Corruption-and-Arbitration 2020 PR

Transparency International Anti-Corruption Helpdesk Answer
Corruption in investor-state
arbitration
Authors: Jonathan Bonnitcha ([email protected]) and Alisha Mathew
([email protected])
Reviewers: Vaclav Prusa, Civil Society Legislative Advocacy Centre ([email protected]), Kush Amin and
Adam Foldes ([email protected])
28 September 2020
This paper explores legal and policy issues relating to the Process & Industrial Developments Limited v
Federal Republic of Nigeria arbitration, focusing on suspicions and allegations of corruption in that case.
It concerns a 2010 contract relating to the construction and operation of a gas processing facility
between Process and Industrial Developments Ltd (P&ID), a company incorporated in the British Virgin
Islands, and the Nigerian Ministry of Petroleum Resources. Less than three years after the contract was
signed, P&ID initiated arbitration, alleging that Nigeria had not performed its obligations under the
contract and seeking damages for lost profits. Despite a number of corruption related red flags in the
contract, Nigeria did not raise the issue of corruption in its defence in the arbitration. The tribunal
concluded that Nigeria had repudiated the contract. It awarded P&ID US$6.6 billion in damages plus 7
per cent interest per annum, even though neither party had taken significant steps to perform their
obligations under the contract.
Nigeria did not immediately pay the award. In response, in 2018, P&ID commenced proceedings in
English courts to enforce the award. Nigeria has now belatedly raised allegations of corruption in its
attempt to avoid enforcement of the award in English courts. It alleges a long-running corrupt conspiracy
in which associates of P&ID paid bribes to the Ministry of Petroleum Resources officials to obtain the
contract and to ensure that the Ministry did not vigorously contest the subsequent arbitration. We take
no position on whether these allegations are true; there are questions about both P&ID and Nigeria’s
accounts. Even if many of Nigeria’s troubling claims of a long-running corruption conspiracy are false or
exaggerated, the case still raises important policy questions about the intersection of corruption in
public procurement, low state capacity and international arbitrations conducted behind closed doors.
© 2020 Transparency International. All rights reserved.
This document should not be considered as representative of the Commission or Transparency International’s
official position. Neither the European Commission,Transparency International nor any person acting on
behalf of the Commission is responsible for the use which might be made of the following information.
The Anti-Corruption Helpdesk is operated by Transparency International and funded by the European Union.
Contents
1.2 Structure of the paper
1. Introduction
2. Legal framework The next section of the paper introduces the legal
3. Examples of arbitral tribunals’ handling of framework governing ISA. It provides a basic
allegations and suspicions of corruption overview of the legal principles governing issues of
4. Policy analysis and a reform agenda corruption and indicates how such issues arise in
ISA. The third section uses a series of concrete
examples to illustrate how arbitral tribunals have
Caveat handled allegations or suspicions of corruption in
investor-state arbitration. In light of the legal
The research and discussion in this paper is analysis in the second and third sections, the final
general in nature and does not constitute legal section identifies wider policy concerns relating to
advice. the intersection of corruption and ISA, and sketches
some possible options for reform.
1. Introduction
2. Legal Framework
1.1 Scope of the paper
The legal principles governing the treatment of
The focus of the paper is corruption in investor-state corruption in investor-state arbitration result from
arbitration. By investor-state arbitration (ISA), we the intersection of three bodies of law: the
mean international arbitrations in which one party is applicable law governing the substance of the
a private actor and the other party is a state, or a dispute between the investor and the state; the
department or organ of a state (such as a Ministry). procedural rules governing the conduct of the
Investor-state arbitration can arise under a contract arbitration; and the law of the seat of the arbitration,
between the investor and the state, where the which may place additional duties on the arbitrators.
contract contains the parties’ agreement to arbitrate In addition, tribunals will normally be mindful of a
(‘contract-based ISA’), or under an investment fourth body of law – the legal principles governing
treaty that contains the ‘host’ state’s advance subsequent challenges to an arbitral tribunal’s
consent to arbitrate with any foreign investor from award in domestic courts (i.e. proceedings to set
the ‘home’ state (‘treaty-based ISA’). Both contract- aside the award in the courts of the seat of
based and treaty-based ISA are within the scope of arbitration) and the associated principles governing
our paper. P&ID v Nigeria is an example of contract- enforcement of arbitral awards worldwide. This
based ISA. In considering types of corrupt fourth body of law becomes directly relevant once
behaviour, we focus specifically on situations where the arbitration has concluded and a party to the
it is alleged or suspected that the investor paid a arbitration seeks to enforce or challenge the
bribe to acquire a contract, or other investment tribunal’s award in court proceedings.
assets, from the host state. The aims of the paper
are to provide a general introduction to how In general, the substantive rules governing the
allegations or suspicions of corruption are dealt with consequences of corruption, if proven, for a dispute
in investor-state arbitration, to articulate policy are found in the applicable law. These substantive
concerns with the current approach and to identify rules are supplemented by over-arching principles
opportunities for future reform. of ‘transnational public policy’ derived from the
Transparency International Anti-Corruption Helpdesk

Corruption in investor-state arbitration
common approach of courts across jurisdictions law, normally by agreement through a contract or
when considering whether to allow enforcement of treaty prior to the time at which the dispute arises.
an arbitral award. Rules governing evidence and The legal consequences of corruption, if proven,
proof of corruption, including the extent of arbitral depend foremost on the applicable law.
tribunals’ investigative powers, are found in the
arbitral rules, supplemented by the law of the seat. In a contract-based ISA, such as P&ID v Nigeria,
Arbitrators duties, including any duty to investigate the applicable law will be the governing law of the
and report corruption that may exist, arise from the contract, which is typically specified explicitly in the
intersection of the law of the seat and the procedural contract. Parties are free to choose any body of law
rules governing the arbitration. to govern their contract, with parties often choosing
the law of a legal hub such as New York or England.
The fact that arbitrations are governed by several In the case of P&ID v Nigeria, clause 20 of the Gas
intersecting bodies of law makes generalisation Supply and Processing Agreement (‘GSPA’)
difficult. The precise legal principles governing specified that the contract was governed by
allegations or suspicions of corruption in any Nigerian law and, hence, Nigerian law was the
arbitration will depend on the applicable law, applicable law in the arbitration. Principles of
procedural rules and law of the seat that are international law may still be relevant in contract-
relevant to the dispute in question. These will vary based ISA to the extent that they have been
from case to case. Further challenges arise from the incorporated into the applicable domestic law 1– in
absence of a doctrine of precedent in international this case, Nigerian law.
arbitration, and from the facts that most arbitrations In a treaty-based claim, the applicable law is the
are held in secret and that many never treaty itself, as supplemented by other relevant
subsequently become public. This allows divergent principles of international law.2 Domestic law is also
interpretations and practices to persist, even insofar relevant in treaty-based ISA insofar as investment
as the same laws and rules are concerned. The treaties rely on domestic law to characterise certain
following sections examine each of the four bodies rights and interests. For example, investment
of law in greater detail. treaties do not contain their own rules on the
nationality of individuals or corporations, so a
2.1 Applicable Law tribunal would resolve questions relating to an
investor’s nationality by applying the domestic laws
The applicable law is the term used to describe the of the state in which nationality is claimed.3
body of law that is used to decide the substantive
aspects of a claim. The basic principle of arbitration If the treaty does not specify the applicable law, or
is that the parties themselves choose the applicable if a contract does not contain a governing law
1 See e.g. Southern Pacific Properties (Middle East) in Investment Treaty Arbitration, 1 MCGILL J. DISP.
Limited v. Arab Republic of Egypt, ICSID Case No. RESOLUTION 1, 11-12 (2014), referring to art. 8(7) of the
ARB/84/3, Award (May 20, 1992) where the tribunal Argentina-Italy Bilateral Investment Treaty as an example.
determined that international law principles of pacta sunt
3
servanda and fair compensation for expropriation were C.L. LIM, JEAN HO, MARTINS PAPARINSKIS, INTERNATIONAL
reflected in Egyptian law. INVESTMENT LAW AND ARBITRATION COMMENTARY, AWARDS
AND OTHER MATERIALS 144-163 (2018).
2George von Mehren, Claudia T Salomon and Aspasia A.
Paroutsas, Navigating through Investor-State Arbitrations:
An Overview of Bilateral Investment Treaty Claims, 59
DISP. RESOLUTION J. 69, 73 (2004) noting a comment by
Antonio R. Parra, ICSID’s Deputy- Secretary-General. See
also Christopher Schreuer, Jurisdiction and Applicable Law
3

clause, the tribunal has discretion to determine the acquit parties for alleged criminal offences. Arbitral
applicable law. Tribunals will do so by reference to proceedings lack the procedural safeguards of
a range of factors, including the facts of the dispute, criminal trials, such as a judge who is independent
relevant choice of law rules, and the relevant arbitral of the parties, and the powers necessary to conduct
rules.4 a criminal trial, such as the ability to compel
witnesses to testify.5 Nevertheless, tribunals can
Unlike other areas of law, international arbitration and should consider allegations of corruption that
does not have a doctrine of precedent. Accordingly, have implications for the resolution of the dispute
arbitrators are not bound to follow earlier decision of referred to the tribunal for decision. This might, in
other tribunals. While this allows for flexibility and some circumstances, include considering
responsiveness, it also can contribute to a lack of allegations of criminal offences, in which case the
clarity in the law, and vests considerable discretion tribunal’s role would be to consider the civil
in arbitrators. However, to the extent the doctrine of consequences of alleged breaches of criminal law.
precedent forms part of the applicable law,
arbitrators are bound to follow it – e.g. if the In contract-based ISA, allegations of corruption are
applicable law is English law, arbitrators must follow directly relevant to the resolution of the dispute
authoritative English court decisions. insofar as they have implications for the validity or
enforceability of the contract on which the investors’
2.1.1 Corruption and the applicable law claims are based. So, if corruption is proven by a
party, the tribunal will have to determine the legal
The foundational premise of arbitration is that a contractual consequences of the type of the
tribunal’s power to decide a dispute depends on the corruption in question according to the applicable
consent of the parties to resolve that dispute law. Nigeria’s belated allegation in P&ID v Nigeria is
through arbitration. For this reason, an arbitral that the GSPA was obtained through the payment
tribunal’s jurisdiction is limited to resolving the of bribes.6 In general, most legal systems recognise
specific dispute(s) that the parties have referred to that contracts obtained through the payment of
arbitration. In doing so, the tribunal applies the law bribes are either automatically void, or voidable at
that the parties have agreed would govern their the election of the innocent party.7 The Council of
dispute. Europe’s Civil Law Convention On Corruption
requires state parties to adopt the latter principle –
Arbitral tribunals do not have a general jurisdiction that contracts procured by bribery are voidable at
to decide whether a state’s criminal laws, including the election of the innocent party.8 This principle is
criminal laws relating to corruption, have been also reflected in English law.9
breached. They do not have the power to convict or
4 7
E.g. the ICC Arbitration Rules, r. 17(a); UNCITRAL Rules Alexis Mourre, Arbitration and Criminal Law: Reflection on
art. 33(3); ICSID Convention art. 42(1). the Duties of the Arbitrator 22 ARBITRATION INT’L 95, 100
(2006).
5 8 Council of Europe, Civil Law Convention on Corruption,
Cf KATHRIN BETZ, PROVING BRIBERY, FRAUD AND MONEY
LAUNDERING IN INTERNATIONAL ARBITRATION: ON APPLICABLE Nov. 1 2003, ETS No. 174, art 8(2).
CRIMINAL LAW AND EVIDENCE (2017), arguing that tribunals
do have the power to apply criminal law (see page 23), but 9 National Iranian Oil Company v Crescent Petroleum
recognising that the procedure of arbitration cannot Company International Ltd & Crescent Gas Corporation Ltd
resemble a criminal trial (see page 259). [2016] EWHC 510 (Comm).
6 In addition, Nigeria alleges corruption on the part of its
legal representatives in the arbitration.

