## Facts

- A ministry in a Middle Eastern country issued a tender for a large public construction project in the late 1970s.
- A South Asian construction company sought to win the tender and entered a representation/consultancy agreement with a local establishment of the same country to promote and assist with securing the project.
- The agreement described broad consulting services (including liaison assistance, tender studies, and site inspections) and contemplated compensation connected to achieving a higher project price.
- After extended negotiations, the construction company obtained the public contract in 1979 at a price of roughly US$374 million.
- A payment dispute arose when the construction company resisted paying the agreed compensation, asserting that the agreement functioned as a vehicle for improper influence or corrupt payments in public procurement.
- The local establishment demanded payment and commenced ICC arbitration under the agreement’s arbitration clause.
- The arbitration proceeded in stages; the second interim award addressed governing-law methodology and the agreement’s validity/enforceability in light of alleged corruption and public policy.

## Issues

1. How should the tribunal determine the law governing the consultancy/representation agreement given mixed contractual indications and the transaction’s connecting factors?
2. Whether the agreement was void or unenforceable because its real object or performance involved bribery or trafficking in influence in relation to a public procurement decision.
3. If corruption concerns existed, whether and to what extent the claimant could recover commissions or success-based remuneration, including whether lawful services could be separated from unlawful elements.

## Decision

- The tribunal used a flexible conflicts approach that considered party indications and objective connecting factors, finding substantial connections to both the project state and Switzerland (Geneva).
- The tribunal held that contractual arrangements providing for bribery or trafficking in influence violate public policy and are null or unenforceable, even when framed as consultancy or agency agreements.
- The tribunal refused to give effect to any contractual obligation that would remunerate corrupt conduct or improper influence.
- The tribunal did not grant the claimant the full commissions/success fee at the interim stage and indicated that any recovery must be limited to demonstrably legitimate services, if separable and proven.

## Legal Principles

- In international arbitration, the governing law may be identified through a closest-connection analysis that accounts for contractual references, objective links (place of performance and regulatory setting), and mandatory public policy considerations.
- Agreements whose true object is to procure public contracts through bribery or trafficking in influence are void or unenforceable as contrary to domestic and transnational public policy.
- Arbitral tribunals may look past contractual labels and examine surrounding circumstances and performance to determine whether an apparent consultancy arrangement masks illicit influence.
- A claimant seeking payment under an agency/consultancy contract facing corruption objections must establish that claimed remuneration is based on legitimate, provable services.
- Where lawful services are clearly separable from unlawful elements, a tribunal may consider partial enforcement limited to the lawful portion; no recovery is available for remuneration connected to corruption.

## Conclusion

The second interim award treated corruption-related arrangements as unenforceable on public policy grounds, applied a closest-connection method to governing law that accommodated both local and Swiss connections, and limited any potential compensation to clearly separable, proven legitimate services while refusing to enforce payments tied to improper influence.


Second Interim Award in ICC Case No. 4145, 12 Y.B. Com. Arb. 97 (Int’l Ct. Arb. 1987)