Corruption and Illegality in Asian Investment Arbitration by Nobumichi Teramura · Luke Nottage · Bruno Jetin Editors

Chapter 1 
Bribery and Other Serious Investor 
Misconduct in Asian International 
Arbitration 
Nobumichi Teramura, Luke Nottage, and Bruno Jetin 
Abstract Bribery and other serious illegal behaviour by foreign investors face wide 
condemnation in any society. Yet there remains a lack of consensus on the conse-

quences of corruption and illegality affecting 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 violating 
a host state’s law should be awarded protection of its investment, as per its contract 
with the host state and/or the applicable investment or trade agreement between 
the home state and the host state. Some suggest such protection would be unnec-

essary, 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 book explores 
Asian approaches towards the issue, setting it in the wider political economy and 
domestic law contexts. It also considers the extent to which significant states in Asia 
are or could become ‘rule makers’ rather than ‘rule takers’ regarding corruption and 
serious illegality in investor–state arbitration.

1.1 Introduction 
Almost everyone regards corruption and bribery as an international evil, and encour-

ages global society to eradicate such illegal activities. Various international initia-

tives against corruption have gained international support. Very important is the 
United Nations Convention against Corruption (UNCAC) (open for signature in 
2003), which has 189 member states and is the only universal legally binding 
anti-corruption instrument, covering the making and soliciting of bribery of local 
and foreign officials. Another influential international legal instrument is the 1997 
OECD Convention on Combating Bribery of Foreign Public Officials in International 
Business Transactions (OECD Convention). This was ‘the first and only international 
anti-corruption instrument focused on the “supply side” of the bribery transaction – 
the person or entity offering, promising or giving a bribe’, requiring member states to 
criminalise such activity, even abroad, under their own domestic laws. It was inspired 
by the Foreign Corrupt Practices Act 1977 in the US, which then pushed for an inter-

national treaty to level the playing field so that not only US businesspeople abroad 
but also those from other states would be prevented from bribing public officials in 
their dealings abroad. (The US legislation, as subsequently amended, and the Bribery 
Act 2010 in the United Kingdom, remain very important domestic laws given the 
centrality still of both countries for investment and financial intermediation.) The 
1997 OECD Convention has been adopted by 44 signatories—all 37 OECD devel-

oped economies, plus Argentina, Brazil, Bulgaria, Costa Rica, Peru, Russia and South 
Africa. Both treaties reflect the normative global consensus against corruption and 
bribery, and Asian states certainly form part of the consensus. 
Nevertheless, despite both treaties having mechanisms for peer review by member 
states, enforcement of these treaties and related national laws remains problematic. 
The treaties only set a baseline, and some key concepts are not clear or spelled out.
International investment agreements are starting to add provisions urging enactment 
and enforcement of anti-corruption laws, including in the intra-Asian context, though 
these do not add detail and remain few. 
Corruption and poor governance remain serious problems worldwide, including 
in many Asian jurisdictions. For example, the majority of East (North and South 
East) and South Asian states and jurisdictions performed poorly in Transparency 
International’s 2021 Corruption Perceptions Index, which scored and ranked 180 
countries and territories based on their perceived levels of public sector corruption 
according to responses from experts and businesspeople. Scores were little changed in 
the 2022 Index report. As demonstrated in Table 1.1, Singapore, Hong Kong, Japan, 
Bhutan and Taiwan are ranked in the top 30 least corrupt countries and territories, 
but 12 among 23 East and South Asian jurisdictions sank below the top 90.
Moreover, the World Justice Project (WJP) Rule of Law Index 2021 measured ‘the 
rule of law in 139 countries and jurisdictions by providing scores and rankings based 
on eight factors: Constraints on Government Powers, Absence of Corruption, Open 
Government, Fundamental Rights, Order and Security, Regulatory Enforcement, 
Civil Justice, and Criminal Justice’. Again, little improvement is evident from the

Corruption and Illegality in Asian Investment Arbitration by Nobumichi Teramura · Luke Nottage · Bruno Jetin Editors