arbitration, there may also be treaty-based ISAs
In treaty-based ISA the legal analysis of corruption under the ICC Rules (e.g. Saab v Cyprus13).
under the applicable law is slightly different, but the
practical effects of such allegations (if proven) are Some sets of arbitral rules are linked with particular
similar. Many investment treaties explicitly require arbitral institutions, for example the ICSID
investment treaties to be made ‘in accordance with Arbitration Rules, ICC Rules and Singapore
the host state’s laws’.10 Insofar as this requirement International Arbitration Centre (SIAC) Rules. If the
is not made explicit, many tribunals have found that parties have chosen a particular arbitral institution
it is implied. If the host state can establish that an to administer their arbitration, the arbitral rules of
investment was procured by corruption in breach of that institution will normally apply to the
its own laws, the arbitral tribunal will not have proceedings. Other sets of arbitral rules are not
jurisdiction to hear the case and the investors’ affiliated with any particular arbitral institution and
claims will fail.11 may be used to govern arbitrations that are not
administered by an arbitral institution – e.g. the
2.2 Arbitral rules UNCTIRAL Arbitration Rules. The role of an arbitral
institution is generally limited to providing
The procedural aspects of arbitration are governed administrative support for the arbitration – e.g. a
by the arbitral rules. The basic principle is that the venue for hearings and a system of document
parties to the arbitration are entitled to choose the management. The role of an arbitral institution is not
arbitral rules that will govern their arbitration. These analogous to the role of a court and does not
rules deal with questions such as the appointment generally involve any substantive oversight of the
of arbitrators, conduct of the arbitration, timing of arbitral proceedings. Many arbitrations are not
awards, allocation of costs etc. administered by any arbitral institution.
There are numerous sets of arbitral rules between In the case of P&ID v Nigeria, the parties in clause
which the parties may choose. In general, a given 20 of the GSPA agreed that the rules of the Nigerian
set of arbitral rules could be chosen to govern either Arbitration and Conciliation Act 1988 would apply to
contract-based ISA or treaty-based ISA. So, while any dispute under that contract, and accordingly the
the ICSID Convention and the related ICSID applicable arbitral rules in the dispute were the
Arbitration Rules are primarily associated with Nigerian Arbitration Rules. The arbitration in P&ID v
treaty-based ISA, there are also contract-based Nigeria was not administered by an arbitral
ISAs conducted under the ICSID Convention (e.g. institution.
World Duty Free v Kenya12). Similarly, while the
International Chamber of Commerce (ICC) Rules Most arbitral rules give arbitrators broad discretion
are primarily associated with contract-based in relation to the conduct of proceedings, including
in determining the relevant standards of proof,
admissibility of evidence, and weight to be given to
10 13
Schreuer, supra note 3, at 1. Ayoub-Farid Saab and Fadi Saab v Cyprus, ICC Case
No. 20588/ZF, Decision on Jurisdiction (Sept. 10, 2015).
11E.g. Metal-Tech Ltd v. Republic of Uzbekistan, ICSID
Case No. ARB/10/3, Award, (Oct. 4, 2013); Spentex
Netherlands, B.V. v. Republic of Uzbekistan, ICSID Case
No. ARB/13/26, Award (Dec. 27, 2016).
12World Duty Free Company v Republic of Kenya, ICSID
Case No. ARB/ 00/7, Award (Oct. 4, 2006).
5

evidence.14 The discretion granted to arbitrators is A related question is whether allegations of bribery
usually couched in broad terms, such that must be proven by direct evidence, or whether
arbitrators have the power direct parties to produce circumstantial evidence, including ‘red flags’, is
evidence.15 In exercising this discretion, arbitrators sufficient. While there is some disagreement
are guided by general duties to be impartial and between tribunals, the prevailing view is that
independent.16 circumstantial evidence is sufficient to prove
corruption, but that this evidence must be evaluated
2.2.1 Standard of proof and rules of evidence with caution.20 The acceptance of circumstantial
relating to allegations of corruption in evidence is premised on the understanding that
arbitration corruption is difficult to prove through direct
evidence, especially as tribunals lack the coercive
Arbitral rules do not specifically address allegations and investigate powers of national authorities.21
of corruption, however play a strong role in This openness to considering ‘red flags’ is
determining parties’ ability to prove allegations of supported by various soft-law instruments –
corruption. Typically, where corruption is alleged by including the Corruption and Money Laundering in
a party to the proceedings, the general practice of International Arbitration Toolkit published by the
most tribunals is to require the party alleging the Basel Institute on Governance, as well as ICC’s
corruption to bear the burden of proof.17 The Guidelines on Agents, Intermediaries and Other
standard of proof for corruption is not settled, with Parties. The red-flag approach was employed by
some tribunals applying the ‘preponderance of the tribunal in Metal-Tech v Uzbekistan,22 discussed
evidence’ standard18 – i.e. that the evidence in more detail in Section 3.3 below.
demonstrates that the allegations are more likely to Support for the ‘red flag’ approach is grounded in
be true than not – while others have applied the arbitral rules that grant arbitrators broad discretion
higher threshold of ‘clear and convincing relating to the conduct of proceedings, and specific
evidence’.19 powers to make inquiries of the parties and to order
14 19
See e.g. ICC Rules art. 25; ICSID Rules r. 34. E.g. Siag Waguih Elie George Siag and Clorinda Vecchi
v Arab Republic of Egypt, ICSID Case No. ARB/05/15,
15 E.g. ICSID r. 34(2)(a). Award ¶¶ 325-6 (Jun. 1, 2009); EDF (Services) Limited v
Romania, ICSID Case No. ARB/05/13, ¶22, Award (Oct. 8,
16See ICSID Convention art. 14; UNCITRAL Arbitration 2009). See also Kryvoi, supra note 18, at 67; Menaker,
Rules 2013 art. 11; SCC Rules 2017 art. 18. supra note 18, at 82-90.
17 20
See Yarik Kryvoi, Economic Crimes in International Emmanuel Gaillard, The Emergence of Transnational
Investment Law 67 INT’L & COMPARATIVE L. QUARTERLY 577, Responses to Corruption In International Arbitration 35
589 (2018), citing Asian Agricultural Products Ltd v ARBITRATION INT’L 1, 7-8 (2019). Two notable examples of
Republic of Sri Lanka, ICSID Case No ARB/87/3, Award ¶ such analysis being Metal-Tech v Uzbekistan, and Spentex
56 (27 June 1990); Tradex Hellas v Republic of Albania, v Uzbekistan.
ICSID Case No ARB/94/2, Award ¶¶ 73–75 (29 April 1999);
21
Valeri Belokon v Kyrgyzstan, PCA, UNCITRAL, Award, Menaker, supra note 18, at 91.
¶161 (24 October 2014). See also Andrea Menaker,
22
Proving Corruption in International Arbitration in DOMITILLE Metal-Tech Ltd v. Republic of Uzbekistan, ICSID Case
BAIZEAU AND RICHARD KREINDLER (EDS), ADDRESSING ISSUES No. ARB/10/3, Award, ¶¶ 248-52. (Oct. 4, 2013).
OF CORRUPTION IN COMMERCIAL AND INVESTMENT ARBITRATION,
79-80 (2015).
18E.g. Fraport AG Frankfurt Airport Services Worldwide v
Republic of the Philippines, ICSID Case No. ARB/03/25,
Award, ¶ 399 (Aug. 16 2007); Tokios Tokeles v Ukraine,
ICSID Case No. ARB/02/18, Award, ¶ 124 (Jul. 26 2007).

