1. Introduction: Corruption Comes Full Circle as a Jurisdictional Issue

The treatment of corruption as a gateway issue in international arbitration has come full circle. If one is to define 'gateway' strictly and equate it with 'preliminary jurisdictional inquiry', a 50-year arc can be identified that began when corruption was first considered in international commercial arbitration and treated as a matter affecting a tribunal's jurisdiction. That approach then fell out of doctrinal favor1 - corruption was considered a matter of admissibility, contract nullity or enforceability, or an issue to be otherwise weighed against the merits - and no longer one that is non-arbitrable or deprives a tribunal of jurisdiction over a claimant's claims. 2 These principles continue to prevail in international commercial arbitration. Over the last few years, however, the rise of investment treaty arbitration has returned corruption to that old jurisdictional piety, with even greater vigor.

The genesis was, of course, the groundbreaking ICC award of Judge Lagergren in 1963, 3 which treated corruption as an issue of high international principle4 that deprived the tribunal of jurisdiction outright. 5 Notwithstanding doubts as to the proper treatment corruption should have, the essence of Judge Lagergren's arbital award was sound, as the underlying contract was a commission/consultancy agreement between a foreign investor and an intermediary that was found to have been for the purpose of bribing government officials in Argentina in order to secure a government contract. In other words, the agreement on which the sole arbitrator's jurisdiction rested was a contract for corruption, and not one that was tainted by corruption. Judge Lagergren's decision is more understandable in this light - then as now, there is little controversy at both the international and national levels that a contract where ostensible consultancy undertakings were actually legitimizations of outright bribery are void contracts for having an unlawful and immoral object, 6and claims based on such a contract may also be inadmissible.

ICC Case No. 1110 was only the first of many subsequent commercial arbitration awards concerning agreements of corruption - as observed in a comprehensive study of corruption decisions in international commercial arbitration, '[a]ll available arbitration cases in which the corruption issue was discussed did not involve direct bribery. Rather they concerned situations of intermediation in government procurement, where a middle person is hired on a commission basis to pursue government authorities.' 7 That body of case law is thus not the ideal starting point from which the treatment of corruption in the realm of foreign investment should be drawn - the more important and less settled questions come in the area of investment agreements with a host state government where corruption of some form (either investor-initiated bribery or public official-led solicitation, or more frequently, some combination of both) occurred at the inception of the investment or at some point in its life. Unlike intermediary contracts that contemplate bribery, investment agreements that are tainted by corruption are not considered void ab initio, and contract-based arbitral tribunals have modulated their responses to corruption allegations accordingly - not all have stopped arbitration at the gate, even when corruption was found to have existed. 8

But in the realm of investment treaty arbitration, which by nature is grounded upon the foreign investment itself and not any intermediation contract, 9 a jurisprudence constante is congealing that returns to the conception of corruption as a jurisdictional issue. Allegations of corruption are increasingly treated as a peremptory issue with 'draconian'10 consequences. Among these is an emerging 'legality doctrine' that requires that all investments be made in accordance with the laws of the host state - notably anti-corruption laws - as a precondition to an investment tribunal's very jurisdiction, regardless of whether the relevant investment treaty explicitly states that investments must be made "in accordance with" the laws of the host state law (or the so-called 'legality clause'). 11 Once proven, corruption at the making of the investment returns a result of no jurisdiction, closing the 'gate' to all of the investor's claims, notwithstanding any wrongs the host state might have done.

2. The chain of Corruption Decision-Making and its Place within Investor Wrongdoing

It is important to recognize the context in which this peremptory treatment of corruption comes about. The schematic that follows presents one simplified but (it is hoped) systematized and coherent view of the decision process tribunals go through when deciding issues of investor wrongdoing as a genus, of which corruption is perhaps the most unpleasant species.

The process begins with an assessment of the facts, which leads to their classification as one or another form of wrongdoing, to which key legal principles are then applied that ultimately result in one or more legal consequences. Note that categories of wrongdoing are distinguished from the legal principles that are applied in order to determine what the proper consequence should be.

Situating corruption within the modalities of investor wrongdoing is also important because so many cases where corruption allegations are made ultimately develop into cases concerning fraud or some other form of illegal conduct where corruption is hardly mentioned, if at all. While corruption is a distinct category of wrongdoing, its outward manifestations - the corrupt act being purchased from the public official - often amounts to fraud, misrepresentation, or some violation of host state laws as well. These external manifestations are easier to prove, being subject to less stringent standards of proof, whilst also achieving the same practical effect - proven fraud or misrepresentation, for example, will often result in a lack of jurisdiction in the same way proven corruption will. 12

There are three principal legal doctrines through which cases of corruption are analyzed: (1) the Legality Doctrine, derived but not fully moored to the 'in accordance with law' clauses founded in many treaties which qualify the definition or circumstances of admission of foreign investment; (2) the 'unclean hands' doctrine; and (3) the concept of transnational public policy. The first is unique to investment treaty arbitration; the rest are overarching principles that can apply to commercial as well as investment arbitration.

This essay will focus on the unclean hands doctrine and its interplay with the legality clause, as well as related questions of mutual fault and state responsibility in the context of anti-corruption decision-making. To do so effectively, it is useful to first step back and revisit the phenomenon of corruption itself.

3. Corruption v Other Forms of Investor Wrongdoing

Corruption is not a monolithic concept. As a term of art in the area of foreign investment, corruption has many modalities and modus operandi that have changed over time. The corrupt transaction is frequently simplified, sometimes inaccurately so, into the 'active' or 'supply', and 'passive' or 'demand' sides. The impression derived from most anticorruption instruments is that of inflexible roles: there is the active bribe initiator, the investor, and the public official taking the bribe acting in a more passive role. 13 It can be counterproductive to label the sides of the transaction in this way, as each seeks and receives reciprocal benefits in return for providing scarce resources. As a practical matter it will often be difficult to separate solicitation and extortion from the passive receipt of a bribe - one can distinguish extortion from bribery by looking into whether the payer receives 'better than fair' treatment or must pay to be treated fairly. 14 These are better considered as the opposed terminal points of a continuum. One useful perspective from which the issue can be clarified is risk management. Corruption is often used as a risk-mitigating tool by investors coming into foreign markets in two ways: first, there is the minimization of economic risk: bribing public officials will reduce the economic uncertainties inherent in foreign (often developing) markets by ensuring that the profit potential exceeds those found in 'safer' markets. This can often be distinguished from a second reason: to secure leave from what the investor deems to be unfair or oppressive regulation perpetrated by public officials, or in other words, to protect the the investment from political risk. 15 Political risk insulation is more typical of public official-led extortion, while economic risk minimization is more akin to investor-led bribery. Pressure to make corrupt payments to insulate an investment from political uncertainty bears some consistency with precisely the same forms of political and non-commercial risks that investment treaties themselves were designed to protect foreign investors against.

