THE AUTHORS:
Anastasia Medvedskaya, Associate Member, Guernica 37 Chambers
Akshit Mago, Independent Counsel
Corruption in international arbitration poses a systemic challenge to the credibility of dispute resolution, particularly within the realm of Investor-State Dispute Settlement (“ISDS”) (Yueming Yan, ‘Returning the Home State to the Global Anti-Corruption Campaign’, 2023). It can permeate various levels of the arbitration process, even compromising the impartiality of arbitrators. The issue has been the subject of extensive debate, with numerous cases demonstrating its impact on the legitimacy of awards (see, World Duty Free v. Kenya, Award 4 October 2006; Metal-Tech v. Uzbekistan, Award, 4 October 2013; Fraport v. Philippines (I), Award, 16 August 2007; Niko Resources v. Bapex, Decision on the Corruption Claim, 25 February 2019; Cortec Mining v. Kenya, Award, 22 October 2018; Krederi Ltd. v. Ukraine, Award, 2 July 2018; Gavrilović v. Croatia, Award, 26 July 2018; Getma v. Guinea (II), Award, 16 August 2016). Given the significant economic and political consequences of arbitration awards, any form of corruption undermines trust in the system and weakens the rule of law. Recognizing this, anti-corruption efforts have become central to transnational public policy, with increased scrutiny and demands for greater transparency. Significant strides have also been made by the United Nations, Organisation for Economic Co-operation and Development (“OECD”), European Union (“EU”), and the African Union in combating corruption and bribery through international conventions (see, Merida Convention (2003), OECD Anti-Bribery Convention (1997), Convention on the Fight Against Corruption Involving Officials of the European Communities or Officials of Member States of the European Union (1997), African Union Convention on Preventing and Combating Corruption (2003). However, recent patterns indicate a continued rise in ISDS cases involving corruption allegations, aligning with the increasing number of ICSID registrations (Yarik Kryvoi, Aleksander Godhe, ‘Enhancing anti-corruption via investment arbitration: from red flags to due diligence’, 2024).
ISDS plays a crucial role in protecting national interests and ensuring fair dispute resolution with foreign investors. The impact of corruption in arbitration is a global phenomenon that affects both developed and developing regions. Instances where bribery or corruption compromise the neutrality of arbitrators undermine the very foundation of ISDS. This challenge becomes even greater when such misconduct is discovered only after an award has been issued under the ICSID Convention.
The discovery of corruption, after an award has been rendered, presents a significant legal dilemma, particularly under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965) (“ICSID Convention”). Even though Article 52 recognises corruption of a member of the tribunal as a ground for annulment, such proceedings are required to be initiated within three years of the award. If evidence of an arbitrator’s corruption surfaces beyond this period, States and investors alike face significant barriers in seeking redress, despite corruption constituting a serious breach of international public policy (F. Haugeneder & C. Liebscher, ‘Corruption in International Investment Arbitration’, 2009). Stakeholders must grapple with the legal and procedural challenges that arise when arbitrator misconduct is discovered post-award, including where such discovery is made after expiry of the three-year limit.
The ICSID Framework Sets Up a Sharp Three-Year Deadline for Annulment
The ICISD Convention sets up the framework for annulment of awards in Article 52. Either party may seek annulment of the award by submitting a written application to the Secretary-General on one or more of the following grounds:
- Improper constitution of the Tribunal;
- Manifest excess of the Tribunal’s powers;
- Corruption by a Tribunal member;
- Serious violation of a fundamental procedural rule; or
- Failure of the award to state its reasoning.
The application must be filed within 120 days of the award’s issuance, except in cases of corruption, where it must be filed within 120 days of discovery and no later than three years after the award’s issuance (Articles 52(1) and (2)). The three-year limitation for seeking annulment upon discovering corruption is firm and unyielding.
After a period of three years, the Secretary-General will decline to register any request, irrespective of when the underlying fact was uncovered (Article 69, ICSID Arbitration Rules 2022). The history of the ICSID Convention suggests that during the negotiations, the 3-year limit was suggested to be reduced to one year. A vote was taken on this suggestion and defeated by a majority of 17 to 10.
The Three-Year Limit Trap in Arbitrator Corruption Cases
On the one hand, ICSID awards must have a point beyond which they cannot be challenged to maintain trust in the arbitration process. While corruption and new evidence may take time to uncover, allowing challenges indefinitely would undermine the stability of dispute resolution. Setting a final deadline prevents parties from abusing revision or annulment proceedings as a strategy to delay enforcement.
On the other hand, justice should not be sacrificed for the sake of efficiency or finality. The primary objective of annulment and revision mechanisms is to correct serious procedural and substantive injustices. The rigid three-year cut-off may prevent a party from proving corruption or uncovering crucial new evidence simply because it was discovered too late. Corruption is often well-hidden and may only come to light many years after an arbitral award is rendered. Especially when the corruption involves the arbitrators, investigations into corruption can take significant time, especially if they depend on whistleblower revelations, forensic accounting, or government investigations. Thus, a strict three-year limit may allow a corrupt party to escape liability simply by concealing wrongdoing long enough.
Notably, in cases involving allegations of an arbitrator’s corruption, it falls upon the ICSID Secretary-General to carefully weigh the balance between: (i) a strict interpretation of the three-year limitation period and (ii) the factual claims put forth by the party invoking Article 52(2) of the ICSID Convention. Scholars suggest that the 3-year cut-off date is assessed strictly without review of the merits of the application.
