Accountability for Corruption in Investment Arbitration: Equitable Remedies for Findings of Illegality

Abstract

This article discusses appropriate remedies for findings of corruption in investor-state arbitration. While grounded in the premise that a contract that hides corrupt payment should be null and void, the article also posits that each arbitration case involving allegations of corruption presents unique underlying facts and circumstances. The author questions the legitimacy of arbitral awards that punish only the investors and exonerate the states whose officials also may have had unclean hands. He argues that a host state that does not investigate and prosecute its corrupt government officials can be estopped in certain circumstances from raising corruption as a defense in arbitration proceedings. The article notes that several legal systems apply the unclean hands doctrine with varying degrees of strictness. Therefore, when faced with cases in which both sides are liable for a concerted act of corruption, arbitral tribunals could have a sound legal basis for resorting to remedies other than those deriving from the tainted contract.