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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
1. Introduction
More than 50 years ago, Judge Lagergren refused jurisdiction in International Chamber of Commerce ("ICC") Case No. 1110 on grounds of corrupt payments, based on his observation that "corruption is an international evil… contrary to good morals and to an international public policy common to the community of nations."1More recently, arbitral tribunals have found "no doubt that corruption is worldwide considered a wrongful and, indeed, unacceptable practice," and that "[c]ondemnation of such practice may in effect be seen as a material rule of international public policy, indeed a rule of 'transnational or truly international public policy'… which must apply irrespective of whichever national law parties to a contract may have chosen to govern it."2
While various international conventions and national laws now prohibit corruption, public polling indicates that corruption is still considered "the most important problem facing the world today."3In fact, corruption reportedly costs the world's poorest countries more than US$1 trillion per year.4The President of the World Bank thus recently remarked that, "[i]n the developing world, corruption is public enemy number one."5The Secretary General of the ICC International Court of Arbitration likewise observed that "[c]orruption is the cancer of international commerce," and that, "[b]y its very nature, it is notoriously difficult to combat, yet its eradication is essential to healthy trading relations."6
Corruption also is a focal point in international arbitration. Parties have alleged corruption as the basis for claims or jurisdictional defenses in a number of recent cases at the International Centre for Settlement of Investment Disputes ("ICSID"), including World Duty Free v Kenya, African Holding v Congo, TSA Spectrum v Argentina, EDF v Romania, Niko Resources v Bangladesh, and Metal-Tech v Uzbekistan. Recent ICC cases also have involved such allegations, as the extracts of awards from 10 recently published ICC cases reflect. The ICC published those extracts in 2013 to focus on "corruption in the context of arbitration," and in particular to show "how arbitrators have approached the key questions of standard of proof and circumstantial evidence."7In our experience, and as the decisions summarized below reflect, there is no agreed approach with respect to many of the core evidentiary issues in cases involving alleged corruption.
In this article, we thus analyze and explain the key disputed issues that arise most frequently when corruption is alleged in international arbitrations, specifically focusing on the burden of proof and the standard of proof for allegations of corruption. The burden of proof and the standard of proof are related, but distinct, concepts. The authors of Phipson on Evidence explain that "[t]he phrase 'burden of proof' is used to describe the duty which lies on one or other of the parties, either to establish a case or to establish the facts upon a particular issue," whereas "[t]he phrase 'standard of proof' is used to describe the degree to which the proof must be established." 8The tribunal in Rompetrol v Romania, an ICSID case that arose under the Netherlands-Romania bilateral investment treaty ("BIT"), likewise commented that "the burden of proof defines which party has to prove what, in order for its case to prevail," whereas "the standard of proof defines how much evidence is needed to establish either an individual issue or the party's case as a whole."9
Below we consider four important issues concerning the burden of proof and the standard of proof for allegations of corruption in international arbitration. First, we analyze which law applies in determining the burden of proof and the standard of proof, and whether the characterization of these issues as procedural or substantive under the applicable law makes a difference. Second, we analyze which party has the burden of proof, and whether it should shift in the event of allegations of corruption. Third, we analyze which standard of proof applies, and whether it should be adjusted for allegations of corruption. Finally, we consider what type of evidence suffices to prove corruption.
2. Choice of Law Concerning the Burden of Proof and the Standard of Proof
The first issue concerning the burden of proof and the standard of proof is which law applies. As with other issues involving a choice of law, tribunals must assess whether the burden of proof and the standard of proof are procedural issues (and thus subject to the procedural law of the arbitral seat or lex arbitri), substantive issues (and thus subject to the law governing the underlying substantive issues or lex causae), or subject to some international standard.10
Tribunals have issued conflicting decisions on this point. In Petrobart v Kyrgyzstan, an ad hoc arbitration under the United Nations Commission on International Trade Law ("UNCITRAL") Arbitration Rules, the tribunal concluded that evidentiary rules are procedural and thus governed by the lex arbitri, which was Swedish law in that case.11By contrast, the tribunals in Oostergetel and Laurentius v Slovakia, an ad hoc UNCITRAL arbitration, and Metal-Tech v Uzbekistan, an ICSID arbitration that arose under the Israel-Uzbekistan BIT, both concluded that "rules establishing presumptions or shifting the burden of proof under certain circumstances, or drawing the inferences from a lack of proof are generally deemed to be part of the lex causae," which in those cases were "essentially the BIT" and the laws incorporated by reference therein.12Commenting on the split in authorities, Gary Born remarks as follows in his treatise on international commercial arbitration:
One frequently expressed view is that burden of proof issues should be subsumed into the underlying substantive law: burden of proof rules are frequently intertwined with substantive legal rules, and it would often distort such rules to separate them. At the same time, some burden of proof rules are the result of procedural matters (such as the availability or unavailability of discovery); it is important in these instances to take this into account in allocating the burden of proof. 13
Born further notes that arbitral tribunals have the authority to "fashion specialized rules in light of the particular substantive issues and procedures at issue in a specific instance," and that they "need not apply the burden of proof rules of any specific jurisdiction."14He thus concludes that "[t]he better view is that the tribunal should allocate the burden of proof in the light of its assessment of the applicable substantive law and procedures adopted in the arbitration."15
A tribunal's choice of law regarding the burden of proof and the standard of proof is not merely of academic interest. Countries with common law traditions generally have more detailed rules of evidence than countries with civil law traditions, because most trials take place by jury, rather than by a judge.16Different national laws, moreover, vary considerably regarding the standard of proof. The tribunal's choice of law thus could have a significant impact on the standard of proof that it applies. In fact, as explained more fully below, the standard of proof for allegations of corruption may vary not only between common law countries and civil law countries, but also between different common law countries and even between different regions of the same country. In these circumstances, and in view of the divergent approaches regarding the standard of proof, a tribunal's choice of law for the standard of proof may have decisive consequences, as demonstrated further below.
International arbitrators and practitioners appear to appreciate the significance of the choice of law with respect to the burden of proof and the standard of proof. Indeed, based on her survey of more than 500 counsel, experts, judges, and arbitrators, Professor Franck found "that individuals who had served as arbitration counsel and/or arbitrator considered issues [regarding] burden of proof to frequently be outcome determinative in arbitration cases."17
3. The Burden of Proof for Allegations of Corruption
The second issue is which party has the burden of proof, and whether that burden of proof should shift when corruption is alleged. As explained below, regardless of which law applies or which instrument or arbitration rules underlie the proceeding, almost all arbitral tribunals hold, with respect to the burden of proof, that each party bears the burden of proving the facts on which it relies to support its claims or defenses (actori incumbit probatio).
