kenya, ICSID, Award, Case No. Arb/00/7, 4 October 2006, § 157 (“In light of domestic laws and international conventions relating to corruption, and in light of the decisions taken in this matter by courts and arbitral tribunals, this Tribunal is convinced that bribery is contrary to the International public policy of most, if not all, States or, to use another formula, to transnational public policy. Thus, claims based on contracts of corruption or on contracts obtained by corruption cannot be upheld by this Arbitral Tribunal.”);
Vladislav Kim and others v. Republic of Uzbekistan, ICSID, Decision on Jurisdiction, Case No. ARB/13/6, 8 March 2017 § 592 (“Respondent argues that the factual case put forward in the previous section as regards Article 211 of the Criminal Code is also such as to violate not only the Uzbekistan law regarding corruption, but also International public policy regarding corruption thereby rendering the claim inadmissible”).
Infinito Gold Ltd. v. Costa Rica, ICSID, Decision on Jurisdiction, Case No. ARB/14/5, 4 December 2017, § 137 (“The Tribunal has noted the Parties’ positions. However, the legality requirement contained in the BIT impacts the Tribunal’s jurisdiction, which the Tribunal has a duty to assess ex officio, in accordance with ICSID Arbitration Rule 41(2). As a result, the Tribunal cannot merely rely on the Parties’ assessment and must engage in its own inquiry on the basis of the evidence in the record. This is particularly true when there are allegations of corruption, which is a matter of International public policy”).
“La corruption saisie par les arbitres du commerce International” Emmanuel GAILLARD, in Revue de l'Arbitrage, 2017, pp. 814 – 815 (“The existence of an illegality, including corruption, may of course be taken into account, but it is then under the heading of substantive issues that it must be apprehended, as a circumstance likely to justify the actions of a State anxious to put an end to corruption or to be taken into account in the assessment of the value of the Investment in the event of the expropriation of an asset initially obtained through corruption, for example […] ”).
“L’office de l’arbitre d’investissement: le cas particulier de l’investissement illicite” Eric TEYNIER, in Revue de l'Arbitrage, 2019, p. 139 (“In the end, there is a strong reluctance in case law and doctrine to sanction the violation of an express or implicit legality clause by the lack of jurisdiction of the arbitral tribunal or the inadmissibility of Investors' claims. This resistance is mainly explained by the primary concern to preserve Investors' right of access to the international courts, which is reserved for them by the treaties, especially since the postponement of the examination of unlawful facts on the merits is not such as to exempt the Investments concerned from any sanction”).
L’office de l’arbitre d’investissement: le cas particulier de d’investissement illicite” Eric TEYNIER, in Revue de l'Arbitrage, 2019, pp. 139 - 141 (“The illegality of the Investment, if not sanctioned at the jurisdiction or admissibility stage, may be sanctioned at the analysis of a potential violation by the Host State of the fair and equitable treatment ("FET"). Arbitral tribunals are increasingly looking at the Investor's conduct to see whether the liberties it may have taken in relation to the normative framework of the State would justify not upholding any violation of the right to fair and equitable treatment […]”);
International Thunderbird Gaming Corporation v. The United Mexican States, NAFTA-UNCITRAL, Award, 26 January 2016, § 164 (“It cannot be disputed that Thunderbird knew when it chose to invest in gaming activities in Mexico that gambling was an illegal activity under Mexican law. By Thunderbird’s own admission, it also knew that operators of similar machines (Guardia) had encountered legal resistance from SEGOB. Hence, Thunderbird must be deemed to have been aware of the potential risk of closure of its own gaming facilities and it should have exercised particular caution in pursuing its business venture in Mexico. At the time EDM requested an official opinion from SEGOB on the legality of its machines, EDM must also be deemed to have been aware that its machines involved some degree of luck, and that dollar bill acceptors coupled with winning tickets redeemable for cash could be reasonably viewed as elements of betting. Yet EDM chose not to disclose those critical aspects in the [Solicitud]”).
