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

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ,Judith Prakash JCA,Robert French IJ
• Judgment Date: 24 November 2022
• Docket Number: Civil Appeal No 55 of 2021
• Court: Court of Appeal (Singapore)

Lao Holdings NV and another

and

Government of the Lao People's Democratic Republic

[2022] SGCA(I) 9

Sundaresh Menon CJ, Judith Prakash JCA and Robert French IJ

Civil Appeal No 55 of 2021

Court of Appeal

Arbitration — Arbitral tribunal — Powers — Parties suspending arbitral proceedings and agreeing not to adduce new evidence if arbitral proceedings were reinstated — Whether arbitral tribunals could admit new evidence to arbitral proceedings even if parties had agreed otherwise

Arbitration — Award — Recourse against award — Setting aside — Arbitral tribunals holding that investors were disentitled from relief under bilateral investment treaties because of bad faith proved on balance of probabilities as opposed to higher standard of clear and convincing evidence — Whether awards could be set aside under Art 34(2)(a)(ii) UNCITRAL Model Law on International Commercial Arbitration on ground that investors did not have opportunity to address arbitral tribunals on line of reasoning adopted — Article 34(2)(a)(ii) UNCITRAL Model Law on International Commercial Arbitration

Arbitration — Award — Recourse against award — Setting aside — Parties suspending arbitral proceedings and agreeing not to adduce new evidence if arbitral proceedings were reinstated — Arbitral tribunals reinstating arbitral proceedings and admitting new evidence of investors' corruption, fraud and bribery — Whether awards could be set aside under Art 34(2)(a)(iv) UNCITRAL Model Law on International Commercial Arbitration on ground that arbitral procedure was not in accordance with agreement of parties — Whether court at seat of arbitration hearing application to set aside award could rule on correctness of arbitral tribunal's interpretation of parties' procedural agreement — Article 34(2)(a)(iv) UNCITRAL Model Law on International Commercial Arbitration

Arbitration — Conduct of arbitration — Evidence

Held, dismissing the appeal:

Breach of the parties' agreed arbitral procedure – Art 34(2)(a)(iv) of the Model Law

(1) As appeared from the text of Art 34(2)(a)(iv), the criteria for setting aside an award for failure to adhere to an agreed procedure required the supervising court to identify “the agreed procedure” and to determine whether the tribunal had failed to adhere to it. When the construction of the agreed procedure was not in issue, the court was confined to considering whether the tribunal had departed from the procedure and whether its decision could reasonably have been different had that departure not occurred: at [99].

(2) Where the tribunal had construed a provision of an arbitral agreement providing for an agreed procedure and its construction was contested, the anterior question arose whether that construction was beyond examination by the court. Awards were not to be set aside for errors of fact or law. The interpretation of an arbitral agreement involved determination of questions of mixed law and fact. As a general rule, the court would not revisit a tribunal's construction of an agreed procedure in an arbitral agreement entered into between the parties where the construction was open on the text of the agreement. Where, however, a tribunal adopted and acted upon a construction of a term, providing for an agreed procedure, which was simply not open on any view of the text and its context, then the tribunal could not be said to have adhered to the agreed procedure. It was open to the supervising court in such a case to determine the content of the agreed arbitral procedure: at [100] to [102], [137] and [138].

(3) It would be difficult to imagine a clearer case of a debate before arbitral tribunals about the interpretation or construction of a provision of an agreement between the parties. The Arbitral Tribunals found that the preclusive operation of Section 34 did not extend to displacing entirely their powers to receive new evidence. That was a finding about the limits of the operation of the provision. In making that finding, the Arbitral Tribunals construed what the parties had agreed: at [109] and [111].

(4) The construction of Section 34 adopted by the Arbitral Tribunals was open having regard to the context in which Section 34 of the Settlement Deed was agreed, including the applicable arbitral rules. Having adopted a construction that was open, the Arbitral Tribunals had discharged their duty of construction. There was no basis upon which to properly revisit the exercise of that arbitral function: at [138].

Failure to grant the Appellants a reasonable opportunity to present their case – Article 34(2)(a)(ii) of the Model Law

(5) The Respondent had pleaded the defence of bad faith as a distinct ground for the denial of treaty relief. There was no breach of natural justice arising by reason of the Arbitral Tribunals' findings in relation to that defence: at [158] and [159].

(6) Nor was there any breach of natural justice in relation to the standard of proof applied by the Arbitral Tribunals in reaching the findings of bad faith, upon which the Appellants had opportunity to address and did address the Arbitral Tribunals: at [159].

