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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
Corruption has come to the fore in international law and policy in recent years. The demands of global commerce, international crime prevention, corporate governance, transparency and accountability in public sectors, together with a disturbing new understanding of the effects of corruption on economic development, political stability and the rule of law, have resulted in a cascade of international instruments and policies relating to corruption. This has included an important series of international conventions against corruption from the OECD, the European Union and the Organization of American States, culminating in December 2003 in the United Nations Convention against Corruption. The norms established by these international instruments have worked their way into domestic law in many jurisdictions. As would be expected, the new norms and the heightened profile of corruption have been reflected in the pleadings and submissions of parties in international arbitration.
There have already been some investment arbitrations involving allegations of corruption, and anecdotal evidence and news reports suggest that a number of arbitrations in progress will address this subject. The purpose of this article is to examine the possible implications of allegations of corruption in connection with an investment in an investor-State arbitration, given the distinctive characteristics of an arbitration pursuant to an investment treaty. [Page203:]
The first part of the article will briefly consider the recent cascade of rule-making in relation to corruption, identify the type of conduct now condemned in international law, and also addresses the treatment of corruption in international commercial arbitration generally.
The second part will consider the distinctive features of investment arbitration and suggest the possible juridical effects of findings of corruption within an arbitration initiated on the basis of an investment treaty.
I International rule-making, corruption and arbitration
(a) The international norm cascade
Corruption, and particularly the bribery of public officials, has until relatively recently been treated as a domestic legal problem. It was condemned and punished when committed at home within the jurisdiction of domestic courts. However, it was not considered to be criminal conduct when committed abroad, being regarded as a matter to be dealt with by the legal system of the place where it took place.
However, where the corruption occurred in a jurisdiction whose detection and enforcement mechanisms were weak or themselves corruptible, or where it was carried out at a distance through agents, or was disguised through commission or agency contracts or off-shore entities, then the bribe payer faced little legal risk and no meaningful deterrence. The liberty to bribe abroad with impunity was encouraged by the acceptance in some business circles that corruption was 'part of doing business' in certain countries, and by the tax deductibility of foreign bribes in many jurisdictions.
A series of corporate scandals involving the bribery of foreign public officials in the mid-1970s saw the emergence in the United States of a new standard according to which the bribery of foreign public officials was no longer acceptable. The most important event in this development was the enactment in 1977 of the Foreign Corrupt Practices Act. This instrument was radical in creating an extraterritorial crime and applying the same standard to the bribery of public officials at home and abroad. After the Foreign Corrupt Practices Act, the United States Government promoted the international criminalization of bribery and related offences. It worked through various international organizations, particularly the OECD and the Organization of American States.
By the mid-1990s the emerging standard had other powerful supporters, not only in the OECD and OAS but also in the European Union and the World Bank, and some leading business organizations, particularly the International Chamber of Commerce (ICC). 1By the 1990s, support for the emerging norms against transnational corruption had unleashed a cascade of law-making marked[Page204:]
by: (a) the adoption by States of numerous international instruments confirming the new norms; (b) the rapid growth in the number of States and other players accepting the new norms; (c) expansion of the norms themselves from the archetypal case of bribery of a foreign public official to include many other offences of transnational corruption.
The major international instruments resulting from this norm cascade are:
(a)The Inter-American Convention against Corruption (1996); 2
(b)OECD Recommendation on the Tax Deductibility of Bribes to Foreign Public Officials (1996); 3
(c)OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (1997); 4
(d)Convention on the Fight Against Corruption Involving Officials of the European Communities or Officials of Member States of the European Union (1997);
(e)Criminal Law Convention on Corruption: (1999); 5
(f)Civil Law Convention on Corruption (1999); 6
(g)African Union Convention on Preventing and Combating Corruption (July 2003); 7
(h)United Nations Convention against Corruption (December 2003). 8
The most comprehensive of these international instruments, in terms of subject matter, number of signatories and the obligations imposed on signatories is the United Nations Convention Against Corruption (hereinafter 'UN Corruption Convention'). The UN Corruption Convention requires signatories to criminalize a wide range of manifestations of international corruption. The core offences[Page205:]
are bribery of a national public official and bribery of foreign public officials in Articles 15 and 16. Article 16(1) reads as follows: 9
Article 16
Bribery of foreign public officials and officials of public international organizations
1. Each State Party shall adopt such legislative and other measures as may be necessary to establish as a criminal offence, when committed intentionally, the promise, offering or giving to a foreign public official or an official of a public international organization, directly or indirectly, of an undue advantage, for the official himself or herself or another person or entity, in order that the official act or refrain from acting in the exercise of his or her duties, in order to obtain or retain business or other undue advantage in relation to the conduct of international business.
