Global, OECD | Tim McKenzie | Aloysius (Louie) Llamzon | Tom Sprange KC

This article is an extract from Lexology In-Depth: Investment Treaty Arbitration – Edition 9. Click here for the full guide.

Introduction

This chapter considers objections to the jurisdiction of investment arbitration tribunals and to the admissibility of claims on the basis of alleged fraud, corruption and other illegal conduct committed by the investor. Objections of this nature have been become increasingly common over time, particularly as an investor’s proven wrongdoing will often lead to an absence of jurisdiction or the inadmissibility of its claims, effectively providing a host state with a complete defence.

This chapter considers the different varieties of illegal conduct that are typically addressed in international arbitral proceedings (‘Typology of illegalities encountered in investment arbitration’), before discussing how illegality is typically proven in arbitration (‘Proving corruption, fraud and other illegal conduct’). The section ‘Legal framework governing illegality objections’ then summarises key aspects of the legal framework governing illegality objections, including the consequences of findings of illegality and factors which may limit a state’s ability to avail itself of an illegality objection.

Typology of illegalities encountered in investment arbitration

Allegations of investor wrongdoing in investment arbitrations take a number of forms. These alleged illegalities range from breaches of widely recognised principles of international public policy to violations of esoteric provisions of the host state’s national laws. This section offers a description of the ways in which alleged investor wrongdoing manifests in investment cases, as characterised and addressed in the case law.

As an initial matter, it bears noting that many of the forms of illegal activity discussed in arbitral case law or commentary – including the ‘violation of the host state’s laws’, ‘deceitful conduct’, the ‘misuse of the system of international investment protection’, the violation of ‘good faith’2 or ‘transnational public policy’3 in the making (or sometimes, the carrying out) of an investment – fall analytically within two principal sources of wrongdoing: corruption and fraud. To these two categories can be added a third, more heterogeneous category involving breaches of host state law that go beyond corruption and fraud, such as violations of laws limiting the types of assets or sectors in which foreign investors may invest. Each of these three categories is considered in turn, below.

Corruption

The term ‘corruption’ serves as a catch-all for a variety of distinct offences – from trading in influence, to money laundering, to bribery, among others.4 There is no offence of ‘corruption’ as such.

Bribery

Bribery is the most common form of corruption found in arbitral case law, and in earlier cases the term ‘corruption’ had long been virtually synonymous with bribery. The bribery typically involved is ‘transnational bribery’, the most widely accepted definition of which is found in Article 16 of the UN Convention Against Corruption (UNCAC), which in turn was inspired by the OECD Anti-Bribery Convention.5 The elements of transnational bribery are found in Article 16(1) of UNCAC:

  1. the person committing the offence
  2. ‘intentionally’ (mens rea)
  3. ‘the promise, offering, or giving’ (actus reus)
  4. ‘of an undue advantage’
  5. the recipient, who is either ‘the official himself or herself or another person or entity’
  6. ‘in order that the official act or refrain from acting in the exercise of his or her official duties’ (quid pro quo)
  7. so that the person committing the offence can ‘obtain or retain business or other undue advantage in relation to the conduct of international business’.

All of these elements must be met for bribery to be found – this is true whether one seeks to prove bribery in a criminal court, in a civil court or before an arbitral tribunal. Perhaps the key and often the most hotly contested element of bribery is the quid pro quo – giving something to a public official whether directly or indirectly (through an intermediary) – in exchange for an undue advantage.

Bribery is universally considered to represent a serious violation of national and transnational public policy.6 In investment arbitration, bribery allegations are typically focused on whether the principal investment – often a concession or other long-term or high-value contract with the government – was entered into by the state because bribes were paid by the foreign investor to the state’s public officials, whether directly or through intermediaries.7

Trading in influence

Beyond bribery, the term ‘corruption’ also encompasses other acts that are not so universally recognised as being contrary to transnational public policy. This includes the concept of trading in influence (sometimes called ‘influence peddling’), which can be difficult to distinguish from legal lobbying.8

Article 18 of UNCAC addresses trading in influence, and states:

Each State Party shall consider adopting such legislative and other measures as may be necessary to establish as criminal offences, when committed intentionally: (a) The promise, offering or giving to a public official or any other person, directly or indirectly, of an undue advantage in order that the public official or the person abuse his or her real or supposed influence with a view to obtaining from an administration or public authority of the State Party an undue advantage for the original instigator of the act of for any other person.(emphasis added)

