It is a well-established practice in international commercial arbitration that tribunals do not accept jurisdiction in disputes that involve corruption. While investment arbitration tribunals endorse such reasoning, the authors challenge the approach. Investment arbitration disputes differ from commercial arbitration disputes in that the Respondent, that is, the Host State, is vested with puissance publique and hence may pursue its interests unilaterally – in contrast to a private entity, it does not need a tribunal to get what it seeks. Moreover, the authors argue that declining jurisdiction is both detrimental from a policy perspective as well as subject to fl awed legal reasoning. Therefore, they seek to promote a balancing of the investors’ responsibilities vis-à-vis corruption with their rights on the merits stage. Only this approach promises both sound legal reasoning and a solution that pursues a policy jointly targeting corruption and conforming with the investment regime’s ultimate goal: to foster economic development by way of protecting investments.
‘There is no kind of dishonesty into which otherwise good people more easily and frequently fall, than that of defrauding the government.’
Benjamin FranklinLegal Issues of Economic Integration