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

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 29 September 2016
• Neutral Citation: [2016] SGCA 57
• Citation: [2016] SGCA 57
• Court: Court of Appeal (Singapore)
• Published date: 07 October 2016
• Docket Number: Civil Appeals No 139 and 167 of 2015 and Summons No 2 of 2016
• Plaintiff Counsel: Alvin Yeo SC, Koh Swee Yen, Monica Chong Wan Yee and Mak Shin Yi (WongPartnership LLP)
• Defendant Counsel: Cavinder Bull SC, Lim Gerui, Darryl Ho Ping and Eunice Chan Swee En (Drew & Napier LLC),Mr J Christopher Thomas QC and Professor Locknie Hsu as Amici Curiae.
• Subject Matter: International Law,Treaties,Arbitration,Arbitral tribunal,Jurisdiction
• Hearing Date: 04 April 2016

Sundaresh Menon CJ (delivering the judgment of the court):

The present appeals arise out of proceedings commenced by the Government of the Lao People’s Democratic Republic (“the Lao Government”) under s 10(3)(a) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the IAA”). An arbitral tribunal (“the Tribunal”) ruled that it had jurisdiction to arbitrate certain expropriation claims brought by a Macanese investor, Sanum Investments Limited (“Sanum”), against the Lao Government (“the Arbitration”). Dissatisfied, the Lao Government brought proceedings before the High Court challenging the Tribunal’s ruling on jurisdiction. Two questions had to be answered in the affirmative for the Tribunal to be found to have jurisdiction to arbitrate the present dispute: (a) whether the bilateral investment treaty entered into between the People’s Republic of China (“the PRC”) and the Lao People’s Democratic Republic (“Laos”) (“the PRC-Laos BIT”) is applicable to the Macau Special Administrative Region of China (“Macau”); and (b) whether the subject-matter of the dispute falls within the dispute resolution clause of the PRC-Laos BIT.

The High Court judge (“the Judge”) in Government of the Lao People’s Democratic Republic v Sanum Investments Ltd [2015] 2 SLR 322 (“the Judgment”) answered both questions in the negative, thereby concluding that the Tribunal did not have jurisdiction in the Arbitration and allowing the Lao Government’s appeal against the Tribunal’s ruling on jurisdiction. Sanum has brought the present appeals against the Judge’s decision.

Background facts

The facts concerning this dispute are largely undisputed.

Prior to the handover of Macau to the PRC in 1999, Macau was under the administrative control and sovereignty of Portugal. Several salient events occurred prior to that. In 1987, the PRC and Portugal signed a joint declaration on the question of Macau (“the 1987 PRC-Portugal Joint Declaration”). The 1987 PRC-Portugal Joint Declaration provided that the PRC would resume the exercise of sovereignty over Macau with effect from 20 December 1999 and declared that the PRC’s “one country, two systems” regime would apply to Macau.

On 31 January 1993, the PRC-Laos BIT was signed. Pursuant to its terms, the BIT entered into force on 1 June 1993. The BIT does not expressly state whether it would or would not in due course apply to Macau. Subsequently, in 1999, following the handover, the PRC “resumed sovereignty” over Macau and established it as a Special Administrative Region (“SAR”). Nothing was said in the aftermath of the handover, either by the PRC or by Laos, on whether the BIT would or would not extend to Macau.

In 2007, Sanum began investing in the gaming and hospitality industry in Laos through a joint venture with a Laotian entity. Disputes subsequently arose between Sanum and the Lao Government which culminated in Sanum commencing arbitral proceedings against the Lao Government by a notice of arbitration issued pursuant to the PRC-Laos BIT on 14 August 2012. Sanum alleged, among other things, that the Lao Government had deprived it of the benefits to be derived from its capital investment through the imposition of unfair and discriminatory taxes. Sanum brought its claim on the basis of Art 8(3) of the PRC-Laos BIT, which provides as follows: 3. If a dispute involving the amount of compensation for expropriation cannot be settled through negotiation within six months as specified in paragraph 1 of this Article, it may be submitted at the request of either party to an ad hoc arbitral tribunal. The provisions of this paragraph shall not apply if the investor concerned has resorted to the procedure specified in the paragraph 2 of this Article.

The Lao Government raised preliminary objections to the Tribunal’s jurisdiction on two bases. The first was that the PRC-Laos BIT did not extend to protect a Macanese investor; and the second was that the claim was not arbitrable as it went beyond the permitted subject-matter prescribed under Art 8(3) of the BIT.

By way of a letter dated 19 April 2013, counsel for the Lao Government in the arbitral proceedings, Mr David J Branson, informed the Tribunal that the Lao Government was “reaching out to the PRC through diplomatic channels” concerning the PRC-Laos BIT “but it [was] difficult to know how quickly there can be a response”. No response was forthcoming from the PRC in the subsequent months. On 13 December 2013, the Tribunal held that the PRC-Laos BIT did apply to Macau and that the subject-matter of the claim did fall within Art 8(3) of the BIT, and concluded that it has jurisdiction to hear the claim (“the Award”).

