The Investment Treaty Arbitration Review: Fraud and Corruption
i Introduction and overview
It is beyond doubt that corruption and bribery are serious offenses that violate international law. Corruption is a global threat to our societies and one of the main sources of poverty in emerging countries, contributing to instability and inequalities, and seriously undermining public trust in governments and states. Arbitration cannot tolerate corruption, or its legitimacy will be seriously undermined in the eyes of the public and states.2 However, allegations of wrongdoing have assumed great significance in investment arbitration and are invoked by investors against states and increasingly by states against investors raising the so called 'illegality objections'. However, several topics surrounding illegality and corruption in investor–state arbitration are still controversial and stringent guidance is missing.
This chapter addresses the main issues surrounding irregularities, including corruption and illegality in relation to the procurement of the investment and will tackle recent developments as to the most pressing questions as follows:
- What is the legal basis for the dismissal of an investor's claim pursuant to alleged wrongdoing?
- Does every breach by the investor of the host state law or international law justify the denial of jurisdiction?
- What is the standard of proof for a finding that the investment is illegal?
- Can the state be estopped from raising the illegality defence?
ii What is the legal basis for the dismissal of an investor's claim pursuant to alleged wrongdoing?
In an investment treaty case, the extent to which an illegality objection will be tenable depends in principle upon the text of the treaty under which the investor's claim is brought as the treaty is the basis of the parties' agreement to arbitrate. Many bilateral investment treaties (BIT) contain provisions that require the investment to be made in accordance with the laws of the host state.
In most treaties, the legality requirement is to be found in the definition of an investment as these treaties define qualifying investments as those acquired, accepted or established 'in accordance with the [host State's] laws'.3 Other bilateral investment treaties do not contain the legality requirement in the definition of the investment but in a provision dealing with the scope of protection stipulating that 'the agreement shall only apply to investments made in the territory of the other Party in accordance with its laws and regulations'.4 Still others do not include a requirement of legality.
Whether a requirement of legality, however, should be presumed where the applicable treaty does not contain such explicit provision or clause is controversial. Some tribunals have found that, even in the absence of a legality requirement, the legality of the investment is essential for protection under the applicable investment treaties and held that the illegality of the investment may nonetheless bar the tribunal's jurisdiction. This position was first adopted in Plama v. Bulgaria. The tribunal found that even if the Energy Charter Treaty did not contain a provision requiring the conformity of the investment with a particular law, the substantive protections of the Energy Charter Treaty could not apply to investments made contrary to the law.5 The tribunal in Phoenix Action Ltd. v. The Czech Republic adopted the approach and noted that the conformity of the establishment of the investment with the national laws arguing that the Salini test6 should contain a fifth and sixth prong requiring that the assets must be invested in accordance with the law of the host state and invested bona fide.7 Others, however, refused to accept an implied condition of legality in the text of the applicable instrument of consent.8
Closely related to the legal basis for the illegality objection is the question at what stage of the proceedings the illegality of the investment may be subject to the tribunal's scrutiny. Case law suggests that where the legality requirement is expressly stipulated in the treaties' text, the prevailing view is that the illegality objection may be considered a bar to jurisdiction and the investor's claim may be dismissed at the jurisdictional stage, where illegality is found to exist in relation to the procurement of the investment.9 Other tribunals considered the issue of corruption and illegality at the admissibility stage, this in particular, where the applicable instrument of consent did not contain express wording.10 The tribunal in Churchill Mining v. The Republic of Indonesia held that claims arising under fraud and forgery are inadmissible as a matter of international public policy.11 Some tribunals addressed questions of corruption and illegality generally during the merits phase of the proceedings, in particular where corruption was alleged to have taken place after the establishment of the investment. In Kim v. Uzbekistan, the tribunal concluded that issues pertaining to corruption after the initial investment were more 'properly addressed at the merits stage'.12 In Al Warraq v. Indonesia, moreover, the tribunal determined that the corruption assertions were a merits-based question, even though, at the merits phase, it held that the investor's claims were inadmissible because of a public interest provision contained in the treaty.13
iii Does every breach by the investor of the host state law or international law justify the denial of jurisdiction?
