Collateral consequences: corruption's ripple effect on arbitration

Major corruption scandals often leave lasting commercial consequences. Years after Brazil’s Operation Car Wash peaked, related disputes still arise. For instance, the ongoing SIAC arbitration between Seatrium and Keppel, triggered by a late-signed leniency agreement with Brazilian authorities, involving $53 million, illustrates how corruption can create long-term liabilities that keep arbitrators engaged well beyond the original scandal.

The Anatomy of Post-Corruption Commercial Disputes

Operation Car Wash's impact on international arbitration can be categorised into several distinct waves of claims.

Contract termination disputes usually form the first wave. As corruption allegations surfaced, counterparties quickly ended major contracts with implicated firms, affecting projects across multiple sectors. A notable example is Vantage Deepwater v Petrobras: Vantage leased an oil rig to Petrobras in 2012 for eight years, but Petrobras terminated the contract in 2015 right after the Car Wash scandal. Vantage filed a $700 million ICDR-AAA claim and ultimately prevailed. Petrobras tried to have the claim dismissed based on the allegation that the contract was procured through corruption. The argument did not stand, showing that corruption allegations alone do not always justify termination under commercial law.[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]

Indemnification disputes have emerged as another category, often surfacing years after initial investigations conclude. The recent Keppel v Seatrium case illustrates this trend: following Seatrium’s $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]

Losses were covered by their agreements. Seatrium argued the indemnity expired before any binding settlement, underscoring the temporal complexities of corruption cases that unfold over many years.[4]

Shareholder claims have also arisen, as the share value of implicated entities fell precipitously due to commercial and reputational damage. Petrobras faced several claims before the Market Arbitration Chamber (CAM) of the B3 stock exchange. Petros Fundação reportedly sought $2.11 billion in losses, while the California Public Employees' Retirement System claimed $210 million. Two other minor investors filed claims totalling $34 billion.[5]

The Ripple Effect: How Corruption Creates Commercial Uncertainty

Car Wash illustrates how corruption investigations create cascading commercial uncertainty far beyond the initially implicated parties. Initial investigations began in 2014, yet related arbitration claims continue to emerge more than a decade later. The several disputes arising between Singaporean companies illustrates this complexity.

The chain started when MHWirth signed seven contracts to supply drilling equipment to Jurong, which was building drill ships for Sete Brasil—a company created by Petrobras. Jurong, owned by Singapore’s state-run Sembcorp Marine, later merged with Keppel in 2023 to form Seatrium.[6]

After Car Wash broke, Jurong suspended and terminated its contracts with MHWirth, prompting MHWirth to initiate arbitration in 2021 seeking $76 million in unpaid invoices and costs. Meanwhile, Sete Brasil faced severe financial distress, losing access to bank loans and eventually filing for bankruptcy,[7] which led Sembcorp to launch arbitration to protect its interests in 2016. That dispute was eventually settled in 2020.[8] However, the ripple effects of Operation Car Wash continued.

The ripple effects continued. In 2024, Seatrium announced an “in-principle” leniency agreement with Brazilian authorities for $182.4 million. Under merger terms, Sembcorp 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 corruption investigations can disrupt commercial risk allocation and generate claims for years, even a decade after the original scandal.

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 must secure business communications, financial records, and decision-making documentation early. These materials may become relevant to both criminal proceedings and commercial disputes that emerge years later.

Contractual risk allocation requires careful consideration of corruption-related scenarios. Standard contract clauses often prove insufficient for corruption scenarios. Parties should include specific provisions addressing government corruption investigations, cooperation requirements, and settlement cost allocation rather than relying on general force majeure or termination clauses.

Interim relief strategies become critical in corruption-related disputes, given their lengthy timelines. Parties may need to secure assets or preserve business relationships while criminal and regulatory investigations unfold. Tribunals’ willingness to grant such relief often hinges on the strength of corruption allegations and their impact on commercial ties.

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 key. Corruption allegations alone are insufficient to void agreements. Parties must present evidence and demonstrate consistency between their claims and their post-discovery conduct—actions taken after alleged corruption came to light carry significant weight.

Conclusion: Preparing for Corruption's Commercial Aftermath

Operation Car Wash shows that major corruption scandals do not end with criminal convictions. They trigger years of complex commercial and arbitration disputes. The takeaway for practitioners and businesses: corruption reshapes contracts and risks long after investigations close. Those who anticipate the fallout by preserving evidence, allocating risks wisely, and coordinating legal strategies will be best positioned to navigate the turbulence.

Ioannis Alexopoulos, Duncan Grieve, Pietro Grassi, and Ariane Fuller, Signature Litigation[10]

[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 S$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 S$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]  Singapore Law Watch, Keppel to start arbitration against Seatrium for S$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 S$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.

[5]  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.

[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]  Ioannis Alexopoulos is a partner at Signature Litigation's London office specialising in international arbitration and commercial litigation; Duncan Grieve is a partner at Signature Litigation's London office specialising in investigations and white-collar crime; Pietro Grassi is a counsel at Signature Litigation's London office specialising in international arbitration and public international law; Ariane Fuller is a visiting foreign lawyer at Signature Litigation's London office specialising in disputes with the public administration, international arbitration and public international law.