Cementownia "Nowa Huta" S.A. v. Republic of Turkey, ICSID, Award, Case No. ARB(AF)/06/2, 17 September 2019, § 162 (“On the basis of the procedural incidents caused by the Claimant in the case at hand, the Arbitral Tribunal is of the opinion that, in the present case, Mr. Kemal Uzan attempts to gain access to international jurisdiction without having made an investment within the meaning of Art. 1(6) of the ECT. By agreeing to dismiss the present claim on the basis of lack of jurisdiction, but only without prejudice to its rights, the risk is considerable that the Claimant will file other similar or identical requests before other international jurisdictions or even before ICSID. The Arbitral Tribunal condemns such conduct, which constitutes a manifest abuse of the International institutional Arbitration system. A formal declaration in the present Award would therefore constitute a fully justified remedy in order to prevent the Claimant from filing this baseless claim before other international jurisdictions or even before ICSID again.”).
“Fraud and Corruption” Sandra DE VITO BIERI and Liv BAHNER, in The Investment Treaty Arbitration Review, 18 June 2021, Section IV (“[...]The instruments that regulate arbitral proceedings provide relatively little guidance on evidentiary matters, such as what sort of evidence the parties should present, and the standard of proof by which tribunals should evaluate the evidence before them. This is also true for the illegality objection and in particular for the allegation that the investment is tainted by corruption […]”).
The illegality objection in Investor-State Arbitration”, Caline MOUAWAD and Jessica BEESS UND CHROSTIN, in Oxford University Press, Issue 1, Volume 37, 2021, p. 95 (“While some trends are clearly discernible, investment tribunals have not (yet) settled on a uniform approach to the illegality objection. Certain aspects remain emerging and others, like a clearly defined standard of proof, remain lacking. For instance, the case law shows an evolution from a bright-line rule to a more nuanced appreciation of the contours and the impact of an alleged illegality”);
“Proving corruption allegations in international arbitration A return to the balance of probabilities standard?”, Paul STOTHARD and Lolan SAGOE-MOSES, in Norton Rose Fulbright international arbitration report, November 2020, p. 29 (“Institutional rules of arbitration do not contain clear definitions of corruption nor guidelines on how tribunals should examine evidence of corruption. In light of this uncertainty, investment and commercial tribunals have developed their own approaches to the standard required to prove corruption allegations. Published awards to date have predominantly concerned investor-state arbitrations, where states raise corruption allegations as a defense against investors’ claims. […]”).
EDF (Services) Limited v. Romania, ICSID, Award, Case No. Arb/005/13, 8 October 2009, § 221 (“[…] There is general consensus among international tribunals and commentators regarding the need for a high standard of proof of corruption The evidence before the Tribunal in the instant case concerning the alleged solicitation of a bribe is far from being clear and convincing.”);
Fraport AG Frankfurt Airport Services Worldwide v. The Republic of the Philippines, ICSID, Award, Case No. Arb/03/25, 16 August 2007, § 399 (“A brief comment on evidentiary standards: whatever standard of proof is required under Philippine law to prove a criminal act, the `jurisdictional question before this Tribunal, which is seized of an international investment dispute, is not a determination of a crime but whether an economic transaction by a German company was made "in accordance" with Philippine law and thus qualifies as an "investment" under the German Philippine BIT. Even assuming, however, that the "preponderance of evidence" test which applies in civil law must yield in the instant case to a "beyond a reasonable doubt" test because the subject of the "in accordance" inquiry is a Philippine criminal statute, this is a case in which res ipsa loquitur. The relevant facts, all of which are found in Fraport's own documents, are incontrovertible”);
World Duty Free Company v Republic of Kenya, ICSID, Award, Case No. Arb/00/7, 4 October 2006, § 136 (“Under these circumstances, such as described by Mr. Ali himself, the Tribunal has no doubt that the concealed payments made by Mr. Ali on behalf of the House of Perfume to President Moi and Mr. Sajjad could not be considered as a personal donation for public purposes. Those payments were made not only in order to obtain an audience with President Moi (as submitted by the Claimant), but above all to obtain during that audience the agreement of the President on the contemplated investment. The Tribunal considers that those payments must be regarded as a bribe made in order to obtain the conclusion of the 1989 Agreement”).