The UNCITRAL Arbitration Rules and the Iran-United States Claims Tribunal Rules of Procedure, which are based on the UNCITRAL Arbitration Rules, both expressly apply the principle of actori incumbit probatio, and accordingly provide: "Each party shall have the burden of proving the facts relied on to support its claim or defence."18While the ICC Arbitration Rules and most other institutional arbitration rules do not address the burden of proof,19tribunals in ICC arbitration cases also routinely hold that each party must prove the facts on which it relies in support of its claims and defenses, including for corruption. Applying Swiss law, the tribunal in ICC Case No. 7047, for example, remarked that "bribery is a fact which has to be alleged and for which evidence has to be submitted, and at the same time constitutes a defence, nullifying the claims from a contract."20The tribunal concluded that "[t]he consequences of this are decisive" for the burden of proof:
"If a claimant asserts claims arising from a contract, and the defendant objects that the claimant's rights arising from the contract are null due to bribery, it is up to the defendant to present the fact of bribery and the pertaining evidence within the time limits allowed to him for presenting facts. The statement of facts and the burden of proof are therefore upon the defendant. 21
Similarly, the sole arbitrator in ICC Case No. 13384 applied French law, and held "that the burden of proof lies on the shoulders of that Party who has raised the argument of nullity." 22This rule likewise applies in investment treaty arbitrations. The tribunal in Metal-Tech v Uzbekistan observed, in fact, that "[t]he principle that each party has the burden of proving the facts on which it relies is widely recognized and applied by international courts and tribunals," and "[t]he International Court of Justice as well as arbitral tribunals constituted under the ICSID Convention and under the NAFTA have characterized this rule as a general principle of law."23Commentators also have found that this is "[t]he practice of nearly all international arbitral tribunals,"24and "is depicted by some authors as a principle of 'transnational public policy.'"25
Notwithstanding the wide acceptance of this principle, a number of commentators have suggested that tribunals should shift the burden of proof to the accused party if there is prima facie evidence of corruption. These commentators have contended that shifting the burden of proof is appropriate, because corruption is inherently difficult to prove and innocent parties should be capable of producing countervailing evidence.26Certain tribunals have issued awards that appear to support this position. The tribunal in ICC Case No. 12990, for example, agreed with the "general principle that the burden of proof falls upon the party invoking the unlawful nature of the contract," although it further stated that "the unlawful character is often difficult to prove given that the parties may hide the real purpose of the contract behind harmless contractual provisions."27The tribunal concluded that the burden of proof "cannot apply when it involves demonstrating proof of the [claimant's] activity," and that "an agent's refusal to establish proof of its activity is a priori an indication of unlawfulness."28In ICC Case No. 6497, the tribunal likewise held that the party alleging bribery has the burden of proof,29but that this burden may shift in certain circumstances:
The "alleging Party" may bring some relevant evidence for its allegations, without these elements being really conclusive. In such case, the arbitral tribunal may exceptionally request the other party to bring some counterevidence, 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… . However, such change in the burden of proof is only to be made in special circumstances and for very good reasons.30
Some arbitrators and tribunals have criticized this concept of burden shifting. Alexis Mourre, for example, objected that, in corruption cases, "a reversal of the burden of proof does not seem to be acceptable or compatible with the right to a fair trial."31Similarly, the tribunal in Siag v Egypt, an ICSID case that arose under the Italy-Egypt BIT, rejected Egypt's contention that the burden of proof should shift to the claimant to disprove forgery or fraud, and remarked that "the reversal of the burden of proof may make it almost impossible for the allegedly fraudulent party to defend itself, thus violating due process standards."32The Oostergetel and Laurentius tribunal also observed that "[i]nternational arbitration is not an inquisitorial system where the [t]ribunal establishes the facts for a denunciating party, nor a system where it is sufficient to make a prima facie case relying on the opponent to rebut that case."33
In addition, the burden of proof is a burden to persuade - not necessarily to produce evidence. The authors of Phipson on Evidence thus describe the burden of proof as a "persuasive burden" that is "distinct from the evidential burden," i.e., from the obligation to produce evidence.34As they explain, only one party will have the burden of persuading the trier of fact with respect to a particular issue, and "[a] party who fails to discharge a persuasive burden placed on him to the requisite standard of proof will lose on the issue in question."35They conclude that it thus "is wrong to speak of the persuasive burden shifting during the course of the trial… ."36Colin Tapper likewise remarks in Cross and Tapper on Evidence that, "[o]n any one issue, there can be only… one persuasive burden," which "can be borne by only one party."37
In Rompetrol, moreover, the tribunal observed that "the burden of proof is absolute," and "if, according to basic principle, it is for the one party, or for the other, to establish a particular factual assertion, that will remain the position throughout the forensic process, starting from when the assertion is first put forward and all the way through to the end."38The Rompetrol tribunal stated that it thus was "not enamoured of arguments setting out to show that a burden of proof can under certain circumstances shift from the party that originally bore it to the other party, and then perhaps in appropriate circumstances shift back again to the original party."39The tribunal concluded that such arguments "confuse, unhelpfully, the separate questions of who has to prove a particular assertion and whether that assertion has in fact been proved on the evidence."40The tribunal in Apotex v United States, an ICSID Additional Facility arbitration that arose under the North American Free Trade Agreement ("NAFTA"), likewise distinguished in its recent award between the "legal burden of proof" and the obligation of either party to produce evidence, which it referred to as the "evidential burden of proof."41While the Apotex tribunal noted that the burden to produce evidence "can shift from one party to another, depending upon the state of the evidence," it held that the legal burden of proof "never shifts," and that, "in accordance with the well-established principle of onus probandi actori, it is the duty of the party which asserts certain facts to establish the existence of such facts."42The tribunal in Fraport v Philippines II, an ICSID arbitration that arose under the Germany-Philippines BIT, likewise held that the burden of proof remained with the party asserting the jurisdictional defense of corruption.43
In this context, a party alleging corruption will have the burden of persuading the tribunal of the truth of its allegations at all times during the proceeding. This does not mean, however, that a tribunal should reject the allegations as unproven in the event that the record is inconclusive due to the responding party's concealment of relevant evidence relating to the alleged corruption. To the contrary, the ICC Arbitration Rules provide that "[t]he arbitral tribunal shall proceed within as short a time as possible to establish the facts of the case by all appropriate means," and "at any time during the proceeding, may summon any party to provide additional evidence."44The IBA Rules on the Taking of Evidence in International Arbitration also provide that, "[i]f a Party fails without satisfactory explanation to produce any [d]ocument… or fails to make available any evidence, including testimony, ordered by the Arbitral Tribunal to be produced, the Arbitral Tribunal may infer that such evidence would be adverse to the interests of that Party."45
The tribunal thus may order either party to produce evidence concerning any disputed factual issue, and may draw adverse inferences against a party that fails to produce such evidence, even if that party does not have the burden of proving that issue. The tribunal's authority in this regard, however, is "distinct in its substance from the burden and standard of proof," as the Rompetrol tribunal observed, "except to the extent that it may condition the circumstances under which a [t]ribunal may take particular factual allegations as 'proved' for the purpose of the arbitration."46In fact, as summarized further below, numerous tribunals have found corruption proven based on inferences arising from indicia or "red flags" of corruption and the accused party's failure to produce relevant evidence, including in ICC Cases Nos. 3916, 6497, 8891, 12990, and 13515. The ICSID tribunal in Metal-Tech also relied on similar inferences in the only investment treaty case that has been dismissed for lack of jurisdiction due to corruption. Thus, while the responding party does not have a "burden of (dis)proof,"47the decisions of tribunals in commercial and investment treaty arbitrations confirm that "a party cannot simply assert or deny a proposition and then rest his case upon a technical rule, throwing the burden of proof on the other party, without running a risk of adverse inference being drawn from his failure to produce evidence."48
4. The Standard of Proof for Allegations of Corruption
The third issue is what standard of proof applies, and whether that standard of proof should be adjusted when corruption is alleged. Commentators have remarked that "[i]nternational arbitration conventions, national arbitration laws, compromis, arbitration rules and even the decisions of arbitral tribunals are almost uniformly silent on the subject of the standard of proof."49As set out below, national laws differ with respect to the applicable standards of proof, and the choice of a particular standard may have decisive consequences for the outcome of the case.
