Respondent 2, a US company, entered into a consulting and other agreements with Claimant for the purpose of acquiring the right to conduct seismic surveys prior to oil extraction off the coast of an African state (X). Claimant was a businessman who had many years of experience working with or for the government of State X. The agreements provided for lump sum payments and ongoing payments of commission on sales of data procured pursuant to the surveys conducted by Respondents. Claimant initiated the arbitration to obtain damages for breach of contract and unlawful deductions from the commission due to him. Respondents argued that Claimant had engaged in unlawful activities, including bribing officials in the state-owned company (Company A) that was responsible for granting rights relating to offshore mining in State X, and that consequently he had no right to any payments, which, besides, would infringe the Foreign Corrupt Practices Act. The consulting agreement was governed by the laws of the State of Texas. The arbitral tribunal recalled the US position on corruption and found in the case several facts evidencing corruption: corrupt country, high rate of commission, inadequate documentation, lack of qualifications of consultant, interest and involvement of beneficiaries of bribes. In accordance with arbitral and Texas case law, the tribunal held that the agreements were consequently void and dismissed Claimant's claims.

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Le défendeur 2, une société établie aux États-Unis, avait conclu un contrat de conseil et d'autres accords avec le demandeur en vue d'acquérir le droit de mener des études sismiques préalablement à l'extraction de pétrole au large de la côte d'un État africain (X). Le demandeur était un homme d'affaires ayant travaillé pendant de nombreuses années avec ou pour le gouvernement de l'État X. Les contrats prévoyaient des paiements forfaitaires ainsi que le versement régulier de commissions sur la vente des données obtenues dans le cadre des études menées par les défendeurs. Le demandeur a engagé un arbitrage afin d'obtenir des dommages-intérêts pour violation de contrat et déductions illicites sur les commissions qui lui étaient dues. Les défendeurs accusaient le demandeur d'activités illicites, dont le versement de pots-de-vin à des agents de l'entreprise publique (la société A) responsable de l'octroi des droits relatifs à l'extraction en mer dans l'État X, et plaidaient qu'en conséquence il n'avait droit à aucun paiement, et cela d'autant plus que tout paiement aurait été contraire à la loi anti-corruption américaine, Foreign Corrupt Practices Act. Le contrat de conseil était régi par les lois de l'État du Texas. Le tribunal arbitral a rappelé la position des États-Unis sur la corruption et établi en l'espèce plusieurs faits prouvant la corruption : pays corrompu, taux élevé des commissions, documentation insuffisante, manque de qualification du consultant, participation et implication de bénéficiaires de pots-de-vin. Conformément aux jurisprudences arbitrale et texane, le tribunal arbitral a ainsi jugé que les contrats étaient nuls et a rejeté les prétentions du demandeur.

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El demandado 2, una empresa estadounidense, celebró un contrato de asesoría y otros acuerdos con el demandante con el fin de adquirir el derecho a realizar estudios sísmicos previos a la explotación petrolífera en la costa de un Estado africano (X). El demandante era un empresario con muchos años de experiencia trabajando con o para el gobierno del Estado X. Los acuerdos establecían pagos a tanto alzado y pagos regulares de las comisiones sobre las ventas de los datos obtenidos a través de los estudios realizados por los demandados. El demandante inició el arbitraje para obtener una indemnización por incumplimiento de contrato y por deducciones ilegales en la comisión que se le adeudaba. Los demandados argumentaron que el demandante había realizado actividades ilícitas, incluyendo el soborno de funcionarios en la empresa estatal (empresa A) que tenía la responsabilidad de la concesión de los derechos relativos a la explotación minera marina en el Estado X, y que, por lo tanto, no tenía derecho a ningún pago, el cual, además, infringiría la ley estadounidense sobre prácticas corruptas en el extranjero (Foreign Corrupt Practices Act). El acuerdo de consultoría estaba regido por las leyes del Estado de Texas. El tribunal arbitral recordó la posición de los Estados Unidos en materia de corrupción y detectó en el caso varios hechos que demostraban la corrupción: país corrupto, elevado tipo de comisión, documentación insuficiente, falta de cualificación del consultor, interés y participación de los beneficiarios del soborno. De acuerdo con la jurisprudencia arbitral y de Texas, el tribunal declaró que los acuerdos eran por consiguiente nulos y desestimó las reclamaciones del demandante.

