Corruption and the (Un)Clean Hands Doctrine in Investor-State Arbitration: Definitional and Reciprocity Challenges

I. INTRODUCTION

The ‘clean hands’ doctrine, or ‘unclean hands’ doctrine, is a popular source that host States have referred to as part of their allegations of corruption in investor-State arbitration (ISA).² It is generally claimed that an investor that had offered a bribe to the public official of the host State comes to the tribunal with ‘unclean hands’ and thus its claims should be dismissed. In practice, the ‘clean hands’ doctrine has been submitted separately or in combination with other references, for instance, in Metal-Tech v Uzbekistan (2013) where the Uzbek government relied on both the ‘unclean hands’ doctrine and the legality clause to request that the Tribunal declare the investor’s claims inadmissible.³ Similar submissions were raised in recent arbitration cases as well:⁴ notably in Tethyan Copper v Pakistan (2017), the Respondent submitted that the ‘Claimant’s claims are inadmissible because Claimant comes to this Tribunal with ‘unclean hands’, referring to the doctrine of ‘clean hands’ as a general principle regarding claims tainted by corruption’;⁵ in Glencore International v Colombia (1) (2019), the government of Colombia insisted that the ‘Claimants’ unclean hands [alleged act of corruption] rendered their claims inadmissible’.⁶

ISA tribunals have delivered diverging propositions regarding the ‘clean hands’ doctrine. Some have endorsed the doctrine as applicable to address corruption issues and, in consequence, have excluded investors’ claims entirely. Notably, in Spentex v Uzbekistan (2016), the ‘unclean hands’ doctrine was one of the grounds on which the Tribunal completely ruled out Spentex’s claims, though the underlying legal reasoning for the application of this doctrine remains unpublished.⁷ The World Duty Free v Kenya (2006) Tribunal also briefly mentioned that ‘the Claimant is not legally entitled to maintain any of its pleaded claims in these proceedings on the ground of ex turpi causa non oritur actio’⁸ while the Tribunal did not expand on this reasoning. In Littop v Ukraine (2021), the Tribunal noted that ‘the doctrine of clean hands … is now a principle of international law’ and ultimately declined jurisdiction because the investment was tainted by bribery and corruption.⁹

On the other hand, the Lao Holdings v Laos (1) (2019) Tribunal refused to apply the doctrine, providing that ‘[i]ncorporation of such a general doctrine into investor-State law without careful boundaries would risk opening investment disputes to an open-ended, vague and ultimately unmanageable principle’.¹⁰ Given the bilateral nature of corruption, one may inquire as to why the demand side of corruption (ie host State) is allowed to benefit from its own unclean hands (ie accepting and/or soliciting a bribe) by arguing that the supply side (ie the investor) of this corruption has ‘unclean hands’ (ie offering a bribe). Why is an investor not allowed to do the same, namely arguing that the host State’s allegation of corruption is raised with ‘unclean hands’ and should be dismissed? A further question then arises: is the ‘clean hands’ doctrine truly a legitimate and proper approach to adequately address the complicated nature of corruption issues?

In this note, I will undertake a comprehensive exploration of the ‘unclean hands’ doctrine in international law and practice, presenting arguments that align with the latter perspective. First, I will demonstrate that the ‘unclean hands’ doctrine is ill-defined in international law and practice, with multiple sources claimed. Its scope is a matter of significant debate, particularly as the International Court of Justice (ICJ or the Court) has consistently decided not to dismiss claims based on this doctrine.

Second, even if we acknowledge its existence in international law, this doctrine essentially prevents an applicant from pursuing claims against a party’s non-performance when the other party itself has failed to fulfil a related or reciprocal obligation, in fact and in law. In the context of international investment disputes, particularly those involving issues such as corruption, I will argue that the ‘unclean hands’ doctrine has limited application. This is because there is generally no reciprocal relationship between an alleged investment treaty breach conduct (such as unlawful expropriation) and the act of corruption (between the investor and officials of the host State). Instead, I posit that when a host State raises a ‘clean hands’ defence, it should be dismissed on the grounds of its own ‘unclean hands’, as giving a bribe and receiving a bribe inherently constitute a pair of reciprocal actions. Consequently, the recent trend among some tribunals to dismiss investment treaty claims based on the claimant’s ‘unclean hands’ upon discovering corruption is an improper application of a legally dubious doctrine.