Unlike Article 16 of UNCAC, which provides that states ‘shall adopt’ legislation to criminalise transnational bribery, Article 18 does not mandate the criminalisation of trading in influence, providing only that states ‘shall consider adopting’ legislation criminalising trading in influence. For this reason, the arbitral tribunal in Kim v. Uzbekistan concluded that, unlike bribery, trading in influence did not fall within the scope of the international public policy against corruption.9

In the more recent case of BSG v. Guinea, however, the tribunal reached the opposite conclusion. It held that international public policy against corruption prohibits both bribery and trading in influence.10 It should be noted, however, that the tribunal in BSG relied heavily on the fact that Guinea was a party to the Economic Community of West African States’ Anti-Corruption Protocol, which contains an express prohibition on trading in influence.11 BSG‘s reasoning leaves open whether there is a principle of customary international law prohibiting trading in influence.

Unlike transnational bribery, trading in influence does not require demonstration of an explicit quid pro quo (i.e., that the investor offered an ‘undue advantage’ to a public official ‘in order that’ said public official abuse their official duties). Rather, to establish trading in influence, it may suffice to show that the investor hired an intermediary to exert improper influence ‘with a view to obtaining’ an undue advantage from a public official, whether or not such influence is actually used or even exists. The concept of trading in influence thus serves to capture a broader range of ‘background corruption’ that goes beyond bribery.12

Distinguishing between permitted lobbying, where the use of influence by an intermediary (the ‘peddler’) to persuade public officials to act in ways favourable to a client, as opposed to improper influence that amounts to influence-peddling, is sometimes a fine line, especially when foreign investors in new markets unfamiliar to them employ intermediaries to secure concessions, licenses or contracts.13

Unsurprisingly, such relationships have been the subject of intense scrutiny in a number of corruption-related decisions.14 In Union Fenosa Gas v. Egypt, for example, the host state made serious allegations about the supposed use of a local partner to exert influence over the Egyptian Minister of Petroleum in negotiations over a long-term gas sale and purchase agreement.15 While the Union Fenosa Gas tribunal found evidence that the local partner exerted influence, it was not the kind of ‘back-channel influence’ characteristic of influence-peddling, and Egypt’s corruption allegations were ultimately dismissed by the tribunal’s majority for insufficient evidence.16

The requirement of due diligence

In recent years, investment cases have expanded investors’ due diligence obligation, identifying the principle as a stand-alone obligation that engages an investor’s responsibility, not only for its own omissions or negligence, but also for the fraudulent, corrupt or other illegal acts of its local partners, even when the investor had no knowledge (let alone complicity) in the wrongdoing of its co-venturer.17 The tribunal in Churchill Mining v. Indonesia held that this due diligence standard is breached where ‘a claimant knew or should have known of third-party wrongdoing in connection with an investment and still chose to do nothing (as opposed to just failing to take due care)’.18

The Churchill Mining due diligence standard has gone on to be applied in more recent awards. For instance, the Worley v. Ecuador tribunal in its December 2023 award expressly adopted the test established in Churchill Mining to ascertain whether the claimant had been wilfully blind to corrupt acts committed by its local contractor, Tecnazul. The tribunal stated that:

The Tribunal is prepared to adopt the Churchill Mining standard for present purposes. In the circumstances of this case, in order to ascertain whether the Claimant was willfully blind to Tecnazul’s corruption, the Tribunal must assess (i) the ‘level of institutional control and oversight deployed’ by the Claimant vis-à-vis Tecnazul; (ii) whether the Claimant was put on notice by evidence of corruption ‘that a reasonable investor . . . should have investigated’; and (iii) whether the Claimant ‘took appropriate corrective steps’.19

The Tribunal went on to hold that ‘the Claimant willfully ignored Tecnazul’s corruption and failed to take appropriate corrective steps, per the Churchill Mining standard’, and that in doing so, ‘it allowed its investment to be used as a platform for Tecnazul’s criminal enterprise for years’.20 The majority of the tribunal considered that this rendered the claimant’s claims inadmissible, while the third arbitrator concluded that the claimant’s investment was not a protected investment under the relevant treaty.21

Fraud

Fraud has been defined as a ‘knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment’.22 In general terms, and as contained in the civil and criminal statutes of many countries,23 a statement or omission is legally considered to constitute fraud when the following elements are present: (1) the knowing misrepresentation or concealment; (2) of a material fact; (3) with a view to deceiving another; (4) to that other’s disadvantage.24

An important characteristic that distinguishes fraud from some other forms of investor wrongdoing is its unilateral nature. Unlike corruption, the acts or omissions of only one party are necessary for fraud to occur. The other party to an arbitration need not have participated – indeed, the other party’s explicit or tacit participation would call into question whether that party was truly defrauded. Fraud has, accordingly, been invoked in investment arbitration case law almost uniformly by host states as a defence against investor claims.

