This article describes how arbitrators have dealt with corruption in the context of ICC arbitration and sheds light on the controls and safeguards available to the ICC International Court of Arbitration and its Secretariat to prevent arbitration from being used to further corruption. The first part of the article discusses arbitrators' decisions in ICC cases, starting with the celebrated Lagergren arbitration, where the arbitrator declined jurisdiction on grounds of corruption. Attitudes have since changed, under the influence of the doctrines of the separability of the arbitration clause, Kompetenz-Kompetenz and public policy. The article then looks at the different approaches to the burden and standard of proof applied by ICC arbitral tribunals. A high standard of proof reflects the need for clear and convincing evidence of corruption, whereas a lower standard relying on circumstantial evidence recognizes the difficulty of producing direct and irrefutable proof of corruption. When investigating corruption, arbitral tribunals are also faced with the need to respect both public policy and due process. In the second part of the article, the authors consider corruption from the perspective of the arbitration institution. They discuss such questions as when the institution might refuse to administer a case on grounds of corruption, how the provisions of the ICC Rules of Arbitration relating to costs help to avoid the risk of illicit funding of proceedings, whether the institution has a duty to report instances of corruption, and how the institution has reacted when the ruling of an arbitral tribunal appeared to endorse corrupt practices.

Cet article décrit la manière dont les arbitres ont jusqu'à présent traité la corruption dans le contexte de l'arbitrage de la CCI et met en lumière les instruments de contrôle et de prévention dont disposent la Cour internationale d'arbitrage de la CCI et son secrétariat afin d'éviter que l'arbitrage soit utilisé pour favoriser la corruption. La première partie de l'article s'intéresse aux décisions arbitrales prises dans des affaires CCI, à commencer par le célèbre arbitrage Lagergren, dans lequel l'arbitre s'est déclaré incompétent au motif de l'existence de corruption. Les attitudes ont évolué depuis, sous l'influence des principes de l'autonomie de la clause compromissoire, de la Kompetenz-Kompetenz et de l'ordre public. L'article étudie ensuite les différentes approches de la charge de la preuve, ainsi que du standard juridique, adoptées par les tribunaux arbitraux de la CCI. Un standard de preuve d'un niveau élevé reflète la nécessité de prouver la corruption de manière claire et convaincante, tandis qu'une exigence moindre, admettant des preuves circonstancielles, prend acte de la difficulté de produire en la matière des éléments probants directs et irréfutables. Lorsqu'ils se penchent sur une éventuelle corruption, les tribunaux arbitraux sont aussi confrontés à la nécessité de respecter tant l'ordre public que l'équité de la procédure. Dans la seconde partie de l'article, les auteurs examinent la corruption du point de vue de l'institution arbitrale. Ils analysent notamment les cas où l'institution pourrait refuser d'administrer une affaire au motif de l'existence de corruption, la manière dont les dispositions du Règlement d'arbitrage de la CCI relatives aux frais contribuent à éviter le risque d'un financement illicite de la procédure, l'obligation ou non de l'institution de signaler les cas de corruption et ses réactions lorsque la décision d'un tribunal arbitral semble cautionner la corruption.

Este artículo describe cómo los árbitros han abordado la corrupción en el contexto del arbitraje de la CCI y arroja luz sobre los controles y salvaguardias a disposición de la Corte Internacional de Arbitraje de la CCI y su Secretaría para evitar que el arbitraje se utilice para fomentar actos de corrupción. La primera parte del artículo examina las decisiones de los árbitros en diversos casos de la CCI, empezando por el famoso arbitraje Lagergren, en el que el árbitro declinó su competencia por razones de corrupción. Desde entonces, las actitudes han cambiado por la influencia de las doctrinas de separabilidad de la cláusula de arbitraje, de Kompetenz-Kompetenz y del orden público. A continuación, [Page28:] el artículo analiza los diferentes enfoques de la carga y el grado de la prueba aplicados por los tribunales arbitrales de la CCI. Un alto grado de prueba refleja la necesidad de indicios claros y convincentes de corrupción, mientras que un menor grado basado en pruebas circunstanciales reconoce la dificultad de presentar indicios directos e irrefutables de corrupción. Al investigar la existencia de corrupción, los tribunales arbitrales también se enfrentan a la necesidad de respetar tanto el orden público como las garantías procesales. En la segunda parte del artículo, los autores tratan el tema de la corrupción desde el punto de vista de la institución de arbitraje. Se plantean asuntos como en qué ocasiones la institución podría rechazar administrar un caso por motivos de corrupción, cómo las disposiciones del Reglamento de Arbitraje de la CCI relativas a los costos ayudan a evitar el riesgo de financiación ilícita de los procedimientos, si la institución tiene el deber o no de informar de los casos de corrupción y cuál ha sido la reacción de la institución cuando la decisión de un tribunal arbitral parece apoyar prácticas corruptas.

Prologue

In his foreword to the 2003 United Nations (UN) Convention against Corruption, the then UN Secretary General, Kofi Annan, described corruption as 'an insidious plague that … undermines democracy and the rule of law, leads to violations of human rights, distorts markets, erodes the quality of life and allows organized crime, terrorism and other threats to human security to flourish'.1 Corruption can be broadly defined as any act whereby something of value, including money, is transferred to a public official or a person who works for a private sector entity, in order that the recipient engage in or refrain from action that is improper or in breach of his or her duties.2 It encompasses a variety of wrongful acts including bribery, trading in influence, abuse of functions and money laundering.3

Until quite recently corruption, and bribery in particular, were regarded as matters for domestic law.4 Most countries outlawed and punished acts of corruption that occurred within the jurisdiction of their own courts, but regarded those committed abroad as beyond the reach of their laws.5 However, the demands of cross-border trade and the prevalence of illicit practices internationally have brought corruption within the sphere of transnational public policy and prompted a number of international initiatives to combat this scourge. The UN Convention against Corruption, which at the time of writing has 170 parties, is a leading instrument in this crusade. Other international conventions include the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions6 and the Convention on the fight against corruption involving officials of the European Communities or officials of the Member States of the European Union.7 The UN Convention authorizes a State Party to assert jurisdiction over acts of corruption not only when committed within its territory, but also when committed by or against its nationals or against the state itself. The Convention also contains detailed provisions relating to international cooperation and asset recovery, among other matters.8