II. AN ILL-DEFINED NOTION

What is the ‘clean hands’ doctrine? While it is generally understood as ‘he who comes to equity for relief must come with clean hands’, there is so far a lack of consensus on the definition and scope of this notion.¹¹ Does it suggest that any illegality of the claimant would render the claims inadmissible, or does it refer to a specific scope of wrongdoings? In practice, the ‘clean hands’ doctrine has become a shorthand reference to a host of related but distinct Latin maxims.

A. Principle of Equity

The ‘clean hands’ doctrine has been frequently encapsulated in the Latin maxim ‘he who seeks equity must do equity’, or the principle of equity. A number of Judges of the ICJ and the Permanent Court of International Justice (PCIJ) have positioned this doctrine within the context of the equity principle through their individual, separate and dissenting opinions.

In Military and Paramilitary Activities between Nicaragua and the United States, Judge Schwebel noted that it was Nicaragua who ‘first intervened with the use of force in the affairs of another State’, whose status was as the ‘prima facie aggressor’ and who had failed to come to the Court with clean hands, which is a ‘fundamental general principle of law’.¹² To support this conclusion, Judge Schwebel referred to Judge Hudson’s opinion about the principle of equity delivered in Diversion of Water from the Meuse:¹³

It would seem to be an important principle of equity that where two parties have assumed an identical or a reciprocal obligation, one party which is engaged in a continuing non-performance of that obligation should not be permitted to take advantage of a similar non-performance of that obligation by the other party. The principle finds expression in the so-called maxims of equity which exercised great influence in the creative period of the development of the Anglo-American law. Some of these maxims are, ‘Equality is equity’; ‘He who seeks equity must do equity’. It is in line with such maxims that ‘a court of equity refuses relief to a plaintiff whose conduct in regard to the subject-matter of the litigation has been improper.’ … A very similar principle was received into Roman Law. The obligation of a vendor and a vendee being concurrent, ‘neither could compel the other to perform unless he had done, or tendered, his own part’.

To strengthen his argument that the ‘clean hands’ doctrine had become a general principle of law understood under Article 38 of the Statute of the International Court of Justice (ICJ Statute), Judge Schwebel further cited words from Sir Gerald Fitzmaurice regarding the principle of equity:¹⁴

Certain English principles of equity find an application in the international field … such as that ‘He who comes to equity for relief must do equity’ and that ‘He who comes to equity for relief must come with clean hands’. Thus a State which is guilty of illegal conduct may be deprived of the necessary locus standi in judicio for complaining of corresponding illegalities on the part of other States, especially if these were consequential on or were embarked upon in order to counter its own illegality—in short were provoked by it.

Judge Schwebel subsequently applied the substance and scope of the equity principle in making his decisions on the ‘clean hands’ doctrine submissions.

In the case of Arrest Warrant of 11 April 2000 between the Democratic Republic of the Congo (DRC) and Belgium, Judge Van den Wyngaert also equated the ‘clean hands’ doctrine with the principle of equity. By referring to Judge Schwebel’s legal reasoning and again to Sir Gerald Fitzmaurice’s statements,¹⁵ she noted that the DRC ‘did not come to the International Court with clean hands, and its application should be rejected’. It is worth noting that the above-mentioned observations from Judge Hudson, Judge Schwebel and Sir Gerald Fitzmaurice have often been used to introduce the meaning of the ‘clean hands’ doctrine.¹⁶

B. Other Latin Maxims

Aside from the principle of equity, the ‘clean hands’ doctrine has been used to stand for a number of other maxims, proposed in both international disputes¹⁷ and academic literature,¹⁸ including ex injuria jus non oritur, ex delicto non oritur actio, ex turpi causa non oritur, nullus commodum capere potest de injuria sua propria and nemo ex suo delicto meliorem suam conditionem facit.