Notwithstanding these nuances, in both in scholarly literature and arbitral jurisprudence there is a tendency to classify corruption as just one of many forms of investor wrongdoing and to treat them all in similar legal fashion. Hamester v Ghana identified six forms of investor wrongdoing: (1) lack of good faith, (2) corruption, (3) fraud, (4) deceitful conduct, (5) misuse of the system of investment protection, and (6) violation of host state law. 16 But while corruption may be of the same genus as, say, fraud, it is a different from the other species in significant ways. Fraud, misrepresentation, and other forms of illegality are essentially unilateral acts: the investor alone makes the misrepresentation with the intent to defraud the state, for example. Agency principles apply, so that the fraud of the investor's employee binds the investor. The host state's conduct is mostly irrelevant, particularly for violations of host state laws, where misrepresentation alone is often enough.

By contrast, corruption is inherently bilateral in nature: it requires the free participation of both the employees of the investor and public officials of the host state, often through intermediaries. Because both parties participate, the issue can be employed both by investors and host states as a shield as well as a sword. Corruption is primarily raised by host states as a putative complete defense against all claims made by the claimant - a study of the significant corruption-related decisions in international investment arbitration has found that corruption has been raised or insinuated to a significant degree about three times as much by host states as by investors. 17 As a sword, the form of corruption typically invoked by investors are bribe solicitations or extortion within the context of fair and equitable treatment or minimum standards violations, 18 where investors allege that they have been made to pay to be spared arbitrary or unjust treatment from the host state. As a form of investor claim, these allegations are thus treated by tribunals as issues to be decided on the merits, instead of peremptory issues (i.e., ones of jurisdiction or admissibility) whenever raised by host states.

The bilateral nature of corruption necessitates serious consideration of the international responsibility of states: should states be held responsible for the corruption of their public officials in the same way that investors are held liable for the acts of their employees under principles of agency?

4. State Responsibility for Corruption?

Despite its bilateral nature, host states that invoke corruption contend, often implicitly, that they have also been the victim of unscrupulous public officials who were never authorized to receive bribes or act pursuant to such payments. State responsibility for corruption is an issue tribunals have hardly engaged with, but it is significant: every time a host state raises corruption as a defense, it implies that it is not responsible for the corrupt conduct of its public officials, even when that official is the Head of State (as in the famous case of World Duty Free v Kenya). 19 One might ask at the outset: does public international law even apply in such cases? In World Duty Free, the eminent tribunal chaired by a former president of the International Court of Justice did not mention the International Law Commission's Articles on State Responsibility a single time, preferring to adhere strictly to that contract-based arbitrationcontract-based arbitration's applicable law (English and Kenyan law), as well as transnational public policy, but not public international law itself.

In the realm of treaty-based arbitration, however, public international law is inevitably part of the applicable law. 20 No definitive award has given serious consideration to the scope of state responsibility for corruption under international law. Ordinarily, the fact that a public official is acting illegally, in excess of power, or without authorization does not absolve a state from international responsibility - under the UN International Law Commission's Articles on State Responsibility, public official conduct is attributable to the state even when that official 'exceeds [his] authority or contravenes instructions'; thus, 'a state will be responsible even for ultra vires acts of its servants, that is to say, even when they acted beyond their powers. Indeed, one can go further and say that, if an organ of state, or public servants of states, acted in a way expressly forbidden by the state and which violated international law, the state would still be responsible for that wrongful conduct. 21 States are routinely held responsible for gross violations of human rights by their public officials, for example, even when such acts are clearly illegal. By that standard, World Duty Free's holding that a head of state's corruption is not attributable under Kenyan law22 would not have been sustained in international law, had the law on state responsibility been applied. 23

That said, there are good reasons for the proposition that at least particular types of corruption cannot be attributed to the host state. Again, bilaterality plays an important role here: corruption of the quid pro quo type is unique relative to others in that the investor actually knows that the public official is not acting within the scope of his powers and is an active participant; this knowledge may be sufficient in law to say that states are not responsible for corruption, at least towards the investor. Article 7 of the ILC Articles on State responsibility embodies the concept of attribution of acts in excess of authority or in contravention of instructions:

The conduct of an organ of a State or of a person or entity empowered to exercise elements of the governmental authority shall be considered an act of the State under international law if the organ, person or entity acts in that capacity, even if it exceeds its authority or contravenes instructions.

However, state responsibility can also operate when the shoe is on the other foot, and corruption is raised by the investor. In that case, the claimant is seeking to hold the host state responsible for the bribe solicitations and extortion of its public officials. That claim is made as part of a violation of fair and equitable treatment, or a denial of justice. There is no mutuality of fault between both sides, so international responsibility on the part of the host state for its public officials' acts is possible.

An asymmetry thus seems to exist: when it is the investor that is the victim of bribe solicitations and extortions, the case law seems to have no doubt that international responsibility for the public official's conduct can attach. It is less certain that state responsibility can apply to attribute corrupt acts by public officials to the host state when it is the investor that is defending itself against corruption allegations, even if corruption in that case has been consummated. So when it is the host state that alleges that the original investment agreement was procured through corruption, no claim of state responsibility seems to be available - no matter how high that public official involved is or how flagrantly he flouts the law.