The provisions established by these international instruments have worked their way into domestic law in many countries and, as might be expected, also into the pleadings and submissions of parties in arbitration. Indeed, allegations of corruption, which until recently were largely confined to state court proceedings, are becoming increasingly common in international arbitration. In most instances, such allegations are made by a respondent as a means of defence against a claimant, whom it accuses of having engaged in corrupt practices in relation to the subject matter of the dispute. However, allegations of corruption may also be made by a claimant, for instance to support a claim that the underlying contract between the parties is null and void on this ground. Furthermore, allegations of corruption can even be made in relation to the procedure itself, as illustrated by a recent ICC case in which a party requested the arbitral tribunal to remove the counsel representing its opponent on the grounds that the counsel was involved in the fraudulent scheme on which the contract that gave rise to the dispute was alleged to have been based. While acknowledging its power to disqualify counsel in exceptional circumstances, the arbitral tribunal noted in its award that 'the mere allegation that the opponent's counsel was involved in the fraud that the interested party is seeking to prove is not enough to justify interference with a party's right to freely select counsel'. The arbitral tribunal was unable to identify any wrongdoing on the part of the opposing party or its counsel and therefore dismissed the request.

When a claim of bribery or corruption is raised in an arbitration, the arbitrators must decide how to address that claim. This can be a relatively straightforward or an extremely difficult task, depending on the nature of the issues involved. The arbitral tribunal may be confronted with [Page29:] matters such as jurisdiction, arbitrability, the burden and standard of proof, as well as its power to investigate these matters sua sponte.

This article pays token to the significance of corruption and bribery in international commercial arbitration. The first part describes how arbitrators have dealt with these issues in the context of ICC arbitration, while the second part sheds light on the controls and safeguards available to the ICC International Court of Arbitration and its Secretariat to prevent arbitration from being used to further corruption.

I. The arbitral tribunal

1. Jurisdiction

Arbitration was in the past considered to be an inappropriate forum for deciding claims of bribery and corruption. This was largely due to a restrictive view of arbitral jurisdiction and to the arbitral tribunal's lack of authority to impose criminal penalties. As a consequence, when faced with such issues, arbitral tribunals would refuse jurisdiction. The seminal award in this field was that of Judge Lagergren in 1963 in ICC case 1110.9

In this case, an agent was commissioned by an English company to exert influence over members of the Argentinian government when bidding for public works contracts. Initially, an oral agreement was made between the agent and the English company, which was subsequently recorded in a number of letters in which the company promised the agent a commission of 5% on any contract won from the government. The understanding was that a substantial portion of the commission would be passed on as bribes to public officials. The letters did not contain an arbitration agreement or a choice of applicable law. When a dispute arose, the parties agreed to submit the dispute to arbitration under the ICC Rules by a tribunal consisting of a sole arbitrator seated in Paris.

After hearing the witnesses and reviewing the evidence, but before making any decision on the applicable law, the sole arbitrator, Judge Lagergren, decided to inquire ex officio into the validity of the contract, which had not been called into question by the parties. He justified this move as follows:

In this respect, both parties affirmed the binding effect of their contractual undertakings and my competence to consider and decide their case in accordance with the terms of reference. However, in the presence of a contract in dispute of the nature set out hereafter, condemned by public decency and morality, I cannot in the interest of due administration of justice avoid examining the question of jurisdiction on my own motion.

Relying on Article V(2)(b) of the 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards ('New York Convention'), which recognizes the power of state courts to refuse the recognition or enforcement of foreign arbitral awards deemed contrary to public policy in the country where recognition or enforcement is sought, Judge Lagergren considered that from the outset of an arbitration arbitrators should be vested with a similar power to refuse a case that risks infringing public policy.

Judge Lagergren examined whether, under the laws of the different legal systems involved, a contract contrary to public decency and morality could be submitted to arbitration. His conclusion was that by allying themselves with corruption the parties had forfeited 'any right to ask for assistance from the machinery of justice'. He consequently declined jurisdiction.

This decision has been criticized for ignoring the principle of the separability of the arbitration agreement and the underlying contract. It presupposes that the illicit act tainted both, depriving the parties of the benefit of an arbitration agreement that was unlikely to have been tainted with corruption.10 It could also be criticized for disregarding the duty to decide a dispute which the parties' arbitration agreement places upon the arbitral tribunal.

A different approach has since been taken by subsequent arbitral tribunals, which have recognized the arbitrability of allegations of corruption and their power to examine the merits of such allegations. For instance, in ICC case 7047,11 it was alleged that part of the fee paid to a consultant to secure the sale of military equipment was to be used to bribe defence ministry officials. The arbitral tribunal accepted jurisdiction over the dispute, analysed the allegations made and issued an award on the merits in which it held that (i) a 'mere suspicion' of bribery was not enough, (ii) the performance of the agreement did not violate the public policy of the state involved and (iii) lobbying by companies to obtain public contracts was not in itself an illegal activity under the applicable (Swiss) law.

The award was challenged in England and Switzerland, where allegations of bribery were again raised. The English court found the award to be enforceable, basing its finding on the [Page30:] separability of the arbitration clause, the principle of Kompetenz-Kompetenz and the public policy of encouraging the enforcement of international arbitral awards.12 The Swiss court also rejected the challenge to the award on similar grounds.13

The separability of the arbitration agreement was also recognized by an ICC arbitral tribunal in an unpublished 2003 award. While finding that the underlying contract was null and void under Swiss law as its purpose was to bribe a public official in order to obtain a public works contract, the arbitral tribunal held that the arbitration agreement was separate and remained valid.

2. Voidance of contract

Arbitral tribunals nowadays tend to address issues of corruption in terms of the admissibility of the claims, the legality of the contract or transnational public policy. Contracts tainted by corruption may be found void on the basis of national laws,14 international conventions and transnational public policy.15 For instance, Article 34 of the UN Convention against Corruption states:

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.

and Article 8 of the Council of Europe Civil Law Convention on Corruption16 that:

1. Each party shall provide in its internal law for any contract or clause of a contract providing for corruption to be null and void.