These Latin maxims are arguably ‘different forms’¹⁹ or ‘closely related to’²⁰ the ‘clean hands’ doctrine. The principle of ex injuria jus non oritur stands for ‘the proposition that unlawful conduct cannot modify the law applicable in the relations between the parties’.²¹ The principle of nullus commodum capere de sua injuria propria means that ‘[a] State may not invoke its own illegal act to diminish its own liability’ or ‘[n]o one should be allowed to reap advantages from his own wrong’.²² The maxim ex delicto non oritur actio has been considered a manifestation of nullus commodum capere de sua injuria propria;²³ however, the former is more relevant in cases where claims are tainted in illegality and the latter focuses on ‘reliance on an illegality’.²⁴ The principle of ex turpi causa non oritur denotes that an action cannot arise from a dishonourable cause, but the ICJ has required the party who invokes this principle against the other to demonstrate that the former party has been prevented from fulfilling its obligation due to the wrongful acts allegedly committed by the latter party.²⁵

While certain overlaps exist among these Latin expressions, they do not hold the same meaning and have intrinsic differences from one another. The practice of roughly referring to these maxims within the ‘clean hands’ doctrine without careful boundaries or clarification reinforces the lack of a uniform understanding of the scope and substance of the ‘clean hands’ doctrine.

C. A standalone doctrine

At other times, the ‘clean hands’ doctrine is differentiated from these Latin maxims and considered a standalone doctrine. Such was the case in Jadhav, where the ICJ differentiated the ‘clean hands’ doctrine, the principle of ex turpi causa non oritur actio and the principle of ex injuria jus non oritur by addressing these concepts separately. The Court has further addressed arguments based on the ‘clean hands’ doctrine in many other cases, without referring to the Latin expressions, such as in Maritime Delimitation in the Indian Ocean, and Certain Iranian Assets. Even so, the Court has never explicated what the doctrine stands for, nor has it expressly recognized the status of the doctrine in international law.

By contrast, a careful review of these cases suggests that the ICJ has been consistently reluctant to apply the ‘clean hands’ doctrine to dismiss applications. In Maritime Delimitation in the Indian Ocean , Somalia initiated the proceedings against Kenya concerning a dispute about the single maritime boundary between these two States. One preliminary objection raised by Kenya was that Somalia’s application was inadmissible because it had breached a memorandum of understanding signed between them. The Court refused to apply the ‘clean hands’ doctrine, reasoning that ‘the fact that an applicant may have breached a treaty at issue in the case does not per se affect the admissibility of its application’.²⁶

In Certain Iranian Assets , Iran launched ICJ proceedings alleging that the United States had violated the Treaty of Amity, Economic Relations and Consular Rights effective between them since 1957; as a response, the United States initiated an objection, among others, to the admissibility of Iran’s claims, stating that Iran had come to the proceeding with unclean hands which precluded the Court from hearing the case.²⁷ The Court first reiterated its proposition regarding the ‘clean hands’ doctrine that ‘even if it were shown that the Applicant’s conduct was not beyond reproach, this would not be sufficient per se to uphold the objection to admissibility raised by the Respondent on the basis of the “clean hands” doctrine’.²⁸ Further, the Court noted that it has never held that the ‘clean hands’ doctrine was part of customary international law (CIL) or constituted a general principle of law.²⁹

The ICJ maintained this approach in the Jadhav case, where India filed an application against Pakistan and requested that the ICJ declare that Pakistan’s arrest and detention of an Indian national (Mr Kulbhushan Sudhir Jadhav) violated the Vienna Convention on Consular Relations. One of Pakistan’s preliminary objections to the admissibility was made in reference to the ‘clean hands’ doctrine, and stated that India’s unlawful conduct precluded this Court from hearing the dispute.³⁰ The Court clearly expressed that it cannot support the opinion that ‘an objection based on the “clean hands” doctrine may itself render an application based on a valid title of jurisdiction inadmissible’.³¹

D. Unsettled Status in International Law

The want for a well-accepted definition and scope of the ‘clean hands’ doctrine has resulted in diverging opinions on the status of the doctrine. According to some, this doctrine qualifies as a general principle of law, because it is ‘encountered in the domestic legal orders of many States’ and ‘can be found in the laws of many jurisdictions, civil- and common-law alike’.³² Opponents propose that ‘in light of … the different versions of the doctrine in municipal legal systems … no form of the clean hands doctrine can be considered a general principle of law’.³³ Those who have different understandings of the scope and the origin of the ‘clean hands’ doctrine likely come to their own distinct conclusions.

