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

• Jurisdiction: Singapore
• Judge: Edmund Leow JC
• Judgment Date: 20 January 2015
• Neutral Citation: [2015] SGHC 15
• Plaintiff Counsel: Cavinder Bull SC, Lim Gerui, Cai Zhenyang Daniel, Ho Ping Darryl (He Bin) (Drew & Napier LLC)
• Docket Number: Originating Summons No 24 of 2014
• Date: 20 January 2015
• Hearing Date: 03 November 2014,05 November 2014,04 November 2014
• Subject Matter: Arbitral Tribunal,Arbitration,Jurisdiction
• Year: 2015
• Citation: [2015] SGHC 15
• Defendant Counsel: Yeo Khirn Hai Alvin SC, Koh Swee Yen, Chong Wan Yee Monica (Zhang Wanyu) and Lau Hui En Charisse (WongPartnership LLP)
• Court: High Court (Singapore)
• Published date: 07 October 2016

Edmund Leow JC: Introduction

The central question in this application concerns the applicability of the bilateral investment treaty (“BIT”) between the People’s Republic of China (“PRC”) and the Lao People’s Democratic Republic (“Laos”) to the Macau Special Administrative Region of China (“Macau”). The second issue that arises concerns the interpretation of the dispute resolution article in that treaty.

The plaintiff is the Government of Laos while the defendant, Sanum Investments Limited, is a company incorporated in Macau. The defendant made certain investments in the gaming and hospitality industry in Laos. Disputes subsequently arose in relation to those investments and the defendant ultimately commenced arbitration proceedings against the plaintiff. The plaintiff disputed the jurisdiction of the arbitral tribunal (“the Tribunal”) on the basis that the BIT did not apply to Macau but the Tribunal held otherwise. The plaintiff then brought the present application to refer the issue of jurisdiction to the High Court under s 10 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the IAA”).

The facts

The pertinent facts of the present application are generally not in dispute.

Background facts and the relevant international instruments

Prior to its handover to the PRC in 1999, Macau was considered “Chinese territory”¹ over which Portugal exercised administrative power.² After the handover, the PRC “resumed sovereignty”³ over Macau and established it as a special administrative region.

The handover was not an unforeseen event. In 1987, the PRC and Portugal signed a joint declaration on the question of Macau (“the 1987 PRC-Portugal Joint Declaration”).⁴ Art 1 of the declaration provided that the PRC would resume the exercise of sovereignty over Macau with effect from 20 December 1999. Art 2 declared the PRC’s one country, two systems principle and laid down in broad terms the PRC’s basic policies regarding Macau to be pursued in accordance with that principle.

On 31 January 1993, the BIT between the PRC and Laos was signed (“the PRC-Laos BIT”).⁵ The treaty does not mention whether the provisions therein extend to Macau.

A week before the handover of Macau to the PRC, on 13 December 1999, the PRC informed the United Nations Security-General (“UNSG”) of the status of Macau in relation to the treaties deposited with the UNSG.⁶

On 20 December 1999, the PRC resumed its exercise of sovereignty over Macau.

The defendant’s investment in Laos

The facts surrounding the defendant’s investment in Laos and the alleged expropriation of its investments by the plaintiff are disputed. However, as the merits of the defendant’s expropriation claim are not relevant to the present application, I shall only briefly summarise the key events to provide the factual backdrop to this application.

On 14 July 2005, the defendant was incorporated under the laws of Macau. In 2007, the defendant began investing in the gaming and hospitality industry of Laos through a joint venture with a Laotian entity. Disputes subsequently arose between the defendant and the Laotian entity. The defendant commenced arbitral proceedings by a notice of arbitration under the PRC-Laos BIT on 14 August 2012, alleging, amongst other things, that the plaintiff deprived them of the benefits from its capital investment by the imposition of unfair and discriminatory taxes.

In its notice of arbitration, the defendant argued that it fell within the definition of “investor” under Art 1(2)(b) of the PRC-Laos BIT because it was incorporated in Macau.⁷ This gave rise to the plaintiff’s preliminary objection to the Tribunal’s jurisdiction. In particular, the plaintiff argued that the territorial scope of the PRC-Laos BIT did not include Macau and that the defendant’s claims were not arbitrable.

On 13 December 2013, the Tribunal delivered its award on jurisdiction. It held that the PRC-Laos BIT applied to Macau and that it had the jurisdiction to arbitrate the defendant’s expropriation claims under Art 8(3) of the PRC-Laos BIT.

I note in passing that on the same day that arbitral proceedings leading to the present application were commenced by the defendant, separate arbitral proceedings were commenced by the defendant’s parent company incorporated in the Netherlands pursuant to the BIT concluded between the Netherlands and Laos in 2005.⁸ It therefore appears that the defendant is pursuing two claims under two BITs in relation to the same subject matter.