2. Each Party shall provide in its internal law for the possibility for all parties to a contract whose consent has been undermined by an act of corruption to be able to apply to the court for the contract to be declared void, notwithstanding their right to claim for damages.

Arbitral tribunals have consistently recognized that anti-corruption laws and treaties are an integral part of international public policy and have relied on these instruments to declare contracts tainted by corruption as being null and void. For instance, in ICC case 391317 the arbitral tribunal found that the claimant was a financial intermediary who received money, disguised as consultancy fees, to redistribute among the members of a network consisting of local persons in decision-making positions in an African country in order to secure public contracts. The arbitral tribunal held that bribes were illicit and immoral under French law and concluded that the consulting agreement was null and void. Similarly, in ICC case 889118 relating to the defendant's failure to pay the claimant the commission that had been agreed upon, the arbitral tribunal relied on the testimony of several witnesses to find that part of the commission was used to influence public officials in an attempt to obtain a higher price under two public contracts. As a result, the arbitral tribunal decided that the consulting contract was void and dismissed all claims.

In situations where a contract is found to be null and void due to corruption and both parties have acted unconscionably, the dismissal of all claims on the grounds of nemo auditor turpitudinem suam allegans may, perversely, result in a dishonest party being freed from the obligation to repay what it has received by illegal means. This situation has arisen in a number of ICC awards. For instance, in ICC case 1391419 relating to a consultancy agreement in an African country, the arbitral tribunal found that there was convincing evidence that the commission paid by the respondent to the claimant was intended to be used to bribe state officials in order to win the contract. The arbitral tribunal declared the underlying contracts null and void and dismissed all claims. As the respondent knew this was the purpose of the commission, it could not recover monies paid under the agreement, since 'what has been given with illegal intent cannot be reclaimed under theories of equity or unjust enrichment'. Likewise, in ICC case 13515,20 the arbitral tribunal found that an agreement for the payment of commission that was intended to allow illicit payments to be made to an official in an African country in order to win contracts was null and void, and that a party that had consciously participated in the illicit activities that led to the nullity of the contract could not recover the commission it had paid.

In a recent ICSID arbitration,21 where the claims were barred as a result of corruption, the arbitral tribunal clearly explained this predicament:

the Tribunal is sensitive to the ongoing debate that findings on corruption often come down heavily on claimants, while possibly exonerating defendants that may have themselves been involved in the corrupt acts. It is true that the outcome in cases of corruption often appears unsatisfactory because, at first sight at least, it seems to give an unfair advantage to the defendant party. The idea, however, is not to punish one party at the cost of the other, but rather to ensure the promotion of the rule of law, which entails that a court or tribunal cannot grant assistance to a party that has engaged in a corrupt act. [Page31:]

3. Burden and standards of proof for allegations of corruption

How an arbitral tribunal evaluates evidence is crucial to the outcome of any case and especially cases involving corruption, which are heavily dependent on factual determinations. Most institutional arbitration rules, including those of the ICC, are silent on the burden and standards of proof to be applied by arbitrators.22 How then must the arbitral tribunal proceed 'to establish the facts of the case by all appropriate means' and to do so in the shortest possible time, as required by Article 25(1) of the ICC Rules of Arbitration?

It has been acknowledged that rules relating to the burden of proof are 'frequently intertwined with substantive legal rules'23 and that there are 'many reasons for suggesting that the law applicable to the substance of the dispute should govern the burden and standards of proof'.24 When dealing with the standard of proof, arbitral tribunals frequently rely on the law governing the merits of the dispute. The two are indeed closely linked, because the standard of proof applied will determine 'how easy or how difficult' it is to enforce a claim (or to raise a defence against a claim).25 Nonetheless, it is rare to find any provisions in national statutes that deal explicitly with such issues.26 It may be more a matter of culture.

The standard of proof applied by an arbitral tribunal is likely to be strongly influenced by the legal background of its members. The difference between the common law and civil law systems in relation to evidence is well known: while the common law approach is to rely on the 'preponderance of evidence' or 'balance of probabilities', civil law systems tend rather to rely on the adjudicator's 'inner conviction' with respect to the facts of the case.27

As for the burden of proof, the prevailing rule is that a party asserting a fact which, if proven, would be to its advantage, has the burden of proving that fact.28 However, there are times when the burden is shifted, in order to balance the parties' rights. This may reflect public policy considerations and the difficulty of obtaining direct evidence of acts of corruption.

Some ICC arbitral tribunals have been seen to shift the burden of proof once a prima facie case is made by the party alleging corruption. For instance, after one of the parties has laid before the tribunal evidence that is considered sufficient to raise suspicions of corruption, the other party is invited to disprove that evidence, by demonstrating the lawful nature of the activities. Such an approach has been welcomed by commentators as an appropriate means of allowing the accused party to meet the requirements of law and good faith.29 The use of this approach has also been encouraged by the fact that it is usually relatively easy for an innocent party to produce the necessary countervailing evidence.30

The circumstances in which the burden of proof may be shifted were clearly explained in ICC case 649731 relating to a dispute over the provision of consultancy services in the Middle East:

The demonstration of the bribery nature of the agreement has to be made by the Party alleging the existence of bribes (hereafter the 'alleging Party'). A civil court, and in particular an arbitral tribunal has not the power to make an official inquiry and has not the duty to search independently the truth. A civil court has to hear the allegations and the proofs offered by the parties. The 'alleging Party' has the burden of the proof. If its demonstration is not convincing, the tribunal should reject its argument, and even if the tribunal has some doubts about the possible bribery nature of the agreements.

