State Responsibility for Corruption: A Return to Regular Order
In its paradigmatic form in transnational investment and commerce, corruption is typically a bilateral act requiring the cooperation of both the private party and the State—the so-called “supply” and “demand” sides—and the specific offense committed is bribery. But that symbiotic relationship notwithstanding, both sides are not usually treated in the same way by international tribunals. In most cases, bribery results in far more severe consequences upon the claimant corporation than on the respondent State, with the State bearing few if any consequences for the participation of public officials in the bribery that occurred, regardless of whether those acts may (or should) have known to the State.
Why this asymmetric treatment is so requires reflecting on whether a State bears any responsibility for the corruption of its public officials in the first place. This is a foundational issue: the ability of the State to invoke corruption as a complete defense is premised on the idea that a State is not responsible for the corruption its own public officials participated in. Put differently, no matter what the merits of the claimant’s claims might be and what breaches the State may have committed, the presence of corruption overrides all other considerations and will cause the dismissal of those claims, often for lack of jurisdiction or inadmissibility. Corruption trumps all other issues.
But that is not how international law ordinarily works: under the ILC Articles on State Responsibility, it is no excuse for a State to say that its public officials were acting in excess of authority or contrary to instructions—under Article 7, ultra vires acts of public officials are always attributable to the State. In the absence of any significant case law discussing the ILC Articles within the context of bribery, commentators have begun to fill that lacuna with significantly divergent opinions. A significant number maintain that Article 7 applies to corruption as well, and that the public official’s participation (or sometimes initiation) of bribery is attributable to the host State. This is so because for the ILC Articles consider what matters to be the exercise of State authority, not its propriety.
But if corruption is attributable to the State, what explains the case law’s hesitance to assign any consequences to the State? Some eminent scholars answer this question by pointing out that conduct attributable to the State must still meet a second basic element of the ILC Articles: that a breach of an international obligation of that State occurred (Article 2). They view lack of consequences as the product of doctrines specific to international anti-corruption law that affix the consequences of corruption decidedly on the side of the Claimant. These include “legality clauses”, transnational public policy, and the unclean hands doctrine and their Latin cognates.
This article contests that view: when treaty and customary international law on the consequences of corruption are carefully considered, no specific rule of treaty or customary international law exists that can justify the implicit exemption of States from the consequences of bribery. Overall, it is hard to say that international law contains a rule requiring that the consequences of bribery or other forms of corruption be borne only by the private party. And just as well: a system that seeks to extract accountability from both the private investor and the State is, in the long run, probably a more durable way to enhance arbitration as a tool for preventing corruption in foreign investment.
Llamzon, A. P. (2021). State responsibility for corruption: A return to regular order. In M. Bungenberg, M. Krajewski, C. J. Tams, J. P. Terhechte, & A. R. Ziegler (Eds.), European Yearbook of International Economic Law 2020 (pp. 107–173). Springer International Publishing. https://doi.org/10.1007/8165_2021_69