Ioannis Alexopoulos, Duncan Grieve, Pietro Grassi, and Ariane Fuller discuss how major corruption scandals often leave lasting commercial consequences, in The Law Society Gazette

In the first article of our series on the intersection of international arbitration and corruption investigations, 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 article, we examine how major corruption scandals generate follow-on commercial arbitration claims, using Operation 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, Operation 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 Operation 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 USD 53 million SIAC arbitration against Seatrium. As discussed further in this article, 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 materialize 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. 

The Anatomy of Post-Corruption Commercial Disputes

Operation 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 impacted 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 (8) 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 USD 700 million ICDR-AAA claim. Despite Petrobras’s corruption-based justification, Vantage ultimately prevailed, with the award paid in 2019—demonstrating that corruption allegations alone do not always justify contract termination under commercial law principles.[1]

Investment treaty claims represent perhaps the most significant category by value. Odebrecht Latinvest’s ongoing ICSID claim against Peru seeks over USD 1.2 billion for the cancellation of the South Peruvian Pipeline concession in 2017 following the uncover of Odebrecht’s corruption action throughout Latin America. Similarly, Enagás’s related USD 1.98 billion 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.[2] As will be discussed further, 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. The recent Keppel v. Seatrium case, discussed further in the next section, illustrates this trend. After Seatrium’s USD 134 million settlement with Brazilian authorities in 2024, Keppel sought USD 53 million 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.[3]

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 (CAM) of the B3 stock exchange. Shareholders argued that Petrobras’s 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 USD 2.11 billion in losses, while the California Public Employees’ Retirement System, a U.S. pension agency, reportedly claimed USD 210 million. Two other minor Petrobras investors reportedly filed claims totalling USD 34 billion.[4]

Offshore construction disputes formed another major cluster. As will be discussed further, the collapse of Brazilian shipbuilder Sete Brasil amid the Car Wash investigations triggered over USD 5 billion in claims from Asian shipyards over cancelled drillship and rig construction contracts, with most disputes settling between 2019 and 2020.[5]

The Ripple Effect: How Corruption Creates 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 in 2025—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 illustrates 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.[6]

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 USD 76 million in unpaid invoices, costs, and interest under four of the contracts. That was only the first dispute arising out of Operation 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.[7] Eventually, Sete Brasil filed for bankruptcy, prompting Sembcorp to initiate arbitration to protect its interests in 2016. That dispute was eventually settled in 2020.[8] However, the ripple effects of Operation Car Wash continued.

In February 2024, Seatrium announced an “in-principle” leniency agreement with Brazilian authorities, agreeing to pay USD 182.4 million. Under the merger terms, Sembcorp Marine had agreed to indemnify Keppel for claims arising within 24 months. When Seatrium finalized leniency agreements in 2025, questions arose about whether these settlements triggered indemnity obligations. Keppel later filed a USD 53 million SIAC claim against Seatrium.[9]

These disputes underscore how long-running corruption investigations can create uncertainty in commercial risk allocation and disputes that continue to arise almost one decade after the outbreak of the operation.

The Domino Effect: How Corruption Creates and Multiplies Disputes

Large corruption scandals involving companies with international operations also have the potential to multiply disputes across different jurisdictions. In Operation Car Wash, for instance, the exposure of the scheme led Odebrecht to enter into a plea agreement with the United States, admitting to having paid USD 778 million 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.[10] 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, emphasizing that Odebrecht “has expressly admitted to having committed unlawful acts” and made illicit payments to obtain the concession.[11]

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 corrupt practices of Odebrecht. The tribunal rejected this claim, citing a lack of evidence of corruption specifically tied to that concession.[12]

A comparable approach was taken by Colombia’s National Agency of Infrastructure (ANI) 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, Operation 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.[13]

Practical Implications for International Arbitration Users

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.

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.

Looking Forward: Implications for Future Corruption Cases

Operation 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. 

Conclusion: Preparing for Corruption’s Commercial Aftermath

Operation 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.

[1]                Vantage Deepwater Company, Vantage Deepwater Drilling, Inc. v. Petrobras America Inc., Petrobras Venezuela Investments & Services, BV, Petróleo Brasileiro S.A. (Petrobras Brazil), ICDR Case No. 01-15-0004-8503, Final Award, 29 June 2018.