These conclusions bear sober reflection: an inflexible principle stating that public official corruption is never attributable to the host state when raised as a defense engages serious issues of fairness and accountability, as well as potentially creating perverse incentives - the more corrupt the state's officials, the less liable the state becomes. Indeed, tribunals are clearly uncomfortable with the implications of a lack of state responsibility for corruption. So far, this has manifested itself only in costs decisions - in Metal-Tech v Uzbekistan, the tribunal required the sharing of costs notwithstanding positive corruption findings, because the nature of corruption is that both parties participate:

The law is clear - and rightly so - that in such a situation [of an investment tainted by corruption] the investor is deprived of protection and, consequently, the host State avoids any potential liability. That does not mean, however, that the State has not participated in creating the situation that leads to the dismissal of the claims. Because of this participation, which is implicit in the very nature of corruption, it appears fair that the Parties share in the costs24

Should more be required of states, such as showing that they have taken effective steps to prosecute errant public officials as a pre-condition to allowing them to employ the complete defense of corruption? Perhaps. 25

5. The Unclean Hands Doctrine and its Absorption into the 'Legality Doctrine'

Apart from state responsibility, difficult questions on mutuality of fault also come to bear with the unclean hands doctrine. The maxim, 'he who comes into equity must come with clean hands'26 is a principle found in many national systems of law, the effect of which is to bar claims due to the investor's illegal conduct in relation to those claims. It is used in all forms of investor wrongdoing, not just corruption. There are many permutations of the clean hands doctrine, which is not (contrary to some views) a common law construct - its roots trace back to Roman law. 27 While these are not exactly the same as the unclean hands doctrine, 28 they do bear familial resemblance - the ex turpi causa defense has been given near equivalence by some scholars. For Prof. Kreindler, for example, 'reliance on the maxim ex turpi causa non oritur action can and should be considered as another application of the Unclean Hands Doctrine. 29

In international investment arbitration, the unclean hands doctrine had been advanced as a principle governing the admissibility of investor claims: once an investor's wrongdoing - corruption, or fraud, or some other illegal conduct - is proven, its claims may be dismissed in their entirety, without further inquiry into any illegalities the host State may have committed. 30 However, the recent Yukos v Russian Federation final award31 has put its continued application into question through the categorical declaration that the unclean hands doctrine was not a principle of international law:

[t]he tribunal is not persuaded that there exists a "general principle of law recognized by civilized nations" within the meaning of Article 38(1)(c) of the ICJ Statute that would bar an investor from making a claim before an arbitral tribunal under an investment treaty because it has so-called "unclean hands." 32

Given the considerable commentary supporting the application of the unclean hands doctrine to international investment arbitration, 33 the Yukos Tribunal's finding may have halted what until then seemed like an emergent consensus that the doctrine was, at a minimum, an international legal principle that formed part of the lex specialis of investment arbitration.

There seems to be no reason to doubt the Yukos Tribunal's conclusion that no clean hands principle 'proper'34 exists as a principle of international law: the UN International Law Commission, tasked with the 'progressive development of international law and its codification,' 35 considered but declined to recognize the clean hands doctrine as a circumstance precluding liability when drafting the Articles on State Responsibility: '[t]he so-called 'clean hands' doctrine has been invoked principally in the context of the admissibility of claims before international courts and tribunals, though rarely applied. It also does not need to be included here.' 36 And it is true that no international court or arbitral tribunal - or more precisely, no majority decision or award - has ever explicitly recognized the existence of the unclean hands doctrine. 37 The recent jurisdictional decision in Niko Resources v Bangladesh also engaged in an extensive canvassing of the law and expressed similar doubt as to whether an opposable clean hands doctrine existed under international law: '[t]he question whether the principle forms part of international law remains controversial and its precise content is ill defined.' 38 Notwithstanding those doubts, the Niko Tribunal circumscribed the principle within criteria markedly different from those in national legal systems, including the need for 'a relationship of reciprocity between the obligations considered', i.e., for reciprocity between the obligations of the investor and the host state. 39

On that point, the Niko Tribunal found that in a situation where corruption occurred after the subject of the investment (a joint venture agreement) had already been concluded, 'there is no relation of reciprocity between the relief which the claimant now seeks in this arbitration and the acts in the past which the respondents characterize as involving unclean hands.' 40 In so emphasizing the direct and reciprocal relationship between the illegality complained of and the wrongdoing of the claimant itself, the Niko Tribunal was echoing the purer form of the unclean hands doctrine seen in interstate claims commissions dating back over a century. 41 As reported by Professor Crawford, 'it appears that these cases are all characterized by the fact that the breach of international law by the victim was the sole cause of the damage claimed, [and] that the cause-and-effect relationship between the damage and the victim's conduct was pure, involving no wrongful act by the respondent state. When, on the contrary, the latter has in turn violated international law in taking repressive action against the applicant, the arbitrators have never declared the claim inadmissible.' Bin Cheng's Chapter 2 | Aloysi us P. Llamzon observation on the ex turpi causa principle from the practice of international tribunals is also apt: '[i]t does not apply to cases where, although the claimant may be guilty of an unlawful act, such act is judicially extraneous to the cause of action.' 42

Given the apparent non-existence of unclean hands qua unclean hands, should the doctrine more properly be considered a nom de guerre that, while rejected in Yukos, lives on in substance through other accepted legal principles? After all, the unclean hands doctrine was not named explicitly in a number of cases that had the same practical result. In World Duty Free v Kenya, a case made prominent by its corruption findings, the words 'clean' or 'unclean hands' were never used; instead, the tribunal found that the ex turpi causa defense under English law (the governing law of the underlying contract) proscribed the claimant from pursuing its claims:

The principle of public policy is this: ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action upon an immoral or illegal act. If, from the plaintiff's own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says he has no right to be assisted. 43

As with the unclean hands doctrine, the World Duty Free Tribunal found that the ex turpi causa defense 'rests on a principle of public policy that the courts will not assist a plaintiff who has been guilty of illegal (or immoral) conduct of which the courts should take notice. It applies if in all the circumstances it would be an affront to public conscience to grant the plaintiff the relief which he seeks because the court would thereby appear to assist or encourage the plaintiff in his illegal conduct or to encourage others in similar acts.' 44