Need To Interpret or Change the ICSID Convention?
There is a principle of treaty interpretation that dictates a treaty should not be interpreted in a way that produces nonsensical or absurd results. This principle is often associated with the doctrine of “effet utile,” which requires that treaty terms be interpreted in a way that does not render them devoid of meaning (see, Corfu Channel (United Kingdom of Great Britain and Northern Ireland v. Albania), Judgment, 9 April 1949, pp. 4-24; Application of the International Convention on the Elimination of all Forms of Racial Discrimination (Georgia v. Russian Federation), Preliminary Objections, Judgment, 1 April 2011, para. 133). The principle of effectiveness or is aimed at ensuring that every provision of a treaty is given meaning and effect, rather than being interpreted in a way that would make it meaningless or redundant. Yet, it appears that this principle would clash with the situation where corruption of the arbitrators was impossible to discover within the 3-year cut-off date.
Suggested Solutions
Ultimately, global counterparts must take a leadership role in shaping the future of ISDS. This includes advocating for procedural reforms, strengthening domestic legal frameworks, and leveraging regional cooperation to address post award corruption-related annulment challenges. Arbitrators engaged in corrupt practices often go to great lengths to conceal their misconduct, making it nearly impossible for affected parties to uncover such actions within the prescribed time frame. By denying annulment proceedings on strict procedural grounds, ICSID may inadvertently legitimize tainted awards, leaving affected States with no viable recourse (Andrew Newcombe & Lluís Paradell, ‘Law and Practice of Investment Treaties’, 2009).
A viable solution is to advocate for amending the ICSID Convention to introduce a specific exception for cases where corruption is discovered beyond the three-year annulment period. Such an amendment would balance the need for legal certainty with the fundamental requirement that corruption should never be legitimized through procedural technicalities. ICSID could also consider adopting a flexible approach by allowing an independent body to review cases of arbitrator corruption even after the expiration of the annulment deadline.
Additionally, nations should strengthen their own domestic regulatory mechanisms to scrutinize arbitrators who participate in ISDS. This includes requiring full financial disclosures from arbitrators in cases involving State parties and increasing judicial oversight over arbitration-related corruption allegations. Governments should actively engage with international arbitration institutions to promote greater transparency and accountability measures.
Finally, increasing capacity-building initiatives for legal professionals and government officials involved in ISDS will be crucial. By enhancing training programs on corruption detection and evidence-gathering, members of the ICSID Convention can improve their ability to challenge corrupt awards effectively. Greater collaboration with international organizations, such as the United Nations Convention Against Corruption, can also help in developing best practices for tackling corruption in arbitration.
Investment arbitration should serve as a mechanism for ensuring fair and just dispute resolution, not a tool that enables corrupt practices to go unchecked. Addressing corruption in arbitration requires collective action from States, investors, arbitration institutions, and the broader legal community. The limitations of ICSID’s annulment provisions must be re-examined with an emphasis on justice rather than rigid procedural constraints. A proactive and collaborative approach will be necessary to ensure that the global community, can protect their interests and uphold the integrity of ISDS. Without adequate safeguards against post-award corruption, investment arbitration risks undermining economic development and investor confidence across multiple regions.
The ICSID Convention, drafted in 1965, predates the international legal community’s concerted efforts to combat corruption, including within the arbitral process. At the time of its inception, corruption was not widely recognized as a systemic threat to legal and economic stability, nor was there a cohesive global framework to address it. In the decades since, coordinated initiatives have reinforced the imperative for action against corrupt practices. Likewise, international arbitration has evolved, with tribunals and institutions increasingly acknowledging the necessity of addressing corruption to preserve the legitimacy of the arbitral process. Yet, despite these advancements, the ICSID Convention remains constrained by outdated procedural limitations – most notably, its rigid three-year time bar – which risks shielding misconduct from scrutiny. This growing disconnect underscores the urgent need to modernize the Convention, ensuring it aligns with contemporary anti-corruption norms and upholds the principles of transparency, fairness, and integrity in investment arbitration.
ABOUT THE AUTHORS
Anastasia Medvedskaya is an associate member of Guernica 37 Chambers and has a broad range of experience as an international arbitration practitioner and arbitrator. Anastasia has represented and advised sovereign states and private companies in investment and commercial arbitrations, and participated in ancillary proceedings before national courts. In addition to her expertise in international arbitration, Anastasia has experience in extradition cases and has advised on several applications before the Commission for the Control of Interpol’s Files where red notices were issued by the Russian Federation and Ukraine. Her expertise extends to forensic and fraud investigations.
Akshit Mago is an Indian-qualified lawyer based in New Delhi with extensive experience in cross-border litigation and international arbitration. He holds an Advanced LL.M. in International Dispute Settlement and Arbitration from Leiden University (cum laude). He previously trained at a leading arbitration firm in London, handling disputes in the energy, infrastructure, and construction sectors. Akshit has worked on arbitrations under ICSID (representing both States and investors), ICC, and LCIA rules. Based in India, Akshit regularly represents clients in high-value, Indian-seated arbitrations and related court proceedings, including actions for interim measures, setting aside, and enforcement of arbitral awards before various courts across the country.
*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.
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