Arbitration of Corruption Allegations

November 30, 2018

A primary goal of the investor-state arbitration regime is to encourage development by providing investors recourse to a neutral forum for resolving disputes concerning lawfully made investments, separate and independent from the host state’s judiciary. At the same time, in some countries where such investments are made, corruption may occur. Thus, it is occasionally contested whether an investment that is the subject of an international dispute has been tainted with corruption.

In such cases, a host state could face claims for tens or hundreds of millions of dollars due to alleged violations of investment treaty protections. In recent years, it has become apparent that corruption inthe making of an investment can serve as a complete bar to recovery by the claimant. This development has been accompanied by an evolution regarding the burden of proof and the standard of proof in corruption cases. In other words, such corruption may serve to completely immunise the state from liability for violations of treaty protections. As such, allegations of corruption have proliferated as a result of state parties raising a so-called “corruption defence” to the admissibility of the investors’ claims and the tribunal’s jurisdiction.

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