MARKET COMMENTARY 39
POSITION IN INVESTMENT TREATY-BASED ARBITRATIONS
THE ENFORCEMENT ISSUES HIGHLIGHTED IN THIS ARTICLE DO NOT ARISE IN INVESTMENT TREATY-BASED ARBITRATIONS UNDER ICSID AS AWARDS ISSUED UNDER THE CONVENTION ARE NOT SUBJECT TO REVIEW BY NATIONAL COURTS. THAT IS NOT TO SAY, HOWEVER, AN ICSID TRIBUNAL WILL NOT APPLY PUBLIC POLICY TO INSTANCES OF BRIBERY AND CORRUPTION. IN THE ICSID CASE OF WORLD DUTY FREE COMPANY LIMITED V THE REPUBLIC OF KENYA 8 , WHERE EVIDENCE WAS GIVEN THAT A BROWN BRIEFCASE CONTAINING USD 500,000 IN CASH HAD BEEN LEFT AT THE PRESIDENT’S RESIDENCE ONLY TO BE REPLACED WITH FRESH CORN UPON COLLECTION, THE TRIBUNAL HELD: “In light of domestic laws and international conventions relating to corruption, and in light of the decisions taken in this matter by courts and arbitral tribunals, this Tribunal is convinced that bribery is contrary to the international public policy... claims based on... contracts obtained by corruption cannot be upheld by this Arbitral Tribunal.” ICSID tribunals do, however, face similar issues to those encountered in international commercial arbitration when it comes to applying the appropriate burden of proof to allegations of bribery or corruption. In the ICSID case of E DF (Services) Limited 9 , a party alleging bribery had to rely on the testimony of its employees (who had allegedly received the bribe) in order to prove corrupt practice by the Respondent. Witnesses for the Respondent (alleged to have given the bribe) subsequently denied such conduct took place, making it extremely difficult for the alleging party to prove corruption on the balance of probabilities test. The tribunal recognised this but rather than apply a more lenient standard of proof, it demanded a higher standard still on the basis that “The seriousness of the accusation of corruption in the present case, considering that it involves officials at the highest level... demands clear and convincing evidence.”
This requirement for a higher burden of proof was repeated in ICSID cases African Holdings Company of America Inc and others v Democratic Republic of Congo 10 in which “irrefutable evidence ” 11 was required and W aguih E lie George Siag and others v Arab Republic of E gypt 12 where the burden of proof was “greater than the balance of probabilities but less than beyond reasonable doubt”. One advantage of arbitration over the national courts, however, is the flexibility available to tribunals. Such flexibility may give tribunals the tools to address such evidential hurdles whilst maintaining the balance of probabilities test. This was demonstrated in the ICSID case of Metal-Tech v Republic of Uzbekistan 13 . In this case, the Claimant had hired a number of consultants who appeared to lack the relevant qualifications which would enable them to properly advise in the circumstances. In addition, the payments made to the consultants (via a Swiss company with concealed offshore shareholdings) were disproportionately high (USD 4 million) when taken against the average cost of living in Uzbekistan. Given the issues raised by the Respondent in relation to the payments, the Tribunal adopted a proactive approach and directed that the Claimant provide an explanation for the suspicious circumstances surrounding the payments. The Claimant’s explanation failed to dispel the suspicious appearance created by the high payment amounts and the Tribunal found that it lacked jurisdiction to hear the claims due to corruption relating to the Claimant’s investment in Uzbekistan. In giving its award, the Tribunal was unable to rely upon proof of direct bribery or even the circumstances as to when and where Uzbek officials were bribed. Rather, the circumstances established by the Respondent created a presumption that corruption had taken place. As the Claimant was unable to present an adequate explanation for these circumstances, the Tribunal found that the claim was based on corruption.
Ultimately, the radical departure from the accepted burden of proof, set out in ICC case 6497, is unattractive because the seriousness of such an allegation demands a high burden to avoid baseless accusations that deliberately seek to damage the reputation of the accused party. At the same time, there is a compelling argument that tribunals and courts should resist raising the evidential bar to beyond reasonable doubt (as seen in the M Schneider case before the Parisian courts). After all, this debate relates to commercial arbitrations, the outcome of which may lead to a civil liability. This is especially the case given that corruption is notoriously difficult to prove (particularly in arbitrations) and raising the burden of proof to beyond reasonable doubt may ultimately promote corruption. By maintaining a balance of probabilities approach when assessing allegations of bribery or corruption, a tribunal can consider circumstantial evidence, draw the necessary adverse inferences (one of the limited powers a tribunal holds) or adopt a proactive and flexible approach as demonstrated by the tribunal in the Metal-Tech ICSID case. 8 ICSID Case No. ARB/00/7 (Award 4 October, 2006) 9 ICSID Case No. ARB/05/13 (Award October 8, 2009) 10 African Holdings Company of America Inc and Societe Africaine de Construction au Congo SARL v Democratic Republic of the Congo; ICSID Case No. ARB/05/21 (Award July 29, 2008) 11 Corruption in Arbitration – Law and Reality (Michael Hwang S.C and Kevin Lim, 2011) 12 Waguih Elie George Siag and Clorinda Vecchi v Arab Republic of Egypt, ICSID Case No. ARB/05/15, (Award June 1, 2009) 13 ICSID Case No. ARB/10/03 (Award 4 October 2013)
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