the production of evidence. In some cases, arbitral particular technical or other specialist expertise to
rules explicitly allow arbitrators to draw adverse the project.’26 He concluded that the investor’s
inferences if a party fails to produce requested failure to provide any plausible alternative
documents or other evidence.23 Even when not explanation for this discrepancy meant ‘that we
granted explicitly, the power to draw appropriate should conclude that corruption has been
inferences from non-production of evidence within established by circumstantial evidence.’27
the possession of a party falls within arbitrators’
broad discretion relating to the conduct of 2.2.2 Arbitral tribunals’ power to investigate
proceedings. suspicions of corruption of their own motion
That said, while arbitrators’ have broad discretion There is a long-standing debate about whether
relating to the conduct of proceedings, there is no arbitral tribunals have the power to investigate
explicit duty to engage in ‘red flag’ analysis. There corruption if no allegation of corruption has been
remains significant variation between tribunals’ raised by any party to the proceedings. The
willingness to draw inferences from circumstantial traditional conception of arbitration sees a tribunal’s
evidence. For example, in Union Fenosa Gas v powers as limited to resolution of issues that the
Egypt the majority of the tribunal observed that parties themselves raise in the proceedings. This
Egypt had drawn attention to several ‘classic “red view is reflected in the 1999 edition of the leading
flags”; but even the reddest of red flags does not text book on international arbitration: ‘it is not the
suffice without proof of corruption before the duty of an arbitral tribunal to assume an inquisitorial
tribunal.’24 The majority concluded that ‘there was role and to search officiously for evidence of
influence exercised by Mr El Komy [an associate of corruption where none is alleged.’28
the investor] over senior decision-makers at the
Ministry of Petroleum and EGPC over the SPA [the This traditional view has been criticised. There is
investor’s contract with Egypt]; but that it was not now strong support for the view that arbitrators can
corrupt.’25 In contrast, the dissenting arbitrator investigate suspicions of corruption of their own
considered the discrepancy between the large motion, even where corruption has not been alleged
amounts of money involved and the fact that ‘Mr. El by any party.29 This changing understanding is
Komy does not appear to have brought any
23 28
E.g. International Bar Association, Rules of Evidence, NIGEL BLACKABY AND CONSTANTINE PARTASIDES, REDFERN
art. 9(5) and (6). See also generally BETZ, supra note 6; AND HUNTER ON INTERNATIONAL ARBITRATION, 153 (1999, 3rd
Menaker, supra note 18, at 82. edition)
24 29
Unión Fenosa Gas, S.A. v. Arab Republic of Egypt, See Domitille Baizeau and Tessa Hayes, The Arbitral
ICSID Case No. ARB/14/4, Award of the Tribunal, ¶ 7.113 Tribunal’s Duty and Power to Address Corruption Sua
(Aug. 31, 2018) Sponte, in ANDREA MENAKER (ED.), INTERNATIONAL
ARBITRATION AND THE RULE OF LAW: CONTRIBUTION AND
25Unión Fenosa Gas, S.A. v. Arab Republic of Egypt, CONFORMITY, 229, (2017); Edoardo Marcenaro, Arbitrators’
ICSID Case No. ARB/14/4, Award of the Tribunal, ¶ 7.109 Investigative and Reporting Rights and Duties on
(Aug. 31, 2018). Corruption in DOMITILLE BAIZEAU AND RICHARD KREINDLER
(EDS.), ADDRESSING ISSUES OF CORRUPTION IN COMMERCIAL
26Unión Fenosa Gas, S.A. v. Arab Republic of Egypt, AND INVESTMENT ARBITRATION, 3, (2015); Alexis Mourre,
ICSID Case No. ARB/14/4, Dissenting Opinion of Arbitrator supra note 8, at 95.
Mark Clodfelter, ¶ 8 (Aug. 31, 2018).
27Unión Fenosa Gas, S.A. v. Arab Republic of Egypt,
ICSID Case No. ARB/14/4, Dissenting Opinion of Arbitrator
Mark Clodfelter, ¶ 19 (Aug. 31, 2018).

reflected in the revised passage taken from the render an enforceable award.31 However, it is
2015 edition of the same textbook quoted above: important to clarify that, even on the most expansive
views of arbitrators’ powers, arbitrators do not have
If an allegation of corruption is made in plain a general mandate to investigate corruption. Any
language in the course of the arbitration investigation into suspicions of corruption must be
proceedings, the arbitral tribunal is clearly relevant to the resolution of the dispute that has
under a duty to consider the allegation and been submitted to the tribunal. While a tribunal
to decide whether or not it is proven. It might legitimately investigate possible instances of
remains less clear, however, whether an bribery that have implications for the validity of a
arbitral tribunal has a duty to assume an contract on which the investor’s claims in the
inquisitorial role and to address the question arbitration are based, a tribunal could not
of corruption on its own initiative where legitimately investigate wider suspicions of bribery
none is alleged. Initiating its own on the part of the investor that are not related to the
investigation and rendering a decision on dispute before the tribunal.
the outcome of such a self-initiated
investigation might leave a tribunal open to Turning to the arbitration in P&ID v Nigeria, the
charges of straying into territory that is ultra Nigerian Arbitration Rules (which are based on the
petita [i.e. beyond the scope of the dispute UNCITRAL Arbitration Rules) grant significant
that the parties agreed to submit to latitude to arbitrators in conducting arbitral
arbitration]. Conversely, a failure to address proceedings, empowering the tribunal to conduct an
the existence of such illegality may threaten arbitration ‘in such manner as it considers
the enforceability of an award and thus may appropriate’ provided the parties are treated
sit uncomfortably with an arbitral tribunal's equally.32 In particular, arbitrators are empowered
duty under some modern rules of arbitration under the Rules to require parties to produce
to use its best endeavours to ensure that its evidence at any time during the proceedings,33 and
award is enforceable. Striking the right to determine the admissibility, relevance, materiality
balance between these competing and weight of evidence.34 Accordingly, a tribunal
considerations may not be easy. For now, constituted under these rules could order the
the extent of an arbitral tribunal's duty—if production of evidence relating to corruption even if
any—to probe matters of illegality of its own not furnished by the parties, should the tribunal
motion remains unclear.30 decide to make such an inquiry. In short, the tribunal
in P&ID v Nigeria could have investigated
Some commentators go further and suggest that suspicions of corruption relating to the award of the
arbitrators have a duty to investigate any suspicions GSPA had it chosen to do so.
of corruption, grounded in their duty to resolve the
dispute according to the applicable law and to
30 33
NIGEL BLACKABY AND CONSTANTINE PARTASIDES, REDFERN UNCITRAL Rules, art. 24(2). See also art. 27(3)
AND HUNTER ON INTERNATIONAL ARBITRATION, 121 (2015, 6th UNCITRAL Arbitration Rules
ed).
31 BETZ, supra note 6, at 287. For the practical implications 34
UNCITRAL Rules, art. 25(6). See also art. 27(3)
of arbitrators’ duty to render an enforceable award, see UNCITRAL Arbitration Rules.
Section 2.4
32
Nigerian Arbitration Rules r. 15(1). See also art. 17
UNCITRAL Arbitration Rules.

Although arbitral rules do not impose a positive duty introduce much greater transparency in treaty-
on arbitrators to investigate corruption in based ISA.37 For example, under the UNCITRAL
proceedings, arbitrators may fall under such a duty Arbitration Rules there are now heightened
by virtue of the arbitral institutions’ ethical codes; standards for transparency in treaty-based ISA.
ethical codes of any member-based organisation of Secrecy in contract-based ISA has not received the
which the arbitrators is a member; the International same attention, even though the underlying policy
Bar Association Guidelines, or the rules of the concerns are essentially the same. Contract-based
national bar association with which the arbitrator is ISA under the UNCITRAL Rules and all arbitrations
licenced.35 To our knowledge, there has been little under the LCIA and ICC rules are governed by
to no discussion as to whether these ethical presumptions of confidentiality, meaning the
obligations could be implicated should an arbitrator proceedings and awards and not made publicly
fail to act on suspicions of corruption arising under available. So far as we are aware, the arbitration in
an arbitration – indeed, this could be a subject of P&ID v Nigeria was conducted entirely in secret,
further inquiry. and the existence of the arbitration did not become
public knowledge until 2015, following a change of
2.2.3 Confidentiality of proceedings government in Nigeria. At that point in time the
jurisdictional and merits phase of the arbitration had
Traditionally, ISA is conducted in secret. already been concluded.
Information relating to the dispute and sometimes
even the fact that the arbitration is taking place is 2.3 Law of the seat of arbitration
often not disclosed. The confidentiality of arbitral
proceedings intersects with and compounds the The ‘seat’ of an arbitration is a term of art that refers
underlying problems of corruption, as public to the relationship between the arbitration and a
awareness and scrutiny is one mechanism by which particular domestic jurisdiction. It is not necessarily
pressure can be brought to bear on government the place where the arbitration physically takes
officials (who may have private incentives that place (although, in practice, hearings are usually
diverge from the public interest) to explain how a held in the seat). Rather, it is the system of law
dispute with an investor arose. selected to have supervisory jurisdiction over the
arbitration.38 With the exception of arbitrations
Over the past two-decades, secrecy in treaty-based conducted under the ICSID Convention, all
ISA has been the subject of a great deal of investor-state arbitrations have a seat in some
academic and public criticism.36 This has led to domestic jurisdiction. Arbitrations conducted under
reforms in investment treaties and arbitral rules that the ICSID Convention are unique in that they are
35 See Catherine A. Rogers, The Ethics of International

Arbitrators, 3-5, (Institute of Comparative Law, Research 37 United Nations Convention on Transparency in Treaty-
Paper No. 08-01). For example, institutional ethical codes Based Investor-State Arbitration, U.N. Doc. A/RES/69/116,
include the Hong Kong International Arbitration Centre’s (Dec. 10, 2014).
38 Jonathan Hill, Determining the Seat of an International
Code of Ethical Conduct for Arbitrators, or the Singapore
International Arbitration Centre’s Code of Ethics for an Arbitration: Party Autonomy and the Interpretation of
Arbitrator. The Chartered Institute of Arbitrators also has a Arbitration Agreements 63 INT’L & COMPARATIVE L.
Code of Professional and Ethical Conduct which members QUARTERLY 517, 518 (2014).
are expected to comply with. None of these codes impose
a positive duty on arbitrators to investigate suspicions of
corruption.
36The Secret Trade Courts, NEW YORK TIMES, Sept. 27,
2004, <https://www.nytimes.com/2004/09/27/opinion/the-
secret-trade-courts.html>.
9

immune from oversight by any domestic jurisdiction England. Because England was the seat of the
and, instead, supervised by a special set of arbitration, the decision by the High Court of Lagos
international mechanisms established by the ICSID to set aside the arbitral award42 had no effect, as
Convention. only the courts of the seat of the arbitration have
supervisory jurisdiction over challenges to arbitral
The basic principle in international arbitration is that awards.43
the parties are entitled to choose the seat of their
arbitration. In contract-based ISA, this is often done Apart from governing the relationship between the
by including a clause in the contract containing the arbitration and national courts, the law of the seat is
agreement to arbitrate specifying the seat of any also important in determining the scope of
future arbitration under that contract. If a seat is not arbitrators’ duties. As noted above, arbitral rules do
selected by the parties, or if the seat is not clear not place an explicit obligation on arbitrators to
from the contract, the arbitral tribunal, or in some investigate suspicions of corruption of their own
cases national courts, will use principles of contract motion. However, arbitrators may have a duties to
interpretation to determine the appropriate seat.39 investigate or to report suspicions of corruption
In P&ID v Nigeria, there was disagreement between arising during proceedings by virtue of the law of the
the parties about the seat of the arbitration during seat.44 For example, while there has been no
the arbitral proceedings themselves, and at the relevant case law examining this provision, it has
enforcement stage. The GSPA designated London, been argued that the duty to report suspicions of
England as the ‘venue’ of the arbitration, but did not money-laundering under the Singaporean anti-
specifically use the term ‘seat’. Countervailing money laundering legislation is sufficiently broad so
factors pointed to Nigeria as the seat of arbitration, as to apply to arbitrators in proceedings seated in
including the fact that the contract was governed Singapore.45 Failure to report is punishable by
Nigerian law and the arbitration was to be conviction and a fine.46
conducted according to the rules of the Nigerian
Arbitration and Conciliation Act. However, both the To the extent that they are incorporated into
arbitral tribunal40 and the English High Court41 national laws, international instruments relating to
determined that the seat of the arbitration was reporting obligations may become applicable to
Serious Crimes (Confiscation of Benefits) Act s 39(1) could

