International Business Arbitration

International business arbitration

American Arbitration Association
International Council for Commercial Arbitration
International Chamber of Commerce. Court of Arbitration
Permanent Court of Arbitration
Arbitration and award, International
Arbitration and award, International Cases
Arbitration and award Pacific Area
Conflict of laws Arbitration and award
Arbitration, International
Arbitration and award Latin America
Arbitration and award, International Periodicals
Dispute resolution (Law) International aspects

Arbitration, a process used to settle a dispute in a non-judicial setting, is particularly effective for international commercial disputes because litigation in a foreign court can be time-consuming, complicated, and expensive. In addition, a decision that is rendered in a foreign court is potentially unenforceable and may be partial to the party native to the court. Arbitration is a simpler process that is governed according to the rules of a neutral arbitration organization that has often been selected by means of a clause inserted into the international agreement or transnational contract. The arbitration is administered by a panel of arbitrators who are agreed upon by both parties. In addition, the confidentiality of the arbitration process is attractive to those who do not wish the terms of a settlement to be known. The growing popularity of international arbitration is a two-edged sword for the researcher: as the number of disputes that are arbitrated rather than litigated grows, so does their interest to third parties. However, the nature of the arbitration process prevents many awards from being made public. It can be frustrating to search for information on international arbitral awards, but the Internet is making it easier to find them and important related documents. An institution’s website is the best first place to look for information.



orn, Gary B. International commercial arbitration in the United States: Commentary & Materials, 2d ed. Ardsley, NY: Transnational Publishers; The Hague: Kluwer Law International, 2001. Edmondson,

Larry E. ed. Domke on Commercial Arbitration, 3rd. St. Paul, MN: Thomson/West, 2003-. Also available on Westlaw (DCMLARB) Frommel, Stefan N. and Barry A. K. Rider, eds.

Conflicting Legal Cultures in Commercial Arbitration: Old Issues and New Trends. The Hague; Boston: Kluwer Law International, 1999.

Germain, Claire M. Germain’s Transnational Law Research: A Guide for Attorneys. Ardsley, NY: Transnational Publishers, Inc., 1991-.
International commercial arbitration ” at IV-39-IV-64. Includes annotated listings of major print and electronic resources for International Commercial Arbitration .

Hill, Richard. “Primer on International Arbitration” (July 1995)

Frick, Joachim G. Arbitration in Complex International Contracts. The Hague; New York: Kluwer Law International (2001)
Gharavi, Hamid G. International Effectiveness of the Annulment of an Arbitral Award. The Hague; New York: Kluwer Law International (2002)

Lynch, Katherine. The Forces of Economic Globalization: Challenges to the Regime of International Commercial Arbitration .
The Hague; New York: Kluwer Law International (2003)

International Business Litigation & Arbitration, 2000 / Chair, John Fellas. New York, NY: Practising Law Institute, 2000-.
An annual course handbook. Practitioner-oriented material with some primary materials reproduced.

Lew, Julian D. M., Loukas A. Mistelis and Stefan Krüll. Comparative International Commercial Arbitration. The Hague; New York: Kluwer Law International, 2003.

Lookofsky, Joseph M. Transnational Litigation and Commercial Arbitration: A Comparative Analysis of American European and International Law. Ardsley-on-Hudson, NY: Transnational Juris Publications, 1992.

Lucash, Richard M. Arbitration in International Computer Contracts
Provides a brief overview of international arbitration issues. From the law firm of Lucash, Gesmer & Updegrove LLP.

Marks, Merton E. New Trends in Domestic and International Commercial Arbitration and Mediation (2000)

Nickerson, Kathryn Helne. International Arbitration.
A primer prepared by a senior Attorney in the Office of General Counsel, United States Department of Commerce.

Oehmke, Thomas H. International Arbitration, 3d. St. Paul, MN: ThomsonWest, 2003-.

Paulsson, Jan, William W. Park, and W. Laurence Craig. International Chamber of Commerce Arbitration, 3rd ed. Dobbs Ferry, NY: Oceana Publications, 2000.

Redfern, Alan and Martin Hunter. Law & Practice of International Commercial Arbitration. 3rd ed. London: Sweet & Maxwell, 1999.

