Corruption and Illegality in Asian Investment Arbitration

Written by: Asst Prof Nobumichi Teramura (UBD-IAS, CAPLUS affiliate) and Luke Nottage

[Updates: I have co-authored draft introductory, concluding, Japan and Thailand chapters for this book agreed with Springer in their Asia in Transition series. Some or all were presented at a public conference held in Brunei on 29 May 2023 (booklet here) supported by ANJeL and CAPLUS, and at events in UFrankfurt and Heidelberg MPI in early July 2023. Earlier versions were presented at an invitation-only webinar for book contributors hosted by UBrunei on 15 June 2022, as well as at Griffith University’s Law Futures Centre on 21 July, NUS ISEAS on 22 September, and at Monash Law (Melbourne CBD) on 9 November 1-2pm.]

The Institute of Asian Studies at the Universiti Brunei Darussalam (UBD-IAS) has recently funded a conference volume project on this important topic, involving several professors from the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS).

The original proposal overview is further below; the final set of authors/chapters submitted to Springer in mid-2023 is as follows:

Foreword — Amokura Kawharu (President, New Zealand Law Commission)[1]

Introduction

1. Bribery and Other Serious Investor Misconduct in Asian International Arbitration — Nobumichi Teramura (Asst Professor, Institute of Asian Studies (IAS) at Universiti Brunei Darussalam (UBD)),[2] Luke Nottage (Professor, Sydney Law School)[3] and Bruno Jetin (Associate Professor and Director, IAS at UBD)[4]

Part 1: The Economic Context of Corruption and Investment

• Does Corruption Hinder FDI and Growth in Asia and Beyond? The Grabbing Versus Helping Hand Revisited — Ahmed Masood Khalid (Professor and Former Dean, School of Business and Economics at UBD)[5]
• The Effect of Corruption on Foreign Direct Investment at the Regional Level: Positive or Negative Relationship? — Bruno Jetin, Jamel Saadaoui (Senior Lecturer, University of Strasbourg)[6] and Haingo Ratiarison (University of Strasbourg)[7]

Part 2: General Legal Issues from the Interface of Corruption, Illegality and Investment Arbitration

• Anti-Corruption Laws and Investment Treaty Arbitration: An Asian Perspective — Anselmo Reyes (International Judge, Singapore International Commercial Court)[8] and Till Haechler (Bar Exam Candidate, Supreme Court Canton of Zurich)[9]
• Multi-Tiered International Anti-Corruption Cooperation in Asia: Treaties Review and Prospects — Dr Yueming Yan (Asst Professor, Faculty of Law at the Chinese University of Hong Kong)[10] and Tianyu Liu (LLM Candidate, Leiden University)[11]
• Corruption in International Investment Arbitration — Michael Hwang (Senior Counsel and Director, Michael Hwang Chambers LLC)[12] and Aloysius Chang (Senior Associate, Watson Farley & Williams)[13]
• Rebalancing Asymmetries between Host States and Investors in Asian ISDS: An Exception for Systemic Corruption — Martin Jarrett (Senior Research Fellow, Max Planck Institute for Comparative Public Law and International Law)[14]

Part 3: Country Reports

• Foreign Investment, Investment Treaties and Corruption in China and Hong Kong — Vivienne Bath (Professor, Sydney Law School)[15] and Tianqi Gu (PhD candidate, Sydney Law School)[16]
• Corruption and Investment Treaty Arbitration in India — Prabhash Ranjan (Professor and Vice Dean, Jindal Global Law School)[17]
• Corruption and Illegality in Asian Investment Disputes: Indonesia — Simon Butt (Professor, Sydney Law School),[18] Antony Crockett (Partner, Herbert Smith Freehills)[19] and Tim Lindsey (Professor, Melbourne Law School)[20]
• Foreign Investment, Treaties, Arbitration and Corruption: Comparing Japan — Luke Nottage and Nobumichi Teramura
• Corruption and Investment Arbitration in the Lao People’s Democratic Republic: Corruptio Incognito — Romesh Weeramantry (Counsel, Clifford Chance)[21] and Uma Sharma (Litigation Associate at TSMP Law Corporation)[22]
• Corruption and Illegality in Asian Investment Arbitration: The Philippines — Thomas Elliot A Mondez (Court Attorney, Court of Appeals in the Philippines)[23] and Jocelyn Cruz (Chair, Commercial Law Department at De La Salle University)[24]
• Investment Arbitration, Corruption and Illegality: South Korea — Joongi Kim (Professor, Yonsei Law School)[25]
• Foreign Investment, Corruption, Investment Treaties and Arbitration in Thailand — Sirilaksana Khoman (Professor of Economics, Thammasat University; Member, National Anti-Corruption Commission)[26] Luke Nottage, Sakda Thanitcul (Professor, Chulalongkorn Law School),[27]

