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World Duty Free Company LTD v. The Republic of Kenya, The Republic of Kenya‘s Response, 18 August 2004, in: Mealey's International Arbitration Report, Vol. 19, Nr. 8, 2004.

World Duty Free Company LTD v. The Republic of Kenya, The Republic of Kenya‘s Response, 18 August 2004, in: Mealey's International Arbitration Report, Vol. 19, Nr. 8, 2004.
Table of Contents

World Duty Free Company LTD v. The Republic of Kenya, The Republic of Kenya‘s Response, 18 August 2004.


IV. The House of Perfume Contract is voidable and has been validly avoided



1. Bribing the head of state does not immunise the House of Perfume Contract from the consequences of illegality

27. By bribing the head of state, the Claimant contends that Mr Ali immunised the House of Perfume Contract from the consequences of illegality. More specifically, the Claimant argues that knowledge of the bribe by Mr Moi is attributable to the Republic of Kenya. Thus, it states that: "The state as an abstract entity acts through the head of state and through the officers working in the presidency. Knowledge privy to the presidency or to the senior-most civil servant in the presidency is by force of logic knowledge held by the state."15


28. However, "force of logic", not to mention Kenyan, English and international law, dictate precisely the opposite.

29. First, a literal and purposive construction of the Kenyan Prevention of Corruption Act defeats any suggestion that the drafters of that Act intended to exclude the president or his senior officers from its ambit. Like all other officers of government, the highest officer is paid a salary, and is required to act in the interests of the Kenyan state. The suggestion that the Prevention of Corruption Act was not intended to prevent the corruption of Kenya's highest officials is absurd. Indeed, the statute in no way restricts itself to individuals other than the president and/or his advisers, and a bribe paid to the president is as illegal under Kenyan law as one paid to any other representative or officer of the Republic of Kenya.

30. Moreover, contrary to the Claimant's contention that there is no distinction between the President of Kenya and the Kenyan state, Kenya's Constitution itself treats the office of the president as entirely separate from the Republic of Kenya. In its very first article, the Constitution makes clear that Kenya's sovereignty is vested in its people: "Kenya is a sovereign Republic".16 No President of Kenya can be the Republic of Kenya. A sitting president, like any government minister, is a temporary agent of state. He can only represent it as its highest official during his tenure in office.17

31. This position under national law is entirely consistent with that under international law, under which a state, as with any other legal entity, may only act through individuals.18 Those individuals, including a president, are - indeed can only be - agents of the state.


32. The knowledge of a head of state acting illegally and in his own interest cannot be attributable to the state that he represents. Thus, the Vienna Convention on the Law of Treaties provides expressly as follows:

"Article 50 Corruption of a Representative of a State If the expression of a State's consent to be bound by a treaty has been procured through the corruption of its representative directly or indirectly by another negotiating State, the State may invoke such corruption as invalidating its consent to be bound by the treaty."19

33. So as to avoid any dispute as to the meaning of the term "representative", Article 7 of the Convention provides that the following are considered as representing their state: "Heads of State. Heads of Government and Ministers for Foreign Affairs, for the purpose of performing all acts relating to the conclusion of a treaty..."20 (Emphasis added.)

34. In the same way that international law allows a state to disavow the acts of a corrupt head of state, so national courts have refused to grant sovereign immunity to heads of state whose acts have been manifestly devoid of any semblance of legality. Thus, when Manuel Noriega, the President of Panama, was tried in the United States on various charges relating to drug trafficking, he pleaded, inter alia, his immunity as an acting head of state. The Court of Appeals for the Eleventh Circuit summarily dismissed the objection on the basis that "the charged acts relate to Noriega's private pursuit of personal enrichment",21 and not the activities of the Panamanian state.

35. In short, there is no basis to depart from the principles of English law and the authorities set out in the opinion of Lord Mustill simply because Mr Ali12 bribed Kenya's highest official. The voidability of the House of Perfume Contract does not depend on which government officer Mr Ali bribed.

2. The bribe was not a collateral contract to obtain an audience with Mr Moi

36. It is common ground between the parties that the payment of a bribe to procure the House of Perfume Contract would render the contract voidable. For this reason, the Claimant has belatedly sought to contrive an artificial distinction between a bribe paid to procure an audience with President Moi and a bribe paid to procure a contract. The Republic of Kenya has already demonstrated that such a distinction lacks any basis on the facts of this case (see Section III of this brief, above). The facts cannot leave anyone in doubt as to the purpose and consequence of the bribe.

37. As for the two cases that the Claimant has cited in apparent support of its new analysis, the Republic of Kenya need only make the following observations:


neither case purports to alter the conclusions and law set out in the cases cited by Lord Mustill, to the effect that a contract procured by bribery is voidable;


neither deals with the circumstances of the illegality presented by this arbitration, i.e. the payment of a bribe that ultimately resulted in the procurement of a contract; and


indeed, it is questionable whether either case concerns collateral contracts at all.

