Money Laundering Through the Arbitral Process: Controversial Issues Wait for Solutions

Arbitrators’ suspicion of money laundering: choices against principles

“…Given that the tribunal’s decision is likely to be final, there is an incentive to unveil the true nature of contracts tainted by criminal conduct to prevent the arbitral process from becoming a safe haven for the enforcement of rights arising from illicit agreements. Depending on the relevant criminal laws, an arbitrator who rules in favor of a contract despite having concerns about its involvement in money laundering may be deemed complicit in the crime (Alkhayer and Gupta, 2023, pp. 81–84).…”

“…Within the framework of arbitration, two avenues exist where an attempt at money laundering may occur. The first scenario is the parties’ money laundering defense and the second is the arbitrators’ money laundering suspicions (Alkhayer and Gupta, 2023).…”

“…In this particular situation, the party bringing a claim in the arbitration has the opportunity to present a defense related to money laundering, potentially using it as a strategy to dispute the enforceability of the contract. In these cases, one party’s accusation of the other’s engagement in money laundering activities is intended to exploit the possible advantages of violating the public policy of the country where the arbitration is taking place (Alkhayer and Gupta, 2023). The intention is to evade the arbitration process altogether and resist the enforcement of contractual obligations.…”

“…They may fear being viewed as complicit or involved themselves, considering their own partial involvement. Alternatively, a party may have been completely innocent of any illegal actions but might be concerned about potential losses to their interests if they were to raise such claims (Alkhayer and Gupta, 2023). Or the most dangerous and difficult presumption, that is if all parties are familiar with all illegal activities and have the intention to commit money laundering in participating with each other, this presumption commonly emerges when the entire matter is part of a broader scheme involving money laundering.…”

“…Based on the perception and response of the arbitral tribunal, when arbitrators have suspicions of money laundering arising from red flags or prima facie evidence (Alkhayer and Gupta, 2023), they have the option to disregard these suspicions. This option primarily relies on the principle of party autonomy, as its advocates argue that the arbitrators’ duties are limited to issuing a final arbitral award that resolves the dispute within the confines of the parties’ agreement.…”