Corruption and Enforcement of Arbitral Awards
Corruption, according to Black’s Law Dictionary, is when someone in a position of power uses that position to gain an advantage for themselves or someone else, going against the rights of others. In the context of arbitration, corruption can occur in various ways, such as when the underlying contract is obtained through corrupt means or when corruption is involved in the arbitral process. This article focuses on situations where the underlying contract is tainted by corruption and the challenges that may arise during the enforcement of such awards.
In an ideal world, the losing party in an arbitration case would simply comply with the arbitral award. However, this is not always the case. When the losing party fails to comply with the award, the successful party must initiate recognition and enforcement proceedings. However, enforcement may be delayed, postponed, or defeated if the losing party challenges the award or opposes the enforcement. Depending on the jurisdiction, awards arising from contracts tainted with corruption may be deemed unenforceable due to public policy considerations.
This article references key cases involving African States to address the enforceability of awards where the underlying contract is procured by corruption. The cases of P&ID v Nigeria, Groupement Santullo Sericom Gabon v Republic of Gabon, and BSG Resources Limited v Republic of Guinea are discussed in detail.
P&ID v Nigeria
The P&ID Arbitration stemmed from a gas supply and processing agreement between P&ID and the Nigerian government. The Tribunal awarded $6.6 Billion against Nigeria, which later increased to US$ 9.6 billion due to interest. Nigeria sought to challenge the award, and the English Court allowed Nigeria to proceed with its challenge, citing strong evidence of bribery in the procurement of the underlying contract. The English High Court ultimately set aside the award, finding that it was obtained by fraud and contrary to public policy.
GSSG Arbitration
In the GSSG Arbitration, the Tribunal awarded $180 million to GSSG, but the award was set aside by the Paris Court of Appeal due to evidence of corruption in the tendering process.
BSG Arbitration
The Tribunal found that BSG’s claims were inadmissible due to corrupt practices, and the award was annulled.
Contracts Procured by Corruption and the Impact on Economies
Corruption has a long-term corrosive impact on economies, leading to misallocation of resources and decreased economic growth. The global corruption perception index ranks countries based on their perceived levels of public sector corruption, with Gabon, Guinea, and Nigeria scoring low.
Enforcement and Challenge of Awards under the Arbitration and Mediation Act, 2023
The Arbitration and Mediation Act, 2023 provides grounds for refusal of recognition of a foreign arbitral award, including where recognition or enforcement would be contrary to public policy. Illegal contracts, including those tainted with bribery or corruption, are generally held to offend public policy principles and are deemed unenforceable.
In conclusion, awards based on fraud and corruption are against public policy and are generally unenforceable. The changing jurisprudence of non-interference by courts in the recognition and enforcement of foreign awards to a more interventionist approach provides a compelling reason for countries to refuse enforcement of awards tainted with corrupt practices.