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Corruption in International Investment Arbitration by Llamzon, Aloysius P (1st September 2014)

Part I Transnational Corruption and International Efforts at its Control, 3 A Typology of Corruption in Foreign Investment

From: Corruption in International Investment Arbitration

Aloysius P Llamzon

From: Investment Claims (http://oxia.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved.  Subscriber: null; date: 16 January 2019

Corruption — Investment — Investment ‘in accordance with host state law’

(p. 34) A Typology of Corruption in Foreign Investment

A. Introduction: Taxonomic Distinctions

3.01  There are many ways in which modern corrupt practices can be classified. One method is more taxonomic than conceptual in nature—incidents of corruption in foreign investments are grouped according to the industry or output involved, i.e. (i) extractive industries; (ii) infrastructure; and (iii) manufacturing.1 Categorization in this manner eases the insight that mineral extraction such as oil concessions are particularly susceptible to corruption when compared to most other industries. However, foreign investment covers many more areas of enterprise than these three; a more comprehensive and analytical typology of corruption is necessary.

3.02  Given its clandestine nature, any classification of corrupt practices in foreign investment will emphasize particular aspects and inevitably exclude others. Nonetheless, typologies do help in placing order into the messiness and complexity of reality, and in putting into focus key conceptual differences within a genus. For those tasked with deciding the legal effects of corruption, an effective typology is especially important.

3.03  Several conceptual distinctions can be made from the outset:

  • •  First, when bribery and extortion are identified as modalities of corruption, one is already looking at corruption based on the degree of voluntariness by which the parties engage in corruption.

  • •  One could also classify according to the contribution the investment makes to the economic development of the host State, with ‘white elephant’ projects at one end of a spectrum and projects that have cognizable developmental benefits for the host State at the other end.

  • (p. 35) •  Yet another would be to view instances of corruption according to the perceived fairness of the economic terms of the contracts in question relative to market forces—contracts that are highly disadvantageous to host States relative to market prices can be differentiated from those that are more fair to host States by market standards.

  • •  One might also distinguish based on the presence or absence of intermediaries/the degree of agency involved, with corporate officers and public officials engaging in corruption at one end, and corruption perpetrated through intermediaries, with the principals not knowing the full extent of the corrupt acts performed at the other.

B. Governmental Action Purchased: Transaction vs. Variance Bribery

That sort of thing happens all through politics, the fellow who holds out his hand for a little money, a little bribe. And it always takes two, the briber and the bribee and I don’t know who is worse.

—Harry Truman2

3.04  There is one categorization of corruption that bears elaboration as it is both widely used and is particularly relevant to this study. This typology distinguishes the act of bribery in foreign investment according to the type of action (or inaction) sought from the public official, i.e. whether the official is asked to engage in a legal or illegal act, and if illegal, the type of illegality induced.

1. Transaction bribery

3.05  Transaction bribes are payments routinely and often impersonally made to a public official to secure or accelerate the performance of that official’s duties.3 Crucially, the payment is not made in order to secure the public official’s divergence from a substantive norm. Instead, the payment is made simply to ensure that the public official performs his duty more efficiently, hence the term ‘grease money’ or the euphemism ‘facilitation payment’; virtually every language will have an equivalent term, often with matching body language or customarily understood non-verbal signals.4

3.06  Examples of transaction bribery abound. One particularly informative real-life case narrated to the author was made by an expatriate European working for one of the largest shipping (p. 36) companies in the world in a West African country, and before then, in East Asia. In those environments, facilitation payments abound and as an operational manner, every shipper doing business knew what the going rate for certain fees were and who needed to be paid. Every firm, without exception, paid the fees. In his view, facilitation payments were not considered corruption by either the participants or even his own company, as ‘facilitation is where you maintain your operability’. ‘Corruption,’ on the other hand, ‘is where you try to gain a competitive advantage.’ The unofficial policy of his firm was that facilitation payments can be made; but the moment payments are made to secure a contract, the employee found to have offered or done so would be fired immediately. In his view, without making facilitation payments, ‘you cannot survive as a business in Asia and Africa’. These difficulties—dealing with facilitation payments through to outright corruption—were in his view the hardest part of his job. He also explained the way facilitation fees were paid to customs officials: the scale of payments was known to all actors. Payments depended on who the receiving or sending party was. A multinational dealing with soap, detergent, and other consumer products would need to pay a facilitation ‘fee’ of US$100 per container (in 2011). On the other hand, a container originating from or destined for one of the large oil companies in that State were charged US$10,000 per container.5

3.07  Sometimes, transaction bribes will be paid for the performance of relatively small matters, such as the payment made to a customs official to speed up the issuance of a customs permit for importing machinery or equipment. At other times, however, it becomes more difficult to draw the line between a bribe done simply to enhance efficiency and bribery of large amounts of money in order to get the public official to do the ‘right’ and ‘legal’ thing in the exercise of discretion invested in that official, especially when the norm being applied is insufficiently clear—one thus easily sympathizes with the familiar aphorism, attributed to Tacitus, that ‘the more corrupt the state, the more laws’.