38. By way of illustration of the irrelevance of those cases, the first, South Western Mineral Water Company Ltd v. Ashmare, involved a written agreement that was held to be unenforceable in its entirety as a result of one term that contravened the Companies Act. The second, Pye v. BG Transport Service, was a claim in negligence (and thus not even contractual). In that case, the defendant delivery company was held to have been negligent following the theft, whilst in the defendant's custody, of radio sets that it was13 transporting to the plaintiffs buyers in Persia. On the question of damages, the defendant attempted to rely on the illegality of the sale agreement between the plaintiff and its Persian buyers in order to reduce the damages that it should pay. The court held that the agreement between the plaintiff and its buyers was irrelevant, stating: "Even if the plaintiffs had agreed to make a free gift of these goods to [the buyers], they could still recover the value of the goods as against the defendants" (at 309).

3. The bribe taints the entirety of the House of Perfume Contract

39. In a further belated attempt to avoid the principles of English law that are directly applicable to the facts in this dispute, the Claimant argues that the bribe represents no more than "illegal consideration" paid under an otherwise valid House of Perfume Contract and can be "severed" from that contract without in any way affecting the claims brought thereunder by Mr Ali.

40. One might wonder, if this were indeed possible, why the English courts should not even have considered applying the doctrine of severance in the decisions identified by Lord Mustill; decisions which are based on facts directly relevant to this arbitration.

41. The answer is obvious.

42. Severing bribes or illegal payments from the contracts that resulted from them necessarily leaves behind no contract at all, for it is the bribe that brought about the contract in the first place. The doctrine of severance under English law is simply inapplicable to the facts presented by this arbitration, and to the cases relied on by Lord Mustill.

43. Thus, all of the cases that the Claimant relies on in support of its "severability" theory bear no relation to the facts of this case. In particular:

(a) none of the Claimant's authorities invoke the severance of a bribe;2214 (b) in the one case that involves the illegality of fraud, albeit affecting only one clause of the agreement between the parties, the House of Lords had "not the slightest hesitation" in holding the entire agreement to be unenforceable.23

44. The illegality in this arbitration goes to the very existence of the House of Perfume Contract. The Claimant's claims arise out of the House of Perfume Contract and that contract alone. It is impossible to "sever" the bribe and enforce a contract that would never have existed but for that bribe.


V. Public Policy Demands that the Claimants Claims be dismissed

55. The fundamental principle of public policy stated by Lord Mansfield in Holman v. Johnson and cited in Republic of Kenya's Application,32 is the following:

"The objection, that a contract is immoral or illegal as between plaintiff and defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed: but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident, if I may so say. The principle of public policy is this; ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If, from the plaintiffs own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says he has no right to be assisted. It is upon that ground the court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff. So if the plaintiff and defendant were to change sides, and the defendant was to bring his action against the plaintiff, the latter would then have the advantage of it; for where both are equally in fault, potior est conditio defendentis."33

15Claimant's Memorial in Reply, at paragraph 30.
16Article 1 of the Constitution of Kenya, Annex 2. The version exhibited by the Republic of Kenya is that in force at the lime of the bribe. The version currently in force contains an identical provision.
17See, in this regard, Chapter II Part 1 of the Constitution, ibid. The Claimant also contends (in relation to Mr Ali's honest belief as to the legality of the bribe) that, under the Kenyan Constitution, the President is above the law. This, as the Constitution makes clear, is simply not the case.
18See Oppenheim 's International Law, Vol 1: Peace, 9th edn., 1992, at paragraph 159.
19Vienna Convention on the Law of Treaties, 22 May 1969, (1980) 1155 UNTS 331, Annex 3.
20Ibid, Article, 7(2)(a)
21U.S. v. Noriega, 117 F3d 1206, at 1212 (11th Cir 1997), Annex 4. See page 9 of the copy exhibited to this brief.
22Again, if only to demonstrate the irrelevance of the Claimant's cases is this arbitration, the case of Beresford v. Royal Insurance Company Ltd concerned a clause in an insurance policy that was common to insurance policies in England at the time. It premised to pay on events that were capable of arising from many causes, one of which would involve the commission of a crime by the assured. Finding that it was able to sever the criminal cause without altering or impacting upon the remainder of the contract, the court found the remainder of the policy to be valid.
23In Farmers' Mart Ltd v. Milne, the House of Lords noted that the illegal clause in an employment agreement, "embodie[d] a device arranged between the [Appellants] and the [Respondent], in fraud of bankruptcy laws, to secure to the [Appellants] a larger dividend than the other creditors in that estate are to receive" (at 115). and refused to enforce any part of that agreement.
32Supra, note 28, at paragraph 17.
33(1775) 1 Cowp. 341, cited in Tinsley v. Milligan, at 354.

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