Corruption is a complex phenomenon of social life that has penetrated into many spheres of life, and international arbitration is not an exclusion.
In order to take more effective measures to counteract this disastrous phenomenon in the field of international arbitration, the Arbitration and Crime Expert Center and the Basel Institute for Governance have recently issued a joint document in a form of instructions for arbitrators. Can corruption in international arbitration be minimized? And how? This requires a global effort. Issues of building joint efforts at the global level, forming a culture of total rejection of corruption are discussed in the new document. It is designed to equip arbitrators with instructions to help detect corruption offenses through international arbitration, investigate and consider the implications for arbitration in the future.
The manual contains fundamental rules, but some aspects set out in it are somewhat vague after thorough consideration. This is especially true with regard to the choice of applicable law and standard of proof. It turns out that the consequences of finding the fact of corruption are left to the arbitrator’s discretion, and this can lead to further confusion. Ultimately, how exactly corruption crimes are to be treated in arbitration still remains unclear.
Which law to be chosen?
The first section of the instruction covers ways to detect corruption offenses in arbitration as a peaceful method of resolving a commercial dispute. The markers that arbitrators need to pay attention to in the first place are listed in this section. For example, disproportionate remuneration and lack of proper documentation are vivid signs of corruption.
However, in the matter of legislation, the problem arises as to what laws and principles need to be applied. Principles such as the provision in the applicable law agreement itself intersect here; the principle of territoriality, that is, the jurisdiction of the State where the act was committed, and the principle of nationality, where the jurisdiction of the State whose national has committed the act is applied anywhere in the world. All three of these conditions can create three options for applicable criminal law.
All the above can lead to a paradoxical situation when in one case the act will be considered illegal, and in the second - quite legal and permissible. Then the question arises, which arbitrator to turn to? And in this case, the above instruction does not give a clear answer and any instructions.
Too many standards
A similar problem arises with regard to the standard and burden of proof.
The instructing manual offers three possible standards of proof:
- The standard of "balance of probabilities" is known in the civil proceedings of Great Britain. It will also apply by default if criminal charges are brought in the course of such proceedings;
- Standard of "convincing evidence";
- The principle of "temporary sentencing" is the arbitrator's personal conviction that there is sufficient evidence to substantiate allegations of corruption.
It seems that this variety of standards can create the risk of inconsistent results and, again, bring confusion into the arbitration process.
As we have already noted, a new instruction manual has been issued so that arbitrators can better detect corruption in international arbitration. Due to the fact that disputes are resolved internationally, a legal conflict is difficult to avoid. However, the new explanatory document is seen as a positive development, a first and important step in defining the framework within which arbitrators should act to combat corruption in their area of activity.
Learn more about the benefits of resolving commercial disputes in international arbitration from IQ Decision UK. Our solicitors will provide you with comprehensive advice on this matter. We are also ready to provide mediation services for peaceful dispute resolution in a foreign jurisdiction upon your request.