Remedies for Corruption - WAMR 2015 Vol. 9, No. 3
John R. Crook
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Originally From World Arbitration and Mediation Review (WAMR)
Investor misconduct can take many forms and occur at various points in the life of an investment. Risks can arise “in securing core assets, in building projects, in dealing with customs, immigration, environmental, health and safety laws and regulations, and tax assessments, in community development and charitable contributions, in litigation and in legislation, in providing for project security, and other areas as well.” Indeed, Michael Reisman in 1979 posited a taxonomy of different kinds of corruption.2 The focus of this comment is on corruption that somehow plays a significant role in establishing or acquiring the investment. The term “corruption” is used broadly, and perhaps a little loosely, to include fraud or failure to comply with significant local regulatory requirements. Tribunals have assigned serious consequences to all of these.
This comment does not address tribunals’ approaches to cases involving some sort of wrongful conduct by the investor after the investment is established. As noted, many situations after an investment is established may be vulnerable to corrupt conduct. Arbitrators have sometimes responded to these situations in much less draconian ways,3 but their responses are not examined here.
No effort is made here to answer the difficult question of what “established” means. Instead, it is assumed that, after applying an appropriate burden of evidence, a tribunal concludes that “corruption” has been “established.” What then? This comment briefly sketches the following four issues:
1. What have tribunals seen as the appropriate remedy? In brief, the treatment of significant corruption in connection with the establishment of an investment has typically been “binary” – if corruption is sufficiently established, the claim is rejected. Full stop. Tribunals have followed different roads to get to this result, but the result is that the claim is dismissed.
2. What consequences follow from the binary remedy?
3. What is the position of the respondent State under international law in relation to the binary remedy?
4. How some tribunals have moderated application of the binary remedy, at least a bit.