If the illegality under host state law is found to be relevant for the tribunal to accept jurisdiction, the scope of the potential violation of the host state's law must be assessed. In international investment arbitration, the most frequent form of corruption that is at stake is the bribery of public officials in the host state by a foreign investor. However, illegality may also take other forms and case law suggests that not every violation of the host state law or international law may amount to a bar to jurisdiction, but only serious violation and breaches of fundamental law shall be taken into account.14
In LESI and Astaldi v. Algeria, the tribunal considered that investments would lose their BIT protection when made 'in violation of fundamental principles in force'.15 In Desert Line v. Yemen, the tribunal commented that references in BITs to investor legality 'are intended to ensure the legality of the investment by excluding investments made in breach of fundamental principles of the host State's law, e.g. by fraudulent misrepresentation or the dissimulation of true ownership'. Similarly, the tribunal in Rumeli v. Kazakhstan found that investments would only be excluded from BIT protection if they were made 'in breach of the fundamental legal principles of the host country'.16 In Saba Fakes v. Turkey, the arbitral tribunal established that the legality requirement concerns compliance with the host state's laws governing the admission of investments in the host state, not any type of law even unrelated to the very nature of the investment regulation and thus excluded violations of national competition law.17 In Inceysa v. El Salvador, the tribunal found that the violation of tender rules was sufficiently fundamental in order to deny jurisdiction. Here, the foreign investor's contract was awarded based on forged financial documents and intentional misrepresentation and concealment.18
While the line between serious violations and less serious violations is sometimes difficult to draw and clear guidance is missing, most of the tribunals facing allegation of the investor's wrongdoing seem to agree that legality clauses do not extend to trivial infringements as minor bureaucratic violations such as that defective paperwork should not defeat meritorious claims.19 Tribunals have thus overlooked de minimis breaches of domestic law, and did not reject jurisdiction purely on the grounds of a trivial breach. In the Tokios Tokeles v. Ukraine case, the tribunal noted that the investor's business was not illegal in itself, but that the investor had used the wrong legal title in the registered name of its corporation and had omitted signatures on certain documents. The tribunal was prepared to overlook these deficiencies, holding that 'to exclude an investment on the basis of such minor errors would be inconsistent with the object and purpose of the [BIT]'.20 In Alpha Projektholding v. Ukraine, the tribunal relied on this reasoning from Tokios Tokeles v. Ukraine to conclude that certain minor defects in paperwork registered by the investor would not be serious enough to prevent a finding of jurisdiction.21 Similarly, Quiborax v. Bolivia applied the Tokios position to reject various claims of illegality on the grounds that they related to minor mistakes and omissions in company records.22
iv What is the standard of proof for a finding that the investment is illegal?
While, in principle, the general burden of proving that the investment was made is on the investor, an allegation of illegality must be proven by the respondent state that raises the illegality defence.23 However, the instruments that regulate arbitral proceedings provide relatively little guidance on evidentiary matters, such as what sort of evidence the parties should present, and the standard of proof by which tribunals should evaluate the evidence before them. This is also true for the illegality objection and in particular for the allegation that the investment is tainted by corruption. With regard to corruption, it is the prevailing view that a heightened standard of proof both in terms of concluding that corruption has been proven and in concluding that corruption has not been proven should be applied. The question of what this high standard should be in the context of allegations of corruption has, however, led to some controversy.
