Lao Holdings NV and another v Government of the Lao People's Democratic Republic

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 24 November 2022
• Neutral Citation: [2022] SGCA(I) 9
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 55 of 2021
• Published date: 30 November 2022
• Year: 2022
• Hearing Date: 12 April 2022
• Plaintiff Counsel: Lin Weiqi Wendy, Chong Wan Yee Monica, Ling Jia Yu, Ho Yi Jie and Teo Guo Zheng Titus (WongPartnership LLP)
• Defendant Counsel: Cavinder Bull SC, Lim Gerui, Tan Yuan Kheng, Lim Qiu Yi Regina and Tan Sih Si (Drew & Napier LLC)
• Subject Matter: Arbitration,Award,Recourse against award,Setting aside,Conduct of arbitration,Evidence,Arbitral tribunal,Powers
• Citation: [2022] SGCA(I) 9

Robert French IJ (delivering the judgment of the court): Introduction

This appeal concerns two arbitral awards (the “Awards”) made in investor-State arbitrations between the appellants (“Appellants”) as claimants in the arbitrations and the respondent (“Respondent”) as defendant in the arbitrations. The arbitrations, seated in Singapore, were conducted by two three-person arbitral tribunals (collectively, the “Arbitral Tribunals”) with common membership, save for the presiding arbitrators. The Appellants alleged violations by the Respondent of two bilateral investment treaties. One of the arbitrations was conducted under the auspices of the International Centre for Settlement of Investment Disputes (“ICSID”). It is referred to in these proceedings as the “ICSID Arbitration” and the arbitral tribunal therein is referred to as the “ICSID Tribunal”. The other was an ad hoc arbitration conducted under the auspices of the Permanent Court of Arbitration (“PCA”). It is referred to as the “PCA Arbitration” and the arbitral tribunal therein is referred to as the “PCA Tribunal”. The arbitrations were distinct proceedings and were not consolidated. They were however, largely conducted in parallel and were the subject of joint hearings attended by the two party-appointed members and the two presiding arbitrators.

Before their completion, the arbitrations were suspended pursuant to a Deed of Settlement (the “Settlement Deed”) entered into between the Appellants and the Respondent on 15 June 2014. Under the Settlement Deed the arbitrations could be reinstated in the event of a “material breach” by the Respondent. Section 34 of the Deed provided that, if that occurred, neither the Appellants nor the Respondent could add new claims or evidence to the arbitrations nor seek any additional relief not already sought. In the event, material breach was alleged and the arbitrations were revived. The Respondent was permitted by the Arbitral Tribunals to adduce new evidence, in the revived arbitrations, said to go to illegal activities undertaken on the part of the Appellants. The Arbitral Tribunals, by their Awards, dismissed the Appellants’ claims with costs. The Singapore International Commercial Court (“SICC”) dismissed the Appellants’ applications to set aside the Awards. The Appellants now appeal to this court. The appeal (“Appeal”) involves the application of Arts 34(2)(a)(ii) and 34(2)(a)(iv) of the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”), which is given the force of law in Singapore by s 3 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”). For the reasons that follow (“Reasons”) the Appeal is dismissed.

Overview of factual background and procedural history

The Appellants are two companies Lao Holdings NV (“LH”), incorporated in the Netherlands and its wholly-owned subsidiary Sanum Investments Limited (“Sanum”), incorporated in Macau in the People’s Republic of China. They were involved in the development of hotels, casinos and clubs in the Lao People’s Democratic Republic. The Respondent is the Government of the Lao People’s Democratic Republic (“GOL”).

The Appellants entered into arrangements with a Laotian conglomerate, the ST Group Co Ltd (“ST”) and related entities and individuals from 2007 to 2013. In partnership with ST they invested in projects including the Savan Vegas Hotel and Casino Complex (or “Savan Vegas”), which was built and successfully operated, the Paksong Vegas Hotel and Casino Complex (“Paksong Vegas”) which was never developed, and multiple slot clubs. The slot clubs included the “Lao Bao Club”, the “Ferry Terminal Club”, the “Thanaleng Club” and a slot club at the Paksan Hotel (“Paksan Club”).

By late 2011, relations between the Appellants and ST had deteriorated and disputes had arisen between them. ST ceased cooperation with Sanum and initiated litigation against it. The Appellants pursued claims against ST in separate arbitration proceedings at the Singapore International Arbitration Centre (“SIAC”).

Relevantly to the present proceedings, the Appellants also claimed that officials of the Respondent began to renege on earlier commitments, and embarked on a series of arbitrary and discriminatory actions designed to enrich them and ST at the Appellants’ expense.

