The corruption defence in arbitration

World Duty Free v Kenya

World Duty Free Company brought a contract claim against Kenya at ICSID. The tribunal was Gilbert Guillaume (president), Andrew Rogers and V.V. Veeder ⁵.

The claimant said its chief executive, Mr Ali, had to make a "personal donation" of US$2 million to President Moi in March 1989 to do business with the government, and that it was part of the consideration for the contract ¹. The claimant said the payment was made in the belief it was lawful, that such donations were routine and linked to the Harambee system, and that it was severable from the contract ¹.

The tribunal said Kenya did not deny the payments as described, so they were established. It held that the payments "must be regarded as a bribe made in order to obtain the conclusion of the 1989 Agreement" ¹. It concluded that claims based on contracts obtained by corruption cannot be upheld ¹. The tribunal noted that the former president was not a party and that it had no jurisdiction over him ¹. The case record lists the outcome as in favour of Kenya ⁵.

Metal-Tech v Uzbekistan

Metal-Tech Ltd brought a treaty claim against Uzbekistan. The tribunal was Gabrielle Kaufmann-Kohler (president), John M. Townsend and Claus von Wobeser ².

The award records that consultants were paid approximately US$4 million ². Uzbekistan argued the consulting contracts were "a sham meant to cover the Claimant's illegal payments" ². The claimant argued that the treaty's most-favoured-nation clause brought in a broader definition of investment from another treaty ². The tribunal noted the treaty may limit protection to investments made in accordance with the laws of the host state ².

The tribunal concluded that it had no jurisdiction over the claims, so the award did not address liability ².

Corruption raised after the award

In Nigeria v P&ID, a Final Award of 31 January 2017 required Nigeria to pay US$6.6 billion with interest at 7% ³. Nigeria challenged it in the English Commercial Court under section 68 of the Arbitration Act 1996 ^3,4.

On 23 October 2023, Mr Justice Robin Knowles found that payments to Mrs Grace Taiga in December 2009 and March 2010 were bribes paid on P&ID's behalf, and rejected as untrue the contrary evidence of Mrs Taiga and Mr Cahill ³. He held the awards "were obtained by fraud" and set them aside ⁴. On 21 December 2023 he refused P&ID permission to appeal ⁴.

Rules that let corruption be raised

• ICSID Convention Article 52(1)(c): annulment where there was corruption on the part of a member of the tribunal ⁶
• English Arbitration Act 1996 section 68(2)(g): challenge where the award was obtained by fraud or is contrary to public policy ⁷
• New York Convention Article V(2)(b): a court may refuse enforcement contrary to its public policy ⁸