Initially, the 'clear and convincing' test was frequently alluded, maintaining that criminal allegations or quasi-criminal allegations of corruption demand a high standard of evidence whose existence must be proven beyond a reasonable doubt, thus demanding clear and convincing evidence.24 Published awards to date have predominantly concerned cases, where states raise corruption allegations as a defence against investors' claims. Where a state raises a corruption allegation, a heightened standard of proof may be justified as the corruption or illegality defence might qualify as a dilatory tactic and may be used as an attempt to escape from the tribunal's scrutiny. Where corruption allegations are raised by an investor as a merits issue, such as a ground for an allegation of unfair and inequitable treatment by the state, however, the 'clear and convincing standard' may not be operative. This is illustratively shown in EDF v. Romania, where EDF alleged that a Romanian government official demanded a US$2.5 million bribe to renew EDF's contract. While acknowledging that corruption is 'notoriously difficult to prove, since typically, there is little or no physical evidence' the tribunal, however, insisted on the 'clear and convincing evidence' standard. Conversely, state officials are often in the position to impede investigations and destroy and conceal evidence and pervasive corruption may weaken investigative and prosecutorial agencies in less developed countries.25
In Metal-Tech v. Uzbekistan the tribunal took a more pragmatic approach and made its determination on the basis of reasonable certainty and acknowledged that allegations of corruption can be shown through circumstantial evidence.26 The tribunal ultimately conducted an enquiry into the facts using a red-flag analysis of indicators of corruption.27 While red flags may indeed be indicators to identify potential corruption,28 a red flag analysis does, however, not resolve the issue of what standard of proof is the most appropriate to be applied by tribunals facing disputes involving allegations of fraud and corruption. Recent case law seems to favour a balance of probabilities test, which means that the tribunal will decide in favour of the party whose claims are more likely to be true in order to find whether corruption or fraud has been proven or not. In a recent commercial arbitration award rendered in the Vale v. BSG Resources Limited case, the tribunal explicitly affirmed the balance of probabilities test. It stated that the appropriate standard of proof is the 'balance of probabilities test', albeit there should be a high evidentiary threshold before the tribunal finds that fraudulent activities had been committed.29 Another feasible option for tribunals suggested by the Toolkit for Arbitrators on Corruption and Money Laundering is to rely on their inner conviction ('intime conviction'), meaning that the arbitrator must be convinced that there is enough evidence to substantiate the corruption allegations or suspicions.30
Finally, it is acknowledged that if the tribunal requests a party to produce specific evidence to rebut the corruption allegations or suspicions and the party fails to do so without a convincing reason, the tribunal may draw adverse inferences from this fact. However, the Toolkit for Arbitrators on Corruption and Money Laundering suggests that the use of adverse inferences shall only be done diligently and only if the circumstances so allow, requiring certain criteria to be fulfilled.31
A further related issue, which is still subject to debate is whether an arbitral tribunal shall have a duty to investigate alleged suspected corruption sua sponte and/or whether it has a duty to request more information from the parties in case there are signs of corruption, but this has not been explicitly brought forward by either party. The Toolkit suggests that if a party alleges or arbitrators suspect that corruption was involved in the underlying dispute, arbitrators should consider investigating (also on a sua sponte basis) those issues and should do so even if the allegations or suspicions arise only at the final stages of the proceedings.32 The question of whether the tribunal would have a duty to report a criminal offense is, further, closely related. Here, the majority seems to maintain that as long as no final decision is made, arbitrators should not be obliged to report anything. Local authorities will have their own means to launch investigations, once the decision is published, which is regularly the case in investor–state arbitration. The question remains regarding how the tribunal should proceed in case the decision will not be published. The prevailing view seems to address this issue through the furtherance of greater transparency and systematic publication of awards.33
v Can the state be estopped from raising the illegality defence?