The 'alleging Party' may bring some relevant evidence for its allegations, without these elements being really conclusive. In such case, the tribunal may exceptionally request the other party to bring some counter-evidence, if such task is possible and not too burdensome. If the other party does not bring such counter-evidence, the arbitral tribunal may conclude that the facts alleged are proven (Art. 8 Swiss Civil Code). However, such change in the burden of proof is only to be made in special circumstances and for very good reasons.32

When it comes to the standard of proof to be applied to allegations of fraud, bribery and corruption in international commercial arbitration, there would appear to be no uniform standard universally applied by arbitral tribunals. Arbitral tribunals acting under the ICC Rules of Arbitration have taken various approaches. Some have favoured the application of a higher standard of proof 'in cases involving particularly sensitive allegations of wrongdoing such as conduct contra bonos mores'.33 Given the difficulty of proving acts of corruption and the public policy considerations they raise, others have argued for a relaxation of the standard of proof, allowing the tribunal to reach a positive finding in situations where there are sufficient signs of the unlawful nature of the act. [Page32:]

Examples of both approaches are discussed below. As will be seen, it would appear that the choice of the applicable standard of proof often reflects the attitude the arbitrators will take towards the alleged facts of corruption. The setting of a lower standard of proof may be designed to facilitate the conclusion that the underlying transaction is tainted by corruption. In any event, it is important that arbitrators do not set a high standard of proof merely to avoid having to issue a finding on corruption. The choice of the applicable standard will also be relevant if due process is serving as a curtain to mask corruption in the arbitral process:

The time may have come to admit to ourselves that we need to start afresh, and rethink deeply held notions of due process and the standard of proof, because corruption thumbs its nose at due process, it feeds on due process like bacteria on sugar, in fact it thrives on due process because the rules of due process, whilst putting in place important safeguards, allow corruption to go under the radar undetected and undealt with.34

A. Application of a high standard of proof

Many arbitral tribunals have been led to apply high standards of proof by the consideration that corruption is considered a criminal offence in most jurisdictions.35 Two well-known examples are ICC cases 562236 and 6401.37

In case 5622, an arbitral tribunal admitted the possibility of relying on indirect evidence when such evidence allows the tribunal to base its decision on something more likely than facts that have not been proven, but demanded proof 'beyond doubt' when it came to allegations of corruption.38

In case 6401, the arbitral tribunal decided to apply the 'preponderance of the evidence' principle to the substantive claims, but held that, pursuant to the laws of the two countries with which the dispute was connected (the Philippines and the USA), a higher standard should be applied to allegations of corruption:

[f]raud in civil cases must be proven to exist by clear and convincing evidence amounting to more than a mere preponderance, and cannot be justified by a mere speculation. This is because fraud is never to be taken lightly.39

More recently, in an ICC award rendered in 2008,40 the arbitral tribunal stated that the standard to be applied is usually higher in cases involving allegations of corruption or bribery, which require 'clear and convincing evidence'. The application of a high standard was justified by a presumption in favour of the validity of a contract and the fact that a finding of illegality cannot be made lightly. The case involved a consultancy agreement relating to seismic exploration. The arbitral tribunal found that there was convincing evidence that the commission paid by the respondent to the claimant (an individual) was intended to be used to bribe state officials in order to secure the desired contracts. To reach this finding, the arbitral tribunal considered the following 'red flags':

• The claimant's refusal to comply with the arbitral tribunal's order for him to disclose his bank and tax records, from which the tribunal drew adverse inferences;

• The implausibility of the claimant's testimony that he was not able to produce these documents because his wife had stolen them;

• The claimant's activity as a livestock breeder and as a purveyor of mechanical pony rides for children, but his lack of seismic expertise which could have justified the unusually high commission he received;

• The claimant's inability to prove the legitimacy of several wire transfers from his account to relatives of a state official.

In a recent unpublished ICC award of 2013, the sole arbitrator decided that [t]he standard of proof to be applied could only be that of 'conviction', not 'preponderance of evidence', and that:

applying such a standard of proof is appropriate not only because the Agreement is subject to German substantive law and because the place of the arbitration is Frankfurt, but also, and above all, because the Sole Arbitrator is called upon to deal with a particularly serious allegation, i.e. an allegation of fraud, and has been asked to consider as null and void an agreement regarding a listed joint stock corporation as a consequence of the alleged fraud. [Page33:]

An unpublished ICC award of 2002 offers another interesting example. In this case, although the framework contract for a building project was tainted with corruption, the arbitral tribunal found that the claimant had not provided sufficient evidence to support its allegation that the respondent has used bribery to win the contract from which the dispute arose and therefore it refrained from making a positive finding of corruption. However, the tribunal did find that there was sufficient evidence to conclude that the respondent had acted with deceit during the negotiation of the contract, as it had failed to disclose all relevant circumstances to the claimant. On that basis, the contract was found to be null and void.

B. Application of a lower standard of proof

When applying a lower standard of proof, arbitrators generally rely on circumstantial evidence, or a faisceau d'indices, as a sufficient basis for a positive determination. There are several ICC examples that illustrate this approach.

In ICC case 12990,41 the arbitral tribunal acknowledged that in certain cases it may be extremely difficult, if not impossible, to prove the unlawful nature of a contract. For that reason, it relied on a body of corroborating circumstances. This is an approach accepted in ICC arbitration, where the arbitral tribunal is required to establish the facts of the case by all appropriate means. One of the circumstances considered by the arbitrators was the high level of corruption existing in the state in question.

Another, more recent case shows the extent to which an arbitral tribunal relied on circumstantial evidence. The dispute arose from an agency agreement, pursuant to which the claimant, as the agent, was to promote sales of equipment manufactured by the respondent in a given territory. In return, the claimant was entitled to commission based on the contracts obtained. Allegations of bribery and corruption emerged progressively during the proceedings, with the respondent contending that the agency agreement was a 'contract of corruption' as the claimant's implied mandate was to do 'everything necessary' to promote sales, including bribing counterparties.

The arbitral tribunal dealt with corruption as a preliminary issue. While acknowledging that a high standard of proof is normally required for corruption due to the negative impact it can have on public order, the arbitral tribunal argued that direct and irrefutable proof is most frequently absent. Consequently, it chose to rely on indirect circumstantial evidence other than general statements and 'sociological remarks'. In support of this approach, the arbitral tribunal cited previous decisions rendered by ICC tribunals. The arbitral tribunal accepted the allegations of corruption raised by the respondent in light of the following:

• The commission paid to the agent was aimed at obtaining contracts rather than ensuring their smooth implementation.