Other tribunals have gone a step further by grounding doctrinal findings outside specific national laws, looking instead to either transnational public policy or public international law. Inceysa v El Salvador is a leading case in this regard - there, the claimant's investment was found to have violated the host state's laws,45and jurisdiction was declined on grounds that the investment fell outside the scope of conditional consent expressed by states party to the investment treaty, 46 the Spain-El Salvador BIT having provided, in art. III, that '[e]ach contracting party shall protect in its territory the investments made, in accordance with its legislation' by investors from the other Contracting Party. The Latin principle nemo auditor propriam turpitudinem allegans (literally: 'no one alleging his own turpitude is to be heard') 47 was considered a general principle of law that formed part of Salvadoran law, and operated to prohibit an investor from 'benefit[ting] from an investment effectuated by means of one or several illegal acts'. 48 For the tribunal, the claimant's violation of this principle meant that the investment was not within the scope of the offer to arbitrate disputes and for that reason denied jurisdiction: 'Inceysa acted improperly in order to be awarded the bid that made its investment possible and, therefore, it cannot be given the protection granted by the BIT. Sustaining the contrary would be to violate the aforementioned general principles of law which, as indicated, are part of Salvadoran law'. 49

Arguably, the unclean hands-related finding in Inceysa was pure obiter, as it was the plain language of the investment treaty ('protect… investments made, in accordance with its legislation'), rather than any purported general principle of law, that lead to a lack of jurisdiction finding. But the case does highlight the link between the two concepts, and one can consider legality clauses in investment treaties as a legislated form of unclean hands - both require that the claimant who raises treaty violations against the host state first demonstrate that the manner in which its investment was made complied with host state laws, including anti-corruption laws.

Indeed, the principle underlying legality clauses has been held to apply even in the absence treaty language. Plama v Bulgaria is the leading case in this regard; there, the claimant was found to have fraudulently concealed the true facts concerning its financial and managerial capacities50 The lack of a specific provision in the Energy Charter Treaty requiring the conformity of the investment with national law 'does not mean … that the protections provided for by the ECT cover all kinds of investments, including those contrary to domestic or international law.' 51 The Plama Tribunal cited Inceysa with approval, including the use of nemo auditor propriam turpitudinem allegans,52 and deemed the claims inadmissible under the ex turpi causa defence - 'in light of the ex turpi causa defence, this tribunal cannot lend its support to claimant's request and cannot, therefore, grant the substantive protections of the ECT' - and the underlying contract unenforceable: 'a contract obtained by wrongful means (fraudulent misrepresentation) should not be enforced by a tribunal.' 53 The source of this norm was said to derive from both Bulgarian law and 'the basic notion of international public policy' - although it is not entirely clear whether the tribunal considered clean hands a principle of transnational public policy only, 54 a general principle of international law (in the sense of Article 38(1)(c) of the ICJ Statute), or both (or neither). 55

The Yukos Tribunal was well aware of all these developments, 56 and acknowledged them before pronouncing the absence of the unclean hands doctrine as a general principle international law. Instead, it decided to ground itself purely upon the concept of legality - which encompassed not only legality clauses found in investment treaties, but also legality as an inherent policy principle that attends all investment treaties, whether explicitly stated or not. The Yukos Tribunal's analytical framework can be summarized in table form, using temporality - the point at which the investor's wrongdoing - as the key distinguishing factor:

The overlap of outcomes is clear. The Yukos Tribunal's conclusions on the unclean hands doctrine per se are narrowly drawn - only the right bottom box above. Yukos places the 'clean hands principle' and 'legality requirement' in equivalence as to the making of the investment, 57 but not as to the performance. In each case, the outcomes are the same.

By clarifying the scope of unclean hands doctrine, the Yukos Tribunal engaged in a significant development of the law, effectively slotting the unclean hands doctrine within the framework of an emerging "legality requirement", 58 i.e., the requirement of 'legality' of the investor's investment is not bound to any explicit treaty text and exists as an independent principle - one might call this the 'Legality Doctrine'. Through Yukos, what had been obiter dicta by that tribunal's own account has now been explicitly and directly sustained:

Other arbitral tribunals have stated in obiter dicta that the principle that an investment 'will not be protected if it has been created in violation of national or international principles of good faith' or 'of the host State's law' is a 'general principle […] that exist[s] independently of specific language' in an investment treaty. The tribunal agrees with this proposition. 59

In so doing, the rejection of the unclean hands doctrine is in some ways inconsequential - indeed, the Legality Doctrine bypasses the stringent requirements of unclean hands set in Niko, there being no requirement of reciprocity or a direct link between the relief sought and the wrongdoing done. Instead, the time of the investor's wrongdoing as it relates to the making of the investment is given importance.

It also bears noting that the Yukos Tribunal's rejection of the unclean hands doctrine was grounded firmly in international law. The relevance of that finding to contract-based arbitrationcontract-based arbitrations that do not automatically involve public international law is not clear-cut. As to contract-based arbitrationcontract-based arbitration, will the inexistence of the unclean hands doctrine as a general principle of international law necessarily change the course of investor-wrongdoing based defenses? It is an open question: apart from the fact that the applicable national law will in many instances contain an unclean hands or similar doctrine (a la WDF v Kenya), Yukos does not, strictly speaking, reject the idea of unclean hands forming part of transnational public policy, which has largely been considered an independent source of rights and duties in international commercial arbitration irrespective of the applicability of public international law.

One final, larger question bears consideration in light of the apparent superseding of the unclean hands defense by the Legality Doctrine: what is the unclean hands principle for? If these similarly target investor wrongdoing, and the outcomes are the same, does unclean hands merit a separate existence from the Legality Doctrine because of certain policy objectives that the latter does not cover? That inquiry starts by ascertaining the policy imperatives behind the Legality Doctrine. Yukos provided object and purpose60 justifications based on temporality: the objective behind depriving tribunals of jurisdiction for investor wrongdoing done at the making or obtaining of the investment under the Energy Charter Treaty was to 'condition[ ] the protection of investments on their legality, or on the good faith of the investor,' 61 and that '[i]n imposing obligations on states to treat investors in a fair and transparent fashion, investment treaties seek to encourage legal and bona fide investments. An investor who has obtained an investment in the host state only by acting in bad faith or in violation of the laws of the host state… should not be allowed to benefit from the treaty.' 62 Whether the tribunal was, apart from declaring policy, adding an 'only by' criterion that would require a rigid factual link between the investment made and the wrongdoing involved such that the latter must have enabled the former - is not entirely clear.

