Deconstructing Duty-Free: Investor-State Arbitration as Private Anti-Bribery Enforcement

Abstract

World Duty Free v. Kenya, in which the panel dismissed an investor’s claim against the Republic of Kenya for expropriating its investment, set a precedent with dangerous implications for the global anti-corruption movement. Despite its proffered intent to help the poor and advance global anti-corruption policy, the award does neither. Indeed, in practice it will tend to do the opposite. In creating an absolute defense for state officials who solicit and accept bribes, Duty Free exacerbates existing imbalances and distortions in anti-bribery enforcement and ultimately undermines global anti-corruption policy.

Though Duty Free has become part of the anti-bribery enforcement problem, investor-state arbitration could actually be part of the solution. This paper describes global anti-corruption policy and the problems that inhere in this, a nascent stage of worldwide enforcement. It then makes the case for private anti-bribery enforcement. It locates the original international anti-bribery law, the U.S. Foreign Corrupt Practices Act (“FCPA”), in the broader context of U.S. white-collar enforcement, and shows how the use of concurrent public and private enforcement in white-collar law generally has produced benefits that could partially mitigate the problems of anti-bribery enforcement. It further shows how companies have thus far searched in vain for an effective venue for private anti-bribery enforcement, and how investor-state arbitration might become that venue. The paper then picks apart each of the three legs on which the Duty Free holding rests, one at a time. In conclusion, I allude to some of the issues that must be resolved if investor-state arbitration is to become a venue for the private enforcement of anti-bribery norms, and show how permitting foreign companies to pursue corruption claims would actually serve to defend investor-state arbitration from some of its fiercest critics.

Keywords: fcpa, arbitration, corruption