Court also offers guidance on the supervisory authority of the Singapore courts over jurisdictional decisions by Singapore-seated tribunals
In Sanum Investments Limited v. The Government of the Lao People’s Democratic Republic  SGCA 57, the Singapore Court of Appeal restored the decision by a Singapore-seated arbitral tribunal (the Tribunal) to accept jurisdiction over certain expropriation claims brought by a Macau investor, Sanum Investments Limited, against the Lao People’s Democratic Republic under the bilateral investment treaty between the People’s Republic of China (PRC) and the Lao People’s Democratic Republic (PRC-Laos BIT). The Singapore Court of Appeal’s decision is noteworthy for at least two reasons. First, the Court of Appeal clarified the supervisory role of Singapore courts over jurisdictional decisions rendered by Singapore-seated arbitral tribunals. The Court of Appeal confirmed that Article 10(3)(a) of Singapore’s International Arbitration Act (Cap 143A, 2002 Rev Ed) (IAA) requires a Singapore court to undertake a de novo review of a Singapore-seated tribunal’s preliminary ruling on jurisdiction. In doing so, a court is not obliged to afford “deference” to a tribunal’s reasoning or conclusions (although the cogency and quality of that tribunal’s reasoning may make it persuasive). Second, the Court of Appeal’s sensitivity to the importance of the international law issues before it should give foreign investors and States confidence in designating Singapore as the seat for investor-State arbitrations. The Court of Appeal was constituted as a five-judge bench. It issued a unanimous decision (delivered by Menon CJ) that was clear and carefully reasoned. The Court of Appeal also appointed two international law experts—Professor Locknie Hsu of Singapore Management University and Mr. J. Christopher Thomas, QC of the National University of Singapore—as amici curiae to make submissions on issues of international law. Best in Energy & Natural Resources The background On 14 August 2012, Sanum began an arbitration against the Lao People’s Democratic Republic under Article 8(3) of the PRC–Laos BIT alleging, among other things, that Laos had expropriated Sanum’s casino investment by imposing unfair and discriminatory taxes. The Tribunal (Dr. Andres Rigo Sureda, Professor Bernard Hanotiau and Professor Brigitte Stern) designated Singapore as the seat of the arbitration. In December 2013, the Tribunal issued a preliminary ruling accepting jurisdiction over Sanum’s claims (Sanum Investments Limited v. Government of the Lao People’s Democratic Republic, PCA Case No 2013-13, Award on Jurisdiction). The Lao Government appealed the Tribunal’s preliminary decision on jurisdiction to the Singapore High Court under section 10(3)(a) of the IAA. On appeal, the High Court held that the Tribunal did not have jurisdiction (Government of the Lao People’s Democratic Republic v. Sanum Investments Ltd  2 SLR 322). The High Court held that the appeal was justiciable because the application was brought under a Singapore statute. It also held that the appeal had to be heard de novo and no “deference” should be afforded by the High Court to the Tribunal’s reasoning or conclusions. The Court then considered the scope of the PRC-Laos BIT. It held that, first, under the moving treaty frontier rule of customary international law, which the parties agreed was reflected in Article 29 of the Vienna Convention on the Law of Treaties (VCLT) and Article 15 of the Vienna Convention on the Succession of States in Respect of Treaties (VCST), the PRC-Laos BIT is presumed to apply to the entire territories of Laos and the PRC (including, following the 1999 handover, Macau). That presumption was displaced in the present case by two Notes Verbales exchanged between Laos and the PRC in 2014—after Sanum began arbitration—in which the Lao Government expressed the view that the PRC-Laos BIT did not extend to Macau and the PRC Embassy concurred that it would not so extend “unless both China and Laos make separate arrangements in future”. Second, it held that Article 8(3) of the PRC-Laos BIT should be given a restrictive interpretation such that arbitration was only available for disputes over the quantum of compensation to be paid following an expropriation. Although this limited significantly the scope of the arbitration clause in Article 8(3), it would still have some (theoretical) application because an investor might submit a dispute over compensation to arbitration if the State had submitted the dispute over whether there was a breach of the PRC-Laos BIT’s expropriation provision to the local courts. Sanum’s application for leave to appeal was granted by the High Court. The appeal Before considering the scope of the PRC-Laos BIT, the Court of Appeal addressed two preliminary issues. First, Sanum had argued before the High Court that the interpretation of the PRC-Laos BIT involved questions of international law that did not bear on the application of Singapore law and was not something the Singapore courts could pronounce on. Although Sanum did not pursue that argument on appeal, the Court of Appeal observed that the High Court was not only competent to consider the proper interpretation of the PRC-Laos BIT, but was obliged to do so in determining whether the Tribunal had jurisdiction. Second, the Court of Appeal rejected Sanum’s argument that the High Court should have shown “deference” to the Tribunal’s findings, especially those involving the application of public international law. The Court of Appeal explained that there “is no basis for deference” to the Tribunal’s findings in an appeal from a preliminary decision on jurisdiction under the IAA. The Court of Appeal also observed that the eminence of the Tribunal is irrelevant; rather, it is the quality of the Tribunal’s reasons that may (or may not) influence a court’s evaluation of a tribunal’s reasoning. 