In the United States, for example, there are three applicable standards of proof. The standard of proof in criminal cases is "beyond a reasonable doubt," which requires "proof coming as close to certainty as is humanly possible."50The standard of proof in most civil cases is "preponderance of the evidence" - or "balance of probabilities" - which requires establishing "that the fact is more likely true than not true."51An intermediate standard of "clear and convincing evidence" also may apply "in cases involving important liberty interests such as proceedings for psychiatric imprisonment or deprivation of parental rights,"52as well as in civil actions involving "conduct that could be prosecuted as a crime, [such as] allegations of fraud and undue influence… ."53While "[t]he clear and convincing evidence standard does not require that the evidence negate all reasonable doubt," it requires establishing that a "proposition is highly probable" or "a firm belief or conviction that the allegations in question are true."54
Countries with civil law traditions do not apply varying standards of proof. Rather, in civil law countries, the standard of proof is "l'intime conviction du juge" in both civil and criminal cases. Some comparative law and civil law scholars have equated this standard with the standard of proof beyond a reasonable doubt,55while other such scholars have suggested that it is equivalent to the preponderance of evidence.56Court of Arbitration for Sport ("CAS") panels, by contrast, have held that this standard is higher than preponderance of evidence but lower than proof beyond a reasonable doubt.57While there thus is a lack of clarity regarding the precise meaning of the civil law standard of "l'intime conviction du juge," there is consensus that civil law countries apply a different standard of proof and, in certain instances, reach different results than common law countries. Indeed, while a defendant in the United States may be found criminally not guilty and civilly liable for the same alleged offense,57the courts of France are authorized to join criminal and civil proceedings against the same defendant, such that "a loss on the criminal case will dictate a loss on the joined civil case."59
As a general matter, Born notes that, "although there is little discussion of the issue," in most international arbitrations the standard of proof "appears to be (or [is] assumed to be) a 'balance of probabilities' or 'more likely than not' standard."60Numerous international arbitral tribunals have referred to this as the "usual standard" or "normal rule" in international arbitration.61The tribunal in Kardassopoulos and Fuchs v Georgia, an ICSID arbitration that arose under the Energy Charter Treaty, the Greece-Georgia BIT, and the Israel-Georgia BIT, thus found that "the principle articulated by the vast majority of arbitral tribunals in respect of the [standard] of proof in international arbitration proceedings… does not impose on the Parties any [standard] of proof beyond a balance of probabilities."62
It is a matter of frequent debate, however, whether the ordinary standard of preponderance of evidence should be heightened - for example, to the criminal standard of beyond a reasonable doubt or to an intermediate standard, such as clear and convincing evidence - for allegations of corruption. Born, among others, contends that "allegations of wrongdoing, particularly serious wrongdoing such as criminal acts, fraud, corruption and the like, require more convincing evidence than other facts."63In his view, "[t]his approach is sensible, both in evidentiary terms and in discouraging baseless allegations of misconduct."64Other commentators have noted that bribery allegations are "more startling" than ordinary allegations, and "among the 'important or delicate questions' that require heightened standards of proof," as "[s]uch cases are vulnerable to the risk that a party to a normal contractual relationship would take advantage of the easiness in invoking bribery to claim invalidation of the contract to escape its obligation."65
This approach accords with the approach of many common law countries. As noted above, many states in the United States apply a higher standard of clear and convincing evidence to proceedings concerning psychiatric imprisonment or the deprivation of parental rights, as well as to civil allegations of criminal misconduct, such as fraud and corruption. According to a leading treatise regarding American jurisprudence, the higher standard applies in these matters, because the issues "are more serious than factual issues in ordinary civil cases and fall within certain classes of acts for which stigma attaches and therefore, a greater degree of certitude is required."66
Arbitral tribunals in a number of ICC cases likewise have heightened the standard of proof for allegations of corruption. In addition to Westinghouse v Philippines, ICC Case No. 6401, which is discussed below, published cases applying a higher standard of proof include:
• In ICC Case No. 4145, the tribunal "stressed that, following general principles of interpretation (also recognized in Swiss law…) a fact can be considered as proven by the way of circumstantial evidence," although "such circumstantial evidence must lead to a very high probability." 67
• In Omnium v Hilmarton, ICC Case No. 5622, the tribunal found that "bribery has not been proved beyond doubt."68The tribunal further remarked that, if a party is unable to proffer direct evidence to sustain its allegation, "it is necessary that a sufficient ensemble of indirect evidence be collected to allow the judge to base his decision on something more than likely facts, i.e., facts which have not been proven…."69
• In ICC Case No. 6497, the tribunal held that, if the evidence of the alleged bribery "is not convincing, the tribunal should reject its argument, even if the tribunal has some doubts about the possible bribery nature of the agreements."70
• In ICC Case No. 8891, the tribunal held that proof of corruption "has to be serious," because it is "not uncommon" and "perfectly legitimate" for companies to use local agents to represent their interests in a foreign country.71
• In ICC Case No. 12472, the tribunal concluded that none of the evidence permitted it "to declare with certitude" that bribes were paid.72
• In ICC Case No. 13384, the sole arbitrator found that corruption defenses, "by their nature… require for their application very careful attention to the facts in accordance with a principle which commands their restrictive interpretation," and "must be ascertained according to a high standard of proof."73
• In ICC Case No. 13515, the tribunal held that "obligations are presumed valid unless proven otherwise," and that it "is important for any arbitrator to exercise great caution" and to reject allegations of illegality that are not established to "a strong degree of certainty."74
• In ICC Case No. 14470, the tribunal acknowledged "the difficulties related to proof of corruption, an operation that is by definition secret," but required "converging and serious elements that make it more likely or almost certain that corruption exists." 75
• In ICC Case No. 14878, the tribunal remarked that, "even though it is true that proof of unlawful practices, especially in a foreign country is not an easy case to be made by a party from the private sector, the fact remains that the rules of evidence are not relaxed simply because such practices are alleged." 76 The tribunal concluded that "[t]he evidence of facts establishing such practices must satisfy the intimate conviction of the sole arbitrator."77
Arbitral tribunals operating under other institutional rules also have applied a higher standard of proof to allegations of corruption or serious criminal misconduct. CAS panels, for example, have applied a higher standard of "personal conviction" or "comfortable satisfaction" to such allegations. In Oil Field of Texas v Iran, the Iran-United States Claims Tribunal imposed the standard of proof from criminal cases, holding that, "[i]f reasonable doubts remain, such an allegation [of corruption] cannot be deemed to be established."78In subsequent cases, the Iran-United States Claims Tribunal has held that similar allegations of forgery "must be proved with a higher degree of probability than other allegations," and that "[t]he minimum quantum of evidence that will be required to satisfy the Tribunal may be described as 'clear and convincing evidence,' although the Tribunal deems that precise terminology less important than the enhanced proof requirement that it expresses."79Moreover, the tribunal in Himpurna v PLN, an ad hoc UNCITRAL arbitration, likewise observed that allegations of illegality "must be treated with great circumspection," because "[i]t is contrary to all experience that a State-owned institution… , whose director is appointed directly by the Head of State, engages in activities contrary to the mandatory laws of that country."80The Himpurna tribunal held that "there is a presumption in favour of the validity of contracts," and that, as a result, "a finding of illegality or other invalidity must not be made lightly, but must be supported by clear and convincing proof."81The tribunal further remarked that its members "do not live in an ivory tower," and "would rigorously oppose any attempt to use the arbitral process to give effect to contracts contaminated by [] corruption," but that "such grave accusations must be proven."82
Tribunals in ICSID cases arising under various investment treaties have made similar observations regarding the need for a high standard of proof. The tribunal in Siag applied the standard of clear and convincing evidence to Egypt's allegations of fraud, contending that "[i]t is common in most legal systems for serious allegations of fraud to be held to a high standard of proof," and "[t]he same is the case in international proceedings."83The tribunal in Saba Fakes v Turkey, an ICSID case that arose under the Netherlands-Turkey BIT, held that the standard of proof for "any allegations of impropriety is particularly heavy."84And, in EDF v Romania, an ICSID case that arose under the United Kingdom-Romania BIT, the tribunal held that "[t]he seriousness of the accusation of corruption in the present case, considering that it involves officials at the highest level of the Romanian Government at the time, demands clear and convincing evidence."85The EDF tribunal further remarked that "[t]here is general consensus among international tribunals and commentators regarding the need for a high standard of proof of corruption."86
In certain cases, the application of a higher standard of proof arguably had decisive consequences. One such case was Bin Hammam v FIFA, a CAS arbitration concerning Mr Bin Hammam's appeal of a lifetime ban from Fédération Internationale de Football Association ("FIFA") for allegedly offering bribes to buy votes in a FIFA election. The facts of that case were as follows: Mr Bin Hammam was a candidate for FIFA President; he invited FIFA's Vice President, Mr Warner, to convene a special meeting of the Caribbean Football Union ("CFU") regarding his candidacy; after Mr Bin Hammam finished his speech and left the room, Mr Warner announced that there were "gifts" in the boardroom for each CFU delegate; in the boardroom, each delegate was handed an unmarked envelope that contained US$40,000 in cash; and the source of the envelopes of cash was a suitcase from Mr Warner's office.87The panel thus had to determine whether the suitcase originated with Mr Bin Hammam and whether he attempted to use Mr Warner as a conduit to pay bribes.
