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Over the last ten years, international investment tribunals have imported anti-corruption principles into the bilateral investment treaties (“BIT”) regime through the use of the doctrine of “unclean hands” and the requirement of “legality of the investment.” These principles have been invoked as a “trump card” defense by responding parties. In light of the rising case laws, the Article focuses on the success of the “trump card” defense of corruption invoked by host States. The Article makes several important findings. First, it shows that tribunals use the standard of a reasonable level of certainty to establish corruption – a standard below the “beyond reasonable doubt” standard employed in domestic criminal courts. At the same time, tribunals have discouraged mere insinuations of corruption without evidence. The Article also explains that this “trump card” defense is rarely successful owing to the minimal evidence offered by States in making allegations of corruption. Further, such a defense might place the entire burden of proof in rebutting corruption allegations on the investor even though the host State may have been complicit in the act. Fundamentally, the Article demonstrates that investment tribunals have not been able to effectively engage with corruption claims, due to the lack of enforceability of both the OECD Convention and the United Nations Convention against Corruption. However, this has not stopped the increasing use of the “trump card” defense. A separate mechanism such as introducing a corruption court could be a better alternative to deal with such claims.

Tackling Corruption in Foreign Investment: Insights from Investment Arbitration Cases