3.08  Bribes paid in order for government functionaries to perform routine governmental acts that they are required to do, but at a faster pace, may be considered the least harmful to public order; notably, the U.S. Foreign Corrupt Practices Act explicitly excuses such payments from its ambit.6 Indeed, there is an understandable tendency to view transactional corruption as innocuous. Some economists have suggested that ‘grease’ payments to low-level government functionaries in order to perform their duties in a more efficient manner may be indispensible to the proper functioning of public institutions in poor States.7

3.09  However, while transaction bribes may be tolerated by the prevailing operative codes of many societies and even by law, is transaction bribery truly as venial a sin as many think? These facilitation payments arguably contribute to an overall sense that government action can be bought and that public officials act only to secure private benefit, eventually bringing about a breakdown of governance that at its extreme can exacerbate the problems of failing States or even lead to a failure of State.8 Analytically, Professor Rose-Ackerman considers (p. 37) ‘routine corruption’ intolerable because: (i) even if routine, when the agency involved is vital to the functioning of the State (such as the tax authority or public utility regulators), corruption may be encouraged to spread to other agencies of government; (ii) the assumption that these functionaries have very limited discretion may not in fact be true—officials may within the scope of their functions ‘create’ liabilities or issues in order to extract bribe payments; and (iii) such corruption will contribute to an uncertain business climate, which does damage in the long term as the state would be viewed as unpredictable and risky.9

3.10  Transaction bribes are sometimes justified by public officials as a ‘supplement’ to government salaries that are often exponentially lower than private sector wages. However, this justification is not limited to just the small functionaire. In interviews, one senior diplomat recalled that it was known for a fact in diplomatic circles that certain States, including at least one wealthy Western European State, would grossly underpay embassy staff, as they knew that corruption (in the form of selling items acquired duty-free such as tobacco and alcohol) would supplement their salaries.10 In such situations, governments themselves are complicit in and self-consciously rely upon corrupt payments.

3.11  The more familiar established culture of transaction bribery is found, predictably, in developing countries, where salaries in the public sector often place those bureaucrats only slightly above the poverty line. Thus, the internal logic within developing country governments is often that corruption is allowed as part of a public officer’s compensation in order to achieve a living wage; indeed, in some cases, in order to get the job in the first place, that bureaucrat often has himself to pay a bribe to other public officials in order to be hired. Following that reasoning, the prevailing attitude within the entrenched bureaucracy is that officials are entitled to be compensated when performing that official act because it is ‘their’ act that resulted in monetary benefit to the private party. It often happens, for example, that public officials in revenue collection agencies (such as tax and customs authorities) insist on ‘sharing’ the fees charged by the professional lawyer or accountant who obtains a tax exemption on behalf of the client, justifying this by maintaining that it is the exemption certificate issued by that employee that adds value to the client, not representation by the private profession. Such an attitude demonstrates yet again that the intermingling of public duty and private reward is engrained in the culture.

2. Variance bribery

3.12  The defining trait of a variance bribe is that the payment is made in order to obtain a favourable result through a deviation from the proper application of a norm. The bribe might be paid in order to suspend the operation of a legal prescription, or in order to have a public official exercise his discretion in a manner favourable to the payer (either through a one-time variance from the rule or by changing the norm itself).

(p. 38) 3.13  Following Professor Rose-Ackerman, one may distinguish the illegality purchased by the bribor further on the basis of the degree of social harm brought about by the conduct being purchased. The bribor may or may not be entitled to the benefit received, and that which is received may or may not be a scarce resource. She then identified three subcategories: (i) benefits that are illegal, (ii) benefits that are legal but scarce, and (ii) benefits that are legal but not scarce if allocated honestly.11 In her view, when allocating scarce resources to combat corruption, the degree of social harm should be the most important variable to consider.