40Process & Industrial Developments Limited v Federal be broad enough to require an arbitrator to report
Republic of Nigeria, Procedural Order No. 12, (April 26 reasonable suspicions of a party’s corrupt activity. See also
2016). BETZ, supra note 6, at 285-6, noting that in Switzerland,
while prosecutors and magistrates have a duty to report,
41Process & Industrial Developments Limited v Federal arbitrators have a right to report, but may be incur civil
Republic of Nigeria [2019] EWHC 2241 (Comm), ¶ 87. liability for breach of contractual duty.
42 45
Process & Industrial Development Limited v. Federal See Hwang and Lim, supra note 45, at 48-9.
Republic of Nigeria, Federal High Court of Nigeria, Lagos
46
Judicial Division (May 24, 2016). Section 39(2) Corruption, Drug Trafficking and Other
Serious Crimes (Confiscation of Benefits) Act (Cap. 65A)
43 Process & Industrial Developments Limited v Federal [Singapore].
Republic of Nigeria [2019] EWHC 2241 (Comm), ¶ 43. See
also Powers, Duties and Jurisdiction of an Arbitral Tribunal
in NIGEL, PARTASIDES ET AL. (EDS.), supra note 31, at 310.
44See Michael Hwang and Kevin Lim, Corruption in
Arbitration – Law and Reality 8 ASIAN INT’L ARBITRATION J. 1,
48-49 (2019), arguing that duty of disclosure contained in
the Singaporean Corruption, Drug Trafficking and Other
10

arbitrators by virtue of the law of the seat. For Terrorist Financing and Transfer of Funds
example, the EU Anti-Money Laundering Directives (Information on the Payer) Regulations 2017. 50
aimed at combating money laundering and the Similarly, participation in litigation or forms of
financing of terrorism imposes a duty on legal alternative dispute resolution are also not typically
professionals to report suspicions of money considered to fall within the scope of regulated
laundering, however, it is commonly understood activity.51 This follows the decisions of the English
that there is an exemption for lawyers providing Court of Appeal, which specifically excluded
legal advice for the purpose of litigation.47 When lawyers advising parties in legal proceedings from
incorporating the Directives into domestic law, the scope of the reporting provisions in the UK
some national jurisdiction have specifically stated Proceeds of Crime Act. 52 While some argue that
that arbitrators are not subject to the Directives.48 arbitrators can be distinguished from lawyers such
that this decision would not apply to arbitrators,53
The UK has incorporated each of the EU Anti- this has yet to be tested in the courts.
Money Laundering Directives into its national
legislation.49 Like other jurisdictions, the UK has The UK has indicated that it does not consider
sought to maintain the balance between reporting settlements, negotiations, out of court settlements,
suspicious activity and ensuring legal professional alternative dispute resolution and tribunal
privilege, and accordingly has indicated that representation to constitute an ‘arrangement’ for the
generally the provision of legal advice will not be purposes of the Proceeds of Crime Act.54
characterised as ‘participation in a financial Furthermore, the UK Arbitration Act specifically
transaction’ such as to fall within the scope of grants arbitrators with immunity for acts or
regulated activity under the Money Laundering
47See Mourre, supra note 8, at 95; Thomas K. Sprange, <https://www.lawsociety.org.uk/topics/anti-money-

Corruption in Arbitration in DOMITILLE BAIZEAU AND RICHARD laundering/anti-money-laundering-guidance>.
KREINDLER (EDS), ADDRESSING ISSUES OF CORRUPTION IN
52
COMMERCIAL AND INVESTMENT ARBITRATION, 137, (2015) pp. The UK Proceeds of Crime Act creates an offence of
137 entering into or becoming concerned in an arrangement
that a person knows or suspects of facilitating the use of
48 Patricia Nacimiento, Tilmann Hertel, Catrice Gayer, criminal property. While this provision does apply to
Arbitration and Money Laundering: What are the lawyers in some contexts, the English Court of Appeal in
Obligations Placed on Counsel and Arbitrators and What Bowman v Fels [2005] EWCA Civ 226 has held it does not
Risks do they Face? KLUWER ARBITRATION (Nov. 10, 2017), apply to lawyers advising parties in legal proceedings.
<http://arbitrationblog.kluwerarbitration.com/2017/11/10/arb
53
itration-money- Sprange, supra note 48, at 137; BETZ, supra note 6, at
laundering/?doing_wp_cron=1597126526.6905949115753 51.
173828125> discussing the German Anti-Money
54
Laundering Act. See Legal Sector Affinity Group, Anti Money Laundering
Guidance, Law Society UK, 89, 90
49See Legal Sector Affinity Group, Anti Money Laundering <https://www.lawsociety.org.uk/topics/anti-money-
Guidance, Law Society UK, 13-14 laundering/anti-money-laundering-guidance>. Citing also
<https://www.lawsociety.org.uk/topics/anti-money- the decision in Bowman v Fels [2005] EWCA Civ 226. In
laundering/anti-money-laundering-guidance>. fact, the Guidance specifically states that “money-
laundering for the purposes of the Proceeds of Crime Act
50See Legal Sector Affinity Group, Anti Money Laundering cannot occur until after execution of the judgement or
Guidance, Law Society UK, 15-17 completion of the settlement”.
<https://www.lawsociety.org.uk/topics/anti-money-
laundering/anti-money-laundering-guidance>.
51
See Legal Sector Affinity Group, Anti Money Laundering
Guidance, Law Society UK, 15-17
11

omissions committed during in the discharge of their 2.4 Principles governing domestic courts’
duties, unless committed in bad faith.55 review and enforcement of arbitral
An in-depth analysis of money laundering is outside
awards
the scope of this paper. However, the above
discussion illustrates how one jurisdiction has tried Unlike other areas of law, once an arbitral tribunal
to balance reporting obligations in the context of issues an award, the parties cannot generally
legal professionals. Further analysis will need to be appeal against the tribunal’s decision. There are,
conducted to determine whether arbitrators are however, two further actions that parties can take in
subject to any such reporting obligations. We are relation to the decision – the first being set aside
not aware of any equivalent legal regimes that might proceedings, and the second being enforcement
place a duty on arbitrators to report suspicions of proceedings.
bribery. A party that is not satisfied with the award rendered
by an arbitral tribunal may seek to set aside the
Insofar as arbitrators do have a duty to report award. Set aside proceedings can only be
suspicions of corruption or money laundering by instigated in the jurisdiction in which the arbitration
virtue of the law of the seat, this duty is likely to be is seated, and the grounds for which an award may
in tension with duties of confidentiality typically be set aside are set out in domestic legislation
imposed by arbitral rules.56 While a duty to report specific to each jurisdiction. Enforcement
seem incompatible with their confidentiality proceedings on the other hand can be brought by a
obligations,57 in some cases the confidentiality party seeking to have a domestic court give effect
obligation is subject to a public policy exemption,58 to the arbitral award, such that the award will take
meaning arbitrators could be permitted to report on the status of a judgement within that jurisdiction.
despite the confidentiality obligation. The historical In practical terms, a successful party will commence
importance of confidentiality as a core principle of enforcement proceedings in situations where the
arbitration is reflected in the fact that there is no other party has failed to comply with the arbitral
known precedent of arbitrators reporting illegal award.
behaviour uncovered in the course of proceedings
to state authorities.59 Most jurisdictions’ arbitration laws enumerate the
grounds on which a court can set aside an award of
an arbitral tribunal seated in that jurisdiction and the
grounds on which a court can refuse to enforce an
award of an arbitral tribunal seated in any
jurisdiction. While set aside proceedings and
55 Section 29 UK Arbitration Act (1996). Lim, supra note 45, at 49-50, arguing that an arbitrator
disclosing of his/her own decision, rather than by legal
56Note that the Nigerian Arbitration Rules do not seem to compulsion, could potentially also fall within the public
impose a duty of confidentiality for arbitrators. policy exception to confidentiality.
57 59
Baizeau and Hayes, supra note 30, at 230. BETZ, supra note 6 ,at 285; Marcenaro, supra note 30, at
5.
58 Marcenaro, supra note 30, noting for example art. 30(1)
of the London Court of International Arbitration Rules,
which provides that confidentiality must be maintained
““save and to the extent that disclosure may be required of
a party by legal duty, to protect or pursue a legal right, or to
enforce or challenge an award in legal proceedings before
a state court or other legal authority.” See also Hwang and
12

enforcement proceedings are conceptually distinct, The concept of ‘public policy’ as a ground for
in most jurisdictions the grounds upon which a court refusing enforcement of arbitral awards is
may set aside an award and the grounds on which interpreted narrowly. Rather than referring to the
a court may refuse enforcement are very similar. specific policies in place in the jurisdiction where the
Historically, this similarity results from the enforcement proceedings are occurring, courts tend
widespread adoption of the 1958 New York to understand public policy as a reference general
Convention, which specifies the grounds on which notions of justice and morality, i.e. norms that are
a state may refuse to enforce a foreign arbitral widely held.64 This is often called ‘international
award. These limited grounds for refusing public policy’.
enforcement were then influential in the drafting of
national legislation dealing with the grounds for It is widely recognised that corruption is contrary to
setting aside an award. public policy.65 For this reason, domestic courts are,
generally, entitled to refuse to enforce an award
For example, section 68 of the UK Arbitration Act where corruption on the part of the investor has
1996 provides that an award may be set aside on been proven. However, there is some tension
the grounds of serious irregularity, including if the between this principle and courts’ broader pro-
award was ‘obtained by fraud’ or if ‘the award or the enforcement bias, on which basis courts respect the
way in which it [was] procured is contrary to public binding and final nature of arbitration and are
policy’.60 Where a party is seeking to enforce an reluctant to intervene too readily.66
award in the UK under the New York Convention,61
the UK Arbitration Act similarly sets out the grounds This tension is illustrated by the English
on which enforcement of an award may be Commercial Court’s decision in Sinocore
refused.62 As with set aside proceedings, a court International Co Ltd. V RBRG Trading (UK) Ltd, in
may refuse to enforce an award if it would be which the court noted that there is a strong
contrary to public policy to enforce the award.63 presumption that New York Convention Awards are
Similarly, most other jurisdictions provide that enforceable, and indicated that public policy
national courts have the discretion to refuse to defences were to be treated with extreme caution.67
enforce an arbitral award that is contrary to public Furthermore, the court noted a distinction between
policy. enforcing contracts for illegal conduct, which are
contrary to English public policy, and enforcing
contracts that are tainted by illegality (e.g. induced
60 Section 68(2)(g) UK Arbitration Act (1996). Symposium on New Directions in Anticorruption Law:
Dealing with Allegations of Corruption in International
61New York Convention on the Recognition and Arbitration 113 AJIL UNBOUND 341, 342 (2019); See
Enforcement of Arbitral Awards, Jun. 10, 1958, 330 Baizeau and Hayes, supra note 30, at 231..
U.N.T.S. 38 (1958).
66 See e.g. Gillies, supra note 65, at 27-8 citing Sumitomo
62 Section 103 UK Arbitration Act (1996). Corp v Parakopi Compania Maritima SA, 477 F Supp 737
(SDNY, 1979); Seven Seas Shipping (UK) Ltd v Tondo
63 Section 103(3) UK Arbitration Act (1996). Limitada, 99 Civ 1164 (DLC, 1999).
67 Sincore International Co Ltd v RBRG Trading (UK) Ltd
64Peter Gillies, Enforcement of International Arbitration [2017] EWHC 251 (Comm.), ¶ 27.
Awards – The New York Convention 9 INT’L TRADE AND
BUSINESS L. REV. 19, 39-40 (2004).
65See e.g. Union Fenosa Gas, S.A. v Egypt, ICSID Case
No. ARB/14/4/, Award, ¶. 7.48 (Aug. 31, 2018); World Duty
Free Company v Republic of Kenya, ICSID Case No. ARB/
00/7, Award ¶ 157 (Oct. 4, 2006); Lucinda A. Low,
13