When considering fraud as a shield in investment arbitration, national anti-fraud statutes are relevant. Because of the ‘legality clauses’ found in many bilateral investment treaties (BITs), host states have referred to such legislation to demonstrate that an investment has not been made or performed in compliance with national law, and are thus not covered ‘investments’ to which the host state has offered the protection of any investment treaty. Some tribunals have reached the same conclusion even in the absence of a legality clause in the relevant treaty. As the Worley v. Ecuador tribunal held, ‘the crucial question is not whether it should read a legality requirement into the Treaty, but rather whether a tribunal should assume that a State would have given its consent to arbitration to protect investments that breached its own law. This question must clearly be answered in the negative’.25

There is a growing body of jurisprudence on fraud in investment arbitration. Identification and analysis of the constitutive elements of fraudulent misrepresentation has been rare. Nevertheless, in most cases in which fraud has played an outcome-determinative role, deliberate intent to deceive concerning a material fact that worked to the detriment of the host state was found by the tribunal, albeit implicitly. Notable examples include Plama v. Bulgaria, Inceysa v. El Salvador and Hamester v. Ghana.

In Plama,26 the host state argued that the tribunal did not have jurisdiction as the claimant’s investment was void as a matter of Bulgarian law due to misrepresentations made in the process of procuring the investment. The tribunal found that the claimant had indeed engaged in fraud, having ‘represented to the Bulgarian Government that the investor was a consortium – which was true during the early stages of negotiations’ but then ‘failed, deliberately to inform [the] Respondent of the change in circumstances’ when the investor became an individual acting alone, without significant financial resources.27 As such, the tribunal found that the investor had engaged in ‘deliberate concealment amounting to fraud, calculated to induce the Bulgarian authorities to authorise the transfer of shares to an entity that did not have the financial and managerial capabilities required . . .’28 The tribunal also found that the investor engaged in ‘deceitful conduct that is in violation of Bulgarian law’, and that granting the Energy Charter Treaty’s protections ‘to the claimant’s investment would be contrary to the basic notion of international public policy – that a contract obtained by wrongful means (fraudulent misrepresentation) should not be enforced by a tribunal’.29

In Inceysa, the tribunal found that the claimant had made fraudulent misrepresentations and non-disclosures during a public bid for a concession related to mechanical inspection services for vehicles in El Salvador.30 The tribunal discussed in detail various misrepresentations made by the claimant in its bid,31 and considered whether the false information provided (or withheld) concerned a ‘central aspect of the bid’.32 The tribunal made findings on the deceitful intent of the investor: for example, it found that Inceysa had falsely and ‘deliberately’ made the host state believe that its strategic partner was a large public entity with relevant experience.33 The tribunal also identified aspects of deceit in the claimant’s conduct misrepresenting its compliance with bid requirements, and inferred that such misrepresentations would have led El Salvador to award the bid to the claimant.34 Because the claimant had ‘falsified the facts’, a lack of good faith ensued from the inception of the investment in violation of Salvadoran law, which for the tribunal meant that it ‘can only declare its incompetence to hear Inceysa’s complaint, since its investment cannot benefit from the protection of the BIT’.35

In Hamester v. Ghana, the host state’s jurisdictional objections that the claimant’s investment (a joint venture cocoa production operation) was tainted with fraud were rejected. Ghana had made multiple allegations of fraud against the investor, allegedly occurring both at the inception of the investment36 and while it was operating in Ghana.37 However, the tribunal considered that only instances of fraud at the initiation of the investment were relevant at the jurisdictional phase: ‘the only question here is whether Hamester perpetrated a fraud, and thereby procured the signing of the [joint venture agreement]’.38 The tribunal sought proof of knowingly perpetrated fraud (an ‘overall scheme of deceit orchestrated by the claimant’).39 It emphasised the element of materiality that fraud needed to play for the procurement of the investment, and ultimately found no proof ‘that the alleged fraud was decisive in securing the JVA’.40 The tribunal ultimately held that there was no conclusive evidence of ‘an overall scheme of deceit’ at the initiation of the investment.41

