Billions of dollars in foreign investment are made each year under the protection of investor-state arbitration (ISA). By providing a neutral forum in which to claim the protections and safeguards afforded to them in investment treaties and contracts, ISA gives foreign investors greater certainty and predictability in their legal rights as they pursue international deals.

However, an arbitration defense which uses corruption as a tool to defang these safeguards has become more common, decreasing the predictability of ISA tribunals, reducing investor confidence in their protections, and deterring this critical investment. Arbitration rules and procedures are often inconsistent and opaque, creating uncertainties and risks which reduce the predictability of foreign projects. This Note concurs with this dissatisfaction with the corruption defense but contends that existing reform proposals are insufficient or would not be effective. Instead, it argues that the best option to address the abuse and asymmetry of the corruption defense in ISA is by codifying treaty language which creates an even playing field by proportionally allocating blame for corrupt practices. There are 2,500 existing investment treaties in the world today which would need to integrate these rules, so this reform is not an instant solution. But if the international community hopes to reaffirm the stability and reliability of arbitration for foreign investors, this is the strongest option. The inconvenience of a long-term commitment to reform should not stand in the way of robust anti-corruption policy.

Continue reading “Blame To Go Around: Treaty Language and the Corruption Defense in Investor-State Arbitration”