by bribery), which is not contrary to English public tribunals to take transnational public policy that
policy.68 (It is important to note, at this point, that this were originally developed in the context of
case concerned an arbitration between private challenges to enforcement in national courts into
parties and that the alleged corruption differs account in their deliberations during the course of
somewhat from that alleged in P&ID v Nigeria.) the arbitral proceedings.71 Conceptually, such an
Where a party has raised issues of corruption approach is often justified on the basis that
before the tribunal and the tribunal dismissed the arbitrators have a duty to render an enforceable
allegations, it seems less likely that a course will award, and an award that violates public policy risks
refuse to enforce an award on public policy being unenforceable.72 From a broader policy
grounds, as enforcing courts are hesitant to reopen perspective, some also argue that arbitrators hold a
disputed questions of fact that have been ‘public responsibility to the administration of
considered and resolved by the tribunal.69 justice’73 such that they must be proactive in
identifying corruption, with others also pointing to
There are also questions about when a court will the broader effects on the legitimacy of international
allow a party to introduce new evidence of arbitration should arbitrators turn a blind eye to
corruption as part of its efforts to resist enforcement corruption.74
in situations where corruption was not raised before
the tribunal. If a party does not raise a matter during Reference to international public policy provides
the arbitration, this may be influential in a court tribunals with an addition ground for refusing to
deciding to exercise its discretion to enforce an decide disputes arising from corruptly-acquired
award, even if the party has proven one of the investments, beyond arguments based on the
grounds upon which refusal may be warranted.70 specifics of the applicable law. For example, in the
This approach accords with the pro-enforcement recent case of Spentex v Uzbekistan, a treaty-
bias of many domestic courts, with the rationale based ISA, the tribunal cited the OECD Convention
being that arbitrations are intended to be final and on Bribery and UNCAC to show that particular acts
binding, and, therefore, that the losing party should of bribery were contrary to transnational public
not be able to raise new matters at the enforcement policy.75 On this basis it refused to hear the
stage that could have been raised during the investor’s claims.
arbitration itself.
While there have only been limited instances of

parties successfully challenging the enforcement of
arbitral awards on the basis of the public policy
exception, there is an emerging tendency for
68 72
Sincore International Co Ltd v RBRG Trading (UK) Ltd Baizeau and Hayes, supra note 30, at 229; Marcenaro,
[2017] EWHC 251 (Comm.) ¶¶ 29- 37. supra note 30, at 3; Mourre, supra note 8, at 110.
69 73
See e.g. Westacre Investments Inc. v Jugoimport-SDPR Baizeau and Hayes, supra note 30, at 229
Holding Co. Ltd and others [1999] 3 All ER 864, 887;
74
Omnium de Traitement et de Valorisation SA v Hilmarton Sprange, supra note 48, at 135.
75
Ltd., [1999] 2 All ER (Comm) 146 Discussed in BETZ, supra note 6, at 130. The decision is
not publicly available
70 Gillies, supra note 65, at 27-28.
71E.g. World Duty Free Company v Republic of Kenya,
ICSID Case No. ARB/ 00/7, Award ¶ 138 (Oct. 4, 2006).
14

3. Examples of arbitral tribunals’ exercising oversight or enforcement functions in
relation to arbitral proceedings. We are not aware of
handling of allegations and any other publicly known cases involving specific
allegations of corruption on the part of state’s legal
suspicions of corruption counsel in investor-state arbitration, so our analysis
focuses on cases that are somewhat analogous.
In the case of P&ID v Nigeria, Nigeria alleges that We begin by explaining why we think this case is
the arbitration was a ‘sham’.76 The allegation is that better understood as involving allegations of bribery
‘from the outset, P&ID’s intent was to transform the than allegations of money-laundering. We then
GSPA into a claim against the FRN [Federal considered three increasingly complex factual
Republic of Nigeria], which it could then attempt to scenarios in which tribunals and courts have
enforce through arbitration.’77 Nigeria alleges that considered allegations of corruption.
Ministry of Petroleum corruptly facilitated this plan,
including by failing to contest the arbitration
3.1 Has Nigeria alleged bribery, money-
vigorously: ‘The Ministry of Petroleum’s handling of
the FRN’s defense at the jurisdiction and liability laundering or both?
phases is notable for its suspicious failure to
present any vigorous defense.’78 An initial question is whether the conduct that
Nigeria is alleging amounts to bribery and/or
We do not take any position on whether these money-laundering. Nigeria clearly alleges ‘a series
allegations are true. Rather, in this section we of bribery schemes’ involving bribes paid by P&ID
consider how such allegations or suspicions might to Ministry of Petroleum officials.79 Nigeria also
be handled by arbitral tribunals and by courts makes allegations of money-laundering against
P&ID.80 In characterising the arbitration as a ‘sham’,
76 Federal Republic of Nigeria, Memorandum of Law in States District Court, Southern District of New York, 13,
Support of Application for an Order Pursuant to 28. U.S.C. (Mar. 25 2020).
§1782(a) Authorizing Applicants to Conduct Discovery in
79
this District for Use in Foreign Judicial Proceedings, In Re: Federal Republic of Nigeria, Memorandum of Law in
Ex Parte Application of the Federal Republic of Nigeria and Support of Application for an Order Pursuant to 28. U.S.C.
Abubakar Malami, the Attorney General of the Federal §1782(a) Authorizing Applicants to Conduct Discovery in
Republic of Nigeria, Case No: 1:20-mc-00169- LGS, United this District for Use in Foreign Judicial Proceedings, In Re:
States District Court, Southern District of New York, 12, Ex Parte Application of the Federal Republic of Nigeria and
(Mar. 25 2020). Abubakar Malami, the Attorney General of the Federal
Republic of Nigeria, Case No: 1:20-mc-00169- LGS, United
80
this District for Use in Foreign Judicial Proceedings, In Re: Federal Republic of Nigeria, Memorandum of Law in
Ex Parte Application of the Federal Republic of Nigeria and Support of Application for an Order Pursuant to 28. U.S.C.
Abubakar Malami, the Attorney General of the Federal §1782(a) Authorizing Applicants to Conduct Discovery in
Republic of Nigeria, Case No: 1:20-mc-00169- LGS, United this District for Use in Foreign Judicial Proceedings, In Re:
States District Court, Southern District of New York, 12, Ex Parte Application of the Federal Republic of Nigeria and
(Mar. 25 2020). Abubakar Malami, the Attorney General of the Federal
this District for Use in Foreign Judicial Proceedings, In Re:
Ex Parte Application of the Federal Republic of Nigeria and
Abubakar Malami, the Attorney General of the Federal
15

Nigeria implies that the arbitration itself was an v Nigeria if Nigeria had raised the allegations of
instance of money-laundering.81 corruption during the arbitration. The legal issues
raised by this scenario are now relatively settled. In
We have doubts about this characterisation of the contract-based ISA, the tribunal should apply the
arbitration, even if the facts alleged by Nigeria are applicable law of the contract. In most cases, the
assumed to be true. These allegation differ from applicable law of the contract will provide that the
examples of money-laundering discussed in the contract is either void or voidable at innocent party’s
literature on arbitration, in which the arbitration is election if bribery is proven. In investor-state ISA, if
used as a vehicle to legitimise illegally obtained bribery is proven the investor’s claims will usually
funds that are already held by one party through an be dismissed on the grounds that the investor did
award ordering the transfer of those funds to a not make a lawful ‘investment’ that is entitled to the
related party.82 Moreover, characterisation of the protection of the treaty. In both contract-based and
P&ID v Nigeria arbitration as money-laundering treaty-based ISA, transnational public policy would
suggests that both parties to the arbitration had the provide an additional and mutually reinforcing
common intention to use the arbitration for this ground for dismissing the investor’s case. To be
purpose. In contrast, in P&ID v Nigeria, the central sure, such cases may raise complex evidentiary
allegation is that officials within the Ministry of issues relating to the standard the proof and the
Petroleum obtained a private benefit by acting weight to be given to circumstantial ‘red flags’ of
contrary to the interests of the Ministry and of corruption.83 But the practical consequences of
Nigeria. There is no suggestion that Nigeria bribery, if proven, are relatively clear.
intended to engage in money-laundering. A more
detailed analysis of the issue of money-laundering An example of a ‘simple’ case of corruption in ISA
is outside the scope of this paper and may benefit is the case of World Duty Free v Kenya. This was a
from further analysis. contract-based investor-state arbitration, where the
claimants argued that Kenya had breached the
3.2 The simple case: the state alleges in contract to operate airport duty-free stores, and had
the arbitration that the investor obtained illegally taken their property. During the course of
the arbitration, Kenya argued that contract had
a contract/investment by paying bribes been procured by corruption and was therefore
void. The investor openly conceded that it had
We begin with a simple case of corruption in ISA, in made a payment to Kenya’s then-President, but
which a state alleges that the investor obtained a argued that this was ‘a personal donation … to be
contract or other assets constituting its investment used for public purposes’ in line with Kenyan
by payment of a bribe. This is the scenario that cultural practices of gift giving.84 Without referring to
would have confronted the arbitral tribunal in P&ID
81 83
Federal Republic of Nigeria, Memorandum of Law in Discussed in Section 2.3, above.
Support of Application for an Order Pursuant to 28. U.S.C.
84
§1782(a) Authorizing Applicants to Conduct Discovery in World Duty Free Company v Republic of Kenya, ICSID
this District for Use in Foreign Judicial Proceedings, In Re: Case No. ARB/ 00/7, Award, ¶ 133 (Oct. 4, 2006).
Ex Parte Application of the Federal Republic of Nigeria and
Abubakar Malami, the Attorney General of the Federal
States District Court, Southern District of New York, 11, 16
(Mar. 25 2020).
82E.g. Mourre, supra note 8 ,at 95; BLACKABY AND
PARTASIDES, supra note 31, at 332-333.
16