3.14  As opposed to the fungibility and regularity of a transaction bribe, a variance bribe demands a specially-crafted deviation from established procedures. This is an important difference, because it makes variance bribery often easier to detect and prove. The bribe is paid in order to deviate from normative prescriptions, and those illegal acts can often be traced and punished, even if the offer and acceptance of a bribe itself cannot be proven to the extent required by a judge. (This has been proven as an effective way of sanctioning corruption ‘by proxy’ in many investment arbitration decisions, as fraud or non-compliance with other national laws of the host State was found even though corruption was not proven conclusively.)12

3.15  Variance bribery ‘distorts the prescriptive program of the community in serious ways. In the short run, it is used to evade the application of norms to events for which they were designed. In the long run, variance bribes tend to reshape the general system in a process worth close attention’.13 One can imagine cases where the law itself is so inefficient and cumbersome that variance bribes to pay for an alternative way of doing things actually point the way to legislative reform once that operational code is thoroughly internalized by the system. Formal laws are thus changed, aligning it much more closely with the operational code, i.e. the way things are actually done.14

3.16  One sees this in the legislative reforms of developing countries. Some environmental laws, for example, can in a swelling of rhetorical commitment be taken wholesale from developed country models. When local businesses and foreign investors set about following the law as prescribed, however, they find it impossible (or at least highly inconvenient) to follow the prescriptions laid out in a developing country setting; indeed, even those officials tasked with monitoring implementation often lack the technical expertise necessary to evaluate the environmental impact of a particular project. Bribes are paid in order to temper the full brunt of the law; and after a period, the operational code finds its way formally into a regulatory regime consisting of more sensible rules that can be enforced by public officials. Thus, the more unrealistic aspects of the myth system can actually benefit from the counter-example of the operational code.

3.17  More often than not, however, government is left less efficient with the presence of rampant variance bribery. The potential for monetary gain often means that in liberal democracies and autocracies alike, ‘politicians try to gain the political advantages of the variance bribe by enlarging their ambit of discretionary competence’.15 For foreign investment, this (p. 39) phenomenon is particularly acute within the bidding process for large-scale investments. Discretionary authority is concentrated in relatively few persons in many States, with obvious problems. Nevertheless, spreading discretionary authority across more government offices and agencies often breeds further problems; apart from increasing bureaucracy, these different agencies often cling to their respective roles in the bidding process in an effort to participate in rent extraction.

3.18  Indeed, variance bribery is far from even a qualified boon. People can understand and perhaps even excuse transaction bribery because of the fact that the bribe was paid precisely in order for public officials to implement the law, thus maintaining to some extent the authoritativeness of the law and institutions. With variance bribery, however, what is purchased is the licence to engage in illegality. In most cases, the wrong that is bought will also result in economic disadvantage, even outright plunder. The overall effect of multiple violations of the law is rather like the effect of termites eating away at the foundations of a house while maintaining its façade: things appear intact and as they are, but the nibbles of a thousand jaws hollow out the inner core of the structure, making the slightest nudge or push bring the whole house down. Variance bribery maintains the appearance of efficacious law while undermining it from the inside through non-compliance, enabled by the very persons who were tasked with ensuring its implementation. And because variance bribery tends to distort efficiency and fairness rather than promote it, social disharmony ensues as government officials lose the trust of people and foster active resistance to taxation by the corrupt government, thereby ensuring a permanently dysfunctional and unresponsive government. Entrenched elites may find this state of affairs perfectly acceptable, as they are able to take advantage of inefficiencies and disincentivized competition. However, when an overall lack of confidence in the fairness of government sets in and becomes part of the culture, all eventually suffer.

3.19  Furthermore, because of the illegality of the act or omission purchased, the bribor eventually becomes susceptible to blackmail and extortion—there will inevitably be much reluctance to criticize the political regime in any way, resulting in general political paralysis for the bribor.16 Corruption thus entangles its actors in a conspiratorial web from which they cannot escape, even long after the corrupt transaction was completed. In Peru, for example, Vladimiro Montesinos, the intelligence Czar and close associate of former President Fujimori, taped no less than 1,600 instances of bribery (one of these tapes may have helped determine the outcome of the landmark Lucchetti v. Peru case).17 This vast archive recorded a particular form of variance bribery. Montesinos paid vast amounts of money to bribe journalists, politicians, judges, and bankers from both public and private sectors, in order to maintain and perpetuate power. This allowed Montesinos to establish control over the press, judiciary, and legislature of Peru, turning an ostensible democracy into a virtual autocracy.18 Reflecting on this case after Mr Montesinos had been brought to justice, Transparency International head Peter Eigen stated:

This is a tremendous case for learning how corruption can destroy a society [...] The whole essence of paying a bribe is that you want to buy a wrong decision. A wrong decision about an investment program, a wrong decision about the sizing and timing of a huge project in a (p. 40) country, a wrong decision about the indebtedness of a country and the allocation of scarce resources. Corruption is really the main reason for poverty in these countries and the reason for despair and hopelessness of billions of people who are affected.19

C. Corruption as Risk-Abatement: Political vs. Economic Risk

3.20  One might ask why investors, as the self-interested ‘supplier’ of bribes, persist in the practice of corruption despite the fact that it breeds a type of relationship with a host State’s public officials that leaves the investor vulnerable to continuous extortion and ill-treatment, and is thus often self-defeating. One answer may lie in understanding the perspective of the foreign investor at the point when the investment is first made. The ‘natural habitat’ that allows corruption to thrive, that virtually assures the occurrence of transnational corruption, is the investor’s rational effort to minimize the level of uncertainty that would attach to its investment within the host State.

3.21  It has been settled for some time now as a matter of customary international law that every State has the right to change the environment in which companies operate within its territory. In many ways, this permissiveness of international law is a direct result of the move in the 1970s by resource-rich States, who had been saddled by what they believed were colonial-legacy contracts with Western corporations, to annul such agreements and espouse the concept of a State’s ‘permanent sovereignty over natural resources’, a principle that was eventually embraced even by Western States.20 Throughout the world, political actors pushed hard to nationalize resources through State-owned companies having monopolies in extractive industries and public utilities; thus, this clearly is a time when ‘law in the sense of a contract for the exploitation of a resource which will remain fixed and inviolable for the life of the resource, is on the wane...’.21

3.22  In a global environment of contractual uncertainty, corporate actors are under considerable pressure to maintain the economic viability of present and future projects, and ‘the persistence of experienced operators’ in those industries is necessary to produce reasonable returns.22 Thus, in many cases, to help compensate for such uncertainty, corruption was and continues to be employed as a tool to ensure certainty in two areas that may adversely affect their investment: political uncertainty and economic uncertainty.

(p. 41) 1. Political uncertainty

3.23  Protection from the unbounded, arbitrary exercise of power—the system now called the ‘rule of law’—is considered by many contemporary historians and economists alike as one of the most important factors that contribute to economic development.23 Whenever foreign investors are asked what they seek in a host State before making an investment (other than the obvious—a decent return on investment), investors will speak of the desire for a ‘level playing field’, and transparent rules that are applied without discrimination. These are, indeed, the very same substantive rights contained in most investment treaties, which include protections against ‘arbitrary and discriminatory’ treatment, a guarantee of ‘fair and equitable’ treatment, and protections against expropriation without adequate compensation by host States.) A foreign investor wants consistency and predictability of the environment in which his investment operates, especially since large-scale investment typically involves a commitment of many years within the territory of the host State, and is thus much more exposed to political vicissitudes within that State than, say, one-off sales of goods or equipment, no matter how expensive. So important is the need for certainty in an investment climate that an entire instrumentality of the World Bank, the Multilateral Investment Guarantee Agency (MIGA), is devoted to promoting foreign investment ‘by providing political risk insurance to investors and lenders caused by noncommercial risks’.24

3.24  This notwithstanding, many investors hedge themselves from political risks using more active methods, one of which is through corruption. To insulate themselves against actual or possible unfair treatment from host governments in the future, some investors go directly to public officials, obtaining through bribe payments a guarantee of non-intervention from government officials. This form of payment animates much of the righteous talk that foreign investors would often give behind closed doors—that their brand of corruption is not to gain unfair advantage, but merely ‘to be treated in a fair manner’. Indeed, one often hears investors in their private moments not only accepting the need to pay bribes for this purpose, but actually praising how bribe payments are ‘honoured’ in some countries, compared to others where observers say many foreign investors ‘complain of having to pay bribes and then don’t quite get what they paid for’.25

2. Economic uncertainty

3.25  There is, of course, another form of hedge that corruption is often used for, and that is economic uncertainty. Investing in an unfamiliar environment, especially in relatively (p. 42) underdeveloped economies, carries the potential for rapid profit, but also carries much more risk, not all of which is political. Significant economic uncertainty in both the cost side of a foreign investment (such as construction cost overruns, wage rises, or labour shortages), or in expected profits from the enterprise, can and do occur. These commercial risks are inherent in any commitment of capital and are thus generally not protected by the MIGA or other forms of political risk insurance.