The UN Corruption Convention moves beyond bribery of public officials to require signatories to prescribe or to consider the prescription of a wide range of corrupt practices, including the solicitation or acceptance of bribes by a public official (Articles 15(b) and 16(2)), misappropriation or diversion of property by a public official (Article 17), trading in influence (Article 18), abuse of functions (Article 1910 ), illicit enrichment (Article 2011 ), bribery and embezzlement in the private sector (Article 21 and 22), and laundering or concealing the proceedings of crime (Articles 23 and 24). The jurisdictional provisions in respect of these offences (Article 42) authorize a signatory to establish jurisdiction over them not only when they are committed within its territory, but also when they are committed by or against its nationals or against the State itself. 12
The UN Corruption Convention contains detailed provisions relating to international cooperation and asset recovery. There is also a provision covering the consequences of acts of corruption, which is potentially significant to investor-State disputes. It reads: [Page206:]
Article 34
Consequences of acts of corruption
With due regard to the rights of third parties acquired in good faith, each State Party shall take measures, in accordance with the fundamental principles of its domestic law, to address consequences of corruption. In this context, State Parties may consider corruption a relevant factor in legal proceedings to annul or rescind a contract, withdraw a concession or other similar instrument or take any other remedial action.
Article 34 is imprecise and amounts to little more than a recognition that acts of corruption should have consequences for State contracts. However, and irrespective of the manner in which the principle of Article 34 might be implemented internally by a particular State, it provides a basis upon which, in the international legal order, a respondent State may raise investor corruption as a defence to possible liability for breach of a bilateral investment treaty.
(b)Corruption in international commercial arbitration between private parties
In international commercial arbitration between private parties corruption has arisen as an issue in relation to four distinct phases of the arbitral proceedings:
(i)jurisdiction;
(ii)the merits;
(iii)the annulment or setting aside of the award in the courts at the seat of the arbitration;and/or
(iv) the enforcement of the award.
The earliest and perhaps most renowned award dealing directly with corruption is ICC case 1110 decided in 1963. The arbitration involved a claim for commissions by an Argentinian agent in respect of public works contracts awarded by the Perón regime in Argentina. The purpose of the contract was for the claimant to trade in his influence with senior members of the Perón regime, and the understanding was that a substantial portion of the claimant's commission would be passed on as bribes to public officials. Judge Gunner Lagergren held that the 'gross violations on good morals and international public policy' involved in this arbitration had the effect of negating his jurisdiction: 13[Page207:]
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 civilised 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 realise that they have forfeited any right to ask for assistance of the machinery of justice (national courts or arbitral tribunals) in settling their disputes.
This decision has been criticized for failing to recognize and give effect to the separability of the contract and the arbitration agreement, given that the arbitration agreement itself is unlikely to be tainted with corruption. 14 In subsequent cases corruption has been considered as a question of contractual illegality and/or domestic public policy at the merits stage, or as a public policy question at the enforcement stage. For example, in two ICC cases under French law in the early 1980s, both involving claims to commissions for services, including trafficking in influence and, most probably, the bribery of public officials to obtain State contracts, the arbitral tribunal rejected the claims on the grounds that the contracts were null and void as they had an illicit purpose contrary to morality or public policy. 15
The question of nullity is determined in accordance with the lex contractus, although the law at the place of performance is also considered in some awards. The public policy significance of corruption means that a respondent that unsuccessfully alleges corruption in its defence on the merits often subsequently seeks annulment of the award at the seat on public policy grounds, or resists enforcement on the same grounds pursuant to Article V(2) of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Therefore, a corruption-based defence to an arbitral claim might involve considering, at different stages, the public policy of the lex contractus, the lex [Page208:]
arbitri, the place of performance and the place of enforcement, as well as transnational public policy. The result might be a complex series of arbitral annulment and enforcement proceedings, which consider essentially the same facts from different public policy perspectives, with the added problem of more evidence becoming available as the proceeding progresses. 16 The modern public policy significance of corruption and the possible procedural complexity of arbitrations involving allegations of corruption make it necessary for arbitral tribunals to investigate issues of corruption whenever they arise in arbitration, regardless of the parties' wishes, and to record their legal and factual conclusions in their awards. 17
At whatever stage of the arbitration corruption is considered, a recurrent problem has been proof of a corrupt purpose. In some cases the corrupt purpose has been more or less admitted, but in many arbitrations the standard of proof to be applied, and whether it has been satisfied, have been major issues. As noted above, the tendency for evidence of corruption to emerge progressively has raised its own problems.