Those who have associated the ‘clean hands’ doctrine with the principle of equity most likely argue that this doctrine is applicable in international courts and tribunals. This is because the principle of equity has been widely recognized and endorsed as a general principle of law.³⁴ On the other hand, advocators who consider the ‘clean hands’ doctrine to be a standalone notion or an assembling of several related doctrines may hold the opinion that this doctrine does not qualify as one source of international law.³⁵

Moreover, in international investment law, the ‘clean hands’ doctrine is sometimes deemed a/an (implied) treaty obligation³⁶ and an issue related to the admissibility of investor claims.³⁷ More specifically, the ‘in accordance with host State laws’ clause is arguably ‘a manifestation of the doctrine of clean hands’.³⁸ The legality clause is mostly invoked in treaty-based arbitration, while the ‘clean hands’ doctrine is more favoured in contract-based investment disputes or when the investment treaty and arbitration rules under consideration do not contain an unequivocal requirement of ‘in accordance with host State laws’. However, in Yukos v Russia, while the Tribunal did accept an implied legality requirement in the Energy Charter Treaty (ECT) from the good faith viewpoint, it indeed differentiated it from the ‘clean hands’ doctrine. In particular, it explicitly concluded that the ‘clean hands’ doctrine is not a general principle of international law.³⁹

In light of the above, it is hard to refine an accurate definition of the ‘clean hands’ doctrine, whose legal status in international law has generated significant controversy and whose application in international courts and tribunals is inconsistent. For this reason, this currently ill-defined notion cannot be used as a source of international law that would bar an investor from making claims before a tribunal.

III. ALTERNATIVELY, THE CONDITIONS TO APPLY THE DOCTRINE ARE NOT MET

Assuming the existence of such a source of international law, either as CIL, a general principle of law, or an implied treaty obligation on legality, a typical allegation of corruption does not automatically invite the application of the ‘clean hands’ doctrine.

If the ‘clean hands’ doctrine is more generally understood as ‘he who seeks equity must do equity’, the condition of reciprocity enshrined within this expression is not met in corruption cases. On the contrary, a State should be barred from raising allegations of corruption because such submission impairs the spirit that the ‘clean hands’ doctrine functions to protect.

A. Reciprocal obligations

Whenever the ‘clean hands’ doctrine is treated as a standalone notion or a reference for a number of related Latin maxims, it is aimed at ‘prevent[ing] equitable relief to a complainant who has injured the defendant by the same delinquency of which he complains’.⁴⁰ In this sense, the doctrine is meant to bar an applicant from raising claims against the respondent for its non-performance of an obligation when the applicant itself did not fulfil a related and reciprocal obligation.⁴¹ The reciprocal obligation is also known as the ‘precisely similar action, similar in fact, and similar in law’ standard, which was first confirmed by Judge Hudson in the Diversion of Water from the Meuse case between the Netherlands and Belgium.

On 1 August 1936, the Netherlands filed an application against Belgium before the PCIJ with regard to the diversion of water from the river Meuse.⁴² The Applicant claimed that ‘various works in connection with the construction of the Albert Canal’ and Belgian measures of ‘supply[ing] with water existing or projected canals in the north of her territory’ were in violation of the 1863 Treaty governing diversion from the Meuse.⁴³ In particular, the Netherlands argued the alimentation of canals by Belgian Neerhaeren Lock was contrary to the 1863 Treaty.⁴⁴ The Belgian government denied the allegations on the ground that ‘if the Court should decide that the functioning of the Belgian lock at Neerhaeren is in opposition to the Treaty of 1863, it ought to admit a fortiori that the functioning of the Netherlands lock of Bosscheveld is not more regular’.⁴⁵ Belgium raised the so-called clean hands doctrine to ask the PCIJ to declare that ‘by the construction of works contrary to the provisions of the Treaty the Netherlands has lost the right to invoke the Treaty against Belgium’.⁴⁶