Conclusions

1. Towards a More Harmonised Asian Approach to Corruption and Illegality in Investment Arbitration— Nobumichi Teramura, Luke Nottage and Bruno Jetin

---

[1] https://www.lawcom.govt.nz/commissioner-profile/amokura-kawharu

[2] https://ias.ubd.edu.bn/nobumichi-teramura/

[3] https://www.sydney.edu.au/law/about/our-people/academic-staff/luke-nottage.html

[4] https://ias.ubd.edu.bn/bruno-jetin/

[5] https://ubd.edu.bn/menu/staff-directory/2017/04/20/dr.-ahmed-masood-khalid/

[6] https://www.jamelsaadaoui.com/

[7] https://www.linkedin.com/in/haingo-ratiarison-20a2b21bb/?originalSubdomain=fr

[8] https://www.sicc.gov.sg/about-the-sicc/judges

[9] https://www.linkedin.com/in/till-haechler-b09b051b6/?locale=es_ES

[10] https://www.law.cuhk.edu.hk/app/people/prof-yueming-yan/

[11] https://www.linkedin.com/in/tianyuliu521/?originalSubdomain=cn

[12] https://www.mhwang.com/

[13] https://www.wfw.com/people/aloysius-chang/

[14] https://www.mpil.de/en/pub/institute/personnel/academic-staff/mjarrett.cfm

[15] https://www.sydney.edu.au/law/about/our-people/academic-staff/vivienne-bath.html

[16] https://www.linkedin.com/in/tianqi-gu-115921228/?originalSubdomain=au

[17] https://jgu.edu.in/jgls/prof-dr-prabhash-ranjan/

[18] https://www.sydney.edu.au/law/about/our-people/academic-staff/simon-butt.html

[19] https://www.herbertsmithfreehills.com/our-people/antony-crockett

[20] https://law.unimelb.edu.au/about/staff/tim-lindsey

[21] https://www.cliffordchance.com/people_and_places/people/lawyers/sg/romesh_weeramantry.html

[22] https://www.linkedin.com/in/umajsharma/?originalSubdomain=sg

[23] https://www.linkedin.com/in/elliot-mondez-518271128/?originalSubdomain=ph

[24] https://www.linkedin.com/in/jocelyn-cruz-4b119719a/?trk=public_profile_browsemap_profile-result-card_result-card_full-click&originalSubdomain=ph

[25] https://uic.yonsei.ac.kr/main/academic.asp?mid=m03_01_02&act=view&uid=849&keyword=

[26] https://www.americanconference.com/speakers/dr-sirilaksana-khoman/

[27] https://www.law.chula.ac.th/en/profile/5496/

* * *

Bribery and other serious illegal behaviour by foreign investors are widely condemned in any society. The problem is that people seem not to have reached a consensus on the consequences of corruption and illegality in international investment and especially in investment arbitration – a transnational procedure to resolve disputes between a foreign investor and a host state. A core issue is whether a foreign investor who violated a host state’s law would be awarded protection of its investment, as per its contract with the host state and/or the applicable trade or investment agreement between the home state and the host state. Some suggest such protection would be unnecessary, as the investor committed a crime in the host state, while others attempt to establish an equilibrium between the investor and the host state. Some others claim to protect investment, invoking the sanctity of promises made. 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. To this end, we will employ a comparative method, inviting scholars from the Asia-Pacific region, including UBD-IAS and other institutions.

The Principal Investigator is Dr Nobumichi Teramura, the Co-Principal Investigator is Assoc Prof Bruno Jetin (UBD-IAS Director), Luke Nottage (appointed also now a Visiting Professor at UBD) is another contributor and the others are listed below. Many have previously worked together on related Asia-focused projects, notably their co-edited volume with Shahla Ali on New Frontiers in Asia-Pacific International Arbitration and Dispute Resolution (Wolters Kluwer 2021) and Luke Nottage’s book co-edited with Julien Chaisse on Investment Treaties and International Arbitration Across Asia (Brill, 2018; expanding on country reports from a 2017 JWIT special issue on ASEAN with Prof Sakda Thanitcul as joint special editor and supported by the Sydney Southeast Asia Centre).

This new project’s primary purpose is to examine Asian approaches and case studies regarding corruption and serious illegality in international investment arbitration. It focuses on corruption-related disputes between private parties and public sector entities. It also covers other serious illegal conduct by foreign investors  related to or broadly equivalent to corruption and bribery, including serious non-compliance with key provisions of national laws regulating the admission or operation of foreign investment.