A distinguished commentator recently came to the following conclusions concerning corruption in international commercial arbitration: 18
The case law shows that international arbitrators:
- accept jurisdiction;
- consider that their primary duty is owed to the parties and is to settle their dispute in accordance with the parties' agreement, and not a duty to be an 'organ' of the international community entrusted with enforcing morality in trade operations;
- require clear proof of bribery before invalidating an agency agreement, notwithstanding any suspicions they may have; - only in a minority of cases search for indicia of bribery on their own initiative; and
- only in a few cases accord primacy to mandatory legal provisions prohibiting use of intermediaries in force in the State most closely linked to the trade operation in question, preferring generally to give precedence to the public policy rules established by the governing law as designated by the agreement between principal and agent. [Page209:]
The final jurisprudential trend summarized above - i.e., that of giving little weight to the mandatory provisions of any law of the importing country forbidding the use of intermediaries in public contracts tendering, and relying decisively instead on the law chosen by the parties - is open to criticism.
A caveat might be added to the conclusion that in only a minority of cases have arbitral tribunals searched for indicia of bribery on their own initiative. Although this statement undoubtedly accurately reflects case law to date, the rapid development of norms relating to corruption in international law and policy means that arbitral tribunals can be expected to be more active in future in investigating the true purposes of suspicious contracts. 19
II. Corruption and investment arbitration
Investment arbitration pursuant to a bilateral investment treaty (BIT) or the investment chapter of a free trade agreement differs in significant respects from international commercial arbitration between private parties. The first part of the present section lists some distinctive features of investment arbitration that may affect the legal approach to or consequences of corruption arising in an investment arbitration. The second part then examines how these distinctive feature are likely to lead arbitral tribunals to respond in new ways to corruption in investment arbitration.
(a) Distinctive characteristics of investment arbitration
The following characteristics of investment arbitration are significant when it comes to the treatment and consequences of corruption:
The fundamental characteristic of investment arbitration is that the substantive rights of the investor are based on a treaty between its home State and the State where the investment is made (known as the host State).
There might also be a contract between the host State and the investor. The relationship between the investor's treaty rights under the BIT and its contractual rights and obligations has proved troublesome in many recent arbitrations. 20[Page210:]
An investment arbitration will be governed by the provisions of the particular BIT on which it is based and also, in the majority of cases, by the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States. Insofar as it involves a private right of action in international law, investment arbitration is permeated by public international law. Theoretically, this sets it apart from international commercial arbitration in many significant respects.
The fact that investment arbitration takes place in the international legal order means that the host State can be liable for any act or omission that is attributable to the State under international law. Accordingly, the State might be liable under a BIT for actions taken by local or regional government, by entities created at a local level, and by local officials. Further, a State cannot invoke the provisions of its internal law to justify breach of a BIT, 21or rely on its constitution or internal law to exclude the jurisdiction of the arbitral tribunal by arguing that certain disputes are the exclusive preserve of its own administrative courts.
