In our first article for the Gazette on the intersection of international arbitration and corruption investigations (Criminal charges in Peru matter for everyone), we discussed how allegations of corruption in arbitrations involving Odebrecht – a company at the centre of Operation Car Wash – sent shockwaves through the international arbitration community.
In this second piece, we examine how major corruption scandals generate follow-on commercial arbitration claims, using Car Wash as a case study to illustrate the complex web of disputes that emerge in corruption’s aftermath.
The reverberations of major corruption scandals extend far beyond the initial criminal proceedings. For instance, Car Wash (Lava Jato), Brazil’s sprawling investigation into systematic corruption at state-owned oil giant Petrobras and national company Odebrecht, exemplifies how a single corruption probe can trigger a cascade of international arbitration claims that continue for years after the initial revelations.
Years after the height of Car Wash, related disputes continue to surface. A recent example is the ongoing litigation between Seatrium and Keppel. Following Seatrium’s leniency agreement with the Brazilian authorities, Keppel initiated a $53m SIAC arbitration against Seatrium.
Seatrium was formed through the merger of Keppel Offshore & Marine and Sembcorp Marine, under which Sembcorp Marine agreed to indemnify Keppel for certain claims arising within 24 months of the merger. Yet, in corruption cases, claims and leniency agreements often materialise long after the underlying misconduct, illustrating how corruption’s tentacles extend deep into commercial relationships and generate a complex web of secondary liabilities that keep arbitrators occupied long after the original scandal has faded.
Since Car Wash investigations began in 2014, the scandal has spawned dozens of high-value international arbitration cases across multiple forums, illustrating how corruption scandals continue generating fresh disputes nearly a decade after the initial investigations commenced.
Post-corruption disputes
Car Wash’s impact on international arbitration can be categorised into several distinct waves of claims, each reflecting different aspects of how corruption investigations disrupt commercial relationships.
Contract termination disputes formed the initial wave. As corruption allegations emerged, counterparties moved swiftly to terminate major contracts with implicated businesses. As these included Latin America’s largest construction and infrastructure firms, many projects were affected across a range of sectors. A clear example is the dispute between Vantage Deepwater and Petrobras, Brazil’s largest state-owned company and a central figure in the investigations. In 2012, Vantage leased an oil drilling rig to Petrobras for eight years. Petrobras terminated the contract in 2015, following the exposure of the corruption scheme during the Car Wash investigations, alleging the contract had been procured through corruption. This prompted Vantage to file a $700m ICDR-AAA claim. Despite Petrobras’s corruption-based justification, Vantage ultimately prevailed, with the award paid in 2019. This demonstrates that corruption allegations alone do not always justify contract termination under commercial law principles.
Investment treaty claims represent perhaps the most significant category by value. Odebrecht Latinvest’s ongoing ICSID claim against Peru seeks over $1.2bn for the cancellation of the South Peruvian Pipeline concession in 2017 following the exposure of Odebrecht’s corruption action throughout Latin America. Similarly, Enagás’s related $1.98bn ICSID claim over the same pipeline project demonstrates how multiple investors in a single project can generate parallel proceedings when corruption investigations trigger government action. Arbitrations involving states are part of the broader domino effect of corruption scandals, as governments also rush to take action against investigated companies operating within their jurisdiction.
Indemnification disputes have emerged as another category, often surfacing years after initial investigations conclude. Keppel v Seatrium illustrates this trend. After Seatrium’s $134m settlement with Brazilian authorities in 2024, Keppel sought $53m under merger-related indemnity provisions, arguing that Car Wash-related losses were covered by their transaction agreements. Seatrium countered that the indemnity had expired before any binding settlements were reached, highlighting the temporal complexities of corruption cases that unfold over many years.
Shareholder claims have also arisen, as the share value of implicated entities fell precipitously due to commercial and reputational damage. Petrobras faced several shareholder claims submitted through the Market Arbitration Chamber of the B3 stock exchange. Shareholders argued that Petrobras directors and managers were aware of the company’s criminal conduct and failed to act transparently toward shareholders. Although the proceedings are fully confidential, Petros Fundação reportedly claimed $2.11bn in losses, while the California Public Employees’ Retirement System, a US pension agency, reportedly claimed $210m. Two other minor Petrobras investors reportedly filed claims totalling $34bn.
