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

JurisdictionSingapore
JudgeMenon CJ,Chao,Phang,Prakash JJA,Loh J,Sundaresh Menon CJ,Chao Hick Tin JA,Andrew Phang Boon Leong JA,Judith Prakash JA,Quentin Loh J
Judgment Date29 September 2016
CourtCourt of Appeal (Singapore)
Docket NumberCivil Appeals Nos 139 and 167 of 2015 and Summons No 2 of 2016
Date29 September 2016

SINGAPORE (COURT OF APPEAL)

(Menon CJ; Chao, Phang and Prakash JJA; Loh J)

Sanum Investments Ltd
and
Government of the Lao People's Democratic Republic 1

State succession — Treaties — Joint Declaration of Government of the People's Republic of China and Government of the Portuguese Republic on question of Macau, 1987 — People's Republic of China (“PRC”) assuming sovereignty over Macau from 20 December 1999 — Application of PRC's treaties to Macau after assumption of sovereignty — Rights of third parties

Treaties — Interpretation — Application — Agreement between Government of the People's Republic of China and Government of the Lao People's Democratic Republic concerning the encouragement and reciprocal protection of investments, 1993 (“the PRC-Laos BIT”) — Whether PRC-Laos BIT applying to Macau — “Moving treaty frontier” rule — Vienna Convention on the Succession of States in respect of Treaties, 1978, Article 15Vienna Convention on the Law of Treaties, 1969, Article 29 — Exceptions — Whether a different intention appearing from treaty — Whether otherwise established that treaty was not meant to apply to Macau — Applicable standard of proof to be met under international law — Applicability of critical date doctrine to court's assessment of evidence

Arbitration — Jurisdiction — Whether arbitral tribunal possessing jurisdiction to hear claims — Whether protection of PRC-Laos BIT extending to Macanese investors — Whether subject matter of claim falling within scope ofdispute resolution clause in Article 8(3) of PRC-Laos BIT — Jurisdiction — Whether interpretation and application of PRC-Laos BIT justiciable before Singaporean courts — Jurisdiction — Standard of review — Whether Singaporean courts obliged to accord special deference to tribunal's findings

Economics, trade and finance — Bilateral investment treaties — PRC-Laos BIT — People's Republic of China assuming sovereignty over Macau from 20 December 1999 — Whether PRC— Laos BIT applying to Macau — Whether protection of PRC-Laos BIT extending to Macanese investors — Whether interpretation and application of PRC-Laos BIT justiciable before Singaporean courts — The law of Singapore

Summary:2The facts:—Until 1999, Macau was under the administrative control and sovereignty of Portugal. In 1987, the People's Republic of China (“the PRC”) and Portugal signed a joint declaration (“the PRC-Portugal Joint Declaration”) agreeing that the PRC would assume sovereignty over Macau from 20 December 1999. On 31 January 1993 (after the PRC-Portugal Joint Declaration was signed but before the PRC assumed sovereignty over Macau), the PRC entered into a bilateral investment treaty3 with Laos (“the PRC-Laos BIT”). The PRC-Laos BIT was silent on the question of whether it would apply to Macau after the handover.

In 2007, Sanum Investments Ltd (“Sanum”), a Macanese company, began investing in the gaming and hospitality industry in Laos. Following disputes between Sanum and the Government of the Lao People's Democratic Republic (“the Lao Government”), Sanum commenced arbitration proceedings against it before an arbitral tribunal (“the Tribunal”) seated in Singapore. Sanum argued, inter alia, that the Lao Government had deprived it ofbenefits due under its capital investment by imposing unfair and discriminatory taxes. Despite the Lao Government's objections, the Tribunal held that it had jurisdiction to hear Sanum's expropriation claims. The Lao Government challenged this finding before the Singaporean High Court (“the Court”). First, it argued that the PRC-Laos BIT did not apply to Macau and hence did not protect Macanese investors. It referred to two Notes Verbales (“the 2014 NVs”) that were exchanged between the PRC and Laos after the Tribunal had rendered its ruling on jurisdiction. The first was sent from the Laotian Ministry of Foreign Affairs to the PRC Embassy in Laos on 7 January 2014, expressing the view that the PRC-Laos BIT did not extend to Macau; the second was a reply from the PRC Embassy dated 9 January 2014 which concurred with that view. Secondly, the Lao Government argued that