The fact that investment arbitrations have their source in treaties gives a unique form to the arbitration agreement. Like international commercial arbitration, investment arbitration requires the parties' 'consent in writing'. 22n international commercial arbitration this consent is expressed in a mutual and contemporaneous exchange of promises between the parties in the form of a written arbitration agreement. In contrast, the State parties in a BIT make an open offer of arbitration to investors from the other State. The investor's acceptance of that offer, and so the formation of the arbitration agreement, does not arise until the investor commences arbitration, as explained in Lanco International, Inc. v. The Argentine Republic: 23[Page211:]
consent to ICSID arbitration by a State may come from a bilateral treaty. In this regard, the award in American Manufacturing and Trading, Inc. v. Republic of Zaire (SINZA Award) establishes . . . that consent for the purposes of Article 25(1) is understood to be given by the State party to the dispute in the bilateral investment treaty from the moment the State extends a generic invitation to all the investors who are nationals of the other Contracting State to submit the settlement of their possible disputes to ICSID jurisdiction. In contract [sic], the consent of the investor who is a national of the other Contracting State, must be given by the investor in writing, since the consent of the State is not binding on the investor.
§44 In the case before us the consent of the Argentine Republic arises from the ARGENTINA-U.S. Treaty, in which the Argentine Republic has made a generic offer for submission to ICSID arbitration. . . . . . . . . .
The written consent by the Argentine Republic is set forth in the ARGENTINA-U.S. Treaty; as concerns the investor . . . such consent was set forth in its letter of September 17, 1997, and in the request for arbitration, which was filed with ICSID on October 1, 1997.
This distinctive mechanism of a generic open offer to investors, accepted by the investor in commencing arbitration has, as discussed below, may have significant ramifications for the treatment of corruption in investment arbitration.
An arbitral award in international commercial arbitration may be the subject of setting aside proceedings at the place where the arbitral tribunal has its seat or review at the place of enforcement. The grounds on which such actions may be brought are limited and have been harmonized internationally through the UNCITRAL Model Law on International Commercial Arbitration and the New York Convention. These instruments provide that an award may be set aside or denied recognition or enforcement if contrary to public policy. 24
In contrast, an arbitral award in an investment arbitration made pursuant to the Washington Convention is not subject to review by the courts at the place of arbitration. 25he Washington Convention has its own annulment procedure in[Page212:]
Article 52, but public policy is not mentioned as a ground for annulment. And Contracting States have an obligation to enforce awards made in accordance with the Convention without any review by domestic courts. 26
Thus, in investment arbitrations conducted under the Washington Convention there is no means of reviewing arbitral awards on grounds of public policy as there is in international commercial arbitration. Accordingly, public policy questions must be examined by the arbitral tribunal (when dealing with either jurisdiction or the merits), or they will not be examined at all.
(b)New consequences of corruption in investment arbitration
There has not yet been an award in an investment arbitration where corruption has been alleged and proved and the tribunal has fully analysed the legal consequences of the corruption. There have been a number of investment arbitrations where corruption has been alleged; in some cases the tribunal has examined and rejected the allegations, in others it has not found it necessary to determine the corruption issues. However, the frequency with which allegations of corruption are now appearing means that an award dealing with these issues is likely to appear soon.
The first point to note about corruption in international arbitration is that it will raise the same difficult issues of proof as corruption has raised in international commercial arbitration. The problems of proof, and the attendant issues of procedural due process and the likelihood of tactical abuse, should not be underestimated. They have been adequately dealt with elsewhere and do not appear to raise new questions in investment arbitration. 27
Issues of corruption are normally raised in arbitration by the respondent in order to resist a claim. The same pattern may be expected in investment arbitration, where the host State is inevitably the respondent. Accordingly, allegations of corruption are likely to be made by the host State against the investor in respect of the establishment or development of the investment. Examples to date include bribery of a senior member of government, 28the concealed participation of [Page213:]
officials or their families in the investment either through a commission or agency agreement29or through shares in or other benefits from an entity involved in the investment, 30and corruption of the judiciary to overcome regulatory obstacles. 31 It is important to note that allegations of corruption arising in this way are likely to involve the host State's own officials.
There are at least five novel legal questions raised by allegations of corruption in investment arbitration.
In international commercial arbitration the substantive rights of the claimant derive from the contract, and the usual effect of fraud or corruption in the execution or performance of the contract is to render it invalid or null and void.
In investment arbitration the substantive rights result from a treaty between two State parties. The corruption of the investor cannot affect the validity of the treaty, and therefore the substantive rights remain intact.