“Proving Corruption in International Arbitration: Who Has the Burden and How Can it Be Met?”, Andrea MENAKER and Brody GREENWALD, Dossier of the ICC Institute of World Business Law: Addressing Issues of Corruption In Commercial and Investment Arbitration, 2015, p. 9 (“The standard of proof in criminal cases is "beyond a reasonable doubt," which requires "proof coming as close to certainty as is humanly possible." The standard of proof in most civil cases is "preponderance of the evidence" - or "balance of probabilities" - which requires establishing "that the fact is more likely true than not true." An intermediate standard of "clear and convincing evidence" also may apply "in cases involving important liberty interests such as proceedings for psychiatric imprisonment or deprivation of parental rights," as well as in civil actions involving "conduct that could be prosecuted as a crime, [such as] allegations of fraud and undue influence…" While "[t]he clear and convincing evidence standard does not require that the evidence negate all reasonable doubt," it requires establishing that a "proposition is highly probable" or "a firm belief or conviction that the allegations in question are true."”).
EDF (Services) Limited v. Romania, ICSID, Award, Case No. Arb/005/13, 8 October 2009, § 221 (“[…] The seriousness of the accusation of corruption in the present case, considering that it involves officials at the highest level of the Romanian Government at the time, demands clear and convincing evidence […]”)
“Proving corruption allegations in international arbitration A return to the balance of probabilities standard?”, Paul STOTHARD and Lolan SAGOE-MOSES, in international arbitration report, Issue 15, November 2020, p. 29 (“[…] Historically, investment arbitration tribunal’s view allegations of corruption as a serious matter requiring a high standard of proof akin to that which would be applied to criminal proceedings. Tribunals have also found that the severe consequences of finding that corruption exists, including that the underlying contract would be rendered voidable for illegality and the investor deprived of any treaty protections, justify this higher “clear and convincing evidence” standard […]”).
“Proving corruption allegations in international arbitration A return to the balance of probabilities standard?”, Paul STOTHARD and Lolan SAGOE-MOSES, in Norton Rose Fulbright international arbitration report, Issue 15, November 2020, p. 29 (“Where a state raises a corruption allegation, a heightened standard of proof may be more readily justified. States enjoy the power to undertake investigations and compel the production of evidence of the alleged corruption prior to arbitral proceedings”).
“Fraud and Corruption” Sandra DE VITO BIERI and Liv BAHNER, in The Investment Treaty Arbitration Review, 18 June 2021, Section IV (“[...]While acknowledging that corruption is 'notoriously difficult to prove, since typically, there is little or no physical evidence' the tribunal, however, insisted on the 'clear and convincing evidence' standard. Conversely, state officials are often in the position to impede investigations and destroy and conceal evidence and pervasive corruption may weaken investigative and prosecutorial agencies in less developed countries”).
Niko Resources (Bangladesh) Ltd. v. Bangladesh Petroleum Exploration & Production Company Limited ("Bapex") and Bangladesh Oil Gas and Mineral Corporation ("Petrobangla"), ICSID, Decision on Corruption Claim, Case No. ARB/10/18, 25 February 2019, § 804 and 805 (“The Tribunals have pointed out repeatedly that they are not a criminal court; their findings on corruption thus do not necessarily require application of the exacting standards of proof that justify criminal sanction. The civil sanctions which they may apply are nevertheless also serious and likely to have far reaching effects for all concerned. They are also aware of the difficulties of proving corruption in a case as the present one […] In this complex situation of facts and allegations, the Tribunals do not find much assistance in terms such as “preponderance of evidence” and “heightened standard of proof”);
The Rompetrol Group N.V. v. Romania, ICSID, Award, Case No. ARB/06/3, 6 May 2013, § 178 (“Operating within an international system characterized by principle rather than procedural formality, the Tribunal is not enamoured of arguments setting out to show that a burden of proof can under certain circumstances shift from the party that originally bore it to the other party, and then perhaps in appropriate circumstances shift back again to the original party. […] by stating the standard of proof as relative, the Tribunal means that whether a proposition has in fact been proved by the party which bears the burden of proving it depends not just on its own evidence but on the overall assessment of the accumulated evidence put forward by one or both parties, for the proposition or against it. A trivial example is that, if a factual allegation is put forward by one side and conceded by the other, it no longer requires to be ‘proved’”).
