Title

ICC Award No. 1110 of 1963, YCA 1996, at 47 et seq. (also published in: Arb.Int'l 1994, at 282 et seq.).

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Award in case no. 1110 of 1963
Facts
Excerpt

Content

Page 47

 

Sole Arbitrator:         G. Lagergren (Schweden)

Parties:                     Claimant: Argentine engineer

                                 Respondent: British company

Place of arbitration:  Paris, France

Published in:             3 Arbitration International (1994, no. 3) pp. 282-294 with note J. Gillis Wetter, pp. 277-281

Subject matters:       - bribery and (lack) of jurisdiction of arbitrator [not included in the Trans-Lex]

                                 - applicable law to arbitration agreement [not included in the Trans-Lex]

                                 - arbitrability of disputes arising from contract violating bonos mores and/or international public policy

                                 - applicable law to arbitrability of subject matter

                                 - general principles guiding arbitrators [not included in the Trans-Lex]

The claimant is an Argentine engineer, who has been an active businessman in Buenos Aires with large commercial and industrial interests since the mid 1930s. The respondent is a British company, trading in the Argentine since 1914.

As described by the arbitrator, "The parties to this dispute first got in touch with each other in 1950 in Buenos Aires. The Argentine authorities were then contemplating increasing the production of electrical power in the region of Buenos Aires, and respondent, which maintained an office in Buenos Aires, became interested in this undertaking as a potential supplier of electrical equipment.... Officials from the respondent asked claimant, who had

Page 48

 

The parties concluded an agreement whereby respondent was to pay claimant a percentage of the price of the electrical equipment contract to be concluded between respondent and the Argentine authorities.

Several contracts were awarded regarding the electrical power projects, only one of which was awarded to respondent. After respondent refused to pay a commission to claimant, the parties agreed to submit their dispute to arbitration. They concluded a submission agreement (compromis) providing for arbitration in Paris by a sole arbitrator under the Arbitration Rules of the International Chamber of Commerce.

The Sole Arbitrator declined his jurisdiction in this case, because "a case like this, involving such gross violations of good morals and international public policy, can have no countenance in any court either in the Argentine or in France or, for that matter, in any other civilised country, nor in any arbitral tribunal."

[...]

Page 51

 

12 "The parties have agreed that Argentine law is the proper law of the commission agreement (or agreements), and should their choice of law, which was only made during the course of arbitration procedure, not by itself be binding upon me, I have no doubts about the correctness of their conclusion in that respect.6

13 "Therefore, pursuant to Art. 5 of the Amsterdam Resolution, the questions whether the subject matter of the dispute is capable of settlement by arbitration should be governed by Argentine law.

14 "The Argentine Code of Procedure stipulates in Art. 768:5 that all question which affect good morals ('la moral y buenas costumbres') are excluded from arbitration. According to this provision and in view of the nature of the present dispute, as set out hereafter, there is obviously no room for any arbitral jurisdiction in this case - a point of view which seems to be shared by the parties.7

15 "It should also be noted that Art. 502 of the Argentine Civil Code provides that an obligation contrary to law or public policy can have no effect and Art. 1891 of the same Code provides that a mandate concerning an illegal, impossible or immoral act does not give the principal any cause of action against the mandatory nor the latter any cause of action against the principal.

16 "Finally, it cannot be contested that there exists a general principle of law recognised by civilised nations that contracts which seriously violate bonos mores or international public policy are invalid or at least unenforceable and that they cannot be sanctioned by courts or arbitrators.8 This principle is especially apt for use before international arbitration tribunals that lack a 'law of the forum' in the ordinary sense of the term.

17 "Now, reverting to the facts in this case. - As might be expected the documents drawn up seem on their face to be legal and bear the semblance of ordinary commercial documents. However, it is, in my judgment, plainly established from the evidence taken by me that the agreement between the parties contemplated the bribing of Argentine officials for the purpose of obtaining the hoped-for business.

18 "In saying this I do not mean to imply that claimant had no more to do than to hand over a commission to his respective collaborators; on the contrary, I am convinced that he had to perform other, important, and quite irreproachable functions. This has to be taken into consideration, but does not obscure the general image that the major part of the commissions to be paid to him were to be used for bribes.

Page 52

19 "Even so, however, there are other circumstances which should be taken into account before it could be established that the action brought before me seriously affects bonos mores. I leave to accept (witness 3's) statement that during the Peron regime everyone wishing to do business in the Argentine was faced with the question of bribes, and that the practice of giving commissions to persons in a position to influence or decide upon public awards of contracts seems to have been more or less accepted or at least tolerated in the Argentine at that time. On the other hand it must be remembered that we have to do here with a mere favour which could be overlooked, or even with the 'little bit of money' which (witness 1) with some understatement referred to. Huge amounts are involved....

20 "Although these commissions were not to be used exclusively for bribes, a very substantial part of them must have been intended for such use. Whether one is taking the point of view of good government or that of commercial ethics it is impossible to close one's eyes to the probable destination of amounts of this magnitude, and to the destructive effect thereof on the business pattern with consequent impairment of industrial progress. Such corruption is an international evil; it is contrary to good morals and to an international public policy common to the community of nations.

21 "However, before invoking good morals and public policy as barring parties from recourse to judicial or arbitral instances in settling their disputes care must be taken to see that one party is not thereby enabled to reap the fruits of his own dishonest conduct by enriching himself at the expense of the other.

[...]

Footnotes

Referring Principles/Related Documents

Referring Principle: No. IV.7.1 - Invalidity of contract that violates boni mores

This document is cited by:

Final award in ICC case no. 6248 of 1990, YCA XIX (1994), at 124 et seq.
Scherer, Matthias, Circumstantial evidence in corruption before international tribunals, in: International Arbitration Law Review, Issue 2, London 2002.
Makinwa, O. Abiola, Civil Remedies for International Corruption: The Role of International Arbitration, in: Meyer, Olaf (ed.), The Civil Law Consequences of Corruption, 2009, S. 257.