Unsafe undertakings: Prominent elements of the International Criminal Court's "red flag" approach to detecting corruption
New Guidelines for Addressing Corruption in International Arbitration
The International Chamber of Commerce (ICC) has published a comprehensive document, titled "Red Flags or Other Indicators of Corruption in International Arbitration", providing a methodology and framework for evaluating and responding to corruption "red flags" in international arbitration.
The document, published in November 2024, defines a red flag as any fact or circumstance that indicates a potential risk that a corrupt practice, most often bribery involving a public official, has occurred. Examples of specific red flags include unexplained, large payments to third parties, while general red flags may include lists specific to sectors such as the natural resources sector, which is seen as being particularly susceptible to corrupt practices.
The methodology proposed by the ICC outlines three key steps:
- Identification and Assessment: Tribunals should carefully examine allegations or independent concerns about corruption, recognising the challenge of substantiating such claims without damaging the integrity of arbitration.
- Framework for Analysis: The document proposes a structured approach to analyze red flags focused on assisting arbitrators, courts, and institutions in determining whether corruption indicators warrant further inquiry or action.
- Assessing the Collective Import of Validated Red Flags: In evidentiary terms, the collective import of validated red flags should be assessed to establish the likelihood of corrupt conduct.
The guidance also recommends actions for tribunals when corruption "red flags" are alleged or arise. These include conducting a preliminary evaluation of the red flag's credibility and seriousness, requesting additional evidence or disclosure to clarify corruption-related concerns, maintaining confidentiality, and considering the legal duties imposed on arbitrators when confronted with corruption allegations.
Upon finding compelling evidence of corruption, the guidance advises on steps tribunals can take, such as drawing adverse inferences, terminating the arbitration if appropriate, and referring the matter to relevant authorities or institutional bodies. The framework stresses the importance of carefully calibrating responses to avoid unfairly damaging parties’ reputations or undermining arbitration’s legitimacy while rigorously addressing corrupt practices.
The publication of the Red Flags Document comes after the English High Court set aside a US$11 billion dollar arbitral award in the case of Nigeria v Process and Industrial Developments Ltd due to fraud and conduct contrary to public policy. This landmark case highlights the growing importance of transparent and balanced scrutiny of corruption-related issues in international arbitration.
In summary, the ICC Red Flags document advocates a rigorous but balanced approach involving careful identification of red flags, transparent yet confidential investigative steps, clear procedural guidance for arbitrators’ legal responsibilities, and appropriate, proportionate responses to uphold arbitration integrity.
- In the pursuit of maintaining the integrity of international arbitration, the ICC has emphasized that financial transactions, such as unexplained, large payments to third parties, could be potential red flags indicative of corruption.
- The ICC's Red Flags Document recommends that in case of suspected corruption, arbitrators should be aware of their legal duties, which may include calling for more financial evidence or disclosure to better understand and address corruption-related concerns.
