The Singapore International Commercial Court (the SICC), in its decision in Lao Holdings N.V. v The Government of the Lao People’s Democratic Republic and another matter [2021] SGHC(I) 10, wherein the SICC upheld the awards in two related Bilateral Investment Treaty arbitrations, has considered the arbitrator’s duty to accept evidence of corruption regardless of any contrary agreement between the parties.
In the course of its judgment, the SICC said that “arbitral tribunals… have a duty to consider corruption, which includes illegal conduct, bribery or fraud”. Notably, the SICC reinforced the importance of this duty by taking the view that “no agreement between the parties can prevent the arbitral tribunal from reviewing and, where appropriate, admitting [evidence of corruption]”.
Although this is a finding made in the alternative, it raises important considerations for future commercial and investor-state arbitrations.
Fundamental to arbitration is party autonomy, that is the principle that the parties may, by agreement, constrain the arbitral tribunal’s jurisdiction and the procedure to be followed throughout the proceedings. The SICC accepted that the Settlement Deed in this case was a legitimate procedural agreement that was binding on the tribunal. However, the “public duty” to consider evidence of corruption acts as a notable exception to this rule. It appears from the broad wording adopted by the SICC that the spectre of corruption or illegality is too serious to be excluded from a tribunal’s consideration by agreement of the parties, who themselves may have engaged in the alleged corruption in question. Furthermore, allowing the exclusion of such evidence by agreement may result in tribunals inadvertently issuing awards that accept, condone or enforce corrupt behaviour. As such, although it may be a violation of an agreement between the parties, the SICC has signalled supervisory courts’ willingness to disregard such a violation where issues of corruption are in play.
The SICC’s conclusion on this point highlights the pro-active role that arbitrators, like judges, must play in ensuring corruption is strongly discouraged by adjudicatory bodies, whether they are courts, which as state organs have a public policy interest in denouncing corruption, or arbitral tribunals, where the integrity of arbitrations may be fundamentally undermined by ostensible support for corruption.
While it stands to reason that this “public duty” is particularly important in the context of investor-state arbitration (a reality the SICC notes in its judgment), that does not mean that parties to a commercial arbitration are immune. Evidence of possible corruption or financial irregularity may enliven this duty in a commercial arbitration.
This may well act as a powerful incentive for commercial actors to ensure a high degree of propriety in the conduct of their business regardless of arbitration’s usual subordination to the agreement of the parties.
