As has been explored on this blog and elsewhere, corruption is a controversial topic in investor-state arbitration disputes. First emerging as a defense by states seeking to avoid liability, multiple tribunals have refused to enforce arbitration contracts tainted by corruption (see World Duty Free v Kenya and Plama Consortium v Bulgaria). Corruption has also been used as a cause of action by investors claiming unfair treatment (see Yukos v Russian Federation and here). The unclear incentive effects of corruption in arbitration proceedings have been analyzed from different angles—whether it provides countries with perverse incentives that might encourage corruption or instead buttresses anticorruption principles and promotes accountability.

Unfortunately, less attention has been paid to the procedural step at which tribunals discuss corruption. In the past ten years, an increasing number of tribunals are evaluating evidence of corruption at the jurisdictional stage of arbitration rather than at the merits stage. Those readers who are not lawyers (and even those who are), may be wondering, “Who cares? Why does it matter if corruption is treated as a ‘jurisdictional’ issue as opposed to a ‘merits’ issue?”

Actually, it matters a lot.  Continue reading →