any legal standard, the tribunal characterised this is offered by B (acting on behalf of Y) to A
payment as a bribe. (acting on behalf of X) which causes or
contributes to the making of a contract … X
Having established that a bribe was paid, the legal is entitled at his [sic] option to rescind the
question was then the consequences of the bribe contact89
for the contractual dispute.85 The tribunal analysed
the issue under two different, but mutually In other words, under English law the contact in
reinforcing, legal frameworks. The primary rubric question was not automatically void but, rather,
that the tribunal applied was international public voidable at Kenya’s election. The tribunal held that
policy. It observed that states can deny the Kenya rescinded the contract through its pleadings
recognition and enforcement of foreign arbitral in the arbitration.90
awards based on their own conception of public
policy.86 Notwithstanding the narrow conception of 3.3 Suspicions of corruption: arbitral
public policy that normally prevails in international tribunals’ investigation of corruption
arbitration, the tribunal argue that a consensus had
emerged among states that corruption was contrary
where the issue is not raised by either of
to public policy. It cited international treaties, the parties
national court decisions and arbitral awards as
evidence. This ‘transnational public policy’ led the More complex issues arise when corruption is not
tribunal to conclude that claims based ‘on contract raised by either of the parties to the arbitration. In
obtained by corruption cannot be upheld by this these situations, a question arises as to whether the
tribunal’.87 tribunal should investigate the possibility of
corruption of its own motion.91 This is the situation
A supplementary basis for the decision was that faced the arbitral tribunal in P&ID. The tribunal
grounded in the applicable law. The contract in noted that, in their submissions, Nigeria’s lawyers:
question was governed by English law and Kenyan
law. The tribunal held that Kenyan law was Described the holder of the office [of
materially identical to English law and based its Minister of Petroleum Resources] at the
supplementary analysis on rules of English contract time of the GSPA as having been a
law. Both parties and the tribunal agreed that a “friendly” Minister who purported to commit
basic principle of English law is that:88 the Government to obligations and
concessions which exceeded his powers.92
If, in the course of negotiating a contract
between X and Y, an improper inducement
85 89
World Duty Free Company v Republic of Kenya, ICSID World Duty Free Company v Republic of Kenya, ICSID
Case No. ARB/ 00/7, Award, ¶ 134-36 (Oct. 4, 2006). Case No. ARB/ 00/7, Award, ¶ 164 (Oct. 4, 2006).
86 90
World Duty Free Company v Republic of Kenya, ICSID World Duty Free Company v Republic of Kenya, ICSID
Case No. ARB/ 00/7, Award, ¶ 138 (Oct. 4, 2006). Case No. ARB/ 00/7, Award, ¶ 188 (Oct. 4, 2006).
87World Duty Free Company v Republic of Kenya, ICSID 91 The Latin term sua sponte – ‘of its own accord’ – is used
Case No. ARB/ 00/7, Award, ¶ 157 (Oct. 4, 2006). in the literature to describe this situation.
88 92
World Duty Free Company v Republic of Kenya, ICSID Process & Industrial Developments Limited v Federal
Case No. ARB/ 00/7, Award, ¶ 163 (Oct. 4, 2006). Republic of Nigeria, Part Final Award on Liability, ¶41 (Jul.
15, 2015).
17

Considered in light of other aspects of the case – contract, under which the claimant would use his
including the lack of a tender process prior to the influence in Argentina to obtain business for the
conclusion of the contract, P&ID’s apparent lack of respondent. The respondent, in turn, would pay a
experience in the gas sector, Nigeria’s apparent 10% commission to the claimant on all contracts
failure to begin carrying out any of its obligations thereby obtained. When the respondent refused to
under the contract once the contract had been pay a commission on some of its contracts in
concluded, P&ID’s offshore corporate structure, and Argentina, the claimant initiated arbitration.
the wider history of corruption in Nigeria’s resource
sector – this submission might well have been While neither party argued that corruption was a
enough to raise suspicions of the possibility of legally relevant issue,94 the respondent’s witnesses
corruption. From the documents relating to the in the case admitted that the commission was
arbitration that are publicly available, it does not intended to be used to pay bribes to procure
appear that the tribunal took any active steps to contracts for the respondent. The claimant does not
investigate the possibility of corruption. appear to have disputed this. Accordingly, no
further factual inquiry was required on the part of the
As we have seen in Section 2, there is an emerging arbitrator. Instead, the central question was the
consensus that arbitral tribunals are entitled to legal consequences of this fact for the contractual
investigate suspicions of corruption of their own dispute. Holding that a contract for bribery was
motion, insofar as these suspicions relate to the contrary to international public policy, the arbitrator
resolution of the dispute – for example, because stated that he had no jurisdiction to decide the
such suspicions would, if proven, have implications dispute.95
for the validity of a contract on which the investor’s
claims are based. It is less clear whether arbitral The second case is Metal-Tech v Uzbekistan, a
tribunals are under an obligation to initiate such treaty-based investor-state arbitration. Strictly
investigations. In practical terms, there are few speaking, the case is not actually an example of a
publicly known examples of cases where tribunals tribunal investigating corruption of its own motion,
have investigated corruption of their own motion. as the host state had argued in its written pleadings
This suggests a continuing reluctance on the part of that ‘the Claimant engaged in corruption and made
tribunals to engage actively with the implications of fraudulent and material misrepresentations to gain
corruption. approval for its investment.’96 The precise nature of
this original allegation of corruption is unclear
We have found only two cases in which arbitral because, as is common in ISA, the parties’ written
tribunals have investigated corruption of their own submissions and most other documents relating to
motion,93 both of which differ from P&ID v Nigeria to the case remain confidential. What is clear,
some extent. The first is ICC Case No 1110 of 1963. however, is that evidence that came to light in the
This was an arbitration between two unnamed hearings marked a crucial turning point in the case.
private parties, not an investor-state arbitration. The At the hearing, the investor’s Chairman and CEO
claimant and the respondent had entered into a admitted paying several million dollars to
93 96
Baizeau and Hayes, supra note 30, at 260. Metal-Tech Ltd v. Republic of Uzbekistan, ICSID Case
No. ARB/10/3, Award, ¶¶ 110(i) (Oct. 4, 2013).
94ICC Award No. 1110 of 1963 by Gunnar Lagergren,
republished in ARBITRATION INT’L 282, 291 (1994).
95 Ibid.
18

‘consultants’ to engage in ‘lobbying’ around the time 3.4 Allegations of corruption that were
that investment was made.97 The tribunal not raised or considered in the
‘considered it its duty to inquire about the reasons
for such payment.’ For this reason, it ‘exercised its
arbitration are raised after the conclusion
ex officio powers to call for additional testimony and of the arbitration
evidence.’98
The situation is even more complex when
This additional evidence raised a number of ‘red allegations of corruption are raised for the first time
flags’ of corruption that the claimant was unable to following the conclusion of the arbitration. In this
explain.99 These included the large amounts of the scenario, the innocent party’s failure to raise
payments, the absence of explanation or allegations of corruption in the arbitration calls for
documentation to support the investor’s argument some explanation – for example, the appearance of
that the consultants had provided legitimate new information that could not have been
services, the fact that one of the consultants was uncovered through diligent inquiries during the
the Prime Minister’s brother, and the fact the course of the arbitration. Nigeria has argued that its
consultants were paid indirectly through offshore failure to raise the issue of corruption in the
companies. On this basis, the tribunal held that arbitration was due to the fact that the Ministry of
‘corruption is established to an extent sufficient to Petroleum Resources was also responsible for the
violate Uzbekistan law in connection with the defence of the arbitration. We are not aware of any
establishment of the Claimant’s investment in other cases in which a state defending an investor-
Uzbekistan.’100 Because the investment treaty in state arbitration has made a belated allegation of
question required investments to be ‘implemented corruption on this, or any other, basis.
in accordance with’ Uzbek law, the claim failed for
lack of jurisdiction.101 An initial question is whether the arbitral award
could be reopened. The basic principle is the
Relevantly for the analysis of the decision in P&ID v arbitral awards are final and binding on the
Nigeria, on the basis of the case documents that are parties.102 Subject to limited exceptions, the
publicly available, it seems that Uzbekistan did not ‘mandate of the arbitral tribunal terminates with the
provide any direct evidence of receipt of bribes by termination of the arbitral proceedings.’103 In
Uzbek officials. This does not seem to have been arbitrations conducted under the UNCITRAL
an obstacle for the tribunal in reaching its Arbitration Rules (on which the Nigerian arbitration
conclusion. rules are based), these limited exceptions include
the power to correct or interpret the award. They do
not include power to revise the award in light of new
97 101
Metal-Tech Ltd v. Republic of Uzbekistan, ICSID Case Metal-Tech Ltd v. Republic of Uzbekistan, ICSID Case
No. ARB/10/3, Award, ¶¶ 240 (Oct. 4, 2013). No. ARB/10/3, Award, ¶¶ 372 (Oct. 4, 2013).
98 102
Metal-Tech Ltd v. Republic of Uzbekistan, ICSID Case UNCITRAL Arbitration Rules, art 34(2).
No. ARB/10/3, Award, ¶¶ 241 (Oct. 4, 2013).
103 UNCITRAL Model Law art 32(3).
99Metal-Tech Ltd v. Republic of Uzbekistan, ICSID Case
No. ARB/10/3, Award, ¶¶ 293 et seq. (Oct. 4, 2013).
100
Metal-Tech Ltd v. Republic of Uzbekistan, ICSID Case
No. ARB/10/3, Award, ¶¶ 372 (Oct. 4, 2013).
19