When an investment treaty contains a legality provision, disputes arising out of an investment acquired or established in violation of the host state's law or procured by corruption might be outside the treaty's scope. In arbitrations based on treaties with an investment legality requirement (e.g., that the investment be made in accordance with host state's law), a finding of corruption may thus lead to the tribunal dismissing the claims for lack of jurisdiction. In Metal-Tech v. Uzbekistan, the tribunal found itself without jurisdiction as corruption placed the investment outside the protection of the BIT. It reasoned that corruption existed 'to the extent sufficient to violate Uzbekistan law in connection with the establishment of the Claimant's investment in Uzbekistan'.34
However, it is often argued that corruption always takes two and a finding of corruptive behaviours or other fundamental breaches of the host state's law may not require an answer at all because representations of legality were made to the investor by state officials. The state should thus be estopped from denying the investor's compliance and from raising the illegality objection. Although investment treaties make no mention of estoppel, the principle finds its application in investment law as a general principle of law within the meaning of Article 38(1) of the Statute of the International Court of Justice and is as such accepted by most tribunals where the investor argued that the estoppel should be recognised in investment arbitration. Such estoppel claims have typically been justified on the grounds that principles of fairness, good faith and consistency should outweigh any strict concerns about legality of conduct and are also described as acquiescence or waiver as the case may be.
The most commonly cited case in which the principle of estoppel was acknowledged is the Fraport case.35 Here, the tribunal pointed out that a tribunal in principle should 'hold a government estopped from raising violations of its own law as a jurisdictional defense when it knowingly overlooked them and endorsed an investment that was not in compliance with its law'. However, estoppel was not found on the facts in this case as it was the case in many other investor state disputes where the estoppel claim was raised by the investor. Claimants could strengthen their argument by, for example, demonstrating some ex post knowledge by the state of alleged wrongdoing involved in the procurement of the investment. While in cases of alleged corruptive practices proving that the state knew about the wrongdoing of its state officials will be in general difficult to establish, it could, however, be questioned whether the solicitation of small bribe at the beginning of an investment should in principle allow a state to successfully raise the corruption defence years later at all.
However, where the illegality defence was raised based on the alleged investor's non-compliance with host state law and regulation, the authors of this chapter are at least aware of one case where the illegality that might have otherwise disqualified the investment from protection because of a potential violation of tender rules could not be raised as a jurisdictional defence as the tribunal found that the state was aware of the potential violation of host state law and expressed no objection on that basis.36
It seems to be pretty much settled that allegation of corruption or other wrongdoing impugned to the investor may be a bar to jurisdiction, while, however, only serious violations may be likely to lead to a finding that a tribunal denies jurisdiction on such ground. Legality clauses have been applied in case of allegations of corruption and fraud,37 serious violations of the host state legal order38 and infringements of foreign investment laws. A case-by-case inquiry will thus determine whether a dispute involving wrongdoing implicitly lies outside the tribunal's adjudicative power ratione materiae. Should the alleged illegality be found to exist and affect the investment itself and be of a sufficiently severe nature in the eyes of the tribunal, this might be a bar to the arbitral tribunal's jurisdiction ratione materiae and may stop the proceeding at an early stage. It also seems that there is less and less divergence as to the evidentiary standard that should be applied and that the debate between the application of a heightened standard requiring 'clear and convincing evidence' and those advocating a more relaxed standard requiring balance of probabilities is becoming largely academic because of the emergence of a transnational method based on the use of red flags. Finally, there is a growing consensus in the investment arbitration case law that when the investment has been made illegally, it is not protected by international law, and the tribunal lacks jurisdiction whether or not legality is a criteria explicitly mentioned in the instrument of consent. The state, however, may be estopped from raising pure illegality in case it overlooked such illegality or became aware of the illegality at a later point in time, but never investigated the matter.
What, however, remains to be seen is whether tribunals would be ready to apply the principle of estoppel also in cases where corruption is proven. It further remains to be seen whether the serious violation test may also carve out an investment for hundreds of millions of dollars where only a small bribe was paid at the beginning of the investment or whether a bribe at the beginning of an investment allows a state to successfully raise the corruption defence years later.39 While arbitration cannot tolerate corruption, there is need, however, for a measure of balance in the way in which arbitrators, counsel and institutions deal with these matters.40
1 Sandra De Vito Bieri is managing partner and Liv Bahner is a senior associate at Bratschi Ltd.
2 Keynote speech of Alexis Mourre, President of the ICC International Court of Arbitration from 2015-06/2021, Workshop Legal Consequences of Corruption and Money Laundering in International Arbitration in Basel, Switzerland, 10 January 2020.
