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

In: The Journal of World Investment & Trade
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  • 1 University of Ottawa, Canada, Patrick.dumberry@uottawa.ca

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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.

  • 42

    Moloo and Khachaturian (n 9) 1485: Bjorklund and Vanhonnaeker (n 9) 370.

  • 49

    ibid para 1281. In doctrine, see Bjorklund and Vanhonnaeker (n 9) 365–386; Llamzon (n 1).

  • 51

    ibid para 1313.

  • 52

    ibid para 1326.

  • 53

    ibid para 1314, referring to Respondent’s Post-Hearing Brief, para 147.

  • 54

    ibid para 1314.

  • 55

    ibid paras 1332, 1328.

  • 59

    ibid para 1350, referring to Plama v Bulgaria (n 21) para 139.

  • 61

    ibid para 1352.

  • 64

    ibid para 1317.

  • 66

    ibid para 1357.

  • 67

    ibid para 1315.

  • 68

    ibid para 1329.

  • 70

    ibid para 1315.

  • 72

    ibid para 1361.

  • 73

    ibid para 1362.

  • 74

    ibid para 1373.

  • 75

    ibid para 1374.

  • 76

    ibid para 1827, and s X.E.4.

  • 136

    In an article published in 1999, Schwebel affirmed that the doctrine of clean hands ‘is supported in international law’ (Schwebel (n 114) 74) and referred to the ‘equitable considerations that are at the heart of the general principles of law that the doctrine of clean hands embodies’ (ibid 78). In an updated version of this article later published in the Max Planck Encyclopedia of Public International Law (Schwebel (n 27)) he seems to have adopted a different position on the matter. Thus, he mentioned that the question as to whether the principle of clean hands is a principle of contemporary international law ‘is a question on which opinion is divided’ (ibid 3), noting that while ‘a number of States have maintained the vitality and applicability of the principle of clean hands in inter-State disputes’, ‘[t]he ICJ has not rejected the principle though it has generally failed to apply it’ (ibid 12).

  • 154

    Moloo and Khachaturian (n 9) 1485.

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