With respect to the standard of proof, the Bin Hammam panel applied the standard of "personal conviction" or "comfortable satisfaction," which it defined as "higher than the civil standard of 'balance of probability' but lower than the criminal standard of 'proof beyond a reasonable doubt.'"88This decision was crucial, because the panel overturned FIFA's lifetime ban, even though it found "it to be more likely than not that Mr Bin Hammam was the source of the money," and "that Mr Bin Hammam gave the money, assuming him to be the source, to Mr Warner."89While the case against Mr Bin Hammam thus apparently was proven by a preponderance of the evidence, a majority of the panel was "not convinced to the standard of 'comfortable satisfaction' that Mr Bin Hammam made monies available to delegates attending the CFU meeting… for the purposes of inducing them to vote for him in the election for the Presidency of FIFA."90The majority reached this decision, because it could not exclude "other scenarios," including the possibility that Mr Warner had decided to pass on money from Mr Bin Hammam "to curry further favour" with the CFU members, without Mr Bin Hammam's knowledge, or even the "unlikely" possibility "that there was another source of money, other than Mr Bin Hammam."91In thus overturning the lifetime ban against Mr Bin Hammam, the majority further remarked as follows:
The Panel wishes to make clear that this conclusion should not be taken to diminish the significance of its finding that it is more likely than not that Mr Bin Hammam was the source of the monies that were brought into Trinidad and Tobago and eventually distributed at the meeting by Mr Warner…. The Panel… is not making any sort of affirmative finding of innocence in relation to Mr Bin Hammam. The Panel is doing nothing more than concluding that the evidence is insufficient in that it does not permit the majority of the Panel to reach the standard of comfortable satisfaction in relation to the matters on which [Mr Bin Hammam] was charged. It is a situation of 'case not proven'… . 92
The chosen standard of proof also was arguably decisive in Westinghouse v Philippines, ICC Case No. 6401. In that case, Westinghouse and its consultant submitted claims against the Republic of the Philippines and a Philippine entity, pursuant to a construction contract and a consulting contract that were governed by the laws of Pennsylvania and New Jersey, respectively. The defendants alleged that both contracts were invalid, because the claimants had used an agent, Mr Disini, to procure the contracts through bribe payments to Philippine President Ferdinand Marcos. The tribunal applied a high standard of proof to this bribery defense, reasoning that "in the Philippines and in the United States, fraud in civil cases 'must be proved to exist by clear and convincing evidence amounting to more than mere preponderance… .'"93
The tribunal rejected the allegations of corruption in connection with the consulting contract, notwithstanding "colorful language" in correspondence, including references to a "bag person."94With respect to the construction contract, the tribunal found that the defendants had "presented a fair amount of evidence" establishing, albeit "not conclusively," that Westinghouse had intended or at least "would not have been surprised or bothered" that certain of its payments to Mr Disini's company, Herdis, would result in payment to President Marcos.95The tribunal also found that it was "clear that Marcos used his power to push the Westinghouse proposal," and that "some Westinghouse employees thought that Marcos owned some of Herdis and that Marcos had documents in his possession that outlined the commissions Herdis was supposed to receive for the contracts."96The tribunal further observed, however, that although the defendants "had unusual access to information" regarding Mr Disini's bank accounts, they were not able to show any transfers from those accounts to any of President Marcos's bank accounts.97The tribunal concluded that there was "no direct evidence" and insufficient circumstantial evidence to establish that President Marcos ever received any commission from Westinghouse through Herdis, that he ever agreed to accept such commissions, or that he ever supported Westinghouse because he expected to benefit from commission payments to Herdis.98
While the Westinghouse tribunal stated that its application of a higher standard of proof was "of no moment" and that its "findings would be the same" if it had applied "the general civil standard of 'more likely true than not true,'"99a trial judge refused to grant summary judgment when the arbitration defendants raised the same bribery allegations in the United States District Court for the District of New Jersey. The judge held that collateral estoppel did not apply because, among other things, the arbitral tribunal had "applied a significantly heavier [standard] of proof than would be applied at trial."100The judge further remarked: "Had the [t]ribunal actually applied a 'preponderance of the evidence standard,' it still might have arrived at the same conclusion," but "applying that standard it could not have found that there was no evidence of bribery."101The judge concluded that there was "ample evidence to permit a reasonable jury to find that the Disini commissions were intended to be paid in whole or in part to President Marcos and were in fact paid in whole or in part to him or upon his direction."102
Other courts also have held that allegations of corruption or comparable illegality should not be subjected to a higher standard of proof. The U.K. House of Lords (now the U.K. Supreme Court) has held that "[t]he civil standard of proof always means more likely than not," and "[t]he only higher degree of probability required by the law is the criminal standard." 103 According to the House of Lords, "cogent evidence is generally required to satisfy a civil tribunal that a person has been fraudulent or behaved in some other reprehensible manner," "[b]ut the question is always whether the tribunal thinks it more probable than not."104The Supreme Court of Canada likewise has held that "there is only one civil standard of proof at common law and that is proof on a balance of probabilities."105The Supreme Court commented that "context is all important and a judge should not be unmindful, where appropriate, of inherent probabilities or improbabilities or the seriousness of the allegations or consequences," but it emphasized that "these considerations do not change the standard of proof."106
Many arbitral tribunals also have applied the ordinary standard of preponderance of evidence to allegations of corruption. In fact, in a survey of 25 arbitral awards that the ICC published in September 2003, Antonio Crivellaro found that 14 tribunals heightened the standard of proof for allegations of corruption, whereas 11 of the tribunals did not.107In ICC Case No. 10518, one of the recent cases that the ICC published last year, the tribunal held that the allegations of corruption had to be proven by a preponderance of the evidence.108The tribunal in ICC Case No. 12990 held, moreover, that "the jurisprudence and doctrine require less stringent evidence on corruption," taking into account that "corruption is rarely established by clear evidence."109
Tribunals in several recent ICSID cases also have declined to heighten the standard of proof for allegations that are comparable to corruption, including fraud, conspiracy, and other illegality. For example, in Fraport v Philippines I, the tribunal rejected Fraport's contention that "the 'preponderance of evidence' test… must yield in the instant case to a 'beyond a reasonable doubt' test because the subject… is a Philippine criminal statute… ."110The Fraport I tribunal thus applied the standard of preponderance of the evidence to the allegation of illegality, and observed as follows:
[W]hatever standard of proof is required under Philippine law to prove a criminal act, the jurisdictional question before this Tribunal, which is seized of an international investment dispute, is not a determination of a crime but whether an economic transaction by a German company was made 'in accordance' with Philippine law and thus qualifies as an 'investment' under the German-Philippine BIT.111
Similarly, in Tokios Tokeles v Ukraine, an ICSID arbitration that arose under the Ukraine-Lithuania BIT, the tribunal refused to apply a higher standard of proof to the claimant's allegations of a "nayizd," i.e., a criminal conspiracy to achieve an illegitimate political goal. The Tokios Tokeles tribunal observed that there were "serious logical problems" with requiring "proof of more than the balance of probabilities where an allegation of gross misconduct is made against a highly placed person."112The tribunal further remarked that "[i]t surely cannot be the case that evidentiary requirements can be heightened purely on the grounds of deference or comity or otherwise," and "if it is said that this is an example of the common-sense principle that an inherently unlikely allegation requires stronger than usual supporting proof before it is accepted, contemporary experience shows how unrealistic it can be to assume that important persons will not behave badly."113The tribunal thus held that "in order to prove its case on the existence and causal relevance of a nayizd the [c]laimant must show that its assertion is more likely than not to be true."114
In Libananco v Turkey, an ICSID case that arose under the Energy Charter Treaty, the tribunal disagreed with the claimant that a higher standard of proof should apply to Turkey's allegations of fraud. Notably, the Libananco tribunal "accept[ed] that fraud is a serious allegation," and it "agree[d] with the general proposition that 'the graver the charge, the more confidence there must be in the evidence relied on.'"115The tribunal concluded, however, that "this does not necessarily entail a higher standard of proof."116Rather, according to the Libananco tribunal, "[i]t may simply require more persuasive evidence, in the case of a fact that is inherently improbable, in order for the Tribunal to be satisfied that the burden of proof has been discharged."117
In Rompetrol, moreover, the tribunal rejected the respondent's submission that "'clear and convincing evidence' is required to sustain allegations of unlawful or malicious conduct, or of bad faith, against a State."118The tribunal remarked that "in international arbitration - including investment arbitration - the rules of evidence are neither rigid nor technical," but rather grant tribunals "a large measure of discretion over how the relevant facts are to be found and to be proved."119The tribunal held that "[a]ll of the above tells heavily against any argument that the present Tribunal should regard itself as bound in advance to expect or to require specific levels of proof or of rebuttal in respect of particular factual allegations… ."120The Rompetrol tribunal concluded that "there may well be situations in which, given the nature of an allegation of wrongful (in the wildest sense) conduct, and in the light of the position of the person concerned, an adjudicator would be reluctant to find the allegation proved in the absence of a sufficient weight of positive evidence - as opposed to pure probabilities" - although "the particular circumstances would be determinative, and in the Tribunal's view defy codification."121
By analogy, the standard of preponderance of the evidence also should apply to allegations of corruption. There are three main justifications proffered in support of applying a higher standard: (1) the standard should discourage parties from raising baseless corruption allegations; (2) a finding of corruption may result in serious consequences, including stigma or a criminal investigation; and (3) allegations of corruption are inherently unlikely, as a result of presumptions that contracts are valid and that high-ranking officials do not generally violate mandatory national laws. None of these justifications, in our view, warrants applying a higher standard of proof to allegations of corruption.
First, while baseless corruption allegations of course should be discouraged, all baseless allegations should be discouraged. Baseless allegations will be rejected, regardless of which standard of proof applies; if a party proves corruption by a preponderance of the evidence, then ipso facto, that allegation cannot be said to have been baseless. One arbitrator has posited that allegations of corruption may influence the tribunal's resolution of other issues, even if they are not proven.122This proposition, however, seems doubtful. The tribunal has an obligation to establish the facts of the case and to resolve the parties' claims and defenses on that basis - not on the basis of unproven suspicions. Unsubstantiated allegations of corruption are unlikely to have any more bearing on the tribunal's decision-making than any other attempt by one of the parties to cast unfounded aspersions on its opponent. In addition, even assuming arguendo that tribunals are influenced by baseless corruption allegations, applying a higher standard of proof would not eliminate that influence and thus would not discourage such allegations.