'189. Bribery is the payment of money or the granting of other benefits to a person for the purpose of altering the behavior of such person in ways not consistent with his or her duties. In Black's Law Dictionary, bribery is defined as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or other person in discharge of a public or legal duty. The bribe is the gift bestowed to influence the receiver's conduct. It may be any money, good, right in action, property, preferment, privilege, emolument, object of value, advantage, or any promise or undertaking to induce or influence the action, vote, or influence of a person in an official or public capacity (Wikipedia, http://en.wikipedia.org/wiki/Bribery).

190. Bribery is a form of political corruption and it is generally considered unethical. In most developed jurisdictions … it is illegal. On an international level, the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of Nov. 21 1997 ("Antibribery Convention") reflects the world's growing concern over corruption in international business. The Antibribery Convention obliges its member states "to take such measures as may be necessary to establish that it is a criminal offence under its law for any person intentionally to offer, promise or give any undue pecuniary or other advantage, whether directly or through intermediaries, to a foreign public official, for that official or for a third party, in order that the official act or refrain from acting in relation to the performance of official duties, in order to obtain or retain business or other improper advantage in the conduct of international business" (see Art. 1 of the Antibribery Convention …). The United States, signed and ratified the Antibribery Convention on December 8, 1998. It entered into force for the USA on 15 February 1999. Until June 17, 2007, some 37 states have signed the Convention … and most of them have amended their local laws to comply with the evolving international standard ...

191. One of the main pillars for combating bribery and corruption under US federal law has long been the Foreign Corrupt Practices Act ("FCPA"). As a result of the Antibribery Convention mentioned above, the FCPA was substantially amended by the Clinton Administration in 1998. The FCPA is part of US federal law and the Arbitral Tribunal considers the laws of Texas to include US federal law. The US Department of Justice, Fraud Section, Criminal Division, issued a brochure providing guidance through the act (see the brochure of the US Department of Justice, "Foreign Corrupt Practices Act, Antibribery Provisions", exhibit R-50). According to this brochure, the FCPA prohibits corrupt payments through intermediaries just like the Antibribery Convention itself. Thus, it is unlawful under US federal law to make a payment to a third party, while knowing that all or a portion of the payment will go directly or indirectly to a foreign official. The term "knowing" includes conscious disregard and deliberate ignorance (see exhibit R-50).

192. The US Government has highlighted a number of "red flags" that indicate the possibility of an improper payment, promise, or offer by an intermediary or another third party. This list of "red flags" includes (see exhibit R-50):

• unusual payment patterns or financial arrangements;

• a history of corruption in the country;

• a refusal by the foreign joint venture partner or representative to provide a certification that it will not take any action in furtherance of an unlawful offer, promise, or payment to a foreign public official and not take any act that would cause the US firm to be in violation of the FCPA;

• unusually high commissions;

• lack of transparency in expenses and accounting records;

• apparent lack of qualifications or resources on the part of the joint venture partner or representative to perform services offered, and

• whether the joint venture partner or representative has been recommended by an official of the potential governmental customer.

193. According to the US Department of Justice, a person charged with a violation of the FCPA's antibribery provisions may assert as a defense that the payment was lawful under the written laws of the foreign country or that the money was spent as part of demonstrating a product or performing a contractual obligation (see exhibit R-50).

