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Investment Treaties and Investor Corruption: An Emergent Defense for Host States?

Bilateral investment treaties (BITs) are famously asymmetric. They grant investors rights but not obligations, while imposing upon states obligations unaccompanied by rights. Recent cases suggest, however, that BIT tribunals are poised to recognize a defense to state BIT liability that, in effect, imposes upon investors the obligation to avoid involvement in public corruption in the course of making a treaty-­protected investment. In this short article I sketch out the contours of this emergent defense, focusing on the recent investment treaty arbitration between Siemens, A.G. and Argentina. Siemens was awarded $200 million for Argentina’s expropriation of its investment, but Siemens voluntarily abandoned the award in response to post-­award revelations that Siemens had procured the investment through the systematic bribery of Argentine officials. While the Siemens tribunal never had the chance to rule on the legal consequences of the bribery allegations, jurisprudential trends suggest that it would likely have used the fact of corruption to either decline jurisdiction or to otherwise refuse to recognize Siemens’ substantive treaty-­based rights. I nonetheless argue that the specific contours of this emerging corruption defense are uncertain, and I suggest model investment treaty text for states that wish to secure their reliable access to it.