Second, the consequences of finding corruption are not necessarily more serious than the consequences of other findings. In a commercial arbitration, a finding of corruption is unlikely to cause reputational harm, because the findings generally are not published or, if they are published, often are redacted to remove the names of individuals, entities, and the country where the activity took place. While a finding of corruption in an investment treaty arbitration is more likely to be made public and thus more likely to cause reputational harm, other findings may have similar consequences. For example, a finding that a state unlawfully expropriated an investor's investment or discriminated against an investor, thus violating its international obligations under a treaty or an investment agreement, may damage the state's diplomatic relations and its ability to attract foreign investment. It also may cause the officials who are found responsible to lose their jobs or the public trust. Such a finding should not be made any less lightly than a finding of corruption.
The possibility that a finding of corruption could result in a criminal investigation also is not a sufficient justification for applying a higher standard of proof. This possibility is uncertain, because the finding may not be made public, and, even if it is, the criminal investigative authorities may not review the award or may not decide to investigate on that basis. Even if a criminal investigation is initiated, moreover, the prosecution will have to prove the allegation beyond a reasonable doubt or to whatever standard of proof applies under criminal law in the applicable jurisdiction, and thus will not be able to rely on the tribunal's finding as a basis to convict the accused. The liberty interests of the accused thus are not directly implicated by the tribunal's findings in the arbitration.
Third, and regrettably, allegations of corruption involving high-ranking Government officials are not inherently unlikely, as the Tokios Tokeles tribunal explained. To the contrary, corruption occurs in every country, and is a widespread and systemic problem in many parts of the world. Furthermore, even assuming arguendo that corruption is inherently less likely than other allegations as a result of a presumption of legality, the tribunal may take any such presumption into account in assessing whether the evidence establishes that the proposition asserted is more likely than not to be true. This does not, however, mean that a higher standard of proof should apply, as the Libananco tribunal, the Supreme Court of Canada, and the U.K. House of Lords explained.
5. Circumstantial Evidence or 'Red Flags' of Corruption
The fourth issue is what type of evidence suffices to prove allegations of corruption. In rare cases, a party may be able to prove corruption through the oral or written testimony of the other party. For example, in World Duty Free v Kenya, an ICSID arbitration that arose under a contract between the parties, the claimant's chairman, Mr Ali, testified that he paid US$2 million in cash to an individual who had close connections to the Government, as a "personal donation" to the President of Kenya, and personally witnessed this individual deliver a briefcase containing US$500,000 in cash to the President.123Mr Ali further testified that the payment "appeared to [him] to be a bribe," but that he "treat[ed] it as part of the consideration for the agreement" approving the investment.124In view of these admissions, the World Duty Free tribunal found that it lacked jurisdiction, and held that "this is not a case which turns on legal presumptions, statutory deeming provisions or different standards of proof under English or Kenyan law."125Rather, as the tribunal explained, "[t]he relevant facts are indisputable on the evidence adduced before this Tribunal," and "the decisive evidential materials came from the [c]laimant itself, including Mr Ali's own written and oral testimony."126
In most cases, however, tribunals will not be able to rely on an admission or direct proof of the alleged corruption. Commentators have noted, for example, that "[c]orruption, by its very nature, occurs in obscure and hidden circumstances and leaves no or scant traces behind," as "[b]ribe-givers and bribe-takers all use schemes to disguise their transactions."127Tribunals also lack the powers of domestic courts and criminal investigative authorities to compel a party to produce witness testimony or evidence.128The EDF tribunal thus remarked that corruption is "notoriously difficult to prove since, typically, there is little or no physical evidence."129As such, tribunals generally must determine whether the party alleging corruption has proffered sufficient circumstantial evidence, taking into account any appropriate inferences, to prove its allegation according to the applicable standard of proof.
It sometimes is suggested that reliance on such circumstantial evidence to find an allegation as proven reflects that the tribunal applied a low standard of proof.130This conflates two separate issues - the standard of proof and the probative value of circumstantial evidence. A tribunal's reliance on circumstantial evidence does not connote a low standard of proof, nor, conversely, is direct evidence required to satisfy a high standard of proof. Rather, as Bin Cheng explained in his treatise on general principles of law, any allegation may be proven through circumstantial evidence, including in criminal proceedings that require proof beyond a reasonable doubt: "In cases where direct evidence of a fact is not available, it is a general principle of law that proof may be administered by means of circumstantial evidence."131
Tribunals repeatedly have affirmed that corruption may be proven through circumstantial evidence, even where a higher standard of proof applies. For example, in ICC Case No. 13515, the tribunal held that corruption must be established to "a strong degree of certainty," but that "such proof may be adduced by any means."132The tribunal in ICC Case No. 12990 observed, moreover, that "the unlawful character is often difficult to prove given that the parties may hide the real purpose of the contract behind harmless contractual provisions," and arbitrators thus "have no other choice but to rely on extra-contractual indications."133The Oostergetel and Laurentius tribunal likewise held that "corruption can also be proven by circumstantial evidence," provided that it "leads clearly and convincingly to the inference that [corruption] has occurred."134Similarly, the Fraport II tribunal applied a high standard of clear and convincing evidence to the allegations of corruption, but held that "considering the difficulty to prove corruption by direct evidence, the same may be circumstantial."135
In international arbitrations involving allegations of corruption, such circumstantial evidence frequently is referred to as indicia, faisceau d'indices, or "red flags" of corruption. As the Metal-Tech tribunal explained, "[f]or the application of the prohibition of corruption, the international community has established lists of indicators, sometimes called 'red flags'."136The ICC published one such list of red flags, the ICC Guidelines on Agents, Intermediaries and Other Third Parties, in 2010. In its comments on its list of red flags, the ICC advised as follows:
In conducting anti-bribery due diligence, it is important that enterprises be sensitive to circumstances that suggest bribery risks. Circumstances that may indicate a [t]hird party's propensity to make illegal payments to public or private sector officials or employees are commonly referred to as "red flags."… [D]epending on the nature of their business and their enterprise policies, enterprises can define one or several of these "red flags" as general showstoppers.
Although such 'red flags' may not themselves constitute violations of the anti-bribery laws, they are warning signs that need to be taken seriously and investigated. The presence of one or more 'red flags' does not necessarily mean that the transaction cannot go forward, but it does suggest the need for a more in-depth inquiry and the implementation of appropriate compliance safeguards….137
The ICC identified the following as red flags that an agent, intermediary, or other third party is engaged in corruption: (1) the third party has a "flawed background or reputation"; (2) the third party operates "in a country known for corrupt payments"; (3) the third party is "suggested by a public official, particularly one with discretionary authority over the business at issue"; (4) the third party objects to representing that it will comply with anticorruption laws; (5) the third party "has a close personal or family relationship, or business relationship, with a public official or relative of an official"; (6) the third party "does not reside or have a significant business presence in the country where the customer or project is located"; (7) the third party "is a shell company or has some other non-transparent corporate structure"; (8) the third party's "only qualification" is his "influence over public officials" or his alleged ability to "secure a contract because he knows the right people"; (9) the third party requires that his identity or the identity of the enterprise's owners, principals, or employees not be disclosed; (10) the third party's "commission or fee seems disproportionate in relation to the services to be rendered"; (11) the third party requires full or partial payment "before or immediately upon the award of a contract"; (12) the third party requests additional fees "to 'take care' of some people or cut some red tape"; and (13) the third party "requests unusual contract terms or payment arrangements," such as "payments in cash, advance payments, payment in another country's currency, payment to an individual or entity that is not the contracting individual/entity, payment to a numbered bank account or a bank account not held by the contracting individual/entity, or payment into a country that is not the contracting individual/entity's country of registration or the country where the services are performed."138There are several other lists of red flags, which, according to the Metal-Tech tribunal, are "worded differently," but "have essentially the same content."139
As the ICC noted, these red flags are indicative of corruption, but are not conclusive evidence that a corrupt payment was made or offered. As also explained above, the party accused of corruption does not have the burden of proving that its activity or its agent's activity was lawful. Rather, the party alleging corruption bears the burden of persuading the tribunal of the truth of its allegation. As also explained above, however, the tribunal may take into account a party's failure to produce relevant evidence that is within its possession, custody, or control. Thus, if a party retains an agent to assist in procuring a Government contract and the tribunal finds that the transaction involved one or more red flags of corruption, the tribunal may draw adverse inferences from that party's failure to provide evidence that the agent performed legitimate services in return for any commissions or other payments or promises of payment. Specifically, the tribunal may infer from the absence of such evidence that the agent did not provide any legitimate services, but rather transmitted the payments as bribes to obtain the award of the contract. The tribunal accordingly may conclude on that basis that the party alleging corruption has met its burden of proving corruption. Numerous arbitral tribunals have made affirmative findings of corruption on the basis of such circumstantial evidence and inferences, regardless of the standard of proof that applied.
