International Public Policy, Corruption and Investor to State Arbitration

Caroline Kago, Tomasz Milej, Fidel Mwaki and Saweria Mwangi

 

ABSTRACT: Taking three arbitral awards as case studies: World Duty Free Company v. Kenya, Cortec Mining v. Kenya and Vladislav Kim & 11 Others v. Uzbekistan, the present paper addresses the issue of protection by International Arbitral Tribunals of investors who obtained contracts or licenses by fraud. While in both Kenyan cases, the Arbitral Tribunals deny such protection, in the Kim case the several objections against the Tribunal’s jurisdiction are rejected, as the Tribunal does not see it as established that fraudulent behaviour actually took place. There is no question that the international law condemns corrupt acts, the consequences it attaches to the same are far less certain. And the bribes are not only given but also taken or even extorted. Accordingly, the tribunals must resolve a clash of principles.

On the one hand, the investor whose hands are tainted with corruption should not be allowed to obtain protection by the Tribunal. But on the other hand, also the State should not benefit from the corrupt acts of its agents. This tension is examined through the lens of multilateral and bilateral treaty frameworks, in particular, the ‘in accordance with’ clauses in the Bilateral Investment Treaties, customary international law and the general principles of law. The paper posits a need for a fair apportionment of responsibility for the corrupt acts to each party, arguing that it is better achieved while deciding the case on the merits than rejecting it as inadmissible.