2024 | ISSUE 2

ICC Dispute Resolution Bulletin | 2024 | Issue 2 2

ICC Dispute Resolution Bulletin | 2024 Issue 2

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ICC Dispute Resolution Bulletin | 2024 | Issue 2

 3

Contentsontents
>> Claudia Salomon
Message from the President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

>> Julien Fouret and Yasmine Lahlou

Welcome from the Editors-in-Chief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

GLOBAL DEVELOPMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

>> Dr. Ioana Knoll-Tudor

France 
India v. CC/Devas: Potential Pitfalls of the Assignment of Arbitral Awards . . . . . . 8

>> Anna Masser

Germany  Two Signatures and a Remark that the Third ‘could not be obtained’
is Sufficient for a Decision to Qualify as an Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

>> Christoph Martin Radtke

Italy 
ICC Incoterms® Rules in Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

>> Rahul Donde and Surbhi Kuwelker

Switzerland Federal Tribunal Confirms Swiss-seated Arbitral Tribunal’s Jurisdiction
over Intra-EU Investment Disputes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

>> Manini Brar and Shania Elias

India Arbitral Tribunals Must Comply with the Express Statutory Requirement
to Deliver the Arbitral Award to Each Party to the Arbitration Agreement,
as Opposed to an Agent or Lawyer of such Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

>> Keita Kawamura, Chié Nakahara and Seri Takahashi

Japan Legal reform on International Dispute Resolution – Entry into force
of the Amended Arbitration Act and Singapore Convention Implementation Act. . . . . . 27

>> Natalia Alenkina

Kyrgyzstan 
Court Seizes Aircraft in Support of International Arbitration. . . . . . . . . . . . . . 31

ICC COMMISSION REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

>> Red Flags or Other Indicators of Corruption in International Arbitration. . . . . . . . . . . . . . . 35

ICC DISPUTE RESOLUTION BULLETIN
2024 | ISSUE 2 | CONTENTS 4

ICC DRS ACTIVITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

>> Florencia Villaggi and Lucila Marchini

ICC Young Arbitration and ADR Forum (YAAF)
Unravelling the Knot – Insolvency in the Realm of Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 77

>> Albert Mukasa

8th ICC Africa Conference on International Arbitration –
Emerging Trends in ADR in Africa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

>> 12th ICC MENA Conference on International Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

>> John Lewis

12th ICC MENA Conference on International Arbitration –
Beyond 100: Arbitration, ADR and the Middle East. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

>> Nicole Araygi

ICC Institute of World Business Law ('ICC Institute') Advanced Training
on Documentary Evidence: Reassessing its role and value in international
commercial arbitration – Focusing on critical key issues of M&A
and construction disputes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
ICC Dispute Resolution Bulletin | 2024 | Issue 2 5

Message from the President

Claudia Salomon
President, ICC International Court of Arbitration

For those lucky enough to ICC Model Contracts

enjoy safety and security,
we can wake up in the
For example, three years ago, at the start of my term,
morning, open our closet full
one of the ICC Court members told me that if we want
of clothes and still think we
to assist small and medium-sized businesses (SMEs), we
have nothing to wear. All too
should provide them with model contracts, and not just
often in this situation, we do
model clauses. I thought that was a great idea.
not see the abundance and
instead think we need to But what many others and I did not realise was that ICC
go shopping. already had a full suite of phenomenal model contracts,1
so a cross-department team revamped and update
An alternative mindset
those contracts. They are now part of ICC One Click, a
that I have adopted is to
platform designed to provide vital resources for SMEs, as
‘shop your closet’, or as they say in the UK, shop your
explained in our campaign to get the word out.2
wardrobe. By this, I mean improvising with what you
have and what’s on hand, creating something fresh and
new with items that would otherwise seem stale and Accessing the Bulletin
old-fashioned.

I am not offering fashion tips here but making a Another example of unlocking our potential is the ICC
broader point about the work of the ICC International Dispute Resolution Bulletin. The Bulletin has always
Court of Arbitration. As President of the ICC Court, I been an insightful journal, but few people would read it
am always striving to unlock the incredible potential because it was behind a pay wall and only available as
of our institution. I seek out what is unique and special a PDF. You could not easily search back issues, or even
that already exists and can be utilised in innovative know what content was there.
new ways to ensure that the ICC Court continues to
To make this resource more accessible, we partnered
meet – and exceed – the evolving needs of the global
with Jus Mundi, which now hosts the ICC Dispute
business community.
Resolution Library.3 The current issue of the Bulletin
In the increasingly competitive landscape for dispute is free, and back issues can be easily searched. Not
resolution services, we have to continually ask surprisingly, readership has grown exponentially. Yet our
ourselves, why should a company or state or state- goal is not only to attract more readers, but also to give
owned enterprise want to use ICC Arbitration over other them a better understanding of ICC’s Dispute Resolution
choices? What are our special strengths? In other words, Services and to drive thought leadership in dispute
how can we shop our closet? prevention and resolution.

1 The ICC Model Contracts and Clauses are also included in the ICC
Dispute Resolution Library subscription.
2 Grow your business beyond borders with ICC One Click
3 https://jusmundi.com/en/icc-dispute-resolution-library
ICC Dispute Resolution Bulletin | 2024 | Issue 2 6

A worldwide organization Always innovating

Another strength I want to tap into is ICC’s global Shopping the closet, however, does not mean relying on
network of people and knowledge. We are the only truly the strength of your past or avoiding the latest advances
international arbitral institution, not tied to any one in technology, communications, or social media. As in
country or region or subject to shifting politics. No other other fields, innovation is essential to providing valuable
institution can boast having parties from nearly 150 dispute resolution services that can address the ever-
countries using their services, with arbitrators coming evolving demands of an increasingly wide range of
from nearly 100 countries and arbitrations taking place businesses and markets.
in 120 cities around the world.4
As I look ahead to my second term as President of the
In addition, there are ICC National Committees in ICC Court, I am committed to continually assessing
more than 90 countries.5 Many of these have strong ICC’s strengths and identifying where we, as a
arbitration committees serving as hubs for anyone global organization, need to invest to maintain our
who wants to get more engaged with arbitration. The unprecedented position in dispute resolution. Meeting
challenge is to leverage this global platform to build the needs of all of our stakeholders – the global business
strong connections with vibrant arbitration committees community, their counsel, and the arbitrators – and
in each National Committee. The new ‘ICC Dispute enabling the ICC Court and the truly impressive
Resolution Services Engagement Roadmap’ provides Secretariat staff to do their job, is our primary goal.
guidance and additional support to the National
We will continue to provide these services in the most
Committees locally, regionally, and globally.
efficient ways possible while always striving to provide
Whether meeting one-on-one, in small groups, or at access to justice and the rule of law to everyone, every
large conferences, we have been able to bring people day, everywhere.
together and communicate our unique value proposition
to critical influencers and business leaders. Over my
past three years as President if the ICC Court, one of my
priorities has been to build this sense of connection.

What I tell everyone is this: what really distinguishes

ICC Arbitration is our service. When parties have a
dispute, they expect a trusted institution to partner with,
one that operates at the highest level of integrity and
independence and understands – and is responsive
to – their needs. This global trust was evident in October
when we registered the 29,000th case under the ICC
Rules of Arbitration.6

4 ICC Dispute Resolution Statistics 2023

5 https://iccwbo.org/national-committees/
6 ‘ICC reaches arbitration milestone with case 29,000’ (www.iccwbo.
org, 23 Oct. 2024).
ICC Dispute Resolution Bulletin | 2024 | Issue 2 7

Welcome from the Editors-in-Chief

Julien Fouret and Yasmine Lahlou

Moving to Asia, Manini Brar and Shania Elias report on

the ruling of the Delhi High Court that delivery of an
award is only effective when made to the parties, not
their agent or counsel, so as to trigger the time limit to
vacate an award begins to run. Keita Kawamura, Chié
Nakahara and Seri Takahashi provide an important
update on Japan’s amended Arbitration Act and the
implementation of the Singapore Convention on the
enforcement of settlement agreements. Natalia Alenkina
flags for us an important ruling, in which a district court
in Kyrgyzstan issued the first known interim measure in
support of an international arbitration.

As part of its work, the ICC Commission on Arbitration

and ADR Task Force ‘Addressing Issues of Corruption in
International Arbitration’ publishes the Document on Red
Dear Colleagues,
Flags and Other Indicators of Corruption in International
Thank you for your continued interest and support for Arbitration – the first in a series of very anticipated
the Bulletin and the ICC’s mission – both in perpetual Documents and final Report. Designed as a tool for
renewal – in an effort to promote access to justice and practitioners and arbitrators, the Document starts with
respect for the rule of law, and reflect the growth of key definitions before offering a method to approach red
international arbitration worldwide. Indeed, since the flags, followed by guidance on their procedural effects
last issue, members of both the ICC International Court and considerations on the role for arbitrators in relation
of Arbitration and ICC Commission on Arbitration and to red flags.
ADR have reached milestones in terms of diversity.
Among the ICC DRS Activities, Florencia Villaggi and
This issue is no exception in our outreach effort. In Lucila Marchini report on ICC YAAF’s 13 June 2024 event
Global Developments, from Europe, we feature Ioana on the intersection of arbitration and insolvency and
Knoll-Tudor’s review of the Paris Court of Appeal’s ruling Albert Musaka takes us to Nairobi, which hosted the 8th
rejecting the admissibility of third-party intervention ICC Africa Conference on International Arbitration for
in enforcement proceedings following the assignment the first time on 30-31 May 2024. John Lewis joins us
of an arbitral award in the long-running Devas dispute from Dubai to report on the ICC MENA Conference on
arising out of a failed satellite project in India. In International Arbitration held on 26 and 27 February
Germany, Anna Masser reports about the Federal 2024 while Nicole Araygi attended for us the ICC
Court of Justice’s ruling that even if an award is missing Institute Advanced Training on Documentary Evidence,
the signature of a tribunal member, its indication that part of the MENA conference, which focused this year on
the signature ‘could not be obtained’ was sufficient to M&A and construction disputes.
qualify as an arbitral award. Christoph Martin Radtke
As always, thank you to the ICC DRS Publications
rejoices on Italy’s Corte di Cassazione reliance on the
Manager, Stephanie Torkomyan, and our stellar
parties’ use of the ICC Incoterms® Rules to determine
editorial board.
the competent court. Rahul Donde and Surbhi Kuwelker
deliver a thoughtful analysis of the Swiss Federal
Tribunal’s important public international law ruling that
Swiss-seated arbitral tribunals do have jurisdiction over
intra-EU investment disputes.
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 8

Global Developments
EUROPE

France
India v. CC/Devas: Potential Pitfalls of the Assignment
of Arbitral Awards

Dr. Ioana Knoll-Tudor

Partner, Addleshaw Goddard, Paris; Member, ICC International Court of Arbitration

In a ruling rendered on 10 September 2024 – the latest development in the landmark investment arbitration CC/Devas
v. India – the Paris Court of Appeal rejected the admissibility of third-party intervention in enforcement proceedings,
based on the assignment of an arbitral award. This contribution discusses the implications of this recent decision and its
impact on the evolving landscape of arbitral award assignment.

1. Background to the dispute valued at US$640 million, Devas’ shareholders assigned

their rights to collect the award’s proceeds to three U.S.
companies4 (the ‘Assignees’), who sought to intervene
The dispute underlying the Paris Court of Appeal’s
in the French proceedings. On 13 February 2024, the
decision in CC/Devas v. India1 arose from a concession
pre-trial judge (‘conseiller de la mise en état’) permitted
contract between Devas Multimedia Private Limited
the Assignees’ intervention, finding notably that the
(‘Devas’), a company based in Mauritius, and Antrix
provisions of the assignment agreements operated a
Corporation Ltd (‘Antrix’), an Indian state-owned
conventional subrogation in favour of the Assignees,
company, which allowed Devas to use India’s
‘thus granting them standing and interest to intervene’.5
electromagnetic spectrum for telecommunication
services. Following the termination of the contract India opposed this intervention, arguing that third
by Antrix, Devas’ shareholders initiated UNCITRAL parties to an arbitration could not join enforcement
arbitration proceedings before the Permanent Court proceedings. It further pleaded, in the alternative,
of Arbitration based on the 1998 India-Mauritius BIT, against the validity of the assignment agreements,
resulting in an award granting $111 million in damages alleging that the Assignees had neither the interest nor
to the Devas’ shareholders.2 the standing to act, that the assignment agreements
were a ‘sham’ and thus invalid under English law (the
After both the (i) award on jurisdiction and liability and
law governing the assignment agreements), and they
(ii) the award on quantum were upheld by Dutch courts,
constituted maintenance and champerty,6 forbidden
Devas’ shareholders sought to enforce the awards
under English law. India also made allegations of fraud
in France. An initial exequatur3 granted by a French
and claimed that the Assignees did not qualify as
judge was appealed by India. In parallel, following a
investors under the 1998 India-Mauritius BIT.
liquidation proceeding in India and the obtaining of a
Mauritian court injunction by India to prevent Devas’
shareholders from filing a new investment treaty claim

1 Société CC / Devas et. al c. République d'Inde, Paris Court of 4 CCDM Holdings LLC, Telcom Devas LLC, and Devas Employees
Appeal, n° 24/00152 (10 Sept. 2024). Fund LLC.
2 CC/Devas v. India (I), Award on Jurisdiction and Merits, 25 Jul. 5 République d'Inde c. Société CC / Devas et. al, Paris Court of
2016 (jusmundi.com); CC/Devas v. India (I), Award on Quantum, Appeal, n° 22/11819 (13 Feb. 2024), ‘Pre-trial judge's order’) (free
13 Oct. 2020 (jusmundi.com). The dispute also gave rise to an translation of the author).
ICC proceeding and an UNCITRAL arbitration between Deutsche 6 The common law doctrines of maintenance and champerty were
Telekom and India. defined in the Camdex decision of the London Court of Appeal
3 The exequatur is a declaration by a national court recognizing that (Camdex International Ltd. v Bank of Zambia (No. 1) [1998] 1
an arbitral award is enforceable within its jurisdiction. Following the Q.B. 22.) as occurring when a party brings forward a case it has no
grant of exequatur, enforcement proceedings permit the award’s legitimate interest in, without valid reason or excuse (‘maintenance’)
creditor to take practical steps to enforce the award against or when a person brings material supports to another’s litigation
the debtor’s assets (including measures such as freezing bank against a share of the proceeds from the action or the lawsuit
accounts, seizing property, etc.). (‘champerty’).
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 9

2. Decision of the Paris Court of Appeal the status of a ‘party’ to the arbitration, nor did they
allow them to intervene in the appeal against the
exequatur order.13
The Paris Court of Appeal (‘Court’) overturned the
pre-trial judge’s order and dismissed the Assignees’ Finally, with regard to the claim of denial of justice, the
intervention. Referring to the strict rules on intervention Court held that denying third parties’ intervention in
under the French Code of Civil Procedure (CPC),7 the the appeal proceedings did not violate their right of
Court first recalled that voluntary intervention ‘is a access to justice under Article 6 of the ECHR, since the
request and is not a means of recourse’ and that, as arbitration procedure and the waiver of certain dispute
such, it does not follow the same procedural rules as resolution rights were in conformity with the Convention.
third-party opposition (‘tierce opposition’ – a mechanism Furthermore, the Court held that a judge’s refusal to
that allows individuals who were not party to a case, but allow the intervention of a third party who does not
have an interest in it, to challenge and seek a review of fulfil the necessary conditions of admissibility does not
the decision that adversely affects them) and ‘remains constitute a denial of justice, ‘as long as the appeal
subject to the principle of the autonomy of arbitration’.8 procedure continues regularly between the parties to the
The Court thus noted that voluntary intervention of procedure, who are bound by the arbitration clause’.14
third parties is not admitted in annulment proceedings
nor in appeals against exequatur orders, ‘except by the Accordingly, the Court rejected the intervention of the
express will of the parties, which can only result from the Assignees, who were unable to continue to seek the
parties’ agreement’.9 enforcement of the award.

The Court further stated that intervention ‘is

independent of any subrogation’, noting that in this
3. Commentary
case the assignment agreements did not provide
for subrogation, and negating any presumption of French courts are frequently requested to decide issues
subrogation.10 It also observed that the Assignees had related to the assignment of arbitration agreements.
not only qualified themselves as ‘assignees’ and not as For instance, the courts held in 2021 that the fact that
‘subrogated party’, but had also requested confirmation an arbitration agreement is severable from the main
of the exequatur ‘in their personal capacity’ and contract does not in itself preclude its assignment.15 In
not as subrogated in the rights of the parties to the case of assignment of contracts, the assignee is
the arbitration.11 bound by all its assignor’s obligations, including those
arising out from an arbitration clause.
In overruling the pre-trial judge’s order, the Court
concluded that even if the Assignees had an interest However, French courts had not yet ruled on the validity
in enforcing the award to recover the claim, they could of the assignment of an award. When a Luxembourg-
not claim the right to seek annulment of the award or based company attempted to enforce against Ukraine
appeal the exequatur order, as ‘those rights [are] being a SCC award assigned to it, the Paris Court of Appeal
strictly attached to the status of party to the arbitration, found the Ukrainian state to be immune from execution
which belongs only to the parties to the award or to and rejected the request, without analysing the
third parties conventionally admitted as parties’.12 The arguments based on the assignment itself. 16 In 2021,
Court thus deemed the Assignees’ voluntary intervention the Paris Court of Appeal allowed the enforcement of
inadmissible, deciding that there was no need to rule on an assigned award but the issue of the validity of the
the legality of the assignment agreements under English assignment of the award was not raised.17
law as such agreements did not grant the Assignees

13 Id. paras. 53-54.

7 Court of Appeal decision, supra note 1, paras. 28-37. 14 Id. para. 56.
8 Id. paras. 37-39. 15 Court of Cassation, 2nd civ., 20 Dec. 2001, no. 00-10806, Quille le
Trident c/ CEE Euro Isolation, Rev. Arb. 2002, p. 379 et seq.; Court of
9 Id. para. 41. Cassation, 1st civ., 26 June 2001, no. 99-17120, American Bureau
10 Id. paras. 42-44. The pre-trial judge, in contrast, had found that (i) of Shipping (ABS) c/ Copropriété maritime Jules Verne, Rev. Arb.
the contractual nature of arbitration does not ‘in principle prevent 2001, p. 529 et seq; M. de Boisséson, C. Fouchard, J. Madesclair, Le
the intervention of a person subrogated in the rights of one of the Droit Français De L’Arbitrage, LGDJ, 2023, [177].
parties to the arbitration’ and (ii), after analysing the provisions of 16 Paris Court of Appeal, 5 Jan. 2012, no. 11-10949, Société
the assignment agreements, that they operated a conventional Sinequanon Invest c. L’Ukraine.
subrogation (‘subrogation conventionnelle’) in favour of the
Assignees, ‘thus granting them standing and interest to intervene’. 17 Paris Court of Appeal, 7 Dec. 2021, no. 18-10217, FG Hemisphere
Associates c. République Démocratique du Congo. See also Court
11 Court of Appeal decision, supra note 1, paras. 46-48. of Cassation, 1st civ., 28 Feb. 2024, no. 22-16152, FG Hemisphere
12 Id. para. 51. Associates LLC c. République Démocratique du Congo.
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 10

To the author’s knowledge Devas is the first case in Admissibility issues in civil law and common law
which a French judge has had to decide on the validity
of an award assignment agreement. The position of The assignment of an arbitral award must be
the French Court of Appeal is straightforward: the distinguished from the assignment of an arbitration
notion of an ‘arbitral award creditor’ for the purpose of agreement:
intervention in enforcement or annulment proceedings • Assignment of an arbitration agreement: Refers
is strictly interpreted to include only direct parties to the to the transfer of rights and obligations under the
arbitration or those conventionally admitted as such. arbitration agreement (with the assignee stepping
into the shoes of the assignor and becoming a
The decision of the Paris Court of Appeal is in line with party to the arbitration agreement, thus assuming
the provisions of the French Civil Code on assignment all rights and obligations under it).
and subrogation: only a subrogee steps into the shoes
• Assignment of an arbitral award: Implies the
of the original party and party status, whereas an
transfer of rights to the award to another party,
assignee, as a third party, has limited rights. Specifically,
often for a discounted fee, therefore not raising
an assignee is entitled to the proceeds of the arbitration
the same risks and legal complexities.
claim but lacks the broader rights of a party to the
arbitration. Essentially, the decision distinguishes
In terms of admissibility, the New York Convention does
between the monetary rights transferred to the assignee
not explicitly address the assignment of arbitral awards.
by the assignment, which coexist with the personal
The lack of any specific requirements for the validity
rights retained by the assignor. In contrast, a subrogee
of such assignments may be justified by the fact that,
would benefit from both sets of rights.
similar to the assignment of an agreement to arbitrate,
the assignee is considered ‘sufficiently warned’ and
Assignment of awards: a solution to increasingly
aware of the arbitral award, and also as having had ‘the
complex enforcement procedures
opportunity to scrutinise [the assignment] in advance’.19
As enforcement of arbitral awards becomes more Nevertheless, if the assignment took place after the
difficult and investors seek access to liquidity, award award was rendered, to seek enforcement, the assignee
creditors are developing new solutions. One such has to submit documents evidencing the assignment20 in
solution is the assignment of arbitral awards – whereby order to fulfil the requirements of Article IV(1) of the New
the rights under an award are transferred from the York Convention.
original creditor (the assignor) to a third party (the
The defences that can be raised against an assignment
assignee), allowing the assignee to enforce the award
of arbitral award and the intervention of an assignee
and collect its proceeds and the assignor to monetise
vary depending on the legal systems.21
and access upfront liquidity, while alleviating the
burdens associated with post-award proceedings. In civil law, parties mainly rely on arguments related to
the legal standing of the assignee.22 This was also one
The growing involvement of third-party funders
of India’s arguments in CC/Devas as it claimed that the
in international arbitration and the evolution of
Assignees lacked legal standing to enforce an award
complex funding agreements have contributed to
because they were not parties to the arbitration and
the development of this practice. As enforcement is
because they could not rely on the award due to certain
increasingly viewed as a distinct concern, third-party
conditions of the agreement to arbitrate not being
funders are sometimes intervening at the enforcement
met. It is worth mentioning that the French doctrine of
stage only. An illustration of this trend is the Stans
‘retrait litigieux’, as articulated in Article 1699 of the
Energy and Kutisay Mining v. Kyrgyzstan case,18 in which,
French Civil Code, allows the debtor of an assigned
pursuant to an assignment of an arbitral award, the
claim to repurchase the claim from the assignee for the
funders enforced the award.
19 S. Jagusch, A.C. Sinclair, ‘Chapter 15: The Impact of Third Parties on
International Arbitration – Issues of Assignment’ in L.A. Mistelis, J.D.M.
Lew (eds), Pervasive Problems in International Arbitration (Kluwer
Law International, 2006), p. 295.
20 M. Scherer, ‘New York Convention, Article IV [Formal Requirements
for Recognition and Enforcement of Arbitral Awards]’ in R. Wolff (ed),
New York Convention: Article-by-Article Commentary (2nd ed, C.H.
Beck, 2019) [14].
21 C. Dupeyron, M. L. Mancinelli, ‘The Emerging Practice of Assigning
Arbitration Awards: Rationale, Structure and Potential Hurdles’
(2022) 40.1 ASA Bulletin, pp. 20-21.
18 Reasons for Decision, Ontario Superior Court of Justice, 18 July 2022, 22 Id. pp. 20-25. See also G. Lazarev, Assignment of arbitral awards
Gebre LLC v The Kyrgyz Republic et al. 2022, [6]. (Practical Law Kluwer Blog, 12 Dec. 2016).
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 11

same price paid by the latter. This right, which can be Common law jurisdictions provide examples of
exercised if specific conditions are met, is designed to enforcement of assigned awards in which the
shield the debtor from speculative practices. maintenance and champerty doctrines have been
invoked. The landmark case is FG Hemisphere v
In common law, the available defences against
DRC, in which two awards had been assigned by
assignment of awards are the doctrines of maintenance
Ukraine’s Energoinvest to FG Hempishere, a U.S. fund,
and of champerty, which are contrary to public policy
which attempted to enforce the awards against the
and can result in the inability to enforce the award.
Democratic Republic of Congo. Enforcement attempts
These doctrines are aimed at discouraging a party
were successful in the U.S.,30 Jersey31 and Hong Kong,32
from supporting a suit solely for a financial interest in its
despite the Hong Kong judge’s concern ‘that the
outcome (‘champerty’) or to discourage an unconnected
assignment of the awards might constitute maintenance
third party from assisting litigation proceedings, for
or champerty’.33 The judge however decided that
example with financial resources (‘maintenance’).
no such issue arose.34 By contrast, champerty and
On the issue of legal standing, civil law courts tend to maintenance are not recognised in several European
take a broad interpretation and to allow enforcement countries,35 including France. As such, and although
of awards by third parties, not only original award the Paris Court of Appeal found there was no need to
creditors, based on a valid assignment agreement. rule on the legality of the assignment agreements, it is
However, if an arbitration agreement explicitly prohibits no surprise that the pre-trial judge in CC/Devas v. India
assignment, such an argument is inadmissible.23 considered India’s arguments based on these doctrines
to be procedural matters and held them inapplicable
• Euler Hermes v PJSC Odessa Fat and Oil Plant: before a French Court,36 evidencing their limitation in
A Ukrainian court initially denied enforcement to civil law jurisdictions. The outcome could have been
Euler Hermes, who was the assignee of Pontus different in a common law context.
Trade S.A. on the basis of lack of standing.24
The court’s reasoning was that only the original Specificities in investment arbitration
creditor (or its representative) could request
enforcement, rejecting a broad interpretation The practice of assignment of arbitral awards has
of the term ‘creditor’.25 Although this reasoning mostly developed in the field of investment arbitration,37
was initially upheld by the Court of Appeal of where discussions arose around the assignee’s
Odessa,26 it was later overturned by the Supreme standing, considering that the award is predicated on
Court but still confirmed by the Court of Appeal, protections granted by a treaty to investors meeting
so the assignee was unable to enforce.27 specific criteria, as well as around the legitimacy of the
assignment agreement. In most cases, these arguments
• Regent Company v. Ukraine: The ECHR ruled
have not been successful. For example:
that refusal to enforce an award due to lack of
standing was a violation of state obligations
and an interference with the right to property.28
Along the same lines, Turkish courts have recently
rendered several decisions in which assignees
and the standing of assignees have been
recognised, allowing assigned arbitral awards to
be enforced.29

23 For a similar argument, see Balkan Energy Limited v. Republic of

Ghana, D.D.C., [2018] Case No. 17-cv-00584 (APM), pp. 18-19.
30 FG Hemisphere Associates, LLC v. Democratic Republic of Congo &
24 Ruling of Prymorskyi District Court of Odessa City, 20 March 2013, SNEL [2011] No.05-7040, USCA Col., 3.
Euler Hermes v. PJSC Odessa Fat and Oil Plant. In this case, PJSC
Odessa was required by a FOSFA award to pay a debt to Pontus 31 [2010] JRC 195, FG Hemisphere Associates LLC v Democratic
Trade S.A., a company from Switzerland, which assigned its rights to Republic of Congo and La Generale des Carrieres et de Mines.
Euler Hermes. 32 See the decisions at [2009] 1 HKLRD 410 (Court of First Instance),
25 Ibid. HCMP 928/2008, [2010] 2 HKLRD 66 (Court of Appeal) and FACV
5-7/2010 (Court of Final Appeal).
26 Ruling of the Court of Appeal of Odessa Region, 5 June 2013, Euler
Hermes v. PJSC Odessa Fat and Oil Plant. 33 [2009] 1 HKLRD 410 (Court of First Instance), HCMP 928/2008,
[135].
27 K. Pilkov, ‘Assignment of Benefits of Arbitral Awards: Problematic
Enforcement in Ukraine’ (Kluwer Arbitration Blog, 2014). 34 Id. [136].
28 S. Konrad, M. Birch, ‘Non–Enforcement of Arbitral Awards: Only a 35 R. Mulheron, The Modern Doctrines of Champerty and Maintenance
Pyrrhic Victory?’ (2010) 4.4 Revista Română de Arbitraj, p. 50. (OUP, 2021), p. 61.
29 M. Arseven, ‘In Quest of Collection: Assignment of Arbitral Awards 36 See para. 40 of the pre-trial judge’s order, supra note 5.
under Turkish Law’ (https://www.morogluarseven.com/, 12 Apr. 37 G. Lazarev, ‘Assignment of arbitral awards’ (Practical Law Kluwer
2022). Blog, 12 Dec. 2016), supra note 22.
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Global Developments 12

• Blue Ridge Investments v Argentina38: The

U.S. courts granted enforcement of an ICSID
award (CMS v Argentina39) after Blue Ridge
purchased CMS’ interest in the award and despite
Argentina’s argument that the assignee lacked
legal standing to enforce the award. The court
highlighted that the term ‘party’ is undefined
in the ICSID Convention and that neither the
ICSID Convention nor U.S. law prohibited award
assignment, leading to the interpretation that the
term could also include an assignee.
• Belize Social Development Limited v. The
Government of Belize and Balkan Energy
Ltd. v. Republic of Ghana: In two other cases,
U.S. courts ruled that the assignment agreement
only needed to be valid under the law governing
the agreement, rendering potential invalidity
under the State’s law irrelevant, so the assignees
were able to enforce the awards.

The decisions immediately above thus take the analysis

a step further than the Paris Court of Appeal in
CC/‌Devas v. India, which did not consider it necessary to
rule on the legality of the assignment agreements.40

As evidenced in CC/Devas v. India, the practice of

assignment of awards is evolving fast due to the fact
that the enforcement phase has become increasingly
complex. Despite being a rather new feature of
international arbitration, this practice is generally
accepted by both civil law and common law courts
which consider the assignment of rights to be valid
as long as the assignment agreement is valid under
its governing law and gives the assignee a valid
legal standing. The decision of the Paris Court of
Appeal, however, underscores the complexities and
nuances inherent in the assignment and enforcement
of international arbitration awards, and highlights a
cautious approach towards third-party intervention in
arbitration-related matters. The ruling indicates a more
restrictive interpretation of the rights of assignees,
suggesting that the acceptance of such assignments
and the standing of assignees in enforcement
proceedings may not be as straightforward as
previously thought.

38 Blue Ridge Investments, LLC v. Republic of Argentina, [2012] 902 F

Supp 2d 367, 380-382.
39 CMS Gas Transmission Company v. The Argentine Republic, ICSID
Case No. ARB/01/8, Award, 12 May 2005.
40 The pre-trial judge, on the other hand, had emphasised that the
assignee did not have to meet the specific criteria imposed on
investors for protection under the BIT.
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 13

EUROPE

Germany
Two Signatures and a Remark that the Third ‘could not be
obtained’ is Sufficient for a Decision to Qualify as an Award

Anna Masser
Partner, Head of International Arbitration in Germany at A&O Shearman, Frankfurt

The Federal Court of Justice in July 2024 overturned a decision rendered by the Higher Regional Court in Frankfurt
(BGH I ZB 34/23). It held that if two members of an arbitral tribunal sign the award and the president indicates that the
third signature ‘could not be obtained’, the tribunal’s decision qualifies as an award.

1. Summary of the dispute The OLG dismissed the applicant’s main request as
inadmissible and granted the alternative request.1 The
and decision before the Higher Regional OLG held that the arbitral award did not meet the formal
Court of Frankfurt am Main requirements of section 1054 ZPO, which stipulates that
the award must be signed by the arbitrator or arbitrators
The applicant (Antragstellerin, known to be a BASF and that the reason for any missing signature must be
group entity) is a company that acquired seven business indicated. The OLG found that the remark ‘signature
units from the respondent (Antragsgegnerin, known to could not be obtained’ did not constitute a sufficient
be a Bayer group entity) under three separate asset indication of the reason for the missing signature, as
purchase agreements, each containing an identical it did not disclose why the signature of the arbitrator
arbitration clause providing for ICC arbitration. The nominated by the applicant could not be obtained.
applicant claimed that the respondent breached its The OLG reasoned that the indication of the reason
warranty for the financial fact books of the acquired was necessary to ensure that the signing arbitrators
business units and sought damages of €1.6 billion in assumed the personal and legal responsibility for the
arbitration. The arbitral tribunal, composed of three award and that the award reflected the outcome of
arbitrators, dismissed the applicant’s claim in full and the deliberations on the merits. The OLG further stated
ordered it to pay the costs of the arbitration and the that the lack of a sufficient number of signatures was
respondent’s legal fees and other costs amounting to not a ground for setting aside under section 1059 ZPO,
roughly €15 million in total. The arbitral award, dated but rather a precondition for the existence of an arbitral
10 August 2022, was signed by two of the arbitrators, award that could be challenged under that provision.2
namely the presiding arbitrator and the arbitrator
nominated by the respondent, but not by the arbitrator
nominated by the applicant. Under the name of the
missing arbitrator, the award stated in print ‘signature
could not be obtained’.
1 See OLG Frankfurt, Decision 26 Sch 14/22 (27 Apr. 2023).
The applicant challenged the arbitral award before 2 According to section 1059 subsection 2 ZPO, an arbitral award
the Higher Regional Court of Frankfurt am Main can only be set aside if one of the specified reasons for setting
aside listed therein applies (R. Geimer, Zöller, ZPO, 35th ed. 2024,
(Oberlandesgericht, ‘OLG’), invoking several grounds for section 1059 ZPO, para. 9). Reasons include the invalidity of the
setting aside under section 1059 of the Code of Civil arbitration agreement or the inability of a party to conclude such
an agreement. In addition, invalidity can arise if there are no proper
Procedure (Zivilprozessordnung, ‘ZPO’). Alternatively, instructions for the appointment of an arbitrator or if the principle
the applicant requested the court to declare the of equal treatment of the parties is violated, or if the arbitral award
deals with a matter not covered by the arbitration agreement or if
arbitral award invalid. The respondent opposed both procedural rules have been violated that had a significant influence
requests and argued that the arbitral award was valid on the outcome. Furthermore, an arbitral award can be set aside
and enforceable. if the subject matter of the dispute is not arbitrable under German
law or if recognition of the arbitral award would violate the principle
of ordre public.
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Global Developments 14

Therefore, the OLG concluded that the document in The BGH held that the remark ‘signature could not be
question was not an arbitral award within the meaning obtained’ was a sufficient indication of the reason for
of section 1059 ZPO and that the application for the missing signature under section 1054 ZPO. The
setting aside was premature and had to be rejected BGH based its conclusion on the wording, the legislative
as inadmissible. history and the purpose of the provision:

The OLG considered itself competent to decide on • The wording of section 1054 ZPO only required
this request by analogy with section 1062 ZPO, which the indication of ‘the reason’ for the missing
confers jurisdiction on the OLG for applications signature, without specifying its nature or detail.
concerning the setting aside of arbitral awards. The The BGH observed that the provision was derived
OLG also found that the applicant had a legal interest from article 31 of the UNCITRAL Model Law on
in obtaining a declaratory judgement under section International Commercial Arbitration (Model Law)
256 ZPO, as the application for setting aside was and that it had replaced the previous provision
inadmissible. The OLG held that the alternative request of section 1039 ZPO, which only allowed the
was well-founded, as the document purporting to be an substitution of the signature of one arbitrator
arbitral award was invalid due to the lack of the required by a remark of the presiding arbitrator that
number of signatures and the indication of the reason the signature could not be obtained. The BGH
for the missing signature. inferred from this change that the new provision
was intended to facilitate the validity of arbitral
Both parties appealed against the OLG’s decision to awards by allowing the indication of other reasons
the BGH, the applicant seeking the setting aside of the for the missing signature, but not to exclude the
arbitral award and the respondent seeking the dismissal previous remark as a valid reason.4
of both requests.
• The purpose for an indication of the reason was
to demonstrate that the missing signature was
2. Summary of the decision an oversight and that the document was the
final result of the arbitration. The BGH found
of the Federal Court of Justice that this purpose was fulfilled by the remark
‘signature could not be obtained’, which implied
The BGH allowed both appeals and remitted the case that the arbitrator had participated in the
to the OLG for a renewed decision.3 The BGH disagreed deliberations and the decision-making, but had
with the OLG’s assessment of the formal requirements refused or failed to sign the award. It added that
of section 1054 ZPO and held that the arbitral award in the indication of the reason was not subject to
question was a valid and challengeable arbitral award verification or correction by the court and that it
within the meaning of section 1059 ZPO. did not affect the merits of the award.
The BGH confirmed that the compliance with the
The BGH further held that the remark ‘signature could
formal requirements of section 1054 ZPO was a
not be obtained’ did not have to be separately signed or
matter of public policy (ordre public) and had to be
attributed to a specific arbitrator.
examined by the court ex officio as a precondition for
the admissibility of the application for setting aside. • The BGH stated that section 1054 ZPO did not
The BGH also affirmed that section 1054 ZPO required prescribe any formalities for the indication of the
the signature of the arbitrator or arbitrators and the reason for the missing signature, unlike section
indication of the reason for any missing signature, and 315 ZPO for the state court procedure.5 The BGH
that these requirements were essential for the binding reasoned that the indication of the reason did
effect and enforceability of the arbitral award under not require a separate signature, as it was not
section 1055 ZPO. However, the BGH disagreed with a separate decision, but an integral part of the
the OLG’s interpretation of the content and form of the arbitral award.
indication of the reason for the missing signature under
section 1054 ZPO.

4 BGH I ZB 34/23, paras. 14 ff.

5 Section 312 subsection 1 ZPO: ‘Should a judge be prevented from
signing the ruling, this shall be noted, with the reasons being cited,
at the bottom of the ruling by the presiding judge, and should the
presiding judge likewise be prevented from doing so, it shall be
3 BGH I ZB 34/23. noted by the most senior among the associate judges’.
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 15

• The BGH also considered that the indication In addition, the draft bill to modernise the arbitration
of the reason did not have to be attributed to rules in Germany, published on 26 June 2024, expressly
a specific arbitrator, as it was not a personal allows for the inclusion of concurring or dissenting
statement, but a collective expression of the opinions in arbitral awards. Draft Section 1054a ZPO
arbitral tribunal.6 The BGH noted that in the clarifies that such opinions do not violate procedural
present case, the remark was covered by the public policy.9 The decision by the OLG Frankfurt was
signature of the presiding arbitrator, who thereby too formalistic in that it would have required further
assumed the responsibility for it. explanations in the award as to why the signature
could not be obtained. In the view of the author
The BGH concluded that the arbitral award met the
such explanations should not violate the duty of
formal requirements of section 1054 ZPO and that it
confidentiality as regards the tribunal’s deliberations.
was a valid and challengeable arbitral award within
the meaning of section 1059 ZPO. The BGH therefore Parties arbitrating in Germany will also welcome a
annulled the OLG’s decision and remitted the case decision by the highest court that gives effect to an
to the OLG for a new decision on the merits of the arbitration agreement, and does not require the parties
application for setting aside. The BGH did not decide on to re-start the arbitration proceedings due to a formality
the alternative request for a declaratory judgement, as that was likely only triggered by an earlier decision of
it was not necessary in view of the existence of a valid the German courts.
arbitral award.

3. Implications

The decision of the BGH is to be welcomed. The arbitral

tribunal in the underlying arbitration was presumably
in a dilemma. This is because an earlier decision by
the OLG Frankfurt in an obiter dictum had held that
dissenting opinions are inadmissible in arbitrations
because they would violate the secrecy of deliberations
(Beratungsgeheimnis). If a dissenting opinion were
rendered that would – according to the OLG Frankfurt –
constitute a reason for setting the award aside.7

The arbitral tribunal therefore was faced with a situation

in which the probably dissenting arbitrator was not in
a position to issue a dissenting opinion without running
the risk that this would render the award vulnerable
to attack – even though the obiter dictum by the OLG
Frankfurt has been widely criticised.8 The arbitral
tribunal did what it could to render an enforceable
award, although it would have been interesting to see
whether the German courts would actually stick to this
view as regards dissenting opinions if and when the
decision would actually turn on this question.

6 BGH I ZB 34/23, para. 37.

7 See OLG Frankfurt, Decision 26 Sch 14/18 (16 Jan. 2020). 9 Draft Section 1054a subsection1 ZPO provides: ‘An arbitrator may
8 See S. Manner in J.H. Nedden, A. Herzberg, U. Kopetzki, ICC-SchO/ put in writing, as a concurring or dissenting opinion, the views they
DIS-SchO (Otto Schmidt, 2nd ed., 2022 ), Art. 39.1, Art. 39.2, have stated in the deliberations of the arbitral tribunal that deviate
Art. 39.4, Art. 39.7, p. 1158, para. 17; J.-H. Nedden, J. Büstgens, from the arbitral award or from the reasons upon which it is based,
SchiedsVZ 2015, 169, 178; M. Escher, SchiedsVZ 2018, 219, 224. unless the parties agree otherwise’.
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 16

EUROPE

Italy
ICC Incoterms® Rules in Dispute Resolution

Christoph Martin Radtke

Of counsel, Fiducial Legal (Lamy & Associés), France; Co-chair, Incoterms® 2020 Drafting Group; Vice-Chair, ICC Commercial Law
and Practice Commission; Chair, ICC France, Commercial Law and Practice Commission

In a recent decision dated 10 May 2024, the Corte di Cassazione considered the effects of the choice of an
ICC Incoterms® rule on the determination of the place of the delivery of the goods and, consequently, on the
determination of the competent jurisdiction.

1. Introduction trade. Any international contract for the sale of goods

that contains an Incoterms rule provides both seller
and buyer a clear and foreseeable solution for issues
The Incoterms® rules (short for ‘International Commercial
worldwide – that is the magic of the Incoterms® rules.
Terms’) are of fundamental importance for the
standardisation and harmonisation of international
trade practice worldwide. This is an achievement of 2. The Corte di Cassazione decision
ICC since the Incoterms® rules were first published in
1936 and through periodic revisions carried out by ICC
One consequence of the use of an Incoterms® rule that
to reflect evolving trade practices.1
is less known to many users is its impact on the place of
Incoterms® rules users – traders, bankers, accountants, jurisdiction in case of a dispute. This is illustrated by the
customs and tax officers, lawyers and arbitrators – decision of the Corte di Cassazione, which clearly states:
know that an Incoterm rule included in a contract of sale
The use of an Incoterm in a contract of sales,
of goods defines in a clear and uniform manner critical
defines the physical place of delivery of the
issues such as:
goods and gives jurisdiction to the court at the
• the place of delivery, place of delivery. 3
• the transfer of risk,
The facts of the case are relatively simple. An Italian
• the transfer of cost, seller sold goods to a Dutch buyer and the documents
• allocation of export and import formalities, constituting the sales contract indicated ‘Ex-works
Incoterm’.4 A dispute arose and the Italian seller filed
• transport and insurance obligations. an action before the Italian courts, which declined
jurisdiction. This result was confirmed by the Italian
This result can be achieved simply by referring
Court of Appeal, who considered that the reference to
to the three-letter abbreviation of one of the
the Incoterm Ex-works does not show a clear agreement
11 Incoterms® Rules, 2 including in any document in
on the choice of jurisdiction.
electronic form, as the Incoterms® rules have been made
technology-neutral and fit for use in the context of digital

1 The latest edition of the Incoterms® released in 2020 is available at

Incoterms® 2020 | ICC Knowledge 2 Go - International Chamber of
Commerce (iccwbo.org). The Incoterms® are decisive in determining
the customs value of the good, see e.g. https://www.douane.gouv.fr. 3 Corte di Cassazione Civile Ord. Sez. 2 Num. 12854 Anno 2024, free
2 The Incoterms® Rules explain a set of eleven of the most commonly translation.
used three-letter trade terms, e.g. CIF, DAP, etc., reflecting business- 4 Ex Works: ‘Delivery and risk – means that the seller delivers the
to-business practice in contracts for the sale and purchase of goods to the buyer when it places the goods at the disposal of
goods. For a description of what the Incoterms® 2020 rules do the buyer at a named place (like a factory or warehouse); and
and do not do and how they are best incorporated, see ‘Incoterms® that named place may or may not be the seller’s premises', see
2020 Introduction’. ‘Explanatory Notes for Users’, ICC Incoterms® 2020.
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 17

This motivation was disapproved by the Corte di The second comment is of more general interest to
Cassazione, which stated that: all users of the Incoterms® rules. Each of the current
eleven Incoterms® rules, gives a clear definition of
[T]he Incoterms Ex Works clause,
the physical place of delivery of the goods. The 2020
validly included in a contract of sales,
version of the Incoterms® rules defines delivery as the
identifies the place of delivery of the goods,
first of the seller’s obligation.7 Delivery determines most
and by virtue of effectiveness of the said
of the other obligations of the parties in a contract of
clause, the place of delivery (premises of the
sale and most of all: delivery is the critical point for the
Seller) must be considered to be located in
transfer of risk and cost. ICC therefore recommends
Italy and consequently gives jurisdiction to
that the exact place of delivery be carefully determined
the Italian courts.
by adding a physical named place to the three letters
of each Incoterms® rule, for example ‘FCA [named
This decision shows a perfectly correct understanding
place] Incoterms® 2020’, 8 which would also provide
of the Incoterms® rules and is in line with the established
greater certainty as to the place of jurisdiction.
case law of the Court of Justice of the European Union
(CJEU) in Electrosteel (9 June 2011) and Granarolo
(14 July 2016).5

3. Comments

Two observations can be made for a better

understanding of the above decision:

The first one is that the result of the Corte di Cassazione

decision is relevant for disputes within the European
Union. EU Regulation 1215/2012 gives jurisdiction for
a dispute resulting from a contract of sale of goods
to the courts at the place where the goods were
delivered according to the terms of the contract,
unless the parties have expressly otherwise agreed on
a choice of jurisdiction.6 This means that jurisdiction
directly results from the place of delivery defined by
the Incoterms® rule used by the parties in the contract
of sale. In all E, F and C Incoterms® rules, the place
of delivery is closest to the seller, and usually in the
seller’s country; and in all D Incoterms® rules, the place
of delivery is closest to the buyer, and usually in the
buyer’s country.