In ICC Case No. 3916, for example, the arbitrator found that the claimant obtained approvals from the Government of Iran on behalf of the respondent, a Greek entity, with surprising rapidity. The claimant refused to explain the nature of its intervention with the Government or the structure of its group. The arbitrator thus concluded that the claimant's activity could be deemed nothing more than the exercise of unlawful influence to obtain Government approvals, thus rendering the contract between the parties null.140
In ICC Case No. 6497, the tribunal rejected the allegations of corruption concerning most of the contested agreements. The tribunal found, by contrast, that one particular agreement - Product Agreement Q - was "very different from all other Product Agreements which were shown to the arbitral tribunal in these proceedings," because it provided for a commission of 33.33%, which was "extremely unusual," and it did "not describe the services to be rendered by claimant," instead noting only that such services had been "received in full."141The tribunal also found that the claimant's principal, Mr Z, gave "confusing and contradictory" testimony regarding the nature of the services that he allegedly rendered under the agreement, and that the claimant provided false explanations for failing to produce relevant documentary and witness testimony.142Taking into account all of these circumstances, the tribunal concluded that there was "a high degree of probability that the real object of Product Agreement X was to channel bribes to officials in country X who had the power to decide that both amounts mentioned in the Agreement were to be paid to respondent," and that "[s]uch probability [wa]s high enough" for the tribunal to hold that Product Agreement Q was null and void under the applicable Swiss law.143Thus, although the tribunal applied a high standard of proof, it found the allegations proven based on circumstantial evidence and the inferences that it made as a result of the claimant's failure to produce evidence.
In ICC Case No. 8891, the tribunal noted that the fact that the contract between the parties provided for the payment of a success fee to the agent for obtaining a Government contract was not by itself sufficient to establish corruption. The tribunal found, however, that the remuneration fee of 18.5% was very high, and that the contract provided for a short duration of activity. The tribunal also noted that the claimant provided inadequate explanations regarding the nature of its activities on behalf of the respondent. Thus, while the tribunal found that the allegation that bribes were paid was not established with certainty, it held that the witness testimony and evidence revealed that the true intention of the parties in concluding the contract was to bribe officials to obtain business.144
In ICC Case No. 12990, the tribunal found it suspicious that the claimant could not document its activity during the three-month period that it negotiated the sale of a large amount of petrol on behalf of the respondent, which raised doubts regarding the credibility of the claimant's witnesses. While the tribunal noted that this by itself did not establish that the parties agreed to pay bribes, it found that the method of remunerating the claimant for its services was a strong indicator of corruption, because the contract awarded the claimant a commission of 25% of the oil royalties, whereas it was uncommon for an agent to receive a commission of more than 4-5%. The tribunal thus concluded that the claimant's intervention included the payment of bribes that led to the signing of the petrol purchase contract. The tribunal also found that the widely recognized problems with corruption in the state in question and the convictions of the claimant's directors in that state constituted additional evidence that corroborated its findings of corruption.145
In ICC Case No. 13515, the parties' contract provided for the claimant to be paid a commission of 40%, which the tribunal found was excessively high for an intermediary. While the tribunal held that a high commission was not by itself proof of corruption, it noted that the payments to the claimant were transmitted abroad, rather than in the country in which the claimant allegedly performed its activities, thus raising further suspicions of corruption. The claimant also provided only one document regarding the contract negotiations, which the tribunal deemed to be insufficient evidence of its activities. In addition, the tribunal noted that the claimant contended that it rendered services under the contract for only 26 days, even though the duration of the contract was for five years. The tribunal accordingly concluded that the contract's object was unlawful, in that the parties agreed to make illegal payments that were essential to the award of the contract.146
The Metal-Tech tribunal followed the approach of these ICC tribunals.147In that case, the claimant's chairman testified at the hearing that Metal-Tech paid US$4 million to three consultants, pursuant to agreements in 1998 that predated the Government's approval of Metal-Tech's investment. At the time of the agreements in 1998, one consultant, Mr Chijenok, was a Government official, and another consultant, Mr Sultanov, was the brother of Uzbekistan's Prime Minister (and later Deputy Prime Minister), who was the Government official responsible for the establishment and implementation of the claimant's investment. As the tribunal emphasized, the claimant's chairman admitted that he knew that Mr Chijenok "was working in a high position in an official position," and "explained frankly that Mr Sultanov's brother 'was the Prime Minister at the time, so [he] really was one of the persons that could facilitate closing red tapes when the [investment] was initiated.'"148In light of this testimony, the tribunal issued multiple ex officio procedural orders directing the claimant to produce all of its consulting agreements; a schedule listing the date of each payment, the amount paid, and who paid whom; and "contemporaneous documents… substantiating the [c]laimant's submission that services were rendered by the [c]onsultants."149The tribunal explained its decision to request this evidence as follows:
Faced with the admission at the hearing that substantial payments had been made, the Tribunal sought to understand what services these payments were intended to compensate. By doing so, it meant in particular to give the [c]laimant an opportunity to substantiate the reality and legitimacy of the services for which payments were made. The [c]laimant, however, was unable to provide that substantiation. 150
The Metal-Tech tribunal expressed "no doubt that the [c]laimant did all it could to produce relevant and contemporaneous documents to justify the services rendered by the [c]laimants," but found that "[t]he [c]laimant's explanations for its non-compliance with the Tribunal's directions to provide additional evidence" were "unconvincing."151The tribunal concluded that "the inference that inexorably emerges from this dearth of evidence is that the [c]laimant can provide no evidence of services, because no services, or at least no legitimate services at the time of the establishment of the claimant's investment, were in fact performed."152The tribunal also found other indicators of corruption, including that the amount of the payments was "striking," "especially when seen in connection with the amount of the [c]laimant's capital investment and in the local context"; "none of the [c]onsultants possessed any professional qualification to perform the services for which they were allegedly retained"; and the claimant paid more than 92% of the money to a Swiss company, its affiliate, and a company in the British Virgin Islands, rather than directly to the consultants, which was a "troubling circumstance" that reflected a "lack of transparency."153The tribunal concluded that the claimant made corrupt payments to facilitate the establishment of its investment, and held that "the rights of the investor against the host state, including the right of access to arbitration, could not be protected because the investment was tainted by illegal activities, specifically corruption." 154
6. Conclusion
Corruption remains one of the most difficult allegations to prove. In all cases, the party alleging corruption has the burden of proof, and thus must persuade the tribunal of the truth of its allegation to the requisite standard of proof. In general terms, the party alleging corruption thus will need to establish that its allegation is more probable than not or that its allegation is highly probable, depending on whether the tribunal applies the ordinary standard of preponderance of the evidence or a higher standard of clear and convincing evidence or personal conviction. The tribunal's choice of the applicable standard may be determined by its choice of the applicable law, which, in certain instances, may have decisive consequences regarding the outcome of the case.
Regardless of the applicable standard of proof, however, arbitral practice reflects that there is no requirement to produce direct evidence of corruption. If the evidence establishes that there are red flags of corruption in relation to payments that were made to a consultant or another third party, the tribunal may order the party that made or received those payments to establish that legitimate services were rendered in exchange for the payments. While this party does not have the burden of proving a negative fact, the tribunal may draw an adverse inference from its failure to produce evidence substantiating that legitimate services were provided in exchange for the payments. Specifically, the tribunal may infer that no legitimate services were provided, and that the actual purpose of the payments to the third party was to transmit corrupt payments.
1 ICC Case No. 1110, Award of 1963, Arbitration International 10:3 (1994) 282, 294.
2 ICC Case No. 13384, Award of December 2005, ICC Bulletin (Supplement) 24 (2013) 62, 63; see also, e.g., World Duty Free Co. Ltd. v Republic of Kenya, ICSID Case No. ARB/00/7, Award of 4 October 2006, ¶¶ 138-57; ICC Case No. 13914, Award of March 2008, ICC Bulletin (Supplement) 24 (2013) 77, 80-81 ¶¶ 230-32.
3 "Corruption Tops the List as the World's Most Important Problem According to WIN/Gallup International's Annual Poll," Gallup International, 28 February 2014, available at http://www.gallup-international.bg/en/Publications/71-Publications/ 181-Corruption-Tops-the-List-as-the-World%E2%80%99s-Most-Important- Problem-According-to-WIN-Gallup-International%E2%80%99s-Annual-Poll (last visited 12 October 2014).
