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Contracts Procured by Bribery Can Still Be Enforceable

Many in the commercial world may be surprised to hear of an important High Court ruling which established that there is no rule of English public policy which precludes enforcement of contracts which have been procured by bribery.

The case concerned a very substantial gas supply contract. Hundreds of millions of pounds had been spent on infrastructure in preparation for supplies to commence but the buyer, company A, launched arbitration proceedings against the seller, company B, on the basis that no deliveries of gas had in fact been made.

Following a 30-day hearing, arbitrators in London rejected company B’s challenge to their jurisdiction to consider the dispute. They found that the contract was valid and binding on both parties and that company B had for several years been in breach of the same. Although there had been misconduct by a number of persons involved in negotiating the deal, the contract had not been procured by corruption.

In rejecting company B’s challenge to that decision, the Court found that the contract itself was not illegal and that company A’s action to enforce it did not arise from any disgraceful conduct. There was no English public policy requiring the Court to refuse to enforce a contract procured by bribery or which had been preceded by a failed attempt at bribery. The Court noted that to introduce a concept of ‘tainting’ of an otherwise legal contract would be to create legal uncertainty.

Directing enforcement of the arbitrators’ award, the Court found that company B in any event had no realistic prospect of overturning their conclusions, which had been reached on the basis of full argument and evidence.