3 See e.g., United Kingdom–India BIT, adopted on 14 March 1994, Article 1 '“investment” means every kind of asset established or acquired, including changes in the form of such investment, in accordance with the national laws of the Contracting Party in whose territory the investment is made and in particular, though not exclusively, includes (...)'; see also Germany–Philippines BIT, adopted on 18 April 1997; Pakistan–Switzerland BIT, adopted on 11 July 1995.
4 See e.g., Republic of Colombia–Switzerland BIT, adopted on 6 June 2009, Article 2; Federal Republic of Germany-Republic of the Philippines BIT, Article 1, 18 April 1997.
5 Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award, 27 August 2008, paras. 138–140.
6 Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4, Decision on Jurisdiction, 31 July 2001, paras. 44–58.
7 Phoenix Action Ltd. v. The Czech Republic, ICSID Case No. ARB/06/5, Award, 15 April 2009, para. 114; Oxus Gold v. Republic of Uzbekistan, Ad hoc Arbitration, Final Award, 17 December 2015, para. 706, see also Veteran Petroleum (Cyprus) v. The Russian Federation, PCA Case No. 2005-05/AA228, Judgment of the Hague Court of Appeal (Unofficial English Translation), 18 February 2020, para. 22.214.171.124.; Cortec Mining Kenya Limited, Cortec (Pty) Limited and Stirling Capital Limited v. Republic of Kenya, ICSID, Award, 22 October 2018, paras. 260 et seq. (Cortec Minig v. Kenya), Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, ICSID Case No. ARB/07/24, Award, 18 June 2010, para. 123 (Hamester v. Ghana); SAUR International SA v. Republic of Argentina, ICSID Case No. ARB/04/4, Décision sur la compétence et sur la résponsabilité, 6 June 2012, para. 307; David Minnotte & Robert Lewis v. Republic of Poland, ICSID, Award, 16 May 2014, para. 131; Yukos Universal Limited (Isle of Man) v. The Russian Federation, PCA Case No. 2005-04/AA227, Final Award, 18 July 2014 (Yukos Universal v. Russia); Hulley Enterprises Limited (Cyprus) v. The Russian Federation, PCA Case No. 2005-03/AA226, Final Award, 18 July 2014, para 1349; Mamidoil Jetoil Greek Petroleum Products Societe S.A. v. Republic of Albania, ICSID Case No. ARB/11/24, Award, 30 March 2015, para. 359.
8 The Hague Court of Appeal, for instance, stated in Yukos Universal v. Russia that 'the Russian Federation has not sufficiently demonstrated that there is a generally accepted principle of law which implies that an arbitral tribunal must (always) decline jurisdiction where it concerns the making of an “illegal” investment and went on to state that the “ECT does not contain a legality requirement; it does not require that an investment must have been made in accordance with the law of the host state”', PCA, Judgment of the Hague Court of Appeal (Unofficial English Translation), 18 February 2020, para. 126.96.36.199.
9 Mabco Construction SA v. Republic of Kosovo, ICSID Case No. ARB/17/25, Decision on Jurisdiction, 30 October 2020 (Mabco v. Kosovo); LESI SpA et Astaldi SpA v. People's Democratic Republic of Algeria Algeria, ICSID Case No. ARB/05/03, Decision, 12 July 2006, para. 83 (LESI SpA v. Algeria); Inceysa Vallisoletana, S.L. v. El Salvador, ICSID Case No. ARB/03/26, Award, 2 August 2006 (Inceysa v. El Salvador); Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines, ICSID Case No. ARB/03/25, Award, 16 August 2007 (Fraport v. Philippines).
