Fighting Bribery and Corruption in Africa: From AU and OECD conventions to a general principle of international investment law

With a view to helping to bridge the gap between international anti-corruption norms and BITs concluded by African Union (AU) and OECD member states and ensure the liability of multinational corporations, this piece argues for the recognition of the prohibition of bribery and corruption as a general principle of international investment law.

Background: International conventions and soft law on corruption

Both the OECD and the AU have concluded anti-corruption conventions stressing the liability of corporations and have engaged themselves in soft-law initiatives to curb corrupt behaviour of the transnational firms from which most of the world’s investments come.

Under the OECD Anti-Bribery Convention, the countries of origin of multinational companies have committed themselves to repress through these companies the corruption of foreign public agents with intent to obtain or keep foreign investment in an unlawful manner.[1]

Unlike the OECD Anti-Bribery Convention, the AU Anti-Corruption Convention is not directed explicitly and exclusively to the corruption of foreign public agents. It calls on African states to adopt all necessary measures to define as offences acts of corruption committed by any person—including private sector agents—with regard to public agents.[2]

The OECD Anti-Bribery Convention also obliges states that have made bribery of their own public officials a predicate offence for the purpose of the application of their money-laundering legislation to do so on the same terms for the bribery of a foreign public official, without regard to the place where the bribery occurred.[3] In turn, the AU Anti-Corruption Convention engages states to criminalize in their domestic law the laundering of corruption proceeds.[4]

The AU Anti-Corruption Convention does not address the duty of accuracy of the company’s accounting standards. On the other hand, the OECD Anti-Bribery Convention requires that states provide for civil, administrative or criminal penalties for companies having their nationality that omit to provide the exact information on their financial statements in their country of origin.[5]

The AU Anti-Corruption Convention entered into force on August 05, 2006. As of October 2019, 43 out of 55 AU countries have ratified this convention. However, there is not yet a public directory of legislative measures adopted by each AU country to evaluate the trend in terms of national implementation of this treaty by member states as required under the convention.

In addition to these international legal instruments, there is an increasing number of noteworthy soft-law initiatives against corruption:

• The OECD Guidelines for Multinational Enterprises consist of a detailed code of conduct recommended by governments for the responsible behaviour of multinational enterprises in the domain of the fight against corruption. These guiding principles, although voluntary, encourage corporate social responsibility (CSR).[6]
• The Draft Pan-African Investment Code[7] introduces several obligations that foreign investors must comply with if they want to invest in Africa. This soft-law instrument is considered as a model BIT to guide AU states in the negotiation of IIAs[8] and will likely serve as an important reference in the negotiations of the investment protocol to the African Continental Free Trade Area (AfCFTA) agreement. The draft code prohibits investors from influencing African public officials with any personal payments or rewards in order to obtain or keep foreign investment in an unlawful manner; it also introduces CSR provisions.
• The Publish What You Pay initiative leads a campaign for the compulsory disclosure of the procedures to obtain licences, contracts and revenues relating to the exploitation of natural resources.[9]
• The Extractive Industries Transparency Initiative (EITI) invites multinational companies to publish the amounts paid to states to extract their natural resources. In return, host state governments must publish the revenues received from extractive industries.[10]

Since the adoption of international anti-corruption instruments and initiatives, there have been increased anti-corruption efforts on the part of multinational companies.[11]These efforts result from the international conventions and the soft-law initiatives listed above, and include:

• The adoption of mandatory codes of conduct, specifying behavioural rules that employees must adopt
• The threat and application of disciplinary sanctions against employees attempting to corrupt foreign public agents
• The creation of ethics committees to verify company compliance with its anti-corruption commitments
• Internal and external audits on the way these companies implement their anti-corruption promises.

International investment case law on corruption

In international investment arbitration, there are at least 20 known cases where the investor was either implicitly or explicitly alleged to have paid a bribe to host state officials in making an investment.[12]

Arbitral tribunals have accepted to hear and determine disputes in which corruption was invoked incidentally. In some cases, tribunals have held that corruption is contrary to international public order,[13]declining their subject-matter jurisdiction or dismissing the investor’s claim.

Several ICSID cases exemplify this. Below, I look into ISDS cases brought involving bribery between OECD investors and African states to argue that African states should use international investment law to help tackle the problem of corruption.

In the World Duty Free v. Kenya case,[14] the investor initiated contract-based arbitration at ICSID for the alleged expropriation of its investment. The Kenyan president had allegedly received a payment of USD 2 million from a foreign investor to establish its activities in Kenyan airports. The Kenyan state pleaded the nullity of the contract, maintaining that a bribe had been paid and that the conclusion of the contract had been contrary to Kenyan law. In its defence, the investor admitted to having obtained the contract by making a personal donation to the Kenyan president, arguing, however, that this was done in conformity with Kenyan habits and customs.