Rhoades, Rufus V., Daniel M. Kolkey and Richard Chernick. Practitioner’s Handbook on International Arbitration and Mediation. Huntington, NY: Juris Publishing, 2002.

Smit, Hans and Vratislav Pechota, ed. International Commercial Arbitration and the Courts, Revised 3rd Edition. Huntington, NY: Juris Publishing, 2002-. Series: Smit’s Guides to International Arbitration

Benedict on Admiralty 7th ed., rev. New York: Matthew Bender, 1974-.
Volume 9 “Marine Arbitration” contains short commentary, and the texts of Treaties , national laws, arbitration rules, conciliation rules, ethics rules, and court forms.

Bergsten, Eric E. ed., (Clive M. Schmitthoff, founding ed.) International Commercial Arbitration. Dobbs Ferry, NY: Oceana Publications, 1980-.
Binder 1 contains multilateral, regional and international conventions and instruments. Binders 2-6 contain national rules and enactments (in alpha order).

Bogard, Lawrence J. and George W. Thompson. Transnational Contracts. Dobbs Ferry, NY: Oceana Publications, 1997-.
This four-volume treatise contains information on ICSID Arbitration, texts of selected arbitration conventions, arbitration laws, rules and regulations.

The International Arbitration Kit: A Compilation of Basic and Frequently Requested Documents. Completely rev. 4th ed. Compiled and edited by Laura Ferris Brown. New York: American Arbitration Association, 1993.
Includes texts of conventions, Treaties , U.S. laws pertaining to arbitration, rules and procedures, and inter-association agreements.

Smit’s Guides to International Arbitration, Hans Smit and Vratislav Pechota, eds. Huntington, NY: Juris Publishing
This set contains the following volumes, which are available as a set or volumes can be acquired individually: Arbitration Rules- International institutions (1 vol.), Arbitration Rules – National Institutions (2 vol.), Roster of International Arbitrators (1 vol.), International Arbitration Treaties (1 vol.), National Arbitration Laws (3 vol.), International Arbitration and the Courts (1 vol.), and Commercial Arbitration: An International Bibliography Revised & Expanded 2nd Edition (1 vol.).

The World Arbitration Reporter, Smit, Hans and Vratislav Pechota, eds. Huntington, NY: Juris Publishing, 1986-.
Vol. 1: International Legal Framework; vol. 2 2B: National Legislation; vol. 3-3A: International Arbitral Institutions and Rules; vol. 4-4A: Rules of National Arbitration Institutions, Volume 5: Court Decisions

B. Journals/Periodicals/Newsletters

1. Search and Identification
Periodical indexes provide the means, through multiple formats, of identifying the important legal literature available in journals, law reviews, and legal newspapers. Many excellent articles on international commercial arbitration are written for law reviews and journals. Law reviews and journals are particularly timely research tools for “hot topics”and recent developments. Use the periodical indexes and services listed below to identify relevant articles.

a. Subscription Services

Thomson Gale ( indexes over 850 law reviews, newspapers, and bar association journals from the United States and other Common law jurisdictions in its publication, LegalTrac. LegalTrac is available as a subscription web product including selected full-text articles. The CD-ROM product, LegalTrac, is a stand-alone terminal. The online product, Legal Resources Index is available on Westlaw (LRI) and on Lexis (LAWREV / LGLIND). The print version is called Current Law Index. Each title included is selected based on criteria provided by the Advisory Committee on the Indexing of Periodical Literature, a special advisory committee of the American Association of Law Libraries. Coverage begins in 1980.

Index to Legal Periodicals & Books (ILP) ( indexes over 850 legal journals from the United States and other Common law jurisdictions. ILP is available on CD-ROM, as a web product, and online in WESTLAW (ILP) and Lexis (LAWREV / ILP). Electronic coverage began in 1981; print coverage dates back to 1908.

Index to Foreign Legal Periodicals (IFLP) ( is a multilingual, multinational index of nearly 520 journals focusing on international law (public and private), comparative law, and the municipal law of countries other than common law jurisdictions. IFLP is available in print, on CD-ROM, as a web product, and on WESTLAW (IFLP).

b. Selected Free Web-based Finding Tools

Ingenta ( Search for articles from over 28,000 multidisciplinary journals since Fall 1988. Provides a fax document delivery service for a fee. Indexes many international and American legal periodicals including Arbitration International; Journal of International Arbitration; Arbitration: the Journal of the Chartered Institute of Arbitrators; World Trade and Arbitration Materials.