5 ‘On [the] occasion [of the CJEU precedents], the principle was
reiterated even more clearly, stating that “if a possible contract
concluded orally or tacitly were qualified as a sale of goods, the
referring court should then verify whether the Ex Works clause is
indeed systematically found in the consecutive contracts between
the parties; if so, it should be affirmed that the goods were delivered
at the seller’s establishment and there alone should jurisdiction be 7 Under the Incoterms® ‘delivery occurs when the goods are placed
established.’ (Corte di Cassazione decision, free translation). on board the buyer’s carrier’, Introduction, para. 33.
6 Regulation (EU) No 1215/2012 on jurisdiction and the recognition 8 See Incoterms® 2020 (ICC Publication No. 723, available in several
and enforcement of judgments in civil and commercial matters languages), Introduction, para. 22: ‘The two rules at the extreme
(recast), 12 Dec. 2012, Section 2 ‘Special Jurisdiction’, Art. 7: ‘A ends of the Incoterms® rules are EXW and DDP. However, traders
person domiciled in a Member State may be sued in another should consider alternative rules to these two for their international
Member State: (1)(a)… (b) for the purpose of this provision and contracts. Thus, with EXW the seller has to merely put the goods at
unless otherwise agreed, the place of performance of the obligation the buyer’s disposal. This may cause problems for the seller and the
in question shall be: - in the case of the sale of goods, the place in a buyer, respectively, with loading and export clearance. The seller
Member State where, under the contract, the goods were delivered would be better advised to sell under the FCA rule (…)’; and at ‘Ex-
or should have been delivered (…)’. Works’ ‘Explanatory notes for users – 1. Delivery and risk’.
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 18

EUROPE

Switzerland
Federal Tribunal Confirms Swiss-seated Arbitral Tribunal’s
Jurisdiction over Intra-EU Investment Disputes

Rahul Donde
Founder, Rahul Donde Dispute Resolution, Geneva

Surbhi Kuwelker
Advocate and Doctoral Candidate, University of Neuchatel

This case comment examines the decision 4A_244/2023 of 3 April 2024 where the Swiss Federal Tribunal (‘SFT’)
rejected Spain’s challenges to the award of a Swiss-seated arbitral tribunal under the Energy Charter Treaty (‘ECT’).
The SFT held for the first time that arbitral tribunals seated in Switzerland have jurisdiction to hear intra-European Union
investment disputes under the ECT.

1. Background - CJEU precedence the European Union, 2020’4 agreeing that arbitration
clauses contained in such treaties were invalid.

For several years now, various European Union (‘EU’) Subsequent decisions of the CJEU, such as those in
courts and institutions have been antagonistic towards Komstroy (which concerned the ECT)5 and others built
EU-seated arbitral tribunals, concluding that they lack on the Achmea decision, cemented this antagonism.6
jurisdiction over intra-EU investor-State disputes. Initially, In Komstroy, a Ukrainian company sought to enforce an
in its landmark ruling in Achmea rendered in 2018,1 arbitral award against the Republic of Moldova, a non-
the Court of Justice of the European Union (‘CJEU’) held EU Member State under the ECT. The CJEU, on reference
that the arbitration clause contained in the bilateral made by the Paris Court of Appeal, noted that:
investment treaty between the Netherlands and Slovakia
was incompatible with EU law because it could prevent Although the ECT may require Member States to
disputes involving EU law from being resolved by the comply with the arbitral mechanisms for which
courts of Member States, thereby undermining the it provides in their relations with investors from
autonomy and effectiveness of EU law.2 third States who are also Contracting Parties to
that treaty as regards investments made by the
In 2019, 22 Member States subsequently signed latter in those Member States, preservation of
a ‘Declaration on the legal consequences of the the autonomy and of the particular nature of
Achmea judgment and on investment protection’ (the EU law precludes the same obligations under
‘Declaration’) to elucidate the legal ramifications of the ECT from being imposed on Member States
the Achmea ruling.3 Thereafter, 23 EU Member States as between themselves.7
signed the ‘Agreement for the Termination of Bilateral
Investment Treaties between the Member States of 4 Agreement of 5 May 2020. Some Member States had earlier
expressed concerns about ongoing arbitration proceedings and
other legal uncertainties. By 2020 however, a broader consensus
emerged, leading to the signing of the Agreement by 23 Member
States.
5 République de Moldavie v Komstroy LLC, Case C-741/19, Judgment
1 Slowakische Republik v Achmea BV, Judgment of the Grand of the Grand Chamber of the Court of Justice of the EU, 2 Sep. 2021
Chamber of the Court of Justice of the EU, 6 March 2018 (‘Komstroy’).
(‘Achmea’). 6 See e.g. Republic of Poland v. PL Holdings Sàrl, Case C109/20,
2 Id. paras 57–59. See also M. Audit et. al., ‘Achmea jacta est … Judgment of the Grand Chamber of the Court of Justice of the
The European Court of Justice Ends Energy Charter Treaty-based EU, 26 Oct. 2021; DA v. Roman Air Traffic Services Administration
Arbitration Among EU Member States’, ICC Dispute Resolution (Romatsa) and Ors., CAS C-333/19, Order of the Court (of the
Bulletin, Issue 2021-3, pp. 41-53. Tenth Chamber), 21 Sep. 2022.
3 Declaration of 15 January 2019. 7 Komstroy, supra note 5, para 65.
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 19

It thus concluded that the arbitration clause in Award, in May 2023, Spain filed a civil appeal before the
Art. 26(2)‌(c) of the ECT8 could not be applied to intra-EU SFT seeking its suspension and annulment under Article
disputes, as that could affect the effectiveness of EU law 190(2) of the Swiss Private International Law Act (‘PILA’).
by depriving national courts of their jurisdiction.

National courts too have found arbitration agreements 3. The SFT Decision
in intra-EU disputes invalid.9 These courts have not only
refrained from enforcing intra-EU awards,10 but have
Spain contested the arbitral tribunal’s jurisdiction on
also set aside awards issued by arbitral tribunals in
several grounds:
intra-EU cases.11 Further, while most arbitral tribunals
have confirmed their jurisdiction to hear intra-EU First, it argued that the arbitral tribunal had not fully
disputes, others, such as the tribunal in Green Power,12 considered the Green Power award, noting that the
have applied the reasoning in Achmea and declined Dissent too mentioned that the Award was lacking in
jurisdiction because of the intra-EU nature of the dispute.13 this respect.16 The SFT however considered the Dissent
irrelevant as it was not a part of the Award. In any event,
it held that the alleged failure to deliberate on Green
2. The Award
Power had no bearing on the outcome of the case, as
Spain’s intra-EU objection was dismissed by the arbitral
The arbitration leading to the SFT decision in case
tribunal unanimously. The Award recorded that the
4A_244/2023 began in 2016 when the French
arbitral tribunal was not persuaded by the reasoning
electricity company EDF Energies Nouvelles SA initiated
in Green Power, which confirmed that that award had
proceedings against Spain before a Swiss-seated ad
been addressed by the tribunal in its deliberations.17
hoc tribunal, under Art. 26 of the ECT and the 1976
UNCITRAL Arbitration Rules.14 During the arbitration, Second, Spain argued that the presiding arbitrator
Spain contested the arbitral tribunal’s jurisdiction, lacked impartiality as the Award repeated, verbatim,
arguing that, under EU law, a claim brought by an the reasoning on the intra-EU objection from another
investor of one EU Member State against another award where he had presided.18 The SFT dismissed this
EU Member State under the ECT cannot be determined objection, noting that Spain had not questioned the
by arbitration (the ‘intra-EU objection’). presiding arbitrator’s impartiality during the arbitration,
despite being aware of the other award. Spain’s inability
In its Award, the arbitral tribunal found, unanimously,
to predict that the arbitrator would reach the same
that it had jurisdiction over the dispute. A majority
conclusions in both arbitrations was not found credible.19
of the arbitral tribunal found that Spain breached
its obligations of fair and equitable treatment under Spain’s third argument, which was considered at length
Art. 10(1) of the ECT and awarded €29.6 million in by the SFT, was that after Komstroy, and on analysing
compensation. One arbitrator dissented and issued a the relevant provisions of the ECT, the arbitral tribunal
dissenting opinion (the ‘Dissent’).15 Aggrieved by the had erred in determining that Article 26 of the ECT
applied to intra-EU disputes.20
8 Art. 26(2)(c) of the ECT: ‘If … disputes cannot be settled … within a
period of three months from the date on which either party to the The SFT began its analysis by asserting that it was not
dispute requested amicable settlement, the Investor party to the bound by the CJEU’s rulings.21 Nevertheless, it stated that
dispute may choose to submit it for resolution: … (c) in accordance
with the following paragraphs of this Article …’. it was unconvinced by the CJEU’s reasoning in Achmea
9 See e.g. Mainstream Renewable Power Ltd and Ors. v. Germany, and Komstroy. Those decisions were based only on the
ICSID Case No. ARB/21/26, Judgement of German Supreme Court specific nature of EU law and the need for upholding
I ZB 43/22, 27 July 2023; Uniper SE, Uniper Benelux Holding BV
and Uniper Benelux NV v. Kingdom of Netherlands, ICSID Case autonomy of EU law, without due regard for international
No. ARB/21/22, Judgement of German Supreme Court I ZB 74/22, law or the rules on treaty interpretation. While
27 July 2023 and RWE AG and RWE Eemshaven Holding II BV
v. Kingdom of Netherlands, Case No. ARB/21/4, Judgement of arbitrations seated in EU Member States required the
German Supreme Court I ZB 75/22, 27 July 2023. application of, and compliance with, relevant EU law, no
10 See e.g. decisions from Luxembourg (Cour de Cassation, 116/22, such obligation existed for arbitrations in non-EU states,
CAS-2021-00061 of July 14, 2022) and Sweden (decision of District
Court of Nacka, Case No. Ä 2550-17,23 Jan. 2019). such as Switzerland. The SFT recognised that it usually
11 See e.g. Kingdom of Spain v Triodos SICAV II, Svea Court of Appeal,
27 March 2024. Case No. T 15200-22.
16 Id. at para. 5.1.
12 Green Power Partners K/S and Anr. v. Kingdom of Spain, SCC Arb.
No. V2016/135, Award, 16 June 2022. 17 Id. at paras. 5.1–5.3.
13 Id. paras. 416–445. 18 Id. at para. 6.
14 EDF Energies Nouvelles SA v. Kingdom of Spain, PCA Case No. 19 Id. at paras. 6.1–6.2.
AA613, Final Award, 11 April 2023. 20 Id. at para. 7.
15 SFT Decision, 3 April 2024, ‘Facts’, at para. 5. 21 Id. at para. 7.6.5.
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 20

respected the highest court of the relevant jurisdiction retrospectively deprive an investor of the right to pursue
whenever an issue of the interpretation of foreign law an arbitration commenced before the Declaration
arose. However, that approach could not be followed was made.29
here as the question was whether therules adopted by
Equally unpersuasive for the SFT was Spain’s alternative
the EU prevailed over the ECT, an international treaty.22
submission that the provisions of EU Treaties in any
For the SFT, that the CJEU had affirmed the primacy
event would take precedence over Art. 26 of the ECT
of EU laws over an international treaty was akin to
in intra-European disputes.30 The SFT first noted that
‘pleading pro domo’ (pleading one’s own case), which
Spain had introduced new arguments on this issue only
could not be supported.23
in its rebuttal submissions. They were belated and thus
Based on this reasoning, the SFT chose not to follow inadmissible.31 However, even if the arguments were
the CJEU’s approach, but to carry out its own analysis to be examined, they would not succeed. Neither the
of Art. 26 and EU law. For doing so, it turned to the Lisbon Treaty nor Arts. 267 and 344 of the Treaty on
principles of treaty interpretation contained in the the Functioning of the European Union, 1958 (‘TFEU’),
Vienna Convention on the Law of Treaties, 1969 could take precedence over the ECT by virtue of the
(‘VCLT’). Interpreting Art. 26 of the ECT in good faith, in principle of lex posterior derogat priori expressed in the
accordance with the ordinary meaning to be given to VCLT (Art. 30(3)). Moreover, if the parties to the ECT had
its terms in their context and in the light of the object wanted the dispute resolution mechanisms in EU law to
and purpose of the ECT, it dismissed Spain’s argument take precedence over those in Art. 26 of the ECT, they
that Art. 26 excluded intra-EU disputes from Spain’s could and should have mentioned this in the text of the
unconditional consent to arbitration in that provision. ECT. Their failure to do so could only mean that investors
The term ‘unconditional’ contained in Art. 26(3) of could submit their disputes, even those against Member
the ECT24 could only mean that all parties to the ECT States, to the forum of their choice (EU Member-State
consented to arbitration without any reservation.25 This courts or arbitral tribunals).32
interpretation was confirmed by the negotiating history
The final argument advanced by Spain was that the
of the ECT: the EU had earlier attempted to introduce
Award should be set aside because, after the CJEU’s
a disconnection clause under which EU law would
decision in Komstroy, intra-EU disputes were no longer
govern intra-EU trade and investment relations, but that
arbitrable.33 The SFT declined to entertain this objection
provision was not included in the ECT. The SFT further
holding that it was based exclusively on Art. 190(2)‌(e)
held that the ECT did not transfer competence to the EU
of the PILA that dealt with incompatibility of an award
in a way that the EU Member States would not be bound
with public policy, instead of Art. 190(2)‌(b), which dealt
by the ECT in their relations with each other.26
with an incorrect ruling on jurisdiction. Arbitrability is a
The SFT also dismissed Spain’s reliance on the condition of validity of the arbitration agreement and,
Declaration, noting that it was not signed by all Member therefore, Spain’s objection should have been brought
States, let alone by all the parties to the ECT. Contrary exclusively under Art. 190(2)(b) and not Art. 190(2)(e).34
to what Spain argued, the Declaration could not be The SFT did not see any basis for Spain’s argument that
considered a ‘subsequent agreement’ concerning the by accepting the arbitral tribunal’s jurisdiction, Swiss
interpretation of the ECT in the context of the VCLT jurisdictional public policy was violated.
(Art. 31).27 It was only a declaration of intent, with
The SFT Decision – amid an increasingly hostile
no binding character. The Declaration set out the
environment within the EU towards intra-EU arbitration
consequences of Achmea, which were not connected
– firmly establishes that the SFT will not adhere to the
to the ECT.28 The Declaration could not be interpreted
CJEU precedence regarding the primacy of EU law
to mean that the Member States that had signed it had
over international agreements in intra-EU investment
never given their consent to arbitrate intra-EU disputes
disputes. The likely consequence is that arbitral tribunals
in the first place. Further still, the Declaration could not
seated in Switzerland will have jurisdiction to hear intra-
EU disputes based on the ECT. Investors wishing to bring
22 Id. at paras. 7.6 et. seq. such disputes would thus be well advised to seat their
23 Id. at para. 7.6.5. arbitration in Switzerland.
24 Art. 26(3) of the ECT: ‘(a) Subject only to subparagraphs (b) and
(c), each Contracting Party hereby gives its unconditional consent
to the submission of a dispute to international arbitration or 29 Id. at para. 7.7.5.
conciliation in accordance with the provisions of this Article (...)’. 30 Id. at paras. 7.8 et. seq.
25 Id. at para. 7.7.1. 31 Id. at para. 8.1.
26 Id. at paras. 7.7.2–7.7.5. 32 Id. at paras. 7.8 et. seq.
27 Id. at para. 7.7.3. 33 Id. at para. 8.
28 Id. at para. 7.1. 34 Id. at para. 8.
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 21

ASIA/PACIFIC

India
Arbitral Tribunals Must Comply with the Express Statutory
Requirement to Deliver the Arbitral Award to Each Party
to the Arbitration Agreement, as Opposed to an Agent
or Lawyer of such Party

Manini Brar
Founder, Arbridge Chambers, Delhi; Member, ICC Commission on Arbitration and ADR

Shania Elias
Deputy Director, Arbitration & ADR, India, ICC

In Ministry of Health & Family Welfare & Anr. v. M/s Hosmac Projects Division of Hosmac India Pvt Ltd., the Delhi High
Court held that delivery of an arbitral award must be to the parties to the underlying arbitration agreement. The court’s
ruling may appear to impose a unique requirement, but it brings coherence to the Indian legal matrix by ensuring that
the strict limitation period for challenging an award is not applied without notice to the proper party. That said, the
mandatory application of this principle to displace institutional rules permitting service to counsel of a party may lead
to inconsistency with international practice, and requires further examination.

Introduction and statutory context The UNCITRAL Model Law,3 from which the 1996 Act
took inspiration,4 limits itself to requiring delivery of an
award to a party (as in Section 31(5) of the 1996 Act)
An arbitral award must be delivered to the parties to
without defining ‘party’.5 Another differentiating feature
the underlying arbitration agreement. This requirement
of the 1996 Act is that it strictly applies the limitation
under Indian law is not only the consequence of the
period within which a party must apply to set aside an
Delhi High Court’s decision in Hosmac Projects,1 but
award. Section 34(3) of the 1996 Act states that an
also the express provisions of the Indian Arbitration and
application to set aside an award may not be made
Conciliation Act 1996 (‘1996 Act’). Section 31(5) of
after three months of its receipt by the applying party
the 1996 Act2 requires that ‘after the arbitral award is
(as in the UNCITRAL Model Law6), but goes a step
made, a signed copy shall be delivered to each party’
further to provide that a court may extend the period of
and Section 2(1)(h) defines a ‘party’ to be a ‘party to an
three months by thirty days for sufficient cause, ‘but not
arbitration agreement’.
thereafter’ (such provision is not found in the UNCITRAL
Model Law).7 Indian courts have held that they have no
discretion to condone delay beyond the extended thirty-
day period (after the expiry of three months).8 Beyond
this period, courts cannot intervene and entertain
challenges to an award. It is clear that the legislature

3 ‘UNCITRAL Model Law on International Commercial Arbitration

(1985), with amendments as adopted in 2006’.
1 Ministry of Health & Family Welfare & Anr. v. M/s Hosmac Projects 4 Arbitration and Conciliation Act 1996, Preamble.
Division of Hosmac India Pvt Ltd. 2023 SCC OnLine Del 8296. The 5 UNCITRAL Model Law, Art. 31(4).
Special Leave Petition against the Delhi High Court’s decision in
Hosmac Projects was also dismissed by the Supreme Court of India 6 Id. Art. 34(3).
in M/s Hosmac Projects Division of Hosmac India Pvt Ltd. v. Ministry 7 Arbitration and Conciliation Act 1996, proviso to Section 34(3).
of Health & Family Welfare & Anr. SLP(C) 4579/2024. 8 Avdhesh Mittal v. Deepak Vig (High Court of Delhi, 6 March 2024) in
2 ‘Arbitration and Conciliation Act 1996’. OMP (COMM) 271/2023, NC No. 2024:DHC:1966, para. 18.
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 22

intended to enhance enforceability of arbitral awards by authorised representative of Respondent 2,13 who was a
minimising the intervention of courts,9 in excess of what non-signatory to the underlying arbitration agreement
was envisaged under the UNCITRAL Model Law and but had signed and affirmed all pleadings on behalf of
under Indian law previously.10 itself and the Ministry in the arbitration.14

The 1996 Act thus provides a clear and express The Delhi High Court identified the following relevant
mandate requiring delivery of an award by an arbitral principles after analysing judicial precedent:15
tribunal to a party. Given the unique nature of this
• A signed copy of an arbitral award should be
mandate, and the strict limitation applicable to setting
delivered to each party;
aside applications, the decision in Hosmac Projects may
have aimed to provide arbitrating parties certainty. It • The delivery should be to a party who is
literally applied the express terms of the 1996 Act and competent to take a decision as to whether or not
held that unless the party that can take the decision to the award is to be challenged;
challenge an arbitral award is notified of it, the clock of • The expression ‘party’ does not include an agent
limitation will not start ticking against it.11 By corollary, or a lawyer of such party;
the arbitral award is required to be delivered to the party
• The limitation under Section 34(3) of the 1996
itself, and not its lawyer or agent, in order to satisfy the
Act commences ‘when the party making the
requirement of form and content under Section 31(5) of
Application has received the Award’.
the 1996 Act.12

In other words, the court held that delivery of the

1. The decision in Hosmac Projects arbitral award to a party’s agent or lawyer does not
constitute valid service on the party itself, as required
by Section 31(5) of the 1996 Act; and limitation under
On facts, an arbitral tribunal rendered an award in an
Section 34(3) only commences when the party itself had
ad hoc domestic arbitration between Hosmac Projects
received the award.16 The court anchored its reasoning
(Claimant), Ministry of Health and Family Welfare
on a literal reading of the provisions of the 1996 Act,
(‘Ministry’, Respondent 1), and RML (Respondent 2),
particularly Sections 2(1)(h) and 31(5). Section 31(5)
to which a corrigendum was subsequently issued
requires that a signed copy of the award ‘shall be
for correction of computational errors. The Ministry
delivered to each party’,17 which, according to the court,
applied for setting aside the award, and a question
could only be a party to the arbitration agreement as
arose whether its application was within the limitation
defined in Section 2(1)(h).
period of three months, extendable by thirty days, under
Section 34(3) of the 1996 Act. The Ministry argued that The ruling is in fact aligned with decisions of the
it had never received a signed copy of the award as per Supreme Court of India on this issue:
the requirement of Section 31(5) of the 1996 Act. Letters
• In Tecco Trichy, the court held that in order to
issued by the arbitral tribunal showed that the award
constitute an effective service, a copy of an
had only been sent to counsel for the parties and the
arbitral award has to be received by a person
who has knowledge of the proceedings, and who
9 Union of India v. Popular Construction 2001 SCCOnLine SC 1186,
paras. 14-16 (Supreme Court of India).
would be the best person to understand and
10 In particular the predecessor Arbitration Act of 1940 required an appreciate an award and ‘to take a decision’
appropriate court to confirm the terms of an arbitral award in a for its challenge.18 It observed that ‘delivery by
judgment for it to be enforceable (Sections 16-19, 30; see also, Law
Commission of India, Arbitration Act, 1940, Report No. 66, 1978),
the Arbitral Tribunal and receipt by the party
para. 1.28). An arbitral tribunal would first file its award in court, and of the award sets in motion several periods of
the court would thereafter give notice of the filing of the award to limitation’.19 The decision was rendered in the
the parties (Section 14(1), (2)). This notice of filing could be given
to the pleader of a party (see Nilkantha Sidramappa Ningashetti context of delivery of an award to the Ministry
v. Kashinath Somanna Ningashetti and Ors. 1961 SCC OnLine SC of Railways, Government of India, which is a
75, para. 8). An application to set aside the award was to be filed
within thirty days of the notice of filing the award (Section 33 r/w very large organisation with several divisions.
Limitation Act 1908 (India), First Schedule (ref. Section 3), Entry 158
(Third Division)); and courts were authorised to extend this period on
grounds specified in the generally applicable statute of limitations 13 Id. para. 43.
at the time (Limitation Act 1908 (India), Section 5.; even as per the 14 Id. para. 49.
Civil Procedure Code 1908 generally applicable to civil disputes 15 Id. para. 45.
in India, service of process on the pleader appointed by a party
is presumed to be duly communicated and made known to such 16 Id. paras. 39, 45.
party (Code of Civil Procedure 1908, Order III Rule 5)). 17 Arbitration and Conciliation Act 1996, Section 31(5).
11 Hosmac Projects, supra note 1, operative paras. 32 to 53, see 18 Id. para. 9.
para. 39. 19 Union of India v. Tecco Trichy Engineers & Contractors (2005) 4
12 Id. paras. 39, 45. SCC 239, para. 81 (Supreme Court of India).
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 23

Understandably, in order to calculate limitation, to the party itself. This would defeat the very
the date of delivery of the award to the Chief object and purpose of providing a time limit for
Engineer having oversignt of the arbitration was challenging the award under the 1996 Act.23
taken as the relevant date, and not the date of
• In 2022, the High Court of Chhattisgarh in Bhola
delivery to the General Manager, who had limited
Prasad Agrawal similarly steered away from
involvement and knowledge of the matter.20
too literal an interpretation of the requirement
• In Benarsi Krishna, the Supreme Court held that to deliver a signed copy of an award to a party,
the requirement of delivery of a signed copy of finding on the facts that once the challenging
the award to a party under Section 31(5) of the party had obtained a legal opinion on the award,
1996 Act could: ‘only mean the party himself and it was deemed to be aware of it. Mere non-delivery
not his or her agent, or advocate empowered of the signed copy in such circumstances did not
to act on the basis of a vakalatnama [power prejudice such party, and limitation could not be
of attorney]‌…, which gives the party concerned extended for non-delivery.24
the right to proceed under Section 34(3) of the
• In 2024, the Allahabad High Court in Bharatiya
aforesaid Act’.21
Rashtriya warned that such stringency might
be used strategically by parties to delay the
2. Does the ruling enhance enforcement, enforcement of the award, thus defeating the
purpose of expeditious dispute resolution through
or delay it? arbitration.25 The court held that if a party can be
shown to have awareness of the contents of an
The Hosmac Projects decision is evidently consistent arbitral award, and has acted on it, it is sufficient
with the clear legislative expression of the 1996 Act and to demonstrate practical acknowledgement of
with Supreme Court decisions on the point. As such, it the award (e.g. if a party begins to comply with
enhances certainty around the enforcement process the award’s directives or uses the award’s findings
in India, including requirements of form and content of in subsequent actions, it indicates a de facto
the arbitral award and calculation of limitation period acceptance of the award). It cannot avoid the
for setting aside applications. On the other hand, consequences of the award later by claiming non-
there is a concern that too strict an application of receipt of a signed copy. 26
the requirement to deliver an award to a party under
• Also in 2024, the Allahabad High Court in
Section 31(5), without taking into account such party’s
Jasvinder Kaur relied on the principle of waiver
knowledge about the contents of the award that may
and estoppel to hold that where a party
otherwise be established in certain circumstances, may
consciously behaves in a manner that indicates
delay enforcement.
acceptance of an award, or acts upon it (e.g. by
This line of reasoning finds support in other High making payment or performing obligations as per
Court decisions: the award), it waives any procedural rights related
to the formal receipt of the signed award copy,
• In 2020, the High Court of Madras in Resurgent
and is prevented from denying the validity of such
Power observed that if a party aware of an award
an award after acting in furtherance of it.27
does not take steps to procure it at the earliest
point of time, such a party cannot extend the
From the above, it is clear that Hosmac Projects sits
limitation period provided to challenge the award
on the crossroads of a competing concern to secure
as mentioned under section 34(3) of the 1996 Act
expeditious and efficient resolution of disputes
on the pretext of not receiving a signed copy.22
through arbitration.
The court was concerned that an unscrupulous
party would wait eternally to challenge an award
and seek to condone the delay by alleging direct
non-delivery if the law recognised delivery only 23 Id. para. 31. The court also notes that Tecco Trichy stands on a
different footing as it involved governmental bodies (Ministry of
Railways, a particularly large organisation).
24 Union of India v. Bhola Prasad Agrawal 2022 SCC OnLine Chh
1644 (High Court of Chhattisgarh), paras. 18-21.
20 Id. paras. 7, 10, 11. 25 Bharatiya Rashtriya Rajmarg Pradhikaran v. Neeraj Sharm and
21 Benarsi Krishna Committee and Ors. v. Karmyogi Shelters Private Ors. (2024) SCC OnLine All 1800, paras. 11, 18 (High Court of
Limited (2012) 9 SCC 496 (Supreme Court of India), at para. 15. Allahabad).
22 Resurgent Power Projects Limited v. ABB India Limited (High Court 26 Id. paras. 13, 14, 16.
of Madras, 6 Jan. 2020 in OP No. 549 of 2019) paras. 28-31 (High 27 Smt. Jasvinder Kaur v. National Highways Authority of India & Others
Court of Madras). 2024 SCC OnLine All 1954, para. 10 (High Court of Allahabad).
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 24

3. Party autonomy and the institutional hallmark of arbitrations under ICC Rules, the arbitral
tribunal’s attention is drawn to any known mandatory
perspective formal requirements at the place of arbitration,
including requirements related to notification and modes
The rules and practice of several arbitral institutions of signature.34
consider delivery of an arbitral award to counsel of
a party sufficient to meet requirements of form and Under the Rules of the London Court of International
content. Parties are typically required to provide contact Arbitration (LCIA), a similar position prevails. The sole
information for themselves and their authorised or presiding arbitrator is responsible for delivering
representatives for receiving communications and the award to the LCIA, which then transmits the
notifications. Communications and notifications are authenticated LCIA award to the parties.35 The term
considered properly made if made at those addresses. ‘party’ is not expressly defined under the LCIA Rules.
Parties are required to provide all contact details for
Under the ICC Rules, arbitrators are required to submit the ‘purpose of receiving delivery of all documentation
an award in draft form to the ICC International Court in the arbitration’, along with those of their authorised
of Arbitration (‘ICC Court’) for scrutiny and approval; representatives.36 Electronic communications are the
and after approval by the ICC Court, the Secretariat is default method of communication, including with
required to ‘notify to the parties’ the text of the arbitral respect to the transmission of the arbitral award.37
award signed by the arbitral tribunal.28 ‘Party’ is defined
in Article 2(iii) to ‘include claimants, respondents or The Rules of the Singapore International Arbitration
additional parties’ (it is not expressly limited to parties Centre (SIAC) also have similar provisions. An arbitral
to the arbitration agreement as under the 1996 Act).29 award is submitted in draft form to the SIAC for
Moreover, notification of an award to a party’s legal approval.38 Once approved by the Registrar SIAC as to
counsel and representatives is considered sufficient. its form, certified copies are transmitted to the parties
All notifications or communications from the ICC by the SIAC.39 Parties are required to notify in advance
Secretariat and the arbitral tribunal are made to the last their particulars and addresses for communication.40
address of the party or its representative as notified by Notices and communications are deemed to be
such party or any other party.30 In particular, the ICC received, amongst others, if delivered to an addressee
Rules envisage that the arbitral tribunal and parties either personally or to its authorised representative, and
agree on a Terms of Reference (TOR) in the initial stages delivery is also valid if it is made at ‘any address’ agreed
of the arbitration, which inter alia must specify the by the parties. 41
contact details of each party, any person(s) representing
the party, and ‘the addresses to which notifications and
communications arising in the course of the arbitration
may be made’. 31

Accordingly, the ICC Secretariat notifies an arbitral

award to the address(es) specified for this purpose in the
TOR. In the event that the ICC Secretariat is notified of
a change of address after the TOR stage, the award will
be notified to the last address notified by the concerned
34 Art. 42, ICC Arbitration Rules: ‘In all matters not expressly provided
party.32 By virtue of Article 35, the parties waive any for in the Rules, the Court and the arbitral tribunal shall act in the
other form of notification or deposit on the part of the spirit of the Rules and shall make every effort to make sure that the
award is enforceable at law’.
arbitral tribunal, and agree to be bound by the award.33
35 LCIA Arbitration Rules, Art. 26.7.
Moreover, during the scrutiny of the award, which is the
36 Id. Arts. 1.1(i) and 2(1)(i).
37 LCIA, ‘Guidance Note for Parties and Arbitrators’, paras. 222, 304;
28 ICC Arbitration Rules, Art. 35(1). LCIA Arbitration Rules, Art. 4.3 confirms that delivery by emails or
29 Arbitration and Conciliation Act 1996, Section 2(1)(h). electronic communication would be as ‘agreed or designated by
30 ICC Arbitration Rules, Art. 3(2): ‘At the threshold stage of arbitral a party for the purpose of receiving any communication in regard
proceedings, parties are required to provide name, address, full to the arbitration agreement’. The delivery of awards is affected by
particulars and contact details of (a) each of the other parties, and transmission of the authenticated award to the parties by the LCIA
(b) any persons representing the party providing the information Court under Art. 26.2.
in the Request for Arbitration under Article 4 (3) (a) and (b), and 38 SIAC Arbitration Rules, Rule 32.2.
Answer to Request under Article 5(1) (a) and (b)’. 39 Id. Rule 32.8.
31 ICC, Note to Parties and Arbitral Tribunals on the Conduct of the 40 Id. Rule 3.
Arbitration under the ICC Rules of Arbitration (1 Jan. 2021), para.
196; ICC Arbitration Rules, Art. 23(1)(a) and (b). 41 Id. Rule 2.1. Under Rule 3, the names, addresses, telephone
numbers, facsimile numbers and electronic mail addresses of
32 Id. Arts. 3(2). the parties to the arbitration and their representatives have to
33 Id. Arts. 35(3) and 35(6) submitted along with the notice of arbitration.
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 25

The above rules and practices of international unnecessary or cumbersome for enforcement abroad.
arbitration institutions indicate two things: Regardless of the approach followed, courts assessing
the binding nature of an award often pay particular
• The parties themselves provide the addresses on
attention to the parties’ intention resulting from the
which they would like to receive communications
arbitration agreement or the applicable institutional
and notifications over the course of
rules.45 Accordingly, if different principles govern the
the arbitration.
delivery of an award to a party under the applicable
• The institution transmits the arbitral award in institutional rules and the mandatory provisions of
accordance with these instructions received from Indian law as the law of the seat, the enforcement of
the parties. international commercial awards rendered in India
would be rendered uncertain.
This matrix is evidently anchored on the principle of
party autonomy which is at the core of arbitration as a
means of dispute resolution. Institutional rules govern Conclusion – The way forward
arbitration proceedings in the place of the agreement
between the parties. If the ruling in Hosmac Project In view of the limited and strict window of time provided
holds sway, and the literal interpretation of Section 31(5) under the 1996 Act to challenge an arbitral award
of the 1996 Act is held to mandate that an arbitral before courts in India, the decision of the Delhi High
award must be delivered to the party to the arbitration Court in Hosmac Projects confirms the position that
agreement and none other, it will be at odds with the an arbitral award must be delivered to the party to
agreement of the parties as reflected in institutional the arbitration agreement who is competent to decide
rules. As such, Hosmac Project’s interpretation of the whether it wants to challenge to award or not, and
1996 Act may strike at party autonomy, particularly not to the authorised representatives or lawyer of a
the flexibility to choose the addressee for receipt party. However, this view does not take into account
of notices and communications under applicable the concerns rightly highlighted by other High Courts,
institutional rules. which have held that once a party has knowledge of the
contents of an award, and acts on it, strict compliance
Moreover, in the context of international commercial
with the formal requirement to deliver a signed copy to
arbitrations seated in India, an incongruity between
such party is not required.46 In essence, a party aware
the formal requirement of ‘delivery’ under Indian law
of the arbitral award cannot be permitted to delay
and the rules of the administering institution may lead
enforcement proceedings and avoid consequences by
to uncertainty around the enforceability of the award
claiming non-receipt of a signed copy directly.
in other jurisdictions. The decision in Hosmac Projects
interprets the requirements of form and content under
Section 31(5), which is placed in Part I of the 1996 Act.
Part I applies to international commercial arbitrations
seated in India, alongside domestic arbitrations. 42 45 Id. paras. 8, 12. The Guide refers to the following decisions: Société
Nationale d’Opérations Pétrolières de la Côte d’Ivoire—Holding
An award rendered in an international commercial v. Keen Lloyd Resources Limited, High Court of the Hong Kong
arbitration in India may be recognised and enforced Special Administrative Region, Court of First Instance, Hong
Kong, 20 Dec. 2001, 55 of 2011, XXIX Y.B. Com. Arb. (2004); Inter-
in the territory of a state other than India as per the Arab Investment Guarantee Corporation v. Banque Arabe et
provisions of the New York Convention 1956. Under Internationale d’Investissements, Cour de cassation, Belgium, 5
June 1998, XXIV Y.B. Com. Arb. (1999); Joseph Müller AG v. Bergesen
Article V(1)(e), one permissible ground for refusal und Obergericht (II. Zivilkammer) des Kantons Zürich, Court of
of recognition and enforcement in such other state First Instance, Switzerland, 26 Feb. 1982. See also X v.Y, Swiss
is if the party against whom the award is invoked Federal Tribunal, Switzerland, 21 Feb. 2005, 5P.353/2004; Antilles
Cement Corporation v. Transficem, Supreme Court, Civil Chamber,
proves that it has not become ‘binding’.43 Jurisdictions First Section, Spain, 20 July 2004, XXXI Y.B. Com. Arb. (2006);
differ on the question whether ‘binding’ force is to be AB Götaverken v. General National Maritime Transport Company
(GMTC), Libya and others, Supreme Court, Sweden, 13 Aug. 1979,
determined under the law applicable to the award, SO 1462; Dowans Holding S.A. v. Tanzania Electric Supply Co. Ltd.,
usually understood to be the law of the seat, or in an High Court of Justice, England and Wales, 27 July 2011, 2010 Folio
1539; International Trading and Industrial Investment Company
autonomous manner independent of the seat.44 An v. Dyncorp Aerospace Technology, District Court for the District of
autonomous interpretation dispenses with compliance Columbia, USA, 21 Jan. 2011, Civil Action No. 09-791 (RBW).
of local requirements imposed on awards, which may be 46 Union of India v. Bhola Prasad Agrawal 2022 SCC OnLine Chh
1644, paras. 18-21 (High Court of Chhattisgarh); Bharatiya
Rashtriya Rajmarg Pradhikaran v. Neeraj Sharm and Ors. (2024)
42 Arbitration and Conciliation Act 1996, Section 2. SCC OnLine All 1800, paras. 11, 18, 13, 14, 16 (High Court of
Allahabad); Smt. Jasvinder Kaur v. National Highways Authority of
43 New York Convention, Art. V(1)(e). India & Others 2024 SCC OnLine All 1954, para. 10 (High Court of
44 E. Gaillard, G. Bermann (eds.), UNCITRAL Secretariat Guide on the Allahabad); Resurgent Power Projects Limited v. ABB India Limited
Convention on the Recognition and Enforcement of Foreign Arbitral (High Court of Madras, 6 Jan. 2020 in OP No. 549 of 2019) paras.
Awards, 1958 (New York 2016), Art. V(1)(e), paras. 7-12. 28-31(High Court of Madras).
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 26

The ruling in Hosmac Projects further creates

uncertainty in the context of party autonomy under
institutional arbitrations where parties themselves
indicate addresses for delivery of notifications. One
possible way to synchronise the strict interpretation in
Hosmac Projects with concerns for party autonomy
and secure enforceability of arbitral awards is to
limit it to its context, as it was rendered in an ad
hoc domestic arbitration and in the absence of any
specific agreement between the parties with respect
to the delivery of the arbitral award. As such, it may
be possible and effective not to extend the decision to
cover institutional arbitrations seated in India. Where
the parties have agreed, under institutional rules or
otherwise, to the manner in which the notifications
and communications are to be received by them in an
arbitration, delivery of an arbitral award in the agreed
terms should be considered sufficient to satisfy the
requirement of form and content under Section 31(5)
of the 1996 Act. The limitation period of three months
under Section 34(3) of the 1996 Act can then be
calculated from the date of delivery or transmission
of the award to the parties in accordance with the
applicable institutional rules.

The above approach will ensure that law in India

is in step with global developments in the field of
arbitration worldwide, and that Indian laws are not
seen as imposing more onerous requirements on
the enforceability of awards than international best
practices require. Both outcomes are vital for a country
taking concrete steps towards becoming a hub for
international arbitration.
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 27

ASIA/PACIFIC

Japan
Legal reform on International Dispute Resolution – Entry into force
of the Amended Arbitration Act and Singapore Convention
Implementation Act

Keita Kawamura
Partner, NS Law Office, Tokyo

Chié Nakahara
Partner, Nishimura & Asahi (GKJ), Tokyo

Seri Takahashi
Partner, Mori Hamada & Matsumoto, Singapore

On 1 April 2024, both the amended Arbitration Act (Act No. 15 of 2023) and the Singapore Convention Implementation
Act (Act No. 16 of 2023) came into effect. These legal reforms strengthen the enforceability of international arbitration
and mediation and are expected to promote their use in Japan or in disputes involving Japanese parties.

Introduction Arbitration Act to promote Japan as a leading dispute

resolution seat in Asia. In response to this movement,
the Arbitration Act was considered for amendment from
Although arbitration is globally recognised as the
September 2020 and was enacted in April 2023.
standard dispute resolution procedure for international
commercial disputes, it has not been as frequently used Additionally, in October 2023, the Japanese government
in Japan as in some other jurisdictions. This situation ratified the United Nations Convention on International
may have been regarded as one of the legal risks for Settlement Agreements resulting from Mediation
foreign companies investing in Japan, as well as a (‘Singapore Convention’), becoming the 11th country
factor that has made Japanese companies reluctant to ratify the Singapore Convention, which provides
to expand their business in overseas for fear of having an international framework to give enforceability to
to resolve international disputes, should they arise, settlement agreements resulting from international
through arbitration.1 mediation (similar to the New York Convention
in arbitration).2
The Japanese government, therefore, has developed
measures such as professional training, familiarisation
with the international arbitration and amendment of the

1 In 2018 and 2024, the Japanese government published ‘Measures

to be considered for the revitalisation of international arbitration’
which noted that the low level of use of international arbitration
in Japan was due to a combination of factors, including the
obsolescence of the Arbitration Act, limited public awareness, and
the lack of human resources and facilities capable of handling
international arbitration. On the previous legal regime, see e.g. H.
Oda, ‘Enforcement and Setting Aside of Foreign Arbitral Awards 2 The Singapore Convention was adopted in December 2018 and
in Japan’, ICC Int. Court. Arb. Bull. 2010, Vol. 21 n°2. T. Sawada, was officially signed by 46 countries (now 56) in Singapore in
‘The 2004 Japanese Arbitration Law in Relation to the UNCITRAL August 2019. To date, the Singapore Convention has been ratified
Model Law and the Japanese ADR and Attorneys Laws’, in by 13 countries. The text and status of the Singapore Convention
Global Reflections on International Law, Commerce and Dispute is available at. For further reading, see E. Sussman, ‘The Singapore
Resolution: Liber Amicorum in honour of Robert Briner (ICC, 2005), Convention: Promoting the Enforcement and Recognition of
p. 724. H. Oda, ‘Arbitration Reform in Japan’, ICC Int. Court. Arb. Bull. International Mediated Settlement Agreements’, ICC Disp. Res. Bull.
2004, Vol. 15 n°1. 2018-3.
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 28

Both the amended Arbitration Act and the Singapore Under the amended Arbitration Act, interim reliefs issued
Convention Implementation Act came into effect on 1 by arbitral tribunals are classified into two distinct types:
April 2024.3 These legal reforms and their impact on
• Prohibition measures. Prohibition of disposal or
the practice of international dispute resolution in Japan
change of property, prohibition of taking harmful
were discussed as the key topics at the 2nd ICC Tokyo
actions to the proceedings, prohibition of disposal
Arbitration Day in April 2024.4
of evidences, etc. (Art. 24(1)(i), (ii), (iv), and (v)). If
a final and binding enforcement approval order
1. Amendment of the Japanese regarding an order for these interim measures is
violated or likely to be violated, a separate order
Arbitration Act for the payment of a penalty can be issued by the
courts, which is effective as a title of obligation
The Japanese Arbitration Act (Act No. 138 of 2003), for compulsory execution of the payment
initially enacted in 2003 on the basis of the UNCITRAL (Arts. 47(1)‌(ii) and 49).
Model Law on International Commercial Arbitration, has
• Prevention and restoration measures. Measures
been amended to align it with the UNCITRAL Model Law
necessary to prevent substantial loss or imminent
20065 (Act No. 15 of 2023).6
danger to the property or rights that are the
The Arbitration Act mainly applies to cases where subject matter of the dispute, and to restore their
the place of arbitration is in Japan (Art. 3(1)), while status quo (Art. 24(1)(iii)). Here, these interim reliefs
the provisions on the recognition and enforcement of with a final and binding enforcement approval
arbitral awards also apply to cases where the place of order can be effective as a title of obligation for
arbitration is outside Japan (Art. 3(3)).7 compulsory execution (Arts. 47(1)(i) and 48).