Metal-Tech Ltd. v. Republic of Uzbekistan, ICSID, Award, Case No. ARB/10/3, 4 October 2013, §§293 - 294 (“Instead, the Tribunal will determine on the basis of the evidence before it whether corruption has been established with reasonable certainty. In this context, it notes that corruption is by essence difficult to establish and that it is thus generally admitted that it can be shown through circumstantial evidence […] For the application of the prohibition of corruption, the international community has established lists of indicators, sometimes called "red flags". Several red flag lists exist, which, although worded differently, have essentially the same content. […] Returning now to the facts of this case under Uzbek law, the allegations of corruption are directed primarily against Messrs Chijenok, Sultanov and Ibragimov. Other lesser allegations are also made in respect of Messrs Mikhailov, Shwa, Krespel and Gurtovoi. The factual matrix is different for each of these individuals. The Tribunal will thus review the involvement of each person separately to determine whether the evidence establishes that any relevant provision of Uzbek law has been violated”).
Vale S.A. v. BSG Resources Limited, LCIA, Award, Case No. 142683, 4 April 2019, §358 (“Nevertheless, having considered the parties’ submissions, it is clear that the applicable standard should be the "balance of probabilities", albeit that "the fact that fraud is a very serious allegation may be relevant to the inherent probabilities of its occurrence, [though] it does not affect the standard of proof”).
“Proving corruption allegations in international arbitration. A return to the balance of probabilities standard?”, Paul STOTHARD and Lolan SAGOE-MOSES, in Norton Fullbright's International arbitration report, November 2020, p. 30 (“Recent decisions signal a return to the traditional standard of ‘balance of probabilities’ – at least as a starting point – in determining corruption claims. The tribunals’ awards in Metal-Tech, Niko Resources and Vale demonstrate that, contrary to early consensus, the ‘clear and convincing evidence’ standard is no longer the default standard of proof for corruption allegations in international arbitration”).
Award by Gunnar LAGERGREN, ICC, Case No. 1110, 1963, §23 (“After weighing all the evidence I am convinced that a case such as this, involving such gross violations of good morals and International public policy, can have no countenance in any court either in the Argentine or in France, or, for that matter, in any other civilized country, nor in any arbitral tribunal. Thus, jurisdiction must be declined in this case. It follows from the foregoing, that in concluding that I have no jurisdiction, guidance has been sought from general principles denying arbitrators to entertain disputes of this nature rather than from any national rules on arbitrability. Parties who ally themselves in an enterprise of the present nature must realize that they have forfeited any right to ask for assistance of the machinery of justice (national courts or arbitral tribunals) in settling their disputes”).
“Addressing allegations and findings of corruption”, Nassib G. ZIADE, in Dossier of the ICC Institute of World Business Law: addressing Issues of Corruption in Commercial and investment Arbitration, 2015, p. 114 (“Historically, arbitration was considered to be an inappropriate forum for addressing and deciding claims of corruption. This view was based principally on the concern regarding a tribunal's ability to compel the production of evidence and a tribunal's lack of authority to impose criminal penalties. When an issue of corruption was raised in arbitration, the usual response was for the tribunal to conclude that it lacked jurisdiction”).
“La corruption saisie par les arbitres du commerce International”, Emmanuel GAILLARD, in Revue de l'Arbitrage, 2017, pp. 806 – 807 (“It is up to the arbitrators, as well as the judges, to sort the wheat from the chaff, without finding in the frequency of litigation a cause of annoyance that is a source of general formulas, and even less a reason to demand a higher standard of proof that does not correspond, or no longer corresponds, to the consensus that has emerged on the subject [. ...] The entry into force in 1999 of the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, which calls on Member States to criminalize bribery of foreign public officials, marked a radical turning point in this respect. However, it is only now, almost 20 years later, that this is reflected in Arbitration jurisprudence and in State Arbitration jurisprudence”).