evidence.104 (Arbitrations conducted under the Paris Court of Appeal allowed Kyrgyzstan to
ICSID Convention are an important exception in this introduce new evidence of money-laundering on the
respect.)105 In arbitrations conducted under the part of the investor and subsequently granted
UNCITRAL Arbitration Rules, tribunals can issue an Krygyzstan’s application to set aside the arbitral
additional award but only on ‘claims presented in award on that basis.107 (However, in that case, the
the arbitral proceedings but not decided by the investor’s alleged involvement in money-laundering
arbitral tribunal.’106 This power to issue an additional had been raised as an issue by Kyrgyzstan in the
award does not appear to be relevant to the arbitration.)
situation in P&ID v Nigeria, where the investor’s
claims were decided by the arbitral tribunal and This leaves the possibility of resisting enforcement
corruption was not raised as an issue and, in any of the award in jurisdiction(s) where the investor
case, the deadline for doing so has long since seeks enforcement. In the case of Belokon v
passed. Kyrgyzstan, it seems that Kyrgyzstan sought to
introduce the same new evidence of money-
A state making belated allegations of corruption laundering in concurrent court proceedings relating
would then be left with the options of seeking to to enforcement of the award in Ontario, Canada.
have the award set aside in the courts of the seat of The Ontario court struck out this evidence as
arbitration, or resisting enforcement in any irrelevant.108 The contrast between the decisions of
jurisdiction(s) in which the investor seeks to enforce the Paris and Ontario courts illustrates the
the award. The outcome of any attempt to set-aside possibility of differences in approach to new
the award will depend on the law of the seat. Courts evidence between jurisdictions, as well as the
in most jurisdictions would accept corruption as a possibility of differences in the standards applied in
basis to set aside an award on public policy set aside and enforcement proceedings.
grounds. However, the questions of whether the
courts of the seat will allow a state to make new In the case of P&ID v Nigeria, P&ID commenced
arguments that were not made in the arbitration, proceedings to enforce the award in the UK in 2018.
and whether the courts of the seat will revisit In August 2019, the English High Court granted
findings of fact made by the arbitral tribunal, P&ID leave to enforce the award.109 However,
including by allowing the introduction of new Nigeria is now seeking to instigate set-aside
evidence, raise more difficult issues. proceedings and to raise allegations of
corruption.110 These set-aside proceedings are also
In the recent French court proceedings arising out being pursued in English courts, given that London
of the treaty-based ISA Belokon v Kyrgyzstan, the was the seat of arbitration. If Nigeria were
104David D. Caron and Lucy F. Reed, Post Award laundering-allegations-by-kyrgyzstan-against-latvian-

Proceedings Under the UNCITRAL Arbitration Rules, 11 investor-resurface-in-paris-cour-dappel/>.
(1995) ARBITRATION INT’L 429.
109
Process & Industrial Developments Limited v Federal
105 ICSID Convention, art. 51. Republic of Nigeria [2019] EWHC 2241 (Comm)
106 110
UNCITRAL Arbitration Rules, art 39(1); similarly See Order made by the Rt. Hon. Lord Justice Flaux, in
UNCITRAL Model Law, art 33(3). the matter of Process & Industrial Developments Limited v
Federal Republic of Nigeria, 20 January 2020, where it was
107 Discussed in Gaillard, supra note 21, at 7-8. stated that the proper grounds for raising a fraud challenge
108Yelena Burova, Money Laundering Allegations by
Kyrgyzstan against Latvian Investor Resurface in Paris
Cour d’Appel CIS ARBITRATION FORUM (Feb. 28, 2017)
<http://www.cisarbitration.com/2017/02/28/money-
20

successful in having the award set-aside, the effect Jugoimport argued that the contract was void as
would be to preclude the enforcement of the award Westacre had been using the consultancy fees to
in the UK and to make enforcement of the award in bribe Kuwaiti officials. Jugoimport cited
any other jurisdiction difficult, if not impossible. For circumstantial evidence that would now be regarded
Nigeria, a significant practical obstacle to having the as ‘red flags of corruption’ – the very large
arbitral award set aside is that an application to set consultancy fee of 15-20% on the arms sales and
aside an award in English courts must be brought that Westacre was an ‘international paper vehicle’
within 28 days of the award, although this deadline domiciled in Panama.114 The tribunal appears to
can be extended for good reason. 111 have taken a dim view of Jugoimport’s failure to
raise the issue of corruption earlier. It observed that
Relevantly, on 4 September 2020, after the ‘it is up to the defendant to present the fact of bribery
research for this paper had been completed, the and the pertaining evidence within the time limits
English High Court granted to Nigeria an extension allowed to him for presenting facts.’115 The tribunal
of time to initiate set aside proceedings of the held in favour of Westacre and ordered Jugoimport
arbitral award.112 Given the standard period in to pay the fees owing under the consultancy
which to initiate such proceedings under the UK contract.
Arbitration Act is 28 days, the decision to grant an
extension of time is unprecedented. However, an Westacre then sought to enforce the award in the
extension was seen as warranted given the strong English proceedings. Jugoimport resisted
prima facie evidence of corruption submitted by enforcement of the award on the grounds that
Nigeria. As a result, it now seems that the questions enforcement of a contract for bribery would be
of corruption will receive a full examination through contrary to English public policy. Jugoimport sought
the set-aside proceedings, including through the to strengthen its case through new evidence in the
introduction of new evidence. form of an affidavit from its legal counsel purporting
to contain much more detail about the corrupt
Some guidance on how the English courts might relationships between the various parties to the
approach such corruption allegations at set-aside arms deals. Westacre was successful at first
proceedings can be found in Westacre v instance and the case then went on appeal to the
Jugoimport.113 The case was not an investor-state Court of Appeal.
arbitration. Rather, it related to consultancy contract
by which Jugoimport engaged Westacre to assist it By a majority of 2 -1, the Court of Appeal again held
in concluding arms sales contracts with Kuwait. for Westacre. All three judges appear to have
When Jugoimport purported to terminate the accepted the premise that the supposedly ‘new’
consultancy contract, Westacre commenced evidence was material that Jugoimport ‘had every
arbitration. At a late stage in the arbitration, opportunity of raising before the arbitrators’.116 The
114
is through set aside proceedings, rather than an application Ibid, at 185-6.
to rely upon a new ground of appeal in the enforcement
115
proceedings. Cited in ibid, at 187.
111 116
UK Arbitration Act (1996), s 70. Westacre Investments Inc. v Jugoimport-SDRP Holding
Co Ltd [1999] EWCA Civ 1401 ¶864 per Waller LJ
112
Federal Republic of Nigeria v Process & Industrial (dissenting).
Developments Limited [2020] EWHC 2379 (Comm)
113
We have not yet been able to find a copy of the arbitral
award. This summary is based on BETZ, supra note 6.
21

reasons for the majority’s decision lay in respect for
the finality of the arbitral award: ‘From the award
4. Policy analysis and a reform
itself it is clear that bribery was a central issue. The agenda
allegation was made, entertained and rejected.’117
However, one qualification noted by Mantell LJ in The case of P&ID v Nigeria highlights policy
the majority was that there was ‘no reason to concerns about the way that investor-state
suspect collusion or bad faith in the obtaining of the arbitration intersects with corruption. These
award’,118 suggesting that the outcome could have concerns arise regardless of whether Nigeria’s
been different if collusion had been proven. The belated allegations of corruption are true (a
dissenting judge, in contrast, emphasized the question on which we take no position).
gravity of the issue of corruption and the importance
of ensuring that allegations of corruption were If Nigeria’s allegations of corruption are true, at least
properly tested ‘[t]he arbitrator simply did not have insofar as they relate to the conclusion of the
an opportunity of considering the case as now underlying contract with P&ID, then international
made, and whatever their suspicion, the majority did arbitration has allowed an investor to convert a
not feel it in their place to make inquiries.’119 series of corrupt interactions with officials in the
Nigerian Ministry of Petroleum Resources into an
The facts in P&ID v Nigeria differ from Westacre in English court order for almost USD 10 billion in
several respects. For one, the issue of corruption damages. Given Nigeria’s financial position, it is
was not raised before the arbitral tribunal in P&ID v unlikely this amount will ever be paid in full.
Nigeria. Moreover, Nigeria now alleges collusion However, to the extent that it is paid even in part,
between its lawyers and P&ID in the arbitration, the burden will fall on Nigerian citizens and
which was not an allegation that was made in taxpayers, not on the allegedly corrupt officials of
Westacre. These differences might provide grounds the Ministry of Petroleum Resources.
for distinguishing Westacre. Moreover, Westacre
was a decision concerning the enforcement of an If Nigeria’s belated allegations are false, then the
arbitral award. Justice Cranston’s decision of 4 arbitral tribunal’s apparent failure to investigate ‘red
September 2020 suggests that English courts might flags’ of corruption relating to the underlying
be more willing to consider the substance of contract has increased the length, cost and
corruption allegations in the context of set aside complexity of subsequent legal proceedings. This
proceedings. Judicial attitudes towards corruption outcome has left all parties worse off than they
may also have evolved somewhat over the past would be if the issue had been thoroughly
twenty years. On the other hand, Nigeria faces investigated and the allegations dismissed. If false,
additional obstacles beyond those facing the belated allegations of corruption have allowed
Jugoimport. Most obviously, English courts have the Nigerian state to divert attention from other
already ordered the enforcement of the P&ID award questions that might otherwise be being asked – for
and, despite contesting the enforcement example, questions about lack of state capacity to
proceedings before Justice Butcher, Nigeria failed negotiate and manage resource contracts, and to
to raise allegations of corruption. adequately defend the state’s interests in
subsequent legal disputes. Even if the allegations of
117
Westacre Investments Inc. v Jugoimport-SDRP Holding
119
Co Ltd [1999] EWCA Civ 1401 ¶ 887 per Mantell LJ. Westacre Investments Inc. v Jugoimport-SDRP Holding
Co Ltd [1999] EWCA Civ 1401 ¶885 per Walle J
118
Westacre Investments Inc. v Jugoimport-SDRP Holding (dissenting).
Co Ltd [1999] EWCA Civ 1401 ¶887 per Mantell LJ.
22