The effect of corruption on an investor's treaty rights must therefore be procedural. The corrupt investor will be estopped from claiming the benefit of the substantive rights in the BIT. This view is supported by the doctrine of 'clean hands' or ex injuria jus non oritur in public international law.
In international commercial arbitration the established doctrine of the separability of the arbitration agreement from the main contract insulates the jurisdiction of the arbitral tribunal from corruption affecting the main contract. When corruption affects the main contract, the substantive rights of the parties are involved and the matter must be dealt with on the merits. Only if the corruption directly affects the execution or performance of the arbitration agreement does an issue as to jurisdiction arise. [Page214:]
This analysis, based on the separation of the arbitration agreement from (the potentially null and void) substantive rights under the main contract, sits very uneasily in the framework of investment arbitration. Firstly, in a treaty-based arbitration there are not two contracts, but a treaty (containing substantive and procedural rights) and an arbitration agreement. Secondly, no action by the investor will have the effect of making the BIT invalid or null and void.
The open offer to arbitrate any dispute with investors, made by the host State in the BIT, survives any corruption on the part of the investor. It might be suggested that the offer is subject to an implied condition that it is confined to bona fide investors, but there is no need to read limitations into the dispute resolution clauses of a BIT in this manner. Where the investor has acted corruptly, the right to arbitrate can be treated in exactly the same manner as the other substantive treaty rights, i.e. the investor lacks clean hands and is estopped from claiming the benefit of the right to arbitration.
According to the above analysis, corruption pertains to jurisdiction insofar as a corrupt investor is estopped by its corruption from accepting the open offer to arbitrate made by the host State in the BIT. As the offer cannot be accepted, there is no arbitration agreement and no jurisdiction for any arbitral tribunal established at the request of the investor. Corruption also involves the merits insofar as a corrupt investor cannot claim the benefit of the substantive rights in the BIT.
In addition to disabling the arbitration agreement, corruption might indirectly concern jurisdiction where a finding of corruption negates a factual or legal precondition to jurisdiction. For example, in Lucchetti S.A. and Lucchetti Peru,
S.A. v. Republic of Peru the Tribunal had to address the issue of whether there was jurisdiction ratione temporis. Article 2 of the Peru/Chile BIT provided that the BIT did not apply to disputes that arose before its entry into force on 3 August 2001. The respondent State argued that the dispute in this arbitration was a continuation of a dispute that arose in 1997, which had not been settled (as alleged by the claimants) by judgments of the Peruvian courts in the claimants' favour because of the corrupt circumstances under which these judgments were obtained. The Tribunal acknowledged that, if proved, the allegations of corruption would have deprived it of jurisdiction under Article 2: 32[Page215:]
Turning now to the question concerning the alleged illegalities surrounding the manner in which the 1998 judgments were procured, the Tribunal is of the view that, if proved, they would provide an independent ground for holding that the judgments could not have had the effect of terminating the earlier dispute. However, since the Tribunal has already concluded on other grounds that these judgments did not end the dispute, it is unnecessary for it to address this issue.
Accordingly, the nature of investment arbitration means-in contrast to the established position in international commercial arbitration-that corruption might properly be raised as a jurisdictional issue if the corrupt investor is incapable of completing the arbitration agreement or the corruption negates a precondition to jurisdiction in the BIT. It cannot be excluded, however, that, for practical reasons, the tribunal might prefer to proceed to the merits and hear all the evidence before ruling on the issues of corruption and jurisdiction.
In international law, a State is responsible for acts committed by its officials, of whatever status, in their official capacity, even when the officials exceed their authority, contravene instructions, or violate internal law. 33Accordingly, if a public official accepts a bribe to exercise his public duties in a certain manner, for example by smoothing the regulatory path for a foreign investment, then the acts of that official are attributed to the State itself in public international law. There is an issue as to whether it is possible to distinguish between the official's act (such as issuing a licence or consent, or awarding a contract) and the official's dishonesty for the purposes of attribution.
Another question is whether the State's indifference to the corruption of its own officials has any consequences for its reliance on corruption as a defence in investment arbitration.