University Law Review Project
Provides full-text search of Law Journals available on the web.

2. Specialized Journals

Articles on international commercial arbitration can be found in many law review and journals. The following titles highlight several of the journals dedicated to international arbitration issues. Journal abbreviations are available in brackets [ ].

Arbitration & the Law: AAA General Counsel’s Annual Report. American Arbitration Association. Office of the General Counsel. Office of the General Counsel, American Arbitration Association, 1982
An annual publication covering recent developments in arbitration, including international arbitration.

American Review of International Arbitration [Am Rev Int’l. Arb]
Huntington, NY: Juris Publishing, Inc.
Vol. 1- 1990-
A Publication of the Center for International Arbitration and Litigation Law, Columbia University. Also available on Westlaw (AMRIARB) and Lexis (LAWREV / AMRIA).

Arbitration International [Arb.Int’l.]
The Journal of LCIA Arbitration International. Kluwer Law International.
Vol. 1- 1985-

Arbitration Journal. [Arb.J.]
American Arbitration Association, [1937 1993]
Continued by:
Dispute Resolution Journal [Dis.Res.J.]
The Association, 1993
Also available on Westlaw (DRJ) and Lexis (ADR / DRJNL).

ASA Bulletin [ASA Bull]
The Hague; Norwell, MA: Kluwer Law International
Vol. 20 2002-
Quarterly journal containing articles on arbitration matters, arbitral awards, and court.
Continues: Bulletin, Vol. 1-19 (1983-2001).

European Arbitration [Eur.Arb.]
EA is an electronic newsletter providing information on current happenings in the arbitration field. Searchable.

ICC International Court of Arbitration Bulletin. [ICC Int’l. Ct.Arb.Bull.]
ICC International Court of Arbitration.
Vol. 1 – 1990
Extracts of ICC arbitral awards, ICC Commission on International Arbitration Reports, and articles on international arbitration.

Mealey’s International Arbitration Report. [Int’l. Arb.Rep.]
LexisNexis, 1986-
Monthly publication containing commentary and notes about recent cases with selected texts of arbitration awards and judicial decisions. Available on Westlaw (MINTARBR)

International Arbitration Law Review [Int’l. Arb.L.Rev.]
Sweet & Maxwell
Vol. 1- 1997-
Also available on Westlaw (INTALR).

Journal of International Arbitration. [J. Int’l. Arb.]
Kluwer Law International.
Vol. 1- 1984-
New developments, case notes, and regional overviews in international arbitration.

Model Arbitration Law Quarterly Reports
London, Simmonds & Hill
Vol. 1-4, 1995-1999
Search the table of contents online.

News & Notes
Institute for Transnational Arbitration (ITA), Center for American and International Law
Plano, TX
A quarterly publication of the ITA. The current issue ( is available on the web.

Revue de l’arbitrage [Rev.arb]
French Commission on Arbitration.
Vol. 1- 1955-.
Published quarterly in French with English summaries since 1998.
Articles on national, international and comparative arbitration law, French, foreign and international court decisions or arbitration awards, commentary, bibliographic reports, and reports of colloquia.

Stockholm Arbitration Report
Huntington, NY: Juris Publishing
Vol. 1- 1999-.
Includes articles on topical issues in international arbitration and extracts from arbitral awards and court decisions. Published twice a year on behalf of the Stockholm Chamber of Commerce (SCC) Institute.

Vindobona Journal of International Commercial Law & Arbitration [VJ]
Published under the auspices of the Moot Alumni Association (MAA). Also available on Westlaw (VINJILCA).

Yearbook of the Arbitration Institute of the Stockholm Chamber of Commerce
Huntington, NY: Juris Publishing.
1994 -1997.
Arbitration articles covering Swedish and international arbitration issues. Continued by
Stockholm Arbitration Report.

Willamette Journal of International Law and Dispute Resolution
Salem, OR: Willamette University, College of Law,
Vol. 5 – 1997-.
Also available on Westlaw (WMTJILDR).

