Corruption — of the bribing State officials variety — can seem like a distant abstraction. Until one reads about it, in excruciating detail. We had that opportunity recently, courtesy of a 360-page ICSID Tribunal Award that declared inadmissible, on grounds of corruption, the expropriation and FET (and other) claims of an investor that deployed an elaborate bribery and influence peddling scheme to secure its investment rights from the State. BSG Resources Ltd. v. Republic of Guinea, ICSID Case No. ARB/14/22 (Award dated May 18, 2022, available at www.italaw.com with the document identifier italaw170322.pdf, hereinafter the “BSGR” case).
What should we as arbitrators and advocates take away from a case like BSGR, a case that was resolved, effectively in its entirety, on the singular question of whether there was a corrupt procurement of mining exploration rights such that, as a matter of international law and international public policy, the investor should have no right of recourse in arbitration for subsequent State inference with the investment? That is a good question for an observer to answer, as the Tribunal’s business is to write for the Parties and for an potential annulment committee, while my job (as always, and for somewhat lower pay) is to entertain you.
So my organizing idea for this Post is this: Can we discern some procedural principles or lessons from the BSGR Tribunal’s painstaking review of evidence and contentions for and against the alleged corruption that was successfully established by the State Respondent in this case — principles and lessons we might use counsel or as arbitrators in future cases when complex facts — often obscured by the passage of time and the motives of perpetrators to conceal prosecutable misconduct — are presented? I will give it a try. So here, without further adieu, I propose…
Arbitration Commentaries’ Possible Principles in the Arbitral Procedural Law of Corruption
1. Due Diligence: Investors who fail to conduct thorough due diligence of the people they engage as intermediaries to the State may be found to have not cared what such due diligence would have revealed, or worse, to have known what such due diligence would have revealed!(“What you should know will hurt you”)
2. Regularity: Tribunals are keen to see that there has been strict observance of corporate governance and internal financial control principles, as well as applicable accounting standards, in regard to payments and reimbursements to State officials or agents/intermediaries. Non-observance unless well-justified by any exceptional circumstance will likely be seen as a badge of corruption.
3. Silence Clause Drafters Beware: Confidentiality and non-disclosure clauses may be seen as normal routine corporate prudence, but when they are found in contracts with intermediaries enlisted as buffers in relationships with State Offices, they may be seen by Tribunals as instruments to suppress illicit facts. It all depends.
4. Hazards of Outsourced Shredding: Causing the destruction of documents is bad, doing so with offers of money is worse, and having your paymaster convicted in the USA of obstruction of justice, for causing such destruction with such inducements, is singularly unhelpful!
5. Attempted Corruption Bad, Successful Corruption Worse: Attempted influence peddling is an act of corruption by international law standards applicable in the West Africa community of nations as elsewhere. (ECOWAS* Protocol Art. 6.1c)). Claimants may argue that evidence of having effectively influenced the State decision is lacking, but will therefore gain little from such argument. On the other hand, evidence that there was actual influence on the decision-making of the State in favor of the Investor and that the desired result was achieved , while not legally necessary, will carry significant weight.
6. FBI Still Popular, Outside Florida: Tribunals can be expected to assign significant weight, other things being equal, to evidence obtained (even when obtained from witnesses who have a possible motive to fabricate in order to self-exonerate) by internationally reputable law enforcement agencies. In this case, that agency was the US Federal Bureau of Investigation, and the the most direct purveyor of influence on the key State official, the fourth wife of the then-President of Guinea, had agreed to cooperate with the FBI. (If memory serves, this was an observable factor in the Niko Resources case few years ago, as to which much of the investigative work has been done by Canada’s Royal Canadian Mounted Police. If memory does not serve well, a person with knowledge will correct me!)
As a bonus to those of you who have read this far, here are a few concluding “takeaways” about the law of corruption applied in the BSGR case — points that should not be obscured by the hundreds of pages necessarily devoted in the Award to the evidence and arguments presented concerning the central issue of whether Claimant had acted corruptly:
1. While it will seem obvious that once corruption in the Claimant’s obtaining of State-awarded natural resource concessions has been established, its claims against the State for violation of the rights so obtained should be ruled inadmissible – as they were in the BSGR case. Less intuitive perhaps is the question of whether the State impacted by the corrupt procurement should be considered a victim, with rights to economic (or moral) damages resulting from the Claimant’s enjoyment of the ill-gotten exploration rights without material benefit to the State. The BSGR Tribunal’s answer is decisively NO and is based on an amalgam of international law and common sense. As to international law, per the Tribunal, the International Law Commission Articles on State Responsibility treat unlawful acts by State officials as attributable to the State even if such unlawful acts were beyond the scope of the officials’ lawful powers. Thus the alleged damages sustained by Guinea were a product of the corruption of its Prime Minister and his fostering of an environment in which the corrupt activities of the Investor could flourish. Common sense led to the same conclusion. To quote the Tribunal (at last!): “[H]ere the harm caused by the Claimants’ actions would not have occurred if the Guinean state officials … had not been on the receiving end of the corruption scheme. Had they resisted the corruption attempts [Claimant’s ] mining applications would have been processed without undue influence, and the damage for which the counterclaims seek reparation would never have been inflicted.” (That’s para. 1104 at page 351, in case I get graded for reading stamina).
2. As to the law applicable to the question of whether bribery (active or passive) or influence peddling (active or passive) is to be seen as unlawful, the Tribunal was deliberate in its assessment that (i) such bribery had been criminalized under the domestic criminal code of Guinea, (ii) such bribery and such influence peddling were broadly regarded as violating international and transnational public policy and therefore international law as evidenced by declarations in innumerable UN and other multilateral conventions on corruption and also in several international Arbitral awards, and (iii) that Guinea even though it had not ratified all the cited international anti-corruption conventions at the relevant times, had indeed ratified prior to the events at issue the ECOWAS Protocol and that could be regarded as having adopted the relevant principles of international law into its domestic law. (fn. The phrasing “active” and “passive” refers to the offering or payment of a bribe or an actual or proposed payment for the exercise for undue influence, on the one hand, or the receipt or solicitation of a bribe or the exercise or offer to exercise undue influence in consideration of a payment. This terminology is elaborated in, for example, on the website of Transparency International UK, www.antibriberyguidance.org/guidance/5-what-bribery).
* That would be the Economic Community of West African States.