But the same object and purpose analysis of the Energy Charter Treaty lead the Yukos Tribunal to reject the proposition that illegality in the performance of the investment would also lead to a lack of jurisdiction or inadmissible claims: '[t]here is no compelling reason to deny altogether the right to invoke the ECT to any investor who has breached the law of the host state in the course of its investment. … It would undermine the purpose and object of the ECT to deny the investor the right to make its case before an arbitral tribunal based on the same alleged violations the existence of which the investor seeks to dispute on the merits.' 63 In the case, tax assessments and fines were argued as either violations of the ECT (the claimants) or valid exercises of governmental authority (the respondent). Being based on the same set of facts, the proper legal characterization of those facts were, for the tribunal, most appropriately heard on the merits. 64 Thus, Yukos recognizes that investor wrongdoing should not be treated monolithically, although one may argue whether the Legality Doctrine is calibrated appropriately, given that a dividing line based on temporality can sometimes lead to problematic results. As stated by Professor Douglas:

This temporal dividing line between pleas of illegality that go to jurisdiction and to the merits has no sound basis in principle. The illegality discerned by the [Fraport v Philippines] majority related to the execution of secret shareholders' agreements… executed at the time [the shareholdings] were acquired and hence fell on the jurisdictional side of the dividing line. It would seem to follow that if those agreements had simply been executed after the shareholding interests were acquired, then this would be a problem for the merits. And yet the essence of the illegality would be identical. 65

By contrast, the dividing line of the unclean hands doctrine is not temporal; rather, as discussed in Niko, one of its key attributes is reciprocity, i.e., the investor's wrongdoing and the alleged treaty or contract breaches of the host state arise from the same or substantially similar facts. But can reciprocity truly occur at the making of an investment? Instances of investor wrongdoing such as corruption or fraud that the inception the investment usually do not concern exactly the same set of facts on which the investor relies in making its claims against the host state. Only by considering the facts that attended the securing of the investment, rather than the facts related to the claimant's strict cause of action (e.g. denial of justice, expropriation, fair and equitable treatment violations) as the juridical link between investor claim and host state defense, can the Legality Doctrine truly be said to be of sufficient identity with the unclean hands doctrine. Accepting this indirect link as sufficient, as Yukos seems to have done, has brought the unclean hands doctrine within the orbit of the Legality Doctrine, thereby consolidating two principles that would otherwise only have hereditary similarity.

Perhaps the assimilation of the Legality and unclean hands doctrines is inevitable, as both are in many ways similar responses to the problem of claimant wrongdoing. Both reinforce the idea that arbitral protection can only be given to the 'good investor'. And by prescribing similar consequences - a lack of jurisdiction and/or inadmissibility of claims - they provide similar outcomes as well. It is certainly true that notwithstanding Yukos' agnosticism concerning whether the consequence of proven wrongdoing is a lack of jurisdiction or inadmissibility, 66 the practical effect of the Legality Doctrine is the same as that of unclean hands: for illegal conduct at the making of the investment, the investor is barred from obtaining any remedy in international arbitration, regardless of any harms the host state might have inflicted upon the claimant. As observed by Professor Orrego, '[w]hether the principle of ex turpi causa non oritur action, the doctrine of unclean hands, or the policy of eliminating corruption domestically and internationally are relied upon, the result is that an arbitration tribunal cannot find for a claim that is tainted by such practices.' 67

Moreover, both are in many ways anomalous responses to wrongdoing. In national as well as international legal system, plaintiffs are not required to be pure and blemishless as a condition to their being able to bring forth a claim; few individuals or states can withstand that kind of scrutiny. As observed by Professor Herstein in the context of the unclean hands doctrine under the common law, '[t]he law generally does not deny access to established legal recourse to a victim of legally recognized wrongdoing even if the victim's past is marred with moral, legal, or ethical blemishes,' and legal claims should be assessed based on their substantive and procedural merits unless they are 'among the operative or material facts on which the legal merits of the claim turn.'68While 'equity does not demand that its suitors shall have lead blameless lives … it does require that they shall have acted fairly and without fraud or deceit as to the controversy in issue.' 69

That said, the apparent demise of the unclean hands doctrine might still be lamented, as that doctrine's moral underpinnings bear far more nuance and potential for fairness than the Legality Doctrine, and has special resonance in investment arbitration. The unclean hands doctrine is sustained by three meta-principles: court integrity, retribution and to quoque ('you too!' or 'you also'). 70 Court integrity is the most common (and often the only articulated) justification for the unclean hands doctrine: courts should not countenance illegality and allow themselves to be used as an 'abettor of iniquity.' 71 By not granting relief to claimants, the evident intention is to keep the court's own hands clean by protecting itself from perceptions of hypocrisy in allowing 'dirty' plaintiffs relief and dilute the public's perception of a court as a harbinger of fairness. Keen to show that it does not coddle the corrupt investor, the idea that clean hands promotes court/tribunal integrity has special resonance in international investment arbitration, where the need to maintain the integrity of the system of investment arbitration is acutely felt. In this sense, the normative rationale for unclean hands is truly similar to the Legality Doctrine.

But should the conception of the unclean hands doctrine as the guarantor of court integrity (i.e., the embodiment of the norm of court integrity) 72 be the sole basis for the doctrine? The World Duty Free Tribunal seems to suggest as much: the ex turpi causa defense under English law 'rests on a principle of public policy that the courts will not assist a plaintiff who has been guilty of illegal (or immoral) conduct… It applies if in all the circumstances it would be an affront to public conscience to grant the plaintiff the relief which he seeks because the court would thereby appear to assist or encourage the plaintiff in his illegal conduct or to encourage others in similar acts'. 73

But if this were the sole explanation, the glaring problem with unclean hands is that it potentially allows clear injustices that might have been perpetrated by the respondent state - outright unlawful expropriation for example - to remain completely unredressed. This should, to an impartial viewer at least, lead to concerns about court integrity. As noted by Professor Herstein, injustice can swing both ways through an unbending application of the unclean hands doctrine:

[w]hile abetting, tolerating, or assisting plaintiffs who are guilty of iniquity, hypocrisy, and wrongdoing may certainly cut against the court's integrity as a court of justice, allowing a legally recognized injustice or wrong to go unchallenged and not remedied also cuts against the grain of the court's nature as a court of justice. This is especially true where but for her unclean hands the claimant would have been, for all practical matters, entitled to a remedy74

The same can be said for investment arbitration: while it is true that investors can sometimes act so illicitly as to not be entitled to any arbitral redress, host states can and historically have engaged in arbitrary and egregious conduct as well.

