VJIL Symposium: Introducing “Investment Treaties and Investor Corruption”

by Jason Webb Yackee

[Jason Webb Yackee is an Assistant Professor of Law at the University of Wisconsin School of Law.]

This post is part of the Virginia Journal of International Law/Opinio Juris Symposium, Volume 52, Issue 3. Other posts in this series can be found in the related posts below.

Thank you very much to the Virginia Journal of International Law and Opinio Juris for facilitating this discussion on my recent VJIL Essay, “Investment Treaties and Investor Corruption: An Emerging Defense for Host States?

In 2007, Siemens AG, a prominent German multinational electronics and engineering firm, won an impressively large arbitral award against Argentina. A tribunal formed under the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID) awarded the company over $200 million for Argentina’s unlawful expropriation of the company’s investment in the design and construction of an information technology (IT) system commissioned by the government. Argentina’s loss in Siemens was one of its several recent ICSID defeats. The country has faced an onslaught of investor lawsuits since its financial crisis in the early 2000s and has suffered awards for damages totaling well over half a billion dollars. Although Siemens’s claims did not arise from the financial crisis, and while the case, unlike the other Argentine arbitrations, did not involve the sensitive issue of the scope of a “necessity” defense under international law, Argentina was still not eager to honor the award. Five months after the award was rendered, Argentina filed a petition for annulment, the sole mechanism of review available under the ICSID Convention. While occasionally ICSID annulment committees have annulled awards, the grounds available for successful annulment are quite limited. There was little in the Siemens award itself to suggest that Argentina had much, if any, chance of convincing the committee to annul the award.

Bilateral investment treaties (BITs) are famously asymmetric. They grant investors rights but not obligations, while imposing upon states obligations unaccompanied by rights. Recent cases suggest, however, that BIT tribunals are poised to recognize a defense to state BIT liability that, in effect, imposes upon investors the obligation to avoid involvement in public corruption in the course of making a treaty-protected investment. In this Essay, I sketch out the contours of this emerging defense, focusing on the recent investment treaty arbitration between Siemens AG and Argentina. Although Siemens was awarded over $200 million for Argentina’s expropriation of its investment, it voluntarily abandoned the award in response to post-award revelations that Siemens had procured the investment through the systematic bribery of Argentine officials. While the Siemens tribunal never had the chance to rule on the legal consequences of the bribery allegations, jurisprudential trends suggest that it would likely have used the fact of corruption to either decline jurisdiction or to otherwise refuse to recognize Siemens’s substantive treaty-based rights. I nonetheless argue that the specific contours of this emerging corruption defense are uncertain, and I suggest model investment treaty text for states that wish to secure their reliable access to it.

Thank you again and I look forward to the discussion.

http://opiniojuris.org/2012/05/31/vjil-symposium-introducing-investment-treaties-and-investor-corruption/

Comments are closed.