Recently, the Worley v. Ecuador tribunal considered whether the claimant had misrepresented the extent of its local contractor’s involvement in a refinery project, in contravention of a provision of Ecuadorean law limiting the extent of subcontractor involvement.42 On the basis of extensive written evidence, including correspondence, indicating that the claimant and its local contractor understood and sought to circumvent the subcontracting limit, the tribunal concluded that ‘the Claimant deliberately misrepresented its intention to comply with the 30% subcontracting limit’, and ‘did so with the clear understanding that it would have otherwise not been awarded the contracts for those projects’.43 Citing Plama and Inceysa, the Worley tribunal concluded that the claimant’s misrepresentations represented a clear breach of the principle of good faith in international law.44 It went on to find that, ‘[t]o the extent that such misrepresentation was a necessary condition for Worley to obtain’ the contracts in question, ‘it amounts to a serious illegality affecting directly the inception of the Claimant’s investment in Ecuador’,45 depriving the tribunal of jurisdiction.46

Other violations of host state law

The ‘in accordance with host state law’ condition found in many investment treaties would almost certainly cover corruption and fraud, since this conduct will in all likelihood amount to a violation of the laws of any host state. At first glance, these clauses might introduce much broader restrictions besides these on access to investment arbitration. Indeed, some states argue that any breach of host state law should be grounds to exclude treaty protection. However, investment tribunals have established restrictions on the categories of breaches of host state law that may affect a tribunal’s jurisdiction or the admissibility of claims.

In Quiborax v. Bolivia, for instance, the tribunal stated that the ‘subject-matter scope of the legality requirement’ is limited to the following categories: (1) non-trivial violations of the host state’s legal order; (2) violations of the host state’s foreign investment regime; and (3) fraud – for instance, to secure the investment.47 Numerous recent awards have emphasised the requirement that a violation of host state law must be ‘serious’,48 and have stated that ‘only violations of fundamental rules of law would deprive a tribunal of jurisdiction’.49 Some tribunals have considered the ‘proportionality’ between the ‘nature of the infringement’ and the ‘severe sanction’ of losing investment protection, focusing on: (1) the significance of the obligation with which the investor is alleged not to comply; (2) the seriousness of the investor’s conduct, including its intentions; and (3) whether ‘the combination of the investor’s conduct and the law involved results in a compromise of a significant interest of the Host State’.50

Violations of host state law often concern investor fraud, deceit or misrepresentation at the inception of an investment. Typically such conduct takes the form of a breach of laws concerning the admission of foreign investment, including limits or an outright prohibition against foreign investors acquiring a particular category of investments, carrying out a certain business activity or prescribing the manner in which foreign investors may hold such investments. One prominent example of this category of cases is Fraport v. Philippines. The primary criminal statute under consideration, the Philippine Anti-Dummy Law, prohibited the exercise of foreign managerial control over public utilities such as airport terminals (the investment project in question). The tribunal learned over the course of the hearing that a secret shareholders’ agreement had been entered into between the investor and its local partner that gave the investor managerial control over the joint venture company, which held a concession to build and operate the new terminal at the international airport in Manila. The claimant had thus ‘knowingly and intentionally circumvented the [Anti-Dummy Law] by means of secret shareholder agreements’.51 The tribunal went on to find that it lacked jurisdiction.52

Proving corruption, fraud and other illegal conduct

Burden and standard of proof

The question of which party bears the burden of proving wrongdoing has been relatively straightforward. Following the maxim actori incumbit probatio, the prevailing principle is that each party has the burden of proving the facts on which it relies,53 and thus host states alleging investor wrongdoing bear the burden of proving those allegations. Investor-state tribunals have confirmed the applicability of this principle both in cases involving allegations of corruption54 and in cases involving allegations of fraud.55

The burden of proof identifies which party bears the obligation to prove a given allegation. The standard of proof defines the threshold of evidence necessary to establish either an individual fact or contention or the party’s case as a whole.