Enforcement approval order for interim measures Limitation of the translation requirement

Upon the petition of the party, Japanese courts can In judicial proceedings in Japan for obtaining
now issue an enforcement approval order for interim enforcement approval orders for arbitral awards and
reliefs issued by arbitral tribunals to preserve rights and interim measures, if the court finds it appropriate, after
evidence until an arbitration award is made, unless hearing the opinions of the respondent, it may decide
otherwise agreed by the parties (Art. 47). The court may not to require the submission of the whole or part of the
dismiss the petition without prejudice only if it finds that Japanese translation of the award or interim reliefs (Arts.
any of the grounds stated in Art. 47(7) exist. 46(2) and 47(2)). This amendment is aimed at reducing
the cost and workload of translation for the parties and
expediting the procedure. It may also help the court
see how the arbitral tribunal felt about the case more
clearly through reading the original expressions used by
the arbitral tribunal, without its key messages being lost
in translation.

Extended jurisdiction of the Tokyo and Osaka

District Courts
If the place of arbitration is in Japan, parties can go
3 https://www.moj.go.jp/EN/MINJI/m_minji07_00006.html (The
Ministry of Justice of Japan). before the Tokyo District Court or the Osaka District
4 The 2nd ICC Tokyo Arbitration Day consisted of the following four Court, in addition to the courts with jurisdiction under
Panels: ‘1. Exploring the Future: Adopting ICC Arbitration under Article 5(1), to have their arbitration-related matter
the Amended Japan Arbitration Act’; ‘2. At the Threshold of an Era:
Navigating AI in Dispute Settlement Landscape’; ‘3. Practical tips decided (Art. 5(2)). This amendment is expected to
and Enforcement Mechanism of Arbitral Awards on global basis’; ‘4. facilitate more reliable and expeditious determination
Japan’s Ratification of the Singapore Convention on Mediation: How
to utilise Combination of Arbitration and Mediation efficiently’. The of arbitration-related matters, including enforcement
3rd ICC Tokyo Arbitration Day will take place on 21 April 2025. of arbitral awards, set aside of arbitral awards, and
5 UNCITRAL Model Law on International Commercial Arbitration enforcement approval order of orders for interim
(1985), with amendments as adopted in 2006 | United Nations
Commission On International Trade Law.
measures, as judges in these large courts are more likely
6 https://www.japaneselawtranslation.go.jp/ja/laws/view/4440/en to be familiar with arbitration.
7 The Arbitration Act also applies to civil disputes subject to
arbitration agreements being filed as lawsuits or petitions for
provisional orders before Japanese courts, regardless of whether the
place of arbitration is in Japan, outside Japan, or to be determined
(Art. 3(2)).
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 29

The arbitration agreement written 2. Ratification of the Singapore

requirement relaxed
Convention on Mediation
The requirement in Articles 13(2) and 13(4) that an and new Singapore Convention
arbitration agreement must be in writing or in electronic
Implementation Act
record has now been relaxed. Specifically, even where
the relevant contract is not in writing, if it refers to a
document or an electronic or magnetic record (e.g. Mediation has been recognised as a popular procedure
email) containing a clause which constitutes an for resolving international commercial disputes,
arbitration agreement forming part of the contract, the especially in terms of time- and cost- efficiency. In recent
arbitration agreement is now deemed to have been years, there have also been an increasing number
made in writing (Art. 13(6)). of cases in which arbitration and mediation have
been combined for more efficient dispute resolution
Issues not amended procedure. The survey conducted by Queen Mary
University and White & Case in 2021 shows that a
The following issues remain potential subjects of
noticeable increase over recent years in the overall
discussion and amendments in the future:
popularity of arbitration used in conjunction with ADR,
Enforceability of emergency arbitrators’ decisions. As including mediation.8
described above, the interim reliefs that are subject to an
Although Japan did not initially sign the Convention, in
enforcement approval order by the Japanese courts are
response to the international trend of increasing use of
limited to those issued by the arbitral tribunal, and do
international mediation, Japan ratified the Convention in
not include decisions made by the emergency arbitrator
October 2023 and enacted the ‘Singapore Convention
as set forth in Article 29 of the ICC Rules. The reason
Implementation Act’ (‘Implementation Act’).9 This new
for this is believed to be because emergency arbitrators
act came into effect on 1 April 2024
are not deemed to fall within the meaning of ‘arbitral
tribunals’ under the Arbitration Act and the decisions of It is notable that Japan adopted the opt-in approach; it
emergency arbitrators are usually not binding on arbitral shall apply the Singapore Convention only to the extent
tribunals under most institutional rules. that the parties to the settlement agreement have
agreed to the application of the Singapore Convention
Confidentiality of the arbitral proceedings. Although, in
(Art. 8(1)(b), Singapore Convention). Accordingly, aside
practice, arbitral proceedings are commonly conducted
from the settlement agreement itself, an agreement
in private, the amended Arbitration Act is silent on the
on the application of the Singapore Convention will be
confidentiality of arbitral proceedings. Therefore, as
required for the enforcement of a settlement agreement
before, the confidentiality of arbitral proceedings is left
reached through mediation in Japan. This avoids party
to the parties’ agreement.
imbalance resulting from a unilateral enforceability of
Governing law of the limitation of period. Statute the international mediation agreement only in Japan
of limitation is one of the topics frequently raised in while such an agreement is not enforceable in the non-
arbitration, and sometimes the parties disagree on what signatory jurisdictions of the other party.
law governs the issue of limitation period (especially
where the period differs depending on what national law
applies). The amended Arbitration Act only provides that
commencement of arbitration tolls or renews a limitation
period for the underlying claim (Art. 29(2)), and does not
clarify which law determines the applicable limitation
period in the first place.

8 Queen Mary University and White & Case, ‘2021 International

Arbitration Survey: Adapting arbitration to a changing world’, p. 7:
59% of respondents expressed their preference for this combination,
as opposed to 49% in 2018 and only 34% in 2015. One example
of combined procedure is the Arb-Med-Arb, in which a case filed
for arbitration is sent to mediation to be resolved by settlement
agreements, and after mediation is conducted, the case is sent
back to arbitration for either final resolution as mediation was
unsuccessful, or for the consent award based on the outcome of
successful mediation.
9 https://www.japaneselawtranslation.go.jp/ja/laws/view/4441/en .
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 30

The effect and the scope of the application of the In addition, given the number of signatory states (and
Singapore Convention Implementation Act ratifications) to the Singapore Convention, it is expected
that the Singapore Convention will have significant
The Implementation Act also establishes an impact on disputes with parties from such countries,
enforcement regime that allows Japanese courts to and Japan is now ready to make material advancement
issue an enforcement approval order for international in the practice of international mediation.
settlement agreements resulting from international
mediation related to commercial disputes (Art. 5).
Conclusion
The ‘International settlement agreements’ subject to
such enforcement fall within one of the following items
(Art. 2(3)): The amended Arbitration Act and Singapore Convention
Implementation Act are expected to improve the
• Some or all of the parties have an address, a main recognition and use of international arbitration and
office or a place of business outside Japan. mediation for international disputes seated in Japan
• Some or all parties have their addresses, offices or involving Japanese parties, and harmonising the
or places of business in different State. country’s arbitration law with global standard rules such
as the 2006 UNCITRAL Model Law.
• The State in which some or all of the parties have
their addresses, offices or places of business is In addition, in August 2020, the amended ‘Foreign
different from the State in which either the place Lawyers Act’ came into force,12 expanding the scope of
where a substantial part of the obligations under international arbitration, and introducing a definition
the agreement is performed or the place with the for ‘international mediation cases’, in which foreign
closest connection to the subject matter of the lawyers can represent parties with a specific connection
agreement belongs. to a foreign jurisdiction,13 or in cases where the
governing law agreed by the parties is a foreign law.
The provisions of the Implementation Act apply when
As a result of this amendment, parties can now choose
parties to the international settlement agreement
not only Japanese lawyers but also foreign lawyers
have agreed that it could be enforced through civil
as their representatives in international arbitration
enforcement (Art. 3). They do not apply to international
and international mediation as defined in the Foreign
settlement agreements on consumer disputes, individual
Lawyers’ Act, which is expected to promote the use of
labor-related disputes, and personal status and other
international arbitration and mediation in Japan.14
disputes regarding family affairs (Art. 4).
Such legal reforms will strengthen Japan’s global-
The impact on the mediation practice in Japan standard framework in the field of international dispute
resolution and encourage foreign companies to conduct
Historically, mediation has been widely accepted in
business transactions with Japanese companies and to
Japan as a popular procedure of resolving domestic
invest in Japan. Such efforts should not be a temporary
disputes for more than 100 years.10 However, lacking
as means to settle international dispute resolution
the mechanism for the enforceability, international
are expected to become more diverse and complex.
mediation was not perceived as similarly popular
Therefore, in addition to further developments in the
procedure as domestic mediation. This situation is
legal system, continuous efforts are needed through
now changing as a result of the increased needs to
public-private cooperation towards the professional
resolve international disputes in mediation in recent
training and development of dispute resolution
years. As part of these developments, a new institution
practitioners, public relations and promotion, and the
dedicated to international mediation was established In
improvement of infrastructure for dispute resolution
November 2018.11
facilities and equipment.
As a result of the enforceability granted to international
commercial mediation through the framework of the
Singapore Convention, more international disputes
12 ‘Law to Partially Amend the Act on Special Measures concerning
involving Japanese companies are expected to be the Handling of Legal Services by Foreign Lawyers’, Act No. 33 of
resolved through international mediation. 2020.
13 For example, in one case all the parties may have their head offices
in Japan but a majority shareholder or parent company of one party
10 Mediation was first introduced in the ‘Act on Land and Building has a head office in a foreign jurisdiction, which provides a foreign
Leases’ in 1922. element to the case.
11 In November 2018, the Japan International Mediation Center, 14 See https://www.japaneselawtranslation.go.jp/ja/laws/
Japan’s first institution specialising in international mediation, was view/3584/en and https://www.japaneselawtranslation.go.jp/
established in Kyoto. outline/22/200901155904_9053108.pdf.
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 31

ASIA/PACIFIC

Kyrgyzstan
Court Seizes Aircraft in Support of International Arbitration

Natalia Alenkina
Associate Professor, American University of Central Asia; Member, Scientific Advisory Council of the Supreme Court of the Kyrgyz
Republic; Former Member, ICC International Court of Arbitration (2019-2024)

In February 2024, a Kyrgyz district court granted for the first time an application for interim measures in support of
an international arbitration proceeding. This article highlights the peculiarities of applying for interim measures in
Kyrgyzstan in international disputes. The Kyrgyz law amending the Civil Procedure Code in 2013 allows interim measures
in relation to arbitration proceedings, yet their application to international cases remains largely untested. This ruling
sets an important precedent, highlighting the role of national courts in upholding arbitral decisions and navigating the
interplay between domestic jurisdiction and international arbitration standards.

Introduction The Kyrgyz courts’ authority to grant interim measures

in relation to arbitral proceedings was introduced into
Kyrgyz legislation in 2013.2 While courts generally use
During an arbitral proceeding brought by a Kyrgyz airline
such authority with respect to domestic arbitration cases,
company, a District Court – assessing the potential
the possibility of a court adopting interim measures in
damage and the proportionality of the measures
support of international arbitration cases has always
requested – seized an aircraft and prohibited the
remained terra incognita.3 The Kyrgyz Code of Civil
Kyrgyz State Civil Aviation Agency from deregistering
Procedure addresses interim measures in relation to
the aircraft. According to the District Court’s ruling,
arbitration proceedings without explicitly distinguishing
the arbitration concerned compensation for damage
between domestic and international cases, leaving room
caused to a Kyrgyz airline company, and in order to
for judicial interpretation of these provisions.
secure its claim, the airline applied to the Kyrgyz District
Court for interim measures. As a result, the District Court’s approach to granting
interim measures in support of an international
In granting the interim measure, the District Court noted
arbitration proceeding is significant as a precedent-
that ‘failure to take such measures may make it difficult
setting decision. The District Court’s ruling raises the
or impossible to enforce the [arbitral tribunal’s] decision’
issue of concurrent jurisdiction between local courts
and that by taking these measures the court was
and international arbitral tribunals with respect to
‘preventing significant damage to the parties’.1
interim measures, and highlights the importance of
educating national courts on different issues related to
international arbitration.

2 Law of the Kyrgyz Republic ‘On Amendments and Additions to

the Code of Civil Procedure of the Kyrgyz Republic’, 11 Dec. 2013,
No. 217.
3 The UNCITRAL Model Law is more explicit about adoption of interim
measures in support of international arbitration than Kyrgyz law.
Arts. 1(2) and 9 of the UNCITRAL Model Law (1985) provide that an
arbitration agreement does not prevent a party from applying for
interim measures in any state court, even if the arbitration is not in
the territory of that state. The 2006 version of the Model Law is even
1 Lenin District Court of Bishkek, Ruling on interim measures, more explicit in this regard, stating that a party can apply for interim
22 Feb. 2024 (not published). The arbitral proceeding was measures ‘irrespective of whether their place is in the territory of this
administered by the London Court of International Arbitration. State’ (Art. 17J).
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 32

1. Peculiarities of interim measures especially if they require foreign jurisdiction cooperation.

Kyrgyz courts may also avoid measures that may
under Kyrgyz law interfere with the arbitration process or the powers of
the courts at the seat of arbitration out of respect for
In many instances, national standards for judicial their primary role in supervising arbitration. This reflects
interim measures are applied to arbitration cases. In a commitment to limited court intervention and prevents
addition, the Code of Civil Procedure (Art. 142) sets potential jurisdictional conflicts.
out the circumstances under which a competent court
can grant interim measures related to a dispute that is Documents requirement. If a party wishes to file a
subject to arbitration. request to a local court for interim measures, it must
provide the following documents:
Institutional arbitration. Under Kyrgyz law, local
• a copy of the request for arbitration certified by
courts can only grant interim measures in institutional
the arbitral institution where the case is initiated;
arbitration cases.4 Ad hoc arbitration does not receive
and
such judicial support. Since complex infrastructure and
construction projects in Kyrgyzstan are typically funded • a notarised copy of the arbitration agreement.
by international financial institutions (such as the World
Bank, Asian Development Bank, etc.) that frequently opt The current legislation does not specify what is meant
for ad hoc arbitration under the UNCITRAL Rules, it is by a ‘certified copy of the request for arbitration by
important to be aware of this restriction. In the present the arbitral institution’. In practice, courts are generally
case, there were no issues with the imposed requirement, satisfied if they receive a copy of the request for
as it was administered by an arbitration institution. arbitration with a stamp from the arbitral institution
indicating the date of receipt and the case number
Effective jurisdiction of Kyrgyz courts regarding interim assigned by the institution. In this case, the court
measures. Under Kyrgyz law, a party involved in arbitral accepted a letter from the arbitral institution as a
proceedings may file a request for interim measures at certified copy of the request, confirming that the request
the place of the arbitration, the defendant’s residence, had been received and accepted for consideration in
or the location of the defendant’s assets.5 In other the institution.
words, the court’s jurisdiction to grant interim measures
is based on the connection between the parties or the Notarising a copy of an arbitration agreement becomes
arbitral proceedings and Kyrgyzstan. This is due to an issue in the majority of interim measure requests
the effectiveness of the requested measures. Effective before Kyrgyz courts. This requirement is not only stricter
interim measures, such as the freezing of assets, can than necessary, but is also difficult to follow in practice,
only be implemented by the courts of the state where because Kyrgyz legislation technically prohibits the
the assets are located.6 notarisation of copies if the initial document was not
notarised first.8 However, in this case, such difficulties did
In this case, the interim measures requested by the party not arise. The court accepted the copy of the arbitration
(seizure of an aircraft and prohibition of deregistration agreement without strictly following the formalities
of the aircraft) could be effective, because the aircraft imposed by the law.
was located and registered in Kyrgyzstan. Therefore,
the Kyrgyz court established its jurisdiction to take the Types of interim measures. The list of interim measures
necessary measures. At the same time, the court may a court may impose under Kyrgyz law includes the
have been more cautious in considering other measures freezing of assets, the prohibition of certain actions, and
that had no territorial connection with Kyrgyzstan.7 the imposition of obligations on the parties to perform
These measures may be challenging to enforce, certain acts.9 Furthermore, the court may, ‘in necessary
cases’, adopt additional measures not explicitly provided
for in the legislation. For instance, the law does not
explicitly provide for prohibiting a third party from
4 Code of Civil Procedure of the Kyrgyz Republic, 25 Jan. 2017 No. 14, engaging in certain actions, such as deregistering
Art. 142, para. 2.
5 Code of Civil Procedure, Art. 143
6 G. Born, International Arbitration: Law and Practice (Wolters Kluwer,
2021) p. 262.
7 The caution of courts when granting interim measures in relation
to international arbitral proceedings is also related to the risk of
interfering with the arbitration proceedings and with the supervisory 8 Instruction on the Procedure for Notarial Actions by Notaries of the
powers of state courts at the seat of arbitration, see J. Lew, Kyrgyz Republic, approved by the Resolution of the Government of
L. Mistelis, et al, Comparative International Commercial Arbitration the Kyrgyz Republic 20 April 2011 No. 179, p.153.
(Kluwer Law International, 2003), p. 622 (23-122). 9 Code of Civil Procedure, Art. 144.
ICC Dispute Resolution Bulletin | 2024 | Issue 2

Global Developments 33

an aircraft. The court deemed that adopting such a 2. Court enforcement of tribunal-
measure aligns with the objectives of interim measures
– to prevent the subsequent impossibility of enforcing
ordered interim measures vs. judicial
the court’s decision10 – and thus went beyond the listed interim measures
interim measures.
Court-ordered interim measures may intersect with
The court also has the authority to grant several types
those ordered by the international arbitral tribunal.
of interim measures simultaneously,11 as was done in this
For instance, could the Kyrgyz airline company obtain
case. The court took the action of seizing the aircraft
interim measures in a foreign arbitration and then seek
and also prohibiting the State Civil Aviation Agency from
to enforce them in a local Kyrgyz court?
deregistering it from the State Register of Aircraft of the
Kyrgyz Republic. Kyrgyz civil procedural law does not directly prohibit the
recognition and enforcement of interim measures from
Appealing the Court decision. A court ruling on interim
international arbitration.13 However, the key question
measures can be appealed in higher instances, such
is whether such interim measures qualify as ‘decisions’
as the appellate court and then the Cassation Court.
enforceable under the New York Convention. A present,
However, filing an appeal against an order for interim
Kyrgyz courts generally consider arbitral orders on
measures does not suspend the enforcement of that
interim measures as non-binding, as they do not resolve
order. This rule serves to promote the principle of
the case’s merits and are therefore not seen as final
expediency of interim measures and to ensure they are
decisions warranting enforcement.
not delayed while the appeal is pending.
However, even if this obstacle is overcome and the court
This is particularly relevant in certain circumstances
accepts arbitral orders on interim measures as final
that extend the time for review of the claim. For
and enforceable, the dissatisfied party may appeal the
example, if the appellate court decides to request
enforcement ruling to appellate and cassation courts.
properly certified copies of case materials from the
This appeal procedure lacks guarantees of immediate
arbitral institution during its review of the complaint,
effect of the first instance court’s ruling, unlike court-
this could cause delays.12 In such cases, the review
ordered interim measures. Such a restriction on the
period may be extended due to the need to obtain
prompt and effective enforcement of international
additional documentation. Therefore, the legal provision
arbitration decisions conflicts with the principle of
ensuring that the court’s ruling on interim measures is
limited court intervention in arbitral proceedings.14
enforced immediately, without suspension in the event
of an appeal, serves as an important safeguard for the Given these potential obstacles, it may often be more
prompt enforcement of interim measures in support of practical to seek interim measures directly from the
the arbitral proceedings. The District Court ruling in the Kyrgyz courts rather than seeking recognition and
current case was not appealed. enforcement of tribunal-ordered interim measures within
the Kyrgyz legal system, as in this aircraft case.15

10 At the same time, the Ruling contains a clear mistake: in prohibiting

the State Civil Aviation Agency from deregistering the aircraft, the
court cited a Civil Procedural Code provision that restricts actions 13 The 2006 version of the UNCITRAL Model Law expressly provides
by the defendant. However, the prohibition of deregistration was for enforcement of interim measures outside the seat of arbitration
directed not at the defendant, but at the State Civil Aviation Agency, (‘regardless of the country in which it was issued’), Art. 17H(1).
which is not a party to the arbitration. As the civil aviation regulator, 14 J. Lew, L. Mistelis, et al, supra note 7, at p. 360 (15-15).
the Agency oversees aircraft registration and maintains the Kyrgyz
Civil Aircraft Register (https://www.caa.kg/en/node/46). 15 The recently published ‘Global freezing order guide – Jurisdiction by
jurisdiction’ by the law firm Eversheds Sutherland demonstrates that
11 Code of Civil Procedure, Art. 142, para. 2. difficulties (prohibitions) to enforce foreign interim measures exist in
12 Code of Civil Procedure, Art. 145. most jurisdictions.
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3. Practical implication of the District Experienced arbitration specialists may criticise the
District Court ruling, for excessive brevity in reasoning,16
Court’s ruling clichéd language,17 lack of the court’s legal evaluation or
terminological errors.18 The ruling however addresses the
The District Court’s decision to grant interim measures inherent challenges that courts may face in applying the
in an international arbitration brought by a Kyrgyz law in a way that best allows for further interactions with
company has practical implications for those involved in international arbitration. It is important to understand
arbitration with a Kyrgyz party. that the District Court decision serves as a precedent
that breaks the silence regarding the court’s ability
Firstly, this ruling is an excellent example of judicial
to order interim measures in relation to international
support for international/foreign arbitration. The District
arbitral proceedings. The more courts address such
Court’s proactive approach in seizing the aircraft and
issues, the more precise their decisions will become.
preventing its deregistration demonstrate flexibility in
the interpretation of Kyrgyz law and sets a precedent
for supporting cross-border disputes. This ruling
illustrates the court’s commitment to safeguarding
arbitration outcomes and reflects a balanced
respect for limited intervention, ensuring enforceable
and expedient measures that meet the needs of
international arbitration.

Secondly, it demonstrates a good example of a prompt

and systematic procedure for considering a request
for interim measures in international arbitration. The
court did not impose undue obstacles on the claimant,
such as the notarisation of the arbitration agreement
and evidence of the claim’s acceptance for foreign
arbitration, which often occurs with measures in relation
to local arbitration proceedings.

16 For instance, the court stated that the measure is acceptable up to

the amount of the value of the claim and court costs. However, it
is not clear from the text of the ruling how the court assessed the
ratio of the value of the aircraft to the amount of the claim in the
arbitration.
17 In reaching its decision, the court states that it ‘studied the
documents and the text of the application’. However, it is not clear
which documents the court had examined, as none of them is
mentioned in the ruling. Rather, the court used this phrase as a
speech pattern, commonly used in these kinds of documents,
without any real substance behind it.
18 The court, interpreting Art. 143 of the Code of Civil Procedure –
which permits interim measures in support of arbitration – initially
framed this as a legal safeguard ‘to prevent significant harm to the
applicant seeking protection’. However, in final part of the ruling,
the court broadened this reasoning, justifying interim measures
as essential to preventing significant harm to both parties. While
a balance of interests is crucial, with the applicant’s potential
harm needing to outweigh that of the opposing party (see e.g.
Art. 17A, UNCITRAL Model Law (2006)), the primary purpose of
interim measures remains to protect the applicant or the arbitration
proceeding itself. To address any harm incurred by the defendant
due to these measures, Art. 149 of the Code of Civil Procedure
provides a mechanism for filing a separate claim for damages.
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ICC Commission reports

Red Flags or Other Indicators of Corruption

in International Arbitration
Document of the Task Force ‘Addressing Issues of Corruption in International Arbitration’ of the ICC Commission
on Arbitration and ADR

This Document of the ICC Commission on Arbitration and ADR entitled ‘Red Flags or Other Indicators of Corruption
in International Arbitration’ (hereafter 'Red Flags Document') reflects part of the ongoing work of the ICC Task Force
‘Addressing Issues of Corruption in International Arbitration’ (the ‘Task Force’), which is led by Co-Chairs Sophie Nappert,
José Ricardo Feris and Vladimir Khvalei, as well as by Caline Mouawad, Melanie van Leeuwen, Carita Wallgren-Lindholm
and Dr Hélène van Lith on behalf of the Commission’s Steering Committee. The Task Force works closely with the ICC
Corporate Responsibility and Anti-Corruption Commission and the International Bar Association (IBA).

Within the Task Force, a specific track led by Lucinda Low, Abdulhay Sayed, Xavier Andrade and Patrick Baeten focused
on the issues of ‘red flags or other indicators’ which is reflected in this Document. This ‘Red Flags Document’ will be an
integral part of the Report of the Task Force, which will consist of a general part supplemented by separate annexes on
specific issues of corruption in international arbitration, including the ‘Burden and Standard of Proof’, ‘Issues related to
Arbitrators’, ‘Parallel Proceedings’ and ‘Red Flags or Other Indicators and the Use of Artificial Intelligence’.

While these issues, such as the standard and burden of proof in relation to allegations of corruption, obviously intersect
with the issue of red flags, they will not be addressed in the Red Flags Document beyond noting the points of intersection.

The Red Flags Document provides for detailed guidance on the identification and assessment of corruption in arbitration
proceedings, frequently called for by the arbitration and anti-corruption community, including corporate users of
ICC Dispute Resolution Services, (ICC) arbitral tribunals, arbitration practitioners, and anti-corruption and compliance
officers. Its purpose is to promote understanding of what red flags or other indicators are, their use, and their limits as a
tool in establishing a corrupt practice. By introducing a three-step methodology for evaluating potential or asserted red
flags, the Document constitutes an innovative approach to address issues of corruption in international arbitration.
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Executive summary

The purpose of this Commission Document (‘Document’) Step 1. Identifying the potential/asserted red flags.
is to identify, examine and assess the use and This step involves determining which facts, factors,
relevance of ‘red flags’ of corruption (also referred to as or circumstances are relevant to the specific corrupt
‘indicators of corruption’) in the context of international practice at issue (either as alleged or as they appear).
arbitration. The Document intends to assist arbitral
Step 2. Validating or confirming (or negating) the red
tribunals, set-aside, annulment, and enforcement
flags. This step determines whether the alleged red flags
judges, and arbitral institutions when they are alerted
are factually supported. It also assesses the strength
by red flags of corruption in the facts of an arbitration,
of the red flag. This entails considering the totality of
i.e. when allegations of corruption are raised, either
the relevant facts and circumstances, including the
affirmatively or as a defence by parties to a dispute
evidence of red flags, contrary indicators, or ‘green’
that has been submitted to arbitration, or when the
flags, as well as mitigating measures or circumstances.
arbitral tribunal, sua sponte, develops concerns about
It also involves identifying the available fact-finding tools
possible corruption.
to assemble this picture.
After examining the genesis of the red flag concept,
Step 3. Assessing red flags from the perspective of the
the Document suggests defining a ‘red flag’ as any
law on evidence. From an evidentiary perspective,
fact or circumstance that indicates a potential risk of
the document noted that red flags may lead to
corruption, most often bribery involving a public official.
circumstantial evidence, while in other instances they
It highlights the importance of identifying the specific
may represent or lead to direct evidence.
legal elements of the corrupt practice at issue and to
examine the relationship between the asserted red flags The Document then maps how red flags impact
and the legal elements of the corrupt practice. procedural questions such as the admissibility of
allegations of corruption, the admissibility of new
The Document identifies two categories of red flags:
evidence, the shifting of the burden of proof, and the
• General red flags relate to the immutable application of the proper standard of proof.
contextual characteristics of the country,
geography, or government administration in It then examines red flags from the perspective of the
question, as well as the business sector. legal duties of arbitrators, and recommends that, in
cases involving red flags of corruption, arbitrators should
• Specific red flags relate to facts or circumstances
strive to achieve a proper balance in the discharge of
pertaining to the counterparty, to the proposed
their duties. In particular, they must resolve the dispute
transaction, the relationship or payment (where a
submitted before them by the parties and must do their
third party is involved), or the transaction itself.
best to ensure that the award rendered is enforceable.
This implies that the arbitrator must not divert the
A crucial question for arbitral tribunals is how to respond
process and resources to unnecessary investigations
to and, consequently, how to assess any asserted or
that may create an unjustified burden on the parties or,
presented red flags, particularly in terms of whether they
in some cases, violate due process. The arbitrator must
constitute evidence of a corrupt practice. This Document
apply the law, including mandatory rules. Finally, the
seeks to elucidate and clarify from a methodological
arbitrator must maintain impartiality in decision-making
perspective how to approach such matters. It is crucial
and avoid becoming biased in favor of one party,
to recognise that red flags require validation, further
despite the existence of corruption.
assessment in evidentiary terms, and ultimately linkage
to the specific legal elements of the corrupt practice in The Document concludes with a discussion of the role
question. Rather than possessing a probative force of of corporate compliance measures. Drawing on the
their own, red flags can lead to a finding of corruption distinction between ex ante and ex post risk analysis,
only with additional reasoning. the Document notes that while red flags play a role in
both contexts, the objective of the ex post risk analysis,
In this vein, this Document proposes a three-step
as conducted by an arbitrator, is to determine whether
methodology for evaluating potential or asserted red flags
a corrupt practice has in fact occurred, and not whether
which can be summarised as follows:
there is a risk that it may occur. While it is useful to
consider the preventive measures taken by a company
ex ante, the judgments ultimately made in the preventive
context are unlikely to determinative in the ex post
(arbitration) context.
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Contents
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 3. The procedural effects of red flags . . . . . . . . . . . . . . . . . . . . 59
3.1 Effects of red flags on the admissibility
1. Definitions, characteristics, role, and typologies of a corruption allegation . . . . . . . . . . . . . . . . . . . . . . . . 59
of red flags. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 3.1.1 Red flags as a tacit case of corruption . . . . . 59
1.1 Red flags – Definition, origins, legal status 3.1.2 Red flags in support of an overt
and relevant civil applications . . . . . . . . . . . . . . . . . . . 40 corruption case. . . . . . . . . . . . . . . . . . . . . . . . . . 60
1.1.1 Origins: the U.S. Foreign Corrupt
Practices Act (‘FCPA’). . . . . . . . . . . . . . . . . . . . . 40 3.2 Effects of red flags on the admissibility
of evidence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
1.1.2 Red flags at the international level. . . . . . . . 40
3.2.1 Red flags as cause for extensive document
1.1.3 Application to the civil context. . . . . . . . . . . . . 41
production requests. . . . . . . . . . . . . . . . . . . . . . 60
1.2 Characteristics of red flags. . . . . . . . . . . . . . . . . . . . . . 42 3.2.2 Red flags as cause for late admission of
1.2.1 Red flags are facts or circumstances tied new evidence in arbitration proceedings . . 60
to corruption risk. . . . . . . . . . . . . . . . . . . . . . . . . 42 3.2.3 Red flags as cause for admission of
1.2.2 Red flags resonate with the legal elements new evidence by an enforcement or
of corruption . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 set‑aside judge. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
1.2.3 Red flags arise when they are alleged 3.3 Red flags and the burden of proof . . . . . . . . . . . . . . . . 62
or suspected . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.3.1 The burden of proof remains with the
1.3 The probative value of red flags . . . . . . . . . . . . . . . . . 44 party making the corruption allegation. . . . . 62
3.3.2 Shifting the burden of proof or reverse
1.4 The quantitative and qualitative characteristics burden of proof. . . . . . . . . . . . . . . . . . . . . . . . . . . 62
of red flags. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.4 Red flags and the standard of proof. . . . . . . . . . . . . . . 63
1.5 Typologies and common types of red flags. . . . . . . . 45
1.5.1 General red flags . . . . . . . . . . . . . . . . . . . . . . . . . 45 4. Role and responsibilities of the arbitral tribunal
in relation to red flags. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
1.5.2 Specific red flags . . . . . . . . . . . . . . . . . . . . . . . . xxx
4.1 Two views on the duties of arbitrators. . . . . . . . . . . . . 65
1.6 Sources of red flags. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 4.1.1 The jurisdictional approach . . . . . . . . . . . . . . . 65
1.7 ‘Green’ (and other shades of) flags. . . . . . . . . . . . . . . . 47 4.1.2 The contractual approach . . . . . . . . . . . . . . . . 66

2. Methodological considerations. . . . . . . . . . . . . . . . . . . . . . . . 48 4.2 Essential duties of arbitrators. . . . . . . . . . . . . . . . . . . . . 67

2.1 A three-step methodology. . . . . . . . . . . . . . . . . . . . . . . 48 4.3 Course of actions available to arbitrators. . . . . . . . . . 69
2.2 Ex ante versus ex post assessments. . . . . . . . . . . . . . . 49 4.3.1 Tools within the arbitral process. . . . . . . . . . . . 69
2.2.1. Ex ante assessment. . . . . . . . . . . . . . . . . . . . . . . 49 4.3.2 Potential external tools. . . . . . . . . . . . . . . . . . . . 71
2.2.2 Ex post assessment. . . . . . . . . . . . . . . . . . . . . . . 49 5. New and emerging issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

2.3 The three steps elaborated . . . . . . . . . . . . . . . . . . . . . . . . . 49 5.1 Role of corporate compliance measures. . . . . . . . . . . 72
2.3.1 Step 1 – Identifying a potential red flag. . . . . 49 5.2 Role of artificial intelligence in red flag
2.3.2 Step 2 – Confirming or validating an generation and analysis. . . . . . . . . . . . . . . . . . . . . . . . . . 74
individual alleged red flag. . . . . . . . . . . . . . . . 50
Annex – References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
2.3.3 Step 3 – The overall assessment . . . . . . . . . . . 56
1. Principal international conventions. . . . . . . . . . . . . . . . 75
2.4 Tools for assessing red flags, individually and/or
2. Selected national legislation and guidance
collectively, and for making factual findings. . . . . . . 57
documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
2.5 Consideration in evidentiary terms. . . . . . . . . . . . . . . . 58 3. International good practice standards
and guidance for businesses . . . . . . . . . . . . . . . . . . . . . 76
4. Country rankings and selected industry
initiatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
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Introduction Some may argue that corruption issues are not

sufficiently different from any other issue to be decided
by an arbitral tribunal and that the issue does not
In recent years, allegations of corruption have arisen
therefore justify a specific approach to the assessment
with increasing frequency in arbitral proceedings, both
of red flags. Others may argue that an assessment
commercial and investor-state. They can arise (i) as part
of whether a corrupt practice has occurred should
of an affirmative claim, (ii) as a defence to jurisdiction
be left to the arbitral tribunal’s ‘gut feeling’ and that
or admissibility of a claim, and (iii) sometimes in other
any attempt at a methodology will unduly constrain
contexts.1 The inherently clandestine nature of most
decision-making. Still others may question whether
acts of corruption and the lack of compulsory tools
criminal law concepts are being improperly imported
(such as subpoena power) available to arbitrators may
into civil disputes. Finally, there may be fears that any
be argued to limit the evidence that is available to the
methodology will discourage a finding of corruption and
arbitral tribunal to evaluate the allegations or suspicions,
therefore inhibit the fight against it.
including any evidence that would demonstrate whether
an improper payment has in fact been made. It is in this However, none of these concerns should discourage
context that ‘red flags’, sometimes called ‘indicators’, or arbitrators from testing the utility of the approach
‘risk indicators’, have been increasingly put forward by described in this Document. Corruption does in fact give
parties to a dispute as relevant to or even constituting rise to distinct challenges – not because its proof may
‘circumstantial evidence’ that is determinative of the ultimately rest primarily on circumstantial evidence, but
corruption issue. because its under-the-table characteristics have given
rise to resort to red flags as a proposed additional tool
This Document will use the term ‘red flags’ to encompass
to ascertain corruption. Precisely because red flags are
the range of expression of corruption risk indicators,
often being put forward as circumstantial evidence of
whether as red flags, indicators, indices (as in faisceau
corruption, it is critical for arbitrators to understand the
d’indices), or other similar terms. The purpose of this
various typologies of red flags and the considerations
Document is to promote understanding of what these
that may come into play when determining whether in a
red flags or indicators are, and their uses and limits
particular case they are valid elements of proof and to
as a tool in establishing a corrupt practice. It will also
what extent.
explain the concept of ‘green’ flags and other shades of
indicators that may be put forward in this context. On whether corruption issues should be decided by
reference to a ‘gut feeling’ or a reasoned process, this
Although red flags are sometimes equated with
Document starts from the premise that arbitrators are
‘circumstantial evidence’, this Document starts from the
generally entrusted with the task of deciding disputes on
position that they are simply indicators of corruption
the basis of applicable law, and that corruption issues
risk, which like any other fact, need to be confirmed
should be subjected to the same analytic rigour as any
or validated before their probative value in relation
other factual and legal issue.
to the corrupt practice can be considered, and
then considered in their totality for their evidentiary The Document also starts from the assumption that the
implications.2 While the ultimate assessment of standard to be applied is a civil rather than a criminal
a corrupt practice may focus on circumstantial standard of proof, and should not import concepts from
evidence, that evidence is best seen as the result of criminal law (such as mens rea) that are not relevant
this assessment process rather than the input. The in the civil context. While red flags have their roots in
Document thus sets forth an analytic framework for criminal law, that does not mean they have no potential
the assessment of red flags and consideration of their application in a civil context – as their increasingly
implications, including in evidentiary terms. frequent invocation in arbitration demonstrates. Part
of the assessment of the probative value of red flags
(Section 1.3 ‘The probative value of red flags’) relates
to their relevance to the applicable legal standard for
the corrupt practice at issue in the arbitration and to
whether the alleged misconduct involves a contract
of corruption or a contract (or investment) resulting
1 For instance, in relation to damages, set-aside, annulment or
enforcement actions, or procedural issues such as those discussed
in Section 3 ‘The procedural effect of red flags’.
2 This is consistent with the view taken by a number of arbitral
tribunals. See e.g. Union Fenosa Gas v. Arab Republic of Egypt,
ICSID Case No. ARB/14/4, Award, 31 Aug. 2018 (hereinafter, Union
Fenosa v. Egypt), paras. 7.73, 7.113 (‘even the reddest of red flags
does not suffice without proof of corruption before the tribunal’).
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from corruption.3 As briefly discussed in Section 1. Definitions, characteristics, role,

1.2.2 'Red flags resonate with the legal elements of
corruption', such distinction may have implications for
and typologies of red flags
the types of red flags that would be relevant.
Before turning to red flags, it is important to highlight
The question of what impact a methodology may that although claims or defences may be framed in
have on the fight against corruption appears to be a terms of ‘corruption’, the term ‘red flag’ is more of an
false dilemma. The purpose of a methodology is not to umbrella or catch-all concept than a legal term. The
make a determination of whether a corrupt practice UN Convention Against Corruption (2003), for example,
has occurred easier or harder; but to make that a global international instrument that has attracted
determination more analytically sound and therefore wide adherence from States, identifies more than a
fairer and more defensible, thereby furthering the dozen distinct types of corrupt practices in its Part I,
rule of law and contributing to the consistency and some but not all of which are subject to mandatory
predictability of the system. criminalisation. Other regional conventions take a
similar approach.4
This Document is prepared with both commercial and
investor-state disputes in mind. It addresses both public In contrast, the OECD Anti-Bribery Convention (1997)
and private sector corruption, albeit with a greater focus (‘Convention on Combating the Bribery of Foreign
on the former since red flags have been developed in Public Officials in International Business Transactions’)
the public sector context. The methodology outlined in is focused principally on bribery (from the ‘active’ or
this Document is not a ‘one size fits all’. Not only is there ‘supply’ side) and a limited number of secondary or
a range of potential corrupt practices and contexts in closely connected offenses.
which the issue arises, but there is no exclusive list of red
flags. A determination whether a corrupt practice has Typically, the first task of an arbitral tribunal will
occurred is a highly fact-specific exercise, and different therefore be to define with greater specificity and in
red flags will be relevant in different contexts. terms of the governing law (which may, of course,
include international as well as national norms) the
In Section 1 of this Document, the definition of red flags, precise nature of the alleged or suspected corrupt
their characteristics, role, and typologies, and their use practice. In many – if not most – cases, this is likely to be
in methodological terms as a fact-finding tool, will be bribery, but other corrupt practices, such as trading in
examined in detail. Section 2 will discuss, through a influence, may also be alleged. The typification of the
suggested three-step methodology, the use and limits conduct at issue will indicate the elements of the corrupt
of red flags both to identify a corruption risk and to practice to be established, with implications for the red
consider their evidentiary character. Section 3 will then flags that may be relevant.5
address the procedural effects of red flags when they
arise in arbitral, enforcement and set-aside proceedings. For example, the OECD Anti-Bribery Convention’s
Section 4 will examine the role and responsibilities of the definition of ‘transnational bribery’ drawing heavily on
arbitral tribunal in relation to red flags, particularly but the U.S. Foreign Corrupt Practices Act (1977),6 focuses
not exclusively in relation to a so-called ‘tacit’ case of on the following elements: the intentional offering,
corruption. Section 5 will principally consider two new promising or giving of any undue pecuniary or other
and emerging areas in relation to red flag analysis: first, advantage – whether directly or through intermediaries,
the relevance of preventive measures by companies to a foreign public official – in order for that official or
(in the form of corporate compliance measures) and for a third party to act or refrain from acting in relation
their relationship to so-called ‘green flags’; and second, to the performance of official duties, in order to obtain
the role of data analytics and, in particular, artificial or retain business or other improper advantage in the
intelligence (‘AI’) as both a source of red flags and a tool conduct of international business.7
for detection. An Annex entitled ‘References’ lists key
4 See the Annex – ‘References’, ‘1. Principal international conventions'.
resources, such as international conventions, selected
5 Some types of corrupt practices, such as bribery, are widely
national rules, good practice and country rankings. condemned by countries, while others (such as trading in influence
and even transnational bribery) have a lower degree of international
consensus. One indicator of the degree of consensus is whether
criminalisation of the particular practice is made mandatory by an
3 The consequences may differ depending on whether the issue international anti-corruption treaty, or subject to a lesser degree of
arises in commercial or investment arbitration, and whether, in obligation (such as ‘consider’). The degree of consensus around a
the case of a contract, whether it is considered to be a 'contract particular practice may also have implications for whether it reflects
providing for corruption' or a 'contract whose consent has been international public policy.
undermined by an act of corruption' (in the terms set forth in Art. 8
of the Council of Europe 'Civil Law Convention Against Corruption', 6 The FCPA was the first transnational anti-bribery statute to be
E.T.S. No. 174 (adopted on 4 Nov.1999, entered into force on enacted by a country.
1 Nov. 2003). 7 See OECD Anti-Bribery Convention, Art. 1(1).
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As this definition makes clear, this is a quid pro quo Rather than simply prohibiting indirect bribery, the FCPA
concept in which the briber seeks to receive something (as originally enacted) contained a provision proscribing
in return for the bribe in the form of official action or payments to ‘any person’ while having ‘reason to know’
inaction, rather than simply giving a gift or gratuity. that that person would pass on the payment in whole
It is also a standard that applies to indirect (‘through or in part to a foreign official or other covered recipient.
intermediaries’) as well as direct bribery. As discussed This ‘reason to know’ standard was criticised as
in below,8 the concept of ‘red flags’ in the corruption inappropriate for a criminal statute – since it potentially
arena has its roots in norms prohibiting indirect bribery, could be triggered by mere negligence – and in 1988
although the concept has been extended to direct was changed to a ‘knowledge’ standard. As the statutory
bribery, especially in the context of procurement and definition made clear, this standard could be triggered
other major government licenses and approvals. not just by positive knowledge but by willful ignorance,
or ‘head in the sand’ behaviour.
1.1 Red flags – Definition, origins, legal status Although the FCPA says nothing about red flags, the
and relevant civil applications concept was put forth by U.S. enforcement authorities
soon after the FCPA’s enactment, and retained when
A red flag in the context of allegations of corruption is the statute was later modified. It remains a viable
any fact or circumstance that indicates a potential risk enforcement concept, as reflected in the Resource
that a corrupt practice, most often bribery involving Guide to the U.S. Foreign Corrupt Practices Act (‘FCPA
a public official, has occurred.9 The concept is also Resource Guide’), issued by the two U.S. government
used in other regulatory compliance contexts, such agencies that enforce the statute, the Department of
as trade controls and anti-money laundering, but this Justice and the Securities and Exchange Commission
Document is focused solely on their use in the context of and last updated in 2020.
potential corruption.
In origin, therefore, the concept of red flags is tied to the
1.1.1 Origins: the U.S. Foreign Corrupt Practices Act issue of indirect bribery – the potential for corruption of
(‘FCPA’) a public official through a third party, such as an agent,
consultant, representative, broker, partner, or others. In
Red flags in the anti-corruption context have their origins fact, a high percentage of bribery cases prosecuted by
in the third-party liability standard of the FCPA, the national authorities involve such third parties, sometimes
first transnational bribery legislation to be enacted by referred to as ‘intermediaries’, and it is considered a
any country in the late 1970s.10 The FCPA criminalised central area for preventive risk management.13 There
the bribery of foreign public officials and certain other is no limit to the types of third-party relationships that
categories of recipients11 for a business purpose, in can give rise to such risks and no requirement that
terms similar to those set out 20 years later in the OECD the third party be formally empowered to act on the
Anti-Bribery Convention.12 principal’s behalf.