Regional free trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership Agreement (RCEP Agreement) mandate member states to combat corruption and other illegal conduct. However, they remain silent on how specifically to deal with public-private disputes arising from corruption and illegality. Trade and investment law experts have become well aware of the problem, and some suggest treaty reforms even at a global level. Against this backdrop, the research aims to accumulate Asian perspectives, for Asia to build the foundation of leading the next rounds of treaty reforms. In particular, it intends to address the following questions:

1. Whether Asia has been and will remain ‘ambivalent’ about international law prohibiting corruption and illegality. How have Asian countries been combatting corruption and other illegal activities particularly as to foreign investment? What laws and rules exist, and how do they operate in respective jurisdictions? What are the recent developments?
2. Whether and how Asian countries have dealt with corruption and illegality in relation to foreign investment projects. If they have faced any international investment cases, what are the outcomes and consequences?
3. Whether Asian countries have been or are more likely to become ‘rule makers’ rather than ‘rule takers’ in international investment law (as explored generally in the Brill and Wolter Kluwers books mentioned above) regarding corruption and illegality.

Those questions will support us to achieve the central objective: to examine Asian approaches toward  corruption and illegality in international investment arbitration. As we enter an age in which Brunei is increasing its engagement with foreign companies, it is probable that there will be disputes that need to be arbitrated, and corruption and illegality in investment arbitration are issues which other countries in the region are already facing. This research project will help the Bruneian authorities and the academic community, and counterparts in other Asia-Pacific jurisdictions as well as further afield especially when engaging with this region, learn more about such topical issues and potential counter-measures.

More specific expected outcomes include:

1. One international online research workshop in mid 2022 and one international symposium in early 2023 (depending on pandemic travel restrictions), both in Brunei, for the contributors to present their papers and exchange opinions.
2. An edited volume in the IAS-Springer Book Series on “Asia in Transition” based on the research papers by the contributors. (A further grant will be applied for to assist with related copy-editing etc, and CAPLUS interns and other Sydney Law School resources will assist particularly with the chapters authored by CAPLUS members.)
3. A journal article co-authored by Professor Nottage, A/Professor Jetin and Dr Teramura for a Q1 Scopus journal.

Contributors based at UBD:

Name and FICs	Description of contribution
Dr Nobumichi TERAMURA (UBD-IAS)	Principal Investigator – general editor and author of chapters for the edited volume in the IAS-UBD “Asia in Transition” series
Associate Professor Bruno Jetin (UBD-IAS)	Co-Principal Investigator – general editor and author of chapters for the edited volume in the IAS-UBD “Asia in Transition” series
Yang Amat Mulia Pengiran Indera Negara Pengiran Anak Haji Puteh ibni Al-Marhum Pengiran Pemancha Pengiran Anak Haji Mohamed Alam	General contributor (re corruption, investment, arbitration and the Asia-Pacific) and author of the forewords of the edited volume
Professor Ahmed Masood Khalid (UBD-SBE)	Contributor (re business and corruption)
Dr Masairol Bin Haji Masri (UBD-SBE)	Contributor (re business and corruption)
Dr Hammeed Abayomi Al-Ameen (UBD-SBE)	Contributor (re business law and corruption)

Other Contributors:

Professor Luke Nottage	University of Sydney, Australia (CAPLUS Associate Director); UBD (visiting professor)	Co-organiser – general editor and author of chapters for the edited volume in the IAS-UBD “Asia in Transition” series
Dr Colin Ong QC	Arbitration Association of Brunei Darussalam; and Colin Ong Legal Service	Contributor (re standard of proof for corruption allegations)
Professor Sakda Thanitcul	Faculty of Law, Chulalongkorn University, Thailand	Contributor (re Thailand)
Professor Sirilaksana Khoman	Faculty of Economics, Chulalongkorn University; National Anti-Corruption Commission (NACC), Thailand	Contributor (re Thailand)
Mr Antony Crockett	Herbert Smith Freehills, Hong Kong	Contributor (re Indonesia)
Professor Simon Butt	University of Sydney (CAPLUS Co-Director)	Contributor (re Indonesia)
Professor Romesh Weeramantry	National University of Singapore; Clifford Chance	Contributor (re Lao Republic)
Justice Anselmo Reyes	Singapore International Commercial Court	Contributor (re corruption regulations for economic warfare)
Professor Vivienne Bath	University of Sydney (former CAPLUS Director)	Contributor (re China and Hong Kong)
Professor Joongi Kim	Yonsei Law School, South Korea	Contributor (re South Korea)
Professor Dai Tamada	Kyoto University, Japan	Contributor (re Japan)
Dr Prabhash Ranjan	South Asian University, India	Contributor (re India)
Dr Martin Jarrett	Max Planck Institute, Heidelberg, Germany	Contributor (re general investment law and investor misconduct)
Professor Tim Lindsey	University of Melbourne, Australia	Contributor (re Indonesia)
Dr Jocelyn Cruz	De La Salle University, the Philippines	Contributor (re the Philippines)