Corruption is as disapproved as it is widespread, both in the public and private sectors.
To that extent, international organizations have adopted several instruments aimed at preventing and repressing corruption. Such is the case of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, signed on 17 December 1997  and the United Nations Convention against Corruption signed on 31 October 2003 , which both condemn corruption in all its forms and entail specific commitments for signatory States.
Similarly, individual countries have adopted regulations to combat corruption, such as the Foreign Corruption Practices Act in the United States,  the United Kingdom Bribery Act  and lately, the Sapin II Law in France.
Notwithstanding, the International Monetary Fund estimated that the cost of corruption accounted for 2% of the world’s gross domestic product (“GDP”) in 2016, given that up to US$ 2 trillion may have been paid on bribes alone.
In this regard, and in view of the persistence of corruption in business and trade, the treatment of corruption in commercial and investment arbitration is of particular interest. Indeed, corruption allegations may be used as a “gateway issue” to prevent access to the arbitral tribunals for the parties involved in the dispute  or as a substantial defense based on the violation of international public policy.
To address such issue, the nature and scope of each of these dispute mechanisms must be clarified. On the one hand, investment arbitration refers to the mechanism between a “host state” and investors, in which, through the signing of bilateral investment treaties (“BIT”), the host state commits to grant investors procedural (access to a neutral forum) and substantive (protection standards) protection.
On the other hand, commercial arbitration is an alternative dispute resolution method, contractually agreed upon  between two parties engaged in an international economic activity, which allows them to choose a reliable legislation and a neutral venue, guided by contractual provisions. In this sense, the scope, content, limitations and applicable standards do not derive from any international treaty, but rather from contractually expressed intentions.
In view of this summa divisio, it is worth analyzing the treatment given to allegations of corruption in each of these types of arbitration. To this end, we will analyze the different approaches to corruption in investment arbitration (I) in contrast with commercial arbitration (II).
I. The treatment of corruption in investment arbitration proceedings
Investment activities entail a considerable source of risk, as they may involve interaction with public agents. As a result, when disputes arise in the execution of a venture, allegations of corruption may appear, leading to consequences that depend, among other things, on the procedural stages at which they are raised, the elements of the act of corruption, the party alleging it and when it is discovered.
A. Procedural consequences of corruption allegations in investment arbitration
First, well-founded allegations of corruption before an arbitral tribunal may have procedural effects and notably be ground for lack of jurisdiction or lack of admissibility of the investor’s claims, depending on the specificities of the dispute. Yet, to avoid prohibiting the investor from its right to a neutral legal forum, procedural sanctions have been considered applicable only to the initial corruption aimed at making the investment, and not to subsequent acts of corruption.
All in all, the rationale for barring jurisdiction or dismissing the investor’s claim may be found in different legal principles, such as the legality of the investment, whether explicit or implicit, the “clean hands” doctrine or the concept of international public order.
Usually, BIT’s impose compliance with the host state law when concluding the investment as a condition for granting effects and protection of said investment. Such clause is considered an explicit legality condition of the investment and it is often used as grounds to decline jurisdiction. In this sense, in the face of an initially corrupt investment, it has been considered that arbitrators are not competent, although in practice tribunals have regarded it as a sanction, which must be proportionate to the violation committed.
Similarly, arbitrators have considered, even in the absence of an express provision, that compliance with host state legislation was implicit in the BIT  and thus have deemed the investors claim inadmissible. Some awards, nonetheless, have opted for barring jurisdiction.
However, to avoid situations in which the host state knew of the illegality but still endorsed the investment, tribunals have used the estoppel principle. Thus, a host state may find itself estopped (“under estoppel”) from using the exception of illegality.
Another possibility for arbitral tribunals to bar investor’s claims has been to apply the “clean hands” doctrine, which requires that the claimant should have a proper conduct. Indeed, “if some form of illegal or improper conduct is found on the part of the investor, his or her hands will be “unclean,” his claims will be barred and any loss suffered will lie where it falls.” This doctrine was used by arbitrators to avoid granting access “to International Arbitration to resolve disputes, because it is evident that its act had a fraudulent origin and, as provided by the legal maxim, “nobody can benefit from his own fraud to absence of fraud in his conduct at the time of formulating his claims”.
Finally, arbitrators have also used the violation of international public policy as grounds for inadmissibility of a claim, notably when the host-state is the one claiming the corruption of the original investment without prejudice to the fact that some awards have considered that, in this instance, jurisdiction should be declined.
B. The analysis of corruption at the merits phase
If corruption allegations do sometimes bar access to arbitral tribunals, most often these allegations are dealt with during the merits phase of arbitration, thus preserving investors’ right to a neutral forum.
In practice this may occur in the case of reparations claimed by the investor, leading to the reduction of the amount claimed according to the analysis of its conduct, or when attributing the costs of the proceeding to one of the parties.
However, the one aspect that is essential to mention when considering allegations of corruption at the merits phase of investment arbitration is the standard of proof applied by arbitrators when characterizing the existence of an act of corruption by one of the parties.
Yet, establishing a clear approach regarding the standard of proof applied to corruption allegations is difficult. Firstly, because there are no standards of proof applicable to the commission of unlawful acts defined by the BITs, nor by any international regulations , and secondly, because arbitral tribunals have not taken a uniform approach.
