Nobumichi Teramura, Luke Nottage andBruno Jetin (eds), Corruption andIllegality in Asian Investment Arbitration(Springer 2024)

CRN33 Book Introduction Session, 7 July 2024

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Published on
20 April 2024!

Open Access,ie, so you
have freeaccess!
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Investment arbitration?
• Investment arbitration (or investor-state dispute settlement (ISDS)
arbitration) is a procedure for resolving disputes between foreign
investors and host states. (Eg, A Dutch casino company v thegovernment of Laos)• These days, an increasing number of arbitration cases have witnessed“a clash between the states’ commitments towards their citizens,which include the duty to protect the environment, their health andwellbeing, and the commitment towards foreign investors to protect
their investments” – Flavia Marisi, Environmental Interests in
Investment Arbitration: Challenges and Directions (Wolters Kluwer,2020). → Investment arbitration is a key mechanism of balancing theinterests of foreign investors and host states, though it might notalways be the case as some suggest it is pro-investors.
3https://www.acerislaw.com/wp-content/uploads/2022/08/Climate-law-ininvestment-arbitration.png

https://corporateeurope.org/sites/default/files/styles/image_l/public/ch
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Aims of the book
Bribery and other serious illegal behaviour by foreign investors are widelycondemned in any society. The problem is that people seem not to havereached a consensus on the consequences of corruption and illegality ininternational investment and especially in investment arbitration – atransnational procedure to resolve disputes between a foreign investor and ahost state. A core issue is whether a foreign investor who violated a hoststate's law would be awarded protection of its investment, as per its
contract with the host state and/or the applicable trade agreement
between the home state and the host state. … This research explores 'Asian'approaches toward the issue, considering the extent to which significant
states in Asia are likely to become 'rule makers' rather than 'rule takers'
regarding corruption and serious illegality in investor-state arbitration.
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Corruption and Illegality in Asian Investment
Arbitration?
• Asian countries seem to be striving to curb corruption and other similarly
serious illegal misconduct.

➢23 Asian states are members of the Anti-Corruption Initiative for Asia and the Pacific(ACIAP) established by OECD and ADB.
➢All Asian countries (excluding North Korea) have adopted the United Nations
Convention against Corruption addressing the supply and demand sides.
➢Almost all Asian countries have domestic legislation prohibiting corruption andbribery.

• BUT corruption and bribery remain real in Asia.

➢Multilateral treaties on anti-corruption are often quite general, not setting forexample any minimum criminal penalties for bribery.
➢Transparency International’s Corruption Perceptions Index (TICPI) and the World
Justice Project’s Rule of Law Index (WJPRLI) indicate that corruption and poor
governance are still prevalent across Asia.
➢Especially, Asia still seems to have difficulty controlling FDI-related corruption
through international investment agreements (IIAs).
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Corruption and Illegality in Asian Investment
Arbitration? [cont’d]• Corruption issues have been cropping up increasingly, especially fromaround 2010, in ISDS arbitrations initiated under IIAs.
• Occasionally, a foreign investor claims compensation because host state
officials solicited a bribe in contravention of the ‘fair and equitable
treatment’ commitment under the IIA.
• BUT, more often, the host state raises as a defence against an ISDS claimthat the allegation that the foreign investor made a bribe when making theinvestment, so it is not covered under the IIA.
➢If the arbitral tribunal agrees, it may decline jurisdiction, so the investor loses alltreaty rights under international investment law, especially where the IIA specifies
that it only covers investments made ‘in accordance with host state law’.
➢Such outcomes may disincentivise foreign investors to provide any form of bribery,
but may lead to the incentive of the host state deliberately seeking a bribe, neverenforcing sanctions against the official, but keeping evidence of the bribe as a ‘getout of jail free card’?

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Paucity of Research on “Asian” Perspectives

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Corruption and Illegality in Asian Investment
Arbitration: Project Details• UBD Grant Book Project since 2021 by Professor Luke Nottage (USYD),
Professor Bruno Jetin (UBD) and Dr Nobumichi Teramura(UBD/USYD).
• It considers 'Asian' approaches toward the corruption and illegality in
Asian Investment Arbitration, considering the extent to whichsignificant states in Asia are likely to become 'rule makers' rather than'rule takers' regarding corruption and serious illegality in investorstate arbitration.
• We have organised one webinar (mid-2022), one international
conference at UBD(29 May 2023) and one book launch symposium at
the Attorney General’s Chambers of Brunei (28 May 2024). [See next.]
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Research Questions(1) What are the real impacts of corruption, potentially of very different
types, particularly on FDI and local economies in Asian jurisdictions.
(2) Whether Asia in general has been and will remain ‘ambivalent’ about
international investment law relevant to corruption and illegality.
(3) Whether and how Asian countries have dealt with corruption andillegality in relation to foreign investment projects and disputes.
(4) Whether Asian countries have been or are more likely to become ‘rulemakers’ (creating rules on their own initiative) rather than ‘rule takers’(following primarily Western normative templates) in international
investment law, specifically regarding corruption and illegality.
→We have discussed these broad themes from economic and legal
perspectives, focusing on developments in China and Hong Kong, India,Japan, Lao Republic, the Philippines, the Republic of Korea and Thailand.
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The Contributors

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Our findings• There are some ‘Asian approaches’ emerging in relation to corruption
and bribery in investment arbitrations.
• BUT, this is in the narrow sense that individual Asian countries havedealt with the issues of corruption and other serious misconduct insome treaties and disputes. → Those experiences are still far fromcreating a uniform Asian approach.
• So, what should Asia do?

https://www.impactio.com/blog/optimizing-an-approach-to-publishing-research-findings

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A Roadmap for an Asian Approach toCorruption and Illegality in ISDS
(1) Asia is encouraged to establish a forum where all Asian states andjurisdictions may discuss corruption and illegality involved in FDI inAsia. (Based on the Anti-Corruption Initiative for Asia and thePacific?)(2) Asian states and jurisdictions are recommended to develop more
unified rules to deal with corruption and other serious misconduct
in Asian investment arbitration. (Based on UNCAC?)(3) Asia should consider establishing an independent institution or
permanent court to better deal with allegations of corruption andother serious misconduct in relation to Asian investment disputes.
(Like a permanent investment court proposed by the EU?)
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Thank you!
https://link.springer.com/book/10.100
7/978-981-99-9303-1

nobumichi.teramura@ubd.edu.bn
https://ias.ubd.edu.bn/nobumichiteramura/