When a State suspects corruption on the part of one of its officials, there are various civil and penal steps that may be taken against the investor and the official, as well as broader measures addressing possible systemic corruption. [Page216:]
In the case of an official suspected of corruption, the State might commence an investigation, remove or suspend the official, institute criminal proceedings against the official and/or the investor, initiate legal proceedings to annul or rescind any contract or concession granted to the investor, 34or even pass legislation to deprive the investor of rights acquired corruptly. 35At a broader level, the State party might review its anti-corruption policies and practices, review its selection and training programmes for officials, implement codes or standards of conduct for the correct, honourable and proper performance of public functions, review its procurement or public reporting systems, etc. 36However, if a host State takes no steps (or merely token steps) to investigate, prosecute or rectify the corrupt acts of its own officials, does this have any consequences upon its right to rely on corruption as a defence in an investment arbitration?
This issue was addressed in the award on the merits in Wena Hotels v. Arab Republic of Egypt. 37The host State in this case alleged that the claimant had made payments to a senior public official (Mr Kandil) in order to obtain the lease of two State hotels. The claimant stated that the payments had been made to Kandil under an agency agreement in respect of unrelated transactions. The Tribunal stated at paragraph 116 of its award (footnotes omitted):
116. Although the Tribunal believes Minister Sultan's testimony that he was not personally aware that 'Mr. Kandil was an agent to Farargy' and that when he did learn about it, 'I passed that to the prosecutor requesting a full fledged investigation,' it is undisputed that Mr. Kandil was never prosecuted in Egypt in connection with this agreement. Regrettably, because Egypt has failed to present the Tribunal with any information about the investigation requested by Minister Sultan, the Tribunal does not know whether an investigation was conducted, and, if so, whether the investigation was closed because the prosecutor determined that Mr. Kandil was innocent, because of lack of evidence, or because of complicity by other government officials. Nevertheless, given the fact that the Egyptian government was made aware of this agreement by Minister Sultan but decided (for whatever reasons) not to prosecute Mr. Kandil, the Tribunal is reluctant to immunize Egypt from liability in this arbitration because it now alleges that the agreement with Mr. Kandil was illegal under Egyptian law. [Page217:]
It is not clear from the Tribunal's conclusion that it was 'reluctant to immunize Egypt from liability in this arbitration' whether this was a legal conclusion (i.e. Egypt's lack of action amounted to a bar to the defence of corruption) or an inference of fact (i.e. Egypt's lack of action meant that corruption was unproved). The implications of the State's inaction when faced with the corruption of its own officials is a complex subject that awaits further development in case law.
The question also arises as to the proper response of an arbitral tribunal to an energetic reaction by the host State to the alleged corruption under domestic law. If, for example, the State has commenced criminal prosecutions against the investor and the official, should the arbitral tribunal avoid ruling on the issue of corruption, for instance by postponing the matter until those proceedings have been completed?
This question raises, in yet another context, the problem of parallel proceedings, and the relationship between domestic courts and international arbitral tribunals. Although a delicate and complex matter, it is suggested, in general terms, that the arbitral tribunal must address issues of corruption when they arise and should not defer to domestic tribunals. 38It is up to the domestic authorities to determine the impact of an award relating to corruption in domestic proceedings, including criminal proceedings. The arbitral tribunal must assume that any use by domestic courts of its own findings relating to corruption will be subject to appropriate protections.
Conclusions
A cascade of new international instruments has substantially raised the international profile and public policy significance of bribery and corruption and confirmed the common will of States to outlaw and eliminate such behaviour[Page218:]
in international commerce. As a result, questions of corruption are bound to arise more frequently in international arbitration, including investment arbitration. However, the special characteristics of investment arbitration, which derives from a treaty rather than a contract, means that the consensus that has been developing in international commercial arbitration over the legal consequences of a finding of corruption cannot be applied uncritically in investment arbitration. The most significant difference is likely to be the effect of corruption on the arbitration agreement, as in investment arbitration corruption is likely to deprive the investor of the power to complete the arbitration agreement, thereby depriving the tribunal of jurisdiction over the dispute. [Page219:]
1 ICC has played an active role in developing rules against international corruption since the Shawcross Report in 1977; see ICC Rules of Conduct: Extortion and Bribery in International Business Transactions in F. Vincke, F. Heimann & R. Katz, Fighting Bribery: A Corporate Practices Manual (ICC Publishing, 1999).
