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The Novel Coronavirus and Methods for Resolving Disputes over International Transactions involving Corruption

2020.09.03



Yukio Kajita
Professor, Faculty of Law, Chuo University
Areas of Specialization: International Business Law, International Dispute Resolution Law

"Our global community in the 21st century must recognize this issue as a common challenge and promptly demonstrate the readiness to address it through collective efforts. Necessary standards must be developed and applied through the studies of laws for the global community." (Koresuke Yamauchi, Professor Emeritus, Chuo University)(1)

Concern over increasingly rampant corruption in international transactions

Vulnerable and unequal social systems in poor and developing countries easily breed corruption across a wide range of international transactions, such as the supply of food and medical products(2). Transparency International ranks 180 countries and territories by their perceived levels of public sector corruption on a scale of zero(highly corrupt) to 100(very clean). In 2019, more than two-thirds of countries scored below 50 point, with an average score of only 43(3).
 

It is feared that the economic downturn and other challenges brought by COVID-19 are further widening economic gaps both within and across national borders and thus encourage corruption(4). The global economy and society should not be impaired by bribery and other corrupt practices, which are provoked by or capitalize on the COVID-19 pandemic.


(1) Koresuke Yamauchi, "Lessons Learned from Epidemics in Legal Studies: Shifting Focus from Civilizations to Cultures (Houritsugaku ni okeru Daikibokansensho no Kyokun - Bunmeironteki Shiten kara Bunkaronteki Shiten e no Tenkan)," Chapter 4, Part 1, Introduction to Studies of Laws for the Global Community (Chikyu Shakai Hogaku e no Izanai), Shinzansha Publisher, 2018, p. 212.
(2) Refer to, for example: Ed Olpwo-Okere (Director, Governance Global Practice, World Bank Group), Can corruption risks be mitigated without hindering governments' COVID-19 response?

https://blogs.worldbank.org/voices/can-corruption-risks-be-mitigated-without-hindering-governments-covid-19-response (Accessed on June 1, 2020).
(3)
http://www.ti-j.org/2019_Corruption_Perceptions_Index.pdf (Accessed on June 1, 2020).
(4) Refer to, for example: Amina Mohammed (UN Deputy Secretary-General), How concerned are you that global inequalities will deepen as a result of the coronavirus pandemic?,
https://news.un.org/en/story/2020/05/1063022 (Accessed on June 1, 2020), and Chelsea Dreher and Alexandra Brown, COVID-19 Corruption: Key Risks to Democratic Institutions, https://www.ifes.org/news/covid-19-corruption-key-risks-democratic-institutions (Accessed on June 1, 2020).

Efforts to fight corruption

The world hasn't stood idly by during the ever-present corrupt practices.
 

For instance, the Organisation for Economic Co-operation and Development (OECD) has established the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Anti-Bribery Convention). The organization also encourages responsible corporate conduct by multinational corporations around the world to prevent bribery, bribe solicitation and extortion (OECD Guidelines for Multinational Enterprises).
 

Africa is also combating what is reputedly the most entrenched corruption in the world. Examples include the African Union Convention on Preventing and Combating Corruption (AUCPCC) and Southern African Forum Against Corruption. Unlike the OECD Anti-Bribery Convention, the AUCPCC does not explicitly and exclusively target foreign public agencies. Instead, it calls for African public agencies to define as crimes corrupt practices by agents in the private sector and any other persons(5).
 

Nonetheless, any situation like the current one is expected to spawn more corrupt practices and disputes involving international transactions. If that is the case, is there any way to resolve disputes involving corruption while trials by domestic courts are suspended by the COVID-19 pandemic? International arbitration holds promise.


(5) African Union Convention to Prevent and Combat Corruption, July 11, 2003, 43 ILM 5 (2004), Arts. 5(1) and 11(1) [AU Anti-Corruption Convention]. https://au.int/sites/default/files/treaties/36382-treaty-0028_-_african_union_convention_on_preventing_and_combating_corruption_e.pdf (Accessed on June 1, 2020).

Functioning international arbitration

Many processes are still handled through international arbitration even as COVID-19 continues to spread. All in all, international arbitration organizations have already been accepting complaints, examining evidence, and conducting hearings via email and video-conferencing. In 2019, the International Centre for Settlement of Investment Disputes (ICSID) conducted 60 percent of their hearings by video-conferencing(6).
 