In the arbitrations which were commenced on 14 August 2012, the Appellants alleged violations by the Respondent of the protection afforded to investors by two bilateral investment treaties (individually, “BIT” or “Treaty”). The first, invoked by LH, was the Agreement on Encouragement and Reciprocal Protection of Investments between the Lao People’s Democratic Republic and the Kingdom of the Netherlands (16 May 2003) (entered into force on 1 May 2005) (“Laos-Netherlands BIT”). The arbitration under that Treaty was initiated by LH through ICSID. It was conducted under the Rules Governing the Additional Facility for the Administration of Proceedings by the Secretariat of the International Centre for Settlement of Investment Disputes (2006) (“ICSID Additional Facility Rules”). Sanum’s claims were brought before the PCA under Art 8(5) of the Agreement between the Government of the People’s Republic of China and the Government of the Lao People’s Democratic Republic Concerning the Encouragement and Reciprocal Protection of Investments (31 January 1993) (entered into force on 1 June 1993) (“Laos-PRC BIT”). That arbitration was conducted under the 2010 UNCITRAL Arbitration Rules (“UNCITRAL Rules”). We shall refer to these arbitral proceedings collectively as the “BIT Arbitrations”.

Although there were two separate Awards, one by the ICSID Tribunal and the other by the PCA Tribunal, the relevant parts of the text of each Award were almost identical. As was stated in each of the Awards:

… for ease of reference only, LHNV and Sanum will be referred to as “the Claimants”, as the facts of the cases are intermingled.

The Arbitral Tribunals characterised the claims of the Appellants as based upon a multiplicity of alleged treaty breaches by GOL including, but not limited to, an 80% tax on casino revenues and what were said to be unfair and oppressive audits of Savan Vegas. It was also alleged that the Respondent had abused its sovereign authority to assist ST to acquire other assets which belonged, in whole or in part, to the Appellants. They eventually valued their investment loss as at 31 August 2016 at between US$690m and US$1bn.

The Respondent raised defences that the claims should not be entertained as there was evidence of bribery, corruption and embezzlement. The Respondent also counterclaimed against Sanum for alleged embezzlement of funds from a joint venture company set up to operate the Paksan Club (“Embezzlement Counterclaim”). The counterclaim was not pursued.

The history of the disputes between the parties and the arbitral proceedings is long and convoluted. However, on 15 June 2014, two days before the merits hearings for the arbitrations were to begin, the parties entered into a Settlement Deed with a “Side Letter” dated 18 June 2014. The Settlement Deed was intended to resolve the claims. On 19 June 2014, the ICSID Tribunal and the PCA Tribunal each signed consent orders suspending their respective BIT Arbitrations.

Key provisions of the Settlement Deed, Sections 32 and 34, provided for the possibility that the proceedings might be revived by reason of material breach by the Respondent. They read as follows: 32. The Claimants shall only be permitted to revive the arbitration in the event that Laos is in material breach of Sections 5 – 8, 15, 21 – 23, 25, 27 or 28 above and only after reasonable written notice is given to Laos by the Claimants of such breach and such breach is not remedied within 45 days after receipt of notice of such breach. … In the event there is a dispute as to whether or not Laos is in material breach of Sections 5 – 8, 15, 21 – 23, 25, 27 or 28 above, the Tribunals shall determine whether or not there has been such a material breach and shall only revive the arbitration if they conclude that there has been such a material breach.

…

34. In the event that the arbitration is revived pursuant to clause 32 above, neither the Claimants nor Laos shall not be permitted to add any new claims or evidence to the arbitration nor seek any additional reliefs not already sought in the proceedings.

[emphasis added in underline]

It was common ground that the word “not”, appearing in the second line of Section 34, was an error which should be disregarded in reading Section 34.

The Settlement Deed also contained a choice of law and dispute resolution provision – Section 42 – which provided as follows:

Governing Law

42. This Deed shall be governed by and construed solely in accordance with the laws of New York. Any dispute arising out of or in connection with this Deed, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre for the time being in force, including its emergency arbitration rules. The seat of the arbitration shall be Singapore. …

Subsequently, the Appellants applied to the Arbitral Tribunals to reinstate the arbitrations on the basis that the Respondent had committed material breaches of the terms of the Settlement Deed. This first application failed. However, a second application on the basis of a second set of alleged material breaches succeeded. On 15 December 2017, the Arbitral Tribunals reinstated the BIT Arbitrations.

On 15 May 2018, the Respondent lodged with each Arbitral Tribunal an “Application to Admit Additional Evidence”. It sought to introduce three categories of evidence consisting of: two awards rendered in related SIAC arbitrations (“SIAC Awards”); documentary evidence...