4 Jones, Sam, "'Web of corrupt activity' costs poorest countries a trillion dollars a year," The Guardian, 2 September 2014, available at http://www.theguardian. com/global-development/2014/sep/03/one-g20-cracking-down-corruption (last visited 12 October 2014).
5 "Corruption is 'Public Enemy Number One' in Developing Countries, says World Bank Group President Kim," World Bank Press Release, 19 December 2013, available at http://www.worldbank.org/en/news/press-release/2013/12/19/ corruption-developing-countries-world-bank-group-president-kim (last visited 12 October 2014).
6 Carlevaris, Andrea, "Foreword," ICC Bulletin (Supplement) 24 (2013) 1.
7 Id.
8 Malek, Hodge, Auburn, Jonathan & Bagshaw, Roderick, Phipson on Evidence (17th edn. 2009) § 6-01.
9 Rompetrol Group N.V. v Romania, ICSID Case No. ARB/06/3, Award of 6 May 2013, ¶ 178.
10 Born, Gary, International Commercial Arbitration (2d edn. 2014) § 15.09[B].
11 Petrobart Ltd. v The Kyrgyz Republic, UNCITRAL, Award of 13 February 2003, 39, 45.
12 Jan Oostergetel and Theodora Laurentius v Slovak Republic, UNCITRAL, Award (redacted) of 23 April 2012, ¶ 147; Metal-Tech Ltd. v The Republic of Uzbekistan, ICSID Case No. ARB/10/3, Award of 4 October 2013, ¶ 238. White & Case LLP represented the Republic of Uzbekistan in Metal-Tech.
13 Born § 15.09[B].
14 Id.
15 Id.
16 See, e.g., id. § 15.09[A].
17 Franck, Susan, "Precision and Legitimacy in International Arbitration: Empirical Insights from ICCA," Kluwer Arbitration Blog, 10 September 2014, available at kluwerarbitrationblog.com/blog/2014/09/10/precision-and-legitimacy-in-international- arbitration-empirical-insights-from-icca/ (last visited 12 October 2014).
18 United Nations Commission on International Trade Law, Arbitration Rules (2010) Article 27(1); Iran-U.S. Claims Tribunal, Rules of Procedure (1983) Article 24(1).
19 Albanesi, Christian & Jolivet, Emmanuel, "Dealing with Corruption in Arbitration: A Review of ICC Experience," ICC Bulletin (Supplement) 24 (2013) 27, 31 (citing Redfern, Alan, "The Practical Distinction Between the Burden of Proof and the Taking of Evidence - An English Perspective," Arbitration International 10:3 (1994) 317, 321).
20 ICC Case No. 7047, Award of 1994, Yearbook of Commercial Arbitration 21 (1996) 79, 93 ¶ 53.
21 Id. ¶ 54.
22 ICC Case No. 13384 at 62, 63.
23 Metal-Tech ¶ 237.
24 Redfern at 321.
25 Sayed, Abdulhay, Corruption in International Trade and Commercial Arbitration (2004) 92 (citation omitted).
26 See, e.g., Mills, Karen, "Corruption and Other Illegality in the Formation and Performance of Contracts and in the Conduct of Arbitration Relating Thereto," ICCA Congress Series 11 (van den Berg, Albert ed., 2003) 288, 295; Lamm, Carolyn, Pham, Hansel & Moloo, Rahim, "Fraud and Corruption in International Arbitration," Liber Amicorum Bernardo Cremades (Fernandez-Ballesteros, Miguel Angel & Arias, David eds., 2010) 699, 701; Constantine Partasides, "Proving Corruption in International Arbitration: A Balanced Standard for the Real World," ICSID ReviewForeign Investment Law Journal 25:1 (2010) 47 ¶¶ 60, 63, 66.
27 ICC Case No. 12990, Award of December 2005, ICC Bulletin (Supplement) 24 (2013) 52, 53 ¶ 251 (translation).
28 Id. at 54, 55 (translation).
29 ICC Case No. 6497, Award of 1994, Yearbook of Commercial Arbitration 24a (1999) 71, 73 ¶ 3.
30 Id. ¶ 4.
31 Mourre, Alexis, "Arbitration and Criminal Law: Reflections on the Duties of the Arbitrator," Arbitration International 22:1 (2006) 95, 103 (positing that the tribunal in ICC Case No. 6497 did not "really shift the burden of proof," but rather drew "adverse inferences from the refusal of a party to cooperate fully with the procedure").
32 Waguih Elie George Siag and Clorinda Vecchi v Arab Republic of Egypt, ICSID Case No. ARB/05/15, Award of 1 June 2009, ¶¶ 316-17.
33 Oostergetel and Laurentius ¶ 148.
34 Malek § 6-02; see also Tapper, Colin, Cross and Tapper on Evidence (12th edn. 2010) 121 (noting that "Wigmore spoke of 'the risk of non-persuasion'").
35 Malek § 6-02.
36 Id. § 6-03.
37 Tapper at 121.
38 Rompetrol ¶ 178.
39 Id.
40 Id.
41 Apotex Holdings Inc. and Apotex Inc. v United States of America, NAFTA/ICSID Case No. ARB(AF)/12/1, Award of 25 August 2014, Part VIII, ¶ 8.8.
42 Id. (citation and internal quotation marks omitted).
43 Fraport AG Frankfurt Airport Services Worldwide v Republic of the Philippines, ICSID Case No. ARB/11/12, Award of 10 December 2014, ¶ 299 ("Regarding burden of proof, in accordance with the well-established rule of onus probandi incumbit actori, the burden of proof rests upon the party that is asserting affirmatively a claim or defense. Thus, with respect to objections to jurisdiction, Respondent bears the burden of proving the validity of such objections. The Tribunal accepts that if Respondent adduces evidence sufficient to present a prima facie case, Claimant must produce rebuttal evidence, although Respondent retains the ultimate burden to prove its jurisdictional objection."). White & Case LLP represented the Republic of the Philippines in this case.
44 International Chamber of Commerce, Rules of Arbitration (2012) Articles 25(1), 25(5).
45 International Bar Association, Rules on the Taking of Evidence in International Arbitration (2010) Rules 9-5, 9-6.
46 Rompetrol ¶ 184.
47 Id. ¶ 179.
48 Sandifer, Durward, Evidence Before International Tribunals (1975) 131.
49 Born § 15.09[B] (quoting Pietrowski, Robert, "Evidence in International Arbitration," Arbitration International 22:3 (2006) 373, 379).
50 Wright, Charles & Graham, Kenneth, "Weight of the Burden of Persuasion," Federal Practice and Procedure: Evidence 21B (2d edn. 2005) § 5122, 405-06
51 "Degree of proof: preponderance of evidence; clear and convincing evidence," American Jurisprudence: State and Federal 29 (Pesando, Marie et al. eds., 2d edn. 2008) § 173.
52 Wright § 5122, 405-06.
53 American Jurisprudence § 173.
54 Id.
55 See, e.g., Moses, Margaret, The Principles and Practice of International Commercial Arbitration (2d edn. 2012) 174; Buisman, Caroline, Bouazdi, Myriam & Costi, Matteo, "Principles of Civil Law," Principles of Evidence in International Criminal Justice (Khan, Karim, Buisman, Caroline & Gosnell, Christopher eds., 2010) 37; Schweizer, Mark, "The civil standard of proof - what is it, actually?" Max Planck Institute for Research on Collective Goods 12 (2013) 4, available at http://www. coll.mpg.de/publications/3229 (last visited 12 October 2014).
56 See O'Malley, Nathan, Rules of Evidence in International Arbitration: An Annotated Guide (2013) 209-10 & n 56.
57 Bin Hammam v Federation Internationale de Football Association, CAS 2011/A/2625, Award of 19 July 2012, ¶ 153 (equating the evidentiary standard of "comfortable satisfaction," which is set forth in the FIFA Disciplinary Code, to the "intime conviction" standard).
58 See, e.g., Manaster, Kenneth, The American Legal System and Civic Engagement: Why We All Should Think Like Lawyers (2013) 52 (recalling the separate trials in which O.J. Simpson was found "not guilty in the criminal case but liable in the civil case").
59 Clermont, Kevin, "Standards of Proof Revisited," Vermont Law Review 33 (2009) 469, 471.
60 Born § 15.09[B].
61 E.g., Tokios Tokeles v Ukraine, ICSID Case No. ARB/02/18, Award of 26 July 2007 ¶ 124; Rompetrol ¶ 183.
62 Ioannis Kardassopoulos and Ron Fuchs v The Republic of Georgia, ICSID Cases Nos. ARB/05/18 and ARB/07/15, Award of 3 March 2010, ¶ 229.