The readiness to provide ordinary services has been announced from March to April 2020 by the London Court of International Arbitration (LCIA), Arbitration Institute of the Stockholm Chamber of Commerce (SCC), Singapore International Arbitration Centre (SIAC), and International Chamber of Commerce. The China International Economic and Trade Arbitration Commission (CIETAC) has launched the Guidelines on Proceeding with Arbitration Actively and Properly during the COVID-19 Pandemic (Trial) and Procedure for Virtual Hearings via Video-conference (Trial). They have been in force since May 1. On May 14, a joint statement on arbitration during COVID-19 was made by 13 international arbitration organizations, including ICSID, LCIA, ICC, and CIETAC, to jointly facilitate fair and effective arbitration of international disputes.
 

So far, international arbitration has made a strong showing, but its weaknesses may also be emerging. It is questionable if domestic courts of an enforcing country under lockdown can recognize and enforce international arbitral awards. There are undeniable risks that some countries may delay trials or refuse to accept complaints on the pretext of COVID-19.
 

Considering these points, alternative ways for resolving disputes should also be considered. What other methods could be employed?


(6) A Brief Guide to Online Hearings at ICSID (March 24, 2020)https://icsid.worldbank.org/en/Pages/News.aspx?CID=362 (Accessed on June 3, 2020)

Exploration of alternatives for resolving disputes

Our global community is expected to prioritize sustainable development goals (SDGs) before focusing on economic growth. Companies must fulfill their social responsibilities. In so doing, further reinforcement must be sought with measures for thwarting bribery. For dispute resolutions, it is good that international arbitration functions well, but as the COVID-19 pandemic is yet to be brought under control, it seems necessary to re-examine whether it is sufficient to simply process disputes with conventional procedures and criteria for identifying corrupt behaviors, but also seek for alternative ways besides court trials and international arbitrations.
 

Perhaps, international mediation could be considered as an amicable alternative. Reportedly, mediation is an effective way to resolve disputes in countries and territories with rampant corruption in the judiciary(7). In mediation, neutral and impartial mediators convince parties to make reciprocal concessions and thereby guide them in the settlement of disputes without unnecessary escalation. Compared to rulings imposed by the judiciary, such an approach is expected to encourage parties to better enforce their agreements. Functional international mediation may also curb corruption.


(7) Arsiola Dyrmish, Mediation's role solving conflicts in corrupted judiciary systems, Mediterranean Journal of Social Sciences, September 2014, Vol. 5, No. 22, pp. 12-19.
Yukio Kajita
Professor, Faculty of Law, Chuo University
Areas of Specialization: International Business Law, International Dispute Resolution Law

Yukio Kajita was born in Tokyo in 1954. He graduated from the Faculty of Law, Chuo University in 1979 before earning a juris doctorate (in 2003) by specializing in international corporate laws at the Graduate School of Law. Before assuming the current position, he has served at e.g., Aomori Chuo Gakuin University and Reitaku University. Among other professional assignments, he doubles as a visiting research fellow at the Institute for International Trade and Investment. His research is focused on international commercial arbitration in China and international investment arbitration.
 

His publications include Practice of International Commercial Arbitration in China (Chugoku Kokusai Shoji Chusai no Jitsumu) (Chuokeizai-sha, 2004) and Legal Risks in Doing Business in China (Chugoku Bijinesu no Riigaru Risuku) (Nippon Hyoron Sha, 2007), as well as "International Civil Procedural Law – Overview (Kokusai Minji Tetsudzuki Hou – Soron)," "International Jurisdiction – Cases involving Properties (Kokusai Saiban Kankatsu – Zaisan Kankei Jiken)," "Recognition and Enforcement of Foreign Arbitral Awards (Gaikoku Hanketsu no Shonin to Shikkou)," "Alternative Dispute Resolution (Saibangai Funsou Kaiketsu Tetsudzuki)" (Chapters 20–23), and Koresuke Yamauchi and Fumihiko Sato, ed., Basics of International Private Law (Hyojun – Kokusai Shihou) (Shinzansha Publisher, 2020).