3.26  Nonetheless, foreign investors seeking the greatest amount of certainty of returns possible will sometimes use corruption as a tool in ensuring maximal returns. As mentioned earlier, prominent advisers of inbound foreign investment, including legal advisers, believe that corruption was actually essential to the furtherance of foreign investment in developing countries, because corruption guaranteed that the return received by that foreign investor for his capital would be at a rate greater than what he would receive in less-risky investment climates, a rate enough to justify the additional risk of investing in a developing State.26

3. Parsing the political vs. economic risk dichotomy

3.27  Viewing corruption from the perspective of investor risk-mitigation is potentially useful when developing a typology of transnational corruption. To distinguish extortion extracted by host State public officials from opportunistic bribery, for example, it is cogent to inquire into the nature of the public decision-making sought to be purchased by the investor. As discussed earlier, corruption is often used as a risk-mitigating tool by investors coming into unfamiliar markets, and an investor seeking to minimize risk might engage in corrupt activity for two purposes: first, there is the economic reason. Bribery of public officials will make a risky investment worth the risk by ensuring that the profit potential exceeds those found in ‘safer’ markets. This can often be distinguished from a second reason: to secure leave from what the investor deems to be unfair or oppressive regulation perpetrated by public officials; in other words, to protect the potential or already existing investment from political risk.27

3.28  An analysis of corruption-related issues from the perspective of risk would therefore include the following inquiry: precisely what form of government action or inaction did the bribe purchase—protection from commercial risks, or from political risk? Not coincidentally, political risk insulation is more typical of public official-led extortion, while economic risk minimization is more akin to investor-led bribery. Pressure to make corrupt payments to insulate an investment from political uncertainty bears some consistency with precisely the same forms of political and non-commercial risks that investment treaties themselves were designed to protect foreign investors against, such as fair and equitable treatment, or freedom from arbitrary and discriminatory treatment. Nonetheless, such activities are all illegal if consummated, and subject the investor to sanction.


1  See Theodore H. Moran, Harnessing Foreign Direct Investment for Development: Policies for Developed and Developing Countries (CGD Books, 2006).

2  Quoted in Merle Miller, Plain Speaking: An Oral Biography of Harry S. Truman (Berkeley, 1973), 70.

3  W. Michael Reisman, Folded Lies: Bribery, Crusades, and Reforms (Free Press, 1979), 69.

4  Corrupt acts are referred to euphemistically across cultures. To give just one example, in India, ‘demands for petty bribes are frequently signaled in code: “Take care of me”, or, for a two-note handout, “Make Gandhi smile twice.” [Gandhi is depicted on all Indian currency notes] Illegal demands by police and bureaucrats are “deeply ingrained in the culture”, says anticorruption crusader Vijay Anand, and are “taken as the norm”.’ ‘Culture: Bribe-busting Bill’, National Geographic, April 2011, 28. Further examples include the following:

In some Spanish-speaking countries, bribes are referred to as ‘mordida’ (literally, ‘bite’); in Arab countries they are Baksheesh or Bakshish. However, Bakshish is more akin to tipping. French-speaking countries often use the expressions ‘dessous-de-table’ (‘under-the-table’ commissions), ‘pot-de-vin’ (literally, ‘wine-pot’), or ‘commission occulte’ (‘secret commission’ or ‘kickback’). While the last two expressions contain inherently a negative connotation, the expression ‘dessous-de-table’ can be often understood as a commonly accepted business practice (for instance, on the occasion of a real estate transaction before the notary, a partial payment made between the buyer and seller; needless to say, this is a good way to launder money). In German the common term is Schmiergeld (‘smoothing money’), [...]

Available at: <http://en.wikipedia.org/wiki/Bribery>.

5  Interview conducted in Italy, September 2011 (on file with author).

6  See discussion in Chapter 3 section B.

7  See Nye, ‘Corruption and Political Development: A Cost-Benefit Analysis’ (1967) 61 Am. Pol. Sci. Rev. 417, 420.

8  ‘Widespread petty or lubricating corruption exists as a matter of course, but failed states are noted for rising levels of venal corruption: kickbacks on anything that can be put out to fake tender or bid (medical supplies, textbooks, constructions, roads, railways, tourism concessions, new airports, and so on); unnecessarily wasteful construction projects arranged so as to maximize the rents that they are capable of generating; licenses for existing or imaginary enterprises and activities; and a persistent and generalized extortion. Moreover, corrupt ruling elites invest their profits overseas, not at home, thus contributing yet further to the economic attrition of their own states.’ Robert Rotberg, ‘The Challenge of Weak, Failing, and Collapsed States’, in Leashing the Dogs of War: Conflict Management in a Divided World (C.A. Crocker et al. (eds.), United States Institute of Peace, 2007), 87.