This is where the other, equally important moral underpinnings of the unclean hands doctrine - retribution and tu quoque - must be considered. Fairness in the form of retribution (proportional punishment) and tu quoque ('you too!') bear close resemblance in international law to the principles of proportionality and reciprocity that animate so much of international law. On reciprocity, Judge Simma has observed that 'a state basing a claim on a particular norm of international law must accept that rule as also binding upon itself.' 75 As for proportionality, within the context of treaty law, 'the remedy must have some degree of equivalence with the alleged breach' before withholding of performance of a reciprocal obligation is allowed. 76 In that sense, proportionality also bears real similarities to the idea of countermeasures, where 'a state whose wrongful act has provoked or contributed to illegal (or what would normally be illegal) action by another, [retains] its right of complaint if such action was out of reasonable proportion or relation to the provocation or contributory acts.' 77

In Yukos, the claimants argued that the unclean hands doctrine, even if opposable, would not confer upon states the right to violate investors' rights, and argued, based on an analogy with counter-measures, that principles of proportionality require the tribunal to consider the investor's illegality vis-a-vis the host state's original breach. 78 The tribunal did not engage with this argument, but may have effectively conducted such an analysis through its findings on contributory fault - there, the tribunal apportioned a part of the responsibility due to the claimants' own willful and negligent acts that contributed to the destruction of Yukos, 79 implicitly considering the claimants' faults and illegalities against the host state to be less than those perpetrated by the host state against them.

6. Conclusion

Although some significant dissenting voices exist, 80 the weight of the contemporary case law is unmistakable: investment arbitrators are coalescing in favor of treating corruption as an issue that affects their jurisdiction through the Legality Doctrine, grounded upon the idea that investors have no a priori right to investment arbitration and that sovereign consent to arbitration was premised on investors acting within the bounds of the host state's national laws when making their investments. The recent case of Metal-Tech v Uzbekistan is an example of a tribunal declaring, after having found corruption (specifically, trading in influence), 81 that it lacked jurisdiction because the host state's consent to arbitration in the investment treaty was preconditioned upon the investment having been made legally. 82 In an echo of Judge Lagergren's original conception of corruption as a jurisdictional matter, investment arbitration increasingly treats corruption as a binary 'gateway' issue: the issue is either set aside if corruption is unsubstantiated, or if proven, automatically results in a lack of jurisdiction, without any possibility of redressing an investor's claims. Indeed, the Legality Doctrine would go one step further, considering all investor wrongdoing - of which corruption is only part - as matters affecting an investment tribunal's jurisdiction, regardless of whether the applicable investment treaty contains an 'in accordance with law' clause.

This lack of meaningful discretion in dealing with corruption issues can lead to undesirable outcomes. To name just one, if the abstractions of doctrine are tested against the realities of a specific investment made in a host state, and arbitrators know that returning a finding of corruption of any kind at the inception of the investment automatically requires them to dismiss the case for lack of jurisdiction, their sense of fairness may sometimes dissuade them from engaging squarely with corruption allegations. 83 Corruption is thus a 'gateway' issue that cannot be disaggregated from a consideration of what the possible consequences of proven corruption are. This in turn requires a calibrated sanctions regime that both punishes the corrupt investor who bribes and holds the host state accountable for inaction in pursuing corruption against errant public officials. Increasingly, arbitrators are called upon to make that decision under the guise of it being a simple, binary, 'gateway' issue, but one should make no mistake: to arrive at any decision, every aspect of anti-corruption decision making must be engaged with, at the procedural and substantive level, from the characterization of the specific corrupt act as one of bribery, trading in influence, or extortion (or some form in between); to questions of evidence; to mutual fault and the responsibility of states; to the proper consequences for proven corruption. These are all difficult issues that continue to resist binary formulations, and conceptualizing corruption as a jurisdictional issue does not ease the arbitrator's task in this difficult area of the law.

1
This reasoning has been 'correctly' rejected in more recent awards. 'Rather than dismissing such disputes on jurisdictional or nonarbitrabilty grounds, tribunals have ordinarily entertained illegality/corruption claims and made awards on the merits, either upholding those claims or rejecting them.' Gary Born, International Commercial Arbitration,Vol. 1 (2014 ed), p.990, citing Schwartz, The Domain of Arbitration and Issues of Arbitrability: The View from the ICC, in Tenth Joint Colloquium on International Arbitration (1998) p 4 note 6.

2
Ibid, at p.989 ('the scope of the nonarbitrability doctrine as applied to corruption claims has progressively narrowed in the past several decades. … civil claims of corruption, bribery and related wrongdoing are now capable of settlement by arbitration under virtually all systems.').

3
ICC Case No. 1110 (1963), reprinted in Arbitration International, Vol. 10 (1994), p.294.

4
'It cannot be contested that there exists a general principle of law recognized by civilized nations that contracts which seriously violate bonos mores or international public policy are invalid or at least unenforceable and that they cannot be sanctioned by courts or arbitrators.' Ibid, at p.293.

5
'[P]arties who ally themselves in an enterprise of the present nature must realize that they have forfeited any right to ask for assistance of the machinery of justice (national courts or arbitral tribunals) in settling their disputes, … jurisdiction must be declined in this case.' Ibid. 'In concluding that I have no jurisdiction, guidance has been sought from general principles denying arbitrators jurisdiction to entertain disputes of this nature rather than from any national rules on arbitrability.' Ibid. (emphasis supplied)

6
See Civil Law Convention on Corruption of the Council of Europe, art. 8(1), which requests (1) that each member State 'provide in its internal law for any contract or clause stipulating corruption to be null and void;' and (2) '[e]ach 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.' (emphasis supplied).

7
Abdulhay Sayed, Corruption in International Trade and Commercial Arbitration (2004), p.348.

8
Compare World Duty Free v Kenya (2006) (contract-based ICSID Tribunal found bribery found and dismissed case for being inadmissible and the contract unenforceable) with Niko Resources v Bangladesh (2013) (contract-based ICSID arbitration found that it retained jurisdiction over the investor's claims notwithstanding corruption findings, and proceeded to the merits).

9
That said, cases like Metal-Tech v Uzbekistan demonstrate that contracts between foreign investors and local intermediaries that 'deal in influence' can affect, fatally, an investor's claims.