World Arbitration and Mediation Report. Huntington, NY: Juris Publishing, Inc.
Vol. 1- 1990-.
Monthly newsletter. Contains news, judicial decisions, articles, and bibliographic resources on dispute resolution in the US and around the world. Also available on Westlaw (WAMREP).

World Trade and Arbitration Materials. [W.T.A.M.]
Geneva, Switzerland: Werner Pub. Co.,
Vol. 6- 1994-.
Contains the texts of important current documents relating to international trade and arbitration. Includes selected arbitral awards, conventions, court decisions, and rules.

3. Selected Free Web-Based Articles
Many articles and publications are freely available via the web. Using Internet search engines such as Google ( and AltaVista ( enable researchers to locate additional useful materials. Law firms and associations often publish newsletters and other publications that are available on their web sites. Faculty web pages or academic forums may have full-text articles online.

International Litigation & Arbitration Alert (IL&A Alert)
A bimonthly publication providing a summary of recent decisions and other points of interest in the area of international litigation and arbitration. A Baker & McKenzie newsletter distributed by the North American Litigation Practice Group.

Drahozal, Christopher R. “Commercial Norms, Commercial Codes, and International Commercial Arbitration”Vol. 33 Vanderbilt Journal of Transnational Law (January 2000).
An online database including links to articles, news, Arbitral Institutions , arbitral rules and practice materials. Registration required but use of the site is free. Provided by the international law firm of Mayer, Brown, Rowe and Maw.

King and Spalding, LLP
Select International Arbitration from pull-down menu. A sampling of articles include:
– A Practical Guide for Drafting International Arbitration Clauses
– Enforcement of Foreign Arbitral Awards
– Practical Guidelines for Interviewing, Selecting and Challenging Party- Appointed Arbitrators in International Commercial Arbitrations

Polkinghorne, Michael and James Cockayne. “Then Woe to Him . . . Good Faith Negotiation Prior to the Institution of International Arbitration Proceedings” (2002)


The Annual Willem C. Vis International Commercial Arbitration Moot
The Willem C. Vis International Commercial Arbitration Moot is a competition for law students, with eligibility for students from all countries. The Moot involves a dispute arising out of a contract of sale between two countries that are party to the United Nations Convention on Contracts for the International Sale of Goods . The site includes texts of moot court problems and information on the moot.

International Council for Commercial Arbitration (ICCA)
A nongovernmental organization established in 1969 to promote the use of commercial arbitration in international trade disputes. The ICCA publishes the ICCA congress series that focus on different issues in commercial arbitration. The first congress was published in 1983; the eleventh congress was published in 2003. To locate series’ titles, select an online catalog from Section X.A. Online Library Catalogs and search for “ICCA congress” as a series search.

Center for Public Resources (CPR) Institute for Dispute Resolution
Includes section on international alternative dispute resolution, listing of neutrals, procedures and clauses.

The Institute for Transnational Arbitration (ITA)
A division of the Center for American and International Law, the ITA focuses on educating professionals about arbitration as a means of resolving transnational business disputes. The Publications section includes the quarterly issue of ITA’s newsletter News & Notes, and a Scoreboard of Adherence to Transnational Arbitration Treaties in chart form.

The Civil Law Consequences of Corruption Under the UNIDROIT Principles of International Commercial Contracts in Light of International Arbitration Practice

The UNIDROIT Principles of International Commercial Contracts (the “Principles”)1 represent a private codification or “restatement” of the general part of international contract law. Regarded as “a significant step towards the globalization of legal thinking”3 and as “a particularly authoritative and valid expression of the lex mercatoria”,4 the Principles have been increasingly used, notwithstanding their non-binding nature, by parties when drawing up their contracts and by courts and arbitral tribunals for the settlement of disputes.

At its 84th session, the Governing Council of the UNIDROIT, convinced that “work for the Principles of International Commercial Contracts ought to continue”, set up a Working Group with the task of preparing a new edition of the Principles, and proposed a list of topics to be included.6 These topics included conditions, plurality of creditors and debtors, and illegality.

At its 90th session, the Governing Council of UNIDROIT adopted the 3rd edition of the UNIDROIT Principles of International Commercial Contracts (“2010 Principles”), whereby a new Section III has been introduced under Chap. 3 in order to deal with the issue of “illegality”.