194. As outlined above, the evidence record of this case shows a number of "red flags":

• According to the Transparency International Corruption Perceptions Index 2007, [State X] belongs to the most corrupt countries in the world …

• … Claimant admittedly received at least [sum of money] from Respondents under the Consulting Agreement and the Supplemental Agreement. Claimant testified that he was hired by [Respondent 2] to "open doors" to [Company A] at a time when "[Respondent 2] was unable to make the proper relationships in [State X]". In the opinion of the Arbitral Tribunal, this commission is unusually high in comparison with Claimant's expected performance. Thus, a strong suspicion arises that the "opening of doors" mainly consisted of the passing-on of substantial commission payments to [Company A] officials.

• As mentioned above, Claimant did not fully comply with Order No. 2 [requesting each party to produce documents]. He unilaterally redacted many of the documents and refused to disclose a number of documents that the Arbitral Tribunal ordered him to produce. Claimant would not offer a credible excuse for that. The Arbitral Tribunal has not seen in the produced bank records any of Claimant's current bank account balances. Claimant not even produced bank records showing that he retained any substantial parts of the approximately [sum] he received under the Consulting Agreement. In the view of the Arbitral Tribunal, there is obviously a lack of transparency in Claimant's expenses and accounting records.

• Claimant testified that he does not have any particular knowledge about the seismic business or the sale of seismic data, and yet, according to Art. 1.01 of the Consulting Agreement, he was obliged "in conjunction with [Respondent 2]'s representatives [to] diligently seek and solicit orders for the provision of Services to be provided by [Respondent 2] in the Territory [State X]". Hence, in the view of the Arbitral Tribunal, there is an obvious lack of qualifications on Claimant's part to perform his services offered in the Consulting Agreement.

• [Company A]'s officials not only proposed that [Respondent 2] hire Claimant, but also negotiated ( through its employee … ( directly with [Respondent 2] Claimant's rate of commission. In this regard, the Arbitral Tribunal concludes that [Company A] officials were involved in Claimant's hiring and the setting of his compensation. Hence, it is established that Claimant was recommended by an official of the potential governmental customer. [Company A] officials obviously had an unusual interest in Claimant's contractual relationship with Respondents. Moreover, the evidence showed that Mr [C] and other [Company A] officials repeatedly attempted to keep the Consulting Agreement in force and to continue the payments to Claimant. This leaves only one conclusion: Mr [C] and other [Company A] officials had substantial personal interests in Claimant's commission payments.

195. As it was shown above, the Arbitral Tribunal found numerous and significant "red flags". Accordingly, the Arbitral Tribunal is convinced that the payments made by Respondents under the Consulting Agreement were greatly used by Claimant to pay substantial amounts to key [Company A] officials. It is proved by the evidence record that Claimant paid more than US$ 6 million to key [Company A] officials without giving any credible explanation for such payments. The true amounts that were transferred are likely to be even greater.

196. Since Respondents have established that the commission payments from Respondents to Claimant under the Consulting Agreement were passed on, to a great extent, to [Company A] officials under suspicious circumstances, it now must be examined whether Claimant's payments to [Company A] officials were made for a legitimate purpose, and Claimant's contention in this respect will be examined next.

………

226. To sum up, the evidentiary record in this case clearly shows that:

• The then head of [Company A]'s Geophysical Department advised a [Respondent 2] employee that in order for [Respondent 2] to win the data processing work, it would have to hire Claimant as its agent. [Respondent 2] followed this advice and subsequently hired Claimant …;

• [Respondent 2] officials were involved when the rates of commission payments for Claimant were negotiated;

• During the term of the Consulting Agreement, Claimant was paid a substantial amount of commissions … and Respondents received concessions from [Company A] for performing seismic surveys;

• Substantial amounts paid to Claimant pursuant to the Consulting Agreement were passed along to [Company A] officials. Claimant directly or indirectly transferred at least US$ 6 million to senior [Company A] officials [during a five-year period]. He failed to offer any plausible and legitimate reason for these multi-million dollar transfers to [Company A] officials;

• … [Respondent 1 (parent company)] was billed for the travel expenses … of a senior-level [Company A] employee and his family, and this travel expense was then deducted from Claimant's the [sic] commission accrual without protest;

• … during a dispute with Claimant over non-payment of commissions, senior-level [Company A] officials took an intense interest in [Respondent 1] paying Claimant the disputed commissions.