ICC Case No. 4145, Yearbook Commercial Arbitration, 1987, p. 97;
ICC Case No. 7047, 1994 Award, Yearbook Commercial Arbitration, 1996, p. 79;
ICC Case No. 5622, Revue de l’arbitrage, 1992 p. 327, §169 ;
ICC Case No. 5943, JDI, 1991, p. 1014, n. D. Hascher;
“La corruption saisie par les arbitres du commerce international”, E. GAILLARD, Revue de l’arbitrage, 2017, §18 (“The first, on which there is complete unanimity today, both in state case law and in the case law of the Court of arbitral jurisprudence, is that the arbitrator who finds that the contract covers a corrupt activity should not infer from it the non-arbitrability of the matter and its own absence of jurisdiction but retain its jurisdiction and declare it null and void or ineffective for disturbance of international public order”).
“La corruption saisie par les arbitres du commerce International”, Emmanuel GAILLARD, in Revue de l'Arbitrage, 2017, p. 818 (“There is perfect unanimity today, both in State jurisprudence and in Arbitration jurisprudence, that the Arbitrator who finds that the contract covers a corrupt activity should not deduce the non-arbitrability of the matter and his or her own incompetence, but should retain his or her jurisdiction and declare the agreement null and void or ineffective for being contrary to International public policy”);
“L'arbitre international, nouvel acteur dans la lutte contre la corruption?”, Gabrielle MASSOULIER, in Journal de l'arbitrage de l'Université de Versailles, Lexis Nexis 2019, p. 22 (“In most cases, arbitrations are conducted without the parties’ raising and the arbitrators’ knowing (and perhaps even caring) where enforcement is to take place. In those cases, arbitrators discharge their obligation by making every effort to adhere to the applicable substantive and arbitration laws (usually, the safest way to ensure that the award is enforceable). In some cases, however, the place of enforcement may be predicted, and a law from that place—a law that, in appearance, does not apply to the arbitration—may be a bar to enforcement. Think, for instance, of a dispute concerning a contract that circumvents competition and antitrust regulations in the place of enforcement, or a contract obtained through bribery or corruption or requiring the payment of a bribe. The applicable laws chosen by the parties may turn a blind eye to these facts and provide for the enforcement of the contract, but a serious concern should exist in the situation that enforcement will be denied under public policy in several (or potentially the majority of) jurisdictions around the globe. Arbitrators should then consider the extent to which the award can be rendered in such situation.”).
“An Arbitrator's Obligation to Use Reasonable Efforts to Issue an Enforceable Award and Its Interaction with the New York Convention”, Anibal SABATER and Lidia REZENDE, in 60 Years of the New York Convention: Key Issues and Future Challenges, Kluwer Law International, 1 October 2016, étude 4 p. 6 (“We note today that the trend in arbitration is towards greater severity with regard to corruption. Arbitrators can no longer ignore these internationally condemned practices, whether for moral or practical reasons: awards are now subject to greater control by the state judge. In the end, without being an auxiliary of justice, the arbitrator cannot voluntarily ignore facts of corruption which would be brought to his attention and thus passively support such actions, at the risk of seeing his decisions without effect or even annulled.”).
Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958; entered into force June 7, 1959, Art. V(2)(b); Model Law on International Arbitration, 1985, Arts. 34(2)(b)(ii) & 36(1)(b)(ii).
Paris Court of Appeal, Belokon v. Kyrgyzstan, 21 February 2017, No. 15/01650.
Paris Court of Appeal, Alstom,10 April 2018, No.16/1182.
Paris Court of Appeal, Libyan State v. Sorelec, 17 November 2020, No. 18-02568.