Offshore construction disputes formed another major cluster. The collapse of Brazilian shipbuilder Sete Brasil amid the Car Wash investigations triggered $5bn in claims from Asian shipyards over cancelled drillship and rig construction contracts, with most disputes settling between 2019 and 2020.
Commercial uncertainty
What makes Car Wash particularly instructive is how corruption investigations create cascading commercial uncertainty that extends far beyond the immediately implicated parties. Consider the timeline: initial investigations began in 2014, but related arbitration claims continue emerging over a decade later.
This creates particular challenges for commercial parties. Unlike discrete business disputes, corruption scandals evolve unpredictably as investigations unfold; prosecutors negotiate leniency agreements and regulatory settlements are reached. Parties may find themselves defending contract terminations based on preliminary allegations that later prove unfounded, or conversely, discovering that counterparties face massive settlements that impair their commercial viability.
The several disputes arising between Singaporean companies illustrate this complexity. The disputes began with MHWirth signing seven contracts to supply drilling equipment to Jurong, which was building drill ships for Sete Brasil, a company created by Petrobras. Jurong was owned by Singapore’s state-run Sembcorp Marine, a company that later merged with Keppel in 2023 to form Seatrium.
Following the Car Wash investigations, Jurong suspended and eventually terminated the contracts signed with MHWirth. MHWirth responded by initiating arbitration in late 2021, seeking around $76m in unpaid invoices, costs and interest under four of the contracts. That was only the first dispute arising out of Car Wash.
Sete Brasil – the company at the end of the chain in all those commercial relationships – began facing severe financial difficulties. The company was blocked from accessing previously approved bank loans intended to fund its contracts with Singaporean companies. Eventually, Sete Brasil filed for bankruptcy, prompting Sembcorp to initiate arbitration to protect its interests in 2016. That dispute was eventually settled in 2020. However, the ripple effects of Car Wash continued.
In February 2024, Seatrium announced an ‘in-principle’ leniency agreement with Brazilian authorities, agreeing to pay $182.4m. Under the merger terms, Sembcorp Marine had agreed to indemnify Keppel for claims arising within 24 months. When Seatrium finalised leniency agreements in 2025, questions arose about whether these settlements triggered indemnity obligations. Keppel later filed a $53m SIAC claim against Seatrium.
These disputes underscore how long-running corruption investigations can create uncertainty in commercial risk allocation and disputes that continue to arise a decade after the outbreak of the operation.
Multiplier effect
Large corruption scandals involving companies with international operations also have the potential to multiply disputes across different jurisdictions. In Car Wash, for instance, the exposure of the scheme led Odebrecht to enter into a US plea agreement, admitting to having paid $778m in bribes related to 100 projects across 12 countries. These countries initiated their own investigations and adopted individual measures to address the uncovered corruption. Such measures are not limited to criminal and regulatory actions – they may also include civil remedies and even the termination of contractual agreements.
An example is the two investor-state arbitrations that arose following Peru’s termination of a pipeline concession agreement. Two companies from the consortium that had secured the concession filed investor-state claims against Peru. Odebrecht, which held a 50% stake in the consortium, was directly implicated in Car Wash. Enagás, a Spanish company with a 25% stake, was not. Nevertheless, both companies were affected by the measures taken by the state. Peru argued that termination of the concession agreement was due to Odebrecht’s failure to secure financing for the project, emphasising that Odebrecht ‘has expressly admitted to having committed unlawful acts’ and made illicit payments to obtain the concession.
The uncovering of the corruption scheme also prompted the Municipality of Lima in Peru to seek the annulment of another concession agreement involving Odebrecht. Although the dispute did not stem directly from the corruption scandal, it was a contractual claim regarding compensation following the municipality’s decision to cancel a new toll on the highway operated by Rutas de Lima, a concessionaire formerly owned by Odebrecht. The municipality argued that the agreement was void due to the corrupt practices of Odebrecht. The tribunal rejected this claim, citing a lack of evidence of corruption specifically tied to that concession.
A comparable approach was taken by Colombia’s National Agency of Infrastructure in an arbitration initiated by a concessionaire owned by Odebrecht (Ruta del Sol). The domestic arbitration was
not originally related to the corruption scandal – it concerned, again, a strictly contractual dispute. While the arbitration was still pending, Car Wash became public, along with revelations of Odebrecht’s bribery in various jurisdictions. Colombia’s agency soon began to argue that the concession agreement was void due to corruption, even after the parties had already agreed on its termination. The all-Colombian tribunal ultimately declared the agreement void after finding that it had indeed been obtained through corrupt means and dismissed the concessionaire’s claims.
