Private remedies for corruption - tackling corrupt contracts

Abiola Makinwa

Lecturer , The Hague University of Applied Sciences

Mar 12 2013

Bribery is a means to an end and not an end in itself. The bribe and the transaction that results from it are inextricably linked in their genesis. A failing of the criminal law approach is that it insufficiently addresses the transactions that result from acts of bribery.

In my book I distinguish two important transactions tainted by corruption. The first is the agreement to give and receive a bribe that occurs between the bribe-giver and the bribe-taker. We can refer to this as the primary contract. However, the whole point of the primary contract is to bring another contract into existence. For example, a contract to build a telecommunications network, to supply arms, to exploit natural resources, to build infrastructure may have as its genesis an act of collusion between a bribe-giver and a bribe-taker. I refer to such contracts as secondary contracts to emphasize their relationship to the originating act of bribery.

The primary and secondary contracts that emerge from acts of bribery must be treated in a manner consistent with the goals of criminalisation. Only at this point can we speak of effective deterrence. For as long as consequential contracts remain outside the remit of criminal law punishment the incentive to engage in acts of corruption remains unchecked.

Contracts typically fall within the purview of the laws that regulate our private interactions as citizens. This means that private national laws governing contracts have an important role to play in the fight against corruption. Art 34 of the UN Convention against Corruption provides a backdrop against which national laws can ‘speak with one voice’. It calls on states to consider corruption as a factor to annul or withdraw contracts that are tainted by corruption.

My book shows that as far as the primary contract is concerned the courts and international arbitration panels do indeed speak with one voice in treating this agreement as unenforceable because it evidences a criminal transaction. However this is not the case with the secondary contract. In most countries this is a valid contract. Some courts resort to public policy to nonetheless declare the secondary contract unenforceable. Others, however, uphold its validity unless it can be shown that there was a ‘defect of consent’ that renders such a contract unenforceable.

The primary and secondary contracts are different because of the impact they have on the political, economic and social development of countries. This public interest should play the decisive role in determining their enforceability. Developing an international and uniform approach to regulating these contracts is the logical next step in the fight against corruption.

For more detail see Abiola Makinwa, Private Remedies for Corruption: Towards an International Framework (Eleven) 2013

Further reading

Private remedies for corruption: Winning the culture war
Private remedies for corruption: The corruption conundrum

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