In international investment and trade, arbitration is a frequently used mechanism to settle disputes between the parties. Economic crime such as corruption, money laundering or fraud may affect global investment and trade relationships in some way. If this is the case, arbitrators will be confronted with alleged or suspected criminal conduct.
Since the late 1980s, a number of international and regional conventions as well as ‘soft law’ have emerged to combat transnational economic crime that has a detrimental impact on the economy and society of states and distorts fair competition. The conventions and soft law provisions have been implemented by states in their domestic criminal law. Public international law as well as domestic criminal law are relevant in international arbitration in cases of alleged criminal conduct if the parties choose to apply them, or if they apply on a mandatory basis.
Criminal law defines the objective requirements of an offence that need to be proven by the evidence in detail. Arbitrators should identify and apply criminal law in cases where criminal conduct is suspected or alleged, and inquire into criminal allegations ex officio. Regarding evidence, arbitrators can rely on ‘red flags’ that are a form of circumstantial evidence, and draw adverse inferences from the non-production of requested evidence by the parties. If a party is able to produce prima facie evidence of criminal conduct, arbitrators can ask the defendant to produce rebuttal evidence. There is no need to apply a higher (or lower) standard of proof when assessing allegations of criminal conduct. The impact of proven criminal conduct on the outcome of the proceedings is different in investment and in commercial arbitration and depends on the circumstances of the case.