9  Susan Rose-Ackerman, ‘The Challenge of Poor Governance and Corruption’, in Global Crisis, Global Solutions (Bjorn Lombord (ed.), Cambridge University Press, 2004), 16–17.

10  Interview conducted by the author in The Hague, March 2011 (on file with author).

11  Susan Rose-Ackerman, Corruption and Government: Causes, Consequences, and Reform (Cambridge University Press, 1999), 53–4.

12  See discussion in Chapter 7.

13  Reisman, Folded Lies (n 3), 79.

14  Reisman, Folded Lies (n 3), 83.

15  Reisman, Folded Lies (n 3), at 76.

16  Reisman, Folded Lies (n 3), at 87.

17  See Chapter 5, section B.

18  See Jason Felch and Michael Montgomery, Vladimiro Montesinos and the Art of the Bribe, American Public Media, accessed on 4 January 2012, <http://americanradioworks.publicradio.org/features/corruption/a1.html>.

19  See Felch and Montgomery, Vladimiro Montesinos (n 18).

20  A revealing anecdote was recounted in W.A. Berkeley, ‘The Changing Political Environment for Investment Agreements’ (2009) 75 Arbitration 248: in 1975, the United Kingdom adopted a bill that would take a 51 per cent stake of all oil produced within the U.K. through the creation of a new State corporation. This would entail a major revision to exploration licences already granted, many to U.S. companies. The U.S. Ambassador objected, saying: ‘the bill raises the question of its compatibility with international law regarding the regulation and taking of foreign property and contractual rights’. U.K. Minister Tony Benn replied: ‘[w]e have looked into this most carefully and we have concluded that questions of international law do not arise, because every nation state has the right to change the environment in which companies operate in its territory’.

21  Berkeley, ‘The Changing Political Environment’ (n 20), 248.

22  Berkeley, ‘The Changing Political Environment’ (n 20), 248. For example, Exxon (an American Company) and Shell (a British/Dutch company), after initially having resisted changes to standard contracts, signed new participation agreements in a form satisfactory to the British government and went on to successfully develop the Brent field in the North Sea.

23  See e.g. Michael Trebilcock and Ron Daniels, Rule of Law Reform and Development: Chartering the Fragile Path of Progress (Edward Elgar, 2008); Daniel Kaufmann et al., Governance Matters IV, Governance Indicators for 1996–2004, World Bank Policy Research Working Paper Series No. 3630 (2005), available at: <http://papers.ssrn.com/sol3/papers.cfm?abstract_id&#x003D;718081>; Niall Ferguson, Civilization: The West and the Rest (Penguin, 2011) (calling the rule of law and representative government, based on the right to property and elected legislatures, one of the ‘killer apps’ that resulted in Western dominance over the rest of the world from 1500 onwards).

24  See the Multilateral Investment Guarantee Agency website: <http://www.miga.org/>. MIGA specifies the types of non-commercial risks it assures against as follows: ‘MIGA can help investors and lenders deal with these risks by insuring eligible projects against losses relating to: (i) Currency inconvertibility and transfer restriction; (ii) Expropriation; (iii) War, terrorism, and civil disturbance; (iv) Breach of contract; and (v) Non-honoring of sovereign financial obligations.’ See further <http://www.miga.org/investmentguarantees/index.cfm>.

25  The world of India’s anti-graft campaigner Anna Hazare, BBC website, 15 August 2011, available at: <http://www.bbc.co.uk/news/world-south-asia-14525537> (‘It’s quite evident that the optimism surrounding India, say a decade ago, has diminished,’ says Patrick French, a historian who has written extensively on India. ‘Many people involved in business, particularly from overseas, complain of having to pay bribes and then don’t quite get what they paid for.’)

26  See Chapter 2, n 34 and accompanying text (interview of a partner at a Wall Street law firm conducted in Hong Kong, June 2008).

27  For further discussion of this idea as it relates to investment arbitration, see Chapter 11, section C.