10 World Duty Free Co. Ltd. v The Republic of Kenya, ICSID Case No. ARB/00/7, Award, 4 October 2009, para. 179.
11 Churchill Mining PLC v. Republic of Indonesia, ICSID Case No. ARB/12/14 and ICSID Case No. ARB/12/40, Award, 29 November 2016, para. 508.
12 Vladislav Kim v. Republic of Uzbekistan, ICSID Case No. ARB/13/6, Decision on Jurisdiction, 8 March 2017, para. 552.
13 Hesham Talaat M. Al-Warraq v. Republic of Indonesia, UNCITRAL, Final Award, 15 December 2014, para. 155.
14 Only the tribunal in Hamester v. Ghana seems to follow a different approach stating that 'an investment will not be protected if it has been created in violation of national or international principles of good faith; by way of corruption, fraud, or deceitful conduct; or if its creation itself constitutes a misuse of the system of international investment protection under the ICSID Convention. It will also not be protected, if it is made in violation of the host State's law' thereby including every breach of domestic law.
15 LESI SpA v. Algeria, para. 83(iii).
16 Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Republic of Kazakhstan, ICSID Case No. ARB/05/16, Award, 29 July 2008, para. 319.
17 Saba Fakes v. Republic of Turkey, ICSID Case No ARB/07/20, Award, 14 July 2010, para. 119 (Saba Fakes v. Turkey): 'The Tribunal is not convinced by the Respondent's position that any violation of any of the host State's laws would result in the illegality of the investment within the meaning of the BIT and preclude such investment from benefiting from the substantive protection offered by the BIT. As to the nature of the rules contemplated in Article 2(2) of the Netherlands–Turkey BIT, it is the Tribunal's view that the legality requirement contained therein concerns the question of the compliance with the host State's domestic laws governing the admission of investments in the host State. This is made clear by the plain language of the BIT, which applies to “investments established in accordance with the laws and regulations”.'
18 Inceysa v. El Salvador, para. 242.
19 See, e.g., Saba Fakes v. Turkey, para. 119; Desert Line Projects LLC v. Republic of Yemen, ICSID Case No. ARB/05/17, Award, 6 February 2008, para. 104; LESI SpA v. Algeria, para 83(iii).
20 Tokios Thokeles v. Ukraine, ICSID Case No. ARB/02/18, Award, 26 July 2007, para. 86 (Tokio Thokeles v. Ukraine); Quiborax SA v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Decision on Jurisdiction, 27 September 2012, para. 248 (Quiborax v. Bolivia).
21 Alpha Projektholding GmbH v. Ukraine, ICSID Case No. ARB/07/16, Award, 8 November 2010, para. 297.
22 Quiborax SA v. Bolivia, para. 280.
23 Cortec Mining v. Kenya, para. 251; Unión Fenosa Gas, S.A. v. Arab Republic of Egypt, ICSID Case No. ARB/14/4, Award, 31 August 2018, para. 7.52; Georg Gavrilovic and Gavrilovic d.o.o. v. Republic of Croatia, ICSID Case No. ARB/12/39, Award, 26 July 2018, para. 229, para. 414; Teinver v. Argentina Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. The Argentine Republic, ICSID Case No. ARB/09/1, Award, 21 July 2017, para. 362; Copper Mesa v. Ecuador Copper Mesa Mining Corporation v. Republic of Ecuador, PCA Case No. 2012-2, Award, 15 March 2016, para. 5.59.
24 EDF (Services) Limited v. Romania, ICSID Case No. ARB/05/13, Award, 8 October 2009, para. 221: 'The Tribunal shares the Claimant's view that a request for a bribe by a State agency is a violation of the fair and equitable treatment obligation owed to the Claimant pursuant to the BIT, as well as a violation of international public policy, and that “exercising a State's discretion on the basis of corruption is a [...] fundamental breach of transparency and legitimate expectations”.' See also Prof. Dr. Richard Kreindler, Applications for 'Revision' in Investment Arbitration: Selected Current Issues, in Liber Amicorum Bernardo Cremades 679 (M.A. Fernandez-Ballesteros and D. Arias eds., La Ley, 2010), N 691.