The World Duty Free tribunal—relying on Kenyan national legislation, anti-corruption treaties, arbitral awards and domestic court judgments—concluded that corruption is contrary to the international public order of most, if not all states. It also concluded that the personal donation made to the Kenyan president was an act of corruption contrary to international public order. On these grounds, the arbitrators rejected the investor’s claim.

In Wena Hotels v. Egypt,[15] the dispute was initiated by a British company after the alleged expropriation of two hotels whose management contracts it had received from Egypt. Wena sought compensation based on the Egypt–United Kingdom BIT. In its defence, Egypt put forward that Wena had illicitly tried to influence the decision made by the Egyptian governmental agency to obtain these hotels’ management contracts.

The Wena arbitrators paid particular attention to the allegations of corruption, but dismissed Egypt’s defence, concluding that it failed to prove its allegations. However, the tribunal suggested that it would have otherwise dismissed Wena’s claim, holding that,“[i]f true, these allegations are disturbing and ground for dismissal of this claim,” and noting that “international tribunals have often held that corruption of the type alleged by Egypt [is] contrary to international bones mores.”[16]

In AHCA v. Congo, the dispute was submitted by the African Holding Company of America (AHCA) and the Société africaine de construction au Congo S.A.R.L (SAFRICAS) against the Democratic Republic of the Congo (DRC), on the basis of an arbitration clause included in the DRC–United States BIT. The origin of the dispute lies in a debt owed by the DRC to SAFRICAS for the construction of a road in Congo. Afterwards, SAFRICAS assigned its claim to AHCA. In its defence, the DRC asserted that there was no contract because the construction contract granted to SAFRICAS was obtained through corrupt practices.

The AHCA tribunal found that the DRC did not prove its corruption allegations, but, unlike the Wena tribunal, did not discuss the possible consequences of a finding of corruption.[17]

Final remarks—A way forward for anti-corruption obligations on investors?

While most BITs do not impose a direct obligation on multinational companies to fight corruption, states should consider including such obligations in IIAs they negotiate or renegotiate, building on recent treaty practice.[18]

However, even in the absence of a treaty-based anti-corruption obligation on investors, the arbitral jurisprudence admits that the prohibition of corruption is a general principle of international investment law.[19]Accordingly, arbitrators should apply the international law obligation on investors to refrain from corrupt behaviour when making an investment. Their failure to do so could lead to the nullity of the resulting award, because “a non-application of the proper law may constitute an excess of powers which calls for annulment.”[20]

Because the prohibition of corruption is part of the general principles of international investment law, a state, even in the absence of a clause requiring the multinational companies to fight against corruption, could initiate arbitration to claim against a multinational company for the corruption of its public agents. This possibility would depend on whether the state has a legal basis to do so under investment treaties or investor–state contracts referring to international law as the applicable law, as well as an arbitration clause. In addition, ISDS clauses in investment treaties or investor–state contracts could oblige the parties to respect the general principles of international investment law. In any such arbitration, the tribunal would need to apply the general principle prohibiting corruption. Similarly, a company that is under pressure to pay a bribe could bring an arbitration claim to denounce corruption.

In a forward-looking manner, if a host state fails to denounce corruption, civil society organizations (CSOs) could do so by filing a petition to submit an amicus curiae brief in a pending arbitration. This could be done by including an optional additional protocol on corruption to the ICSID Convention.[21] Given that arbitral tribunals currently have discretion as to whether to accept and how much weight to give amicus submissions, states could consider rules to allow CSOs easier access to arbitrations as amici.[22] This could be done, for example, in the context of ongoing ISDS reform efforts at UNCITRAL Working Group III and of the current ICSID rule amendment process. Finally, they could consider ways to allow CSOs to bring their corruption complaints to arbitral tribunals or international institutions, building on practices in human rights bodies, such as the “calls actions” received by the African Commission on Human Rights.[23]

Author

Guy Marcel Nono is a teaching assistant in international law at Douala University (Cameroon). He previously taught an international law course at Laval University (Canada) from 2015 to 2018.

Notes

[1] Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, November 21, 1997, 37 ILM 4 (1998), preamble, para. 1; Arts. 1(1), 2) and 3(1) [OECD Anti-Bribery Convention]. https://www.oecd.org/daf/anti-bribery/ConvCombatBribery_ENG.pdf

[2] African Union Convention to Prevent and Combat Corruption, July 11, 2003, 43 ILM 5 (2004), Arts. 5(1) and 11(1) [AU Anti-Corruption Convention]. https://au.int/sites/default/files/treaties/36382-treaty-0028_-_african_union_convention_on_preventing_and_combating_corruption_e.pdf

[3] OECD Anti-Bribery Convention, supra note 1, Art. 7.