Judge Hudson (while concurring in the main judgement) made certain individual observations, including a careful and thorough examination of both Dutch Bosscheveld Lock and Belgian Neerhaeren Lock, which allowed him to draw a conclusion that these two locks are, in law and in fact, in the same position and no one is more favourable or more unfavourable than the other.⁴⁷ In this situation, Judge Hudson raised some concerns (including that of the ‘clean hands’ doctrine) that needed to be addressed before making any decision on the Netherlands’ claims:⁴⁸

The question arises, therefore, whether in this case the Court must pronounce upon the legality or the illegality of the alimentation which results from the operation of either the Neerhaeren Lock or the Bosscheveld Lock. If the operation of both locks were thought to be in conformity with the Treaty of 1863, the submissions of the Netherlands Government as to the Neerhaeren Lock would of course be rejected. It remains to be considered whether that result would be reached if the operation of both locks were thought to be in violation of the Treaty of 1863.

There can be no question here as to the good faith of either party. Each party proceeded on its own view of the Treaty of 1836. Each had taken action which led to the same result, in fact and in law. If the Court were called upon to give judgment on the action of both parties, it could do so with due regard to the equal positions of the parties; but here it was asked by one party to condemn the action taken by the other. Aside from the fact that the moving party was the one whose action preceded that of the other, that the Bosscheveld Lock was put into service in 1931 and the Neerhaeren Lock only in 1934, is this a case in which affirmative relief should be given by the Court? Or should it be said, in the terms of the alternative Belgian submission, that the Netherlands has in some measure perdu le droit d’invoquer the Treaty against Belgium?

In brief, Judge Hudson noticed that both parties were thought to have violated the same treaty and the Court could have given decisions on the actions of both parties. But here, when one of the parties initiated the proceeding as the applicant, against the other, he questioned whether the Court should still deliver affirmative relief in such a situation. Judge Hudson believed that the equity principle (sometimes referred as the ‘clean hands’ doctrine) should have applied in this case, when two parties have assumed ‘an identical or a reciprocal obligation’. In particular, when the Netherlands complained about the operation of the Bosscheveld Lock, the Netherlands itself was also engaging in exactly the same measures, or, to use Judge Hudson’s words—‘taking precisely similar action, similar in fact and similar in law’:⁴⁹

On the assumption that the alimentation of canals by the functioning of the Neerhaeren Lock and the Bosscheveld Lock is contrary to the Treaty of 1863, is this a case in which the Court ought to apply the principle referred to? Here the Parties are not before the Court under a special agreement in which they have mutually agreed to seek the Court’s interpretation of the Treaty of 1863. This proceeding was instituted by the Netherlands. The jurisdiction of the Court rests on the declarations made by the Parties under paragraph 2 of Article 36 of the Statute. It is the Court’s obligatory jurisdiction which is invoked, without challenge by Belgium. If it is important that this jurisdiction should not be attenuated by the action of the Court itself, it is no less important that it be exercised within the limitations which equity imposes. As the moving Party, the Netherlands asks that the Belgian action with respect to the operation of the Neerhaeren Lock be declared contrary to the Treaty of 1863, and that Belgium be ordered to discontinue that action. Yet, in its operation of the Bosscheveld Lock, the Netherlands itself is now engaged in taking precisely similar action, similar in fact and similar in law. This seems to call for an application of the principle of equity stated above.

