Case Note

• Citation: (2018) 30 SAcLJ 384
• Author: Mahdev MOHAN LLB (National University of Singapore), JSM (Stanford Law School); Advocate and Solicitor (Singapore); Consultant, Providence Law Asia; Assistant Professor of Law, Singapore Management University. Siraj SHAIK Aziz LLB (Singapore Management University); Advocate and Solicitor (Singapore); CLAS Fellow, The Law Society of Singapore.
• Date: 01 December 2018
• Published date: 01 December 2018

CONSTRUING A TREATY AGAINST STATE PARTIES' EXPRESSED INTENTIONS?

Sanum Investments Ltd v Government of the Lao People's Democratic Republic

[2016] 5 SLR 536

The Singapore Court of Appeal's decision in Sanum Investments Ltd v Government of the Lao People's Democratic Republic was a landmark one in several respects. A key aspect of this decision though may appear controversial at first blush – that is, the apex court placed less weight on the express views of state parties, even though Singapore itself was not a party to the relevant bilateral investment treaty (“BIT”). While doing so was admittedly “counter-intuitive”, the Court of Appeal did not set out to construe the BIT against the intentions of the contracting states. Rather, much turned on the critical date and nature of evidence adduced by, Laos to indicate the states' purported intentions. Put another way, when joint intentions were first expressed was significant, as were the types of evidence relied upon to evince subsequent joint intentions. This note will suggest that the Court of Appeal was animated by a desire to clarify important points of public international law and curial procedure; points which are instructive to future investor – state cases arising from the International Arbitration Act.

I. Introduction

1 The Court of Appeal's seminal decision in Sanum Investments Ltd v Government of the Lao People's Democratic Republic1 (“Sanum Investments”) was the first appeal to, and curial review by, the apex court of an investor–state arbitral tribunal's ruling on jurisdiction. The appeal arose under s 10 of the International Arbitration Act2 (“IAA”), which imports the amended version of Art 16 of the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration3 (“UNCITRAL Model Law”). The Court of Appeal interpreted and applied an international investment treaty to which Singapore was not a party, namely, the Peoples' Republic of China–Laos BIT (“PRC–Laos BIT”).4

2 At first instance, the Singapore High Court held that the award on jurisdiction be set aside, finding that the PRC–Laos BIT, and its investment protections, did not extend to the Macau Special Administrative Region where the investor was domiciled. That court preferred a narrow construction of the investor–state dispute settlement (“ISDS”) provision in the PRC–Laos BIT. However, the full bench of the Court of Appeal overturned the lower court's decision and affirmed the arbitral tribunal's ruling that the tribunal had both territorial and subject-matter jurisdiction to hear the Macanese investor's claims. Some have argued that as investment arbitration cases typically involve complex questions of public international law on which courts may not have particular expertise, they should show restraint and even adopt a deferential standard of review.5 Rejecting this view, however, the Court of Appeal found that precedent required a de novo review of such awards. After deciding that the interpretation and application of the PRC–Laos BIT were justiciable by a Singapore court in this case, the Court of Appeal also added that since Singapore was the seat of the

arbitration, the Singapore courts were “not only competent to consider these issues, but … obliged to do so”. 6 It then proceeded to apply relevant public international law principles and canons of treaty interpretation, ultimately adopting a broad construction of the ISDS clause in the PRC–Laos BIT.

3 Consistent with its reception of public international law and in accordance with the best practices of international courts and tribunals, the Court of Appeal admitted opinions from international law experts. The Court of Appeal appointed two distinguished amici curiae, Mr Christopher Thomas QC and Prof Locknie Hsu, to proffer opinions on public international law. Party-appointed experts, namely, Prof Simon Chesterman, for Laos, and Sir Daniel Bethlehem QC and Prof Wenhua Shan, for Sanum, had given evidence to the court below.7

4 Notably, the Court of Appeal had conceded that its approach to treaty interpretation might be viewed as “counter-intuitive”.8 After all, the state parties to the BIT, Laos and PRC, had adduced two sets of Notes Verbale9 in 201410 and 201511 which expressly stated that the PRC–Laos BIT does not extend to Macau. Indeed, Lawrence Boo and Earl J Rivera-Dolera have added that the Court of Appeal's conclusion has generated “wide differences of opinion”:12

