Issues of Illegality and Evidence Acquisition
THE AUTHOR:
Milan Chamber of Arbitration
Arbitration is an effective tool for resolving commercial and investment disputes. However, the emergence of criminal conduct, such as corruption, fraud, and money laundering, complicates its administration.
The intersection between arbitration and criminal law raises questions about arbitrators’ powers, duties, and responsibilities, as well as procedural issues like the acquisition and admissibility of illegally obtained evidence.
The Evolving Role of Arbitrators
Historically, arbitral tribunals have adopted an “eyes shut” approach to criminal issues, avoiding delving into allegations of unlawful conduct. However, with increasing public awareness of phenomena such as corruption and money laundering, arbitration has taken a more proactive stance.
Paolo Marzolini, Founding Partner of Patocchi & Marzolini, highlights how the perception of this issue has significantly evolved since the 1963 Lagergren case, leading to a “zero-tolerance” attitude towards illegality.
According to Mark Pieth, former Professor of criminal law at the University of Basel, illegality can take various forms in international arbitration, including corruption, fraud, money laundering, and bid rigging. Allegations or evidence of these phenomena may arise in both commercial and investment arbitration, making it essential to understand the duties and powers of arbitrators in such situations.
While arbitrators have often chosen not to address allegations or evidence of criminality, Pieth has argued for the importance of addressing criminal issues not only at the request of the parties but also sua sponte.
Michele Potestà, a Partner at the Lévy Kaufmann-Kohler law firm in Geneva, suggests that addressing criminal conducts ex officio is the appropriate approach in light of arbitrators’ duty to render enforceable awards.
Arbitrability of Issues of Illegality: The Case of Corruption
A central theme in investment arbitration is the arbitrability of corruption allegations.
According to Mohamed Shelbaya, a Partner at Gaillard Banifatemi Shelbaya Disputes, recent Bilateral Investment Treaties (“BITs”) are increasingly addressing the issue of corruption, sometimes providing a more specific definition of “investment” that excludes those made through bribery or extortion. Shelbaya also highlighted the issue of the standard of proof, noting that while the burden of proof is generally undisputed, the standard itself varies among tribunals. Significant divergences remain regarding the application of methods and tools for gathering evidence.
Loukas Mistelis, a Partner at Clyde & Co in London and Professor of transnational law and arbitration at Queen Mary University of London, argues that, differently from the past, arbitral tribunals can address the issue of corruption when it is raised in the parties’ arguments or appears from the evidence.
If corruption is not deliberately raised but appears to emerge from the proceedings, the tribunal has a duty to address it in the award, says Mistelis. Their limited but adequate investigative powers include the ability to request documents and witnesses, as well as to draw adverse inferences from the parties’ refusal or failure to comply with such requests.
The Use of Illegally Obtained Evidence
The admissibility of illegally obtained evidence is one of the most contentious issues in arbitration. Such evidence includes unauthorized recordings or documents obtained in violation of confidentiality.
Kathrin Betz, a lawyer at Betz Law, discussed the admissibility phase, outlining the factors arbitral tribunals generally consider when determining whether illegally obtained evidence can be admitted. These include relevance, materiality, the degree of illegality, the requesting party’s involvement in obtaining the evidence, and whether the evidence is protected by legal privileges.
Even if evidence passes the admissibility test, Kamalia Mehtiyeva, Professor of Law, University Paris-Est Créteil argues that its probative value may be reduced if doubts arise about its authenticity, accuracy, or integrity and reliability.
Conclusion
The relationship between arbitration and criminal law is a complex and evolving topic with significant implications for the management of international disputes.
This subject, particularly original and rarely debated, was the object of the 15th Annual Conference organized by the Milan Chamber of Arbitration (“CAM”), held in Milan on November 29, 2024. The initiative, chaired by Stefano Azzali, General Director of the Milan Chamber of Arbitration, and moderated by Paolo Marzolini, brought together 140 arbitration experts from 13 foreign countries (from Sweden to Turkey, Nigeria to the USA) to discuss best practices and emerging challenges. The event confirmed CAM’s commitment to promoting arbitration as a fair and effective tool capable of addressing even the most complex issues promptly.
ABOUT THE AUTHOR
The Milan Chamber of Arbitration (CAM) is one of Europe’s leading arbitration institutions, offering efficient and innovative dispute resolution services. Established by the Milan Chamber of Commerce, CAM provides a full range of alternative dispute resolution (ADR) solutions, including arbitration, mediation, and dispute boards, ensuring effective resolution of commercial disputes at both national and international levels.
With a strong reputation for excellence, CAM administers cases under its Arbitration Rules, designed to promote efficiency, flexibility, and transparency. The institution also supports businesses and practitioners through specialized training, thought leadership, and publications on arbitration and ADR.
CAM is also actively engaged in the organization of training events, conferences, and workshops aimed at fostering dialogue and knowledge-sharing among arbitration professionals, academics, and businesses.
Committed to innovation, CAM integrates digital tools for case management, including online mediation and remote hearings, making arbitration more accessible and adaptable to modern business needs.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