Traditionally, a lot of investment arbitral tribunals applied the heightened standard of “clear and convincing evidence”, which seems to be a middle ground between the standard of proof found in criminal law matters “beyond a reasonable doubt” and the “balance of probabilities” often found in civil cases. In practice, such standard is mostly applied to corruption allegations used as a defense against investor claims, as such allegation were considered very serious  and host states were deemed to have the necessary tools and powers to conduct an investigation and could therefore meet its burden of proof with relative ease.
Yet, such heightened standard may be difficult to meet as corruption is often concealed. In addition, there is always a risk that public officials may dispose of evidence or interfere with the relevant investigations.
With that in mind, some investment arbitral tribunals have adopted a more flexible approach, not basing themselves on any standard of proof, but rather adopting a pragmatic approach involving reasonable degree of certainty of the corruption, by using notably the red flag methodology (and admission of circumstantial evidence), whereas others, more recently, based themselves on the “balance of probabilities” as starting point in determining corruption claims.
Therefore, without it being possible to confirm an absolute standard, it seems that arbitral tribunals have more recently abandoned their historical heightened standard of proof when considering corruption allegations in investment arbitration.
II. The treatment of corruption in international commercial arbitration proceedings
In commercial arbitration, the treatment of corruption is substantially different compared to investment arbitration. Indeed, commercial arbitration is based on the will of the parties and thus on private contract law, whereas investment arbitration applies standard rules of public international law. In commercial arbitration, allegations of corruption do not deprive either party of jurisdiction or admissibility of the claim but are rather analyzed on the merits of the dispute, as a potential violation of international public policy.
A. Jurisdiction of arbitrators to assess corruption allegations
The arbitrability of allegations of corruption was not always evident. Traditionally, arbitrators refused jurisdiction to assess such claims, as they considered that these issues went beyond their scope of authority. Arbitrators were hesitant to address criminal matters due to their lack of power to impose criminal penalties but also due to their inability to compel parties to produce evidence, etc.
Nevertheless, such reluctance has been gradually overcome with the generalization of the fight against corruption. Thus, arbitral tribunals no longer decline jurisdiction over corruption issues. With time, it has even evolved from a recognition of arbitrators’ jurisdiction to rule on allegations of corruption, to an obligation to rule on such allegations.
Effectively, as arbitrators have become increasingly active in the fight against corruption, they need to be careful in rendering enforceable awards that do not violate international public policy. Therefore, an award in which allegations of corruption are ignored or in which an unlawful act is legitimized in contravention of these principles runs the risk of being overturned.
Such is the case when national judges control arbitral awards if asked either to enforce an arbitral award or to set it aside  and specifically verify that arbitral awards do not endorse an illegal enterprise. To do so, French courts verify that the enforcement of such award does not violate international public policy. As an example, the Belokon, the Alstom and the Sorelec cases are good illustrations of the red flags techniques used by French judges to identify “serious, precise and concordant indications” of corruption and prevent the enforcement in France of an award rendered abroad judged to be in “manifest, effective and concrete” violation of the French conception of international public policy. However, recent decisions now seem to only verify if enforcing such award would result in a “significant” breach on international public policy.
B. The sanctioning of corruption at the merits phase of the dispute
The incidence of corruption at the merits phase of a dispute, necessarily depends on the applicable law of the contract, in particular to determine the sanction applicable on the merits of the dispute.
The first type of sanction is to render the contract null and void. Nullity of the contract is used as a sanction when the purpose of the contract was the payment of bribes. Such is often the case in consultancy contracts.
Yet, in the case in which bribery or corruption practices were performed in order to obtain the said contract, the sanction depends on whether we are in a common or civil law environment. If Common Law is applicable, the contract is voidable at the request of the non-corrupt party. Under French law, it was decided that the contract was null and void as it’s “cause” violated international public policy. Nevertheless, arbitrators will decide the possible outcome regarding restitutions, depending on specificities of each case.
At this point, it is necessary to mention the disadvantages that may result from the application of such strict sanction. Indeed, depriving the contract of its effects due to corruption may, in some cases, end up benefiting the party having benefited from the bribes (i.e., having obtained substantial contracts thanks to the bribes) which may sometimes be inequitable. In fact, a defaulting debtor may claim corruption to justify its non-performance, even though he himself benefited from the corruption scheme. In such cases, the application of such sanction is a deviation from the purposes of international public policy, namely the protection of the common and general principles or values that are essential to international trade.
In addition to the nullity of a contract, arbitrators may be called upon to rule on damages sustained by the un-corrupt party when an act of corruption is committed by one of the parties during the performance of a contract. If this issue has not yet been widely developed in arbitration, the use of anti-corruption clauses and the inclusion of compliance programs in different international trade contracts, may lead to assess these situations under the contractual liability perspective. Such is already the case in French case law, where compliance clauses may justify the application of contractual civil sanctions.
It can be concluded that allegations of corruption in commercial arbitration, contrary to investment arbitration, may not lead to the application of “gateway issues” as presented above, taking into account the differences between these two dispute resolution mechanisms. In other words, while in investment arbitration corruption may be an obstacle to adjudicate the dispute or to consider the investor’s claims admissible, in commercial arbitration it is the duty of arbitrators to ascertain and sanction acts of corruption to ensure the effectiveness of the award.
As for the analysis of corruption at the merits phase, the trend in both types of arbitration seems to be the evolution towards the application of more pragmatic standards. However, arbitrators are free to assess these situations and apply the appropriate consequences.
Finally, both types of arbitration highlight the need to modulate the applicable sanctions to prevent the party claiming an act of corruption from evading its duties.