corruption are entirely false, the catastrophic not subject to timely public scrutiny. Such
outcome of the case for Nigeria raises urgent scrutiny might increase the pressure on a
questions about how its natural resources are state to provide an account of its own
governed, including the question of whether it is conduct, including the circumstances in
wise to agree to resolve contractual disputes which a contract with a foreign investor was
through international arbitration. negotiated and concluded. Depending on
the procedural rules governing amicus
4.1 Arbitration doctrine vs. political curiae submissions and third party
economy intervention, transparency of proceedings
might also allow participation of other actors
in the case. Procedural rules governing
In order to formulate and justify proposals for
arbitration normally deal with the question of
reform, it is necessary to consider why the tribunal
third party intervention through joinder
in P&ID v Nigeria does not appear to have
explicitly. There are some differences
investigated red flags of corruption that were
between rules but, generally speaking, third
present in that case. Our discussion in Section 2
parties will only be joined in limited
and 3 points to some possible explanations:
circumstances when they have a direct
interest in the dispute.121 In contrast,
- Arbitration is a mechanism for resolving
procedural rules governing arbitration tend
disputes based on parties’ consent. For this
not to deal explicitly with the question of
reason, tribunals have historically confined
amicus curiae. In Methanex v Unites States,
themselves to deciding issues raised by the
the arbitral tribunal held that it had the
parties. This is reflected in the (outdated)
power to accept written amicus curiae
view that ‘it is not the duty of an arbitral
submissions, in its discretion, as a result of
tribunal to assume an inquisitorial role and
its wider powers to control the conduct of
to search officiously for evidence of
the proceedings.122 Although this was a
corruption where none is alleged.’120
treaty-based ISA, this discretion to allow
amicus curiae would appear to be equally
- Parties in legal proceedings, including
relevant to contract-based ISA conducted
arbitration, are represented by legal
under the same procedural rules.
counsel. Counsel are assumed to ‘speak
for’ the parties. For this reason, the
- Legal doctrine, particularly international
possibility that legal counsel may
doctrine, tends to see the state as a unitary
themselves be part of a corrupt conspiracy
actor, rather than a site of political
or constrained by their corrupt superiors
contestation between groups. These habits
from vigorously defending their client raises
of thought can encourage arbitrators to
difficult issues.
attribute corruption and incompetence on
the part of government officials to the state
- Confidentiality of arbitral proceedings
itself. This way of seeing the world makes
means the conduct of parties and counsel is
120NIGEL BLACKABY AND CONSTANTINE PARTASIDES, REDFERN

AND HUNTER ON INTERNATIONAL ARBITRATION, 153 (1999, 3rd 122 Methanex v United States of America, Decision of the
edition). tribunal on Petitions from Third Persons to Intervene as
‘amici curiae’, 15 January 2001.
121
See, e.g. UNCITRAL Arbitration Rules (2013) art. 17(5);
LCIA Rules (2020) art. 22(1)(x).
23

arbitrators less sympathetic to a state’s of Petroleum Resources lacked this power)
allegations of bribery on the part of the as ‘technical in the highest degree’.124 To be
investor, because such allegations can be sure, it is not clear whether either of
perceived as a state raising its own Nigeria’s arguments was well-founded as a
misconduct in having accepted a bribe to matter of Nigerian law in this case. But the
defeat a claim against it. Likewise, these way these arguments were handled by the
habits of thought encourage arbitrators to tribunal failed to recognise the possibility
see belated allegations of corruption as a that substantive and procedural limits on
last-ditch litigation tactic of a state aiming to government officials’ power to enter into
avoid accountability, rather than as an contracts may serve important public
outcome of complex internal processes that purposes.
might have made it difficult for legal counsel
acting for that state to explicitly allege - Arbitration is, historically, a mechanism for
corruption earlier in the proceedings. resolving disputes between parties on the
same legal plane – for example, disputes
- Arbitrators may lack familiarity with the between two private actors or disputes
political economy of the host state. between two states. Investor-state
(Although, in P&ID v Nigeria, it is important arbitration, however, involves a dispute
to acknowledge that one of the arbitrators between a private actor and a state. The
was the former Nigerian Attorney-General, fact that states have powers and
who might be expected to have had some responsibilities that are distinct from those
familiarity with these issues.) of private actors has provided the
justification for significant structural reforms
- Arbitrators may lack familiarity with the laws of treaty-based ISA over the past two
of the host state and may have a tendency decades, including through the introduction
to view arguments based on the law host of much greater transparency of
state as technical and irrelevant, even if the proceedings and new rules allowing the
purpose of such laws is to prevent participation of amicus curiae under certain
corruption or implement a system of circumstances. None of these reforms have
oversight over decisions relating to public been extended to contract-based ISA, as
resources. For example, in the Partial yet.
Award of June 2014, the tribunal gave short
shrift to Nigeria’s argument that the Ministry 4.2 An agenda for reform: the need for
of Petroleum Resources possessed the transparency in contract-based ISA
capacity to enter into contracts on behalf of
the Government of Nigeria.123 In the Partial
Introducing greater transparency in investor-state
Award of July 2015, the tribunal described
arbitration is an urgent reform priority. While there
Nigeria’s argument that only the Nigerian
may be room for legitimate debate about whether
National Petroleum Corporation possessed
disputes like P&ID v Nigeria should ever be
the power to bind Nigeria in relation to gas
resolved through international arbitration, there are
contracts (and, therefore, that the Ministry
no legitimate grounds for the view that such
123 124
Process & Industrial Developments Limited v Federal Process & Industrial Developments Limited v Federal
Republic of Nigeria, Part Final Award on Jurisdiction, ¶¶ Republic of Nigeria, Part Final Award on Jurisdiction, ¶¶ 48
39-41 (Jun. 3, 2014). (Jun. 3, 2014).
24

disputes should continue to be resolved through arbitration should be published throughout the
international arbitrations conducted in secret. proceedings and that the tribunal’s hearings should
Greater transparency will not resolve all the be open to the public. Both principles are subject to
problems identified in the foregoing paragraphs, but exceptions where necessary to protect confidential
it can ameliorate several of the most pressing information.
concerns. The movement to establish transparency
as the norm in treaty-based ISA over the past two Such reforms could be implemented through
decades provides a direct model for such reforms. concerted action by several different actors across
The fact that these reforms have not, as yet, been multiple fora. States such as Nigeria could pass
extended to contract-based ISA is due to domestic laws to ensure that the state’s capacity to
idiosyncratic factors relating to how the consent to arbitration in future contracts is limited to
transparency debate in treaty-based ISA evolved arbitration conducted according to minimum
over time, not due to considered arguments that requirements of transparency. Existing contracts
contract-based ISA should be exempt from the could be renegotiated to ensure consistency with
same level of transparency as treaty-based ISA. this new approach, although to be practical such an
approach should prioritise contracts above a certain
The rationale for transparency in contract-based threshold amount in sectors where the risk of
ISA is the same as the rationale for transparency in corruption is highest. National arbitration legislation
treaty-based ISA: such arbitrations affect public could be amended to mandate transparency in
interests and it cannot be assumed that those contract-based ISA. Arbitral institutions could
appearing on behalf of the state in the proceedings amend their procedural rules to the same effect
adequately represent such public interests. In the (pressure may need to be brought to bear on them
context of allegations of corruption specifically, to do this).
transparency is an important mechanism to address
situations in which all those involved in an investor-
state arbitration have private incentives to avoid
raising the issue of corruption. That an investor may
have private interests in avoiding investigation into
corruption is obvious. Those representing the state
may also have a private incentive to avoid
investigation of corruption either because they are
implicated in the original acts of corruption
themselves or out of fear of retribution from more
powerful officials who were engaged in the original
acts of corruption.
In practical terms, the 2014 UNCITRAL Rules on

Transparency in Treaty-Based Investor-State
Arbitration provide a model for what greater
transparency in contract-based investor-state
arbitration could look like.125 These rules establish
the basic principles that documents relating to the
125UNCITRAL, UNCITRAL Rules on Transparency in <https://www.uncitral.org/pdf/english/texts/arbitration/rules-

Treaty-Based Investor-State Arbitration (2014) on-transparency/Rules-on-Transparency-E.pdf>.
25

“Anti-Corruption Helpdesk Answers provide practitioners around the
world with rapid on-demand briefings on corruption. Drawing on
publicly available information, the briefings present an overview of a
particular issue and do not necessarily reflect Transparency
International’s official position.”
Transparency International
International Secretariat
Alt-Moabit 96
10559 Berlin
Germany
Phone: +49 - 30 - 34 38 200

Fax: +49 - 30 - 34 70 39 12
[email protected]
www.transparency.org
blog.transparency.org
facebook.com/transparencyinternational
twitter.com/anticorruption
26
Transparency International chapters can use the Helpdesk free.

Email us at [email protected]

Corruption-and-Arbitration 2020 PR

Uploaded by

Copyright:

Available Formats

Corruption-and-Arbitration 2020 PR

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Corruption-and-Arbitration 2020 PR

Uploaded by

Copyright:

Available Formats

Transparency International Anti-Corruption Helpdesk Answer

© 2020 Transparency International. All rights reserved.

Transparency International Anti-Corruption Helpdesk

Transparency International Anti-Corruption Helpdesk

Transparency International Anti-Corruption Helpdesk

Transparency International Anti-Corruption Helpdesk

Transparency International Anti-Corruption Helpdesk

Transparency International Anti-Corruption Helpdesk

Transparency International Anti-Corruption Helpdesk

35 See Catherine A. Rogers, The Ethics of International

Transparency International Anti-Corruption Helpdesk

Serious Crimes (Confiscation of Benefits) Act s 39(1) could

Transparency International Anti-Corruption Helpdesk

47See Mourre, supra note 8, at 95; Thomas K. Sprange, <https://www.lawsociety.org.uk/topics/anti-money-

Transparency International Anti-Corruption Helpdesk

Transparency International Anti-Corruption Helpdesk

Transparency International Anti-Corruption Helpdesk

While there have only been limited instances of

Transparency International Anti-Corruption Helpdesk

Transparency International Anti-Corruption Helpdesk

Transparency International Anti-Corruption Helpdesk

Transparency International Anti-Corruption Helpdesk

Transparency International Anti-Corruption Helpdesk

Transparency International Anti-Corruption Helpdesk

104David D. Caron and Lucy F. Reed, Post Award laundering-allegations-by-kyrgyzstan-against-latvian-

Transparency International Anti-Corruption Helpdesk

Transparency International Anti-Corruption Helpdesk

Transparency International Anti-Corruption Helpdesk

120NIGEL BLACKABY AND CONSTANTINE PARTASIDES, REDFERN

Transparency International Anti-Corruption Helpdesk

Transparency International Anti-Corruption Helpdesk

In practical terms, the 2014 UNCITRAL Rules on

125UNCITRAL, UNCITRAL Rules on Transparency in <https://www.uncitral.org/pdf/english/texts/arbitration/rules-

Transparency International Anti-Corruption Helpdesk

Phone: +49 - 30 - 34 38 200

Transparency International chapters can use the Helpdesk free.

You might also like