The New Section on Illegality

As the preparatory works show, the Working Group on Illegality initially adopted a bipartite approach, distinguishing between contracts that are illegal because (a) they are “contrary to fundamental principles”; or (b) by their terms, performance or otherwise, they infringe “a mandatory rule”, and providing for different legal effects for the two categories.

Although this bipartite approach was in line with that adopted by the Principles of European Contract Law,20 the Working Group eventually abandoned it. Thus, the 2010 Principles only address illegality due to the infringement of a “mandatory rule, whether of national, international or supranational origin”.

The New Section on Illegality encompasses two articles.

Art 3.3.1 distinguishes between two types of effects that may follow the infringement of a mandatory rule, establishing that:

  • such an infringement shall have the effects prescribed by the infringed rule itself; and
  • where the rule is silent, the parties shall “have the right to exercise” the remedies available under the contract that are reasonable in the circumstances. Among contractual remedies, the right to performance or compensation, as well as “the right to treat the contract as being of no effect, the adaptation of the contract or its termination on terms to be fixed” may be available to the parties.

Art 3.3.2 addresses the parties’ right to claim restitution of what they have paid, “[w]here there has been performance” under an illegal contract. In particular, even “where the parties are denied any remedies under the contract”,26 if the infringed mandatory rule is silent on the effects of the infringement, “restitution may be granted where this would be reasonable in the circumstances”. This rule may prove to be very innovative. In fact, as the official commentary to the 2010 Principles highlights, “contrary to the traditional view that, at least where both parties were aware or ought to have been aware of the infringement of the mandatory rule”, no restitutionary remedies are available, Art 3.3.2 admits that “restitution may or may not be granted depending on whether it is more appropriate to allow the recipient to keep what it has received or to allow the performer to reclaim it”.

The Legal Consequences of a Positive Finding of Corruption in International Commercial Arbitration Practice

Generally speaking, an arbitral tribunal is prevented from hearing and ruling on the merits of a case if it either lacks jurisdiction, or declares the claims before it to be inadmissible. So, before addressing the civil law consequences (on contracts) of corruption in international arbitration, one has to determine – preliminarily – whether international arbitrators would:

  • view themselves as having jurisdiction to address and verify the merits of the allegations of corruption; and
  • dismiss claims brought under a contract tainted with corruption as inadmissible.

Lack of Jurisdiction

Where an allegation of corruption is raised, the first dilemma for the arbitral tribunal will be whether it lacks jurisdiction ratione materiae over the disputes.30 In the case known as the oldest international commercial arbitration dealing with corruption,31 the sole arbitrator Judge Lagergren declined jurisdiction, holding that disputes concerning allegedly illegal contracts where not arbitrable as a matter of public policy.

Specifically, even if none of the parties had raised the issue, Judge Lagergren felt that, “in the interest of due administration of justice”, he had ex officio powers to examine “the question of jurisdiction”. Eventually, on the basis of “general principles denying arbitrators to entertain disputes of this nature”, he found that “jurisdiction must be declined” in cases “involving gross violation of good morals and international public policy”.34 This was so because “parties who ally themselves in an enterprise of the present nature must realize that they have forfeited any right to ask for the assistance of the machinery of justice (national courts or arbitral tribunals) in settling their disputes”.

According to Judge Lagergren’s findings, allegations of illegality or corruption per se render the dispute non-arbitrable and, as a consequence, deprive the arbitral tribunal of its jurisdiction to hear claims brought under a contract allegedly tainted with corruption. The rationale of his reasoning lies on the assumption that “due to the criminal element involved, those issues should be left to the State courts”.

The shortcomings of this approach are evident. By way of example, arbitral practice shows that allegations of corruption may eventually be found to be groundless.37 In these cases, Judge Lagergren’s approach would inevitably lead to an unjustified denial of justice, or at least to a betrayal of the will of the parties, which entered into an arbitration agreement to see their disputes resolved in the agreed forum.

Furthermore, under the settled doctrine of separability, an arbitration agreement is distinct and autonomous from the contract in which it is contained.