Both direct and indirect bribery (i.e. bribery effected

1.1.2 Red flags at the international level
directly by individuals or through corporate personnel,
as well as through intermediaries) were prohibited. International anti-corruption treaties began to be
adopted in the late 1990s, first on a regional basis,14
then in the OECD for capital-exporting countries in
8 See Section 1.1.1 ‘Origins: the U.S. Foreign Corrupt Practices Act
(‘FCPA’)’ the late 1990s,15 and finally culminating in a global
9 Many bribery statutes today also apply to private sector bribery, or convention of the United Nations, the Convention
separate legislation covering bribery in the private sector may exist. Against Corruption (‘UNCAC’), in 2023. Today, most
10 The FCPA was enacted in 1977, and became effective in 1978,
in the wake of revelations of overseas bribery of public officials
by many U.S. companies, first detected in the investigation of the 13 As discussed further in Section 2.2.1 ‘Ex ante assessment’ and
Watergate scandal. It has been amended twice: once in 1988; and more extensively in Section 5.1 ‘New and emerging issues’, red flags
the second time in 1998, in connection with U.S. ratification of the have become a key tool in the preventive, or ex ante, context, as
OECD Anti-Bribery Convention. companies seek to mitigate potential corruption risks associated
11 These include political parties, party officials, and candidates for with the engagement of third parties; they are also considered
political office, as well as anyone “acting in an official capacity” in the ex post context in connection with the analysis that must
on behalf of a government. Officials of public international be performed under the FCPA’s ‘knowledge’ liability standard for
organizations, such as the World Bank and the United Nations, are indirect bribery.
also covered. 14 The Inter-American Convention Against Corruption (1996), later
12 However, the OECD Anti-Bribery Convention is narrower than the expanding to the EU and Africa, see Annex 'References', '1. Principal
FCPA in that it does not apply to bribery involving political parties, international conventions'.
party officials, or candidates for political office. See M. Pieth, L.A. 15 OCDE Convention on Combating Bribery of Foreign Public Officials
Low, N. Bonucci, The OECD Convention on Bribery: A Commentary in International Business Transactions (1997) (‘OECD Anti-Bribery
(Cambridge University Press, 2d ed. 2013), Ch. 1. Convention’).
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countries are party to at least one of these conventions, 2. If the engagement goes forward, to take
and a significant number participate in multiple appropriate steps to mitigate any bribery or
conventions. The scope of these conventions ranges corruption risks (i.e. red flags) identified using
from quite focused (in the case of the OECD Anti-Bribery contractual and other tools (such as training,
Convention), to comprehensive (in the case of UNCAC). audits, etc.).
Although some of these instruments contain provisions
3. To maintain continuous oversight and monitoring
relevant to civil disputes,16 there is only one instrument of the third party’s activities during the course of
focused exclusively on civil law, the Council of Europe contract performance and respond appropriately
‘Civil Law Convention Against Corruption’. to any red flags that arise during such
performance.
None of these anti-corruption treaties contain provisions
on red flags, however. Virtually all such treaties require Many corporate compliance programmes today
the criminalisation of public sector bribery in the require periodic updating of core due diligence. These
domestic sphere, and several require it (at least from compliance steps and programmes may be relevant
the supply or active side) in the transnational sphere.17 as potential ‘green flags’. It should be emphasised
However, the proscription is typically framed as a that while these standards are in place today, as
prohibition on bribery, whether direct or indirect, without international ‘soft law’ norms (and as standards in
any special provisions for third-party liability such as domestic transnational bribery legislation in a number
those found in the US FCPA. Nonetheless, the concept of countries), their emergence is relatively recent. The
of ‘red flags’ has found its way into soft law instruments, FCPA stood for almost 20 years as the world’s only
generally as signaling bribery (‘pass-through’) risks transnational bribery statute and it was not until the
by a third party in relation to a public official. ICC, for adoption of the OECD Anti-Bribery Convention in 1997
instance, devotes significant attention to red flags in its that other capital-exporting countries began to enact
guidance document ‘ICC Anti-corruption Third Party similar legislation.
Due Diligence: A Guide for Small- and Medium-sized
Enterprises’.18 As further discussed in this Document,21 preventive
compliance expectations have tended to follow the
The basic concept first articulated in the FCPA context, adoption of ‘transnational bribery legislation’ or
and later embraced internationally, was that red flags, international anti-corruption instruments, unless the
while not constituting proof of corruption – and this legislation adopted includes a compliance defence as
point is key – were indicators of a potential risk of part of its basic scheme.22 When assessing historical
public official bribery, and therefore ignoring them conduct, therefore, arbitral tribunals should be careful
could lead to liability for ‘head in the sand’ behaviour.19 not to impute compliance expectations to companies
This concept has had profound implications for at times when such expectations had not yet become
corporate compliance practices, both domestically and part of domestic law or enforcement expectations,
internationally, which is reflected in the ‘good practice’ or sufficiently ripened at the international level to be
guidance issued by the OECD on internal controls, considered a good practice.
ethics and compliance in 2009, and in multiple other
guidance documents.20 Today, responsible companies 1.1.3 Application to the civil context
are expected:
‘Red flags’ have been prominently featured in a number
1. To take steps prior to engaging a third party to do
of arbitral decisions. One of the best known decision
risk-based due diligence on that third party.
is Metal-Tech v. Republic of Uzbekistan,23 in which the
16 UN Convention Against Corruption (2003), Art. 34 ‘Consequences arbitral tribunal found that two contracts of the foreign
of acts of corruption’ and Art. 35 ‘Compensation for damages’. investor with third parties were in effect contracts
17 Not all instruments deal with private sector bribery, and for those for corruption, and that the investment had been
that do, it is generally not treated on the same plane with public
sector bribery. Most of the instruments contain provisions on other procured via bribery in violation of Uzbek law, resulting
so-called ‘acts of corruption’ as well, sometimes requiring their in a dismissal for lack of jurisdiction based on the
criminalisation, and at other times requiring consideration of
criminalisation or other steps.
18 This ICC guide aims to address the due diligence requirements and
procedures and inspire Small and Medium size Enterprises (SMEs) to 21 See Section 5.1 ‘Role of corporate compliance measures’ and the
engage in due diligence by creating achievable and manageable discussion under Section 2.3.2 ‘Step 2 – Confirming or validating
due diligence goals. See also the ‘ICC Rules on Combating an individual alleged red flag’, ‘ii) Specific red flags’, ‘4.(Lack of)
Corruption’ (2023). compliance measures’.
19 See U.S. Department of Justice and Securities and Exchange 22 Such a provision is found e.g. in the UK Bribery Act 2010 (referenced
Commission, A Resource Guide to the U.S. Foreign Corrupt Practice there as ‘adequate procedures’).
Act (2nd Ed., 2020), at pp. 22-23. 23 Metal-Tech Ltd. v. Republic of Uzbekistan, ICSID Case No. ARB/10/3,
20 See the Annex – ‘References’. Award, 4 Oct. 2013.
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requirement that the investment had to have been made Arbitrators are not vested with enforcement powers to
‘in accordance with law’. This illustrates the cross-over of prosecute corruption from the standpoint of criminal
red flags from the criminal to the civil context. law. However, as discussed in Section 4 below, they
are invested with the duty to enforce the civil law
The importation of red flags into civil disputes where
consequences set out in the rules prohibiting corruption.
corruption issues are present does not mean that
Red flags must be confronted when it is necessary to
criminal standards should be imported wholesale into
ensure that arbitral awards are not exposed to the
the civil arena. State of mind (mens rea) elements of
risk of leaving questionable facts or circumstances
criminal offenses, for example, may not be relevant
in a transaction or investment in dispute unchecked
to the corrupt practice put at issue in a civil context.
or unsanctioned.
This will depend on the applicable law. One caveat,
illustrated by the Metal-Tech decision, is important
1.2.2 Red flags resonate with the legal elements
to note: international law instruments and other
of corruption
authorities distinguish between contracts of corruption
and contracts resulting from corruption.24 While the Issues of corruption as dealt with in international
latter are voidable by the injured party, the former are commercial and investment arbitration fall into specific
void ab initio. types of offenses carefully defined by reference to their
constitutive legal elements, as set out in international
Assessing whether a contract is a contract of corruption
conventions, as well as in the relevant national laws.
involves a determination of the purpose of the contract
as intended by the parties, which begins to approach Some arbitral tribunals consider that given that
a state of mind element. However, this should be corruption is a matter of transnational public policy,
an objective determination based on the facts and there is little relevance to specific statutory rules setting
circumstances. Both red and green flags may be forth the legal elements of corruption.26 While this
relevant in assessing the purpose. A different element may be true, given that transnational public policy
must be considered when assessing contracts allegedly is a value-based concept and that there is a global
resulting from corruption, that being the element of consensus condemning corrupt practices, international
causation. Red or green flags going to causation may instruments and the national laws reflecting this
also be relevant to that element. universal condemnation do contain such constitutive
legal elements. Red flags arise as risk indicators
1.2 Characteristics of red flags because they are tied to the objective legal elements
of a corrupt practice at issue, not only because they
Red flags are facts or circumstances that are tied to stir the repulsion of an arbitral tribunal by reference to
a certain type of corruption risk. They resonate with transnational public policy, but because they resonate
the ‘constitutive legal elements’ of a specific corrupt with legal rules that prohibit transnational corruption
practice and are perceived as such when they are set out in international conventions and national
put forward in the form of an allegation by a party, statutory legislation.
or when they give rise to sua sponte suspicions by a The legal elements of the offense are the types of
decisionmaker in international arbitration. ultimate facts, iterated in the substantive rule that
needs to be proven, to enable an adjudicator to make
1.2.1 Red flags are facts or circumstances tied a determination that the relevant offense has been
to corruption risk committed and from there to adjudge the consequences
of such determination. Legal elements often vary from
At their core, red flags reflect facts or circumstances,
one legal instrument to the other, whether in international
real or perceived, of relevance to a dispute involving a
business contract or an investment, which an arbitral
tribunal is constituted to adjudicate. Furthermore, red
flags in the context of a dispute point to some kind of 26 See e.g. Exem Energy B.V. (The Netherlands) vs. Sociedade Nacional
de Combustíveis de Angola, - Sonangol E.P. (The Republic of
corruption risk considered in an ex-post context.25 Angola), Netherlands Arbitration Institute, NAI 4687, Final Award,
23 July 2021, finding, without use of the technique of red flags,
that a Share Purchase Agreement had been tainted by corruption
because it has been made through the involvement of a daughter
of the Angola President, who had been the chair of the respondent
24 Council of Europe, Civil Law Convention on Corruption, Art. 8; State entity that concluded the agreement. Para. 8.18 rules as
R. Kreindler, Competence-Competence in the Face of Illegality follows: ‘Furthermore, as the case law of the Supreme Court of the
in Contracts and Arbitration Agreements (Hague Academy of Netherlands makes clear, for the operation of Article 3:40 para. 1
International Law, 2013), Ch. 5. of the Dutch Civil Code it is not required that a legal act has been
25 See Section 2 ‘Methodological considerations’, 2.2.2 ‘Ex post concluded or performed in violation of a specific statutory rule, in
assessment’. particular a rule contained in the Dutch Criminal Code’.
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conventions, or in domestic law.27 They may also determine what evidence they yield’.30 They help to
vary from the perspective of whether the offense is bridge the evidentiary gap between the law and the
considered in the context of criminal or civil law. facts in matters involving hidden corrupt practices.
Having said this, it must be further stressed that
Schematically, one is able to posit that there are
red flags:
two sets of legal elements of corruption offenses
that are commonly used in national legislation, do not warn about potential “corruption”
and international conventions,28 and are relevant to in the general and generic sense; rather,
international arbitration: proving particular forms of corruption requires
methodical reference to the elements of
1. Acts of promising, offering, receiving, soliciting
the offense.31
undue advantages directly, or using or exerting
influence on or by a foreign public official in order
It follows that red flags must begin by striking the chords
to obtain, grant or retain a business advantage
of the legal elements of the relevant corrupt practice,
in the context of international commercial and
thereby commanding further delving into the facts,
investment contracts. This is the material element,
through the rules of evidence, to ascertain based on the
commonly known in criminal law as actus reus.
evidence ultimately adduced whether corruption in the
2. An intent to corrupt, to bribe, to solicit a bribe or specific form it is alleged or suspected to have taken
benefit directly; to use, offer or exert influence by place has occurred.
or through intermediaries.
Red flags do not as such prove the suspected or
As discussed above, mens rea does not have the same alleged corrupt practice to which they allegedly relate.
application in the civil context as in the criminal context; Each red flag identified is an indicator of potential
rather, questions of purpose and causation (‘cause risk, yet to be validated, assessed and its evidentiary
indirecte’ or ‘intention réelle’ as understood in civil law) implications considered. The suspected or alleged
come into play. The element of intent is relevant in so facts or circumstances become red flags because they
far it underlies consent in contracts, whether one is resonate with the legal elements of the relevant offence
speaking of a ‘contract of corruption’ or a ‘contract and begin to strike some chords in the constitutive legal
procured by corruption’. The formation of contract is the elements of a corrupt practice. They are thus closely
product of a meeting of minds, expressed as reciprocal wedded with the legal elements of the specific act of
declarations, which are exterior manifestations of the corruption at issue. Indeed, only the legal elements of
consent, mutually communicated, and are as such the relevant corrupt practice are able to infuse ‘redness’
provable. However, what marks arbitration cases to what could otherwise appear to be banal facts in a
dealing with corruption is an element that lies beneath given commercial or investment relationship. But as will
the expressed consent, namely intent, and in particular be discussed further below, there are key intermediate
the corrupt intent that is so often hidden behind benign steps to be addressed before an ultimate finding of a
contractual constructs.29 corrupt practice can be made, involving not only the
identification and validation of the red flags, but their
Red flags come into play when they resonate as risk assessment in evidentiary terms.32
indicators with one or more of the constitutive legal
elements of the relevant corrupt practice. As such, 1.2.3 Red flags arise when they are alleged or suspected
red flags are ‘only indicators that must be pursued to
Although they pertain to facts or circumstances, real
or perceived, red flags effectively arise when they are
27 Some leading international conventions, such as the OECD alleged by one party in ongoing arbitral, enforcement
Anti-Bribery Convention, explicitly adopt a ‘floor’ approach to or set-aside proceedings; or when they give rise to
their requirements, such that States Parties have the discretion
to enact national legislation that will be consistent with the suspicions of a decision maker, be it an arbitral tribunal,
Convention so long as it meets its minimum requirements. This an arbitral institution scrutinising an award, or an
approach contributes to the diversity of national legislation.
And as noted earlier, there is greater consensus around some enforcement or set-aside judge. At this moment the fact
offenses at the international level than others (e.g. bribery versus or circumstance becomes a potential red flag.
trading in influence), as reflected in whether the obligation to
enact implementing legislation is mandatory or subject to a lesser
obligation. 30 L.A. Low, ‘Dealing with Allegations of Corruption in International
28 See e.g. Annex – ‘References’: ‘1. Principal international conventions’ Arbitration’, 113 AJIL Unbound (2019), p. 341.
and ‘2. Selected national legislation and guidance documents’. 31 A. Llamzon, ‘Chapter 14: Arbitrating Corruption’, in M.J. Moser,
29 A. Sayed, ‘Duplicity in Corruption and Arbitration: Dealing with the C. Bao (eds), in Managing ‘Belt and Road’ Business Disputes: A Case
Evidentiary Gap’, in International Arbitration and the Rule of Law: Study of Legal Problems and Solutions (Wolters Kluwer, 2021)
Contribution and Conformity, A. Menaker (ed.), ICCA Congress pp. 285-314, at p. 299.
Series, Vol. 19 (Wolters Kluwer, 2017) pp. 266-282, at p. 268. 32 See Section 2 ‘Methodological considerations’.
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At the outset, a red flag remains closely wedded to a of corruption both imply that a decision maker in the
party’s allegation or the tribunal’s suspicion. It then takes context of international arbitration must examine red
a life of its own in the course of the proceedings, as it flags with an unbiased mind and with a view towards
is identified, validated, assessed and first considered in consideration of all relevant facts and circumstances.
terms of evidence and ultimately in terms of whether it This means in turn that where red flags, after validation,
is a constitutive legal element of the corrupt practice assessment and consideration in evidentiary terms, do
at issue. not emerge as evidencing a specific corrupt practice,
an arbitrator must be ready to rule that such red flags
1.3 The probative value of red flags have turned out to be ‘false alerts’, and that there is no
room in the circumstances for a finding of corruption.36
As red flags typically do not establish evidence of any They should not be treated as presumptive, but must
of the legal elements of a specific corrupt practice be considered in the context of the totality of the facts
(although once validated they may resonate with and circumstances, including any ‘green’ or even
them), they do not at the stage when first asserted ‘black’ flags.37
possess a probative force of their own to prove such
legal elements. Instead, they speak to the possibility or 1.4 The quantitative and qualitative
potentiality, and eventually may speak to the likelihood characteristics of red flags
of one or more of the constitutive legal elements of the
relevant corrupt practice:
According to recent authorities,38 red flags can have
i) When red flags are being identified, under both qualitative characteristics and quantitative effects.
Step 1,33 they simply suggest a possibility or
A high-quality – or strong or serious – red flag is one
potentiality that one or more legal elements of the
that renders one or several elements of a corrupt
corrupt practice at issue might be implicated in
practice more likely (but still not presumptive). Subject to
some form.
validation and assessment, and further consideration in
ii) When red flags are validated, under Step 2,34 they evidentiary terms, a high-quality red flag does not only
start to speak to the likelihood of one or more of render more likely certain legal elements of a corrupt
the legal elements of the relevant corrupt practice. practice but might also emerge as evidence of a specific
Red flags are no longer suggestive of a possibility corrupt practice, under certain conditions. In other
of corruption; when validated they become words, it can be said to have a strong probative value.
indicators of a likely corrupt practice absent This may be the case, for instance, where there is a high
contravening facts or circumstances; in other level of compensation to a third party coupled with a
words, they render the relevant legal elements lack of proof of any legitimate services provided.39
of the offense probable in the facts. It should
however be emphasised that when validated, red Quantitatively, a collection of validated red flags
flags are yet to acquire probative force. – converging towards the probable existence of certain
legal elements of a corrupt practice – allows a decision-
iii) When red flags are assessed, and then
maker to consider that in the full context (i.e. taking
considered through the law of evidence, taking
into account all the facts and circumstances and
into account the totality of the available facts
any contrary evidence, including ‘green flags’), these
and circumstances of the case, under Step 3,35
they may lead to factual findings, using a variety
36 As ruled in Union Fenosa Gas v. Egypt, supra note 2, Award, para.
of evidentiary tools, that set the stage for a 7.113: ‘Even the reddest of red flags does not suffice without
legal determination. proof of corruption before the tribunal. Whilst it can be relatively
easy to allege corruption, it is less easy to prove it, as observed
iv) On the basis of the evidence so assessed, red flags by the arbitral tribunal in its award in the Metal-Tech v. Republic
of Uzbekistan, supra note 23: ‘Suspicion is not equivalent to
may ultimately be reflected in evidence having proof. Unanswered queries may have innocent explanations, not
probative force, allowing a determination to be amounting (in the absence of explanations) to proof of corruption’.
made on whether a specific corrupt practice has 37 See Section 1.7 ‘Green (and other shades of) flags' below.
occurred. 38 A. Llamzon, supra note 31, p. 296. Metal-Tech Ltd. v. Republic of
Uzbekistan, supra note 23, at para. 293; Union Fenosa Gas v. Arab
It follows that when red flags arise, they cannot Republic of Egypt, ICSID Case No. ARB/14/4, Award, 31 Aug. 2018,
paras. 7.91, 7.113; Worley International Services Inc. v. Republic of
automatically lead to a finding that a specific corrupt Ecuador, PCA Case No. 2019-15, Final Award, 22 Dec. 2023, para.
practice has occurred. The possibility and the likelihood 469, 475.
39 This has typically been the finding in Metal-Tech Ltd. v. Republic of
33 Section 2.3.1 ‘Step 1’ below. Uzbekistan, supra note 23, at para. 351, where the arbitral tribunal
concluded in respect of a consultancy contract that substantial
34 Section 2.3.2 ‘Step 2’ below. payments were made with ‘no meaningful documentary evidence
35 Section 2.3.3 ‘Step 3’ below. of any services rendered’.
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validated red flags taken together may constitute part of 1.5.2 Specific red flags
the evidence leading to a finding of corruption, but not
as red flags per se. i) Party

Background or reputation
1.5 Typologies and common types of red flags
–– The entity (private or public) or a key individual
It is accepted wisdom that there is no definitive list of red has a reputation for corrupt practices, or has
flags. Any fact or circumstance that suggests potential a flawed background, including prosecutions,
bribery or another form of corrupt practice can serve as convictions, etc.
a red flag. That has been the position under the FCPA, –– The third party is a public official or was a
and the view has been carried forward into international public official very recently and would be
instruments’ treatment of the subject. That does not trading on official knowledge.
mean, however, that no typologies of red flags exist.
How identified (e.g. recommendation of a public official)
There are two basic categories of red flags:
–– The third party was recommended by a public
General red flags typically relate to contextual official with discretionary authority over the
characteristics that are most often immutable: the business opportunity in question (for public
country, geography or government administration in sector bribery), or a private actor with similar
question, and the business sector (1.5.1). authority (for private sector bribery).
Specific red flags typically relate to facts or Relationships (e.g. with public officials)
circumstances relating to of the counterparty to the
–– The third party has a close personal, business
proposed transaction, relationship or payment (where a
or family relationship with a public official,
third party is involved), or to the transaction itself (1.5.2).
especially one with discretionary authority over
As will be discussed further below,40 specific red flags are the business opportunity being pursued.
generally considered to constitute stronger indicators Corporate structure/transparency
of corruption risk than general red flags; conversely,
they are more susceptible to risk mitigation measures –– The third party’s corporate structure is not
than general red flags. The Annex ‘References’ identifies transparent, is a shell, or is layered and includes
various documents that contain lists of commonly entities in jurisdictions known for a lack of
identified red flags. Using the ‘general’ and ‘specific’ transparency (e.g. offshore havens), is rumored
typology, and further subdividing the specific category to have government officials involved as a silent
into party or transaction-focused red flags, the following partner or via a proxy (prestanombre, or straw
list represents the most commonly identified red flags in man), or the ultimate beneficial ownership is not
international guidance documents. clear.

Relevant experience and qualifications

1.5.1 General red flags
–– The third party does not possess the experience
Country (or particular government administration) and qualifications that would normally be
expected for the performance of the activity in
–– The country (region/subregion/relevant
question.
geography) has a reputation for corruption.
–– The third party’s primary qualification for the
–– The government administration in power (for
engagement is its influence over key decision-
public sector bribery) has a reputation for
makers.
corruption.
Location
Industry
–– The third party does not reside in or have a
–– The industry has a reputation for or track record
significant business presence in the country
of corruption, or has characteristics (such as
where the customer or project is located.
high-value transactions, need for speed, etc.)
that make it vulnerable to corruption. Secrecy
–– The third party insists on maintaining secrecy
with respect to its identity, or does not provide
information in response to due diligence
requests.
40 See Section 1.5.2 ‘Specific red flags’ below.
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ii) Transaction

Nature of product or services Legality

–– The product or service to be supplied is illegal. –– Hiring the third party for the type of
The services to be supplied are vague in nature contemplated activity is illegal. The transaction
(or after the fact, are not documented), or itself, or aspects of it, raise significant illegality
consist primarily of the exertion of influence. issues.
–– The products to be supplied are not pertinent to Transparency
the business in question.
–– Aspects of the counterparty or transaction are
Compensation not transparent.
–– The third party’s compensation is excessive in Procurement structure (if applicable)
relation to the value of the legitimate goods or
–– The transaction is a sole source procurement.
services to be provided. A significant success
fee is involved. –– An official intervenes in the award process.
–– A compensation increase (or advance of funds) –– An official with influence over the selection
is requested during the course of performance process has a conflict of interest.
in suspicious circumstances. –– The tender specifications appear to have been
structured to favor a particular bidder.
Contractual and payment terms
–– An unqualified company is allowed to tender or
–– The third party refuses to agree to appropriate
win an award.
contractual anti-corruption safeguards in the
engagement documents, including compliance Other features
with relevant anti-corruption laws, or they –– Pre-transaction: lack of due diligence with
are not requested. The contractual terms are respect to acquired assets, or a failure to follow
atypical for a contract of this general nature. up on red flags that are revealed during the
–– The third party requests payments in cash, course of due diligence.
offshore (e.g in a haven jurisdiction where –– Post-transaction: diversion of payments from an
accounts are not easily traced), or to a party established account.
other than the contractual counterparty.
–– Post-transaction: A key asset is quickly resold
Timing or ‘flipped’ following its acquisition for a
–– The need for the third party arises just before or significantly larger price.
after a contract is to be awarded. A success fee
or other significant compensation is payable
upon the award of a contract.

Although the above potential red flags are widely resources sector), and particular types of transactions
recognised in lists and literature, it should be emphasised such as government and international development
that they are not exclusive. As noted at the outset, any institution procurement.41
fact or circumstance that suggests a risk of a possible
Red flags can arise at any time in the life cycle of a
corrupt practice should be considered a red flag and
transaction: at the time of engagement, in the course of
treated accordingly. As the above list makes plain,
performance, or in the course of termination or windup.
some red flags that are relevant in the governmental
A counterparty whose structure or ownership raised no
context may not be applicable in the private sector
red flags at the outset of an engagement can undergo
context, while others can be readily adapted to the
changes. Similarly, a compensation structure that was
private context. Specific red flags have been developed
unremarkable at the outset can acquire elements of
for transactions in particular industries (e.g. the natural
concern from requests for additional or changed terms

41 See e.g. Natural Resource Governance Institute, ‘Twelve Red Flags:

Corruption Risks in the Award of Extractive Sector Licenses and
Contracts’ (6 April 2017); International Anti-Corruption Resource
Centre, ‘The Most Common Procurement Fraud Schemes and their
Primary Red Flags’ (https://iacrc.org/, 2024); World Bank Group
‘Warning Signs of Fraud and Corruption in Procurement’.
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as the matter progresses. General characteristics of the 1.7. ‘Green’ (and other shades of) flags
environment can also change, e.g. with the advent of
a new government with a better (or worse) reputation Not all indicators relevant to a potential corrupt practice
for combating corruption. Finally, changes that occur in are negative in character. As commentators and arbitral
close temporal relation to key events (such as a tender tribunals have recognised, there may be facts or
decision) may present greater risks than changes that circumstances that suggest an absence of corruption –
cannot be linked to such events.42 so-called ‘green’ flags.

1.6. Sources of red flags Chief among these are facts or circumstances that
indicate an effort to prevent or detect a corrupt practice,
The sources of red flags can be (and are) extremely either generally or in a particular case. Corporate anti-
varied, but are important to identify and evaluate. corruption programmes have become much more
commonplace in recent years.45 While it may be difficult
• General red flags. For country red flags, publicly for an arbitral tribunal to assess the effectiveness of
available rankings such as the Transparency such a programme (simply having a paper programme
International’s Corruption Perceptions Index (‘CPI’) is generally not viewed as effective), the compliance
or the World Justice Project’s Rule of Law Index measures taken in a particular case will be more
are commonly used, although widely criticised for significant as a risk mitigation measure. Such measures
their subjective, secondary character. Industry or could include, for example, whether:
sectoral red flags have been identified in studies
done by the OECD, World Bank and others. Those (i) a company has performed due diligence on a third
studies often focus on the characteristics of the party;
sector that make them prone to corruption.43
(ii) the contract with a third party contains anti-
• Specific red flags. Specific red flags can have corruption safeguards, and how robust those
a wide range of sources. For a specific party, safeguards are;
they can include public record information
(iii) there is evidence of the testing or oversight of their
(e.g. investigation, prosecution, or conviction
effectiveness (e.g. through audits);
information), press reports, corporate record
information, as well as source information from (iv) the company has trained its personnel on specific
reference checks, due diligence reports, press policies or procedures; and
reports, etc. For transactions, they may include
(v) the company participates in collective action
specific transactional or contract characteristics
initiatives to offset risks.
(if a procurement, whether it is sole source), place
or manner of payment details (e.g. a known tax
In addition, third-party verification, which may take the
or regulatory haven jurisdiction), competitor
form of certification of compliance with programme
information, press or whistleblower information,
standards, third-party audits, government investigations
or the like. Data analytics, with or without the use
finding no corruption or resulting in a declination of
of artificial intelligence, may also be a source of
prosecutions, or other relevant reviews, may be a source
red flags as discussed below.44 The conduct or
of green flags.
involvement of a third party, or of a government
official with whom the company or third party is Some green flags may also be the converse of a red
dealing, may also raise red flags. Although there flag (e.g. a country or sector with a low reputation
is no limitation on the sources of red flags, the for corruption, local law that permits or mandates a
credibility of those sources can vary widely and particular payment, or transparency-focused measures).
needs to be assessed. As with red flags, a distinction should be made in
evaluating green flags between the general and the
specific, with the general carrying less weight as a risk
mitigator than a specific measure.

42 See Section 2.3.2 ‘Step 2 - Confirming or validating an individual

alleged flag’: ‘(i) General red flags – Country risk’, ‘(iii) Specific red
flags: Third-party background and qualifications’, and ‘(iii) Cross-
cutting considerations in assessing individual red flags’; and Section
2.3.3 ‘Step 3 –The overall assessment’.
43 See Annex – ‘References’: ‘4. Country rankings and selected industry
initiatives’.
44 See Section 5.2 ‘Role of artificial intelligence in red flag generation 45 See Section 5.1 ‘Role of corporate compliance measures’ for a more
and analysis’. detailed discussion.
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At least one arbitral tribunal has used the term ‘black 2.1 A three-step methodology
flags’ to denote a neutral fact or circumstance,
i.e. one that is neither risk indicating or risk mitigating.46 The evaluation of potential or asserted red flags can be
‘Pink flags’ have sometimes been referenced in the broken into a three-step process:
compliance context to denote weak risk indicators.
1. Identifying the potential/asserted red flags. What
facts, factors, or circumstances of relevance to the
2. Methodological considerations specific corrupt practice at issue (either as alleged
or as appear) indicate the potential risk of that
corrupt practice (or not) such that they should be
This section will discuss the use and limits of red
examined further?
flags both to identify whether a true corruption risk
is presented and to weigh their evidentiary value, 2. Validating/confirming (or negating) individual red
regardless of whether a corrupt practice has been flags. Are the individual red flags that have been
alleged by the parties or the risk of such is raised by the alleged factually supported? What is the strength
arbitral tribunal sua sponte. of each of the alleged red flags?

3. The overall assessment. What picture emerges

from the totality of the relevant facts and
circumstances, having considered the red flags,
contrary indicators or ‘green’ flags, and other
mitigating measures or circumstances? What fact-
finding tools are available to assemble the picture?

46 Union Fenosa Gas v. Egypt, supra note 2, para. 7.114.

Proposed three steps methodology

From isolated potential indicator to established and assessed global set of facts, allowing a proper legal qualification

Spot the Ascertain the red Consolidate and Legal qualification

red flags flags and their analyse the global of the combined
individual relevance factual background proven facts

1 2 3
• Identify the alleged (‘overt’ • Confirm the occurrence/ • Establish the overall picture
case) or suspected (‘tacit’ veracity of said facts formed by the proven red flags
case) fact(s) that, if confirmed,
• Determine the relevance • Combine with other (proven)
may indicate a risk of
of each of these confirmed facts: ‘green facts’, etc.
corruption
facts: general or specific
• Check on potential
• Sua sponte identification indicators; temporality;
inconsistencies and/or gaps.
(investigation) of other facts? contested or not; indirect (risk-
indicating) or direct (indicating
a constituent element of a
potential breach); etc.

Potential issues of burden Potential issues of burden

of proof of proof

Red Flag: ‘a warning sign: a sign that there is a problem that should be noticed or dealt with’ (Brittanica).
In the context of allegations of corruption, any fact that indicates a potential risk that a corrupt practice
– most often bribery involving a public official – has occurred.
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Only after this three-step process is complete is the the third party. Due diligence reports often focus on a
matter ripe for considering the legal implications of the wide range of legal issues, not just corruption, as well as
evidence that has been assembled starting with the financial and reputational risks, and it will be important
asserted red flags, or risk indicators.47 for arbitral tribunals to focus on the relevant aspects of
these broader reports.
2.2 Ex ante versus ex post assessments
2.2.2 Ex post assessment
Prior to discussing the three steps in risk assessment and Ex post, the question is not the likelihood that a corrupt
factual development, it may be useful to highlight the practice will occur, but whether a specific corrupt
two main contexts in which red flags are used – ex ante practice has occurred, either directly or through an
and ex post – and their key differences. intermediary. This involves a different set of questions
than at the preventive stage where perceived risk and
2.2.1. Ex ante assessment risk appetite are the organising and determinative
principles. In the ex post context, the core tasks are
Red flags have become a core tool in ex ante corruption
to consider the specific corrupt practice at issue as
risk analysis, especially in compliance policies and
defined by applicable law, the evidence that is relevant
procedures relating to the engagement and supervision
to the elements of that alleged practice, and the
of third parties.48 In that context, the use of red flags
standard of proof that will be needed to establish that it
involves the following tasks:
has occurred.49
• risk identification;
Any use of red flags from a methodological standpoint
• risk management; must thus tie into the ultimate tasks of the arbitral
• decisions about net risk tolerance based on the tribunal, and start from the premise that red flags
information gathered during the due diligence are not proof of any specific form of corruption, but
process on potential prospective corruption risks; only potential risk indicators that must be identified
and and carefully assessed for their strength and ultimate
implications in light of all the facts and circumstances
• decisions about the availability and effectiveness
and in terms of evidence in relation to the corrupt
of the available risk management safeguards.
practice at issue.
Companies bring varying degrees of risk tolerance to
this process, and may have different preferred tools 2.3 The three steps elaborated
for risk management. They may also identify and rank
risks differently. Sources may be soft (e.g. press reports With the above contextual framework in mind, and
of varying quality, reputational information gathered with a focus on the ex post context, the ‘three steps-
through a due diligence firm, references). Moreover, the methodology’ is described below.
quality and extent of the information that is available
is often limited by what time and resources permit to 2.3.1 Step 1 – Identifying a potential red flag
be gathered, and credibility may be difficult to assess.
This step is effectively an issue-spotting exercise within
In that context, red flags can (and often do) play an
the relevant normative construct. As noted earlier,50
outsized role in decision-making.
although there are recognised types of red flags, any
Legal counsel may be asked to opine not on the fact or circumstance that suggests the risk that bribery
substantive question of whether there is or could be a or another specific type of corrupt practice may have
violation of law if the third party were to be engaged, occurred – whether through a third party or directly –
but on the more procedurally-focused question of can be a red flag. Red flags put forward by a party or
whether the principal has conducted sufficient due identified by the arbitral tribunal on its own initiative
diligence about potential risks in relation to enforcement may end up being considered for their risk implications.
expectations, or what the investigative risk might be if
there is a later allegation of misconduct on the part of

47 As part of its work, the ICC Commission on Arbitration and ADR

Task Force on ‘Addressing Issues of Corruption in International
Arbitration’ has considered the issue of standard and burden of
proof in corruption cases generally. This Document focuses on the
narrower issue of red flags and is subject to any conclusion and 49 See Section 3.4 ‘Red flags and the standard of proof’.
recommendations the work of the Task Force will formulate. 50 See e.g. the list in Section 1.5 ‘Typologies and common types of red
48 On the ‘Role of corporate compliance measures’, see Section 5.1. flags’.
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The red flags that are relevant will likely depend on the The same is true for expectations regarding business
context (a direct or an indirect payment issue) and the practices, especially in relation to compliance and
type of corrupt practice (public or private, involving risk management, an area where global standards
bribery or other alleged misconduct) that is potentially and practices have evolved relatively quickly in
implicated. These therefore need to be defined at the recent years. The lapse of time can also, of course,
outset and the relevant elements identified. degrade the recollections of witnesses or the available
documentation. The temporal consideration therefore
2.3.2 Step 2 – Confirming or validating an individual requires particular care on the part of the arbitral
alleged red flag tribunal in its evidentiary findings.

Once red flags (or potential red flags) have been The arbitral tribunal may also have to evaluate the
identified, particularly those that are specific in effects of other intervening changes or developments.
character, the next and crucial step is to critically For companies, for example, subsequent or prior
examine them to see whether they are confirmed or mergers, acquisitions or other business combinations
validated as a threshold matter and to what extent. Red may limit the availability of personnel, records, and (in
flags should not be taken at face value, but must be cases of successorship) can raise difficult questions
examined, first individually, then collectively (see Step 3) of legal responsibility. Governments and their policies,
to ascertain whether they are factually supported. practices and legislation, as well as personnel, change
as well.
There can be many reasons why a red flag may not be
validated. It may rest on a source that lacks credibility; With these general comments, we turn to a discussion
an assumption that proves to be incorrect; a confusion of the most commonly identified red flags and the
of identities; an overstatement of relationships; a lack of specific questions they may typically raise in relation to
information or misinformation; a lack of understanding validation. It is hoped that the discussion will provide
of the business purpose or context; an overly broad helpful insights, not only with respect to the specific
or mistaken concept of corruption; or others. Or it red flags discussed, but as regards the validation
may simply be inconclusive or limited in nature, or approaches that can be employed more generally. We
contradicted by other facts and circumstances. begin with the general categories of red flags and then
move to specific categories.
Conversely, an examination may validate a potential
red flag. The examination of the background of a i) General red flags
third party may indicate a lack of qualifications for
the task for which he or she has been engaged, or a 1. Country risk. Although general red flags do not
compensation structure that is out of the ordinary and present the same range of validation challenges as
potentially excessive. Or there may be little evidence of specific red flags, they should still be examined critically
the provision of legitimate services. Close relationships at this stage.: What is the source? Is it credible? What is
to key government officials may also be validated.51 If the basis of the conclusion? Is it temporally relevant? Is it
so, the inquiry should at that point turn to determining sufficiently specific?
the probative value of the indicator (Step 3).
The temporal consideration may be particularly
The temporal consideration and the risk of hindsight important in relation to country risk, as such risks can
bias are particularly important to highlight in relation change materially over time with different government
to the issue of validation. Inevitably the arbitral tribunal administrations (e.g. Indonesia was perceived as
will be reviewing red flags on an ex post basis not only presenting higher and more centralised risks of
after the conduct at issue has occurred, but perhaps corruption during the Suharto Presidency than in
even many years thereafter. While information that has later years). As most country risk factors are based
become available subsequent to the conduct at issue on rankings such as the Corruption Perceptions Index
can undoubtedly serve as a red flag or contribute to a (‘CPI’) published by Transparency International (which
red flag analysis, the arbitral tribunal must be careful is perception-based, rather than objective in nature),
not to fall into the seductive trap of hindsight – using it is important for arbitral tribunals to recognise that
information that has come to light subsequently to perception is, in effect, only bias, and may not reflect
attribute knowledge, purpose, or expectations to parties the reality of the geography, let alone the reality of
at an earlier time without a sufficient basis for doing so. an individual case. This is particularly true for large
countries, which may have very different regional
variations. This discussion illustrates why this general
red flag, if validated, is likely to be at most a weak risk
51 Additional examples are provided in the paragraphs below.
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indicator (i.e. of limited probative value) in most cases. As with the country risk factor, this red flag cannot be
Like the general industry/sector risk red flag discussed mitigated per se, but evidence of extra ex ante caution
below, it is relevant to both direct and indirect bribery. based on the recognition of the general risk presented
by the industry may be relevant in an individual case.
Country or other geographical risk is not susceptible to
mitigation per se. In the ex ante context, it may be used
ii) Specific red flags
to signal a need for greater caution. Arbitral tribunals
can therefore look for indicators of such caution as 1. Third-party background and qualifications. There
countervailing at least to some extent, for example: are three dimensions to this potential red flag, which
How did the company approach meetings with host of course only comes into play only when a third party
government officials? Did it require the presence of at is involved.
least two employees?
The first dimension is purely objective. What information
2. Industry/sector risk. A search for rankings, analyses is available about the third party’s background,
or other sources discussing industry/sector risks related reputation and qualifications? Does it come from
to corruption quickly reveals that, while there is a credible sources? How much of the information about
consensus that certain industries pose significant risks background and reputation, for example, is based on
(defence, extractives, construction and engineering, unconfirmed rumor and innuendo in the press or from
and sometimes transport being the most commonly due diligence sources? Who are the sources? Is the
cited), there is no authoritative source for this general information consistent and relevant?
industry/sector risk, as there is for country risk, and
If the third party is a former government official, or
opinions vary.52
a company in which a former government official,
The first question therefore is what is the asserted close family member or business associate has an
source? Is it credible? Does it apply in this case? interest, that is not the end of the investigation, just the
Particularly if it is one that is not frequently identified beginning: What was the position? How long ago? What
as presenting a high risk, understanding the basis of is its relevance to the business being pursued? Is the
the designation is important. Some sectors frequently family member essentially a proxy for the government
identified as high risk, such as the extractive industries official or an independent actor? Is the close family
(oil and gas, mining, associated suppliers) are viewed as member or close business associate really a close
risky not just because of their industry characteristics, relative or associate? What is the relevance of the
but also because of the geographies where they are politically exposed person (‘PEP’) status?53 How was the
forced to operate (those locales where the resources to third party identified?
be extracted are located). Thus, there can be overlap
Regarding the third-party qualifications: How specific
between the country risk factor and the industry or
are the qualification requirements for the task at hand?
sector risk factor which should be recognised when
Are they highly technical or specific in other ways, so
assessing the totality of the red flags presented, in
that one would expect any legitimate candidate to have
order to avoid what would otherwise be effectively
them? Or is there a range? How well does the proposed
double counting. Apart from geography, industries
third party match these qualifications? What is the
tend to be identified as risky by virtue of their structural
pool of available personnel in the country in question (if
characteristics in terms of how they interact with
the issue concerns local personnel)? How clear are the
government (reliance on government procurement or
qualification requirements for legitimate services? In the
key licenses/permits to operate, use of agents or other
Alcatel corruption case a few years back, enforcement
third parties, time pressures, size of contracts and the
authorities flagged the fact that Alcatel’s agents in
like). These structural issues are presented to a much
Costa Rica had no telecommunications experience but
greater extent in the public than in the private sector
were perfume salesmen. And when a third party is being
context, but there may be spillover into the private
hired primarily for influence, there is no question that the
sector context, especially in relation to the supply chain
risk profile is elevated. But this is not per se an issue, and
downstream. In any event, like the general country factor
third parties may be engaged in legitimate transactions
discussed above, this risk factor is typically of limited
if their profile does not match what might be considered
relevance in an individual case.
inappropriate.