227. For all of the above, there is only one reasonable conclusion, namely that the majority of payments to Mr [C] and other [Company A] officials were made through the intermediary of Claimant in order to secure the data processing rights for [Respondent 2] as suggested by [Company A]. Claimant failed to prove an independent purpose for these payments, i.e. that he had a [another] business and that the payments were made for legitimate purposes in this connection. He also failed to prove that the major part of the [sum] paid to Mr [C] in connection with his mother's death, had a legitimate business purpose.

228. Based on clear and convincing evidence, the Arbitral Tribunal concludes that the commission payments from Respondents to Claimant under the Consulting Agreement were bribes, used to influence [Company A] officials in their decision-making process (see paras.189 et seqq. above).

229. Considering the size and weight of evidence before it, the Arbitral Tribunal further concludes that the additional evidentiary measures requested by Respondents in their Second Motion to Compel Production of Document …, for certain bank and tax records, which, moreover, Claimant agreed to provide the Tribunal Secretary with a power of attorney to retrieve and review, are not necessary for Respondents' case. This is so because Respondents' have proven bribery already without these documents and no further supporting evidence could serve a useful purpose to support Respondents' position. Pursuant to paragraph 3 of the Procedural Order No. 4 [informing the parties that if additional evidentiary measures were deemed necessary, the Arbitral Tribunal would define them in a procedural order] and to the "complete control over the procedure" reserved to the Arbitral Tribunal by the Terms of Reference the Arbitral Tribunal thus concludes that such additional evidentiary measures are not necessary and shall not be ordered.

3. Legal consequences of Claimant's bribery

3.1. International public policy

230. As mentioned above, money laundering, corruption, fraud and similar activities are criminal in most civilized countries. Several international enactments and treaties ban these criminal activities. Anti-corruption is an integral part of the international public policy reflected, amongst other, in the following international conventions and US law (including Texas law):

• United Nations Convention against Corruption;

• OECD: Convention on Combating Bribery of Foreign Public Officials in International Business Transactions;

• Council of Europe: Criminal Law Convention on Corruption;

• OAS: Inter-American Convention Against Corruption; and

• United States: FCPA ( US Foreign Corrupt Practices Act.

231. Arbitral tribunals and state courts throughout the world have consistently stated this principle when enforcing or annulling arbitral awards that were affected by corruption (see below). The antibribery provisions of the FCPA, in particular, make it unlawful for a US person and certain foreign issuers of securities to make payments to a foreign official for the purpose of obtaining or retaining business.

232. In the following, the Arbitral Tribunal summarizes some international arbitration cases dealing with bribery:

• ICC Case No. 3913 (1981):

Defendant was a French firm attempting to win business with the government of an African country. Claimant was a British firm which agreed to assist the defendant in winning business with that African government. In return for these services the defendant agreed to pay to the claimant 8% of the amount of the business deal, excluding materials and charges. However, the evidence showed that the claimant was a financial intermediary who received money to redistribute to members of a network consisting of local persons in decision-making positions. The arbitral tribunal applied French law and held that bribes were illicit and immoral. The tribunal therefore concluded that the Consulting Agreement was null and void and that the parties could not require performance of the contract nor seek restitution under it (Collection of ICC Arbitral Awards 1974(85, p. 497 et seqq. ).

• ICC Case No. 3916 (1982):

Claimant was an Iranian national who assisted defendant, a Greek firm, with obtaining of contracts from the Iranian Government. The parties entered into an agreement in which the defendant would pay commissions to the claimant for a minimum of 2% of the amount of each contract signed with the Iranian Government. In this case the arbitrator came to the conclusion that the case involved bribery and that under any of the laws considered the activity of bribery was illegal and would render any agreement null and void. Accordingly, he dismissed the claim and made claimant responsible for all of the arbitration costs.