Practical implications
The Car Wash experience offers several practical lessons for international arbitration users navigating corruption-adjacent disputes.
Evidence preservation becomes critical when corruption investigations commence. Parties should anticipate that business communications, financial records and decision-making processes may become relevant not only to criminal and regulatory proceedings but also to subsequent commercial disputes. Early litigation holds and privilege preservation strategies help ensure that evidence remains available for commercial proceedings that may not emerge until years later.
Contractual risk allocation requires careful consideration of corruption-related scenarios. Standard force majeure and termination clauses may prove inadequate when corruption investigations create regulatory uncertainty or reputational damage. Parties should consider specific provisions addressing corruption-related government action, investigation cooperation requirements, and settlement cost allocation.
Interim relief strategies become particularly important given the extended timelines typical in corruption-adjacent commercial disputes. Parties may need to secure assets or maintain business relationships pending resolution of both criminal and regulatory investigations and related commercial claims. Tribunals’ willingness to grant interim relief may depend partly on the strength of underlying corruption allegations and their impact on commercial relationships.
Settlement timing and structure require careful coordination with ongoing criminal and regulatory proceedings. Parties must balance commercial resolution needs against potential prejudice to criminal defence strategies or regulatory cooperation agreements. The complexity illustrated by the Seatrium indemnity dispute demonstrates how settlement timing can determine liability allocation under commercial agreements.
A consistent narrative has also proven to be a relevant element in disputes. The mere fact that an agreement was signed under corrupt circumstances does not, in itself, appear to be sufficient grounds to declare it void. When raising or facing a claim of breach of contract or nullity due to the alleged corrupt nature of the agreement, it is important to consider not only whether there is evidence supporting the allegations, but also the actions taken by the parties after the alleged corruption came to light.
Roadmap for future cases
Car Wash’s arbitration aftermath provides a roadmap for understanding how future major corruption scandals may generate commercial disputes. Several trends emerge from this analysis.
Extended dispute lifecycles appear inevitable when corruption investigations span multiple jurisdictions and involve complex commercial relationships. Practitioners should anticipate that corruption-adjacent commercial disputes may extend far beyond the conclusion of underlying criminal and regulatory proceedings and may impact disputes that are not directly related to corruption acts.
Increased scrutiny of commercial relationships with implicated entities will likely continue. Counterparties will demand enhanced due diligence, specific corruption-related contractual protections, and clearer termination rights when corruption allegations emerge.
Regulatory settlement costs will increasingly become sources of commercial disputes as leniency agreements and deferred prosecution agreements become more common. Parties should anticipate that regulatory settlement costs may trigger indemnification claims, insurance disputes, and contract renegotiation demands.
Cross-border coordination challenges will persist as corruption investigations increasingly span multiple jurisdictions while related commercial disputes proceed in various arbitral forums. Enhanced coordination mechanisms between criminal prosecutors and commercial arbitrators may emerge to address these challenges.
Unpredictability in commercial relations and disputes is likely to continue, as different parties and tribunals may adopt varying positions when addressing allegations of corruption. Even when a dispute is unrelated to the corrupt acts themselves, parties may attempt to undermine the proceedings by alleging that the contract or agreement in question was tainted by corruption. Tribunals may also diverge in their approaches to such claims, further contributing to the overall unpredictability of outcomes.
Preparing for the aftermath
Car Wash shows that major corruption scandals trigger not only criminal and regulatory liability but also years of complex commercial disputes. For arbitration practitioners, this means preparing for corruption-adjacent disputes through strong evidence preservation, tailored contractual risk allocation, and coordination with criminal and regulatory counsel.
The takeaway is clear: corruption reshapes long-term commercial relationships and obligations well beyond the criminal and regulatory sphere. Success requires a grasp of both arbitration procedure and the wider commercial ecosystem that investigations disrupt.
For businesses in high-risk sectors or jurisdictions, Car Wash is both a warning and a roadmap: those who plan for corruption’s commercial fallout are best placed to protect their interests when the inevitable disputes arise.
Ioannis Alexopoulos and Duncan Grieve are partners, and Pietro Grassi a counsel, at Signature Litigation, London. Ariane Fuller, a visiting foreign lawyer at Signature Litigation, also contributed to this article
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