Broadly speaking, the general standard of proof for civil actions in common law is the ‘balance of probabilities’, while in civil law systems it is typically the ‘inner conviction’ of the adjudicator.56 When serious allegations of wrongdoing are involved in civil proceedings, however, both systems generally demand a heightened standard of proof.57 Both the heightened standard and the ordinary standard have found their way into investment arbitration case law on investor wrongdoing.58

The BSG v. Guinea tribunal provided the following summary of the various approaches to the standard of proof for corruption in investment case law:

[T]here appears to be no settled case law on the standard for proving corruption. Essentially, one can distinguish two groups of cases. A first group applies a heightened standard compared to the measure of proof for facts underlying other claims due to the gravity of a finding of corruption. These are the decisions that resort to the common law standard of clear and convincing evidence [. . .]. A second group is less demanding and applies the same standard like for any other claim. Within this group, one finds the cases which employ the common law standards of balance of probabilities or preponderance of evidence or the civil law standard of intime conviction du juge. [. . .].59

Some recent tribunals have held that a heightened standard should apply, consistent with the principle that the ‘graver the charge, the more confidence there must be in the evidence relied on’.60 Others have adhered to a preponderance of the evidence or balance of probabilities standard.61 Yet other awards have emphasised that tribunals have ‘relative freedom in determining the standard necessary to sustain a determination of corruption’.62

Method of proof

It is often difficult to obtain direct evidence of illegal acts, and particularly acts of corruption. This stems from the fact that bribery is bilateral in nature, requiring cooperation between the supplier of the bribe and its recipient (often a public official), and therefore both sides of the corrupt transaction have an incentive to hide the evidence, which they often do under the veneer of legal transactions designed to withstand initial scrutiny.

As observed by the tribunal in UFG v. Egypt, ‘corruption is rarely proven by direct cogent evidence; but, rather, it usually depends upon an accumulation of circumstantial evidence’.63 In Metal-Tech v. Uzbekistan, the tribunal recognised the international community’s establishment of lists of indicators of corruption (often called red flags), including an adviser’s lack of experience in the sector involved and any close personal relationship the adviser may have with the government that could improperly influence the latter’s decision.64 These red flags and similar indicia of corruption can be conceived as potential forms of circumstantial evidence that may allow certain inferences and conclusions regarding an investor’s corrupt conduct to be drawn.

Recent tribunals have affirmed the relevance of red flags in assessing claims of investor illegality in international arbitration, often describing a process of ‘connecting the dots’ between various pieces of circumstantial evidence to assess whether illicit acts had occurred.65 However, red flags do not arise from the world of criminal (or civil) practice or adjudication, but rather were originally created by compliance officers seeking to alert businesses conducting activities abroad about certain practices particularly susceptible to corruption.66 Indeed, commentators and tribunals have often taken a cautious approach to red flags, noting that they may have innocent explanations and they do not constitute proof of corruption unless sufficient ‘dots’ can in fact be connected.67 The tribunal in UFG v. Egypt held that ‘even the reddest of red flags does not suffice without proof of corruption before the tribunal’, and found in the circumstances of that case that ‘there are insufficient dots; and the red flags are outnumbered by neutral black flags’.68 The MOL v. Croatia tribunal stated that it would be ‘open to resorting to inferences to fill evidential gaps, though only if the gap was unavoidable and the inference itself a compelling one from the surrounding circumstances’.69 In DTEK v. Russia, the tribunal dismissed the respondent’s illegality objection after finding that ‘the red flags which exist are set off by other possible explanations and simply do not connect’.70

Legal framework governing illegality objections

Consequences of findings of illegality in international arbitration

Once proven, investor wrongdoing is then analysed by investment tribunals typically through one or more of three key legal principles: (1) investment treaty provisions that provide that investments must comply with the national laws of the host state; (2) general principles of law such as the ‘clean hands’ doctrine and other principles reflected in maxims such nemo auditur propriam turpitudinem allegans; and (3) transnational public policy.