25 As noted in the UN Anti-Corruption Toolkit (2004), 'Senior officials actively engaged in corruption are often in a position to impede investigations and destroy or conceal evidence, and pervasive corruption weakens investigative and prosecutorial agencies to the point where gathering evidence and establishing its validity and probative value becomes problematic at best'.
26 Metal-Tech Ltd. v. Republic of Uzbekistan, ICSID Case No. ARB/10/3, Award, 4 October 2013, para. 243 (Metal-Tech v. Uzbekistan) '[i]n this context . . . corruption is by essence difficult to establish and that it is thus generally admitted that it can be shown through circumstantial evidence'. Similarly, in Niko Resources v. Bapex and Petrobangla, the tribunal refrained from deciding between the heightened standard of proof proposed by the claimant and the preponderance of evidence standard proposed by the respondent (Niko Resources (Bangladesh) Ltd. v. Bangladesh Petroleum Exploration & Production Company Limited ('Bapex') and Bangladesh Oil Gas and Mineral Corporation ('Petrobangla'), ICSID Case No. ARB/10/18, Decision on the Corruption Claim, 25 February 2019, para. 799 et seq.).
27 Metal-Tech v. Uzbekistan, para. 293 'For the application of the prohibition of corruption, the international community has established lists of indicators, sometimes called “red flags”. Several red flag lists exist, which, although worded differently, have essentially the same content. For instance, Lord Woolf, former Chief Justice of England and Wales, included on his list of “Key Red Flags” among other things (1) “an Adviser has a lack of experience in the sector”; (2) “non-residence of an Adviser in the country where the customer”.'
28 For a comprehensive red flag list: Corruption and Money Laundering in International Arbitration, A Toolkit for Arbitrators, 29 April 2019, Basel Institute on Governance, Competence Center Arbitration and Crime, Tool 1 (Toolkit).
29 Vale S.A. v. BSG Resources Limited, LCIA Case No. 142683, Award of 4 April 2019, paras. 350–358.
30 Toolkit, op. cit. Tool 5.2.
31 Toolkit, op. cit. Tool 6: Arbitrators should consider applying adverse inferences if the following conditions are fulfilled: (1) the party that seeks the adverse inference must produce compelling indicators of corruption and must itself have produced all available evidence to corroborate the inference sought, or the tribunal itself has identified sufficient indicia of corruption; (2) the party of whom evidence has been requested must have access to such evidence; (3) the party of whom evidence has been requested failed to give any convincing reason for not producing such evidence; and (4) the inference must be reasonable, consistent with the facts and logically related to the likely nature of the withheld evidence.
32 Toolkit, op. cit. Step 4.
33 Keynote speech of Alexis Mourre, President of the ICC International Court of Arbitration from 2015-06/2021, op. cit.
34 Metal-Tech v. Uzbekistan, para. 372.
35 Fraport v. Philippines, para. 398; the Fraport award was later annulled: Decision on the Application for Annulment of Fraport AG Frankfurt Airport Services Worldwide, 23 December 2010. However, this development did not affect the tribunal's reasoning on legality.
36 Mabco v. Kosovo, paras. 410–411.
37 See, e.g., Hamester v. Ghana, para. 123; lnceysa v. El Salvador, paras. 236–238.
38 See, e.g., Metal-Tech v. Uzbekistan, ICSID Case No. ARB/10/3, Award, 4 October 2013, para. 165; Tokios Tokeles v. Ukraine, para. 86.
39 Workshop Legal Consequences of Corruption and Money Laundering in International Arbitration in Basel, Switzerland, 10 January 2020.
40 Keynote speech of Alexis Mourre, President of the ICC International Court of Arbitration from 2015-06/2021, op cit.