53 The concept of PEPs arises out of anti-money laundering norms.

Although intended to encompass senior-level government officials,
in practice the term is used much more loosely and sometimes
52 See Annex – ‘References’: ‘4. Country rankings and selected industry inconsistently. See Financial Action Task Force ‘FATF Guidance:
initiatives’. Politically Exposed Persons’ (Recommendations 12, 22).
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The second dimension is temporal. What information information, questions about beneficial ownership
was publicly or generally available at the time of may have to be answered in a more subjective and less
the conduct at issue? Information of concern (e.g. definitive way (e.g. through due diligence inquiries).
investigations, charges, convictions, etc.) may only
Temporal considerations are also relevant to this red
surface at a later date. It would not be appropriate
flag: Was the structure in question in place at the
to attribute that information back to the time of the
relevant time or times? Has it changed? In the public
engagement, although if the relationship is ongoing, it
corruption context, the concern is for ownership by
would serve to operate as a red flag at the time it did
government officials, their family members, or close
become available.
business associates. In the private corruption context,
The third dimension is subjective. What was known to the concern is whether a beneficiary is one who has
the party engaging the third party at the time of the provided legitimate value in the form of goods, services,
engagement? And, as a corollary, what could have been financing or technology.
known? Did the party engaging the third party have a
Other indicia of non-transparent conduct can also be a
compliance programme in place at the time to manage
red flag and the arbitral tribunal will need to consider in
third party risks, including due diligence requirements?
the validation process whether the evidence suggests
If so, was it followed? If not, was it required to do so by
that there is a legitimate explanation for the conduct
applicable law? Is there an indication that the party
(e.g. a requirement to maintain the confidentiality of
buried its head in the sand regarding the conduct
transaction documents may be motivated by legitimate
of the third party, or conversely, did the party look
interests and considerations; hiding the role of a third
into the issue in a way that was appropriate? Again
party where it would not normally be hidden, on the
here, arbitral tribunals must be careful not to apply
other hand, could be a red flag).
hindsight, by applying standards of care that may not
have been available to the principal at the time, or 3. Transaction features. The red flags that can be raised
by imputing knowledge that may have only become in this category range from very specific elements
available subsequently. (e.g. payment in cash, or to an offshore account, or
to counterparty other than the one specified in the
2. Corporate structure and the use of anonymous
contractual documentation) that can be red flags for an
shell companies and offshore entities. Because
intended pass-through by an intermediary), or specific
corruption is associated with secrecy and a lack of
provisions (e.g. contractual provisions calling for the use
transparency, non-transparent corporate structures
of influence, vagueness in the services being provided,
can be a significant red flag. These issues may present
secrecy provisions discussed above, etc.) that raise
themselves in the context of a third-party engagement,
questions about their purpose, to more generalised
or in relation to the recipient of a direct payment.
assertions that the transaction is atypical of the genre,
The questions at the validation stage are: How the region, the time frame, etc.54 The more general the
transparent is the corporate structure? Can the ultimate assertion, and the more individualised the transaction,
beneficial owner(s) of the entity(ies) involved be the more difficult it will typically be to validate the
identified? Is the corporate structure multi-layered or asserted red flag. The key question is always whether
does it have other features that suggest it was designed there is a legitimate purpose for these provisions.
to prevent the detection of the interests involved and
Many red flag lists identify as a red flag the refusal of
to conceal the flow of funds (‘layering’)? Does the
a third party to agree to anti-corruption provisions in
structure feature anonymous shell companies or entities
a transaction document. However, this scenario has
organised in recognised offshore havens? Of course,
become less frequent as international anti-corruption
not every entity located in a haven jurisdiction has an
standards have grown. Third parties have become more
improper purpose, and the issue of purpose will need to
aware in recent years of the importance that many
be examined further to determine whether it really is a
companies given to anti-corruption compliance, and
red flag in the particular context.
understand that a refusal to provide appropriate written
Arbitral tribunals should be aware that there is a trend assurances in this area will be problematic for, and
in a number of countries to require the disclosure of potentially even fatal to, their engagement. However,
beneficial ownership at the time a business entity is where such issues do arise, it is sometimes because the
formed and to maintain that information in a register proposed assurances are overly broad or poorly drafted
that is available at least to law enforcement authorities
and sometimes to the public. Absent such definitive 54 The frequently raised issue of ‘excessive compensation to a third
party’, is discussed separately in the paragraph ‘Special issues
with so-called ‘excessive’ compensation; benchmarking and
comparables’ below due to its frequency and importance.
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(e.g. parties that are not subject to a domestic law, such in certain sectors, or prohibits lobbying activities), or to
as the FCPA, may be reluctant to provide an assurance regulated aspects of the relationship (e.g. the need to
that binds them to comply with the FCPA, as opposed register an agent or lobbyist). Or they may relate to the
to a more general worded standard not to engage in underlying business that is being pursued, or specific
improper conduct). While this category of red flag, as aspects of that business (e.g. a company may seek to
the above discussion shows, is often presented in the establish a project in an area that is protected from
context of an intermediary transaction, it can also be development, or for which only certain types of investors
presented in a direct payment scenario. are eligible, or specific permitting, licensing or regulatory
requirements apply).
4. (Lack of) compliance measures. As noted above,
when a lack of compliance measures is asserted Non-compliance with local law can be a peripheral or
as a red flag, several threshold questions should be a central issue in terms of its relevance as a red flag,
considered. First and foremost, were such measures depending on the nature of the non-compliance and the
required of the party in question at the time the conduct type of corruption involved. Timing can also be an issue:
occurred? non-compliance with a key requirement at the time an
investment is made may have a different impact (in
As noted at the outset, the transnational bribery
particular in investment disputes where compliance with
legislation of many countries is recent, and only some
local law is a condition for investment protection) than
contain requirements for compliance measures, or
non-compliance during the course of operations. The
recognise compliance as a defence. The FCPA does
nature of the non-compliance is also potentially relevant:
not as a matter of law (but treats effective compliance
a corrupt practice in the securing of a foundational
as a mitigator under its enforcement policies), while
licence or permit (i.e. one on which the business is
the UK Bribery Act (2010) has a defence to the strict
premised) may be very different from a minor regulatory
corporate liability otherwise applicable under Section 7
breach in the course of operations.
for so-called ‘adequate procedures’. This is therefore
a matter of national law; international law makes it a At the validation stage, the main questions are whether
good practice but does not require it. Companies may a breach of local law at the time of the conduct has
be subject to more than one national law in this area by been established by sufficiently clear and credible
virtue of their nationality and where they do business. evidence, and whether the breach was intended by
They may also take steps to go beyond the requirements parties as such at the time (as this may go to the
of national law as a matter of corporate policy. question whether the relationship had a corrupt
purpose). Conversely, advice from counsel at the
Compliance measures may be programmatic in nature,
time as to legality, particularly if contemporaneously
but even in the absence of an overall programme, risk
documented, may not only negate a corrupt state
mitigation measures may be taken on a case-by-case
of mind, but may also reflect compliance efforts (a
basis. While the existence of an overall programme
‘green flag’).
(or certifications of that programme, e.g. through
ISO 37001 or other standards) may be seen as reflecting 6. Special issues with so-called ‘excessive’
a commitment to corporate responsibility, the ultimate compensation, benchmarking and comparables.
assessment should focus on the measures taken in the Excessive compensation is considered to be one of the
individual case. If a company has internal programmatic strongest indicators of potential corruption, especially
requirements, and they were not followed or even in third-party contracts. But ‘excessive’ is, as its name
circumvented, that can be an indicator of improper implies, a relative term. Compensation may be high in
purpose, or it can be a function of oversight or a lack of absolute terms but not excessive in the context of the
resources. Conversely, if a company follows its internal industry, the business at issue, the work to be performed,
programme requirements and took appropriate steps to the risks involved, or other legitimate factors. The more
identify and manage risks, even though such preventive complex and customised the transaction and the
measures may not preclude an ultimate determination more significant the business, the more difficult it will
that it engaged in a corrupt practice, such efforts may be for an arbitral tribunal to determine whether the
represent a ‘green flag’, at least to some extent.55 compensation is truly excessive. Benchmarking analysis
and comparable transactions, if available, have a role to
5. Local law issues. Alleged red flags involving local law
play in this area. Some of the questions to be considered
can take various forms. Where third-party relationships
when assessing whether compensation is excessive are:
are concerned, they may relate to the legality of the
relationship (e.g. if local law restricts the hiring of agents (i) Is this a standardised transaction where ’typical’ or
‘normal’ compensation can be determined?
55 See Section 5.1 below ‘Role of corporate compliance measures’.
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(ii) If so, can suitable benchmarks, or comparable • Are there specific deliverables?
transactions, be identified?
• Is there proof that legitimate services were
(iii) Are they comparable in time? provided if that is the nature of the contract?

(iv) Are they comparable in terms of other features? • And what of the contract that involves lobbying
or the leveraging of connections and influence,
(v) Even if the transaction in question is not a where it is question not of whether, but of how
standardised transaction in an industry, does the those activities are carried out?
actor in question have a standardised approach to
which this transaction can be compared? Although it may be difficult to assign a specific value
to particular services, it may be possible to evaluate
(vi) Was the compensation benchmarked at the time
whether compensation is substantially disproportionate
of the transaction? What was the result?
to the legitimate services that can be identified.
(vii) What legitimate factors could influence the size of However, care must be taken to avoid biases towards
the compensation in this case? specific models (e.g. while a time-cost model may be
easiest to evaluate, it does not mean that all services
(viii) Timing;
are or need to be provided on that model, or that any
(ix) Size of overall transaction; services not provided on that model are to be viewed as
being at increased risk).
(x) Risk;
The foregoing is by no means an exhaustive treatment
(xi) Performance requirements;
of the types of specific red flags that may arise. It does,
(xii) Leverage; however, illustrate the types of specific questions that
may be helpful to validate and assess the relevance of
(xiii) Other (e.g. special qualities, ’first mover’ status,56 some of the most common red flags, taking into account
etc.). potentially mitigating circumstances. Some further
The complexity of these issues may lead to experts cross-cutting observations on the weighing of individual
being asked to opine on comparability, or to answer red flags are set out below.
the question of excessiveness. Whether or not
compensation is considered ‘excessive’ is ultimately a iii) Cross-cutting considerations in assessing
question of judgment and not a simple fact, and will be individual red flags
highly contextual. As noted earlier, general red flags – even if validated –
Success fees present a particular challenge. They are by their nature tend to shed little light on the ultimate
common in some industries, and generally not unlawful. question to be determined by the arbitral tribunal
However, where success is dependent on discretionary (i.e. whether the alleged corrupt practice(s) occurred
government action, such fees are recognised to in the individual case). They carry therefore inherently
present elevated risk of pass-throughs. Depending less weight than party- or transaction-specific red flags
on the context, such fees may represent a red flag in that have been validated. In considering the weight,
and of themselves. In particular if they are linked to or seriousness, to be accorded specific red flags,
discretionary government decisions involving key assets judgments will need to be made by the arbitral tribunal
– such as a concession or key license or operating about the credibility of the source of the red flags, the
permit – the existence of a success fee may incentivise clarity with which they are established, any mitigating
a third party to engage in improper conduct. The larger measures that have been taken and the extent to
the fee, the greater the incentive. which those affect the assessment of the red flag,
and other relevant circumstances. Some companies
7. Legitimacy of services. Closely related to the issue or commentators reflect this variability by referring to
of excessive compensation in third-party services flags as ‘pink’ or possessing varying degrees of redness.
contracts is the scope and legitimacy of the services to ‘Green’ flags may also be presented alongside the red
be provided, i.e.: flags, or perhaps more frequently, as part of the overall
picture (as discussed in Step 3 below).
• Does the contract provide for specific services to
be provided or is it vague? 1. Relevance of investigation or prosecution by national
authorities. One issue that arbitral tribunals have
had to deal with more frequently in recent years is the
56 This could, for example, be someone who first recognises a market
opportunity and acts to capitalise on it, someone who is a pioneer
relevance of investigation or prosecution, or more often
and therefore takes greater risk. the lack thereof, by the countries whose interests are
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involved in the matter, which may involve the home other red flag, giving them collateral effect. Arbitral
countries of the claimant and respondent, as well as tribunals will also need to consider whether and to
third countries. This issue is particularly relevant in cases what extent such facts correlate with the elements of
of alleged corruption of government officials, where the the corrupt practice at issue, as ‘corruption’ cases can
respondent State or State-owned enterprise has raised proceed on many legal bases.
a corruption defence. Such investigation is desirable for
There are currently no international tribunals specifically
several reasons:
established to adjudicate corruption claims, although
1. Many international anti-corruption instruments some have called for the creation of an international
oblige states to take steps to investigate and anti-corruption court. Decisions are rendered by
prosecute such conduct. national authorities applying domestic laws, including
2. Such investigations may assist the fact-finding of extraterritorial transnational bribery laws.58 In the
the arbitral tribunal. absence of the ne bis in idem rule at the international
level, today’s anti-corruption prosecutions are often
3. Such investigations provide comfort that the multi-jurisdictional, involving multiple authorities,
corruption defence is serious and not simply a different national norms and sometimes different parties
tactical measure taken to benefit the arbitration. to the conduct than the ones involved in the civil dispute.
Of course, there may be reasons why investigation 2. Stay of arbitral proceedings. The issue of stay of
and/or prosecution could not take place – one being proceedings by arbitral tribunals in favor of domestic
temporal, i.e. the facts giving rise to suspicions of investigations or prosecutions is discussed below in
corruption were not known at the relevant time(s). Section 4.3 ‘Course of actions available to arbitrators’,
However, where the allegations have existed and been ‘4.3.2 ' Potential external tools’.
known since the conduct took place and the host state
has taken no steps to investigate, these circumstances 3. Data protection and state secrets. As arbitral
may be considered by an arbitral tribunal as bearing on tribunals will be well aware, data protection regimes are
the credibility of the allegations.57 proliferating in many jurisdictions. State secrets laws
are also becoming more common. Blocking statutes,
Where prosecutions have occurred, the arbitral some long standing, others more recent, may also
tribunal must be cautious in assessing the findings arise in corruption cases. Such laws can impede or
and conclusions. In a number of jurisdictions where prevent the movement of data, including personal data
enforcement is the most active (including the U.S.), and commercially sensitive economic data, from one
companies tend to reach negotiated resolutions jurisdiction to another. They can, for example, affect
with prosecuting authorities rather than litigate the the ability of a company to conduct due diligence on
matter. These resolutions may be accompanied by a counterparty. They may provide an explanation as
stipulated facts, in which case, absent evidence of to why certain information is not available, thereby
coercion or a lack of due process, there should be no negating a red flag, but as with anything, their
issue with their acceptance by the arbitral tribunal invocation as a shield and a reason for non-disclosure
as established facts at least where they involve a needs to be carefully considered.
party to the dispute (although given their negotiated
nature, such agreements, even if approved by a court, 4. Economic sanctions and trade controls – imposed at
may not reflect a criminal standard of proof). These the national level, at the regional (e.g. by the EU) or at
facts may constitute red flags or direct evidence of a the international level (e.g. by the UN Security Council) –
corrupt practice. restrict dealings with certain persons, both natural and
legal persons. Except for the so-called Global Magnitsky
Where the stipulated or determined facts involve persons (‘Glo-Mag’) sanctions imposed by the U.S., and any
who are not parties to the investigation but a party similar sanctions of other countries, they are typically
to the dispute that has been submitted to arbitration imposed for national security or foreign policy reasons
(i.e. they were not agreed to by the party against whom rather than because the sanctioned person engaged
they are now being asserted) giving them direct effect
would seem to raise issues of due process. Accordingly,
the better approach may be to consider such stipulated 58 The World Bank and certain other international financial institutions
have adopted rules prohibiting fraud, corruption and other forms
facts as ‘red flags’ and to seek to validate them as any of misconduct in the projects and transactions they finance in
whole or in part, and contravention of those rules can lead to
sanctions including a permanent loss of eligibility to participate
57 In its award in the case of Union Fenosa Gas v. Egypt, supra note 2, in such projects and transactions. These institutions apply their
the arbitral tribunal found the lack of prosecution of either the own definitions of corruption, not national law. See International
government or the private parties against whom Egypt had raised a Financial Institutions Anti-Corruption Task Force, Uniform Framework
corruption defence relevant (para. 7.111). For Preventing And Combating Fraud And Corruption (2006).
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in corrupt practices. However, sanctions are being neutral indicators. Mitigation may also have been
increasingly used by authorities as a tool to combat achieved, either partially or completely, by specific
corrupt conduct. There may also be sanctions imposed measures taken by a party, such as contractual or other
on persons for conduct (e.g. drug trafficking or terrorist safeguards, or by other circumstances.
activity) which, because of its underlying illegality, may
While the probative value of each red flags and the
be more likely to be associated with corrupt practices.
totality of the circumstances must thus be considered,
Thus, while most sanctions would not necessarily serve
it is important to emphasise that this should not be
as a red flag for corruption, some sanctions might. It
a process of simply aggregating red flags to support
is therefore important to consider the reason for the
a conclusion that a corrupt practice has occurred.
sanction designation. However, a sanction designation
Transactions can feature multiple red flags and still not
alone will typically not function as a corruption red flag.
be improper. Conversely, a corrupt practice can have
iv) Concluding observations on general principles taken place without the appearance of multiple red
relating to red flag validation flags (or perhaps even any red flags). Nonetheless, the
red flags that have been validated and their probative
As the discussion of specific types of red flags above
value assessed should be considered in relation to each
indicates, the assessment that must ultimately be made
other, along with any green flags or contrary indicators,
of the asserted red flags will be very specific to the facts
as well as risk mitigation measures, for their likely
and circumstances involved, as well as to their sources.
significance on an overall basis.
Three general principles are:
Some arbitral tribunals have used a ‘connect the dots’
1. Red flags, even if validated, only represent risk
methodology,59 or endorsed the doctrine of ‘faisceau
indicators, and are not tantamount to proof of a
d’élements graves, précis et concordants’. As discussed
corrupt practice.
below (Section 2.5 ‘Consideration in evidentiary terms’),
2. Red flags should not be taken at face value, but these exercises tend to look at the consistency of the
must be confirmed as relevant to the corrupt picture presented by the red flags, the strength of the
practice at issue and carefully validated, red flags, and the existence and credibility of alternative
especially when they are being used not as an ex scenarios. It is not always as clear as it could be from
ante risk management tool, but as an ex post tool the decisions of arbitral tribunals to date how this
to support an allegation of corruption. exercise translates into evidentiary findings, given that
the identification of red flags is often conflated with
3. Red flags are not all of equal significance, even
evidentiary considerations. Most red flags will lead to
if validated.
circumstantial evidence, others may represent or lead
2.3.3 Step 3 – The overall assessment to direct evidence. As discussed below,60 it is widely
accepted that corrupt practices can be proven by
Having validated the alleged or suspected red flags and circumstantial evidence. However, there is still a leap
considered their relevance on an individual basis, the to be made from the identification, validation and
third step in the factual methodology is to assess the red assessment of mere risk indicators to evidence – even
flags as a whole, and consider their implications and if only circumstantial – which is sufficient to support a
other relevant facts and circumstances. legal conclusion that the elements of a corrupt practice
have been met.
At the outset, this may involve consideration of the
relative seriousness, or probative value, of the individual In the vast majority of cases an arbitral tribunal will
red flags – i.e. their strength in terms of the allegation be considering a business transaction or relationship
of corrupt practices as determined in the second step, (or multiple relationships or transactions) that is
and their assessment in full context, including in relation legitimate on its face, and trying to weigh whether
to each other. As noted, general indicators, such as the such relationship or transaction has a proper or an
country or sector will often have only limited probative improper purpose. It is particularly important at this
value. On the other hand, the probative value of party- stage, therefore, that arbitral tribunals take into account
or transaction-specific indicators will be highly fact-
specific and context-dependent. There may be contrary 59 Methanex v. United States, UNCITRAL, Final Award on Jurisdiction
and Merits (3 Aug. 2005), at pt. III, ch. B; Union Fenosa Gas v.
indicators on the same overall issue (e.g. ‘green flags’ Egypt, supra note 2, Award, para. 7.114: ‘with a case dependent
discussed in Section 1.7 above) or on other relevant upon circumstantial evidence (as in the present case), it is often
a question of joining up the dots; but there have first to be dots
aspects that may be stronger or inconsistent, or even
in the evidence adduced before the tribunal. In this case, so the
Tribunal decides, there are insufficient dots; and the red flags are
outnumbered by neutral black flags’.
60 See Section 2.5 ‘Consideration in evidentiary terms’.
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green flags, mitigation measures, neutral factors, and 2.4 Tools for assessing red flags, individually
alternative scenarios, when assessing the collective and/or collectively, and for making factual
import of the red flags in evidentiary terms. findings
The use of chronologies and temporal correlation
The tools available to arbitral tribunals in considering
warrant particular comment at this point. Chronologies
where red flags lead in terms of evidence are generally
can be an important tool in anti-corruption analysis for
not limited to the corruption arena. Fact-finding
highlighting potential connections between events and
tools include:
pinpointing key time periods for further assessment.
Events that are close in time may be more likely to be (i) Adverse inferences. Adverse inferences may be
to be causally related than are very distant in time. But and are judiciously taken where a party properly
temporal correlation is not causation, and chronologies charged with knowledge of a matter, and
are therefore just another tool in the assessment presumably in control of relevant records, fails to
process. Of course, temporal correlation can also be produce information the arbitral tribunal deems
red flags. relevant (e.g. documentation of services rendered
by a third party; payment information showing
For example, an intermediary is brought in to help place of payment). Of course, the lapse of time,
pursue an opportunity shortly before a key decision changes in corporate ownership, and intervening
is made. If there is also evidence that a key official events, among others, may provide reasons why
recommended that intermediary, these two red flags such inferences should not be taken.
together can be significant risk indicators, unless the
engagement can be explained on legitimate grounds (ii) Expert opinions. Expert opinions may be put
(e.g. the intermediary possesses unique and necessary forward in relation to the methodology to be used,
the import of particular red flags, the compliance
technical expertise). But care must be taken not to
expectations that would have been reasonable or
overread the implications of the temporal correlation.
appropriate for the time and parties in question,
Some have argued that presumptions should be applied and other relevant issues. As with any other area,
to a bundle of red flags. Given the apparent validity of it will fall to the arbitral tribunal to assess the value
the transactions and relationships in which they arise, it of such opinions.
is difficult to see how presumptions can reasonably be (iii) Tribunal inquiries. Some arbitral tribunals have
applied to red flags, which are at most risk indicators. used their inherent authority over the proceedings
This does not mean there needs to be a ‘smoking gun’, to pursue lines of inquiry based on red flags
or evidence of an actual corrupt payment, for an that appeared to them, even in the absence
arbitral tribunal to find bribery. That information is rarely of corruption issues having been raised by the
available. But conversely, given the likely draconian parties. The arbitral tribunal’s authority in this
consequences of finding that a corrupt practice has regard may depend on the specific rules governing
occurred, neither should the fact that corruption the proceedings, but the facts resulting from such
typically occurs under the table serve to justify the inquiries can be highly relevant to the ultimate
dilution or abandonment of evidentiary standards. Of findings in the case.62 It may even be argued that
course, if the legal standard applies a presumption to it is part of the duty of the tribunal to make such
certain findings of fact, that will control; but the point inquiries when presented with red flags.63
is that the red flags, as mere risk indicators, should not
(iv) External findings. Findings of other tribunals,
themselves be the basis of such presumptions.
or enforcement authorities conducting
Others have argued for similar results by burden shifting investigations may, where relevant contribute to
once a prima facie case is made. But if a prima facie the overall picture. The evidence adduced in such
case is based primarily on red flags, this should not proceedings, if available, may be particularly
relevant, although for the reasons expressed
be sufficient to shift the burden, even if shifting were
earlier,64 it may be most relevant where the same
warranted, as red flags are simply risk indicators.61
party is involved.
While presumptions and burden shifting on the basis of
red flags alone do not appear to be a tool that arbitral
tribunals should use, arbitral tribunals have numerous
tools that can be brought to bear in the process of fact-
finding in relation to these issues. 62 See Metal-Tech Ltd. v. Republic of Uzbekistan, supra note 23.
63 For further discussion, see Section 4 ‘Role and responsibilities of the
arbitral tribunal in relation to red flags’.
64 See Section 2.3.2 ‘Step 2’, at ‘iii) Cross-cutting considerations in
61 See Section 3.3 ‘Red flags and burden of proof’. assessing individual red flags’
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(v) Estoppel and waiver. General principles of estoppel Some arbitral tribunals have regarded red flags as
and waiver may also be invoked in appropriate ‘indices’ concurring towards a finding of corruption.
circumstances to influence a factual finding. French case law looks for a ‘faisceau d’indices
Under these principles, a party’s prior conduct suffisamment graves, précis et concordants’70
may preclude it from denying certain facts, or the (i.e. a collection of indices sufficiently serious, precise
party may be deemed by prior positions to have and concordant) when assessing the totality of the
waived the right to deny certain facts.65 evidence. Although the ‘faisceau d’indices’ analysis is
(vi) Admissions. Admissions of corrupt practices used in a general fashion by French courts, it can be
are relatively rare, but are occasionally made.66 useful to guide circumstantial reasoning that relies on
Admissions of more peripheral facts that (validated) red flags.
contribute to an understanding of the overall
(i) ‘Indices graves’ could reflect a number of
picture are a more frequent phenomenon.
validated red flags, which directly speak to one
(vii) Artificial intelligence processes. Artificial or more material legal elements of corruption.
intelligence represents a new frontier in this For example, the conclusion of a contract or
context. In the future, arbitral tribunals may be settlement agreement whose terms are manifestly
confronted with the outcome of AI operations damaging to a State, or the involvement of a son
as reflective of certain facts, probabilities, or daughter of a head of state in a transaction
or possibilities.67 that is manifestly to the detriment of that State,
speak to the likelihood that an undue advantage
2.5 Consideration in evidentiary terms passing to public officials has permitted such
settlement or transaction to occur. While such
‘indices’ cannot themselves lead to an inference of
This final step in the methodology described in Section
corruption, absent proof of intentions, they appear
2.3 above also requires that the facts and circumstances
so closely connected with the material legal
to be considered in terms of evidence, as it is only
element of corruption that they can be regarded
on the basis of factual findings, and not mere risk as ‘graves’.
indicators (and in particular the ultimate facts relevant
to an alleged corrupt practice), that a determination (ii) ‘Indices précis’ reflect the probative value of red
can be made as to whether improper conduct has in flags which have not only been validated but
fact occurred. have been shown to be specifically relevant to the
ultimate issues, thereby acquiring strength (e.g.
As discussed earlier, some arbitral tribunals have been the remuneration of a consultant in a percentage
able to see in the convergence of a collection of red of the value of an investment or government
flags, a basis for an inference of corruption.68 They procurement contract is increasingly unusual).
have done so using the technique of circumstantial While it may not be enough to assert that such
evidence. Circumstantial reasoning purports to prove remuneration is unusual in general terms, if it
circumstances surrounding a particular fact (that is is shown to be unusual in the context of the
necessary to prove a legal element of the relevant act of particular transaction/industry and no legitimate
corruption) but is unable to establish that fact without explanation is provided for it, then it may be said
a certain inference.69 In the case of circumstantial to have become ‘précis’.
reasoning, the totality of the facts and circumstances (iii) While the ‘graves’ and ‘précis’ elements refer
presented in relation to the issue raised by the red flags to the individual quality of each red flag, the
makes the finding of a corrupt practice inevitable. ‘concordant’ element refers to the inter-play of a
collection of validated red flags and, in particular,
their ability to be convergent, so as to allow a
65 These principles may or may not be a bar to a set-aside court’s
consideration of the issues. See Etat de Libye vs. SA Société finding of corruption. It is clear that a collection
Orléanaise d’éléctricité et de chauffage électrique – SORELEC, Paris of validated general red flags cannot be regarded
Court of Appeal, No. 18/02568, Judgment, 17 Nov. 2020, pp. 7-9
(even if a party knowingly failed to raise the defence of corruption
as ‘indices’ that allow an inference of corruption.
in the arbitration, the reviewing court will not be precluded from While ‘indices’ drawn from validated general red
reviewing the award’s conformity with international public order). flags, however 'concordants', cannot alone lead
66 E.g. in World Duty Free Company Limited v. the Republic of Kenya, to an inference of corruption, ‘indices’ drawn
Award, ICSID Case No. Arb/00/7.
from validated specific red flags can qualify
67 See Section 5.2 ‘Role of artificial intelligence in red flags generation
and analysis’. as ‘concordants’. Validated general red flags
68 The first precedent is ICC Case 8891, in Journal de Droit
International, 2000, No. 4, p. 1076, at p. 1082. 70 See e.g the latest line of case law: SA Alstom Transport SA
69 A. Sayed, Corruption in International Trade Commercial Arbitration vs. Société Alstom Network UK Ltd, Cour d’appel de Paris,
(Kluwer Law International, 2004), at p. 94. 28 May 2019; Etat de Libye vs. Sorelec, supra note 65.
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may have a supporting role, but there could be 3. The procedural effects of red flags
no substitute to ‘indices’ drawn from validated
specific red flags. Such ‘indices’ must, however, not
be contradictory. A decision maker would need to The practice of international commercial and
satisfy herself that all, or at least substantial parts investment arbitration shows that the need to examine
of the relevant ‘indices’, are converging towards and assess red flags, when they are raised, produces
an inference of corruption. If ‘green’ flags are part procedural effects in the arbitration and in set-aside or
of the evidence, or the ‘indices’ are ambiguous or enforcement proceedings, and may trigger admissibility
debated, there is room to question what ‘indices’ issues in relation to the corruption allegations. (3.1); the
are of sufficiently serious and precise that they admissibility of new evidence (3.2); the shifting of the
potentially tip the scales in favour of a finding of burden of proof (3.3); and the application of the proper
a corrupt practice. standard of proof (3.4).

In the previous example in Section 2.3 above, an

intermediary was found to have received an unusually 3.1 Effects of red flags on the admissibility of a
high fee expressed as a percentage, and it was posited corruption allegation
that this could constitute a finding of an ‘indice grave’
and ‘précis’. Such a finding on this aspect alone cannot 3.1.1 Red flags as a tacit case of corruption
lead to establishing a corrupt practice, but may be
There may be instances where a corrupt practice may
sufficient in the light of other findings emanating from
not be explicitly alleged; however red flags could be
the red flag analysis. This may include general red flags
identified by a party as part of a tacit case of alleged
such as the country risk, but more important are findings
corruption. Because of insufficiency of evidence, or
from other specific red flags, for example, attaching
because of other considerations (political repercussions
to the consultant’s low or inexistent qualifications,
or otherwise), a party may raise a defence against
absence of proof of legitimate services, or other features
a claim of non-performance of a contract, citing red
surrounding the engagement, and the absence of
flags relevant to corruption, but without making an
credible explanations for the absence of such.
explicit case.
In some jurisdictions, the engagement of an
When a party raises a tacit case of alleged corruption
intermediary due to his influence will not be improper
through red flags, it generally hopes that it will be picked
unless it can be shown to be linked to the receipt of an
up by an arbitral tribunal, or a set-aside or enforcement
undue advantage. In others, the breadth of trading-
judge, thereby leading to a finding of a corrupt practice.
in-influence legislation may make such arrangements
Such a finding would obviously defeat the other party’s
illegal. Even if the latter circumstances are present,
breach of contract case and would somehow shield the
however, that may not mean that a contract procured
alleging party from performance. Arbitral tribunals and
with the involvement of that intermediary was a contract
set-aside or enforcement courts have dealt with this
resulting from corruption. Further evidence would be
situation in different ways.71 In the absence of an overt
needed to show the causation, or linkage, between
and manifest case of bribery in arbitration, general red
the intermediary relationship and the securing of the
flags are unlikely to trigger, alone, further examination
contract. This illustrates the importance of ensuring
by a tribunal.72 However, in conjunction with specific
that the evidentiary findings are correlated to the
red flags, they are more likely to trigger a further
specific elements of the misconduct that is sought to
examination by the arbitral tribunal. Section 4 examines
be established.
the duties of arbitral tribunals in this regard.
In summary, the three-step process may be useful
in analysing asserted red flags in a structured and
objective fashion in relation to the corrupt practice 71 Cases in which corruption was explicitly argued include ICC Case
at issue. No. 13914, Final Award (2008), excerpted in ICC Int’l Ct. of Arb.
Bull 77 (Special Supp. 2013) (after pointing to several red flags,
highlighting a lack of transparency in the Claimant’s expenses
and accounting records, payments by the Claimant to officials
of a key state-owned enterprise without any credible explanation
therefor, among others, establishing clear and convincing evidence
of bribery); ICC Case No. 12290 (2005), excerpted in Collection of
ICC Arbitral Awards, 2008-2011, (J. Arnaldez, Y. Derains, D. Hascher
(eds.) (Wolters Kluwer, 2013), p. 831 (use of presumptions based
on indicators); Methanex v. United States, supra note 59 (‘connect
the dots’).
72 In the Sorelec case, supra note 65, Libya did not make a case of
corruption during the arbitral proceedings. However, before the
Paris Court of Appeal, Libya relied on the fact that the events
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3.1.2 Red flags in support of an overt corruption case 3.2 Effects of red flags on the admissibility
of evidence
If a party makes an overt case of corruption in the
course of arbitral proceedings, there generally is no
If, in the course of the arbitration proceedings a party
issue of admissibility for an allegation of corruption. A
raises red flags that resonate with some of the legal
party has the burden to prove its case, and the arbitral
elements of an alleged corrupt practice, no admissibility
tribunal must allow the parties to fully plead their
issue is susceptible to arise. However, an issue of
respective positions.
admissibility of evidence may arise when a party makes
However, the timing of such allegations can raise extensive document production requests (3.2.1) or seeks
questions as to their validity, especially when they are admission of new evidence as part of a late allegation of
raised very late in the proceedings. If the allegation are corruption based on red flags (3.2.2).
based on newly discovered evidence, then the question
of the timing of their assertion is answered. If not, 3.2.1 Red flags as cause for extensive document
greater caution on the part of the arbitral tribunal may production requests
be warranted.73
In the presence of qualitatively strong red flags, arbitral
While a tacit case of bribery is unlikely to succeed in tribunals tend to subject the matter to heightened
obtaining a reopening of the case,74 courts have differed scrutiny. This leads them to grant more extensive
when red flags are raised for the first time before an document requests. Arbitral tribunals also tend to be
enforcement or set-aside judge as part of an overt case more relaxed on issues of relevance and/or materiality
of corruption (and implicate public policy). In the Alstom of evidence.77
case, in which Alstom was resisting the payment of a
While a tribunal keeps its total discretionary power to
consultant’s fees and for the first time made an overt
regulate the process of document production, arbitral
corruption defence before the enforcement judges,
tribunals tend to allow limited-scale ‘fishing’ expeditions
the London Commercial Court refused to reopen
and to allow at the same time the production of
the case, even where general and specific red flags
exculpatory documentary evidence from the other
had been cited as being indicators of corruption.75 In
side, if available; all being useful for a full and proper
contrast, the Paris Court of Appeal agreed to reopen
assessment of the available red flags.
the case, ordered that additional evidence be adduced,
and further ordered that the parties should provide
3.2.2 Red flags as cause for late admission of new
submissions in respect of the red flags identified.76 The
evidence in arbitration proceedings
Paris Court did so as the respondent made explicit
for the first time its corruption case before the court, Because, in an arbitration, a party may hesitate to put
supported by red flags. forward startling allegations of corruption (which may
implicate not only the other party but its own employees
happened in Libya that was known for its poor record on corruption,
which should have amounted to an ‘indice’ and triggered the or agents), and because corruption is rarely manifested
attention of the court. in direct evidence, parties take time to make a case for
73 See e.g. Union Fenosa Gas v. Egypt, supra note 2, at paras. 7.53, corruption. It may happen that, at the start of a dispute,
7.112.
a party begins entertaining suspicions that bribery or
74 Swiss Federal Tribunal, Case No. 4A_136/2016, 3 Nov. 2016. The
tribunal speaks of ‘implicit case’ of corruption, through red flags, another corrupt practice may have tainted a particular
raised before the arbitral tribunal. contract or investment; however, it refrains from making
75 See e.g. Alexander Brothers v. Alstom [2020] EWHC 1584 (Comm), a case, absent sufficient evidence.
paras. 150, 165. The Court did not find that there had been ‘special
circumstances’ which would cause injustice, allowing the Court
to reopen the case, even when allegations of corruption were
made citing red flags. Such red flags included insufficient proof of
services, accounting errors, international control weaknesses, and
most importantly access to confidential documents as part of the On remand, the Versailles Court of Appeal found insufficient proof
government bidding process, to which the consultant could not to support Alstom’s corruption defence and rejected its challenge to
legitimately have had access. the enforcement order, ending the case. See ‘Arbitration between
76 This was not the end of the saga in the French courts: The Supreme Alstom & ABL: the Versailles Court of Appeal confirms the exequatur
Court held that the Court of Appeal had misconstrued the on 14 March 2023’( https://navacelle.law/, 29 mars 2023). Although
evidence, and remanded the case for further proceedings,Paris that case ultimately failed on the facts, the underlying principle
Court of Appeal, decision on 28 May 2019 (n°16/11182), discussed guiding the Court of Appeals decision remains in place.
in Ch. Jarrosson, ‘La dénaturation : tendon d’Achille d’un contrôle 77 See e.g Vladislav Kim and others v. Republic of Uzbekistan, ICSID
étendu de la sentence en cas d’allégation de corruption ?, note sous Case No. ARB/13/6, Decision on Jurisdiction, 8 March 2017, paras.
Cass. civ. 1re, 29 sept. 2021’, Revue de l’Arbitrage, 2021, Issue 3, pp. 550-553, where the tribunal acceded to an extensive additional
691 – 693; also in L. Stefani, ‘New Developments in France on the document request related to the financial aspect of the share
Alstom Saga: The French Supreme Court Overrules the Paris Court purchase, and undertook itself ‘to examine for relevancy the
of Appeals Decision to Deny Enforcement of the Arbitral Award documents requested by Respondent (despite a lack of apparent
on the Grounds of Corruption’ (Kluwer Arb. Blog, 18 Dec. 2021). relevancy or materiality)’.
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Raising red flags alone, absent a clear allegation of Allowing reasonable consideration of alleged red flags,
corruption, is unlikely to succeed. However, raising red even those raised late in the proceedings, may have the
flags with an underlying allegation of a corrupt practice effect of minimising the probability of parties raising
and linking it to one or more of its legal elements, them before set-aside and enforcement courts. Where
even at a late stage in the proceedings, is more likely specific red flags are raised at a late stage in the arbitral
to succeed. proceedings, in the context of a serious allegation of
corruption, and where they appear tied with one or more
Even if the proceedings are well advanced, it would
of the legal elements of an alleged corrupt practice, it
be less difficult in these circumstances for an arbitral
would be appropriate to reopen the case, and let them
tribunal to grant leave for further submissions to argue
be properly and sufficiently debated for the benefit of a
about the implications of the red flags raised. Indeed,
reasoned award.
the arbitral tribunal itself may direct inquiries to the
parties using its ex officio powers, as in the Metal-Tech
3.2.3 Red flags as cause for admission of new evidence
v. Republic of Uzbekistan case.78
by an enforcement or set-aside judge
However, where the proceedings have been closed
Courts have differed as to whether facts could be
to render an award, it would be more difficult for a
reconsidered in enforcement and set-aside proceedings,
tribunal to grant a request to re-open the proceedings.
when public policy is implicated, at the expense
This is so because, after the parties have rested their
of the finality of arbitral awards. This obviously
respective cases, it would be abusive to seek to reopen
has repercussions as to whether new evidence to
the proceedings without serious cause (e.g. it is difficult
corroborate red flags pertaining to suspected corruption
to see how general red flags, even if coupled with
could be declared admissible by such courts. Courts
a clear allegation of corruption, could constitute a
have generally been reluctant to admit such new
serious ground for the reopening of the proceedings).
evidence in enforcement or set-aside proceedings, as
However, where the allegations relate to specific red
judicial control of awards must defer to awards on the
flags suggesting some form of quid pro quo, a tribunal
matters of fact.81
must be prepared to re-open the case, even if an award
is imminent. However, the jurisprudence of the Paris Court of Appeal
takes a different position by admitting reconsideration
Some arbitral tribunals have done so without hesitation,
of the facts when there are allegations of corruption,
while ensuring that the parties are afforded sufficient
implicating the French conception of ‘international
due process guarantees to make their respective cases
public policy’.82 In the Alstom case, the Paris Court even
on the import of alleged red flags.79 Other arbitral
ordered the parties to provide additional evidence in
tribunals have not been willing to do so, with the
relation to some ‘indices’ raised in the context of an
consequence that the parties have been tempted to
allegation of corruption made for the first time before
carry forward their debate over the alleged red flags
the enforcement court.83
before enforcement and set-aside courts, which has
produced contradictory findings.80 This is not the place to comment on what degree of
judicial control is appropriate in the enforcement and
set-aside context when allegations of corruption are
proffered. The specific issue dealt with here is whether,
78 Metal-Tech v. Republic of Uzbekistan, supra note 23, at
paras. 86‑87. if red flags are raised, they are sufficient to warrant
79 See e.g Tethyan Copper Company Pty Limited v. Islamic Republic admission of new evidence in enforcement and set-
of Pakistan, ICSID Case No. Arb/12/1, Decision on Respondent’s aside proceedings. It is clear that if allegations of
Application to Dismiss the Claims, 10 Nov. 2017, para. 233: ‘The
Tribunal considers that in view of the seriousness of at least some of corruption are based on general red flags, it is unlikely
the allegations raised by Respondent and the fact that Respondent that they could be a sound motive for admitting new
has advanced ten witnesses that testify to having paid or accepted
bribes in connection with the Reko Diq project, there are indeed evidence. However, where red flags are specific and
‘special circumstances’ that justify to hear Respondent’s objections
to jurisdiction and admissibility despite the fact that they have been
raised only at a very late stage of the proceedings’. 81 This has been the constant jurisprudence of the Swiss and to some
extent UK courts.
80 This has been the case, e.g. in Westacre Investment Inc. v.
Jugoimport-SPDR Holding Co. Ltd. and Others, in Bulletin de 82 For a critical review of the position of the Paris Court of Appeal, see
l’Association Suisse de l’Arbitrage, 1995, p. 301, at p. 342; giving rise Ch. Jarrosson, ‘La jurisprudence Belokon-Sorelec, ou l’avènement
to contradictory judgments from the UK and Swiss court: Westacre d’un contrôle illimité des sentences ‘, Rev. de l’Arbitrage, 2022,
Investment Inc. v. Jugoimport-SPDR Holding Co. Ltd. And Others, Issue 4, pp. 1251 – 1286; see also S. Lemaire, ‘La preuve de la
[1998] 2 Lloyd’s Law Reports, 111; Westacre Investment Inc. v. corruption’, Rev. de l’Arbitrage, 2020, No. 1, pp. 185-205; and P.
Jugoimport-SPDR Holding Co. Ltd. and Others [1999] 2 Lloyd’s Mayer, ‘Corruption and Arbitration: Recent Developments in French
Law Reports, 65; Jugoimport-SPDR Holding Co. Ltd. and Others v. Case Law’, ICC Dispute Resolution Bulletin, issue 2022-2.
Westacre Investment Inc., Swiss Tribunal fédéral, 30 Dec. 1994, in 83 SA Alstom Transport SA vs. Société Alstom Network UK Ltd, Cour
Bulletin de l’Association Suisse de l’Arbitrage, 1995, p. 217. d'appel de Paris, 28 May 2019.
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seem to be pointing to a risk of a corrupt practice on 3.3 Red flags and the burden of proof
the facts, it remains a matter of judicial discretion to
admit new evidence in respect thereof. This obviously 3.3.1 The burden of proof remains with the party making
depends on the domestic judicial policy with respect to the corruption allegation
the degree of scrutiny of awards in enforcement or set-
aside proceedings. The burden of proof is the obligation incumbent on the
alleging party to produce the quantum of evidence
In this context, red flags would be looked at, not from needed in support of its case (the standard of proof).86
the prism of the risk of a corrupt practice alone, but The burden of persuasion may be somewhat different
from the prism of whether the tribunal that issued the inasmuch as it represents a burden to persuade a trier of
award that is about to be recognised and enforced may fact of a party’s case on a particular issue.87
have overlooked red flags relevant to such offense. An
enforcement or set-aside judge looks thus at a different When red flags are raised as part of an allegation
kind of risk, and generally balances between the cost of a specific corrupt practice, the arbitral practice is
of refraining from entertaining new evidence based on unanimous that the burden of proof remains with the
specific red flags, in the enforcement or set-aside stage party making the allegation.
and the cost of admitting new evidence in the narrow
However, since some red flags purport to indicate a
context identified above. Such judge might consider that
lack of evidence from which a tribunal is called to draw
if new red flags are not fully probed, even in enforcement
an inference that a corrupt practice has occurred
or set-aside proceedings, they are likely to remain, and
(e.g. lack of proof of services, or lack of application
the case may return to the same court for revision of
of compliance checks), the question has arisen as to
the award, in the event parallel or subsequent criminal
whether this must lead a tribunal to shift the burden
findings establish that a corrupt practice has occurred.84
of proof to the other side. Arbitral practice is generally
Conversely, if it is apparent to the enforcement or set- unanimous in maintaining the burden of proof with the
aside judge that the arbitral tribunal has given full party raising red flags in the context of a corruption
and careful consideration to the red flags raised in the allegation. Therefore, the alleging party cannot simply
course of issuing its award, given the highly factual raise red flags and then choose to rest. It must pursue its
nature of such red flags, it would not seem appropriate case to meet the relevant standard of proof and thereby
for that judge to reconsider them. Although red flags persuade the decision maker of its case.
function as such because of their resonance with the
3.3.2 Shifting the burden of proof or reverse burden
legal elements of corrupt practices, their content is
of proof
inherently factual and circumstantial. Their proper use,
as explained above, involves their validation, overall There are, however, instances where arbitral tribunals
assessment and consideration in evidentiary terms, prior decide to shift the burden of proof (sometimes
to the application of the relevant legal standard to the referred to as the ‘burden of persuasion’ or ‘burden
findings that emerge. of production’) on a particular issue to the other side,
in order to allow the other party to present evidence
For an enforcement or set-aside judge, therefore, the to prevent the drawing of an adverse inference of
decision is not simply to reconsider the red flags as corruption initially suggested by the red flag. In general,
such, but to justify the embarking on a full factual and this appears warranted where a red flag points to an
evidentiary reassessment.85 aberrant situation relating to facts that should be known
to a party (e.g. the total absence of a consultant’s
services in the evidence, despite a high remuneration).88

84 In the Brunner Sociedad, Frontier AG vs. Thomson CSF, ICC Case

7664, the Swiss Tribunal fédéral had confirmed the award, which 86 As part of its work, the ICC Commission on Arbitration and ADR
found that there had been no corruption intended or pursued Task Force on ‘Addressing Issues of Corruption in International
through a consultancy agreement (Thomson CSF v. Frontier AG and Arbitration’ has considered the issue of standard and burden of
Brunner Sociedad, Tribunal fédéral, 28 Jan. 1997, ASA Bulletin 1998, proof in corruption cases generally. This Document focuses on the
p. 118). However, following subsequent criminal findings to the narrower issue of red flags and is subject to any conclusion and
contrary in France, the case returned to the Tribunal fédéral Suisse recommendations the work of the Task Force will formulate.
for an action for revision. The Tribunal féderal ordered that the 87 See generally A. Menaker, ‘Chapter 5: Proving Corruption
award must be revised in a manner consistent with the criminal in International Arbitration’, in D. Baizeau, R. Kreindler (eds.),
findings (Thomson CSF v. Frontier AG and Brunner Sociedad, Addressing Issues of Corruption in Commercial and Investment
Tribunal fédéral, Case 4A_596/2008, 6/10/2009). Arbitration (Dossiers of the ICC Institute of World Business Law,
85 Of course, if the argument is that the arbitral tribunal has Vol. 13, 2015), pp. 77–102, at p. 81.
misapplied the law in relation to the allegation of corruption, then 88 See e.g. ICC Case 12990, ICC Bulletin Special Supplement –
(depending on the standard of review of such matters) a different Tackling Corruption in Arbitration, Vol. 24, 2013, p. 52, at p. 54,
exercise is implied. para. 256.
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Other arbitral tribunals have called the shifting of 3.4 Red flags and the standard of proof
the burden of proof, a ‘reverse burden of proof’.89
In particular, where a party makes an allegation of A long debate has ensued over the issue of what
corruption, the burden of proof should rest with that standard of proof to apply when there is a suspicion or
party if it simply cites red flags that point to positive an allegation of corruption in international arbitration.
acts or intentions of corruption. However, if that party The debate has been influenced by the diversity of
seeks to draw inferences from red flags having to do legal cultures that are usually brought to bear in a
with lack of specific actions taken that are within the typical international arbitration proceeding, and by the
knowledge or control of the other party (e.g. lack of connection that corruption has with the criminal law.90
services or lack of ex ante corruption risk analysis), then
it would be normal for the other party’s case, though As part of its work, the ICC Commission on Arbitration
being responsive or rebuttal in nature, to be also an and ADR Task Force on ‘Addressing Issues of Corruption
affirmative one. in International Arbitration’ has considered the issue
of standard and burden of proof in corruption cases
In defence, the other side would be expected to rebut generally. This Document focuses on the narrower
these red flags by asserting that legitimate services were issue of red flags and is subject to any conclusion
in fact provided, or that due diligence measures were in and recommendations the work of the Task Force
fact taken. In so doing, that party makes an affirmative will formulate.
case, in support of which it should be in a position to
adduce the relevant evidence. In this particular case, The work of the Task Force has generally been
a decision maker in international arbitration may need alternating between two main standards of proof:
to expect that the burden of proof in relation to this a heightened standard of proof, requiring ‘clear and
issue lies with that party. From the perspective of the convincing’ evidence, that is short of the U.S. ‘beyond
corruption allegation, whether it is called ‘shifting’ or reasonable doubt’ test proper to criminal matters;91
‘reversing’ the burden of proof matters little, as long as and a low standard of proof, commonly referred to
all means are used to allow the evidence in respect of as ‘preponderance of the evidence’ or ‘balance of
the asserted corrupt practice to be properly considered. probabilities’.92 Arbitrators with a civil law background
will sometimes search their own ‘conviction intime’
There are specific red flags, which if validated, are when looking at the totality of evidence before them.93
more probative of the existence of key elements of ‘Reasonable certainty’ – an intermediate standard
a corrupt practice (e.g. consultant fees expressed in found in areas such as quantum – has also occasionally
what has been determined to be a high percentage). In been used.
these situations, arbitral tribunals maintain the burden
of proof on the party alleging a corrupt practice, but More specifically related to red flags, decisionmakers
may request that the party against whom a red flag in international arbitration have frequently questioned
is addressed to come forward with an explanation. A their effect on where to place the cursor of the standard
burden of persuasion or production would thus lie on of proof.
that party to provide evidence as to why the red flag
(i) For some arbitral tribunals, red flags have had the
being asserted against it does not support a finding
effect of lowering the standard of proof toward a
of an element of the asserted corrupt practice. A test that is less than ‘clear and convincing’.
decisionmaker in international arbitration keeps its
discretionary power to appreciate the evidence and
explanations provided.