“Arbitration and Corruption: What Type of Control Do Judges Have Over Arbitration Awards?”, Salomé GARNIER and Julie ZORRILLA, in Revue internationale de la compliance et de l’éthique des affaires, LexisNexis, 6 December 2021, p. 2 (“Consequently, according to the Paris Court of Appeal ruling, it is for the judge, seized with an action based on a request of exequatur of an award, to investigate, in law and in fact, all the elements that make it possible to rule on the alleged illegality and to assess whether the recognition or enforcement of the award “effectively and concretely” violates international public policy”).
Cass. Crim., 23 March 2022, No. 17-17.981 (“. Without being required to carry out a search which its findings rendered inoperative, it deduced exactly that the recognition or enforcement of the award, which would have the effect of giving Mr. [K] the benefit of the proceeds of criminal activities, was in significant violation of International public policy, so that it had to be annulled. Without having to carry out a search which its findings rendered inoperative, the Court concluded that the recognition or enforcement of the award, which would have the effect of giving Mr. [K] the benefit of the proceeds of criminal activities, was in clear violation of International public policy and should therefore be set aside. […] Without disregarding the principle of contradiction and without ruling on the basis of mere assertions, the Court of Appeal ruled that the recognition or enforcement of the award, which would have the effect of giving Mr. [K] the benefit of the proceeds of criminal activities, was in significant violation of International public policy, so that it had to be annulled pursuant to article 1520, 5°, of the Code of Civil Procedure”);
Paris Court of Appeal, Santullo v. République Gabonnaise, 5 April 2022, No. 20/03242 (“Consequently, the recognition and enforcement of this award in France, which is likely to have the effect of giving the Santullo Group the benefit of the proceeds of fraudulent activities, is likely to be in significant violation of International public policy. The action for annulment should therefore be granted.”).
“La corruption saisie par les arbitres du commerce International”, Emmanuel GAILLARD, in Revue de l'Arbitrage, 2017, p. 821 (“It is for the lex contractus, corrected where necessary by the requirements of truly International public policy, to determine whether and under what conditions the payment of bribes or the existence of influence peddling is likely to affect the validity or enforceability of the contract in respect of which this illicit activity took place”).
ICC, 1998, Award No. 8891, 1998, in Journal de Droit International Clunet, Issue 4, 2000, p.1082 (“The convergence of these indicators leads the arbitral tribunal to conclude that the purpose of the consultancy contract was to obtain an increase in the price of the goods. by the payment of bribes to persons well placed in the [State] administration. administration [of the State]. The accumulation of evidence leaves no room for hesitation. It is also clear that the purpose of the agreement is to achieve the interests of both parties both parties at the time of the conclusion of the contract. This is obvious to [the plaintiff]; the Statements of Mr. z confirm this. This is no less clear to [the defendant], who is deferring party], who is very familiar with the use of n-series. Consequently, the arbitral tribunal can only find that the contra! tie consultancy and to dismiss [the claimant] from all its claims, which all derive from the consultancy contract.”);
ICC, 1981, Award No. 3913, cited by ICC, 1998, Award No. 8891, 1998, in Journal de Droit International Clunet, Issue 4, 2000, p.1076 (“It is clear from the foregoing that (the British firm) was to act as a financial intermediary, receiving a certain amount of money which it would redistribute to members of a network of local officials whose "positions" suggested that they were likely to compete favorably for the award of the contract for... v. In other words, the commission stipulated for the benefit of (the British company) was to be used to pay what is commonly known as bribes. The payment of bribes by (the British firm) is the cause of the commitment entered into by (the French firm) [...] such a cause under French law is unlawful and immoral [...] This solution is not only confined to French public policy. This solution is not confined to internal French public policy, it also results from the conception of International public policy as recognized by most nations”).
Vantage Deepwater Company, Vantage Deepwater Drilling, Inc. v. Petrobras America Inc., Petrobras Venezuela Investments & Services, BV, Petróleo Brasileiro S.A. (Petrobras Brazil), ICDR Case No. 01-15-0004-8503, § 372 (“A contract procured by bribery is not within the narrow category of contracts that are illegal per se, under relevant case law,134 but rather such a contract is merely voidable, but not void, and thus subject to ratification by an innocent party.”).
