State of Confusion: The Doctrine of ‘Clean Hands’ in Investment Arbitration After the Yukos Award

State of Confusion: The Doctrine of ‘Clean Hands’ in Investment Arbitration After the Yukos... This article examines the controversial question of the clean hands doctrine in investment arbitration and how tribunals have analyzed this concept. Many tribunals have concluded that they lacked jurisdiction over a claim (or that it was inadmissible) because an investor had made its investment in violation of the host State’s laws. This article argues that this legality requirement is a manifestation of the clean hands doctrine. The main focus of the article is a critical review of the recent Yukos award. It assesses the Tribunal’s conclusion that the doctrine should not be considered as a general principle of law and its rejection of the application of the doctrine to violations committed by an investor during the post-establishment phase of its investment. The article argues that a number of investment tribunals have in fact already applied the clean hands doctrine in their awards to bar the admissibility of claims. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of World Investment and Trade Brill

State of Confusion: The Doctrine of ‘Clean Hands’ in Investment Arbitration After the Yukos Award

Journal of World Investment and Trade, Volume 17 (2): 229 – May 4, 2016

State of Confusion: The Doctrine of ‘Clean Hands’ in Investment Arbitration After the Yukos Award


* Assistant Professor, Faculty of Law (Civil Law Section), University of Ottawa, Canada. This article reflects facts current as of July 2015. The author wishes to thank Ms Sarah Rajguru and Ms Shunghyo Kim (both students at the University of Ottawa) for their assistance and suggestions. 1 Introduction This article examines the controversial question of the status of the clean hands doctrine in investment arbitration and how tribunals have analyzed this concept. The clean hands doctrine (‘[H]e who comes into equity must come with clean hands’, also sometimes referred to as the principle of ‘unclean’ hands) has been expressed in many Latin maxims including ex delicto non orituractio (‘an unlawful act cannot serve as the basis of an action at law’) and ex turpicausa non oritur (‘an action cannot arise from a dishonourable cause’). 1 In simple terms, it means that ‘if some form of illegal or improper conduct is found on the part of the investor, his or her hands will be “unclean”, his claims will be barred and any loss suffered will lie where it falls’. 2 It should be added that fraudulent or illegal acts must be ‘connected with the instant litigation and of such a nature as to affect the clean hands of the applicant.’ 3 In the words of Cheng, the ‘claim itself [must be] based upon the unlawful act’. 4 The ‘clean hands’ doctrine originated from the general principle of equity (and good faith) 5 and is found in many civil and common law jurisdictions. 6 The present article will argue that the clean hands doctrine has been recognized and applied by investment tribunals when they decide issues of jurisdiction/admissibility based on the requirement that an investment be made in accordance with the laws of the host State. Part 2 of this article examines how investment tribunals have considered the doctrine thus far in their awards. This analysis will distinguish...
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Publisher
Brill
Copyright
© 2016 by Koninklijke Brill NV, Leiden, The Netherlands
Subject
Articles
ISSN
1660-7112
eISSN
2211-9000
DOI
10.1163/22119000-01702002
Publisher site
See Article on Publisher Site

Abstract

This article examines the controversial question of the clean hands doctrine in investment arbitration and how tribunals have analyzed this concept. Many tribunals have concluded that they lacked jurisdiction over a claim (or that it was inadmissible) because an investor had made its investment in violation of the host State’s laws. This article argues that this legality requirement is a manifestation of the clean hands doctrine. The main focus of the article is a critical review of the recent Yukos award. It assesses the Tribunal’s conclusion that the doctrine should not be considered as a general principle of law and its rejection of the application of the doctrine to violations committed by an investor during the post-establishment phase of its investment. The article argues that a number of investment tribunals have in fact already applied the clean hands doctrine in their awards to bar the admissibility of claims.

Journal

Journal of World Investment and TradeBrill

Published: May 4, 2016

Keywords: clean hands doctrine; legality requirement; general principle of law; Yukos case

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