10
Z. Douglas, The Plea of Illegality in Investment Treaty Arbitration, ICSID Review-Foreign Investment Law Journal, Vol. 29 (2014), p.22 ('It would appear that the category of violations that do not provoke a jurisdictional infirmity is expanding in the jurisprudence to avoid the draconian effects of the approach to the plea of illegality under consideration.') and p.27 ('Tribunals must exercise care in their recognition of grounds of international public policy given the draconian consequences that follow the application of this doctrine.')

11
S. Schill, Illegal Investments in International Arbitration, Law and Practice of International Courts and Tribunals, Vol. 11 (2012), p.281-323.

12
For a typology of investor wrongdoing (corruption, fraud, other illegalities vis-a-vis abuse of process/rights, lack of good faith, etc.) and their basic elements, the applicable evidentiary rules (burdens and standards of proof, circumstantial evidence), and legal principles that are applied to such wrongdoing (legality clauses, the unclean hands doctrine, and transnational public policy), see Aloysius Llamzon & Anthony Sinclair, Investor Wrongdoing in Investment Arbitration: Standards Governing Issues of Corruption, Fraud, Misrepresentation and other Investor Misconduct, in Albert Jan van den Berg (ed.), Legitimacy: Myths, Realities, Challenges, ICCA Congress Series No. 18 (2015), pp.451-530.

13
Initial national anti-corruption legislation (such as the US Foreign Corrupt Practices Act) and international conventions (such as the OECD Anti-Bribery Convention) centered on the 'supply' side, i.e., the conduct of the foreign investor. Gradually, however, focus on the 'demand' side - that of public officials of host states - has begun to take hold. The UN Convention Against Corruption, art. 15, requires Contracting States to criminalize in their national legislation not only the 'promise, offering or giving, to a public official, directly or indirectly,' but also 'the solicitation and acceptance by a public official, directly or indirectly, of an undue advantage.'

14
Put another way, 'extortion may be reserved for those situations in which the capacity of the official to withhold a service or benefit otherwise required by law exceeds the capacity of the private party to sustain the loss of that service or benefit.' W. Michael Reisman, Folded Lies: Bribery, Crusades, and Reforms (1979), p.38.

15
See Convention Establishing the Multilateral Investment Guarantee Agency, Second Preambular Clause ('Recognizing that the flow of foreign investment to developing countries would be facilitated and further encouraged by alleviating concerns related to non-commercial risks').

16
Hamester v Ghana, ICSID ARB/07/24, Award, 18 June 2010, para. 123.

17
See Aloysius Llamzon, Corruption in International Investment Arbitration (2014). Of the 20 or so cases in investment arbitration where corruption issues were raised or insinuated to a notable degree, only five instances of investor-alleged corruption occurred. These are: Methanex v US, F-W Oil v Trinidad and Tobago, Rumeli v Kazakhstan, EDF (Services) v Romania, and RSM v Grenada.

18
See Rumeli Telekom AS and Telsim Mobil Telekomunikasyon Hizmetleri AS v Republic of Kazakhstan, ICSID Case No.ARB/05/16, Award, 29 July 2008; RSM v Grenada.

19
For a detailed discussion, see Aloysius Llamzon, State Responsibility for Corruption: The Attribution Asymmetry in International Investment Arbitration, Transnational Dispute Management (2013), No. 3.

20
See Eureko v Slovak Republic, Decision on Jurisdiction, Arbitrability, and Suspension, UNCITRAL/PCA, para. 22; Alain Pellet, The Case Law of the ICJ in Investment Arbitration, ICSID Review, Vol. 28 (2013), pp.223-240 ("ICSID, first, remains rooted in public international law. It was created by treaty, it comes under what Charles Leben named a 'logique internationaliste' (public international law logic.").

21
UN International Law Commission, Articles on State Responsibility, art. 7. See also Rosalyn Higgins, Problems and Process: International Law and How We Use It (1994), p.150 (citation omitted).

22
World Duty Free v The Republic of Kenya, para. 185 ('Moreover, there can be no affirmation or waiver in this case based on the knowledge of the Kenyan President attributable to Kenya. The President was here acting corruptly, to the detriment of Kenya and in violation of Kenyan law (including the 1956 Act). There is no warrant at English or Kenyan law for attributing knowledge to the state (as the otherwise innocent principal) of a state officer engaged as its agent in bribery'). [emphasis supplied]

23
For Professor Kreindler, World Duty Free's attribution findings may have been in serious error: "in the case of World Duty Free, it strains credulity to conclude after the admission of the bribery and the underlying circumstances that the Kenyan head of State was not acting in his official capacity. It seems curious to conclude that he was not acting with apparent authority. And it seems strained to decide that he was not acting manifestly, and not just by 'happenstance', as an organ or agent of the State. Indeed he was the State." R. Kreindler, Competence- Competence in the Face of Illegality in Contracts and Arbitration Agreements, 361 Recueil des Cours 292-93 (2013).

24
See, e.g., Metal-Tech Ltd v The Republic of Uzbekistan, para. 422

25
For further discussion, see Llamzon, Corruption in International Investment Arbitration (2014), pp.275-81.

26
Precision Instrument Mfg Co. v Automotive Co., 324 U.S. 806, 814 (1945).

27
The Latin maxims that underpin the unclean hands doctrine include the following: ex delicto non orituractio ('an unlawful act cannot serve as the basis of an action at law'), nemo ex suo delicto meliorem suam conditionem facit ('no one can put himself in a better legal position by means of a delict'), ex turpi causa non oritur ("an action cannot arise from a dishonourable cause"), inadimplenti non est adimplendum ('one has no need to respect his obligation if the counter-party has not respected its own'), and nullus commodum capere potest de in juria sua propria ('no one can be allowed to take advantage of his own wrong').

28
Apart from the above, related doctrines also include in pari delicto ('in equal fault'), where a court weighs comparative wrongs committed and denies a claimant the remedy it seeks because both it and the respondent stand in equal fault in respect of the unlawful transaction complained about. The ex turpi causa principle is a manifestation of the contract law principle that illegal inducements result in unenforceable contracts. See Ori Herstein, A Normative Theory of the Clean Hands Defense, Legal Theory, Vol. 17 (2011), p.176.

29
See Richard Kreindler, Corruption in International Investment Arbitration: Jurisdiction and the Unclean Hands Doctrine, in Kaj Hober et. al., Between East and West: Essays in Honour of Ulf Franke (2010), p.319.