• The high rate of commission was supposed to cover all 'extra services' necessary to secure the contracts and in light of the 'difficult environment' in the territory.

• The agent repeatedly requested increases in the commission, arguing that they would improve the chances of success.

• The legitimacy of additional payments made to unidentified beneficiaries referred to as 'friends', 'third parties' or 'other parties' could not be proven by the claimant.

Another example of an arbitral tribunal relying on circumstantial evidence to make a positive finding on corruption is found in a 1998 ICC award. The case related to a consultancy agreement requiring the consultant to serve as intermediary between its counterparty, a construction company, and the communications ministry in a Middle Eastern state, in order to obtain an increase in the price to be paid to the construction company under its contract with the ministry. The arbitral tribunal ruled that the consultancy agreement was null and void as its purpose was the payment of unlawful commission. The arbitral tribunal identified a number of circumstances indicative of corruption, including:

• The agent's inability to provide any documentation evidencing that he had engaged in lawful activities.

• The duration of the agent's involvement in the transaction.

• The particularly high rate of the commission compared to the value of the contract.

The first of these circumstances involved a shifting of the burden of proof, as the claimant was requested to provide concrete documentary evidence to disprove the allegations made by the respondent. [Page34:]

In addition to relying on circumstantial evidence, arbitrators have also used adverse inferences to support a finding of corruption. For instance, when a party refuses to comply with an order to produce certain documents, arbitrators are likely to conclude that such documents are unfavourable to that party's case. Whenever it is used, the technique of drawing adverse inferences should be applied with circumspection and adverse inferences drawn only when there is a sufficiently close relationship between the suspected nature of the documents allegedly withheld and the inference to be drawn therefrom.42

A 1994 ICC award illustrates an arbitral tribunal's reliance on both circumstantial evidence and adverse inferences. The dispute concerned unpaid commission resulting from a consultancy agreement. The respondent argued that no payments were due given that the real purpose of the agreement was to bribe public officials with a view to winning contracts. The arbitral tribunal placed the burden of proving the bribery on the party alleging its existence (the respondent). However, the respondent presented only circumstantial evidence. The arbitral tribunal stated that the evidence produced by a party in support of an allegation of corruption might not necessarily be conclusive. In such a situation, it considered that the arbitral tribunal was entitled to request the other party to bring counter-evidence and, if no such counter-evidence was produced, to draw adverse inferences against the uncooperative party.

In ICC case 12990,43 relating to the sale of oil, the arbitral tribunal relied on 'abnormal circumstances' to conclude that the purpose of the underlying contract was unlawful. These circumstances were as follows:

• The claimant was unable to produce evidence that it had performed any of its obligations in relation to the agreements between the parties.

• The agreements were negotiated over a very short period of time and without any substantial documentation.

• The claimant received a commission of 15% of the purchase price, which was an excessively high rate of remuneration.

• A finding of corruption was consistent with conditions prevailing at the time in the state in question.

On the basis of these abnormalities and the claimant's inability to rebut the allegations of corruption, the arbitral tribunal inferred that there were grounds for concluding that at least some of the commissions were intended for bribery and therefore declared the contract null and void.

4. The power of arbitral tribunals to investigate allegations of corruption

Allegations of bribery or corruption are most frequently raised by the parties, in which case arbitrators have no choice but to address them. However, parties sometimes try to avoid raising such issues, at least explicitly, and instead make vague insinuations about the legality of the underlying contract. At other times, while there may be no doubt about the existence of corruption, the party harmed by the consequent illegality of the contract may not present its case properly, or the arbitral tribunal may realize on its own that the contract is probably tainted by unlawful behavior. In such situations, the question arises as to whether the arbitral tribunal should decide the case solely on the basis of the evidence put forward by the parties or whether it can and should seek further information on its own motion.

This question leads to a confrontation between fundamental principles in arbitration. On the one hand, an arbitral award should be binding. In addition, when arbitrators are confronted with an issue not expressly provided for by the ICC Rules of Arbitration, Article 41 of the Rules requires them to make every effort to make sure that their awards are enforceable at law, while Article V(2)(b) of the New York Convention allows the recognition or enforcement of an award to be refused if it is contrary to the public policy of the country where recognition or enforcement is sought. An award rendered in disregard of the possible existence of corruption may be contrary to these provisions.

On the other hand, Article V(1)(c) of the New York Convention provides that the recognition or enforcement of an award may also be refused if the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration. Therefore, if the arbitral tribunal decides to raise this issue or request information ex officio, it could be argued that it would be acting outside the mandate given by the parties, running the risk of rendering an award ultra petita. [Page35:]

Given the seriousness of corruption, it seems that considerations of international public policy should take precedence over other principles, provided this does not put the fairness of the proceedings at risk. Therefore, if an arbitral tribunal suspects the existence of corrupt practices in the underlying transaction, it should make the necessary enquiries, while ensuring that the parties are given an opportunity to comment and respond on the matter.44

In this regard, Judge Lagergen stated as follows in ICC case 1110 discussed above:

Whether one is taking the point of view of good government or that of commercial ethics it is impossible to close one's eyes to the probable destination of amounts of this magnitude, and to the destructive effect thereof on the business pattern with consequent impairment of industrial progress. Such corruption is an international evil; it is contrary to good morals and to an international public policy common to the community of nations.

ICC case 1492045 illustrates the complex situations to which the confrontation of the above-mentioned principles may lead. In this case, the respondent was awarded a contract by a state and subcontracted certain services for the performance of this contract to the claimant. As part of emergency legislation introduced by the state, a decree was passed terminating the contract. The claimant sought damages as the termination of the principal contract entailed the termination of the subcontract.

During the proceedings, the respondent acknowledged the payment of bribes to state officials for the purpose of obtaining the contract. Faced with this situation, the arbitral tribunal stated as follows:46

225. All arbitrators are … under an obligation to seriously oppose corruption. In view of this, if any accusations are made during arbitration proceedings that the underlying legal transaction is affected by corrupt practices, the arbitrator cannot ignore these facts but must instead investigate, collect arguments and evidence, to corroborate or reject the accusations and assess their implications on the parties' claims.