Therefore, even where the contract itself is invalid (eg, because it is tainted by corruption), the arbitration agreement must still be held to be valid and effective. As a consequence, allegations of corruption are currently not likely to deprive the arbitrator of jurisdiction and, hence, courts and arbitral tribunals uphold the right of the arbitrator to exercise jurisdiction in cases where allegations of illegality or corruption have been made. This is well-explained in the first Interim Award rendered in ICC Case No 4145. In that case, even though the respondent challenged the jurisdiction of the arbitral tribunal because the “agreement was immoral per se and its object was illicit”, the arbitrators eventually ruled that “the question of validity or nullity of the main contract, for reasons of public policy, illegality or otherwise, is one of merits and not of jurisdiction, the validity of the arbitration clause having to be considered separately from the validity of the main contract”.

However, an exception to this principle may apply where voidness ab initio of the contract infects the arbitration agreement ab initio.40 Although, generally corruption and illegality issues do not undermine separability,41 there are exceptional cases (which do not include bribery) where illegality renders the separate arbitration agreement void ab initio, including in certain cases of

  • non est factum cases (ie, where a party claims that it signed the contract by mistake, without knowing the meaning of that signature, but without being negligent),
  • forgery,
  •  threat,
  • mistake of identity, and
  • signature absent authority.

The competence-competence principle would normally entitle a (negative) decision on separability in such instances.

Inadmissibility of Claims

Even if legality is no longer considered an express jurisdictional prerequisite, it still may be seen as an implied prerequisite to admissibility, either under the applicable law or as an effect of international law informing national law. As a result, parties to a contract tainted with corruption may find themselves barred from maintaining any claims (whether contractual and or for restitution) under the contract.49 Such a bar is usually imposed under the equitable adages nemo auditur turpitudinem suam allegans (literally, no one can be heard to invoke his own turpitude) and ex turpi causa non oritur actio (literally, an action cannot arise from dishonorable cause). In other words, since an unlawful act cannot serve as the basis for action in law, the contracting party cannot seek redress through protection of substantive legal rights under a contract if it has “unclean hands”.

For instance, in a recent case, an arbitral tribunal found that the agreement entered into by the parties had a “corruptive intent” and, accordingly, “dismissed the agent’s case on the ground that no claim is defendable in law whenever it arises from an invalid contract, affected by an illicit object”. According to a commentator who was directly involved in the case, this was a “clear reminiscence of the Roman adagio fraus omnia corrumpit”.

Technically speaking, these maxims do not operate as a defense on the merits, rather, they constitute a “procedural” bar to the admissibility of a claim.

Voidness of the Contract and (Un)Availability of Contractual and Restitutionary Remedies

Distinct from the issue of admissibility of claims, international arbitral tribunals may assess the consequences of corruption on the merits of the case and, specifically, on the commercial contract in dispute.

In this respect, a distinction may be drawn between contracts providing for corruption and contracts procured by corruption. Generally, the latter are merely voidable at the insistence of the innocent party (but are otherwise intrinsically valid and therefore continue to produce all their legal effects), while the former are null and void ab initio.

Arbitration practice shows that contracts entered into for “corruptive intent”54 (eg, bribing agreements providing for corruption) are invariably declared null and void ab initio, either under the applicable domestic law, or under international public policy requirements, or both.

By way of example, in a case where the parties entered into several agreements whereby “claimant, acting as consultant for defendant, would assist defendant in trying to secure saving on costs” and “in acquiring extensions of the total value”55 of a construction project, the arbitral tribunal found that the last agreement provided for corruption since it was in reality “an offensive secret commission agreement”. As a result, it declared the agreement “entirely null and void”, because it was contrary to “bonos mores” (under both the law governing the agreement and international public policy). Similarly, in ICC Case No 3913 of 1981, the arbitral tribunal declared the contract providing for the payment of “kickbacks” null and void because it was contrary to French domestic public policy and to international public policy.

In these instances, arbitral tribunals, “without either party having to take any steps to set it aside”, will neither enforce the contract nor grant any other remedies (ie, neither contractual nor restitutionary remedies will be available to the parties).

Instead, contracts entered into as a result of a bribing agreement (contracts procured by corruption) may be annulled at the option of one party, depending on the domestic applicable law. It follows that, if the innocent party takes action, “what was previously an existing contract is set aside” and, consequently, it cannot be enforced (ie, no contractual remedies will be available to the parties).

