Allegations of Corruption in the Underlying Claim: What Remedies are Available to the Arbitral Tribunal? - WAMR 2015 Vol. 9, No. 3

This panel will address the fundamental issue of what arbitrators can and should do when there are allegations – and proof – of corruption in the underlying claim. Specifically, the panelists will discuss and assess available remedies. Questions addressed will include: What duties to report does the tribunal have in case of alleged or suspected corruption? How should a tribunal respond to a pending investigation by domestic courts? What should the tribunal do if corruption is found? Should the case be dismissed? How does the law of State responsibility, succession, and attribution apply in this context? How should a Tribunal consider issues of unjust enrichment and compensation?

PROF. GIORGETTI: Welcome to the second session of this workshop. Our first panel discussed the most important issues of proving corruption, and what kind of evidence is needed and required. We now will address the fundamental question of what kinds of remedies are available to the arbitral tribunal once corruption is proven or is alleged. This is, of course, a fundamental question, in terms of what is the best policy to obtain the specific desired outcome in these kinds of situations. And it also really is a matter of the rule of law and the basic principle of justice.

Several panelists have already mentioned the World Duty Free v. Kenya case, which is probably one of the most famous and outrageous cases of international corruption, where the tribunal found it had no jurisdiction. Kenya had raised the corruption issue as a defense, and the claimant’s director himself had submitted a statement that he had paid a bribe of $2 million to the then President of Kenya, President Moi, and, in return, he received a suitcase of corn, which meant that the investment was agreed upon.

The corruption allegations were upheld by the tribunal, and, indeed, they were outcome-determinative. The tribunal concluded that contracts obtained by corruption cannot be upheld, because they are contrary to UK and Kenyan law, as well as contrary to international and transnational public policy. The claims were thus dismissed in their entirety.

I think we all agree that this is somehow the right outcome for the investor. We do not want to provide a platform when a contract was obtained by corruption, but we mentioned already that corruption is a two-way operation. There is a giver and a taker, and it takes two to tango. And, as Professor Reisman noted at the beginning, the malaise that resulted in looking at Kenya, the tribunal highlighted that Kenya had not instituted proceedings against President Moi, and it found that highly disturbing, but said that the absence of such proceedings did not stop Kenya from raising the issue of corruption. The tribunal also rejected arguments that the corruption of the President was attributable to the State and that personal donations were actually a cultural norm in Kenya and used to secure the bribe from the main contract. The tribunal essentially concluded that what President Moi had done was illegal under local law, but that it did not benefit the State.