226. Pursuant to this duty, the Arbitral Tribunal added a procedural stage - not initially included in the Provisional Timetable - to give the parties ample opportunity to present their arguments regarding the effect which the acts of corruption would have on the case.

As part of the above-mentioned addition to the proceedings, the arbitral tribunal invited the parties to comment on the implications of the respondent's acknowledgement of corruption and to amend their claims if they so wished. However, the claimant did not modify its claims. The arbitral tribunal found that (i) the contract was terminated ex lege for emergency reasons equivalent to force majeure; (ii) as a result of this termination, the respondent's contractual position in the subcontract was automatically transferred to the state, which meant that the subcontract remained in force, but was now between the claimant and the state; and (iii) the claimant's claims had to be dismissed and the respondent's unlawful conduct left unpunished:

265. On the face of it, the final outcome may seem unsatisfactory: the Tribunal is forced to … reject all of the Claimant's pleas and leave Respondent's unlawful behaviour unpunished. What makes the decision particularly difficult is that the Claimant is entitled to bring a whole variety of actions arising from the corruption of the Contract, such as an action for damages from being fraudulently misled into signing the Subcontract, for loss of a chance, moral damages… and the principle fraus omnia corrumpit.

266. However, the Arbitral Tribunal expressly opened up the possibility of the Claimant raising such claims in these proceedings, and the Claimant - clearly and consciously - decided not to exercise those rights in these proceedings, possibly reserving them for another venue or jurisdiction. The Tribunal is bound by the principle of petitioned redress and must respect the Claimant's decision.

In this case, the arbitral tribunal was torn between what it considered its twin duties of eradicating unlawful practices such as corruption that hindered international trade and respecting the rule of law and due process.

In such a situation, the arbitral tribunal may turn to the arbitration institution for guidance. The International Court of Arbitration has on several occasions been asked by arbitrators to share its experience of cases in which corruption has been at issue and discuss the practices followed when it has been confronted with such issues. [Page36:]

II. The arbitration institution

The involvement of an arbitration institution empowered to monitor the arbitral proceedings offers an added guarantee against corruption, compared with ad hoc arbitration, provided the arbitration institution is not used as part of a stratagem to conceal corruption. This of course begs the question of how the arbitration institution is to be made aware of corrupt practices. Should the parties and the arbitrators inform the institution of facts pointing to corruption? Can a third party external to the arbitral proceedings report an existing or alleged act of corruption to the institution? When addressing such questions it may be necessary to reconcile possible tension between several fundamental concepts and principles in arbitration: the arbitration institution's obligation to administer the proceedings in accordance with its rules and without undue delay; the parties' agreement to arbitrate and their expectations in the proceedings; the arbitrators' undertaking to conduct the case with a view to rendering a final award resolving the dispute; privity of contract; confidentiality; and the need to comply with public policy. When an issue relating to corruption arises in ICC arbitration, the Court and its Secretariat will take any measures deemed appropriate in the circumstances to remove any risk of their being seen as giving effect to corrupt practices.

The arbitration institution will first need to ask itself whether a dispute really exists between the parties. This will usually be done at a very early stage of the arbitral proceedings when the institution is asked to register a case upon receipt of a request for arbitration. However, the question can arise at any point in the proceedings, for example when the institution is informed of the contents of the terms of reference or an award.

The ICC recently administered an arbitration that had been preceded by a mediation conducted under the ICC ADR Rules. The mediation ended with the parties signing a settlement agreement in which it was stated that the respondent would pay a sum of money to the claimant and the matter would be referred to arbitration in which the neutral would act as sole arbitrator and render an award by consent. Upon receipt of the request for arbitration, the Secretariat of the Court invited the parties to confirm that a dispute within the meaning of Article 1(1) of the 1998 ICC Rules of Arbitration truly existed and to explain why they were seeking an award by consent. The parties explained that the respondent, which was a public entity, needed an award by consent for internal reasons and that the settlement reached in the mediation proceedings was conditional upon the rendering of such an award. In light of these explanations and the fact that the dispute had not been brought to an end by the mediation, the request for arbitration was registered and the arbitration moved forward. However, there might be instances in which the parties are unable to confirm the existence of an actual dispute. This would be the case if the dispute has been fabricated to conceal acts of corruption. In such cases, the institution would have grounds for refusing to administer the case, as it would for refusing to approve an award that upheld an illicit act.

Corruption may affect the relationship between, on the one hand, the institution and the parties and, on the other hand, the institution and the arbitrators.

1. The institution's relationship with the parties

Parties may try to influence the arbitral tribunal's decision by requesting the arbitration institution to adopt a certain course of action when administering the proceedings.

In a recent ICC case lasting ten years, the respondent had to pay a very high advance on costs. After a hearing had taken place, the Secretariat of the Court was requested to hold a conference call with the parties, during which they asked for the advance on costs to be increased. The ICC informed the parties that the increase should be requested in writing. However, the respondent refused to cooperate and argued that, as a public entity, it could not justify a formal written request. It later transpired that the arbitral tribunal was behind the parties' request: during the hearing, the tribunal had told the parties that the advance on costs was insufficient and that it would appreciate an increase.

ICC arbitration forbids payments directly between the parties and the arbitrators, other than those related to VAT and taxes on the arbitrators' fees,47 precisely to avoid the risk of unjust coercion or pressure as illustrated in the above-mentioned case. The ICC Rules of Arbitration provide that the Court fixes the advance on costs in an amount that is likely to cover the fees and expenses of the arbitrators and the administrative expenses incurred by the ICC.48 They further state that the Court alone is empowered to fix arbitrators' fees and expenses and that separate arrangements for [Page37:] the remuneration of arbitrators are contrary to the Rules.49 The parties pay the advance to the ICC and the ICC in turn pays the arbitrators.

All payments made by the parties to the ICC are based on the contract that is implicitly created between each party and the institution when a dispute is submitted to the ICC. The sums to be paid and the basis on which they are calculated are clearly indicated in the Rules of Arbitration, their Appendixes and the Secretariat's letters to the parties. The amounts paid, the reasons for the payments and the means of payment are all subject to control by the ICC, which has been known to refuse payment of the advance on costs in cash, for example.