However, restitutionary remedies may in principle still be available. In fact, as an ICC tribunal made clear, the “avoidance of a contract must be distinguished from restitution” because “by rescinding, the innocent party seeks to set aside the contract”, while in “asking for restitution of whatever he has performed to the date of rescission, he must either make or tender restitution of that which he has received”.62 Nonetheless, arbitration practice shows that arbitral tribunals are not keen on awarding parties full restitution of what they have rendered in performing a contract that was procured by corruption. For instance, in ICC Case No 11307, the arbitral tribunal dismissed a claim for full restitution under two maintenance contracts and ordered the contractor to reimburse to the principal only the balance between the total consideration it received under the maintenance contracts and the commission it paid to an intermediary to (illegally) secure the contracts.

Contractual and Restitutionary Remedies Under the New Section on Illegality

As mentioned, the New Section on Illegality deals with the effects that the infringement of a mandatory rule by the “terms, performance, purpose” of a contact may have on the contract itself. Where the infringed mandatory rule is silent, parties to an illegal contract (a) may exercise the contractual remedies that are reasonable under the circumstances; and (b) where the contract has been performed, may still claim restitution if it is reasonable in the circumstances, and even where they “are denied any remedies under the contract”.

In the following two subsections, we will examine how the principles established by the New Section on Illegality may influence international arbitrators when assessing the consequences of corruption on commercial contracts and, specifically, the remedies – both contractual and restitutionary – that parties to a contract tainted with corruption may retain.

Although no arbitral awards applying the New Section on Illegality seem to be publicly available to date, the Illustrations provided by the official commentary to the 2010 Principles are helpful for our purposes. It is worth recalling that any of the considerations made below are relevant to the extent that the UNIDROIT Principles apply and no national law rules on the legal effects of illegality on contracts take precedence.

Contractual Remedies

According to current arbitration practice, parties to a contract tainted with corruption are usually denied any contractual remedies, except where the contract is procured by corruption (as opposed to providing for corruption) and the innocent party decides not to take action for its annulment. Instead, pursuant to Art 3.3.1 of the New Section on Illegality, contractual remedies may still be granted if it appears reasonable, based on the following criteria:

  • the purpose of the infringed mandatory rule;
  • the category of persons that the infringed mandatory rule intends to protect;
  • the sanctions that may be imposed under the infringed rule;
  • the seriousness of such infringement;
  • the knowledge that one or both parties had (or ought to have) of the infringement;
  • the circumstance that the performance of the agreement may have required the infringement; and
  • the reasonable expectations of the contracting parties.

As to contracts providing for corruption, Illustration No 1 of Art 3.3.1 provides the following example.66 A (the “Contractor”) entered into a “Commission Agreement” with B (the “Agent”). Under this agreement, the Agent would pay, against a substantial fee, “a high ranking procurement advisor” of a Governmental entity to induce the latter to award the Contractor a construction contract. Commission agreements as such are illegal under the law of virtually all jurisdictions (because they infringe either statutory provisions, or national public policy standards), as well as under well-established international principles of good morals. As seen supra, an international arbitration tribunal would declare such contracts null and void ab initio. Equally, under new Art 3.3.1 of the 2010 UNIDROIT Principles, such contracts will be considered non-existent (and, therefore, be devoid of legal effect). Indeed, in the example, if the Governmental entity refused to award the Contractor the construction contract, notwithstanding the fee that the Contractor paid to the Agent, neither the Contractor nor the Agent would be granted “any remedy under the Commission Agreement”.

Source: Bonell M., Meyer O. (eds) The Impact of Corruption on International Commercial Contracts. Ius Comparatum – Global Studies in Comparative Law, vol 11. Springer, 2015



See Also

References and Further Reading

About the Author/s and Reviewer/s

Author: international

Mentioned in these Entries

Arbitral Institutions, Attorney, Common law, International Commercial Arbitration, International Commercial Law, International commercial arbitration, International institutions, Law Journals, Legal Resources Index, Lexis, Permanent Court of Arbitration, Transnational Arbitration, Transnational Litigation, Treaties, United Nations Convention on Contracts for the International Sale of Goods.