Dissatisfied with this decision, the Lao Government commenced Originating Summons No 24 of 2014 (“OS 24/2014”) on 10 January 2014 to have the High Court of Singapore decide the question of the Tribunal’s jurisdiction. Singapore was designated as the place of arbitration pursuant to Procedural Order No 1 issued by the Tribunal on 21 May 2013 prior to the Award being made and after consultation with the parties. Under s 10(3)(a) of the IAA, the Tribunal’s determination that it has jurisdiction remains subject to overriding court supervision in the form of an appeal to the High Court of Singapore.

The Lao Government also filed Summons No 884 of 2014 (“SUM 884/2014”) on 19 February 2014 to have two Notes Verbales (“the 2014 NVs”) admitted into evidence before the High Court. The first NV was sent from the Laotian Ministry of Foreign Affairs (“the Lao MFA”) to the PRC Embassy in Vientiane, Laos on 7 January 2014 (“the 2014 Laos NV”). In it, Laos expressed the view that the PRC-Laos BIT did not extend to Macau and sought the views of the PRC on this. The second NV was the reply from the PRC Embassy dated 9 January 2014 (“the 2014 PRC NV”), which stated its concurrence with the view that the PRC-Laos BIT did not apply to Macau “unless both China and Laos make separate arrangements in the future”.

The Judge decided to admit the 2014 NVs into evidence. On the substantive questions, he allowed the Lao Government’s challenge against the Tribunal’s ruling on jurisdiction and awarded costs to the Lao Government.

Sanum appealed against the Judgment in Civil Appeal No 139 of 2015 (“CA 139/2015”) by way of a Notice of Appeal dated 20 July 2015. Sometime after the Notice of Appeal was filed, the parties appeared before the Judge to determine the costs of the Arbitration and of SUM 884/2014 (on adducing further evidence). By way of an oral judgment dated 18 August 2015 (“the Costs Order”), the Judge applied the principle that costs follow the event, and granted costs of the Arbitration and of SUM 884/2014 to the Lao Government. By way of a Notice of Appeal filed on 27 August 2015, Sanum also appealed against the Costs Order in Civil Appeal No 167 of 2015 (“CA 167/2015”).

Prior to the hearing of the present appeals, the Lao Government procured two further NVs (“the 2015 NVs”) which it now seeks to admit into evidence by way of Summons No 2 of 2016 (“SUM 2/2016”). These consist of a NV sent from the Lao MFA to the PRC Embassy in Vientiane, Laos on 18 November 2015 (“the 2015 Laos NV”) requesting that the PRC Ministry of Foreign Affairs (“the PRC MFA”) confirm that the 2014 PRC NV is authentic, and a NV sent from the PRC MFA in reply confirming that the 2014 PRC NV had been sent with the authorisation of the PRC MFA (“the 2015 PRC NV”).

Decision below

As noted above, the Judge found that the Tribunal did not have jurisdiction to arbitrate the expropriation claims between Sanum and the Lao Government.

As an anterior step, the Judge first found that the application was justiciable before the Singapore courts. The Lao Government’s application was based on s 10(3)(a) of the IAA, which provides that if the arbitral tribunal rules as a preliminary matter that it has jurisdiction, any party may, within 30 days after having received notice of that ruling, apply to the High Court to decide the matter. The Judge was satisfied that the Lao Government had the right to have the Tribunal’s ruling on jurisdiction reviewed by the High Court on the basis that the Lao Government was relying on s 10(3)(a) of the IAA, a Singapore statutory provision, and the issues that arose in the application had a bearing on Singapore domestic law and the rights or duties arising thereunder. This finding of the Judge is not contested by Sanum in the present appeal.

Secondly, the Judge held that although the Tribunal had heard arguments, considered the point and then concluded that it did have jurisdiction, when this was challenged before the court, the matter of jurisdiction was to be considered afresh without any deference being accorded to the Tribunal’s reasoning or its conclusions. The Judge further noted that it did not matter that the Tribunal in this case was an eminent one; if deference was to be accorded based on the eminence of the Tribunal, a varying standard of review would be applied when the court considers applications under s 10 of the IAA, a position which the Judge was unwilling to accept.

Thirdly, the Judge took the view that the test in Ladd v Marshall [1954] 1 WLR 1489 did not strictly apply to the question of whether the 2014 NVs should be admitted. Instead, he applied the modified version of the test as was laid down in Lassiter Ann Masters v To Keng Lam (alias Toh Jeanette) [2004] 2 SLR(R) 392 (“Lassiter”). In Lassiter, the Court of Appeal held (at [24]) that with respect to certain types of appeals (such as, Registrar’s Appeals), the first Ladd v Marshall condition – that it must be shown that the evidence could not have been obtained with reasonable diligence for use at trial – need not be applied as strictly. Instead, the judge should be given a wider discretion in the matter although sufficiently strong reasons would have to be advanced to explain why the new evidence had not been adduced at the...