The institution is sometimes faced with the allegation that an arbitration is being funded with the proceeds of illicit acts. The respondent might in that case contend that the claimant should be prevented from commencing the arbitration. The arbitral institution is normally not in a position to ascertain whether the money used to finance the arbitration has been obtained fraudulently, so it would be difficult for it to refuse to register the case, or to stay the proceedings if the allegation is made after they have commenced. The arbitration institution has a contractual obligation towards the parties with respect to the administration of the proceedings and cannot allow the arbitration to be derailed by unsubstantiated objections or guerilla tactics. It must at the same time avoid being associated with illicit acts. Therefore, to the extent possible and insofar as permitted by the applicable law and the institution's rules and bylaws, it should seek clarification from the parties on any allegedly illicit acts. It will need to be able to show, if the need arises, that it acted diligently and with an appropriate standard of care and did not engage in any illicit behaviour.

A party who is dissatisfied with the arbitration proceedings, with an administrative decision made by the institution, or with an award rendered by an arbitral tribunal acting under its aegis might claim that the conduct of the institution was tainted by corruption or that undue influence was exerted on the institution by another party or by a third party. The institution will be best equipped to answer such claims by ensuring that its arbitration rules and bylaws and the financial relations created by their implementation are publicly available and explained. Transparency is key here: it helps to ensure the predictability of the process and to prevent complaints, or even lawsuits, from being brought against the institution due to a misunderstanding or ignorance of the applicable procedural norms.

Allegations of corruption may relate to the dispute resolution process itself. For example, the ICC has in the past received a request for arbitration relating to a dispute that had been submitted to the state courts. The claimant alleged that the respondent had obtained a decision in its favour by bribing the judge. While the arbitration institution will consider such allegations with utmost care to determine whether or not it is in a position to register the case, its powers of investigation do not go far beyond asking questions and checking that the conditions for registering a new case are met. If the case satisfies those conditions and proceedings commence, it will then be for the arbitral tribunal, once constituted, to make a final decision on the validity and scope of the allegation.

2. The institution's relationship with the arbitrators

Allegations of corruption are sometimes raised in relation to the selection of arbitrators by arbitration institutions. Arbitrators in ICC proceedings are either nominated by parties for confirmation by the Court, or appointed by the Court either directly or on the proposal of an ICC National Committee or Group. There have been times when the selection process used in a particular case was called into question by one or more parties. The ICC's response is to refer to the Rules of Arbitration and their Appendixes in which the principles followed by the institution are set out. The President of the Court has taken steps to ensure that National Committees and Groups respond to the Court's requests for the proposal of an arbitrator with the required diligence and the highest possible standard of care. The functioning of National Committees and Groups is constantly evaluated and adapted to ensure a service of the highest quality when proposing arbitrators. This aim is underpinned by the institution's ongoing efforts to strengthen its network of National Committees and Groups with a view to increasing user confidence. The Secretary General of the Court (when confirming arbitrators), the Court (when appointing or confirming arbitrators) and the President of the Court (when appointing arbitrators) always verify that an arbitral tribunal is constituted in accordance with the Rules. The institution also produces publications, notably the ICC International Court of Arbitration Bulletin, in which detailed explanations and discussions relating to the constitution of arbitral tribunals in ICC [Page38:] proceedings can be found. Together, these measures and safeguards should allay any concern a party might have regarding the choice of the arbitrators hearing its case. However, if any concerns persist, parties are always free to contact the Secretariat to discuss their concerns.

When administering a case, an institution may be confronted with a situation in which there is a risk that the decision reached by an arbitral tribunal has the effect of endorsing an unlawful act. Although attempts to obtain an arbitral award as part of a fraudulent or illicit scheme is more likely to happen in ad hoc as opposed to institutional arbitration, parties to such a fraudulent scheme may deliberately choose institutional arbitration to give some credibility to their arbitration and the ensuing award. As mentioned previously, the institution's limited powers of investigation may make it difficult for the institution to analyse the factual situation with which it is confronted. As far as the ICC is concerned, the tight administration of cases throughout their entire duration helps to forestall the effects of such initiatives and thereby affords valuable protection against corruption, bribery and money laundering schemes. The attention of the Court and its Secretariat may be alerted by a combination of factors signaling that the case should be given careful consideration:

• the parties are not represented by outside counsel;

• the dispute is to be heard by a sole arbitrator chosen by the parties;

• the parties agree on the name of the sole arbitrator;

• the parties accept the jurisdiction of the arbitral tribunal;

• the parties agree on the list of issues to be determined;

• the parties acknowledge their failure to perform the contract, the liability resulting from such failure and its financial consequences;

• the parties request an award by consent;

• the scope of the arbitration agreement implicitly or expressly excludes the question of the validity of the underlying contract.

If the proceedings cannot be shown to be lawful, the Court or the Secretariat may refuse to register a case or refuse to approve an award that would contravene rules of international public policy and possibility cause the institution to be held liable. If a party suspects that the proceedings brought against it are unlawful, it might refuse to take part or decide to obstruct or delay the proceedings and to request that the arbitration institution report some of the facts of the case to a regulatory authority or a judge. When facing a request of this kind, the Court and its Secretariat consider their contractual duties to ensure that the arbitration proceedings are conducted pursuant to the Rules of Arbitration, the parties' agreement (including any confidentiality requirements), any obligation to disclose certain aspects of the case placed upon it by applicable law, and the need to keep the arbitral tribunal informed and ensure that the institution and the tribunal act consistently with each other.

Epilogue

Corruption and bribery in international trade are coming under increasing scrutiny. The international crusade against corruption and a greater awareness amongst arbitration practitioners of those business relations and sectors most exposed to the risk of illicit practices have led to more informed decisions by arbitral tribunals. The media have also brought corruption into the public eye. The ICC has confirmed its uncompromising opposition to corruption and bribery as unacceptable impediments to the development of international trade. If there is more talk about corruption in arbitration now than ever before, it should not be thought to reflect an upsurge in the number of cases involving corruption, but rather the increasing tendency of arbitrators, parties and even third parties to raise the issue of corruption and bribery whenever their presence is suspected and it is felt necessary to ensure that they have been given due consideration in the course of the proceedings.