63 Born § 15.09[B].
64 Id.
65 Sayed at 103 (citation omitted).
66 American Jurisprudence § 173.
67 ICC Case No. 4145, Second Interim Award of 1984, Yearbook of Commercial Arbitration 12 (1987) 97, 102 ¶ 28.
68 ICC Case No. 5622, Award of 1988, Yearbook of Commercial Arbitration 19 (1994) 105, 112 ¶ 23.
69 Id.
70 ICC Case No. 6497 ¶ 3.
71 ICC Case No. 8891, Award of 1998, Journal du Droit International 4 (2000) 1076, 1079.
72 ICC Case No. 12472, Award of August 2004, ICC Bulletin (Supplement) 24 (2013) 46, 51 (translation).
73 ICC Case No. 13384 at 62, 64.
74 ICC Case No. 13515, Award of April 2006, ICC Bulletin (Supplement) 24 (2013) 66, 71 (translation).
75 ICC Case No. 14470, Award of March 2008, ICC Bulletin (Supplement) 24 (2013) 90, 91 (translation).
76 ICC Case No. 14878, Award of October 2008, ICC Bulletin (Supplement) 24 (2013) 92, 93 (translation).
77 Id.
78 Oil Field of Texas, Inc. v Islamic Republic of Iran, Iran-U.S. Claims Tribunal, Award of 8 October 1986, Iran-U.S. Claims Tribunal Reports, 12 (1988) 308, 315.
79 Dadras Int'l v Islamic Republic of Iran, Iran-U.S. Claims Tribunal, Award of 7 November 1995, Iran-U.S. Claims Tribunal Reports, 31 (2001) 127, 162.
80 Himpurna California Energy Ltd. v PT (Persero) Perusahaan Listruik Negara, UNCITRAL, Award of 4 May 1999, Mealey's International Arbitration Report, 14:12 (1999) 54 ¶ 169 (quoting ICC Case No. 7047 at 79, 85).
81 Id. ¶ 171.
82 Id. ¶¶ 219-20.
83 Siag ¶¶ 325-26.
84 Saba Fakes v Republic of Turkey, ICSID Case No. ARB/07/20, Award of 14 July 2010, ¶ 131.
85 EDF (Services) Ltd. v Romania, ICSID Case No. ARB/05/13, Award of 8 October 2009, ¶ 221. White & Case LLP represented Romania in this case.
86 Id.
87 Bin Hammam ¶¶ 7-9, 166-67, 192-93.
88 Id. ¶¶ 153-55.
89 Id. ¶¶ 195-96.
90 Id. ¶ 205.
91 Id. ¶¶ 197-98.
92 Id. ¶ 204.
93 ICC Case No. 6401, Award of 19 December 1991, Mealey's International Arbitration Report, 7:1 (1992) 34-35 (citation omitted) (further observing that the courts of New Jersey and Pennsylvania both hold that bribery is a form of fraud that must be established by "a clear preponderance of the evidence" or by "clear, precise and convincing evidence").
94 Id. at 43-44, 46, 55-57.
95 Id. at 76.
96 Id. at 77-78.
97 Id. at 78-79.
98 Id. at 77-79.
99 Id. at 35.
100 Republic of Philippines v Westinghouse Elec. Corp., 782 F. Supp. 972, 982 (D.N.J. 1992).
101 Id. at 983.
102 Id. The jury subsequently rejected the allegations of bribery. The Philippine parties then reportedly agreed to abandon their remaining claims and to terminate the litigation. See "Westinghouse Pact with Philippines," New York Times, 16 October 1995, available at http://www.nytimes.com/1995/10/16/ business/westinghouse-pact-with-philippines.html (last visited 12 October 2014).
103 In re CD [2008] UKHL 33, ¶¶ 26, 41-43 (quoting Secretary of State for the Home Department v Rehman [2001] UKHL 47, ¶ 55 (internal quotation marks omitted)).
104 Id.
105 FH v McDougall, 2008 SCC 53, ¶ 40.
106 Id.
107 Crivellaro, Antonio, "Arbitration Case-Law on Bribery," Arbitration, Money Laundering, Corruption and Fraud: Dossiers of the ICC Institute of World Business Law (Karsten, Kristine & Berkeley, Andrew eds., 2003) 109, 114-15.
108 ICC Case No. 10518, Partial Award of May 2001 and Award of November 2002, ICC Bulletin (Supplement) 24 (2013) 39-40, 44-45.
109 ICC Case No. 12990 at 52, 60 (translation).
110 Fraport AG Frankfurt Airport Services Worldwide v Republic of the Philippines, ICSID Case No. ARB/03/25, Award of 16 August 2007, ¶ 399. White & Case LLP represented the Republic of the Philippines in this case. The award was annulled on unrelated grounds. A parallel ICC arbitration, in which White & Case LLP represented the Republic of the Philippines, was dismissed on similar grounds. That award is not publicly available.
111 Id. The ICSID tribunal in the resubmitted arbitration found, by contrast, that "in view of the consequences of corruption on the investor's ability to claim the BIT protection, evidence must be clear and convincing so as to reasonably make-believe that the facts, as alleged, have occurred." Fraport II ¶ 479.
112 Tokios Tokeles ¶ 124.
113 Id.
114 Id.
115 Libananco Holdings Co. Ltd. v Republic of Turkey, ICSID Case No. ARB/06/8, Award of 2 September 2011, ¶ 125 (citation and emphasis omitted).
116 Id.
117 Id.
118 Rompetrol ¶ 180.
119 Id. ¶ 181.
120 Id. ¶ 182.
121 Id.
122 See, e.g., International Thunderbird Gaming Corp. v United Mexican States, UNCITRAL/NAFTA, Award of 26 January 2006, Separate Opinion of Thomas Wälde ¶¶ 111, 118.
123 World Duty Free ¶ 130.
124 Id.
125 Id. ¶ 166.
126 Id.
127 Vincke, Francois, "Recent Anti-Corruption Initiatives and their Impact on Arbitration," ICC Bulletin (Supplement) 24 (2013) 5, 14; see also, e.g., Pieth, Mark, "Contractual Freedom v Public Policy Considerations in Arbitration," Private Law: National-Global-Comparative: Festschrift fur Ingeborg Schwenzer zum 60 Geburtstag (Buchler, Andrea & Muller-Chen, Markus eds., 2011) 1375, 1381-82.
128 Khvalei, Vladimir, "Using Red Flags to Prevent Arbitration from Becoming a Safe Harbour for Contracts that Disguise Corruption," ICC Bulletin (Supplement) 24 (2013) 15, 18.
129 EDF ¶ 221.
130 See, e.g., Albanesi at 27, 33.
131 Cheng, Bin, General Principles of Law as Applied by International Courts and Tribunals (1953 reprinted 1987) 322 (quoting Judge Azevedo's dissenting opinion before the International Court of Justice in the Corfu Channel case that "condemnation, even to the death penalty, may be well founded on indirect evidence").
132 ICC Case No. 13515 at 66, 71 (translation).
133 ICC Case No. 12990 at 52, 53 (translation).
134 Oostergetel and Laurentius ¶ 303 & n 149.
135 Fraport II ¶ 479.
136 Metal-Tech ¶ 293.
137 ICC Commission on Corporate Responsibility and Anti-corruption, ICC Guidelines on Agents, Intermediaries and Other Third Parties (2010) 5.
138 Id. at 5-6.
139 Metal-Tech ¶ 293.
140 ICC Case No. 3916, Award of 1982, Collection of ICC Arbitral Awards 1974-1985 (Jarvin, Sigvard & Derains, Yves eds., 1990) 507, 509.
141 ICC Case No. 6497 ¶¶ 17-18.
142 Id. ¶¶ 19-29.
143 Id. ¶ 30.
144 ICC Case No. 8891 at 1080-82.
145 ICC Case No. 12990 at 60-61.
146 ICC Case No. 13515 at 71-75 (translation).
147 See Lamm, Carolyn, Greenwald, Brody & Young, Kristen, "From World Duty Free to Metal-Tech: A Review of International Investment Treaty Arbitration Cases Involving Allegations of Corruption," ICSID ReviewForeign Investment Law Journal 29:2 (2014) 328, 339-41.
148 Metal-Tech ¶¶ 225-26.
149 Id. ¶¶ 248-52.
150 Id. ¶ 246.
151 Id. ¶¶ 256, 390.
152 Id. ¶ 265.
153 Id. ¶¶ 199, 208, 219.
154 Id. ¶ 422.