2 Available<www.oas.org/juridico/english/Treaties/b-58.html>.
3 Available<www.olis.oecd.org/olis/1996doc.nsf/LinkTo/c(96)27-final>.
4 Available <www.oecd.org/document/ 210,2340,en_2649_34859_2017813_1_1_1_1,00.html#text>. On this Convention see particularly L. Miller, 'No More "This For That"? The Effect of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions' (2000) 8 Cardozo Journal of International and Comparative Law 139.
5 European Treaty Series 173.
6 European Treaty Series 174.
7 (2004) 43 I.L.M. 1 (not yet in force).
8 (2004) 43 I.L.M. 37 (not yet in force).
9 'Foreign public official' and 'official of a public international organization' are defined in Article 2(b) and (c) of the UN Corruption Convention as follows: '(b) "Foreign public official" shall mean any person holding a legislative, executive, administrative or judicial office of a foreign country, whether appointed or elected; and any person exercising a public function for a foreign country, including for a public agency or public enterprise; (c)"Official of a public international organization" shall mean an international civil servant or any person who is authorized by such an organization to act on behalf of that organization.'
10 Article 19 defines an abuse of function as 'the performance of or failure to perform an act, in violation of laws, by a public official in the discharge of his or her functions, for the purpose of obtaining an undue advantage for himself or herself or for another person or entity'.
11 Article 20 defines illicit enrichment as 'a significant increase in the assets of a public official that he or she cannot reasonably explain in relation to his or her lawful income'.
12 Article 42 must be read as subject to Article 4 relating to protection of sovereignty.
13 J.G. Wetter, 'Issues of Corruption before International Arbitral Tribunals: The Authentic Text and True Meaning of Judge Gunnar Lagergren's 1963 Award in ICC Case No. 1110' (1994) 10 Arbitration International 277 at 294.
14 A.S. El Kosheri & P. Leboulanger, 'L'arbitrage face à la corruption et aux trafics d'influence' Rev. arb. 1984.3. See also J.G. Wetter, supra note 13 at 278-279.
15 Articles 1131 and 1133 of the French Civil Code. Extracts from these cases appear in S. Jarvin & Y. Derains, Collection of ICC Arbitral Awards 1974-1985 (Kluwer Law & Taxation/ICC Publishing, 1990) at 497 (case 3913) and 507 (case 3916). For a list and analysis of published ICC awards relating to corruption see A. Crivellaro, 'Arbitration case law on bribery: Issues of arbitrability, contract validity, merits and evidence' in K. Karsten & A. Berkeley, eds., Arbitration: Money Laundering, Corruption and Fraud (ICC Publishing, 2003) 109.
16 See e.g. the progressive emergence of the evidence relating to corruption in Westacre Investments Inc v. Jugoimport SPDR Holding Co. Ltd, [2000] Q.B. 288.
17 See generally B.M. Cremades & D.J.A. Cairns 'Transnational public policy in international arbitral decision-making: The cases of bribery, money laundering, and fraud' in K. Karsten & A. Berkeley, eds., Arbitration: Money Laundering, Corruption and Fraud (ICC Publishing, 2003) 65.
18 A. Crivellaro, supra note 15 at 118.
19 B.M. Cremades & D.J.A. Cairns, supra note 17 at 79-82 and 85-86.
20 On distinguishing treaty and contract claims see B.M. Cremades & D.J.A. Cairns, 'Contract and Treaty Claims and Choice of Forum in Foreign Investment Disputes' in N. Horn, ed., Arbitrating Foreign Investment Disputes: Procedural and Substantive Legal Aspects (Kluwer Law International, 2004) at 325-351; S.A. Alexandrov, 'Breaches of Contract and Breaches of Treaty-The Jurisdiction of Treaty-based Arbitration Tribunals to Decide Breach of Contract Claims in SGS v. Pakistan and SGS v. Philippines' (2004) 5 Journal of World Investment 555.
21 Article 27 of the Vienna Convention on the Law of Treaties; Article 3 of the International Law Commission's Articles on State Responsibility.