• ICC Case No. 6497 (1994):

This case elaborated the burden of proof in deciding upon the existence of bribery. Furthermore, the case confirmed the general principle that bribery invalidates a contract. Regarding the burden of proof, the arbitral tribunal held that a party alleging bribes had the principal burden of proof. If the proof submitted was not convincing, then the tribunal should reject it. However, the burden of proof may be reversed under certain circumstances. If the alleging party produces relevant evidence that is not itself conclusive, the tribunal may request the other party to bring counter-evidence, provided this seems possible and not too burdensome. If the other party fails to bring such counter-evidence, the arbitral tribunal may conclude that the alleged facts are proven.

• ICC Case No. 7047 (Westacre case - 1994):

This case arose out of a consultancy agreement between Westacre and Jugoimport. Westacre had agreed to assist Jugoimports in relation to orders to be placed by the Kuwait Ministry of Defense (KMD) for M-84 tanks. In return, Westacre was to receive a substantial percentage of the value of the contracts. After termination of the contract, Westacre started arbitration proceedings in Geneva under Swiss law for the unpaid monies.

Claimant (Westacre) was awarded approximately US$ 50 million plus interest. The arbitral tribunal held that the consultancy agreement was not invalid. Respondent (Jugoimports) failed to establish that the consultancy agreement was null on grounds that the parties were to procure a contract with the Kuwait Government by illicit means. Rather than consider certain signs or "red flags" indicating that bribery was most likely happening, the arbitral tribunal appeared to demand more specific and concrete evidence. A "mere suspicion" was not considered enough. Accordingly, the consultancy agreement was not held to violate international public policy. Lobbying by private enterprises to obtain public contracts was not, as such, considered to be an illegal activity and contracts to carry out such lobbying activities were not illegal.

The Westacre case was and still is a very controversial arbitration case. It was appealed in two countries and enforcement was sought in three different countries. The Swiss court of appeal as well as the English court of appeal refused to reopen the case in spite of new evidence, holding that the public policy of sustaining international arbitration awards on the facts of the case outweighs the public policy in discouraging international commercial corruption. Under the existing system, courts do not re-examine facts established by arbitrators unless basic rules have been violated. They decide on that basis whether an award violates public policy (Lew/Loukas/Kröll, Chapter 9-87). Critics assert that there should be no reason why a court should not review an award at the time of enforcement if new evidence becomes available (Ibid. Chapter 9-89).

ICC Case No. 8891 (1998):

In this case, claimant contracted to become defendant's agent in an effort to obtain a higher price under two government contracts. The defendant failed to pay the agreed upon commission of 18.5% to the claimant. Claimant thus initiated a legal action to claim the agreed fee. When looking at the contract, the arbitral tribunal took a proactive approach by examining whether bribery existed. The tribunal noted that the testimony by several witnesses provided very explicit confirmation that influential people had to be guaranteed payment to win the deal. It therefore declared the consulting contract to be void and dismissed each and every one of claimant's claims.

233. The same principles apply under the applicable Texas law as will be shown below.

3.2. Case law of Texas

234. Phylis J. Speedlin, Justice of the Court of Appeals of Texas, San Antonio, concluded in her opinion the following (see Villanueva v. Gonzalez, 123 S.W.3d 461, 464 (Tex. App. ( San Antonio 2003); exhibit R-166): "A contract to do a thing which cannot be performed without violation of the law violates public policy and is void. The purpose behind this rule is not to protect or punish either party to the contract, but to benefit and protect the public."