Sanum's claims fell outside the scope of the dispute resolution clause in Article 8(3) of the PRC-Laos BIT.4

The Court upheld the Lao Government's objections and annulled the Tribunal's finding of jurisdiction. The Court relied upon: (a) the 2014 NVs;

(b) certain provisions of the 1987 PRC-Portugal Joint Declaration (under which Macau had the capacity to conclude agreements with States in its own capacity, and the PRC could decide on the application ofits treaties to Macau “in accordance with the circumstances of the case and the needs of[Macau]”);

(c) the experience of the PRC and the United Kingdom in relation to Hong Kong (on which there was international consensus that the PRC's treaties did not automatically apply to Hong Kong); and (d) a 2001 World Trade Organization (“WTO”) Trade Policy Report (which stated that apart from two agreements with Portugal, Macau had no other bilateral investment treaties). The Court also held that Sanum's claims fell outside the scope of Article 8(3) of the PRC-Laos BIT, which was to be interpreted restrictively as referring strictly to disputes concerning the amount of compensation to be paid to Sanum in the event of an expropriation. Sanum appealed.

Held (unanimously):—The PRC-Laos BIT applied to Macau. The Tribunal had subject-matter jurisdiction over the claims brought by Sanum.

(1) The interpretation and application of the PRC-Laos BIT were matters that the Singapore courts were competent, and, under the circumstances, obliged to consider, owing to the parties' choice of Singapore as the seat of arbitration (paras. 37–9).

(2) The Court had not erred in finding that it was not bound to accord any special deference to the Tribunal's findings on jurisdiction. Its task was to conduct a de novo review on jurisdiction irrespective of the fact that the Tribunal's findings arose from an investor-State arbitration involving the application of public international law principles (paras. 40–4).

(3) According to the “moving treaty frontier” rule (“the MTF rule”), a customary international law rule contained in Article 15 of the Vienna Convention on the Succession of States in respect of Treaties, 19785 and Article 29 of the Vienna Convention on the Law of Treaties, 1969 (“the

VCLT”),6 a State's treaties automatically extended to a new territory when that territory became a part of that State. The MTF rule applied presumptively but could be displaced by one of the exceptions contained in Article 15 of the Vienna Convention on the Succession of States in respect of Treaties and Article 29 of the VCLT. Accordingly, the presumption was that the PRC-Laos BIT applied automatically to the territory of Macau from the date of handover unless the MTF rule was displaced by an exception. The only potentially applicable exception was whether a “different intention” appeared from the BIT or it was “otherwise established” that the BIT was not meant to apply to Macau (paras. 45–53).

(4) There was no intention appearing from the PRC-Laos BIT that the treaty did not apply in respect of the entire territory of the PRC. The BIT was silent on its applicability to Macau. Further, the text, objects and purposes of the BIT, as well as the circumstances ofits conclusion, did not demonstrate that the parties intended to exclude Macau from its application. That the BIT applied to Macau was supported by the facts that: (a) the 1987 PRC-Portugal Joint Declaration predated the PRC-Laos BIT and hence it was foreseeable that the PRC's treaties would become territorially applicable to Macau following the 1999 handover since this was the MTF rule's default position; despite this, the PRC and Laos had not taken any steps to exclude the BIT's applicability to Macau; and (b) even ifthe reversion ofMacau to the PRC had been overlooked, the PRC and Laos had reviewed the BIT close to handover without attempting to exclude Macau from the BIT's application (paras. 55–9).

(5) There was no definite standard of proof under international law for finding that it was “otherwise established” that a “different intention” had been shown under Article 29 of the VCLT. Since, at a minimum, something was “established” ifit was shown to be more likely than not to be so, the Court would apply the balance of probabilities standard in its assessment of whether it was “otherwise established” that the PRC-Laos BIT was not applicable to Macau (paras. 61–2).

