ICSID Tribunal grapples with Effect of Corruption on Access to Investor-State Arbitration

In a Decision on Jurisdiction dated 19 August 2013 an ICSID tribunal addressed the question whether acts of corruption should deprive a claimant from proceeding to have its claims considered and ruled upon at the merits stage.

The tribunal allowed the claim to continue based on their findings that:

  • the respondent state party had not argued that there was anything illegal about the object and content of the contracts in question (which concerned the development of gas fields and the sale of that gas);
  • there was no proof of any link of causation between the acts of corruption and the conclusion of the contracts, nor had the respondent sought to avoid the contracts, so the contracts remained in force and binding; and
  • the tribunal’s jurisdiction derived from a specific agreement to arbitrate between the parties contained in two investment contracts (as opposed to an arbitration agreement deriving from an investor’s acceptance of an offer to arbitrate in an investment treaty, where different considerations might apply).

In such circumstances, the questions whether the investment had been made in good faith and what consequences should be drawn from a lack of good faith should be determined as part of the merits of the dispute in accordance with the parties’ arbitration agreement.  The doctrine of clean hands had narrow application in international law and did not to apply to bar such jurisdiction in the present case.

The Decision determined a number of other jurisdictional objections and includes a detailed consideration of the meaning of “designated” within the meaning of Article 25(1) of the ICSID Convention as regards the jurisdiction of the Centre over constituent subdivisions or agencies of a state.

See: Niko Resources (Bangladesh) Ltd v People’s Republic of Bangladesh, Bangladesh Petroleum Exploration & Production Company Limited (“BAPEX”) and Bangladesh Oil Gas and Mineral Corporation (PETROBANGLA”), ICSID Cases Nos. ARB/10/11 and ARB/10/18, Decision on Jurisdiction (as published on the ICSID website)

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