1
http://www.unodc.org/ unodc/en/corruption

2
cf. Articles 15 and 21 of the UN Convention against Corruption.

3
M. Abdel Raouf, 'How Should International Arbitration Tackle Corruption Issues?' in M.Á. Fernández-Ballesteros & D. Arias, eds., Liber Amicorum Bernardo Cremades (Madrid: La Ley, 2010) 1.

4
B. Cremades, 'Corruption and Investment Arbitration' in G. Aksen, K.-H. Böckstiegel, M.J. Mustill, P.M. Patocchi, A.M. Whitesell, eds., Global Reflections on International Law, Commerce and Dispute Resolution, Liber Amicorum in honour of Robert Briner (ICC, 2005) 203.

5
Notable exceptions are the USA (US Foreign Corrupt Practices Act, 1977) and the United Kingdom (Bribery Act, 2010).

6
http://www.oecd.org/corruption

7
http://eur-lex.europa.eu

8
See Article 42 of the UN Convention against Corruption.

9
See e.g. J. Gillis 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) 10:3 Arbitration International 277 at 294ff. See also 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, Dossier of the ICC Institute of World Business Law (ICC, 2003) 109 at 119.

10
B. Cremades, supra note 4; A.S. El Kosheri & P. Leboulanger, 'L'arbitrage face à la corruption et aux trafics d'influence' [1984] Rev. arb. 3.

11
(1996) XXI Y.B. Comm. Arb. 79.

12
Westacre Investments Inc. v. Jugoimport-SDRP Holding Co Ltd, [1999] EWCA Civ. 1401.

13
Swiss Supreme Court, Jugoimport-SDPR Holding Company Ltd & Beogradska Banka v. Westcare Investments Inc. (Westacre) , Case No. 4P.115/1994, [1995] ASA Bulletin 711.

14
Section 23, Indian Contract Act, 1872; Article 169 (in relation to Article 167), Civil Code of the Russian Federation; Article 20, Swiss Law on Obligations.

15
See e.g. Center of Transnational Law, No. IV.7.2(a) Invalidity of Contract Due to Bribery, http://www.trans-lex.org.

16
http://www.conventions.coe.int

17
[1984] Journal du droit international at 920, 921 (in Annot. Y.D., ICC case 2730).

18
[2000] Journal du droit international 1076.

19
See hereinafter.

20
See hereinafter.

21
Metal-Tech Ltd v. The Republic of Uzbekistan, ICSID Case No. ARB/10/03, award of 4 Oct. 2013, https://icsid.worldbank.org.

22
A. Redfern, 'The Practical Distinction Between the Burden of Proof and the Taking of Evidence - An English Perspective' in A. Redfern et al., 'The Standards and Burden of Proof in International Arbitration' (1994) 10:3 Arbitration International 317 at 321.

23
G.B. Born, International Commercial Arbitration, vol. II (Kluwer Law International, 2009) 1858.

24
A. Reiner, 'Burden and General Standards of Proof' in A. Redfern et al. , 'The Standards and Burden of Proof in International Arbitration' (1994) 10:3 Arbitration International 328 at 331.

25
Ibid. at 331.

26
An exception is § 1042(4) of the German Code of Civil Procedure (Zivilprozeßordnung), pursuant to which the arbitral tribunal is 'authorized to decide on the admissibility of the taking of evidence, to so take evidence, and to assess the results at its sole discretion'.

27
J. Rosell & H. Prager, 'Illicit Commissions and International Arbitration: The Question of Proof' (1999) 15:4 Arbitration International 329.

28
A. Redfern, supra note 24 at 321.

29
K. Mills, 'Corruption and Illegality in the Formation and Performance of Contracts and in the Conduct of Arbitration Relating Thereto' (2002) 5:4 International Arbitration Law Review 126 at 130.

30
C.B. Lamm, H.T. Pham, R. Moloo, 'Fraud and Corruption in International Arbitration' in in M.Á. Fernández-Ballesteros & D. Arias, eds., Liber Amicorum Bernardo Cremades (Madrid: La Ley, 2010) 699 at 701.

31
(1999) XXIV Y.B. Comm. Arb. 71.

32
Ibid. Emphasis added. Footnote omitted.

33
R. Pietrowski, 'Evidence in International Arbitration' (2006) 22:3 Arbitration International 378; G.B. Born, supra note 17 at 1858.

34
S. Nappert, 'Public Interest in a Private Procedure - What Burden of Proof for Allegations of Corruption in International Arbitration', [2013:4] Transnational Dispute Management, http://www.transnational-dispute-management.com.

35
A survey published in 2003 revealed that in more than 50% of the awards considered arbitral tribunals rejected allegations of corruption as a result of applying a very high standard of proof. 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, Dossier of the ICC Institute of World Business Law (ICC, 2003) 109.

36
Final award of 1988 in ICC case 5622 Hilmarton Ltd v. Omnium de Traitement et de Valorisation, (1994) XIX Yearbook Commercial Arbitration 105.

37
Award of 19 December 1991, Westinghouse and Burns & Roe v. National Power Company and the Republic of the Philippines, (1992) 7:1 Mealey's International Arbitration Report 31.

38
Supra note 36 at 111.

39
Supra note 37 at 34.

40
Final award in ICC case 13914, see hereinafter.

41
See hereinafter.

42
W.L. Craig, W.W. Park, J. Paulsson, International Chamber of Commerce Arbitration, 3d ed. (Oceana/ICC, 2000) at 451 ('There must be a logical nexus between the probable nature of the documents withheld and the inference derived therefrom.'). See also S. Greenberg & F. Lautenschlager, 'Adverse Inferences in International Arbitral Practice' (2011) 22:2 ICC ICArb. Bull. 43.

43
See hereinafter.

44
cf. Article 22(4) of the ICC Rules of Arbitration.

45
See hereinafter.

46
Translated from the original Spanish.

47
Article 2(13) of Appendix III to the ICC Rules of Arbitration (2012).

48
Article 36(2).

49
Article 2(4) of Appendix III.