Improving domestic governance through international investment law: Should bilateral investment treaties learn from international anti-corruption conventions?

This paper is the result of a comparative analysis of investment treaties, investment arbitration awards, subject literature and expert interviews. It investigates options for integrating the strong legal regime of investment arbitration - which brings together the principal actors in transnational corruption: foreign investors and host states - further into the fight against corruption. Investment arbitration jurisprudence shows that host states have made allegations of bribery with an increasing frequency. However, the lack of unambiguous guidelines on how to treat such arguments has arguably contributed to a shortage of affirmative decisions, even where further evidence might have been available. The inflow of illicit payments through investment projects can severely undermine domestic good governance efforts. As a measure to keep corruption-tainted investments from benefiting from investment treaty protections, states should press for explicit provisions in investment treaties excluding such assets from the treaty’s scope of application. This paper proposes making the investor’s access to arbitral procedures depend on its compliance with international bribery norms such as Article 1 of the OECD Convention. Building on the findings of the paper, a Model Clause has been drafted, which is intended as an innovative reference for drafters and negotiators of future investment treaties.