90 For a summary of the debate, see e.g. V. Khvalei, ‘Standards of

Proof for Allegations of Corruption in International Arbitration’ in
D. Baizeau, R. Kreindler (eds), supra note 87, pp. 69-76.
91 See e.g. EDF (Services) Ltd. v. Romania, ICSID Case No. ARB/05/13,
Award, 8 Oct. 2009. para. 221; ICC Case 13384, ICC Bulletin
Special Supplement – Tackling Corruption in Arbitration, Vol. 24,
2013, p. 62, at p. 64, para. 67.
89 See e.g. Alexander Brothers v. Alstom [2020] EWHC 1584, para.
40 discussing the way in which the award (which is not published) 92 For a review, see e.g. A. Menaker, supra note 87.
dealt with red flags raised without an allegation of corruption. 93 Id. at p. 83.
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(ii) One tribunal suggested that the cursor should must also be considered in determining this issue. The
be placed a little higher than the ‘balance of admonition that ‘the more startling’98 the charge, the
probabilities’ test, but lesser than the ‘clear and higher the standard should be, has been invoked in the
convincing test’.94 context of allegations of corruption, which may result in
a finding of a lack of jurisdiction over a claim or its non-
(iii) Other arbitral tribunals have not decided a clear
admissibility, among others. While a fuller discussion of
standard in presence of red flags in support of an
allegation of a corrupt practice. the consequences is beyond the scope of this document,
the issue should be noted.
(iv) While keeping in mind both the higher standard
of ‘clear and convincing’ as well as the lower
standard of ‘balance of probabilities’, one arbitral 4. Role and responsibilities of the
tribunal ruled that if an allegation of corruption arbitral tribunal in relation to red flags
and the red flags mobilised in its support failed
to establish the lower standard, it would not
be possible for such red flags to satisfy the The previous sections have touched on this issue, which
higher standard.95 however deserves full attention given the debate on
the subject and the many open questions. As part of its
There is a close relationship between red flags and work, the ICC Commission on Arbitration and ADR Task
the standard of proof to be applied. While there is a Force on ‘Addressing Issues of Corruption in International
growing trend in arbitral practice to move away from the Arbitration’ has considered the issue of the duties of the
rigidity of high standards of proof’,96 the debate on the arbitrators in corruption cases generally. This Document
appropriate standard of proof to apply can be enriched focuses on the narrower issue of red flags and is subject
by a proper assessment of the type, quality and quantity to any conclusion and recommendations the work of the
of red flags that are at stake in a case. In particular, Task Force will formulate.
the issue of where to place the cursor in a given case
depends on the answers to the following questions: The term ‘duty’ has two related connotations: what we
are obliged to do because it is our legal responsibility
(i) how abundant (quantitative) or specific (legal connotation), and because it is the right thing
(qualitative) the validated red flags are; to do (moral connotation).99 Given the nature of this
Document, the discussion will only refer to the legal
(ii) whether they point to a quid pro quo; and
connotation, but doing so on the assumption that there
(iii) whether they are capable of crystallising into is no doubt that arbitrators must act on an ethical basis,
‘indices graves, précis, et concordants’, by particularly in matters with a high moral component
operation of the technique of circumstantial such as corruption.
evidence discussed above.97
The duties of arbitrators facing allegations or suspicions
However, many would argue that the consequences of corruption based on asserted red flags have been
of a finding that a corrupt practice has occurred intensely debated in recent years. Efforts have focused
on the question what arbitrators should do under these
94 Lao Holdings N.V. v. The Lao People’s Democratic Republic, ICSID circumstances. There are, however, complementary
Case No. ARB (AF)/12/6, Award, 6 Aug. 2019, considering a red flag questions that help us understand the complexity of the
in the form of an order to stop an EY audit in relation to gambling
and casino investment in Laos. The arbitral tribunal reasoned as
subject, for example:
follows, at para. 110: ‘In the Tribunal’s view there need not be ‘clear
and convincing evidence’ of every element of every allegation • Are arbitrators allowed to do nothing or to be
of corruption, but such ‘clear and convincing evidence’ as exists indifferent in the face of red flags?
must point clearly to corruption. An assessment must therefore be
made of which elements of the alleged act of corruption have been • Do they have to justify their inaction?
established by clear and convincing evidence, and which elements
are left to reasonable inference, and on the whole whether the • Does an unjustified inaction generate any legal
alleged act of corruption is established to a standard higher than
the balance of probabilities but less than the criminal standard
consequences or responsibility?
of beyond reasonable doubt, although of course proof beyond
a reasonable doubt would be conclusive. This approach reflects
• Is the fight against corruption relevant to the
the general proposition that the graver the charge, the more arbitration system in the long run?
confidence there must be in the evidence relied on’.
95 See e.g. The Republic of Croatia v. MOL Hungarian Oil and Gas Plc, 98 M. Hunter, ‘Modern Trends in the Presentation of Evidence in
PCA Case 2014-15, Final Award 23 Dec. 2016, para. 125: ‘None of International Commercial Arbitration’, Ius Arbitale Internationale,
the ultimately residual conceptual difficulties, however, needs to Essays in Honor of Hans Smit, The American Review of International
be resolved in this case if the Tribunal finds that the allegations of Arbitration, 1992, Vol. III, pp. 204-213, p. 211.
corruption fail even under a traditional balance-of-probabilities’.
99 Cambridge Dictionary, definition of ‘duty’: ‘something that you have
96 A. Llamzon, supra note 31, at p. 295. to do because it is part of your job, or something that you feel is the
97 See Section 2.5 below right thing to do’.
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Existing literature has also focused on differentiating legal order and the rule of law.102 This responsibility
the duties of arbitrators when allegations of corruption would be associated with the growth of arbitration as
are made by the parties versus when arbitrators act an alternative to the ordinary justice, which requires
sua sponte based on a tacit case or their perception of arbitrators to observe the individuals’ fundamental
red flags. The development of the law in recent years rights.103 Under this approach, if courts make efforts
sheds some light on what to do in these two scenarios to fight corruption, arbitrators must do the same given
by emphasising the role of the applicable law and the the public responsibility they have assumed.104 As a
notion of transnational public policy, which could help to consequence, investigations into acts of corruption
reconcile the different approaches of the two schools of are no different from those related to other types of
thought explained below. illegality of the underling contract, which are normally
covered by the arbitration agreement and which,
4.1 Two views on the duties of arbitrators therefore, the arbitrators have the power (and the duty)
to investigate.105
The duties of arbitrators, in general, are set out in a This jurisdictional approach has been adopted by
broad and complex spectrum of sources, including a number of arbitral tribunals, e.g. in the cases of
the arbitration agreement, the law applicable to the World Duty Free v. Kenya,106 Metal-Tech v. Republic
arbitration agreement, the law applicable to the merits, of Uzbekistan,107 and ICC No. 1110,108 in which the
the lex arbitri, the rules of arbitration institutions, the arbitrators recognised their duty to safeguard the public
law of the country of enforcement of the award, and
the international conventions on the fight against 102 C.A. Rogers, ‘The Vocation of the International Arbitrator’, 20 Am.
corruption, among others. However, going back to U. Int’l L. Rev. 958, 963, 2005; M. Hwang, K. Lim, ‘Corruption in
Arbitration – Law and Reality’, 8(1) Asian Int’l Arb. J (2012) 1, 20.
a timeless debate, the duties and prerogatives of
103 L. Neuberger, ‘Arbitration and Rule of Law, Address Before the
arbitrators in relation to corruption seem to have a Chartered Institute of Arbitrators Centenary Celebration’, 20 March
connection with the theories on the nature of arbitration, 2015, para. 8: ‘over the past forty years national legislation and
international conventions have famously given arbitrators ever
i.e. jurisdictional (4.1.1) or contractual. (4.1.2). increasing freedom and power by restricting interference by the
courts with arbitrators’ procedures and awards. Any increase in
Without suggesting a rule, the powers of arbitrators freedom or power carries a concomitant increase in responsibility,
to carry out investigations sua sponte appear to be and an increase in arbitral powers must be accompanied by an
increased responsibility to observe fundamental rights’.
broader in places where the jurisdictional theory
104 D. Baizeau, T. Hayes, ‘The Arbitral Tribunal’s Duty and Power
prevails, according to which the role of arbitrators is to Address Corruption Sua Sponte’, in A. Menaker (ed.), supra
equivalent to that of the judges with few exceptions note 29, at p. 25: ‘From a moral and political perspective, it has
been submitted that arbitrators have a “public responsibility to
and nuances. In contrast, in jurisdictions where the the administration of justice”, which goes hand in hand with the
contractual theory predominates, the applicable law autonomy accorded to them by national courts; that states and
companies alike today are making efforts to eliminate corruption,
may be more restrictive since the role of arbitrators is and arbitrators can and should best support those efforts by being
limited to solving specific contractual disputes, leaving proactive; and that, since ineffective judiciaries are a root cause
of the tenacity of corruption, the interests of the international
the duty to investigate acts of corruption to judges and
arbitration community itself are served by actively assisting in anti-
other public servants. The implications of these two corruption efforts, rather than being seen as weak and complicit in
views are briefly explained below. corruption’.
105 R. Kreindler, supra note 24, at p. 252.
106 World Duty Free Company Limited v. the Republic of Kenya,
4.1.1 The jurisdictional approach supra note 66, para. 142: ‘bribery is contrary … to transnational
public policy. Thus, claims based on contracts of corruption or on
The supporters of the jurisdictional approach suggest contracts obtained by corruption cannot be upheld’; and para. 181:
that arbitrators exercise a quasi-judicial100 function, ‘The answer, as regards public policy, is that the law protects not
the litigating parties but the public; or in this case, the mass of tax-
which is not subordinated to the will of the parties,101 and payers and other citizens making up one of the poorest countries in
that they must ensure compliance with the international the world’.
107 Metal-Tech v. Republic of Uzbekistan, supra note 23, at para. 389:
‘[T]he Tribunal is sensitive to the ongoing debate that findings on
corruption often come down heavily on claimants, while possibly
100 J.D.M. Lew, Applicable Law in International Commercial Arbitration, exonerating defendants that may have themselves been involved
Oceana, 1978, para. 66: ‘It follows that the arbitrator, like the in the corrupt acts. It is true that the outcome in cases of corruption
judge, draws his power and authority from the local law; hence the often appears unsatisfactory because, at first sight at least, it
arbitrator is considered to closely resemble the judge…’. seems to give an unfair advantage to the defendant party. The
101 UK Supreme Court, Jivraj v. Hashwani [2011] UKSC 40 (27 July idea, however, is not to punish one party at the cost of the other, but
2011), para. 40: ‘Although an arbitrator may be providing services … rather to ensure the promotion of the rule of law…’.
and he of course receives fees for his work, and although he renders 108 ICC Case No. 1110, Award, Gunnar Lagergren, published in Arb.
personal services which he cannot delegate, he does not perform Int’l 1994, p. 291: ‘it cannot be contested that there exists a general
those services or earn his fees for and under the direction of the principle of law recognised by civilised nations that contracts
parties … He is rather in the category of an independent provider of which seriously violate bonos mores or international public policy
services who is not in a relationship of subordination with the parties are invalid or at least unenforceable and that they cannot be
who receive his services …’. sanctioned by courts or arbitrators’.
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interest and the rule of law beyond their contractual that states had not offered access to arbitration
duties or the rules under which they were appointed. for investments not made in good faith or in
On jurisdictional issues, it is recommended to address violation of the laws of the host state; investments
commercial and investment disputes separately: made illegally fall outside the consent given by
the parties.114
• In commercial disputes, given the presumption of
separability of the arbitration clause, arbitrators
4.1.2 The contractual approach
tend to declare themselves competent even if
there are claims of illegality of the underlying The proponents of the contractual approach consider
contract (e.g. in Fiona Trust v. Privalov,109 the that the main role of arbitrators is to enforce the
House of Lords clarified that an allegation that contract, not to be the guardians of public order.
a contract was procured by bribery affects Consequently, it is not for arbitrators to assume the role
only the main contract, and not necessarily the and investigative powers of judges and prosecutors.115
arbitration agreement). Therefore, arbitrators would not have a duty to
• In investment arbitration, where consent is investigate acts of corruption, particularly when the
based on a treaty, different issues arise, in parties have not alleged them.116 This position has
particular whether corruption can vitiate the been endorsed by some arbitral tribunals, e.g. in SPP
parties’ consent to arbitration when the treaty v. Egypt,117 Azurix v. Argentina,118 African Holding v.
requires investors to make their investments
Salvador in the BIT is limited to investments made in accordance
in accordance with the laws of the host state.
with the laws of the host State of the investment. Consequently, this
Arbitral tribunals have tended to consider the Tribunal decides that the disputes that arise from an investment
legality of an investment to be a condition of made illegally are outside the consent granted by the parties and,
consequently, are not subject to the jurisdiction of the Centre, and
investment treaties, in some cases even where that this Tribunal is not competent to resolve them, for failure to
the instruments do not contain an express legality meet the requirements of Article 25 of the Convention and those of
the BIT’.
clause. For example, arbitral tribunals in Phoenix v.
114 Issues may arise as to whether the illegality clause covers all
Czech Republic,110 SAUR v. Argentina,111 Hamester forms and types of illegality or is restricted to more serious types
v. Ghana,112 and Inceysa v. El Salvador113 held of misconduct; temporal issues may also arise as to conduct that
post-dates an investment. These issues are beyond the scope of this
Document.
109 Fiona Trust & Holding Corporation v. Privalov [2007] UKH 70, 115 A. Mourre, ‘Chapter 11 – Arbitration and Criminal Law: Jurisdiction,
para. 17: ‘The principle of separability... means that the invalidity Arbitrability and Duties of the Arbitral Tribunal’, Part II Substantive
or rescission of the main contract does not necessarily entail the Rules on Arbitrability, in L. Mistelis and S.L. Brekoulakis (eds),
invalidity or rescission of the arbitration agreement. The arbitration Arbitrability: International and Comparative Perspectives (Wolters
agreement must be treated as a distinct agreement and can Kluwer, 2009), pp. 207, 229: ‘Arbitrators should act with great
be void or voidable only on grounds which relate directly to the caution when introducing in the arbitral debate elements which
arbitration agreement’. were not included in the parties’ submissions. Although there is
110 Phoenix Action, Ltd. v. The Czech Republic, ICSID Case No. no doubt that arbitrators should be sensitive to states’ legitimate
ARB/06/5, para. 106: ‘In the Tribunal’s view, States cannot interests, they should not turn themselves into investigators,
be deemed to offer access to the ICSID dispute settlement policemen or prosecutors. As opposed to the state judges, the
mechanism to investments not made in good faith. The protection primary role of an arbitrator is to enforce the contract, and not to
of international investment arbitration cannot be granted if defend public policy. It is submitted, as a consequence, that an
such protection would run contrary to the general principles of arbitrator has no duty to investigate possible breaches of criminal
international law, among which the principle of good faith is of law of which there is no evidence at all and which were not raised
utmost importance’. by the parties in their submissions’.
111 SAUR International SA v. Republic of Argentina, ICSID 116 T. Giovannini, ‘Chapter 8: Ex Officio Powers to Investigate: When
Case No. ARB/04/4, Decision on Jurisdiction and Liability, Do Arbitrators Cross the Line?’, in D. Baizeau, B. Ehle (eds.), Stories
6 June 2012, para. 308: ‘Il entend que la finalité du système from the Hearing Room: Experience from Arbitral Practice. Essays
d’arbitrage d’investissement consiste à protéger uniquement les in Honour of Michael E. Schneider (Wolters Kluwer, 2015) pp. 59,
investissements licites et bona fide. Le fait que l’APRI entre la France 68 (citing A. Redfern, M. Hunter, Law and Practice of International
et l’Argentine mentionne ou non l’exigence que l’investisseur agisse Commercial Arbitration paras. 3-28, 1999): ‘It is not the duty of
conformément à la législation interne ne constitue pas un facteur an arbitral tribunal to assume an inquisitorial role and to search
pertinent. La condition de ne pas commettre de violation grave officiously for evidence of corruption when none is alleged’.
de l’ordre juridique est une condition tacite, propre à tout APRI, 117 SPP v. Egypt, Award, ICSID Case No. ARB/84/3, para. 132: ‘Thus,
car en tout état de cause, il est incompréhensible qu’un État offre the allegations concerning irregular contacts and connections
le bénéfice de la protection par un arbitrage d’investissement si are not supported by the evidence in the record and are based
l’investisseur, pour obtenir cette protection, a agit à l’encontre du on suppositions, guilt by association and what the Respondent
droit’. describes as ‘commencement de preuve’. On such grounds, it is
112 Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, Award, simply not possible to reach the findings of fact and conclusions
18 June 2010, para. 123: ‘An investment will not be protected if it requested by the Respondent’.
has been created in violation of national or international principles 118 Azurix v. Argentina, Award, ICSID Case No. ARB/01/12, para: 56:
of good faith; by way of corruption, fraud, or deceitful conduct; or if ‘The Tribunal was informed by Argentina that an investigation
its creation itself constitute a misuse of the system of international of this matter had been initiated by the office of the Procurador
investment protection under the ICSID Convention. It will also not be del Tesoro. During the hearing on the merits, and as a reaction to
protected if it is made in violation of the host State’s law’. insinuations of corruption during the examination by Argentina
113 Inceysa Vallisoletana S.L. v. Republic of El Salvador, Award, 2 Aug. of a witness presented by Argentina, counsel for the Claimant
2006, para. 207: ‘Based on the foregoing arguments, this Arbitral asked the witness whether to his knowledge there had been any
Tribunal considers that the consent granted by Spain and EI corruption in connection with the award of the Concession. The
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Congo,119 EDF v. Romania,120 Himpurna California Energy Although these two schools of thought at first sight
v. PLN,121 ICC No. 6497,122 and ICC No. 7047,123 in which look incompatible, the development of the law in recent
the arbitrators dismissed corruption allegations because years could help in reconciling them: today there is no
there was insufficient evidence in the record without doubt that legislators, arbitral institutions, and parties to
having conducted sua sponte additional investigations. arbitrations have provided arbitral tribunals with greater
investigative powers than in the past, without exceeding
It must be clarified that not all these cases are
the limits of the arbitration agreement and the law.
comparable. In some of them, in fact, accusations of
Respect for these limits is achieved by complying with
corruption were vague and not firmly pursued by the
the duties explained below.
parties. A common criticism to this position is that acts
of corruption are usually not easy to prove, so requiring
conclusive evidence might not be realistic.124 4.2 Essential duties of arbitrators

witness replied that he was not aware of any improper conduct, In cases involving allegations or red flags of corruption,
and the Procurador General present at the hearing confirmed that arbitrators should make every effort to find a proper
the investigation was continuing but that no evidence of improper
conduct had surfaced. No further information has been transmitted
balance in the performance of some essential – and
to the Tribunal’. sometimes conflicting – duties. Four of the arbitrators’
119 African Holding Company of America v. Congo, ICSID Case No. duties are set out below.
ARB/05/21, para. 52: ‘Le Tribunal est disposé à considérer toute
pratique de corruption comme une affaire très grave, mais exigerait 1 - Arbitrators must resolve the dispute submitted to
une preuve irréfutable de cette pratique, telle que celles qui
résulteraient de poursuites criminelles dans les pays où la corruption them by the parties. Such duty implies not diverting the
constitue une infraction pénale. En revanche, si PwC s’était rendue process and resources to unnecessary investigations
compte dans son examen des comptes que les contrats auraient
pu avoir été accordés à SAFRICAS à des prix dépassant les prix du that can create an unjustified burden on the parties or
marché, il est fort probable que les montants déterminés comme in some cases violate due process. Therefore, arbitrators
étant dus par la RDC auraient été réduits à due conséquence’.
should avoid initiating ex officio investigations in cases
120 EDF Services Limited v. Romania, Award, ICSID Case No. ARB/05/13,
para. 221: ‘In any case, however, corruption must be proven and where there is no clear justification to do so, such as
is notoriously difficult to prove since, typically, there is little or no when the parties’ allegations are vague, immaterial,
physical evidence. The seriousness of the accusation of corruption
in the present case, considering that it involves officials at the
or clearly made in bad faith with the aim of tainting
highest level of the Romanian Government at the time, demands the counterparty’s case in the arbitrators' mind. When
clear and convincing evidence. There is general consensus among determining whether it should engage in investigations
international tribunals and commentators regarding the need for
a high standard of proof of corruption. The evidence before the sua sponte investigations, the arbitral tribunal can be
Tribunal in the instant case concerning the alleged solicitation of a guided by the red flags and validation process (Section
bribe is far from being clear and convincing’.
2.3.2 ‘Step 2: Confirming or validating an individual
121 Himpurna California Energy Ltd. v. PT (Persero) Perusahaan Listruk
Negara, Award, 4 May 1999, para. 118, reported in Mealey’s alleged red flag’).
International Arbitration Report, Vol. 14, 12/99: ‘The members of
the Arbitral Tribunal do not live in an ivory tower. Nor do they view 2 - Arbitrators must apply the law including mandatory
the arbitral process as one which operates in a vacuum, divorced
from reality … The arbitrators believe that cronyism and other forms
rules. Indeed, the legal elements of the relevant acts
of abuse of public trust do indeed exist in many countries, causing of corruption, which require the identification of red
great harm to untold millions of ordinary people in a myriad of flags, are set out in statutory rules that are labelled as
insidious ways. They would rigorously oppose any attempt to use
the arbitral process to give effect to contracts contaminated by mandatory. Importantly, arbitrators also have at their
corruption … But such grave accusations must be proven. There is in disposal the principles of the transnational public order,
fact no evidence of corruption in this case. Rumours or innuendo will
not do. Nor obviously may a conviction that some foreign investors under which there is little doubt today that corruption is
have been unscrupulous justify the arbitrary designation of a condemned.125 This premise is important because if it is
particular investor as a scapegoat’.
assumed that corruption violates transnational public
122 ICC Award No. 6497, ICCA Yearbook Com. Arb. 1999, para. 73:
‘The demonstration of the bribery nature of the agreement has to order, there would be no reason to disregard mandatory
be made by the Party alleging the existence of bribes (hereafter rules.126 In this context, there seems to be little doubt that
the “alleging party”). A civil court, and in particular an arbitral
tribunal, has not the power to make an official inquiry and has
not the duty to search independently the truth. A civil court has The Oxford Handbook of Institutions of International Economic
to hear the allegations and the proofs offered by the parties. The Governance and Market Regulation Get access Arrow,
“alleging Party” has the burden of the proof. If its demonstration is E. Brousseau, J.-M.Glachant, J. Sgard (eds.) (OUP, 2019). ‘In contrast
not convincing, the tribunal should reject its argument, even if the to past pronouncements by other tribunals that corruption must
tribunal has some doubts about the possible bribery nature of the be proven by no less than ‘substantiated facts and conclusive
agreements’. evidence’ (making it in practice near-impossible to prove) …’.
123 ICC Award No. 7047, ASA Bull., 1995, para. 342: ‘The word 125 See generally, P. Lalive, ‘Transnational (or Truly International) Public
“bribery” is clear and mistakable. If the defendant does not use it Policy and International Arbitration’ in P. Sanders (ed.), Comparative
in his presentation of facts an Arbitral Tribunal does not have to Arbitration Practice and Public Policy in Arbitration (Kluwer Law
investigate. It is exclusively the parties’ presentation of facts that International, 1987).
decides in what direction the arbitral tribunal has to investigate …’. 126 C.F. Concepción, ‘Combating Corruption and Fraud from an
124 S. Nappert, ‘International Arbitration as a Tool of Global International Arbitration Perspective’, Arbitraje, Vol. IX, nº 1, 2016,
Governance: The Use (and Abuse) of Discretion’, 2017, p. 15 pp. 369–396, at p. 387: ‘Before determining whether a party has
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transnational public order mandates arbitrators and be enforced.131 An award that enforces a contract
judges to have zero tolerance for corruption. This can be tainted by corruption risks being denied recognition
deduced from the proliferation of international treaties, and enforcement on public policy grounds,132 as in the
local laws, and guidelines of international organisations Soleimany v. Soleimany case,133 in which an English
on the fight against corruption. In the words of the court refused enforcement of an award upholding a joint
United Nations: venture contract for smuggling carpets out of Iran which
contravened English public order; and in Kyrgyzstan v.
Convinced that corruption is no longer a local
Belokon,134 in which an UNCITRAL award was annulled
matter but a transnational phenomenon that
for violating the international public order for referring to
affects all societies and economies, making
a contract used for money laundering. Equally important
international cooperation to prevent and control
is the position holding that awards which disregard
it essential.127
red flags can be declared unenforceable. Due regard
to transnational public policy appears therefore key in
This position was adopted by the arbitral tribunal in
this perspective.
World Duty Free v. Kenya:
Since the notion of transnational public order is deemed
In light of domestic laws and international
to be a consolidation of the public policies of most
conventions relating to corruption ... this
countries, an award that contravenes transnational
Tribunal is convinced that bribery is contrary
public order is also likely to contravene the public order
to the international public policy of most, if
of the country of enforcement. In general, it appears
not all, States or, to use another formula, to
that corruption and public order grounds are receiving
transnational public policy.128
increasing attention from courts in the context of
While recognising the need for arbitral tribunals to retain
a margin of discretion in its conduct of the proceedings,
this strongly suggests that where red flags are identified, 131 G. Born, International Commercial Arbitration (Third Edition, Kluwer
Law International, 2021), ‘Chapter 19: Choice of Substantive Law
they should not remain unchecked.129 in International Arbitration’ (Updated February 2024) (footnotes
omitted): ‘Nevertheless, as already suggested, arbitrators are
3 - Arbitrators must do their best to ensure that the obliged, by the adjudicative character of their mandate, to
award they render is enforceable.130 This duty has consider and apply mandatory laws and public policies, even
when this is contrary to the terms of the parties’ choice-of-law or
two practical implications in the context of this work: other agreement. The essence of the arbitrators’ mandate is to
arbitrators must verify that the award does not violate render a decision through an adjudicative process that rests on the
application of legal rules. It is a vital precondition to the fulfillment of
the public order so it can be enforced, but they cannot this mandate that the arbitrators consider and decide claims that
act ultra petita/vires by resolving matters not submitted contractual agreements are invalid, unlawful, or otherwise contrary
to applicable mandatory law and public policy.’
by the parties to arbitration.
132 B.M. Cremades, D.J.A. Cairns, ‘Transnational Public Policy in
International Arbitral Decision-Making: The Cases of Bribery, Money
On the one hand, arbitrators must verify that the
Laundering and Fraud’ in K. Karsten, A. Berkeley (eds.), Arbitration
award does not violate the public order so it can – Money Laundering, Corruption and Fraud (Dossiers of the ICC
Institute of World Business Law, 2003), at p. 86: ‘The position today
is that the international arbitrator has a clear duty to address issues
of bribery, money laundering or serious fraud whenever they arise
in the arbitration and whatever the wishes of the parties and to
record its legal and factual conclusions in its award. This is the only
course available to protect the enforceability of the award and the
integrity of the institution of international commercial arbitration’;
C.F. Concepción, supra note 126, at p. 377: ‘If the tribunal’s decision
engaged in a corrupt or fraudulent act, the tribunal must determine is not mindful of transnational public policy and consequently
the applicable law for the dispute. As previously discussed, however, delivers an unenforceable award, then it renders the arbitral
transnational public policy may be available to simplify this analysis’. proceeding pointless and undermines international commercial
arbitration as the preferred dispute resolution for foreign parties. It is
127 Preamble, UN Convention Against Corruption (2003). thus imperative that tribunals examine transnational public policy in
128 World Duty Free Company Limited v. the Republic of Kenya, supra reaching their decisions’.
note 66, at para. 157. 133 Soleimany V. Soleimany, [1998] 3 WLR 811.
129 See also V. Khvalei, ‘Using Red Flags to Prevent Arbitration from 134 Kyrghyzstan V. Belokon, Cour d’appel Paris, 21 Feb. 2017, at p. 8:
Becoming a Safe Harbour for Contracts that Disguise Corruption’, ‘Considérant que la prohibition du blanchiment est au nombre
ICC Bulletin Special Supplement 2013: Tackling Corruption in des principes dont l’ordre juridique français ne saurait souffrir la
Arbitration. violation même dans un contexte international; qu’elle relève, par
130 See Art. 42, ICC Arbitration Rules: ‘In all matters not expressly conséquent de l’ordre public international’. At p. 15 : ‘Considérant
provided for in the Rules, the Court and the arbitral tribunal shall que la reconnaissance ou l’exécution de la sentence entreprise, qui
act in the spirit of the Rules and shall make every effort to make aurait pour effet de faire bénéficier M. Belokon du produit d’activités
sure that the award is enforceable at law’. See also C. Nairac, délictueuses, viole de manière manifeste, effective et concrète
M. Thadikkaran, E. Aleynikova, ‘Public Policy and the Enforceability l’ordre public international; qu’il convient donc de prononcer
Of Arbitral Awards’ including ‘Extracts from ICC Arbitral Awards l’annulation sollicitée’. For a recent critical review of the position of
on Considerations of Public Policy and Enforceability’, ICC Dispute the Paris Court of Appeal, see Ch. Jarrosson, S. Lemaire, P. Mayer,
Resolution Bulletin, 2016-1. supra note 82.
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recognition and enforcement or setting-aside of arbitral 4 - Arbitrators, despite findings of corruption, must
awards. However, courts must be cautious in interpreting remain impartial in their decision-making and avoid
the public order defence. becoming biased against one of the parties.