[Observation: The ground of non-adherence to an agreed arbitral procedure as a basis for setting aside an award under Art 34(2)(a)(iv) of the Model Law was not available where the agreed procedure conflicted with a provision of the Model Law from which the parties could not derogate. One such provision was Art 18, which provided that “[t]he parties shall be treated with equality and each party shall be given a full opportunity of presenting his case”: at [130].

The construction adopted by the Arbitral Tribunals allowing for a discretionary reception of additional evidence in limited circumstances was correct: at [139].]

Case(s) referred to

ABU v Comptroller of Income Tax [2015] 2 SLR 420 (folld)

AJU v AJT [2011] 4 SLR 739 (refd)

AKN v ALC [2015] 3 SLR 488 (refd)

AMZ v AXX [2016] 1 SLR 549 (folld)

ANC Holdings Pte Ltd v Bina Puri Holdings Bhd [2013] 3 SLR 666 (refd)

AQZ v ARA [2015] 2 SLR 972 (distd)

Atkins Ltd v The Secretary of State for Transport [2013] BLR 193 (refd)

Bariven SA v Wells Ultimate Service LLC ECLI:NL:GHDHA:2019:2677 (refd)

Belokon v Kyrgyzstan (21 February 2017, Paris Court of Appeals) (France) (refd)

BLC v BLB [2014] 4 SLR 79 (refd)

Briginshaw v Briginshaw (1938) 60 CLR 336 (folld)

BZW v BZV [2022] 1 SLR 1080 (folld)

CBS v CBP [2021] 1 SLR 935 (folld)

China Machine New Energy Corp v Jaguar Energy Guatemala LLC [2020] 1 SLR 695 (refd)

Compañía de Aguas del Aconquija SA v Argentine Republic ICSID Case No ARB/97/3 (20 August 2007) (refd)

Flughafen Zürich AG v Bolivarian Republic of Venezuela ICSID Case No ARB/10/19 (18 November 2014) (refd)

Fraport AG Frankfurt Airport Services Worldwide v Republic of the Philippines ICSID Case No ARB/03/25 (16 August 2007) (refd)

Government of the Lao People's Democratic Republic, The v Lao Holdings NV SIAC Case No ARB/143/14/MV (29 June 2017) (refd)

Hebei Jikai Industrial Group Co Ltd v Martin [2015] FCA 228 (folld)

L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125 (refd)

London Export Corp Ltd v Jubilee Coffee Roasting Co Ltd [1958] 1 WLR 271 (folld)

Metal-Tech Ltd v Republic of Uzbekistan ICSID Case No ARB/10/3 (refd)

Quarella SpA v Scelta Marble Australia Pty Ltd [2012] 4 SLR 1057 (distd)

Sanum v ST Group SIAC Case No ARB184/15 (22 August 2016) (refd)

Triulzi Cesare SRL v Xinyi Group (Glass) Co Ltd [2015] 1 SLR 114 (distd)

World Duty Free Co Ltd v Republic of Kenya ICSID Case No ARB/00/7 (4 October 2006) (refd)

Facts

This was an appeal against the Singapore International Commercial Court's refusal to set aside two arbitral awards. The Singapore-seated arbitrations were conducted by two arbitral tribunals (the “Arbitral Tribunals”). In the arbitrations, the appellants (“Appellants”) had alleged violations by the respondent (“Respondent”) of two bilateral investment treaties. The Appellants were involved in the development of hotels, casinos and clubs in the Lao People's Democratic Republic. The alleged violations included a tax on casino revenues and audits of a hotel and casino. The Respondent was the Government of the Lao People's Democratic Republic. The Respondent raised the defence that the claims should not be entertained as there was evidence of bribery, corruption and embezzlement.

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 Settlement Deed (“Section 34”) 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 Arbitral Tribunals concluded that the record in existence at the time of the Settlement Deed should remain “frozen” as provided in Section 34 unless they were satisfied that there were “compelling circumstances” to exceptionally admit fresh material. The Arbitral Tribunals permitted the Respondent to adduce new evidence on matters including its allegations of bribery, corruption and fraud against the Appellants.

The Arbitral Tribunals, by their awards, dismissed the Appellants' claims. Flowing from its allegations of bribery, corruption and fraud against the Appellants, the Respondent contended that as a matter of public policy, the Appellants were not legally entitled to maintain any of their treaty claims. The Respondent also argued that under the “clean hands” doctrine, the Appellants' misconduct was sufficient to deny them the assistance of investor-State arbitration. The Arbitral Tribunals made four findings (the “Four Findings”) of fraud and...