Discussions of corruption in the context of international arbitration typically focus on how arbitral tribunals handle corruption allegations in the cases before them. But there is a wholly separate issue that is often glossed over or ignored: corruption in the arbitral proceedings themselves. And I’m not just talking about the concern—stressed by numerous prominent figures in the arbitration community—about potential conflicts of interest in the system for constructing the tribunals. That concern is a real and serious one, but there is also a more direct and crude problem: parties (or their lawyers) bribing, or making backdoor deals with, the arbitrators to secure a favorable outcome. Last November, Stephen Jagusch QC discussed the routine nature of certain forms of corruption in the arbitration process. He highlighted this claim by repeating a boast he had heard from a presiding arbitrator that year: the arbitrator was “[able] to deliver a good result providing the party appointing him was prepared to share the result with him.” A similar story of corruption and bribery occurred last year in Italy in an arbitral proceeding between AmTrust and Somma. The saga culminated in AmTrust using in U.S. federal court to block the arbitral award, claiming that Somma had offered on the arbitrators 10% of the final award if the one of the arbitrators found in Somma’s favor. Although the case was ultimately settled, the questions about impropriety in the arbitral process remain.
There are two avenues for handling corruption in the arbitral process, but unfortunately neither provides an adequate guard against potentially corrupt activity conducted by arbitrators: Continue reading