An anti-corruption group has criticised the UK government for failing to address corruption risks in arbitration, describing it as a significant missed opportunity.
- Recent court cases highlight vulnerabilities in arbitration to abuse by corrupt individuals, yet proposals for changes to the Arbitration Bill have been dismissed.
- Justice Minister Lord Ponsonby underscores existing safeguards and ethical standards within arbitral bodies as sufficient to combat corruption.
- Concerns from leading arbitral institutions argue against amending the bill, fearing it could diminish the UK’s global arbitration appeal.
- Critics believe the UK should proactively lead international efforts to combat corrupt practices in arbitration.
The UK government has come under criticism from an anti-corruption campaign group for its refusal to address potential corruption risks within the arbitration system. The group argues that the government’s stance represents a “missed opportunity” to rectify a significant gap that could potentially facilitate money laundering within UK legal frameworks.
Several recent high-profile court cases have underscored the vulnerabilities of arbitration processes to exploitation by corrupt actors. Despite these revelations, a letter from Justice Minister Lord Ponsonby to the anti-corruption group Spotlight on Corruption rejected calls for amendments to the Arbitration Bill, which were intended to address these concerns.
During the second reading of the bill, Labour peer and former lawyer, Lord Hacking, highlighted issues of corruption, referencing a notable ruling where an $11bn arbitral award against Nigeria was deemed to be fraudulently obtained. This instance, among others, indicates a persistent problem, according to Lord Hacking’s extensive experience in the field.
Proposed amendments aimed to establish clear guidelines for arbitrators in England and Wales to report suspected corruption to authorities and refer cases to the High Court when transparency was deemed more critical than confidentiality. However, Lord Ponsonby cautioned against any changes that might delay the bill’s progression.
In defending the current structure, Lord Ponsonby pointed to the existing ethical, procedural, and case management frameworks within arbitral institutions that ostensibly provide sufficient mitigation against corruption. He emphasised the role of ‘red flags analysis’ and compliance with current legislative requirements as effective measures.
Feedback from major arbitral bodies, such as the Chartered Institute of Arbitrators and the London Court of International Arbitration, indicated a lack of support for amending the bill. Concerns were raised that a generalized approach to anti-corruption measures might weaken the UK’s attractiveness as a hub for arbitration globally.
Despite this, critics such as Susan Hawley, executive director of Spotlight on Corruption, argue that relying on arbitral institutions to police themselves is problematic. She suggests the UK should not wait for international bodies like the International Chamber of Commerce to develop guidelines and should instead take a leadership role in addressing corruption in arbitration.
Ms. Hawley has expressed concern that ongoing corruption in UK-related arbitral cases could damage the nation’s credibility as a leading arbitration centre. She urges the government to proactively enhance safeguards within arbitral proceedings to repair reputational harm following cases like Nigeria v P&ID.
The UK government’s decision not to amend the Arbitration Bill has sparked criticism amid calls for stronger anti-corruption measures, reflecting a complex debate on maintaining both transparency and international competitiveness in arbitration.