The application of this principle would have resulted in a rejection of the Netherlands’ submission, which would have prevented the Netherlands from taking advantage of its Applicant position in this international court system to impugn Belgian measures, even when the Court found the operation of Neerhaeren Lock was indeed in violation of the Treaty of 1863. Judge Hudson explained that by virtue of equity, ‘the Netherlands is not in a position to have such relief decreed to her. Belgium cannot be ordered to discontinue the operation of the Neerhaeren Lock when the Netherlands is left free to continue the operation of the Bosscheveld Lock.’⁵⁰

These holdings from Judge Hudson have been regarded as ‘the most notable exposition and application of the [“clean hands”] principle’⁵¹ and are arguably ‘shared by the majority of the Court’.⁵² The ICJ seems to have recognized this reciprocity standard as reflected in the recent jurisprudence. For example, in Certain Iranian Assets, while the ICJ refused to endorse the ‘clean hands’ doctrine (raised by the United States), it indeed responded to Iran’s argument that the ‘clean hands’ doctrine applies only when the claimant is engaged in a precisely similar action, similar in fact and similar in law as that of which it complains.⁵³ In the end, it noted that ‘the United States has not argued that Iran, through its alleged conduct, has violated the Treaty of Amity, upon which its Application is based’⁵⁴ and that ‘there is, in any case, not a sufficient connection between the wrongful conduct imputed to Iran by the United States and the claims of Iran’.⁵⁵

Judge Schwebel’s decision on the ‘clean hands’ submission in Military and Paramilitary Activities was also made after recognizing reciprocity as the precondition for the application of the doctrine. He noted that the alleged illegalities on the part of the United States ‘were consequential on or were embarked upon in order to counter Nicaragua’s own illegality—“in short were provoked by it”’.⁵⁶ Given that Nicaragua was guilty of illegal conduct, Nicaragua should be thus deprived of the locus standi to claim against the United States.⁵⁷

In Jadhav, Judge Iwasawa additionally noted in his Declaration that the alleged wrongful acts of India raised under the ‘clean hands’ doctrine ‘do not relate to the Vienna Convention on Consular Relations upon which India’s Application is based’, which thus failed to meet the ‘precise similar’ criteria as established in Maritime Delimitation in the Indian Ocean and in Certain Iranian Assets.⁵⁸

Given the foregoing, if the ‘clean hands’ doctrine is yet applicable as one source of international law, then the party who invokes this principle against another party must demonstrate that the latter party is ‘taking precisely similar action, similar in fact and similar in law’.

B. Allegations of corruption

In corruption cases, if a host State submits the application of the ‘clean hands’ doctrine as part of the corruption allegations in an objection to an investor’s claims, this State must demonstrate that the illegal action of the investor (⁠|${A_i}$|⁠) is ‘precisely similar action, similar in fact and similar in law’ or ‘reciprocal’ with the alleged illegal action of this host State (⁠|${A_s}$|⁠) claimed by this investor.⁵⁹

Investment tribunals have confirmed the applicability of this standard in investment arbitration. In Niko Resources v Bangladesh, the tribunals concurred with what had been argued by Judge Hudson as to the content of the ‘clean hands’ doctrine and refined three criteria: ‘(i) the breach must concern a continuing violation, (ii) the remedy sought must be “protection against continuance of that violation in the future” not damages for past violations and (iii) there must be a relationship of reciprocity between the obligations considered’.⁶⁰

Although acts of corruption, either giving or demanding, are unlike the operation of the Neerhaeren Lock or the Bosscheveld Lock in the Diversion of  Water from the Meuse case, which were instances of continuing non-performance, the rationale behind this principle is similarly applicable to corruption cases: international dispute settlement prevents a party (Party A), whichever the applicant or the respondent, from taking advantage of its position in this proceeding to blame the other party (Party B) of certain measures while Party A itself is engaged in similar measures.

However, the allegation of corruption does not conform with this relationship because in such cases:

In a typical allegation of corruption, the investor requests that the tribunal declare the host State’s measures contrary to the treaty obligation (eg illegal expropriation, failure to accord fair and equitable treatment). These regulatory measures by the host State were not normally direct responses to the investor’s corrupt acts, but arose out of other concerns. This is the case in almost all the investment disputes (so far identified) that involve corruption. In this sense, the ‘illegality’ on which the ‘clean hands’ submission raised by this host State is neither a similar action with expropriation, nor a reciprocal one.⁶¹ Consequently, host States’ corruption claims based on the ‘clean hands’ doctrine are without merit.

