Originally from World Arbitration and Mediation Review (WAMR) 

PREVIEW PAGE

ABSTRACT

Arbitrators and judges must comply with legal norms and regulations and promote the rule of law. Nonetheless, their authority is tested when censurable practices clash with arbitral procedure. When allegations of document tampering, bribery, fraud, money laundering and corruption are raised during an arbitration, the parties, the arbitrators and the arbitral institutions involved in the dispute must decide whether they will play an active or passive role.  This article analyzes the options that arbitrators and arbitral institutions have when dealing with purported criminal conduct during the proceedings or that arise in a legal relationship connected with the arbitral process.  This article also explains the limitations and implications for each option and offers several recommendations for the arbitration community in this regard.

I.  INTRODUCTION

All participants in the arbitral process have an important role to play when dealing with serious issues such as document alteration, bribery, fraud, money laundering and corruption.  In the realm of commercial arbitration, when contracts are made to cover up corrupt payments and make them seem legitimate or when the contracts are preceded by criminal acts, corruption allegations entail serious ethical dilemmas and may have important consequences,  such as the annulment of the contract—legal consequences or even the loss of jurisdiction of the arbitral tribunal— all arbitral effects.

In the context of investor state arbitration, acts such as when a foreign investor engages in a corrupt act or when the investor refuses to make an illegal payment to a government official and notice is given about it, can have different implications.  More specifically, some arbitral tribunals have indicated that certain acts of corruption can infringe upon the protection standards protected by investment treaties.  Since foreign investments do not operate in a legal ether secluded from reality, arbitral tribunals cannot ignore any of the matters presented before them, regardless of whether they are complicated or controversial.   In all matters presented before them, arbitral tribunals must deal with their obligation of ensuring a fair arbitration that generates results through an efficient process.  Participants in the arbitral process must deal with a series of ethical questions when deciding how to act and regarding the purpose of their actions.