[2]                Global Arbitration Review, Spanish investor wins claim against Peru over Odebrecht project, 2 January 2025. Available at: https://globalarbitrationreview.com/article/spanish-investor-wins-claim-against-peru-over-odebrecht-project, last accessed on 9 September 2025.

[3]                Singapore Law Watch, Keppel to start arbitration against Seatrium for SUSD 68.4 million related to Brazil corruption probe, 27 August 2025. Available at: https://www.singaporelawwatch.sg/Headlines/keppel-to-start-arbitration-against-seatrium-for-s684-million-related-to-brazil-corruption-probe, last accessed on 9 September 2025. See also in CNA, Keppel files for SUSD 68.4 million claim against Seatrium over Brazil corruption case, 25 August 2025. Available at: https://www.channelnewsasia.com/business/keppel-files-claim-against-seatrium-brazil-corruption-5315111, last accessed on 9 September 2025.

[4]                Global Arbitration Review, Petrobras defeats shareholder claim over Lava Jato, 17 September 2024. Available at: https://globalarbitrationreview.com/article/petrobras-defeats-shareholder-claim-over-lava-jato, last accessed on 9 September 2025.

Global Arbitration Review, Petrobras wins another dispute with investors over Lava Jato, 13 January 2025. Available at: https://globalarbitrationreview.com/article/petrobras-wins-another-dispute-investors-over-lava-jato, last accessed on 9 September 2025.

[5]                Global Arbitration Review, Singaporean state-owned entity liable in oil drilling dispute, 18 April 2024. Available at: https://globalarbitrationreview.com/article/singaporean-state-owned-entity-liable-in-oil-drilling-dispute, last accessed on 9 September 2025.

[6]                Global Arbitration Review, Singaporean state-owned entity liable in oil drilling dispute, 18 April 2024. Available at: https://globalarbitrationreview.com/article/singaporean-state-owned-entity-liable-in-oil-drilling-dispute, last accessed on 9 September 2025.

[7]                Offshore Energy, Sete Brasil reaches settlement with Singapore’s rig builders, 7 October 2019. Available at: https://www.offshore-energy.biz/sete-brasil-reaches-settlement-with-singapores-rig-builders/, last accessed on 16 September 2025.

[8]                Keppel, Keppel reaches a settlement with Sete Brasil, 7 October 2019. Available at: https://www.keppel.com/media/keppel-reaches-settlement-with-sete-brasil-6853/, last accessed on 16 September 2025.

[9]                Global Arbitration Review, Singapore rig builder faces SIAC claim after settling corruption probe. Available at: https://globalarbitrationreview.com/article/singapore-rig-builder-faces-siac-claim-after-settling-corruption-probe, last accessed on 16 September 2025.

[10]               Odebrecht Latinvest S.à.r.l. v. Republic of Peru, ICSID Case No. ARB/20/4 and Gasoducto Sur Peruano S.A. En Liquidación v. Republic of Peru, ICSID Case No. ARB/24/29.

[11]               Ministerio de Economía y Finanzas, Comunicado del SICRECI – Sistema de Coordinación del Estado en Controversias Internacionales de Inversión, 18 February 2020. Available at: https://www.italaw.com/sites/default/files/case-documents/italaw181080.pdf, last accessed on 9 September 2025.

[12]               Global Arbitration Review, Lima liable in Odebrecht toll road case, 19 May 2020. Available at: https://globalarbitrationreview.com/article/lima-liable-in-odebrecht-toll-road-case, las accessed on 9 September 2025.

[13]               Concesionaria Ruta del Sol S.A.S v. Agencia Nacional de Infraestructura – ANI, CAC-CCB Case No. 4209, Final Award, 6 August 2019. See also comments made in Global Arbitration Review, Evidence of Odebrecht’s Corruption and Third-Party Rights: Arbitration Highlights of the Ruta del Sol Award, 8 May 2020. Available at: https://legalblogs.wolterskluwer.com/arbitration-blog/evidence-of-odebrechts-corruption-and-third-party-rights-arbitration-highlights-of-the-ruta-del-sol-award/, last accessed on 9 September 2025.