ICC, December 2005, Award No. 12990 §§340 – 346 (“It is therefore reasonable to infer from the record that the large sums of money received by the Claimant were received, if not in full, then at least in part, as a result of the corruption of certain officials [of State X]. [...] The contract is null and void. The parties do not dispute the nullity in law of any contract that has an unlawful cause or is based on an unlawful cause. However, for all practical purposes, it is necessary to recall the terms of article 1131 of the Civil Code: An obligation without cause, or based on a false cause or on an illicit cause, can have no effect. This provision implies in particular that any contract with an illicit cause is null and void. The Arbitral Tribunal found that the true intent of the parties underlying the contractual provisions of the Protocol [between Claimant and State X] was wrongful. The Protocol [between Claimant and State X] shall therefore be declared null and void”);
“La corruption dans les contrats commerciaux et ses effets en droit privé”, M. MEKKI, in Revue International de droit comparée, Lexis Nexis, 2014, p. 398, § 10 (“Finally, remains to question the validity of subsequent contracts rather than the corruption agreement. […] So-called subsequent contracts will be void for wrongfulness. According to one author, since these contracts do not constitute the constitutive element of the offence, nullity would be pronounced only on the condition of proving the determining character of the unlawful act on the subsequent act. For other authors, the illicit nature of the motive leads to a presumption of its impulsive and determining character, a point of view not shared by Mr. A. Dadoun in his doctoral thesis. Beyond questions of corruption, however, case law tends to consider that the existence of an illicit purpose, even if it is not the only purpose pursued, may be presumed to have been a determining factor in the parties' commitment.”).
“L’office de l’arbitre en arbitrage Commercial : caractérisation de l’illicéité et mise en oeuvre des sanctions”, Jean-Yves GARAUD, in Revue de l'Arbitrage, 2019, pp.203 – 204 (“ While the principle of prohibition of restitution may seem to be particularly appropriate, its implementation sometimes raises some difficulties. In the event of a bribery pact where the principle of prohibition of restitution is applied, the intermediary could be deprived of the right to claim financial compensation for services - other than the payment of the bribe - that he or she actually rendered to the other party (e.g., arranging contacts or meetings). Thus, the sponsor of the bribery could benefit from the intermediary's services without having to pay anything. Conversely, if the sponsor of the bribery has made payments in advance and the intermediary has not rendered the expected services and has retained all or part of the sums that should have been used as a bribe, the sponsor will not be able to claim back the sums advanced and the intermediary will be immoderately enriched”).
ICC, 1994, Award No. 6497, cited in “L’office de l’arbitre en arbitrage Commercial: caractérisation de l’illicéité et mise en oeuvre des sanctions”, Jean-Yves GARAUD, in Revue de l'Arbitrage, 2019, p. 204 (“[…] by the way, the result of such nullity is not necessarily equitable. The enterprise having benefited from the bribes (i.e., having obtained substantial contracts thanks to the bribes) has not a better moral position than the enterprise having organized the payment of the bribes. The nullity of the agreement is generally only beneficial to the former and thus possibly inequitable”).
“Ordre public transnational (ou réellement international) et arbitrage international”, Pierre LALIVE, in Revue de l'Arbitrage, 1986, p. 333 (“What really falls within the notion of transnational public policy from what "simply" concerns, so to speak, the general, common or fundamental principles of international trade law, of the lex mercatoria, of a "transnational law" in formation, or of an "international law of contracts". It may be thought that, among these principles, only those that appear to be essential, to be supported by a very broad if not universal consensus, to enjoy, in view of their importance, a particular force and imperative, will deserve to be considered as constituting the concept of transnational public order”).
Cass. Com., 20 November 2019, No. 18-12.817 (“[…] in the light of these findings and assessments, the court of appeal, which, without being obliged to follow the parties in the detail of their arguments, considered that, taking into account the rules laid down by the compliance program and the agreement entered into, EIC's breach of its contractual obligations, insofar as it was likely to give rise to Biomet's own liability, was sufficiently serious to justify the termination of the Commercial relationship without prior notice, legally justified its decision”)