The Dis-Embedded Arbitrator: Releasing Arbitration from Corruption-Shaped Environments in the Wake of the Odebrecht Arbitral Ordeal in Peru

Abstract

Despite local instances of single arbitrators’ corruption not having proven completely absent from arbitration chronicles over the last decades, one may safely argue that until very recently, no scandal had ever been severe enough to shake the foundations of arbitration communities on a regional, let alone global, level. However, this eventually occurred in 2019 in Peru as the outcome of one of the countless parallel investigations stemming from the 2016 Odebrecht corruption saga, propagated from Brazil to the whole of Latin America, the Caribbean, sub-Saharan Africa, and beyond, and labelled by many as the largest scandal of its kind in recent history. Peru’s vicissitudes revolved around a number of corrupted arbitrators who systematically accepted bribes and political favours from Odebrecht in return for favourable awards upholding the repricing of public-procurement contracts. This story can teach us about more than the simple evidence that arbitrators, too, might fall for corruption; criminologically, it suggests that arbitration as a dispute-resolution mechanism can find itself embedded within regionalised networked systems of corruption-prone regulatory capture, and even play an active role in their normalised perpetuation. To prevent this, while having regard for safeguarding the independence and confidentiality of arbitral proceedings to the highest possible extent, the enactment of context-sensitive binding regulation is advised.

Keywords: arbitrators’ embeddedness; commercial arbitration; corruption in Latin America; ethical shopping; normalisation of deviance; Odebrecht scandal; Peru; regulatory capture; social construction of corruption

JEL Classification: J38, J48, J88, K14, K23, K33, K40, K41, K42, K49, P16, P48, P59, P37