30
See Llamzon and Sinclair, supra note 13.

31
Hulley Enterprises (Cyprus) Limited, Yukos Universal Limited (Isle of Man) and Veteran Petroleum Limited (Cyprus) v Russian Federation, PCA Case Nos. AA226-28, Final Awards (18 July 2014)[hereinafter 'Yukos'].

32
Ibid, para 1358.

33
See Kreindler, supra note 30; Carolyn Lamm et. al., Fraud and Corruption in International Arbitration, in Liber Amicorum: Bernardo Cremades (2010), p.723-26; Rahim Moloo, A Comment on the Clean Hands Doctrine in International Law, Transnational Dispute Management (2011), Vol. 8, No. 1; Patrick Dumberry and Gabrielle Dumas-Aubin, The Doctrine of 'Clean Hands' and the Inadmissibility of Claims by Investors Breaching International Human Rights Law, Transnational Dispute Management (2013), Vol. 10, No. 1.

34
Yukos, para. 1361.

35
Statute of the International Law Commission, art. 1(1).

36
UN International Law Commission, Draft Articles on Responsibility of States for Internationally Wrongful Acts, with Commentaries, Yearbook of the International Law Commission (2001), Vol. 2, Ch. 5, p.72, para. 9.

37
See Guyana v Suriname, Award, PCA Awards Series (2007), para. 418 ('use of the clean hands doctrine has been sparse, and its application in the instances in which it has been invoked have been inconsistent').

38
Niko Resources (Bangladesh) Ltd. v Bangladesh & Ors, ICSID Case No. ARB/10/11 and ARB/10/18, Decision on Jurisdiction, 19 August 2013, para. 477.

39
Id. para 481-85.

40
Niko Resources (Bangladesh) Ltd. v Bangladesh & Ors, ICSID Case No. ARB/10/11 and ARB/10/18, Decision on Jurisdiction, 19 August 2013, para. 484.

41
ILC Second Report on State Responsibility (James Crawford, Special Rapporteur), 3 May-23 July 1999, UN Doc A/CN.4/498/Add.2.

42
Bin Cheng, General Principles of Law as Applied by International Courts and Tribunals 157-58 (1953).

43
World Duty Free v Kenya, ICSID Case No. ARB/00/7, Award, 4 October 2006 paras. 161, 179-81 (citing Holman v Johnson (1775) 1 Cow 341, 343, per Mansfield J).

44
Ibid, para. 161 (citing Euro-Diam Ltd v Bathurst (1990) QB 1, per Kerr LJ).

45
Inceysa Vallisoletana v El Salvador, ICSID Case No. ARB/03/26, Award, 2 August 2006, paras. 248-52.

46
Ibid, para. 257.

47
Ibid, Part VI(A)(viii)(b).

48
Ibid, paras. 240-42.

49
Ibid, para. 243.

50
Plama Consortium Limited v Bulgaria, ICSID Case No. ARB/03/24, Award, 27 August 2008, Part IV(B)(3).

51
Ibid, para. 138.

52
Ibid, para. 141 (citing Inceysa, paras. 240-42).

53
Ibid, paras. 143 and 146

54
See Pierre Lalive, Transnational (or Truly International) Public Policy and International Arbitration, in ICCA Congress Series (1987), No. 3.

55
Plama Consortium Limited v Bulgaria, ICSID Case No. ARB/03/24, Award, 27 August 2008, para. 144.

56
See e.g. Yukos, paras. 1349-51.

57
See subheading under B(4)(a): "Can a Clean Hands Principle or Legality Requirement be Read into the ECT?" Yukos, at para 1349 p.429.

58
Yukos, para. 1353.

59
Ibid, paras. 1346-47.

60
See Vienna Convention on the Law of Treaties, art. 31(1).

61
Yukos, para. 1346.

62
Ibid, para. 1352.

63
Ibid, para. 1355.

64
Ibid.

65
Douglas, supra note 11, at p.21.

66
See Yukos, para. 1353.

67
Siag v Egypt, Dissenting Opinion of Professor Orrego Vicuña, pp.4-5.

68
Herstein, supra note 29, at pp.1-2.

69
Precision Instrument Mfg. Co. v Automotive Co., 324 U.S. 806, 814 (1945).

70
See Herstein, supra note 29, at p.1.

71
Precision v Automotive, 324 U.S. at 814-15.

72
See Herstein, supra note 29, at p.8.

73
See World Duty Free v Kenya, para. 161 (citations omitted), citing Chitty on Contracts, which cites Euro-Diam v Balhurst, 1990 Q.B. 1 (Kerr, L.J).

74
Herstein, supra note 29, at p.8.

75
Simma, Reciprocity, in Max Planck Encyclopedia of International Law (2008), para. 15.

76
Greig, Reciprocity, Proportionality, and the Law of Treaties, Virginia Journal of International Law, Vol. 34 (1993), p.295, 342; see also Vienna Convention on the Law of Treaties, art 60.

77
Fitzmaurice, The General Principles of International Law Considered from the Standpoint of the Rule of Law, Collected Courses of the Hague Academy of International Law, Vo. 92 (1957), p 119.

78
Yukos, paras. 1340 and 1341.

79
Ibid, para. 1599.

80
These include Prof. Zachary Douglas, who echoes Prof. Cremades' dissent in the first Fraport v Philippines award, maintaining that legality clauses merely reference the formal conditions under host State law by which an investor might acquire title to an asset. For Douglas, treaty protection will arise upon the acquisition of an asset falling within the scope of the treaty's definition of "investment", provided those formal conditions are met. He considers that a breach of host State law will almost never impinge upon the formation of an agreement to refer investment disputes to arbitration, which he believes are matters of separability and competence-competence. It would in his view be wrong to deny a remedy for such investments outright, as the consequences of such wrongdoing are seldom so severe under host State law. See Douglas, supra note 11, at p.5.

81
See Cecily Rose, Circumstantial Evidence, Adverse Influences, and Findings of Corruption: Metal-Tech Ltd. v The Republic of Uzbekistan, Journal of World Investment and Trade, Vol. 15 (2014), p.747.

82
Metal-Tech v Uzbekistan, ICSID Case No. ARB/10/3, Award, 4 October 2013.

83
See discussion in Llamzon, Corruption in International Investment, supra note 18, chapter 8.