1. Whether the PRC-Laos BIT applies to Macau On whether the PRC-Laos BIT extends to Macau, the Court of Appeal identified as critical the moving treaty frontier rule. It was common ground on the appeal that this rule was reflected in the VCLT and VCST. Article 29 of the VCLT provides that a treaty is binding on the “entire territory” of a State “[u]nless a different intention appears from the treaty or is otherwise established”. Article 15 of the VCST provides that the treaties of a successor State are in force in respect of the territory to which the succession relates. That rule establishes a presumption—which can be displaced by evidence to the contrary—that a State’s treaties extend automatically to new territory that has become part of that State. To displace that presumption, the Lao Government had to (i) establish that the PRC and Laos did not intend that the PRCLaos BIT would apply to Macau, or (ii) “otherwise establish” that it is not meant so to apply. The Court of Appeal held that there was insufficient evidence to displace the moving treaty frontier rule. The PRC and Portugal had signed a joint declaration in 1987 confirming the PRC’s resumption of sovereignty over Macau in 1999. Therefore, in 1993, the Contracting States to the PRC-Laos BIT “must be taken to have been aware that by virtue of the operation of the [moving treaty frontier rule] … the PRCLaos BIT would apply to Macau upon the handover”. The Contracting States had done nothing at that time to exclude its application. Moreover, the PRC-Laos BIT provided an option for each Contracting State to give notice to terminate the treaty one year before the expiry of its initial 10-year term. That would have necessitated a review of the treaty sufficiently in advance of 1 June 2002 (ie, nine years after it entered into force) to decide whether to give notice of termination. The Contracting States could not have been unaware of the handover of Macau by the time of any such review. The Court of Appeal therefore held that there is nothing in the text, object or purpose of the PRC-Laos BIT that pointed to an intention to displace the moving treaty frontier rule. Turning to whether it was “otherwise established” that the moving treaty frontier rule had been displaced, the Court of Appeal considered the impact of certain Notes Verbales exchanged between the diplomatic representatives of Laos and the PRC. The Court of Appeal noted that those Notes Verbales post-dated the dispute under the PRC-Laos BIT. Under international law rules of evidence, no weight is to be given to evidence of self-serving conduct intended by a party to improve its position after a dispute has arisen (ie, the critical date) if it contradicts a position established by pre-critical date evidence. The Court of Appeal further noted that post-critical date evidence may be considered if the pre-critical date evidence is inconclusive on a point, but that “special attention” would need to be given to its weight. According to the Court of Appeal, since the Lao Government had failed to establish that the PRC-Laos BIT does not extend to Macau on pre-critical date evidence, the Notes Verbales had been adduced merely to contradict that position and should not bear any weight. The Court of Appeal held that the PRC-Laos BIT therefore applies to Macau and reversed the decision of the High Court. In doing so, the Court of Appeal emphasised that its decision related specifically to the PRC-Laos BIT. 2. Whether the Tribunal had subject-matter jurisdiction over the expropriation claims Next, the Court considered the proper interpretation of the investor-State dispute resolution clause in Article 8 of the PRC-Laos BIT. Article 8(3) of the PRC-Laos BIT provides that “[i]f a dispute involving the amount of compensation for expropriation cannot be settled through negotiation within six months”, either party may submit it to arbitration before an ad hoc arbitral tribunal. It further provides that if an investor submits a dispute to the host State’s courts, that investor can no longer submit that dispute to arbitration. The Lao Government submitted that the phrase “disputes involving the amount of compensation for expropriation” limited recourse to arbitration to disputes that only related to the compensation after an expropriation has taken place (ie, the “narrow” interpretation). Sanum submitted that, read in context, Article 8(3) permitted the Tribunal also to consider the alleged breach of the treaty’s provision on expropriation in addition to the quantum of compensation (ie, the “broad” interpretation). The Court of Appeal held that, if the words of Article 8(3) are read in context, the narrow interpretation was untenable because it would render illusory the ability to submit disputes to arbitration, contrary to the principle of effective interpretation under international law. That was because the proviso to Article 8(3) meant that “if any dispute is brought to the national court, the claimant will no longer be entitled to refer any aspect of that dispute to arbitration”. The Court of Appeal rejected the High Court’s suggestion that the narrow interpretation still allowed an investor to submit a dispute to arbitration where the State had brought the proceedings before its courts. That would enable a State to avoid arbitration by denying that there had been an expropriation and thereby compel an investor to bring proceedings before that State’s courts—at which point, under the narrow interpretation, the investor would lose the ability to initiate arbitration. The Court of Appeal distinguished the PRC-Laos BIT from certain Russian BITs with similar dispute-resolution clauses that had been interpreted restrictively by investment-treaty tribunals on the grounds that those treaties do not “contain a fork-in-the-road provision which would limit the investor’s access to arbitration if the investor had recourse to the national courts to determine whether an expropriation had occurred”. The cumulative effect of the Court of Appeal’s findings was that the Tribunal had jurisdiction over Sanum’s expropriation claims.