That being said, there is no denying that a host State may take certain regulatory actions right against the corrupt acts found in the establishment of investments; in such particular situations, it is still doubtful whether these two kinds of illegalities are ‘similar in law and in fact’. To this point, we have not observed any such case in the investment dispute context.

This note further argues that an investor could raise a new ‘clean hands’ submission to defend against the host State’s ‘clean hands’ doctrine submission. The ‘unclean hands’ concern of the host State’s submission is based on the investor’s misconduct of corruption (as the supply side), which is truly ‘similar action, similar in fact and similar law’ with host State’s own illegal act of corruption (as the demand side):

More specifically, when a host State asks a tribunal to dismiss an investor’s submissions because of the investor’s engagement in a corrupt act, this host State, per se, is engaged in the same corrupt act by taking precisely similar action, similar in fact and similar in law: namely, demanding a bribe or accepting a bribe. This is exactly what the equity principle or the ‘clean hands’ doctrine (if considered to exist) prohibits. Or, to apply another doctrine, in pari delico (‘in equal fault’)⁶²—a sister doctrine in law to the ‘clean hands’ doctrine, under which an international court or tribunal should deny ‘a legal remedy because both parties—plaintiff and defendant—stand in equal fault in relation to the wrong or unlawful transaction complained about’.⁶³ If a tribunal weighs comparative wrongs committed in cases of corruption, the claims that a host State seeks based on its acts of solicitation should thus be denied because it and the investor stand in equal fault in relation to the illegal investment the host State complained about. In some situations, the host State may even hold more fault than the investor, depending on the facts and the legal norms applied in that particular case.

In sum, the conditions for the application of the ‘clean hands’ doctrine are not met in a typical scenario with a corrupt relationship, because the alleged illegalities on the two sides are not in violation of reciprocal obligations. By contrast, the host State’s ‘clean hands’ submission should be dismissed because of its own ‘unclean hands’.

IV. CONCLUSIONS

As allegations of corruption in ISA cases increase, some tribunals, such as those in World Duty Free v Kenya, Spentex v Uzbekistan and Littop v Ukraine, have endorsed the ‘clean hands’ doctrine as a means of denying investment protection to investors who obtained their investment through illicit acts like bribery and corruption. However, this note argues that the ‘clean hands’ doctrine is not a source of international law. Its contours are unclear, its legal status in international law remains unsettled and its application in international courts and tribunals is inconsistent. In fact, the ICJ has been consistently reluctant to endorse this doctrine when facing allegations of a claimant’s misconduct, as reflected in recent cases such as Maritime Delimitation in the Indian Ocean , Certain Iranian Assets and Jadhav. Consequently, relying on this disputed doctrine to address allegations of corruption presents significant issues.

This being said, even under its most commonly understood meaning, the necessary conditions for its application are not fulfilled in cases involving corruption. Reciprocity is the key attribute of the ‘clean hands’ doctrine (if it even exists as international law), which requires that the two alleged illegalities (one illegality is alleged by the claimant and the other is alleged by the respondent who is also the party raising the ‘clean hands’ doctrine) are ‘precisely similar action, similar in fact and similar in law’. In allegations of corruption, we must ascertain whether the alleged treaty breaches by the host State (eg an illegal expropriation) is ‘precisely similar’ to the alleged investor wrongdoing (ie, the corrupt act). As these two types of misconduct are not reciprocal, the ‘clean hands’ doctrine cannot be invoked to support allegations of corruption. This note further argues that the host State’s ‘clean hands’ submission should be dismissed on account of its own ‘unclean hands’, as giving a bribe and receiving a bribe are a pair of reciprocal actions in nature.

It is important to emphasize that this note recognizes the detrimental impact of corruption and the imperative to denounce it. While contending that the ‘clean hands’ doctrine has been misapplied in corruption cases, this argument is not meant to make excuses for corruption. It is not to be construed that this approach advocates for investment arbitration to be compatible with illicit acts, particularly corruption, or that tribunals are safeguarding ‘tainted’ investors. Instead, this note proposes that allegations of corruption ought to be addressed through alternative approaches rather than the current binary approach that applies the ‘clean hands’ doctrine in ISA jurisprudence.

Footnotes

Author notes