Enhancing anti-corruption via investment arbitration: from red flags to due diligence

Abstract As the number of corruption allegations in investor–State disputes (ISDS) grows, tribunals must balance their duty to resolve disputes and to render enforceable awards. Given the difficulty of proving corruption, arbitrators increasingly consider red flags to detect it, but still struggle with drawing consequences for corrupt conduct that would serve as an effective deterrent. Our empirical analysis of 92 ISDS cases that involved allegations of corruption reveals that over a quarter of arbitral decisions already utilize a red flags approach, which helps tribunals assess corruption risks and provide circumstantial evidence. This article proposes a novel list of red flags based on the empirical analysis, domestic and international law sources as well as soft law instruments. It then frames a corresponding anti-corruption due diligence mechanism, which can minimize the risks of corruption occurring, bring more predictability to ISDS and disincentivize frivolous allegations of corruption.