While some practitioners welcome the decision as being correct to say that by selecting Singapore as seat, the IAA as well as the supervisory jurisdiction of the Singapore court is engaged and will bolster confidence in Singapore as a serious and viable seat for investor–state arbitrations involving Southeast Asian states, others accepted the court's decision more cautiously as being explicable on the particular facts of

the case in that it involved a BIT which, by its nature, creates rights for third parties to the treaty. [emphasis added]

5 According to one high-level PRC official, the decision in Sanum Investments was “incorrect”, as the PRC alone “decides whether or not the international treaties to which [she] is or becomes a party apply to the Special Administrative Regions (‘SARs’) based on the circumstances and their needs after seeking the views of the governments of the SARs”.13

6 Noting that “Chinese scholars, in the main, could not accept that a Singapore court could ignore and interfere with the PRC and Laos'[s] common position on the extent of their treaty coverage”, Boo and Rivera-Dolera went further to suggest that the Court of Appeal's “readiness to displace state parties' joint expressed intentions, could well work against Singapore's intention to poise itself as a place of choice for investor–state arbitration” [emphasis added].14 With respect, the present authors do not agree with this assessment, in part because the date at which joint intentions are first expressed, and the types of evidence evincing subsequent joint intentions, matter. Indeed, belated jointly expressed intentions of contracting states may do little to aid a treaty's proper interpretation. The Court of Appeal's approach accords with the view that interpretation of treaties which establish rights for other states or actors may be less amenable to “authentic” post-hoc interpretation by treaty parties where a dispute is ongoing.15

7 In the course of setting out the facts and analysing the holdings of this seminal case in greater detail, this note will examine two admittedly “counter-intuitive” aspects of the Court of Appeal's decision, that is, (a) that the territorial scope of a BIT was interpreted contrary to state parties' expressions of intent, and (b) that a clause can be broadly interpreted beyond its plain and ordinary meaning. In the present authors' view, the Court of Appeal applied public international law norms when construing the contracting states' silence or inaction, as well as when construing their possibly “self-serving”16 expressed intentions in relation to territorial and subject-matter jurisdiction. We

are of the opinion that the Court of Appeal did not set out to construe a BIT against the intention of the contracting states, nor did it defer to the views of the arbitral tribunal. On the contrary, from the outset, the Court of Appeal seems to have been animated by a desire to consider the proper scope of the PRC–Laos BIT in light of all the evidence before it, examining “the question of admissibility and weight within the framework of any other applicable principles of international law, such as the critical date doctrine”.17

8 As the present authors will analyse further in this note, the Court of Appeal held that post-critical date evidence in the form of Note Verbales (“NVs”) adduced by Laos could be admitted where pre-critical date evidence was inconclusive, although “special attention” should then be given to the former's weight.18 The court added that “greater weight” may be placed on post-critical date evidence if such evidence demonstrates “evidentiary continuity and consistency with pre-critical date evidence”,19 and ultimately held that the NVs were not sufficient to displace the presumption that the PRC–Laos BIT extends to Macau. Moreover, the Court of Appeal disagreed with the emphasis the High Court had placed on a literal reading of the “first-generation” BIT because it involved two communist countries, and shed light on the latitude with which an ISDS clause in such a BIT ought to be interpreted, taking account of all the circumstances of the case.

9 As a matter of arbitral procedure, the Court of Appeal further held that regardless of the fact that investment treaty arbitration involves a foreign investor as “third party to a treaty”, the standard of review in an appeal against a decision of an investment arbitration tribunal is a de novo one, just as it is apropos a commercial arbitration award. As Kelvin Elbert noted, this uniform standard is “consistent” with the fact that both international commercial arbitrations and non-ICSID20 investment arbitrations fall within the purview of the IAA as the lex arbitri.21 Even though a curial court might consider what the tribunal has said because this might well be persuasive, it is not bound to accept or take into account the arbitral tribunal's findings on the matter as it is

the “cogency and quality of their reasoning rather than their standing and eminence that will factor in the Judge's evaluation of the matter”.22

10 This note sets out the material facts of the case and the award of the arbitral tribunal (Part II);23 the decision of the High Court (Part III);24 the decision of the Court of Appeal (Part IV);25 and the present authors' analysis of the implications of the Court of Appeal's decision, and its contribution to the corpus of investment law jurisprudence (Part V).26 The authors' analysis pertains to whether IAA-related investment...