The present proceedings

The plaintiff filed the present application, Originating Summons No 24 of 2014 (“OS 24/2014”), on 10 January 2014.

On 19 February 2014, the plaintiff filed Summons No 884 of 2014 (“SUM 884/2014”) praying for the admission of two diplomatic letters (“the Two Letters”) that were exhibited in Outakeo Keodouangsinh’s affidavit of 19 February 2014. The first letter dated 7 January 2014 (“the Laos Letter”) was sent from the Laotian Ministry of Foreign Affairs to the PRC Embassy in Vientiane, Laos.⁹ The letter stated Laos’ view that the PRC-Laos BIT did not extend to Macau and sought the views of the PRC Government on the same. The second letter dated 9 January 2014 (“the PRC Letter”) was the reply from the PRC Embassy in Vientiane, Laos stating its view that the PRC-Laos BIT did not apply to Macau “unless both China and Laos make separate arrangements in the future”¹⁰.

On 11 April 2014, I heard SUM 884/2014 and granted the prayers therein, subject to the defendant’s right to object to admissibility at the hearing of OS 24/2014. The defendant raised the issue of admissibility of the Two Letters and this will be addressed below at [38]–[56].

The parties’ submissions

The plaintiff’s submissions can be summarised as follows: The PRC-Laos BIT does not apply to Macau and official correspondence between the two states confirms this. The other pieces of positive evidence point towards the same conclusion. The defendant’s expropriation claims exceed the scope of the agreement to arbitrate under the PRC-Laos BIT; Art 8(3) of the PRC-Laos BIT only applies to disputes involving the quantum of compensation payable to investors.

The defendant’s submissions can be summarised as follows: The application raises only questions of pure international law which are not justiciable by the court. Singapore is not a party to the PRC-Laos BIT and the issues involving the interpretation of international treaties have nothing to do with Singapore domestic law. Even if the issues are justiciable, the standard of review is a limited one of deference and respect for the Tribunal. The Two Letters should not be admitted as further evidence for the present application because the plaintiff has not satisfied any of the Ladd v Marshall conditions. According to the moving treaty frontiers rule in international law, the PRC-Laos BIT is presumed to apply to Macau because it formed part of the territory of PRC from 20 December 1999 upon the restoration of Chinese sovereignty. None of the exceptions to this rule applies. Laos has failed to establish that the PRC-Laos BIT does not apply to Macau. The Tribunal had the jurisdiction to decide the defendant’s expropriation claims under Art 8(3) of the PRC-Laos BIT.

Issues

There are two preliminary issues to be determined in this application: Whether the present application only raises issues of international law which are non-justiciable. Whether the Two Letters should be admitted as evidence in this application.

The two substantive issues arising in this application are as follows: Whether the PRC-Laos BIT applies to Macau. Whether the defendant’s expropriation claims fall outside the scope of Art 8(3) of the PRC-Laos BIT.

Whether the present application only raises issues of international law which are non-justiciable

The defendant submits that this application only concerns questions of pure international law because it stems from an investment treaty arbitration which operates on an international plane different from typical international commercial arbitrations. It also argues that a decision on the interpretation of the PRC-Laos BIT would potentially have significant consequences for approximately 130 other BITs to which the PRC is party.

In adopting this position, the defendant acknowledges that the courts may well find justiciable a question of international law that in fact bears on the application of domestic law (see the Singapore High Court decision of Lee Hsien Loong v Review Publishing Co Ltd and another and another suit [2007] 2 SLR(R) 453 (“Review Publishing”) at [98]).

However, the defendant attempts to distinguish Review Publishing by pointing out that the court there was only concerned with the procedure to be adopted when private litigants wish to serve the process of the Singapore court on defendants residing in Hong Kong under a treaty concluded between Singapore and the PRC. The defendant further submits that Singapore is not a party to the PRC-Laos BIT and the issues here have nothing to do with Singapore domestic law.

I am unable to accept the defendant’s submission on the issue of justiciability. While it cannot be denied that Singapore is not a party to the PRC-Laos BIT, it does not necessarily follow that the issues in this application have nothing to do with a person’s rights or duties under Singapore law.

Here, the plaintiff is relying on s 10(3)(a) of the IAA, a Singapore statutory provision, to seek a review of the Tribunal’s positive ruling on jurisdiction. This issue evidently has a bearing on the application of Singapore law and on the right of the plaintiff to have the Tribunal’s ruling on jurisdiction reviewed by this court.

At the hearing before me, counsel for the plaintiff, Mr Bull, referred me to the English Court of Appeal decision of Republic of Ecuador v Occidental Exploration and Production Co [2006] 2 WLR 70 (“Occidental...