For the reasons set out in Section 2 ‘Methodological

4.3 Course of actions available to arbitrators
considerations’ and Section 3 ‘The procedural effects
of red flags’, the mere existence or allegation of red
To ensure a right balance between the above-mentioned
flags in an arbitration should not justify conducting a
duties, arbitrators can use a number of tools, available
de novo review of the dispute, denying the recognition
within (4.3.1) and outside (4.3.2) the arbitration process,
or enforcement of an award, or setting aside the
to identify facts relevant to alleged acts of corruption.
award, unless the court concludes, after a thorough
analysis, that: 4.3.1 Tools within the arbitral process
• (i) new evidence justifies reopening the factual
Investigating facts. When corruption is alleged by one
inquiry; or
of the parties, there is no discussion that arbitrators
• (ii) the arbitrators ignored the red flags and should analyse the relevant facts, as they would do
therefore arguably buried their heads in the sand in connection with any other allegation, including the
regarding the risk of corruption without sufficient assessment of any red flags that may be raised.137
justification; and However, things get complicated when neither party
alleges it and the tribunal feels the need, often on the
• the omission (ii) and the failure (i) to consider
basis of red flags presented, perhaps tacitly by a party
the new allegations and potential new evidence
to investigate it sua sponte,138 for example, by requesting
arising therefrom led or would lead the arbitrators
ex officio the disclosure of information that is not on
to render an award that upholds an illegal
the record, asking for additional witness statements,
contract that, by virtue of its illegality, contravenes
appointing experts, or requesting the help of the courts
public order.
for that purpose.
On the other hand, arbitrators cannot act ultra petita/
vires by resolving matters not submitted by the parties Arbitrators willing to use these extraordinary powers will
to arbitration. However, in practice the risk of an award face complex questions such as:
being set aside because the tribunal investigated red • How should they address any red flags that have
flags pertaining to acts of alleged corruption seems been identified?
limited as the arbitral tribunal would not act ultra
• What is the relationship between red flags and
petita simply by conducting such investigations, but by
the ultimate proof of corruption?
granting the parties more than they have claimed.135
In any event, in order to guarantee their right to due • At what point do they have a duty to investigate?
process, arbitrators must give the parties sufficient • How far can they go in that investigation and
opportunity to comment on the findings of any sua when should they stop?
sponte investigation or on any matter of law raised
ex officio.136 • What tools do they have to conduct an
investigation?
• How can they ensure their impartiality during the
investigation?
135 Ph. Fouchard, E. Gaillard, B. Goldman, International Commercial
Arbitration (Wolters Kluwer, 1999) p. 941: ‘The arbitrators will also fail These complex questions (discussed in Sections 2
to comply with their brief by ruling ultra petita or, in other terms, by
ruling on claims not made by the parties… the fact that arbitrators ‘Methodological considerations’ and Section 3 ‘The
may have based their decision on allegations or arguments which procedural effects of red flags’), among others, indicate
were not put forward by the parties does not amount to a failure
to comply with their brief. They only fail to comply with their brief that this is an area where prudence must be the guiding
where they grant one of the parties more than it actually sought in its principle. As noted above, either when acts of corruption
claims’; G. Born, supra note 131, at 2608-2609: ‘An arbitral tribunal
does not exceed its authority under Article 34(2)(a)(iii) by relying on are alleged by the parties or when arbitrators act sua
arguments or authorities not raised by the parties to support their
claims. Doubts about the scope of the parties’ submissions are
resolved in most legal systems in favor of encompassing matters
decided by the arbitrators. Put differently, a considerable measure findings of fact derived from such investigations if the enforcee has
of judicial deference is accorded the arbitrators’ interpretation of the not been given any reasonable opportunity to present its case in
scope of their mandate under the parties’. relation to the results of such investigations’.
136 Minmetals Germany GmbH v. Ferco Steel Ltd [1999] 1 All E.R. 137 B.M. Cremades, D.J.A. Cairns, supra note 132, at p. 79;
(Comm.) 315 (Q.B.): ‘Where the tribunal is procedurally entitled M. Hwang S.C., K. Lim, supra note 102, at pp. 6-9.
to conduct its own investigations into the facts, the effect of this 138 See Section 4 ‘Role and responsibilities of the arbitral tribunal in
provision will be to avoid enforcement of an award based on relation to red flags’ above.
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sponte, they must abide by the limits of the applicable the International Bar Association Rules on Evidence.149
law. In this context, there are jurisdictions that openly Institutional rules play a crucial role in international
allow arbitrators to conduct ex officio investigations, arbitration, not only due to their frequent use but
such as the French,139 Swiss,140 English141 and US laws,142 also because of their gap-filling effect. Therefore, it is
while others remain silent on the matter. possible to conclude that if arbitrators were to undertake
a sua sponte investigation into acts of corruption,
In addition, it must be emphasised that, at the
they would have the support of the main arbitral
institutional rules level, there is a clear trend to allow
institutions’ rules.
arbitrators to conduct sua sponte investigations on any
matter (without corruption being an exception), as is Draw adverse inferences. As discussed in Section 2.4
the case under the rules of the ICC,143 ICSID,144 ICDR,145 ‘Tools for assessing red flags, individually and/or
LCIA,146 UNCITRAL,147 and SIAC,148 as well as under collectively, and for making factual findings’, another
useful tool for arbitrators in cases involving corruption is
139 Code of Procédure Civile, Art. 1467: ‘Le tribunal arbitral procède drawing adverse inferences against parties that refuse
aux actes d’instruction nécessaires à moins que les parties ne to produce evidence ordered by the tribunal.150 Cases
l’autorisent à commettre l’un de ses membres. Le tribunal arbitral
peut entendre toute personne. Cette audition a lieu sans prestation such as ICC No. 3916,151 Europe Cement Investment
de serment. Si une partie détient un élément de preuve, le tribunal & Trade S.A. v. Turkey,152 and Metal-Tech v. Republic of
arbitral peut lui enjoindre de le produire selon les modalités qu’il
détermine et au besoin à peine d’astreinte’. Uzbekistan,153 among others, illustrate the effectiveness
140 Art. 184, Swiss Federal Statute on Private International Law: ‘[T]he of this tool.
arbitral tribunal shall itself conduct the taking of evidence’.
141 Section 34(1), English Arbitration Act: ‘it shall be for the tribunal to 149 IBA Rules on the Taking of Evidence in International Arbitration,
decide all procedural and evidential matters, subject to the right Art. 3(10): ‘At any time before the arbitration is concluded, the
of parties to agree any matter’; Section 34(2): ‘Procedural and Arbitral Tribunal may (i) request any Party to produce Documents,
evidential matters include … (g) whether and to what extent the (ii) request any Party to use its best efforts to take or (iii) itself take,
tribunal should itself take the initiative in ascertaining the facts and any step that it considers appropriate to obtain Documents from
the law’. any person or organization’. Art. 4(10): ‘At any time before the
142 Federal Arbitration Act, 9 U.S. Code Sect. 7: ‘The arbitrators … may arbitration is concluded, the Arbitral Tribunal may order any Party to
summon in writing any person to attend before them or any of them provide for, or to use its best efforts to provide for, the appearance
as a witness and in a proper case to bring with him or them any for testimony at an Evidentiary Hearing of any person, including one
book, record, document, or paper which may be deemed material whose testimony has not yet been offered’.
as evidence in the case’. 150 IBA Rules on the Taking of Evidence in International Arbitration,
143 Art. 25(4), ICC Arbitration Rules: ‘At any time during the Art. 9 ‘Admissibility and Assessment of Evidence’: (6) ‘If a Party
proceedings, the arbitral tribunal may summon any party to provide fails without satisfactory explanation to produce any Document
additional evidence’. requested in a Request to Produce to which it has not objected in
due time or fails to produce any Document ordered to be produced
144 Art. 43, ICSID Convention: ‘Except as the parties otherwise agree, by the Arbitral Tribunal, the Arbitral Tribunal may infer that such
the Tribunal may, if it deems it necessary at any stage of the document would be adverse to the interests of that Party’; ‘(7) If
proceedings, (a) call upon the parties to produce documents or a Party fails without satisfactory explanation to make available
other evidence, and (b) visit the scene connected with the dispute, any other relevant evidence, including testimony, sought by one
and conduct such inquiries there as it may deem appropriate’. Party to which the Party to whom the request was addressed has
145 Art. 20(4), ICDR International Arbitration Rules: ‘At any time during not objected in due time or fails to make available any evidence,
the proceedings, the tribunal may order the parties to produce including testimony, ordered by the Arbitral Tribunal to be produced,
documents, exhibits, or other evidence it deems necessary or the Arbitral Tribunal may infer that such evidence would be adverse
appropriate. Unless the parties agree otherwise in writing, the to the interests of that Party’.
tribunal shall apply Article 21’. 151 S. Jarvin, Y. Derains, ICC Case No. 3916, in Collection of ICC Arbitral
146 Art. 22.1, LCIA Arbitration Rules: ‘The Arbitral Tribunal shall have the Awards 1974-1985, (Wolters Kluwer, 1994), pp. 507-511.
power, upon the application of any party or…upon its own initiative, 152 Europe Cement Investment & Trade S.A. v. Republic of Turkey,
but in either case only after giving the parties a reasonable ICSID Case No. ARB(AF)/07/2, Award, 13 Aug. 2009: ‘It could have
opportunity to state their views and upon such terms (as to costs produced the share certificates that it claimed it owned … But, it
and otherwise) as the Arbitral Tribunal may decide: (iii) to conduct never produced any documents. This contributes to the inference
such enquiries as may appear to the Arbitral Tribunal to be that the originals of the documents copied in its Memorial and
necessary or expedient, including whether and to what extent the on which its claim was based either were never in the Claimant’s
Arbitral Tribunal should itself take the initiative in identifying relevant possession or would not stand forensic analysis, in which case the
issues and ascertaining relevant facts and the law(s) or rules of law claim that Europe Cement had shares … at the relevant time was
applicable to the Arbitration Agreement, the arbitration and the fraudulent’.
merits of the parties’ dispute; (iv) to order any party to make any
documents, goods, samples, property, site or thing under its control 153 Metal-Tech v. Republic of Uzbekistan, supra note 23, paras. 216,
available for inspection by the Arbitral Tribunal, any other party, any 218: ‘Several elements in the December 2000 Contract attract the
expert to such party and any expert to the Tribunal’. Tribunal’s attention: … the obligations provided in the…Contract
appear to be nothing more than a smokescreen – neither MPC, nor
147 Art. 27(3), UNCITRAL Arbitration Rules: ‘At any time during the Messrs Sultanov or Mikhailov were qualified to fulfill the obligations
arbitral proceedings the arbitral tribunal may require the parties to assumed through in the contract… the Claimant was unable to show
produce documents, exhibits or other evidence within such a period that any services were actually rendered in return for the payments…
of time as the arbitral tribunal shall determine’. the Tribunal has found that none of the documents on which
148 Art. 27, SIAC Arbitration Rules: ‘Additional Powers of the Tribunal: the Claimant relies … convincingly show that the Consultants
… the Tribunal shall have the power to: … c. conduct such enquiries rendered any legitimate services at the time of establishment of the
as may appear to the Tribunal to be necessary or expedient… Claimant’s investment… For all these reasons, the Tribunal comes
f. order any party to produce to the Tribunal and to the other parties to the conclusion that the December 2000 Contract cannot be
for inspection, and to supply copies of, any document in their regarded as a genuine agreement and must be deemed a sham
possession or control which the Tribunal considers relevant to the designed to conceal the true nature of the relationship among the
case and material to its outcome’. parties to it’.
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4.3.2 Potential external tools154 do so for public interest reasons.159 In any case, as this
work refers mainly to the treatment of red flags, it is
1. Notify state authorities. Arbitrators may consider evident that red flags would not have to be disclosed
external sources of fact-finding as well. An issue that has under any circumstances, unless:
generated debate is whether or not arbitrators who have
found indicators of corruption (after red flags have been • they have been validated and evidence of
confirmed and may be deemed to be sufficiently serious acts of corruption have been found from their
to create concerns of possible corruption155), are obliged examination (see Section 2.3 ‘The three steps
to report to the authorities in charge of prosecuting elaborated’); and/or
them (e.g. prosecutors, criminal judges, etc.). • there is a rule requiring arbitrators to make such a
disclosure, as in national rules under anti-money
On the one hand, some suggest that arbitrators must
laundering laws requiring suspicious activity
ensure the confidentiality of the arbitral process, which
reporting if applicable.
is an essential feature of arbitration, and making such
a disclosure would violate confidentiality. On the other 2. Stay of arbitral proceedings.160 Although unusual,
hand, other authors consider that arbitrators should where state authorities are conducting a parallel
notify acts of corruption to the competent authorities, investigation into an act of corruption, arbitrators may
not only to be consistent with the application of the consider staying the proceedings until the investigation
transnational public order,156 but to avoid incurring in is complete, particularly if the investigation is necessary
responsibility as an accomplice or auxiliary to a crime, to solve the case.161 In considering whether to do so,
especially when a local law mandates such disclosure. the tribunal must balance the costs of potential delay
While this debate is not yet settled, there is an initial versus the benefit that may result from the national
consensus that such disclosure requires an express investigative processes.
rule157 or court order158 obliging the arbitral tribunal to Determine whether national authorities are
investigating. In any event, in investor-state cases in
154 As part of its work, the ICC Commission on Arbitration and ADR particular, it may be useful for arbitral tribunals to
Task Force on ‘Addressing Issues of Corruption in International
Arbitration’ has considered the issue of parallel proceedings inquire the state making a corruption allegation as
in corruption cases generally. This Document focuses on the to the status of any present or past investigations,
narrower issue of red flags and is subject to any conclusion and
recommendations the work of the Task Force will formulate. particularly in relation to the state’s knowledge of
155 See Section 2.3 ‘The three steps elaborated’. potential corruption issues. Law enforcement authorities
156 See e.g. T. Martin: ‘International arbitration and corruption: an are typically reluctant to share information about
evolving standard’, TDM 2 (2004): ‘The arbitrator may assume that ongoing investigations, for fear of tipping off potential
he only needs to address the particular interests of the parties in
the arbitration and need not be concerned with international public targets or compromising sources, but the arbitral
policy. That may no longer be the case in the area of corruption. tribunal may request the submission of such information
Given the ratification of these corruption treaties, it is clearly the
international rule of law that bribing government officials is illegal
and those charges with the administration of justice, including public interest for the information to be disclosed’; or Art. 14E(2)(a),
international arbitrators, have the responsibility to ensure that such New Zealand Arbitration Act: ‘The High Court may make an order
laws are applied properly’. under subsection (1) only if – (a) it is satisfied, in the circumstances
of the particular case, that the public interest in preserving the
157 See e.g. B.M. Cremades, D.J.A. Cairns, supra note 132, at p. 85: confidentiality of arbitral proceedings is outweighed by other
‘Such duty [to notify state authorities] could only arise from express considerations that render it desirable in the public interest for the
legislation in a jurisdiction to which the arbitral tribunal, or some confidential information to be disclosed …’.
of its members, were subject.’; M. Hwang, K. Lim, supra note 102,
at para. 102: ‘Any duty of disclosure can only arise from national 159 See e.g. the Czech Criminal Code (Section 368, Act. No. 40/2009
legislation to which the tribunal members are subject. Such duty Coll.; the obligation in Spain to report specific criminal offences
overrides any express or implied obligation of confidentiality. For including those associated with, respectively, direct bribery or
instance, anti-money laundering regulations (which often work corruption activities, applies to 'any person', including arbitrators.
hand-in-hand with anti-corruption legislation) may impose on Similar provisions were reported also in the Netherlands, Poland,
arbitrators an obligation to report his or her reasonable suspicions Tanzania (Section 39(1), Prevention and Combating of Corruption
of a party’s corrupt activities, and exempt them from liability for Act, [Cap 329 R.E 2019] provides that: ‘Every person who is or
any breach of confidentiality obligations’; D. Baizeau, T. Hayes, becomes aware of the commission of or the intention by another
supra note 104, at p. 236: ‘As things stand, there is no evident duty person to commit an offence under this Act shall be required to give
to report corruption that can be gleaned from institutional rules, information to the Bureau’). In England and Wales, arbitrators could
published arbitral awards, national laws or jurisprudence. Subject to be under an obligation to report any conduct which falls outside the
the applicable laws of the seat, arbitrators should therefore not feel ordinary conduct of dispute resolution, for example, if the arbitrator
obliged to report suspicions of corruption’. knows or suspects that there is no genuine dispute and the claim is
a sham brought to launder the proceeds of a crime.
158 Such an order could appear, for example, by applying Art. 23G(1)‌(a),
Australian International Arbitration Act: ‘A court may make an order 160 The subject of ‘parallel proceedings’ is studied separately within the
allowing a party to arbitral proceedings to disclose confidential ICC Commission on Arbitration and ADR Task Force on ‘Addressing
information in relation to the arbitral proceedings in circumstances Issues of Corruption in International Arbitration’.
other than those mentioned in section 23D if: (a) the court is 161 See e.g. Société Générale de Surveillances v. Philippines, ICSID Case
satisfied, in the circumstances of the particular case, that the public No. ARB/02/6, Decision on Objections to Jurisdiction, para. 175;
interest in preserving the confidentiality of arbitral proceedings is L.A. Low, ‘Dealing with Allegations of Corruption in International
outweighed by other considerations that render it desirable in the Arbitration’, AJIL Unbound, Vol. 113, 2019, p. 344.
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in a confidential manner if it deems it necessary to The main internationally recognised business

evaluate the circumstances surrounding a corruption instruments on anti-bribery all largely include the same
allegation. In this regard, it is relevant to note that basic anti-corruption and compliance elements.163
under the aforementioned international anti-corruption Developing an anti-bribery and corruption compliance
conventions, states have undertaken a range of duties programme is one of those fundamental elements.164
to prevent, detect and remediate corrupt practices, in
This has been reinforced by national legislation (most
both the public and the private sector. While it does not
with an extra-territorial reach) – all of them imposing
fall to an arbitral tribunal to enforce those obligations,
or incentivising anti-bribery and corruption compliance
just as the tribunal may inquire as to the measures
programmes, either directly or indirectly.
taken by a private party to prevent or detect corruption,
including by responding to red flags, so it may inquire Whereas the FCPA does not mention explicitly anti-
as to the measures taken by the public administration bribery and corruption compliance programmes, the
in furtherance of treaty commitments. Obviously, such Department of Justice and the Securities and Exchange
steps fall to the discretion of the arbitral tribunal as it Commission Resource Guide to the U.S. Foreign Corrupt
deems necessary or appropriate in its assessment of an Practices Act (2020) (‘FCPA Resource Guide’) states
individual case. at p. 56 :

In a global marketplace, an effective

5. New and emerging issues compliance program reinforces a company’s
internal controls and is essential to detecting
This final Section 5 examines the growing role of and preventing FCPA violations.
corporate compliance measures preventing corruption
and their relevance to arbitral disputes involving The U.S. Sentencing Guidelines, on the other hand, are
corruption allegations (5.1), and the role of artificial far more explicit and not only detail what should be ‘an
intelligence (5.2). effective compliance and ethics program’ but ‘offer
incentives to organisations to reduce and ultimately
5.1 Role of corporate compliance measures eliminate criminal conduct by providing a structural
foundation from which an organisation may self-police
Having an anti-corruption compliance programme has its own conduct through an effective compliance and
become mainstream, at least for large-size companies ethics program’.165 The Department of Justice, the
operating internationally.162 The international legal Department of Commerce and the State Department
framework for combating corruption requires holding have all published guidance on anti-bribery and
legal persons liable for corrupt practices. Additionally, corruption compliance programmes.166
some of the instruments expressly require or incentivise
The UK Bribery Act (2010) provides in its section 7(2)
the adoption by businesses of ‘anti-bribery and
that ‘adequate procedures designed to prevent’ acts
corruption compliance programmes’.
of bribery constitute a full defence for a ‘commercial
The first inter-governmental anti-corruption guidance organization’ which, otherwise, would be guilty of an
for businesses for instance, the OECD Recommendation offence because acts of bribery committed by an
of the Council for Further Combating Bribery of Foreign ‘associated person’. Section 9 states that:
Public Officials in International Business Transactions
The Secretary of State must publish guidance
(2009) recommends that:
about procedures that relevant commercial
Companies should consider, inter alia, the organisations can put in place to prevent
following good practices for ensuring effective persons associated with them from bribing.
internal controls, ethics, and compliance
programmes or measures for the purpose of
preventing and detecting foreign bribery (…).

163 OECD, UN Office on Drugs and Crime (‘UNODC’), and World Bank,
Anti-Corruption Ethics and Compliance Handbook for Business
162 See e.g. S. Bruce, ‘Chapter 1: Evolving Expectations on Business (2013).
Responsibilities for the Environment’; D. Cassel, ‘Chapter 2: The 164 Id. pp. 18-23.
‘hardening’ and ‘broadening’ of Norms on Business and Human
Rights’, Navigating the New Contents of International Public Policy 165 U.S. Sentencing Commission Guidelines Manual 2018, Introductory
- Compliance in Environment and Human Rights (Dossiers XXI, ICC Commentary to Chapter 8 and § 8B2.1(a)(2).
Institute of World Business Law, 2023). 166 FCPA Resource Guide, at p. 67.
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The ‘Bribery Act 2010 guidance’,167 provides that those There is a developing international consensus on
procedures should be informed by six (not prescriptive) compliance best practices. The classical ‘building
principles related to: (i) proportionate procedures, (ii) blocks’ of a state-of-the-art anti-bribery and corruption
top-level commitment, (iii) risk assessment, (iv) due compliance programmes are:
diligence, (v) communication and training, and (vi)
(i) support and commitment from senior
monitoring and review.
management for the prevention of corruption;
In France, the ‘Loi Sapin II’ requires major corporations
(ii) an anti-corruption programme;
to take the appropriate actions to prevent and detect
corruption (‘les mesures destinées à prévenir et à (iii) the oversight thereof;
détecter la commission, en France ou à l’étranger, de
faits de corruption’).168 It is provided that such ‘dispositif (iv) a clear, visible and accessible policy prohibiting
corruption;
anticorruption’ should be articulated based on three
pillars: (i) a clear commitment from top management; (v) detailed policies for particular risk areas;
(ii) a thorough risk mapping; and (iii) a robust risk
management programme aiming at preventing, (vi) the application of the anticorruption programme
detecting and remediating corruption.169 to business partners;

An anti-bribery and corruption compliance programme (vii) internal controls and record keeping;
is relevant to the use of red flags in international (viii) communication and training;
commercial and investor-state arbitration in at least
two respects: (ix) promoting and incentivising ethics and
compliance;
• Some of its constituent elements – especially in
relation to the risks associated with third parties – (x) means for seeking guidance, detecting and
make an extensive use of red flags (albeit in an ex reporting violations;
ante context);170
(xi) how to address violations; and
• The existence, design, implementation, and
(xii) periodic reviews and evaluations of the anti-
enforcement of the anti-bribery and corruption
corruption programme.171
compliance programmes (or the lack thereof) can
constitute a green or a red flag in itself. Some of those constituent elements make an extensive
use of red flags to help prevent or help detect acts of
corruption.

The risk mapping which should form the very basis of

an efficient and effective anti-bribery and corruption
167 A non-statutory ‘quick start’ version is also available: The Bribery Act compliance programmes clearly builds upon the
2010 - Quick start guide (publishing.service.gov.uk). detection – in a preventive way, ex ante – of red flags,
168 ‘Loi n° 2016-1691 du 9 déc. 2016 relative à la transparence, as illustrated for example by the lists provided by
à la lutte contre la corruption et à la modernisation de la vie
économique’, Art. 17-I. the UK Bribery Act Guidance (2010),172 and by the
169 ‘Avis du 4 décembre 2020 relatif aux recommandations de l’Agence ‘Recommandations de l’Agence Française Anticorruption
française anticorruption destinées à aider les personnes morales (‘AFA’) (2021).173
de droit public et de droit privé à prévenir et à détecter les faits de
corruption, de trafic d’influence, de concussion, de prise illégale
d’intérêts, de détournement de fonds publics et de favoritisme’, at
Due diligence reports on partners, suppliers, clients,
pp. 4-5. Courtesy translation in English: ‘Notice on the French Anti- etc. do also rely heavily on the identification of red
Corruption Agency Guidelines to help Public and Private Sector flags.174 For example, in the context of M&A, the due
Entities to Prevent and Detect Bribery, Influence Peddling, Extortion
by Public Officials, Illegal Taking of Interest, Misappropriation of diligence process is an in-depth analysis of a target
Public Funds and Favouritism’. company or asset. Its purpose is to identify strengths
170 It should be noted that, whereas red flags used in an ex ante and weaknesses, risks and opportunities, as well as key
versus ex post context both pursue a risk identification purpose,
what one tries to achieve by them is fundamentally different (see
Section 2.2.1). In an ex ante context, red flags are indicators which
hint at the (increased) possibility that corruption may occur in the 171 See Annex 1 ‘Comparison Table of Business Guidance Instruments
future; the existence of such indicators may lead a company, for on Anti-Bribery’ in OECD, UN Office on Drugs and Crime (‘UNODC’),
example, not to contract with this specific counterpart or under and World Bank Anti-Corruption Ethics and Compliance Handbook
these specific terms, or in that particular sector or country. The for Business, at pp. 77-119.
purpose is to avoid corruption. In an ex post context – an audit into 172 UK Bribery Act Guidance (2010), at p. 26.
past behaviour, or an assessment of the validity of a contract under
arbitration – red flags also hint at a potential risk, but with aim of 173 Recommandations de l’AFA, at para. 136.
correcting a potential past corrupt practice and its contractual or 174 See e.g. ‘FCPA Resource Guide’, at pp. 62-65; ‘Recommandations de
other consequences. The purpose here is to ‘sanction’ corruption. l’AFA’, paras. 220, 221, 223, 228 and 230.
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value drivers. The results of the due diligence are used 5.2 Role of artificial intelligence in red flag
to determine the purchase price, draft the purchase generation and analysis
agreement, conduct negotiations, and form the basis
for integration plans. Some findings of the due diligence Effective management of corruption and fraud risks
however can also lead to the termination of the depends on the entities’ ability to extract meaning from
transaction, in case specific deal breakers are identified data through analysis, tools and techniques.179 Clearly,
and cannot be mitigated.175 Such findings – in fact, building on the data available in, and to, the company
indicators of a potential risk that cannot be mitigated to is an essential part of an effective anti-bribery and
the buyer’s satisfaction – are commonly referred to as corruption compliance programme. Because this data
‘red flags’. The same is obviously true for internal controls needs to be gathered, systematised and analysed,
and audits.176 and as the amount of data can be gigantic, the use
of artificial intelligence (‘AI’) makes a lot of sense. Both
Today, the absence of an anti-bribery and corruption
the U.S. Department of Justice and the OECD have
compliance programme (in disregard of international
alluded to this, respectively in 2020180 and 2018.181
and national recommendations), a poorly designed
Neither of these guidance documents states that all
programme, or one that is not implemented seriously
companies must adopt AI. Taken together, however, they
and enforced fairly, also constitute red flags.177 As
strongly indicate that companies must be prepared to
indicated above, several elements must, however, be
demonstrate that they can and do draw on all relevant
taken into account: e.g. the criticality of this red flag
data within their organization to effectively manage
depends on whether having a well-calibrated anti-
their compliance programmes.182
bribery and corruption compliance programme is
simply a good practice or a requirement in the relevant Even if very few private sector companies seem to use
jurisdiction at the relevant time. It should also be noted machine learning products and services specific to
that such red flags can relate not only to the party who anti-corruption, a certain number of developments
allegedly engaged in corruption but also to the party indicate that there may be genuine value in using AI for
that engaged in corruption (e.g. when it has an anti- anti-corruption purposes183: at least a certain number
bribery and corruption compliance programme in place, of companies have already developed and deployed
but has not implemented it seriously). machine learning solutions in direct support of their
anti-bribery and corruption compliance programmes;
Conversely, as noted earlier,178 the existence of a
non-governmental organisations have touted the use of
preventive programme and its implementation in a
AI for anti-corruption purposes; academic studies have
particular case can serve as a green flag, indicating
demonstrated the utility of AI in analysing public data
that proper risk mitigation measures have been taken.
to make predictive judgments related to corruption;
However, as noted above in the discussion of ex ante
and anti-corruption advocacy organisations and
versus ex post risk analysis, while red flags play a role in
investigative journalists have made effective use of AI.184
both contexts, the objective of the risk analysis exercise
Still, the use of AI in this context is in its very early days.
is different in the two contexts. Ex ante processes
consider the risk of improper conduct occurring, As machine learning’s great strength is in efficiently
whereas ex post the issues is whether such conduct reviewing and finding associations between data in very
has in fact occurred. While it is useful to consider what large datasets to improve identifying, monitoring, and
preventive measures have been taken, judgments acting on higher-risk transactions and relationships,
ultimately made in the preventive context (e.g. not to do
business with a particular party or in a particular place 179 OECD, ‘Analytics for Integrity. Data-Driven Approaches for
at a particular time) are unlikely to be determinative in Enhancing Corruption and Fraud Risk Assessment’ (2019), p. 27.
See also ‘Corruption risk management and audit’ in Anti-Corruption
the ex post context. and Integrity Outlook (2024), p. 27.
180 Criminal Division, U.S. Department of Justice, ‘Evaluation of
Corporate Compliance Programs’ (updated March 2023), at
pp. 5-6: ‘Confidential Reporting Structure and Investigation Process’.
181 Organisation for Economic Co-operation and Development, OECD
‘Due Diligence Guidance for Responsible Business Conduct’ (2018),
at pp. 82- 84: ‘Track Implementation and Results’.
175 See https://merger-strategy.com/due-diligence-meaning/. 182 Coalition for Integrity, ‘Using Machine Learning for Anti-Corruption
176 E.g. ‘Recommandations de l’AFA’, para. 298. Risk and Compliance’ (2021), at pp. 2-3.
177 For a hypothetical yet telling example, see ‘FCPA Resource Guide’, 183 AI having been dubbed as ‘the next frontier in anti-corruption’:
p. 65; comp. ‘Recommandations de l’AFA’, para. 223: ‘Le fait que A. Petheram, I. Nti Asare, ‘From Open Data to Artificial Intelligence:
le tiers ne communique pas sur la mise en place d’un tel dispositif the Next Frontier in Anti-Corruption’ (https://oxfordinsights.com,
[de conformité anticorruption] et ne le documente pas peut être 27 July 2018).
considéré comme un point de vigilance’. 184 ‘Using Machine Learning for Anti-Corruption Risk and Compliance’,
178 See Section 2.2 above. supra note 182, at pp. 6-10.
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both for general compliance oversight (preventive) and Annex – References

for internal investigations (preventive and corrective),185
its most straightforward benefit lies in the areas where
companies search for red flags: risk mapping, due 1. Principal international conventions
diligence and monitoring (internal control, audit, etc.).186
It saves human resources by taking over key tasks of • OCDE, ‘Convention on Combating Bribery of
pre-screening large datasets, analysing it to enable Foreign Public Officials in International Business
detecting, predicting, and reporting risks, suspicions or Transactions’ (adopted in 1997, entered into force
clear-cut cases of crimes.187 It allows clustering of similar in 1999).
data, helping identify high risk suppliers in specific • ‘United Nations Convention against Corruption’
countries or businesses, so-called politically exposed (‘UCAC’) (adopted in 2003, entered into force in
people, dubious customers and so forth. It also detects 2005).
anomalies (e.g. payments of unusual size or frequency).
• Organization of American States, ‘Inter-American
Finally, it can be used both to prevent and to detect
Convention Against Corruption’ (adopted in 1997,
inappropriate conduct.
entered into force in 1997).
As such, in arbitration, red flags ‘generated’ by AI do give
• Council of Europe, ‘Criminal Law Convention on
rise to identical questions as red flags identified by more
Corruption’ (adopted in 1999, entered into force
classical means (have they been legitimately obtained or
in 2002), and ‘Additional Protocol to the Criminal
not, what is their probative value, etc.), with a twist:
Law Convention on Corruption’ (adopted in 2003,
(i) Red flags generated via AI do suffer the limits of entered into force in 2005).
the tool itself; class imbalance in the data set, • Council of Europe, ‘Civil Law Convention on
overfitting, underfitting and bias are the most Corruption’ (adopted in 1999, entered into force
common ones.188 in 2003).
(ii) One can doubt arbitrators, and counsel and • European Union, ‘Convention drawn up on
parties today have the required skills to interpret the basis of Article K.3 (2) (c) of the Treaty on
and understand the data to detect flaws and bias, European Union on the fight against corruption
especially when these are embedded in the design involving officials of the European Communities or
of the algorithm itself. Expert testimony may officials of Member States of the European Union’
become critical in these matters.
(adopted in 1997, entered into force in 2005).
(iii) The issue is particularly sensitive when AI • African Union, ‘Convention on Preventing and
generated red flags are used by one party to make Combating Corruption’ (adopted in 2003, entered
its case against the other party and when the into force in 2006).
arbitrators’ decision as to their probative value
may well affect the enforceability of the award.
In this context, the very design choices of the 2. Selected national legislation and guidance
technology and algorithm will have an impact, documents
especially the trade-off made between the need
to avoid ‘false positives’ (wrongly classifying facts i) France
as corruption) and ‘false negatives’ (leaving actual
• Loi relative à la transparence, à la lutte contre
corrupt cases undetected or unaccounted for).
la corruption et à la modernisation de la vie
As the use of AI in anti-corruption and in arbitration économique (‘Loi Sapin II’) (2016).
is still in its early days, these questions are, to the • Agence française anticorruption, ‘Avis du 4
largest extent, uncharted territory – and request further décembre 2020 relatif aux recommandations
in‑depth research. de l’Agence française anticorruption destinées
à aider les personnes morales de droit public et
de droit privé à prévenir et à détecter les faits de
corruption, de trafic d’influence, de concussion,
185 Id. at p. 13. de prise illégale d’intérêts, de détournement de
186 See Section 5.1 ‘Role of corporate compliance measures’. fonds publics et de favoritisme’.
187 N. Köbis, C. Starke, I. Rahwan, ‘Artificial Intelligence as an Anti-
Corruption Tool (AI-ACT) – Potential and Pitfalls for Top-down and
Bottom-up Approaches’, at p. 6.
188 ‘Using Machine Learning for Anti-Corruption Risk and Compliance’,
supra note 182, at pp. 28-36.
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• Courtesy translation in English: ‘Notice on the • Asia-Pacific Economic Co-operations, APEC Anti-
French Anti-Corruption Agency Guidelines to Corruption Code of Conduct for Business (2007).
help Public and Private Sector Entities to Prevent
• World Bank, ‘Integrity Compliance Guidelines
and Detect Bribery, Influence Peddling, Extortion
(2011).
by Public Officials, Illegal Taking of Interest,
Misappropriation of Public Funds and Favouritism’.
4. Country rankings and selected industry
ii) United Kingdom initiatives

• Bribery Act 2010 • Transparency International, ‘Corruption

• Bribery Act Guidance: ‘Guidance about Perceptions Index (CPI)’ (2022 and prior years).
procedures which relevant commercial • World Justice Project, WJP - Rule of Law Index
organisations can put into place to prevent (2023 and prior years): ‘The 2023 WJP Rule of Law
persons associated with them from bribing Index® evaluates 142 countries and jurisdictions
(section 9 of the Bribery Act 2010)’ and around the world. For the sixth year in a row, the
‘Quick start guide’. rule of law has declined in most countries’.

iii) United States • World Bank ‘Ease of Doing Business Index’

(discontinued in 2021, but reinstatement slated for
• U.S. Department of Justice, Criminal Division, 2024).
Foreign Corrupt Practices Act (‘FCPA’) (1977),
• Extractive Industries Transparency Initiative,
paras. 78dd-1 (prohibiting corrupt practices by
‘2023 EITI Standard’: ‘The EITI Standard outlines
‘issuers’), dd-2 (prohibiting corrupt practices by
the requirements applicable to countries
‘domestic concerns’) and dd-3 (prohibiting corrupt
implementing the EITI as well as the Articles of
practices by ‘any persons’).
Association governing the EITI’.
• U.S. Department of Justice and Securities and
• Transparency International, ‘Defence Industry
Exchange Commission, ‘Resource Guide to the
Integrity’: Key work includes ‘Defence Companies
U.S. Foreign Corrupt Practices Act’ (2nd ed., 2020).
Index on Anti-Corruption and Corporate
Transparency (DCI)’, ‘Defence Procurement
3. International good practice standards and Standards’, ‘Industry Influence’, ‘Illicit arms flows’.
guidance for businesses
• FIDIC ‘Guidelines for Integrity Management in the
• ICC ‘Anti-corruption Third Party Due Diligence: A Consulting Industry, Part III – FIMS and ISO 37001
Guide for Small- and Medium-sized Enterprises’ Procedures’ (2019).
(2016).
• ICC ‘Rules on Combating Corruption’ (2023).
• OECD ‘Good Practice Guidance on Internal
Controls, Ethics and Compliance’, Annex II to
the OECD Council Recommendation for Further
Combating Bribery of Foreign Public Officials
in International Business Transactions (2010,
updated in 2021).
• World Economic Forum, ‘Partnering Against
Corruption Initiative, PACI Overview’ (2024).
• Transparency International, ‘Business Principles
for Countering Bribery’ (2013).
• International Organization for Standardization,
‘ISO 37001 – Anti-Bribery management systems’
(2016).
• OECD, UNODC, and World Bank, Anti-Corruption
Ethics and Compliance Handbook for Business
(2013).
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ICC DRS Activities

ICC Young Arbitration and ADR Forum (YAAF)

Unravelling the Knot – Insolvency in the Realm of Arbitration

New York, 13 June 2024

Florencia Villaggi
Vice President, Burford Capital, New York; ICC YAAF North American Representative

Lucila Marchini
Senior Associate, Herbert Smith Freehills NY LLP, New York

The authors would like to express sincere gratitude to Michael Zhao, Summer Associate at Herbert Smith Freehills NY LLP, for his
contribution to this report.

Insolvency and arbitration are two contrasting mechanisms, but their intersection has become
prevailing. The ‘automatic stay’ that results from insolvency proceedings can significantly impact
arbitral proceedings, raising a range of substantive and procedural issues. At an event organised by ICC YAAF,
Panellists engaged in an interesting discussion to ‘unravel the knot’ introduced by insolvency proceedings on arbitration
agreements, arbitral proceedings, and the enforceability of arbitral awards.

1. An overview on insolvency vis-à-vis Before diving into the issues arising out of the
hypothetical scenario, Benjamin Beller (Partner, Sullivan
arbitration in the U.S. and Cromwell LLP, New York) provided a basic overview
of insolvency proceeding in the U.S. He explained that
The moderator Lucila Marchini (Senior Associate, once a company files for insolvency or bankruptcy, all
Herbert Smith Freehills, New York) began the discussion actions outside of the bankruptcy proceedings, including
by introducing a hypothetical scenario to the panellists: lawsuits, arbitrations, enforcement actions, notices
• Owner, a company from Atlantis, concluded an to enforce, and notices of default are automatically
EPC contract with Contractor, incorporated in stayed. Parties can petition the bankruptcy court to lift
El Dorado, where the project is also located. The the automatic stay and continue other actions against
arbitration clause in the EPC contract specifies the insolvent party under justifiable circumstances.
New York, U.S. as the seat of arbitration. In the U.S., federal laws heavily favour arbitration,
so the bankruptcy court generally respects parties’
• Owner encountered numerous issues due to agreement to arbitrate. When it comes to enforcing an
the Contractor’s omissions, breaches, technical arbitral award in the insolvency proceeding, the award
deficiencies, and significant delays, which were creditor will be treated as an unsecured creditor under
compounded by Contractor’s financial problems. Chapter 11 of the United States Bankruptcy Code
In February 2024, Owner terminated the contract (‘Bankruptcy Code’).
and demanded compensation from both the
Contractor and its U.S.-based parent company. Ishaan Madaan (Associate, DLA Piper, New York)
summarised the key features of both arbitration and
• In March 2024, Contractor’s parent company in
insolvency. He noted that while arbitral proceedings
the U.S. entered insolvency proceeding, leading
are a decentralised system, rooted in party autonomy,
to the subsequent insolvency proceeding for the
insolvency proceedings are centralised with the aim
Contractor in El Dorado. In June 2024, Owner
to maximise the value of the insolvent party’s assets
initiated arbitration in New York against both the
so that everyone can benefit from one proceeding.
Contractor in El Dorado and its parent company
In the hypothetical scenario, Owner is not concerned
in the U.S.
with El Dorado’s domestic objectives in the insolvency
• Both respondent entities immediately challenged proceeding, but rather is focused on enforcing the
the arbitral tribunal’s jurisdiction in New York, arbitration agreement entered with Contractor.
arguing that any claims should be addressed
in the insolvency proceedings in the U.S. and/or
El Dorado.
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Applicable law The court found that the capacity of a party to contract
should be considered at the time of entering into the
The application of different laws1 can lead to varying arbitration agreement, and insolvency proceedings do
outcomes in situations where insolvency and arbitration not exempt the parties from its obligation to arbitrate.
intersect. Sharmistha Chakrabarti (Counsel, Skadden,
Arps, Slate, Meagher & Flom LLP, New York) introduced Mr Maadan further elaborated that outcomes can vary
the case Vivendi v. Elektrim as an example. In this case, depending on whether the debtor is the claimant or
Vivendi commenced two arbitral proceedings against the respondent. Many pro-arbitration jurisdictions will
Elektrim. One was seated in London, and the other generally allow the arbitration to proceed as long as the
in Geneva. Elektrim filed for bankruptcy in Poland. In arbitral tribunal does not encroach on the core issues
the London-seated arbitration, the arbitral tribunal, reserved for the insolvency proceeding. Especially when
applying the English law, let the arbitration proceed the debtor is the claimant, continuing with the arbitral
and rendered a US$1.9 billion award against Elektrim. proceeding could potentially maximise the value of the
However, in the Geneva-seated arbitration, the arbitral assets for the creditors, so the court would generally let
tribunal, applying the Polish law, voided the arbitration the arbitration proceed.
agreement and stayed the arbitral proceedings.2
Timing
Drawing from these contrasting outcomes,
Ms Chakrabarti underscored that the law of the seat In U.S. bankruptcy proceedings, the maturity of the
of arbitration, the agreed-upon applicable law to the arbitration claim (i.e. before or after bankruptcy) will
arbitral proceedings (if different) or the substantive affect the parties’ litigation strategies. Ms Chakrabarti
law applicable to the contract, as well as the selected and Mr Beller discussed the different approaches that
arbitrators who will decide what law applies, are crucial the parties can take regarding the automatic stay under
considerations that insolvency proceedings may have a Section 362 of the Bankruptcy Code. One approach
significant impact on arbitral proceedings. could be to proceed with the arbitration proceedings
under the assumption that the arbitration claims are
Arbitration agreement not subject to the automatic stay. Later on, if the issue
is litigated in the bankruptcy court, the party could ask
Mr Madaan next addressed whether one party’s the bankruptcy court for ‘forgiveness’. Alternatively,
insolvency will undermine the validity of the arbitration a more conservative approach would be to request
agreement entered by such party. Generally in the U.S., a the bankruptcy court to lift the automatic stay for the
company undergoing insolvency proceedings continues arbitration claim. This approach might carry more risks
to have legal capacity. Therefore, the validity of the as the judge may deny the request, depending on the
arbitration agreements entered by such party cannot court and the specific circumstances.
be challenged based on an alleged lack of capacity.
He explained that the Swiss Supreme Court reached
the same conclusion in the case ‘X v. Y’,3 in which the 2. Procedural and administrative
respondent, a Portuguese company in insolvency considerations in arbitration
proceedings, challenged the arbitral tribunal’s
jurisdiction for lack of valid arbitration agreement. The Yilin Tim Chen (Senior Associate, Freshfields Bruckhaus
Swiss Supreme Court affirmed the arbitral tribunal’s Deringer, New York) and Mr Madaan then discussed
decision rejecting the jurisdictional challenge and several practical implications in arbitration-insolvency
ordered the continuation of the arbitration proceedings. correlated proceeding:

1 The IBA Toolkit on Insolvency and Arbitration provides guidance • Ensure to settle with the appropriate counterparty,
in situations where a party to arbitral proceedings is also subject whether it is the ‘trustee’ or ‘debtor’ depending
to insolvency proceedings in one or more jurisdictions. It includes
on the proceeding, and get the settlement
national reports from several countries, discussing the legal
approach to such intersection. agreement approved by the bankruptcy court;
2 Vivendi v. Elektrim (I), Judgment of the United Kingdom High
Court of Justice [2007] EWHC 571, 20 Mar. 2007. And Vivendi
• Apply for interim relief if necessary and secure the
Universal v. Elektrim (II), Decision of the Swiss Federal Tribunal bankruptcy court’s approval for it;
4A_428/2008, 31 Mar. 2009. See also D. Vidal, ‘Arbitration and
Insolvency Proceedings: Comments on ICC Awards and Other • Be conscious of domestic laws prohibiting
Recent Decisions’, ICC International Court of Arbitration Bulletin, insolvent parties from participating in arbitrations;
Vol. 20 n°1, 2009; F. Mantilla-Serrano, ‘Arbitration and Insolvency:
Important Aspects for Tribunals to Consider’ in Arbitration Beyond and
Borders: Essays in Memory of Guillermo Aguilar Álvarez, N. Blackaby,
W.M. Reisman (eds.) (Wolters Kluwer, 2023). • Consider placing security on the insolvent party’s
3 N. Voser, ‘Insolvency and arbitration: Swiss Supreme Court revisits its assets or getting the claims insured.
Vivendi vs. Elektrim decision’ (Kluwer Arbitration Blog, 5 Dec. 2012).
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3. Enforceability of arbitral awards

Ms Chakrabarti then pointed to the tension created

when the bankruptcy court stays the arbitration, but
the arbitral tribunal nonetheless renders the award.
She referred to the case Fotochrome v. Copal,4 where
Fotochrome, a Delaware company, filed for bankruptcy
in the U.S. and requested the arbitral tribunal, seated in
Tokyo, to stay the arbitration. The arbitral tribunal denied
the stay, citing the lengthy duration of the arbitration
proceedings and the fact that the arbitral tribunal was
close to issuing an award. The arbitraltribunal then
proceeded to render an award against Fotochrome.

When Copal sought to enforce the award against

Fotochrome in the U.S., the bankruptcy court denied
Copal’s enforcement request on the ground that the
arbitration proceeded in violation of the automatic
stay. However, the Second Circuit reversed the decision,
considering that the automatic stay does not necessarily
suspend all ongoing proceedings, and the bankruptcy
court does not have personal jurisdiction over an arbitral
tribunal seated in Tokyo.

Despite this decision which clearly favours arbitration,

Ms Chakrabarti cautioned that violating the automatic
stay (i.e. violating the Bankruptcy Code) could potentially
be a ground for setting aside the award under the
Federal Arbitration Act and the New York Convention, as
such critical mechanism of Bankruptcy Code could be
considered part of the U.S. public policy. In Fotochrome
v. Copal, the court did not address whether violating the
Bankruptcy Code amounts to a violation of public policy,
but recent cases have concluded it does.

Mr Beller also noted that the award-creditor should

submit the claim under Chapter 11 of the Bankruptcy
Code before the ‘bar date’, and that the amount
awarded in the arbitration award would probably not
be enforced at 100%, since the award-creditor’s claim
may be unsecured and in lower priority than secured
creditors, and that the enforcement may take months
to years.

In conclusion, the intersection of insolvency and

arbitration presents a complex web of legal and
procedural issues that require careful navigation. The
discussions and case studies presented by the panellists
served to unravel some of these complexities, shedding
light on the practical implications and potential
strategies for managing these correlated proceedings.

4 Fotochrome, Inc. v. Copal Company, Ltd., 517 F.2d 512 (2d Cir.
1975); T. Lawler ‘‘Fotochrome, Inc. v. Copal Company Limited’,
1 Maryland J. Int’l L. 263 (1976) See also T. Robinson, ‘The
Recognition and Enforcement of Foreign Arbitral Awards As
Foreign Judgments in the United States’, The American Review of
International Arbitration, Vol. 24 No. 1.
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ICC DRS Regional Conferences

8th ICC Africa Conference on International Arbitration –

Emerging Trends in ADR in Africa
30-31 May 2024, Nairobi, Kenya

Albert Mukasa
M&K Advocates, Kampala, Uganda; ICC YAAF Representative for Africa

The 8th ICC Africa Conference on International Arbitration ('Conference') was held at the Emara Ole Serene overlooking
the picturesque Nairobi National Park in Nairobi, Kenya. The first edition to be held in East Africa, with 284 participants
and 28 countries represented, followed an ICC Institute Training on Dispute Boards and featured expert-led discussions
and insights into the unique aspects of arbitration and ADR practices in the region and a mock ICC International Court
of Arbitration (‘ICC Court’) session. This report summarises 10 of the key themes of the Conference. The 9th ICC Africa
Conference on International Arbitration will take place on 28-30 May 2025 in Kenya.

1. Opening remarks Ms Diawara also highlighted the ICC’s unwavering

commitment to diversity with the appointment of African
Arbitrators, who accounted for just over 4% of the
Diamana Diawara (Director, Arbitration and ADR for
arbitrators confirmed or appointed by ICC in 2023. She
Africa, ICC), in her opening remarks, highlighted that,
noted that whereas the figures were still low, progress
in 2023, the ICC Court administered newly registered
was stiff and growing. Other initiatives, such as the
disputes amounting to a total value of US$ 53 billion,
recently launched ICC Academy for Africa, ensure the
which represented over 70% of Tanzania’s GDP. Further,
building of capacity and visibility of African Practitioners
the aggregated value of all disputes pending before the
in the ICC ranks.2
ICC Court (1,766 at the end of 2023), reached US$ 255
billion, representing more than twice the GDP of Kenya. During the Conference, Hon. Mr Justice Richard
Mwongo highlighted that ICC – as the world’s largest
Ms Diawara highlighted that ICC has been instrumental
business forum – has been promoting global peace
in resolving disputes in Africa, particularly those
and opportunities since 1919 and that the current
involving the construction and engineering industry.
ADR trends seen in Africa include growth in dispute
Although the above mentioned industries are more
resolution, gender diversification, and increased ADR
dominant, many other business sectors in Africa such as,
training. Dorothy Ufot SAN (Founder, Dorothy Ufot
transportation, extractive sector, finance and insurance
& Co, Nigeria) highlighted that the economic growth
trust ICC to resolve their disputes.
and increasing commercial disputes across Africa are
She further stressed that the strength of ICC is that driving the need for efficient dispute resolution, and
different types of parties choose ICC Rules to resolve praised the Kenyan courts for supporting for arbitration
their disputes. It is a truly global institution equipped by recognising and enforcing arbitral agreements
to handle disputes and transactions from SMEs, and awards.
multinationals, or states and state-owned entities.
With over 400 awards under its expedited procedure
since 2017 since the procedure was established, 95%
of which had a dispute value below 3 million, ICC’s
capability of resolving a wide range of dispute scales is
well demonstrated.1
2 The next ICC Advanced Arbitration Academy for Africa will take
place from May 2024 to March 2025 in Nairobi, Dakar, Casablanca
1 See the ICC 2023 Dispute Resolution Statistics, and E. Zlatanska, and Accra. More information on Professional Development at ICC
R. Dupeyré, 'Expedited Procedures – Practical and Comparative is available at https://iccwbo.org/dispute-resolution/professional-
Considerations', ICC Dispute Resolution Bulletin 2023-1. development/.
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2. Keynote address: Emerging trends in 3. ADR, Alternative Justice Systems (AJS)

alternative dispute resolution in Africa and Non-Judicial Grievance Mechanisms

The Keynote address3 by Justice William Ouko (Justice The power of mediation over arbitration and litigation,
of the Supreme Court of Kenya) on behalf of Hon. Lady is that the latter is often expensive in Africa. In addition,
Justice Martha Koome (Chief Justice of Kenya), court-annexed mediation showcased a decrease in the
provided a historical context to arbitration, especially backlog of court cases.6 Most disputes in Kenya are
in Africa and the evolving socioeconomic landscape in resolved outside of court. AJS are crucial for promoting
attracting foreign direct investment into the continent access to justice, especially in multi-layered and cross-
and the utility of ADR as a panacea for swift and fair to border disputes and achieving restorative justice.
resolution of disputes to build investor confidence and
While noting that effective dispute resolution is directly
promote a stable and predictable business environment.
linked to attracting foreign direct investment, the panel
He further noted that the implementation of the African
stressed the importance of tailoring ADR methods to the
Continental Free Trade Area (AfCFTA)4 will provide a
specific needs and challenges of each sector. Specific
further avenue for using ADR as an efficient tool to
case studies and success stories showcased how ADR
manage disputes that arise and maintain the increase in
could effectively resolve construction, finance, and
trade flows into the continent.
healthcare disputes. The discussion highlighted the
Policy reforms in Kenya, such as the National Alternative cost-effectiveness and efficiency of ADR compared to
Dispute Resolution Policy and the Judiciary’s Strategic traditional litigation, instilling confidence in its role in
Blueprint, ‘Social 13 Transformation through Access maintaining business relationships.7
to Justice (STAJ)’,5 have also played a critical role in
The session also covered emerging trends and
improving access to justice through the adoption
best practices in sector-specific ADR, including the
of a multi-door approach to the delivery of justice.
growing use of technology and specialised training
Technology is also seen as a transformative force in
for practitioners. It concluded with insights on future
shaping the future of dispute resolution on the continent,
developments and the potential for ADR to further
in line with the ever-evolving socio-economic landscape
enhance dispute resolution across different industries.
and legal frameworks. Artificial Intelligence has emerged
as a force to be reckoned with, offering several benefits, During the colonial era in Africa, traditional dispute
including efficiency and speed, cost-effectiveness, resolution systems and AJS were repressed in favour
reduction of human error, improved decision-making, of the colonial legal systems introduced at the time.8
mitigation of bias, accessibility and transparency, Knowledge sharing and cooperation in addressing
and language translation. Artificial Intelligence is a challenges in Africa are crucial, and it’s equally
complementary tool not intended to replace arbitrators. important to adapt international ADR standards to
fit the unique social contexts of African countries,
Justice William Ouko concluded his keynote address
respecting their individuality. Government and non-
with the reminder that the courts still play a significant
governmental institutions play a critical role in promoting
supervisory role in the ADR ecosystem by referring
ADR, with seats of arbitration shaped by formal legal
disputes and enforcing decisions, which efforts have
infrastructures influenced by governments.
alleviated the court system’s case backlog.