[4] AU Anti-Corruption Convention, supra note 2, Art. 6.

[5] OECD Anti-Bribery Convention, supra note 1, Art. 8.

[6] Organisation for Economic Co-operation and Development. (2011). OECD guidelines for multinational enterprises. http://www.oecd.org/daf/inv/mne/48004323.pdf

[7] United Nations Economic Commission for Africa. (2016). Draft Pan-African investment code. UN Doc. E/ECA/COE/35/18, Arts. 21 and 22. https://repository.uneca.org/handle/10855/23009

[8] Hedar, A. (2017). The legal nature of the Draft Pan-African Investment Code and its relationship with international investment agreements (Investment Policy Brief, 9), p. 1. https://www.southcentre.int/wp-content/uploads/2017/07/IPB9_The-Legal-Nature-of-the-Draft-Pan-African-Investment-Code-and-its-Relationship-with-International-Investment-Agreements_EN.pdf

[9] Van Oranje, M. & Parham, H. (2009). Publishing what we learned: An assessment of the Publish What You Pay coalition, p. 25–30. https://eiti.org/sites/default/files/documents/Publishing%20What%20We%20Learned.pdf

[10] Extractive Industries Transparency Initiative. (2019). EITI Standard 2019. https://eiti.org/document/eiti-standard-2019

[11] Organisation for Economic Co-operation and Development. (2003). Enhancing the role of business in the fight against corruption – 2003 Annual Report on the Guidelines for Multinational Enterprises. OECD.

[12] Levine, A.J.M. (2019). Canadian initiatives against bribery by foreign investors, p. 14 (box 9). IISD. https://iisd.org/sites/default/files/publications/canadian-initiatives-against-bribery-foreign-investors.pdf

[13] See World Duty Free Co Ltd v. Republic of Kenya, ICSID Case No. ARB/00/7, Award, October 4, 2006, 46 ILM 339 (2006), paras. 152, 155.

[14] Id., paras. 105–107, 143–157. See also Johnson, L. (2011). World Duty Free v. Kenya. In: N. Bernasconi-Osterwalder & L. Johnson. (Eds.). International investment law and sustainable development: Key cases from 2000–2010. IISD. https://www.iisd.org/ITN/2018/10/18/world-duty-free-v-kenya

[15] Wena Hotels Ltd v. Arab Republic of Egypt, Case No. ARB/98/4, Award, December 8, 2000, 41 ILM 881 (2000). https://www.italaw.com/sites/default/files/case-documents/ita0902.pdf

[16] Id., para. 111.

[17] African Holding Company of America, Inc. and Société Africaine de Construction au Congo S.A.R.L. v. Democratic Republic of the Congo, ICSID Case No. ARB/05/21, Award on the objections to jurisdiction and admissibility, July 29, 2008, paras. 52. 54. https://www.italaw.com/sites/default/files/case-documents/ita0016.pdf

[18] The 2005 IISD model BIT, the 2012 SADC model BIT and the 2016 Morocco–Nigeria BIT include anti-corruption obligations on investors and investments, and the 2016 CETA excludes investments made through corruption from dispute settlement. See Levine, M. J. (2019, June). A bit of anti-bribery: How a corruption prohibition in FIPAs can bring a minimum standard of conduct for Canadian investors abroad. Investment Treaty News, 10(2), 8–11. https://www.iisd.org/itn/2019/06/27/a-bit-of-anti-bribery-how-a-corruption-prohibition-in-fipas-can-bring-a-minimum-standard-of-conduct-for-canadian-investors-abroad-matthew-levine

[19] See Schreuer, C. (2009). The ICSID Convention – A commentary. Cambridge University Press, p. 608.

[20] Id., p. 556.

[21] The question of how this protocol would operate and how to ensure a tribunal would have to consider requests by CSOs would need to be fully developed in a separate article.

[22] IISD. (2019, April). Summary comments to the proposals for amendment of the ICSID arbitration rules. Geneva: IISD. https://www.iisd.org/library/summary-comments-proposals-amendment-icsid-arbitration-rules

[23] This idea is borrowed from the African Commission on Human Rights, Association pour la sauvegarde de la paix au Burundi / Kenya, Uganda, Rwanda, Tanzania, Zaire (DRC), Zambia, 157/96 HRCLA (CommAfr DHP 2003), paras. 1, 63. https://www.achpr.org/sessions/descions?id=140