The prism through which investor wrongdoing is typically addressed is the clause of many investment treaties according to which it is asserted that covered investments are only those made ‘in accordance with’ the laws of the host state. The preponderance of arbitrators and commentators confirm that such terms precisely operate as a limit on a host state’s consent to refer disputes to arbitration, and thereby operate as a condition for jurisdiction.71

As noted above, some tribunals have found that a requirement that investments be made ‘in accordance with’ the laws of the host state can effectively be read into investment treaties even in the absence of an express legality clause.72 Other tribunals have found that it is not appropriate to read such a requirement into a BIT.73 In any event, the weight of arbitral practice supports the conclusion that, in the absence of express words to the contrary, legality requirements in treaties are concerned with wrongdoing solely at the date of admission or establishment of an investment, and not subsequent illegal acts.74 Illegalities committed during the operation of an investment may nonetheless be a ground for finding a claimant’s claims inadmissible in certain circumstances, or may serve as a defence on the merits.75

Certain tribunals have also held that claims arising out of or tainted by serious wrongful conduct are inadmissible pursuant to the ‘clean hands’ doctrine76 or other purported general principles of international law. In Plama, the tribunal stated that the lack of a specific treaty provision requiring the conformity of the investment with national law ‘does not mean . . . that the protections provided for by the [Energy Charter Treaty] cover all kinds of investments, including those contrary to domestic or international law’.77 In view of its finding that the claimant had violated Bulgarian law through fraud, the tribunal went on to take the view that granting the treaty’s protections to the claimant’s investment ‘would be contrary to the principle nemo auditur propriam turpitudinem allegans‘,78 and therefore the claimant’s claims were inadmissible.79

Finally, the most serious forms of investor wrongdoing often trigger an analysis in terms of ‘transnational public policy’. Transnational public policy is a term ‘usually employed to refer to certain fundamental principles of law that are considered to be common among developed legal systems, and to have mandatory application, regardless of what the parties have agreed’.80 As the Worley tribunal held, ‘particularly serious illegalities concerning violations of international public policy may have the effect of barring the admissibility of claim . . .’81 Transnational bribery is widely recognised as being contrary to transnational public policy,82 while the BSG v. Guinea tribunal has recently concluded that the same is true for trading in influence.83

Possible limitations on findings of illegality

Even if a host state is able to establish that the investor is guilty of some form of illegal conduct, this will not always necessarily result in the dismissal of the case for lack of jurisdiction or admissibility.

As noted above, tribunals generally agree that the illegality in question must be sufficiently ‘serious’.84 In this respect, some tribunals have appeared to consider that a failure of the host state’s authorities to investigate or prosecute individuals alleged to have been party to the illicit activities is a factor that weighs against finding a serious illegality.85

Moreover, certain tribunals have insisted on a requirement of a causal link between the illegal act and the claimant’s investment. In Hamester v. Ghana, for instance, the tribunal dismissed Ghana’s fraud claim on the basis that there no proof ‘that the alleged fraud was decisive’ in enabling the claimant to obtain the joint venture agreement at issue.86 More recently, the Worley v. Ecuador tribunal considered whether the claimant’s misrepresentations were a ‘necessary condition’ for it to obtain two refinery contracts.87 In the corruption context, the tribunal in Niko Resources v. Bangladesh held that the respondent needed to demonstrate a causal link between the alleged act of corruption and the claimants’ acquisition of the relevant contracts.88 Other tribunals have framed the issue somewhat differently, insisting on ‘connexity’ (i.e., a ‘close relationship’ between the illegal act and the investor’s claims).89

Finally, some tribunals have considered that a host state may effectively forfeit its ability to invoke illegal acts as an objection to jurisdiction or admissibility where its own officials ignored those acts and proceeded to treat the investment legal. In Railroad Development Corporation v. Guatemala, for instance, the tribunal held that ‘principles of fairness should prevent the government from raising violations of its own law as a jurisdictional defence when in this case, . . . it knowingly overlooked them and effectively endorsed an investment which was not in compliance with its law’.90

The participation of host state officials in corrupt acts may also have consequences for the state in arbitration even where illegality objections are upheld. In BSG v. Guinea, for instance, the tribunal ruled that Guinea’s counterclaims were inadmissible because its own officials had ‘acted unlawfully by accepting favors (or letting family members do so) in consideration for exercising their influence over the attribution of mining rights’ to one of the claimants.91

Conclusion

In sum, allegations of corruption, fraud, and other violations of host state law, when proven, can lead a tribunal to dismiss an investor’s arbitration claims for lack of jurisdiction or inadmissibility on the basis of a number of legal doctrines. Going forward, it remains to be seen whether arbitral tribunals will further refine the state of jurisprudence on such issues as the standard of proof in corruption cases, or the consequences of a state’s participation in or ratification of illegal acts. Given the prevalence of illegality objections in contemporary arbitration, the case law on these issues will continue to evolve.

This article first appeared on Lexology. You can find the original version here.