6 ‘State of the Judiciary and Administration of Justice, Annual Report

2022/23’, at p. 108: ‘The overall settlement rate for matters referred
to CAM [Court Annexed Mediations] was 51,2%.’
7 The Conference also highlighted concerns about the increased
cost and lengthy procedures in arbitration, which are akin to
litigation, thus leading to some parties shunning the process.
Arbitrators have a cardinal duty to manage time and costs and
competent arbitrators who could limit the length of proceedings
and submissions needed to be appointed. The panel agreed
that a predictable scale for international arbitration fees could
3 https://judiciary.go.ke/download/remarks-delivered-justice-william- reduce unnecessary expenses. Reports of the ICC Commission
ouko-at-the-opening-ceremony-of-the-8th-icc-africa-conference-on- on Arbitration and ADR ‘Reducing Time and Costs in Arbitration’
international-arbitration/. (2012), ‘Effective Management of Arbitration’ (2014) and ‘Effective
4 https://au-afcfta.org/purpose-the-afcfta/. Conflict Management’ (2023) provide valuable tools for managing
5 https://judiciary.go.ke/wp-content/uploads/2023/11/STAJ-Blueprint. cost and time in arbitral and ADR proceedings.
pdf. 8 See e.g. F. Kariuki ‘African-Traditional-Justice-Systems’, at p. 12.
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4. Fireside chat: Spotlight on African disputes relating to digital assets. Blockchain technology
is a decentralised digital ledger that revolutionises
business success stories industries like finance, emphasising its legal implications
and the need for balanced regulation.
The fireside chat shone a bright spotlight on the
transformative role of social entrepreneurship in Cryptocurrencies are increasingly recognised as
Africa emphasising that it is not just about business, valuable investments, driving innovation and opening
but also about creating a lasting impact that can new markets despite their volatility. Fintech is breaking
alleviate poverty, inequality, and exclusion. Interventions barriers and making financial services more convenient
in agriculture, job creation, and environmental and inclusive through innovations like mobile banking
sustainability are the building blocks of this apps and blockchain-based solutions.
inspiring vision.
Consumer protection in crypto or digital assets is
The private sector, with its immense potential, is a key critical as consumers want tech companies to be more
player in driving change and creating wealth. With the innovative. Regulators are often apprehensive of digital
right collaborative framework, businesses can thrive assets or crypto due to the democratisation of money;
and contribute to international trade, bridging the gap however, certain jurisdictions like Ghana and Rwanda
between Africa and countries like the United States. have regulated the industry to protect consumers.
This potential is a source of optimism and motivation Lifting the ban on cryptocurrencies while implementing
for all involved in Africa. The African Continental Free clear regulations is crucial for fostering innovation
Trade Area (AfCFTA) will create exponential growth in and ensuring investor protection, allowing responsible
Africa, and lawyers were urged to support their clients’ growth and harnessing blockchain’s economic potential
businesses so that they can take advantage of this intra- in Africa.
African trade platform.

It was further stressed that businesses should take 6. Future of construction dispute
advantage of capacity-building initiatives to strengthen resolution in Africa
their businesses. For them to thrive, conducive and
predictable legal, regulatory, fiscal, and tax policies
Construction contracts contain a critical party,
should be adopted. Technology and automation, as well
a contract administrator, who is responsible for
as corporate governance, should be an integral part of
supervising the contract and ensuring quality control,
the businesses in order for them to scale up.
cost management, compliance with work programs,
and more. The contract administrator’s role is crucial
5. Lessons learnt from the recent global in resolving disputes, as they oversee the entire
construction process and can intervene to prevent or
disruptions to ADR: Emerging disputes resolve issues as they arise.
trends in Fintech and Crypto
Furthermore, an essential feature of construction
contracts is the provision for immediate or real-time
The session highlighted how COVID-19 led to the
dispute resolution, as disputes that occur during
adoption of virtual hearings through protocols, such
construction projects must be resolved in real time. The
as the Africa Arbitration Academy Protocol on virtual
prevalent challenge in many African jurisdictions relates
hearings in Africa, 9 and away from the physical
to the enforcement of adjudicator’s decisions in different
hearings that were the norm pre-pandemic. Several
jurisdictions due to the prevailing statutory framework.
challenges, such as a lack of awareness of virtual
This challenge often arises due to the lack of uniformity
protocols and internet connectivity issues, impact the
in ADR laws across African countries, making it difficult
effectiveness of virtual proceedings in arbitration on
to enforce decisions made in one jurisdiction in another.
the continent.
Construction and infrastructure contracts are uniquely
On the Fintech and Crypto sectors, a panel discussion
complex for several reasons: they are high-risk, with
delved into three critical aspects of jurisdiction, service
many uncertainties; they occur over a long period;
of process and property rights in digital assets. It was
they have multiple stakeholders; and they have high
stressed that different courts, such as in the UK and
profit margins.
Singapore, had applied different approaches to resolve

9 https://www.africaarbitrationacademy.org/wp-content/
uploads/2020/04/Africa-Arbitration-Academy-Protocol-on-Virtual-
Hearings-in-Africa-2020.pdf
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7. Energy transition in the spotlight: 9. Current trends in investment

ADR as a force for good arbitration in Africa

The panel highlighted the significance of renewable Investment treaty claims from 2021 to 2023 revealed
energy sources such as wind, geothermal, and solar that two-thirds of new claims were brought against
in the energy transition. Power Purchase Agreements only 15% of African States, with Egypt, the Democratic
(PPAs) are critical for negotiating between governments Republic of Congo, Algeria, the Republic of Congo
and energy providers. The discussion emphasised and Tanzania as repeat offenders.12 The impact of
the need to consider Africa’s diverse landscape claims on states includes strain on state finances
and developmental needs in addressing its energy and diversion of funds, deterrence of future foreign
challenges. While fossil fuel investments play a role in investment and effects on the country’s credit and
economic development and meeting energy demands, international standing.
transitioning to cleaner sources is essential due to
Trends in commercial arbitration highlighted
environmental risks.
the preference for ICC, ICSID, and LCIA. Positive
The global commitment to combating climate change developments include modernising arbitration laws
was also discussed, highlighting the significance of based on the UNCITRAL Model Law, encouraging
the Paris Agreement, which has been ratified by 195 third-party funding, and increasing diversity in arbitral
countries, including all African nations.10 The speakers tribunals, including African arbitrators.
discussed the possibility of a multilateral investment
The session also examined Francophone and civil law
courts as a viable mechanism for resolving such
jurisdictions trends, noting increasing court support
disputes as they can develop legal precedents and
for arbitration and rapid growth in arbitration practice
ensure consistent outcomes.
through international partnerships. An increase in the
enactment of arbitration laws was observed, showing a
8. The corruption defence: Practical move towards modernisation across Africa.
considerations and international trends
10. Behind the scenes of the ICC Court
The panel highlighted that arbitral tribunals should
not ignore corruption allegations, as they pose serious This discussion featured a mock exercise by showcasing
ramifications to the integrity of the proceedings. a typical ICC Court session. Led by Claudia Salomon,
There is a multifaceted approach regarding the President of the ICC International Court of Arbitration,
burden and standard of proof in corruption cases in with Court Members from different African jurisdictions,
international arbitration.11 the session focused on a draft award presented before
The discussion also covered the increasing trend the Court for approval. The exercise aimed to create an
of corruption allegations against arbitrators and understanding of ICC arbitration process and scope of
outlined various tools to address these issues, such as scrutiny, the ICC Court award review in accordance with
challenging or removing arbitrators, annulling awards, Article 34 and 42 of the ICC Arbitration Rules.13
denying enforcement recognition, remitting awards, and
initiating parallel criminal proceedings.

12 https://icsid.worldbank.org/resources/publications/icsid-caseload-
statistics.
13 Art. 34 of the ICC Arbitration Rules provides: ‘Before signing any
10 https://unfccc.int/process/the-paris-agreement/status-of- award, the arbitral tribunal shall submit it in draft form to the Court.
ratification. The Court may lay down modifications as to the form of the award
11 See e.g. Document of the ICC Commission on Arbitration and and, without affecting the arbitral tribunal’s liberty of decision, may
ADR ‘Red Flags or Other Indicators of Corruption in International also draw its attention to points of substance. No award shall be
Arbitration’ published in this issue of the ICC Dispute Resolution rendered by the arbitral tribunal until it has been approved by the
Bulletin (issue 2024-2); V. Khvalei, ‘Standards of Proof for Allegations Court as to its form’. Art. 42 provides: ‘In all matters not expressly
of Corruption in International Arbitration’ in Addressing Issues of provided for in the Rules, the Court and the arbitral tribunal shall act
Corruption in Commercial and Investment Arbitration - Institute in the spirit of the Rules and shall make every effort to make sure
Dossier XIII’ (ICC, 2015). that the award is enforceable at law’.
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ICC DRS Activities 84

Speakers at the 8th ICC Africa Conference: Aisha

Abdallah, Hamid Abdulkareem, Jide Adesokan,
Dr. Adeyemi Agbelusi, Leyla Ahmed, Isaiah
Bozimo SAN, Charlie Caher, Priyesh Daya,
Chloé De Jager, Nikhil Desai, Diamana Diawara,
Bernd Ehle, Sami Houerbi, Greg Falkof, Dr. Ehud
Gachugu, Wangechi Gichuki, Marx Ikongbeh,
Mrinal Jain, Ilham Kabbouri, Ndanga Kamau,
Dr. Sylvia Kasanga, Njeri Kariuki, Kamau Karori SC,
Noreen Kidunduhu, Madeline Kimei, Stephen Kiptinness,
Bwalya Lumbwe, Robert Mahenia, Aicha Mane,
Pauline Mcharo, Evelyne Memphil, Christine Mugenyu,
Prof. Githu Muigai SC, Wambui G. Muigai,
Wanjiku Muinami Karanja, Mary Mulili, Hon.
Muthoni Mwangi, Dr. Wilfred Mutubwa, Dr. James
Mwangi, FCS Hon. Justice Richard Mwongo, Terry
Mwango, Wilson Mwihuri, Samuel Nderitu, Dr.
Victoria Nalule, Mary Ngechu, Thierry Ngoga, Paul
Ngotho, David Nandwa, Calvin Nyachoti, Patrick
Obath, Desmond Odhiambo, Faith Odhiambo,
Gordon Oduor, John M. Ohaga SC, Mercy Okiro,
Diane Okoko, Ngo‑Martins Okonmah, Teniola Onabanjo,
Emilia Onyema, Julius Opio ,Hon. Justice William Ouko,
Jacqueline Oyuyo Githinji, George Owuor, Tabitha Raore,
Suzanne Rattray, Funmi Roberts, Peter Rosher,
Gabriele Ruscalla, Claudia Salomon, Kamal Sefrioui,
Chiraag Shah, Jason Smit, Leyou Tameru,
Tomás Timbane, Manuel Tomas, Dorothy Ufot SAN,
Jacqueline Waihenya, Colleen Parker Bacquet.

The 8th ICC Africa Conference on International

Arbitration was kindly sponsored by: Aelex, TripleOKlaw,
White & Case, Bowmans, CDH Incorporated, CIARB
Kenya Branch, Desai & Co Advocates, Jmiles & Cok, Foley
Hoag, Jus Mundi, Morrison Foerster, Unyer, Wilmerhale,
Nairobi Centre for International Arbitration (NCIA).
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ICC DRS Regional Conferences/ ICC Institute Trainings

12th ICC MENA Conference on International Arbitration

The ICC MENA Conference on International Arbitration (‘the Conference’) gathered 276 dispute resolution professionals,
in-house counsel, business and state entities coming from 37 countries. The expert-led panels addressed party
autonomy, the role of arbitrators and arbitral institutions in law-making, and disputes within large-scale construction
projects. A mock session of the ICC International Court of Arbitration (‘ICC Court’) provided insights into the work of the
Court and its approach when considering challenges of arbitrators.

As part of the Conference, the ICC Institute of World Business Law (‘ICC Institute’) provided a one-day training designed
to provide participants with the necessary tools to strategically use documentary evidence in the different stages of
arbitral proceedings (written submissions, document production, evidentiary hearings, etc.), in particular in M&A and
construction disputes.

The next ICC MENA Conference on International Arbitration will take place on 10‑11 February 2025 in Abu Dhabi.

12th ICC MENA Conference on International Arbitration – Beyond 100: Arbitration,

ADR and the Middle East

John Lewis
Head of General Commercial Litigation and International Arbitration, Stephenson Harwood LLP, Dubai

Sherif Akl (Director, Arbitration and ADR for MENA, ICC) seasoned diplomat’ when navigating the complex
opened the 12th ICC MENA Conference on International sensitivities inherent to the region’s diverse cultural and
Arbitration by emphasising ICC’s commitment to legal landscape.1
actively contributing and deepening its engagement in
Building on this foundation, Mr Hussein reflected
the region to address the evolving needs of parties. He
on the ICC role, based on its established traditions
underscored the importance of ICC’s experience and
and robust foundational practices, are integral to
continued participation in a region that is increasingly
the development of, and confidence in, the dispute
becoming a key player on the global arbitration.
resolution process in the region and the optimistic
As part of the welcoming address, Mahmood Hussein outlook for arbitration in light of recently favourable
(Chairman, ICC UAE Commission on Arbitration and judicial rulings and developments underscoring the
ADR) spoke about the rise of arbitration as the preferred UAE’s increasing commitment to refining its arbitration
mechanism for dispute resolution in the region, reflecting practices to support the needs, and expectations, of the
on the region’s capacity to adapt to the challenges international business community.
presented by an ever-evolving landscape. Mr Hussein
Asli Yilmaz (Managing Counsel, ICC Court) further
underscored how the upward trajectory of arbitration is
elaborated on how international arbitration has
unique to the region and how, as a key global institution
outgrown its previous role as an alternative solution for
in that trend, ICC plays an essential role in safeguarding
investments and ensuring business continuity amidst
geopolitical uncertainties. Mr Hussein illustrated the 1 Since the 12th ICC MENA Conference, ICC, Jus Connect and
McCann have released the Executive Summary (May 2024) and
need for strategic finesse to be implemented with the first part ‘Emotion in business’ (June 2024) of the six-part global
the ‘grace of a ballet dancer and the acumen of a research report ‘The Truth about Cross-Cultural B2B Relationships,
which explores the role of emotion, culture and behavioural
tendencies and their impact on B2B relationships’.
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ICC DRS Activities 86

dispute resolution and is now the preferred mechanism note, that understanding historical arbitration practices
by regional and international parties. Ms Yilmaz helps shape a future where international arbitration
highlighted the proactive approach adopted by the remains a trusted solution for resolving global disputes.
judicial systems in the UAE which has enhanced
the legitimacy and reliability as a favoured seat of 1 – Fireside chat between the President
arbitration users. of the ICC Court and the ICC Secretary
2,389 parties from 141 jurisdictions were involved in General on ‘Leadership and authenticity in a
ICC Arbitration cases filed in 2023 with total pending changing world’
claims and counterclaims valued at US$255 billion
across sectors, reflecting the rising confidence in the John W.H. Denton (Secretary General, ICC) and
ICC process, which is supported by a diverse pool of Claudia Salomon (President, ICC Court) engaged in a
arbitration practitioners bringing a wide array of ethical, thoughtful fire-side chat on the evolving demands of
professional, and cultural perspectives to the table.2 leadership exploring the essential traits required to lead
effectively amidst the constant changes in the global
In 2023, 355 parties involved in newly-registered ICC legal environment.
cases came from MENA. The UAE, specifically, often
ranks in the top 10 countries in ICC disputes and ranked Mr Denton passionately articulated that ICC is
5th in 2023 with 94 parties. In 2023, the ICC Court fundamentally driven by its mission to foster peace,
confirmed or appointed 84 arbitrators from MENA.3 prosperity, and business opportunity and emphasised
ICC’s pro-active commitment to identifying the
Nayla Comair-Obeid (Founding Partner, Obeid business needs and advocating for the private sector
& Partners, Beirut/Dubai/Paris; Professor of Law; authentically, facilitating economic activity and
Chartered Arbitrator; Council Member, ICC Institute navigating trade finance intricacies.
of World Business Law) in her keynote speech
robustly defended the legitimacy of international Ms Salomon and Mr Denton expanded on the theme
arbitration in the region, affirming its essential by discussing the importance of understanding the
role without reservation. Ms Comair-Obeid posed nuanced needs of the business community particularly
the question of whether there should be concerns where, and how, companies are affected by geopolitical
about the legitimacy of international arbitration and complexities. Mr Denton was clear that ICC engages
responded with a decisive ‘no’ while emphasising with, and listens attentively to, the business community
the necessity for continual adaptation and trust- to identify challenges and opportunities to shape
building among practitioners and institutions. She positive outcomes. For example, one area of focus was
highlighted ICC’s recognition of that position and its the important role that ICC plays through its strategic
proactive efforts to adapt and maintain the trust of the engagement with small and medium-sized enterprises
international community whilst bolstering international (SMEs) which constitute 90% of businesses. Mr Denton
economic development. and Ms Salomon discussed how the ICC’s offering of a
streamlined Expedited Procedure is a key tool providing
Ms Comair-Obeid stressed that arbitration is a strategic cost efficient access to justice and supporting economic
choice for global businesses, especially in a region stability of SMEs throughout the world.
experiencing a boom in sectors like construction, energy,
and renewables, driving substantial foreign investment. In conclusion to the session, Mr Denton stressed that
She underscored ICC’s pivotal role in supporting ICC is a truly global organisation that fosters a deep
economic growth through arbitration and other dispute connection with communities throughout the world and
resolution mechanisms whilst concluding, on a visionary advocates for adapting strategies and policy to support
global economic activity.

2 See the ICC 2023 Dispute Resolution Statistics. The ADGM ICC
Dispute Resolution Services (DRS) regional office was established
in 2017, which then integrated ICC Court Secretariat’s fifth case
management team in April 2021. Early 2024, the ICC Advanced
Arbitration Academy for Middle East was launched further
strengthen and support the diverse communities in the wider MENA
region through capacity building and training programs.
3 In line with this development, the ICC Guide on Disability Inclusion
in International Arbitration and ADR reinforces the institutions
commitment to diversity as a driver for growth and a means to
bolster the legitimacy of international arbitration consistent with the
demands of international users in an increasingly globalised world.
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2 – Party autonomy, between efficiency and The panel was in agreement that the methods
enforceability: How is the balance struck? discussed not only improved cash flow but also resulted
in an increased likelihood of maintaining business
The panel centered on the delicate balance between relationships and ensuring the progress of large scale
party autonomy and the enforceability of arbitral construction projects; however, the panel underscored
decisions. Nadine Debbas Achkar (Independent that the effectiveness of any dispute resolution method
Arbitrator; Judge, Supreme Court, Bahrain; Visiting largely depends on the parties’ readiness to engage
Professor, NYU Abu Dhabi) moderated a lively discussion and reach a resolution, concluding that without a
that delved into the question of the effect of mandatory cooperative mindset, even the most tailored ADR
laws, arbitrator authority, and institutional policies on processes would be unlikely to expedite or successfully
party autonomy. resolve any dispute arising.

The panel which comprised Ali Al Aidarous (Managing In circumstances where the parties appeared unwilling
Attorney, Al Aidarous Advocates and Legal Consultants, to consider settlement, the panel moved on to address
Dubai), Justice Michael Black (Court of Appeal Judge the role of arbitrators in actively promoting settlement,
and Judge in Charge of the Digital Economy Court drawing from a recent survey where 80% supported
(DEC), Dubai International Financial Centre Courts, arbitrators playing a proactive role in facilitating
Government of Dubai), Alain Farhad (Partner, Mayer resolutions in circumstances where there is a need to
Brown, Dubai) and Floriane Lavaud (Counsel, Debevoise remain impartial to avoid challenges to any final award.
& Plimpton LLP, New York) debated the arbitral tribunal’s Despite traditional views suggesting the existence of a
duty to intervene when the enforceability of an award tension between active participation and impartiality, it
might be at risk, agreeing on a precautionary approach was acknowledged that such involvement could benefit
whereby any arbitral tribunal would proactively the parties if managed correctly.
address concerns and propose impartial solutions in
The ICC’s latest report on facilitating settlement was
collaboration with the parties and reflecting consensus
referenced,4 offering guidelines on how arbitrators
that while party autonomy is crucial, it is not without
might encourage dispute resolution effectively; and
limits. Summarising the outcome of the discussion,
the techniques that can be adopted to encourage
Mr Al Aidarous emphasised that ‘while party autonomy
parties to consider settlement or alternative dispute
is paramount, it must be balanced with the need for
resolution processes.
enforceability to ensure that arbitration remains a robust
mechanism for dispute resolution’.
4 – Arbitrators as lawmakers and the legal
traditions in the MENA region
3 – The wave of large-scale construction projects
in the Middle East: Choosing the adapted forum
In the final discussion on the topic of arbitrators as
lawmakers, Raëd Fathallah (Partner, Bredin Prat, Paris),
The second panel focused on the crucial role of
Richard Harding, KC (Keating Chambers, London) and
alternative dispute resolution (ADR) methods amidst
Mireille Taok (Independent Arbitrator, Taok ADR, Abu
a surge in construction disputes within the region.
Dhabi: ICC Emirates; Visiting Professor, Poitiers University,
Armani Khalifa (Partner, Freshfields Bruckhaus Deringer,
France) emphasised the distinction between common
Riyadh) probed the panellists, comprising lawyers and
law and civil law approaches and how these frameworks
in-house counsel, on the impact and effectiveness of
influence international arbitration. Fabien Gélinas (Sir
ADR methods to specific disputes or industry needs.
William C. Macdonald Chair in Law, McGill University,
Ahmed Ibrahim (Independent Arbitrator, Ibrahim ADR,
Montreal; Independent Arbitrator) led a discussion
Dubai), Marcus Antoine Khoury (General Counsel, Alec
which considered how the diverse legal traditions and
Engineering and Contracting, Dubai), and George
cultural backgrounds of parties and arbitrators raised
Valvianos (Partner, Dispute Resolution, Head of Qatar
fundamental questions about the role of arbitration in
Office, DLA Piper Middle East LLP) explored various ADR
shaping legal norms.
options such as bifurcation of proceedings, mediation,
Expert Determination, dispute adjudication boards, and
med-arb processes; whilst expert, Claire Lavin (Partner,
Forensic Accounting & Commercial Damages EMEA, 4 ‘Facilitating Settlement in International Arbitration’ (ICC Commission
HKA, Dubai) commented on the recognition that the on Arbitration and ADR, July 2023). See also ‘Construction Industry
Arbitrations Recommended Tools and Techniques for Effective
early instruction of experts can often result in significant Management’ (ICC Commission on Arbitration and ADR, Feb. 2019)
savings to parties involved in technical disputes. and the report of the latest ICC-FIDIC Conference on International
Arbitration by M. Labelle, Y. Schneller, ICC Dispute Resolution
Bulletin, 2024-2.
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While it was acknowledged that arbitrators do not ICC Court5 simulated an ICC Court session to discuss
create new law, the panel focused on the subtle, in an interactive format (engaging the audience) an
yet significant, impact that their decisions have array of issues frequently arising in the challenges
on the evolution of legal rules and practices. The of arbitrators. The panellists shared insights into the
panel explored how the arbitration process reflects deliberative processes that ensure the integrity and
a blend of best practices drawn from different legal impartiality of the arbitration process and safeguard the
systems providing the flexibility needed to adapt to the parties from potential challenges at the enforcement
specifics of each case and the ability to adapt and stage, highlighting how the ICC maintains rigorous
propose innovative solutions to meet global business standards and a high level of scrutiny of awards,6 which
needs. That said, the panel expressed the need for is a fundamental aspect of the parties’ trust in ICC
arbitrators a consider the extent to which they are Arbitration over the past century and beyond.
influenced by their own legal backgrounds and to apply
appropriate principles suitable for the specific dispute to 5 Mohamed Abdel Raouf (International Arbitrator, Partner, Abdel
Raouf Law Firm, Egypt; Alternate Member, ICC Court); Aïcha
avoid challenges at the enforcement stage. Consistent Brahma (Attorney and Partner, Brahma Avocats, Morocco;
with the theme of the day, the importance of arbitrators Alternate Member, ICC Court); Girgis Abd El Shahid (Managing
Partner, Shahid Law Firm, Egypt; Member, ICC Court); Karam
having a deep understanding of the legal frameworks Farah (Counsel, ICC Court, Abu Dhabi); Samaa Haridi (Partner,
applicable to each case is crucial for maintaining the King & Spalding LLP, New York; Vice President, ICC Court); Sara
Koleilat-Aranjo (Partner, Arbitration and Disputes Practice Leader
integrity of, and trust in, the arbitration process. (MEA), Morgan, Lewis & Bockius LLP, Dubai; Member, ICC Court);
Stella Leptourgou (Counsel, ICC Court); Aysha Mutaywea (Partner,
Mena Chambers Law Firm, Bahrain; Member, ICC Court); Claudia
5. The ICC Court in action: A behind-the-scenes Salomon (President, ICC Court); Asli Yilmaz (Managing Counsel,
look at the challenge of arbitrators ICC Court).
6 See also ‘Ten Tips on How to Make an Arbitration Award Work:
Lessons from the ICC Scrutiny Process’, ICC Dispute Resolution
The day concluded with an inside look at the ICC Court’s Bulletin, issue 2022-2, where members of the ICC Court provide
ten practical tips on how to improve the quality and enforceability
approach to handling challenges related to arbitrator of arbitral awards, based on frequent issues that arise during the
appointments and decisions. Panel members from the scrutiny of draft awards.

ICC Institute of World Business Law ('ICC Institute') Advanced Training

on Documentary Evidence: Reassessing its role and value in international commercial
arbitration – Focusing on critical key issues of M&A and construction disputes

Nicole Araygi
Associate, Araygi & Maalouly Law Firm, Beirut

Sybille de Rosny-Schwebel (Director, ICC Institute, Paris) noted that the 2021 QMUL/White & Case International
welcomed the participants and introduced the ICC Arbitration Survey showed demands for a page
Institute, encouraging the participants to become limit on submissions and/or documentary evidence,7
members and join this growing community that has given that it is not feasible to assimilate a very large
been promoting research, exchanges and networking number of exhibits. The training purpose is for counsel
between the practitioners of international business law, to understand how to give help, and for arbitrators
scholars and researchers for over 40 years. to understand how to get help when it comes to
documentary evidence.
The training, developed by Mauricio Almeida Prado
(Partner, MAP Negotiation and Arbitration, for Sao Paulo;
ICC Institute Council Member) and Blossom Hing
(Director, Disputes and Restructuring & Insolvency,
Drew & Napier LLC, Singapore; Member, ICC Institute),
was chaired by Laurence Shore (Partner, Seladore
7 ‘2021 International Arbitration Survey: Adapting arbitration to a
Legal, Milan; Council Member, ICC Institute). Mr Shore
changing world’, at p. 13: ‘Imposition of page limits was thought
explained the purpose of the training, which is to find most appropriate for certain types of submissions, predominantly
ways for considering, preparing, and better presenting post-hearing briefs (…). Interestingly, some interviewees felt it is not
only the parties who should curb their tendencies in this regard,
evidence, both for arbitrators and counsel. Mr Shore suggesting that page limits should also be set for arbitral awards,
particularly in the context of investor-state disputes’.
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Four interactive sessions covered (1) Strategic tribunal time to grasp and understand the
deployment of documentary evidence; (2) Maximising documents. The contractual framework should
the quality and efficiency of document production; be presented early on, and key documents for
(3) Documentary evidence and key issues of M&A each step of the story should be identified (and
disputes; and (4) Documentary evidence and key issues grouped together if necessary).
of construction and infrastructure disputes. Three out
• The other side’s documents should be neutralised
of the four sessions involved a study of case scenarios
and used to fit the party’s story, not ignored.
examined and discussed by several small groups of
participants, with one or more speakers participating in • The presentation of the documents should be well
these discussions. organised and clear: labeling should be clear and
complete, and footnotes should contain the full
name of the document, the text of the document
1 – Strategic deployment of documentary should be visually clear, and the translations
evidence should be presented early on to avoid controversy.

Noradèle Radjai (Partner, LALIVE, Geneva) started the • The terminology used in the submission should be
discussion by highlighting the difference between the consistent with the terms used in the documents
civil law and common law systems when it comes to to tell the party’s story.
dealing with documentary evidence. Ms Radjai explained • Key passages in documents should be
that while the internationalisation of arbitration has emphasised (copied in the written submissions
reduced the gap between the common law and civil or highlighted at the hearing).
law systems, the legal and cultural background of
• Counsel should take every opportunity to show
an arbitrator may influence the way he/she looks at
and highlight documents to the arbitral tribunal
documentary evidence. In particular, Ms Radjai noted
and emphasise them, including at the hearing in
the following differences between the two systems:
counsel’s submissions and by witnesses, notably
• The civil law system is more inquisitorial; the during cross-examinations.
standard of proof lies in the free assessment
and/or the discretion of the judge/arbitrator; Ms Radjai explained the importance of knowing
on issues of privilege and weight to be given to the strengths and limitations of each document, in
pre-contractual discussions, the procedure is particular to consider whether other evidence is needed
document-centred; and witness evidence by party to complement it.
representatives is not admissible.
• Among the strengths of documents, Ms Radjai
• The common law system is more adversary; cited their contemporaneity, their integrity, as
the standard of proof relies on the balance of documents are more reliable when written without
probabilities; on issues of privilege and weight to the perspective of a dispute (unlike witness
be given to pre-contractual discussions, it gives statements or submissions), and the fact that they
importance to witness evidence; and witness are less costly than witness statements as they
evidence by party representatives is accepted.8 are less time consuming.
• With regard to the limitations of documents,
According to Ms Radjai, because of these differences,
Ms Radjai mentioned that they often do not give
counsel must consider the background of the arbitrator
the full context, are sometimes inconsistent as
when deciding how to present evidence. Ms Radjai
they are drafted by different authors for different
emphasised that given that the arbitral tribunal is
purposes, and are sometimes voluminous and
considered to be the ‘audience’, its perspective must be
their accuracy depends on how and when they
taken into account consideration when deciding on the
were put on the record.
best way to present documents. In particular, Ms Radjai
advised the following:
Panellists then discussed the relevance of using witness
• Important documents should be presented as evidence: to give context to documents drafted for the
early as possible, as this will give the arbitral purpose of the dispute, to help understand technical
terms, to explain the true intention of the parties at
8 See e.g. J.D.M Lew ’ Document Disclosure, Evidentiary Value of the time of the conclusion of the contract (which is
Documents and Burden of Evidence’, Written Evidence and
Discovery in International Arbitration: New Issues and Tendencies relevant in civil law countries). 9 Both Ms Radjai and
(ICC Institute Dossier VI, 2009); R. Kreindler ‘Benefiting from
Oral Testimony of Expert Witnesses: Traditional and Emerging
Techniques’ and P.A. Gélinas ‘Evidence Through Witnesses’, in 9 For further reading on witness eevidence, see the ICC Commission
Arbitration and Oral Evidence (ICC Institute Dossier VI, 2005). on Arbitration and ADR Report, ‘Accuracy of Fact Witness Memory
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ICC DRS Activities 90

Laurence Shore reiterated the importance of considering which are material to the outcome of the case, as
the background of the arbitrator when taking a decision the major goal is to allow parties to make their case.
in this regard. Panellists also discussed the interplay According to Mr Ziadé, there is a need to achieve a
between cross-examination and documentary evidence, balance between time, costs and efforts, and he thus
explaining that while cross-examination is particularly highlighted the usefulness of being decisive in relation to
important (the information presented at hearings is what key issues of the case.
arbitrators remember most), parties should avoid the risk
Anne K. Hoffmann (Independent Arbitrator, Hoffmann
of asking a witness to comment on a clear document,
Arbitration, Dubai) also discussed the significant impact
which could undermine that document rather than
the arbitrator’s background can have on the document
highlight it.
production process (e.g. in Singapore, document
production occurs after all the written submissions)
2 – Maximising the quality and efficiency of
and on the tools that the arbitrator will have to make
document production
document production as efficient as possible (tools
provided for in the applicable procedural rules, technical
In the second session, Roland Ziadé (Global Co-head
tools, etc.).
of International Arbitration, Linklaters, France; Vice-
President, ICC International Court of Arbitration Alumni
Parties’ role in making document production efficient
Group; Member, ICC Commission on Arbitration and
ADR; Member, ICC Institute) began by explaining Ms Hoffmann began by reminding the audience that
the different ways in which each system deals with Article 22 of the ICC Rules (and similar provisions in
document production: while document production is other institutional arbitration rules) requires parties
minimal in civil law systems, it is generally of medium to make every effort to conduct the arbitration in an
importance in common law systems and very important expeditious and cost-effective manner, and that this
in the United States. principle should be applied to document production.
In particular, Ms Hoffmann identified the following
In light of these multiple systems, Mr Ziadé noted that
measure that parties can take in this regard:
international arbitration is better tailored to the needs of
trade and business but is not always up to the parties’ 1. Identify and address procedural issues at the
expectations when it comes to the time and overall stage of the Case Management Conference
cost of the process. Mr Ziadé emphasised that these (‘CMC’) or Procedural Order No. 1 and agree
concerns should not be downplayed in order to maintain on the procedure for document production
international arbitration as the method of choice for (e.g. maximum number of requests considered
dispute resolution in commercial matters. Given that sufficient and fair as well as selective; non-
the document production process has a direct impact disclosure agreement from the outset in cases
on the time and cost of the arbitration and on whether involving sensitive information or trade secrets;
due process and the equality of arms have been how to deal with privilege logs; electronic
respected, Mr Ziadé stressed the importance of making disclosure). 11 Agreeing on these issues at the
the document production process as efficient and useful outset will save time rather than having to deal
as possible.10 with them in the middle of the proceeding.

However, given the mix of legal cultures, one or more 2. Target strategic documents, and separating
parties will always feel out of their comfort zone when between the documents that a party ‘needs to
have’ and the documents that would be ‘nice
it comes to document production, despite all the
to have’.
efforts made to bridge these differences (IBA Rules on
the Taking of Evidence, the Redfern Schedules, etc.). 3. Make requests as specific and narrow as possible.
Mr Ziadé also mentioned that document production is
not a tool to push parties to an early resolution of the 4. Clearly articulate grounds for document requests
case: international arbitration requires narrow requests and objections (provided for in the IBA Rules on
the Taking of Evidence12 and in most Procedural
in International Arbitration’ (ICC, 2020); X. Favre-Bulle, Ch. Newmark, Orders No. 1 but often not respected).
‘The Use and Abuse of Factual Witnesses’; D. Jones, R. Turnbull,
‘Witness Statements and Memorials: Reforms to Serve Parties,
Arbitrators and Arbitrations’, Chapters 5 and 6 in Rethinking
the Paradigms of International Arbitration - Institute Dossier XX
(ICC, 2023). 11 See e.g. A. Sabater, ‘Optional Provisions for the Terms of Reference
10 See e.g. Y. Derains, ‘Towards Greater Efficiency in Document and Procedural Order No. 1’, ICC Dispute Resolution Bulletin, issue
Production before Arbitral Tribunals-A Continental Viewpoint’, 2023-3.
Special Supplement 2006: Document Production in International 12 In particular in Arts 3.3 and 9 of the IBA Rules on the Taking of
Arbitration (ICC Int. Court. Arb. Bulletin, 2006). Evidence in International Arbitration (2020).
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ICC DRS Activities 91

5. Establish a meet and confer process prior to • Trade secrets: Can they justify a party’s refusal
the submission of the document requests to the to produce a document in all circumstances?
arbitral tribunal in case one of the parties does not What measures can an arbitral tribunal take to
play by the rules (missing a deadline, requesting balance the confidentiality of trade secrets and
documents outside of the case, etc.). the protection of the other party’s right of access
to such documents?
6. Use artificial intelligence which increases
efficiency and helps to save time, although it
cannot replace the parties in deciding how to 3 – Documentary evidence – Key issues
formulate requests. in M&A disputes

Arbitrators’ role in making document production efficient Olivier Caprasse (Member of the Brussels Bar, Caprasse
Arbitration, Belgium; Professor, Universities of Brussels
Ms Hoffmann emphasised that parties play a more
and Liège; Council Member, ICC Institute) introduced
important role in document production, as they are
the topic by listing M&A-specific issues that can have an
responsible for guiding the arbitral tribunal with their
impact on documentary evidence:
requests. In addition, arbitrators may be concerned
with issues such as lack of familiarity with the case 1. The key clauses in Sale and Purchase Agreements
or prevention of future challenges against the (SPAs) on the price adjustment, representations
award. Nevertheless, Ms Hoffmann listed a number and warranties, etc.
of measures that arbitrators can take to improve
2. The importance of applicable law and rules in
document production:
interpretating the duty of good faith and whether
1. Apply the concepts of ‘relevance’ and ‘materiality’ an obligation in that regard should be added.
more consistently and more meaningfully.
3. The standard of proof and whether the balance of
2. Avoid abuses in the document production process probabilities or the inner conviction is required.
(e.g. by rejecting requests that mention that the
4. The protection of privileged information and
documents ‘may’ exist as this could hint at a
whether it extends to outside counsel or in-house
fishing expedition).
counsel; the ethical rules applicable to counsel
3. Ensure that the process is followed throughout (e.g. when counsel ignores a case law).
the document production phase (e.g. consider
5. The duties of the parties in relation to
removing the phase where the parties respond to
information (e.g. what duties are required by the
the other party’s objections if the requests were
applicable law; the nature of the party and how
well formulated, which could save time and costs;
‘sophisticated’ it is, which may have an impact
indicate early in the CMC that the arbitral tribunal
on representations and warranties, and whether
does not wish to be flooded with document
the parties have been assisted by professionals;
production requests; hold a second CMC to
whether there is a potential implied duty on the
identify the key points in document production).
seller to communicate information, and on the
4. Impose sanctions for non-compliance at the buyer to investigate the target company, and the
document production stage (e.g. clearly state degree of the potential breaches from negligence
how the parties’ conduct has been taken into to fraud.
consideration for the decision on costs; draw
adverse inferences when necessary). Tuvan Yalim (Partner, Kabine Law Office, Turkey;
Member, ICC Institute) then discussed the procedure
The discussion was followed by a case scenario divided for claims in M&A disputes. Mr Yalim noted that the
into two issues: contract and the applicable law will provide rules on
the procedure for making claims such as the time
• A document production phase with a very
limits and the form/content of the claim, as well
large number of requests, each representing
as the consequences of failure to comply with the
a substantial volume of documents, and with
notification requirements.
parties unwilling to cooperate to make the process
more efficient (e.g. by attending a CMC as
requested by the arbitral tribunal). The main issue
discussed was what measures (if any) the arbitral
tribunal could take to ensure the efficiency of
document production.
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ICC DRS Activities 92

Mr Yalim noted that M&A is generally document 4 – Documentary evidence – Key issues in
driven. In sales and purchases, assets and liabilities, construction and infrastructure disputes
when acquired, need to be detailed during the due
diligence process. Documentary evidence is important For this last session, Nagla Nassar (Senior Partner,
because witnesses may be unwilling/unavailable to NassarLaw, Egypt; Independent Arbitrator; Council
testify, their first-hand knowledge may be limited, Member, ICC Institute) and Kim Rosenberg (Partner,
and their testimony is subject to testing which means Freshfields Bruckhaus Deringer LLP, Dubai, UAE)
that most cases witness evidence is not relied upon. conducted a fireside chat on documentary evidence in
Mr Yalim also noted that, there is an asymmetry in the construction disputes.
documentary evidence:
The panellists discussed the definition of documentary
• in favour of the seller in the pre-closing phase as
evidence, which is considered broad and would include
it owns the target and therefore the documents;
any written evidence including videos, WhatsApps, SMS,
and
with the exception of witness testimony based on the
• in favour of the buyer in the post-closing phase as personal recollection of the witness (which is limited and
it owns the target and therefore the documents. will not be treated by the arbitral tribunal in the same
way as a contemporaneous document).
Finally, Mr Yalim addressed the admissibility of
documentary evidence when faced with issues such as The panellists then explained the different ways
legal advice (privilege), settlement (without prejudice) of proving a construction claim and stressed the
process,13 technical or commercial information that importance of:
should be protected given that the parties in M&A • expert reports written by independent and
disputes are often competitors, where he noted that impartial professionals commenting on a
total exclusion is not the first solution and other methods technical issue;
may be available such as redaction of documents,
• contemporaneous evidence which the panellists
documents for ‘attorneys’ eyes only’, recourse to
considered to be the most persuasive in a
independent experts, etc.
construction context; and
The case scenario that followed the presentation was
• the contract (in particular hierarchy of documents
divided in two issues:
clauses) as well as the documents that can
• A claim by a buyer against a seller in an SPA assist in its interpretation (e.g. documented pre-
agreement in relation to an environmental contractual documents).
contingency discovered by the buyer during the
negotiations but not accepted by the seller, and Finally, the panellists examined the question of the
which led to the payment of a fine by the buyer a volume of documents in construction arbitration and
year after the acquisition. Can the buyer require how artificial intelligence could assist in dealing with
the seller to reimburse the fine and does the buyer a large number of documents when preparing the
have the possibility to refuse the reimbursement documents to be produced, noting however that the
based on several scenarios and clauses that arbitral tribunal should be mindful to have the consent
would be included in the SPA (entire agreement, of the parties to avoid raising questions of due process.
price adjustment, any mention of how to deal with
Like other sessions, this presentation was followed by a
this type of situation, etc.)?
case scenario divided into two parts.
• What can a buyer claim in the event of breach
• Contract interpretation: Whether the post-
of contract (direct costs or indirect costs/loss of
contractual conduct of the parties could justify a
profit) where there is a conflict between the SPA
variation or a modification of the contract.
and the applicable law?
• Documents produced during contract
performance: Which types of documents can
be used to evidence a claim, and to which
documents would a tribunal give the most
weight to.

13 Art. 9.4, IBA Rules on the Taking of Evidence.

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ICC DRS Activities 93

The ICC Institute Advanced Training on Documentary

Evidence highlighted the many issues that can
arise when parties and arbitral tribunals deal with
documentary evidence. In particular, the Training
highlighted the importance for parties to use
documentary evidence strategically to best support
their case, and for arbitral tribunals to carefully monitor
the use of documentary evidence, especially during
the document production phase, to ensure the efficient
conduct of the proceedings, especially in M&A and
construction cases where parties and arbitral tribunals
typically have to deal with a very large volume of
documentary evidence.

The 12th ICC MENA Conference on International

Arbitration was kindly sponsored by: Shahid Law Firm;
Global Advocacy & Legal Counsel; JS Held; Linklaters;
Jurisera; Bredin Prat; DLA Piper; Jus Mundi; Obeid &
Partners; Morgan Lewis; Tarek Riad & Partners. View
sponsorship opportunities for events in your region at
https://iccwbo.org/become-a-member/partnership-and-
sponsorship-opportunites/.

For more information on the ICC Institute of World

Business Law and membership, please visit
www.iccwbo.org/icc-institute.