235. The US Supreme Court and several other courts in Texas support the opinion of Justice Phylis J. Speedlin (see Oscanyan v. Arms Co. , 103 U.S. 261, 267 (1880), exhibit R-156; State v. Williams, 938 S.W.2d 456, 460 (Tex. Crim. App. 1997), exhibit R-162; Cayan v. Cayan, 38 S.W.3d 161, 166 n.8 (Tex. App. ( Houston 2000), exhibit R-141; Lewis v. Davis, 145 Tex. 468, 199 S.W.2d 146, 148(49 (1947); Jack v. State, 694 S.W.2d 391, 397 (Tex. App. ( San Antonio 1985, writ ref'd n.r.e.).

236. Moreover, Texas courts do not allow legal or even equitable damages, such as restitution, to be awarded with respect to illegal transactions (see SCI Texas Funeral Services, Inc. v. Hijar, 214 S.W.3d 148, 156(57 (Tex. App. 2007) ["Restitution is available if the contract is unenforceable, impossible, not fully performed, or void for other legal reasons. But Appellees do not allege that the contracts were unenforceable, impossible, or not fully performed. Instead, they argue that restitution is a proper remedy because the contracts are void due to illegality. An illegal contract is one in which the parties undertake to do an act forbidden by the law of place where it is to be done, and as such it is an invalid agreement which imposes no legal obligation. A contract to do a thing which cannot be performed without a violation of the law is void. However, a contract that could have been performed in a legal manner will not be declared void simply because it may have been performed in an illegal manner. …We conclude that restitution is not an available remedy for [appellant's] alleged breach of contract." (internal quotations omitted) (emphasis added)]).

3.3. Consulting Agreement

237. In line with the mentioned international public policy, United States federal and Texas law, Art. 14.02 (b) of the Consulting Agreement provides as follows:

Payment in Violation of Laws. Consultant warrants, represents, and covenants that neither it nor any of its employees or representatives, directly or indirectly, (i) has or shall have any agreement or arrangement with, (ii) made or shall make any offer to, (iii) gave or shall give to, or (iv) promised or shall promise to, any official, employee, or representative of any customer, government, governmental agency, or political party, under which any such official, employee, representative, or political party shall receive either directly or indirectly anything of value whether monetary or otherwise.

(A) as the result of or in connection with any actual or contemplated sale or provision of any [Respondent 2] Services pursuant to the Agreement or any Supplementary Agreement by [Respondent 2] or any of its subsidiaries, and/or affiliated companies or affiliated divisions, to any government, or governmental agency, or

(B) as the result of or in connection with any action or contemplated action taken or requested to be taken by any government or governmental agency of any nature relating to [Respondent 2], or any of its subsidiaries and/or affiliated companies or affiliated divisions.

3.4. Conclusions

238. In summary, the Arbitral Tribunal concludes that arbitration precedents and legal authorities dealing with bribery and corruption are clear: If bribery is established by the evidence to have been part of the intent of, and in fact arises out of, a consulting agreement, such agreement is to be declared null and void ab initio. Neither party may require performance of the contract nor seek restitution under it. The courts in Texas apply the same standard. See SCI Texas Funeral Services, Inc. v. Hijar, 214 S.W.3d 148, 156(57 (Tex. App. 2007), quoted supra.

239. Therefore, the Arbitral Tribunal declares the Consulting Agreement … null and void. The Arbitral Tribunal also declares the following Supplemental Agreements, which suffer from the same legal defect, null and void: …

240. As the Consulting Agreement and all Supplemental Agreements are null and void, the Arbitral Tribunal need not determine whether Respondents breached the Consulting Agreement as Claimant stated. Claimant's requests for damages for breach of contract are to be fully dismissed.

B. Request for punitive damage

241. The same applies to Claimant's request for punitive damages … If there is no damage claim, there is no room for punitive damages either under Texas Law. Tex. Civil Practice & Remedies Code § 41.004 ("[E]xemplary [punitive] damages may be awarded only if damages other than nominal damages are awarded."). Thus, Claimant's request for punitive damage is also dismissed.'

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