The Use and Misuse of the Corruption Defence in International Investment Arbitration

30(3) Journal of International Arbitration (2013), 267–282

20 Pages Posted: 16 Dec 2013 Last revised: 4 Jan 2016

See all articles by Tamar Meshel

Tamar Meshel

University of Alberta Faculty of Law

Date Written: June 1, 2013

Abstract

This article argues that while a mutually beneficial relationship can be cultivated between international investment arbitration and anti-corruption policies, the recent emergence of a state-invoked 'corruption defense' as a complete defense to liability for alleged breach of investment protection obligations may hamper the sustainability and effectiveness of such a relationship. In the context of a corrupt host state, for instance, and particularly a corrupt developing host state, the growing use of this defense may arguably frustrate the objectives of both foreign investment protection and anti-corruption policies. This was the case, for instance, in the 2006 investment arbitration World Duty Free Co. Ltd. v. Republic of Kenya, in which the arbitral tribunal accepted the corruption defense invoked by Kenya as a complete defense to the investor’s claims of alleged breach of investment protection obligations. In so doing, the tribunal arguably disregarded the potentially detrimental effects such a decision may have on Kenya’s ability to fight corruption and attract further foreign investment, both of which are of crucial importance to its future development. This article argues, therefore, that investment arbitration tribunals ought to proceed with caution when permitting a corrupt host state, and particularly a developing one, to rely on the corruption defense, and ought to devise alternative remedies to the complete rejection of the claims where investor corruption is established.

Keywords: Corruption, investment arbitration, corruption defense, developing country

Suggested Citation

Meshel, Tamar, The Use and Misuse of the Corruption Defence in International Investment Arbitration (June 1, 2013). 30(3) Journal of International Arbitration (2013), 267–282, Available at SSRN: https://ssrn.com/abstract=2368088

Tamar Meshel (Contact Author)

University of Alberta Faculty of Law ( email )

Law Centre (111 - 89 Ave)
University of Alberta
Edmonton, Alberta T6G 2H5
Canada

HOME PAGE: http://www.ualberta.ca/law/faculty-and-research/profiles/tamar-meshel

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