(6) The judge had erred in finding that the application of the critical date doctrine to the dispute contravened Article 31(3)(a) and (b) of the VCLT, which allowed for subsequent agreements between parties to be taken into account for the purposes oftreaty interpretation. Sanum had relied on the date of initiation of arbitration proceedings as the critical date, not the date of the handover of Macau to the PRC or of the conclusion of the PRC-Laos BIT. Therefore, even if the doctrine were applied, the Lao Government could still rely on evidence that came into being after handover or the conclusion of the

(b) treaties of the successor State are in force in respect of the territory to which the succession of States relates from the date of the succession of States, unless it appears from the treaty or is otherwise established that the application of the treaty to that territory would be incompatible with the object and purpose of the treaty or would radically change the conditions for its operation.”

PRC-Laos BIT but before the dispute had commenced to demonstrate that the parties had reached a subsequent agreement. Further, applying the critical date doctrine to the evidence did not mean that any evidence that came into being after the date on which the dispute had crystallized was automatically inadmissible, but rather that it was to be weighed carefully. Self-serving evidence that came into being after the critical date was to be given...

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    ...the Lao People's Democratic Republic [2021] 5 SLR 228 (refd) Sanum Investments Ltd v Government of the Lao People's Democratic Republic [2016] 5 SLR 536 (refd) Sanum Investments Ltd v ST Group Co, Ltd [2020] 3 SLR 225 (refd) Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3......
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3 firm's commentaries
  • COURT OF APPEAL SUMMARIES (May 29, 2023 ' June 2, 2023)
    • Canada
    • Mondaq Canada
    • 7 June 2023
    ...Co , [2014] 6 HKC 421, AQZ v. ARA, [2015] SGHC 49, Sanum Investments Limited v. The Government of the Lao People's Democratic Republic , [2016] SGCA 57, Lin Tiger Plastering Pty Ltd. v. Platinum Construction (Vic) Pty Ltd , [2018] VSC 221, Mexico v. Cargill , 2011 ONCA 622, Nigel Blackaby, ......
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    ...B Co, [2014] 6 HKC 421, AQZ v. ARA, [2015] SGHC 49, Sanum Investments Limited v. The Government of the Lao People’s Democratic Republic, [2016] SGCA 57, Lin Tiger Plastering Pty Ltd. v. Platinum Construction (Vic) Pty Ltd, [2018] VSC 221, Mexico v. Cargill, 2011 ONCA 622, Nigel Blackaby, K.......
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    ...Democratic Republic v Sanum Investment Ltd, [2015] SGHC 15. Government of the Lao People's Democratic Republic v Sanum Investment Ltd, [2016] SGCA 57 at para Luxtona at para 54. Luxtona at paras 57-58. Luxtona at para 61 (emphasis in original). Luxtona at para 69. To view the original artic......
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    • Singapore Academy of Law Journal No. 2019, December 2019
    • 1 December 2019
    ...26 L Capital Jones Ltd v Maniach Pte Ltd [2017] 1 SLR 312. 27 Sanum Investments Ltd v Government of the Lao People's Democratic Republic [2016] 5 SLR 536; Swissbourgh Diamond Mines (Pty) Ltd v Kingdom of Lesotho [2019] 1 SLR 263. 28 Kho Jabing v Attorney-General [2016] 3 SLR 1273; Tan Cheng......
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    • Singapore
    • Singapore Academy of Law Journal No. 2020, December 2020
    • 1 December 2020
    ...relief). 245 [2015] 5 SLR 707. 246 [2016] 1 SLR 373. 247 Cap 10, 2002 Rev Ed. 248 [2019] 2 SLR 595. 249 Cap 43, 1999 Rev Ed. 250 [2016] 5 SLR 536. 251 1946 UNTS 3 (23 August 1978; entry into force 6 November 1996). 252 1155 UNTS 331 (23 May 1969; entry into force 27 January 1980). 253 [2019......
  • Case Note
    • Singapore
    • Singapore Academy of Law Journal No. 2018, December 2018
    • 1 December 2018
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