22 Article 25 of the Washington Convention; Article II(1) of the New York Convention; Article 25 of the US Model BIT (2004).
23 ICSID case ARB/97/6, preliminary decision on jurisdiction, 8 December 1998, (2001) 40 I.L.M. 457 at 471. The earlier award referred to in this quotation is American Manufacturing & Trading v. Republic of Zaire (ICSID case ARB/93/1), (1997) XXII Y.B. Comm. Arb. 60.
24 See UNCITRAL Model Law, Articles 34(2)(b)(ii) and 36(1)(b)(ii); New York Convention, Article V(2)(b).
25 Article 53 of the Washington Convention; C.H. Schreuer The ICSID Convention: A Commentary (Cambridge University Press, 2001) Article 53 at paras 18-20.
26 Article 53 of the Washington Convention.
27 See generally, B.M. Cremades & D.J.A. Cairns, supra note 17; M. Scherer, 'Circumstantial Evidence in Corruption Cases before International Arbitral Tribunals' [2002] Int. A.L.R. 29; J. Rosell & H. Prager, 'Illicit Commissions and International Arbitration: The Question of Proof' (1999) 15 Arbitration International 329.
28 e.g. as alleged in World Duty Free Company Limited v. Republic of Kenya (ICSID case ARB/00/7); cf. SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan (ICSID case ARB/01/ 13), Decision on Objections to Jurisdiction, 6 August 2003, (2003) 18 ICSID Rev. 301, (2003) 42 I.L.M. 1290 at para. 78. This arbitration has been settled, see press release, 'Settlement between SGS and the Government of the Islamic Republic of Pakistan (GOP)', 6 May 2004, <www.sgs.com>.
29 As alleged in Wena Hotels Limited v. Arab Republic of Egypt (ICSID case ARB/98/4), award of 8 December 2000, (2002) 41 I.L.M. 896, (2004) 6 ICSID Reports 89.
30 As alleged in Metalclad Corporation v. United Mexican States (ICSID case ARB(AF)/97/1), award of 30 August 2000, (2001) 16 ICSID Rev. 168, (2001) 40 I.L.M. 36; and as considered in the subsequent judgment of the Supreme Court of British Columbia, (2002) 5 ICSID Reports 238 at paras 110-12.
31 As alleged in Lucchetti S.A. and Lucchetti Peru, S.A. v. Republic of Peru (ICSID case ARB/03/4), award on jurisdiction, 7 February 2005, <www.worldbank.org/icsid/cases/lucchetti-award.pdf> at paras 37, 43, 51 and 57.
32 Ibid. at para. 57.
33 J. Crawford The International Law Commission's Articles on State Responsibility, Introduction, Text and Commentaries (Cambridge University Press, 2002) at 106-109 (Article 7); I. Brownlie, State Responsibility, Part I (Clarendon Press, 1983) at 134-35 (liability for acts of minor officials) and 145-52 (ultra vires acts of organs and officials).
34 As foreseen in Article 34 of the UN Corruption Convention.
35 Lucchetti S.A. and Lucchetti Peru, S.A. v. Republic of Peru, supra note 31, where a reason for one ofthe decrees allegedly expropriating the claimants (Decree 259) was to overcome 'the fraudulent judicial decisions' that granted the claimants a municipal operating licence in respect of their investment; see particularly para. 51.
36 See Chapter II (preventive measures) of the UN Corruption Convention for State obligations in respect of preventive practices relating to corruption.
37 Wena Hotels Limited v. Arab Republic of Egypt, supra note 29
38 A danger of arbitral tribunals deferring to domestic courts when allegations of criminal conduct are raised is that it might encourage domestic courts in the mistaken view, infamously taken by the majority of the Supreme Court of Pakistan (Appellate Jurisdiction) in WAPDA v. The Hub Power Company Limited (HUBCO), that according to public policy matters requiring findings about alleged criminality are not referable to arbitration; see Hubco Judgment Transcript (2000) 16 Arbitration International 439 at 458. It is a short step from an arbitral tribunal desisting voluntarily from investigating allegations of corruption to a domestic court issuing an injunction to prevent an arbitral tribunal from considering these allegations.