In a recent decision, the Singapore High Court (the “HC”) held that a question of international law is justiciable if it bears on the application of domestic law. In determining a party’s right to seek review of the arbitral tribunal’s ruling under Singapore law, the HC had to first consider the international law issue of whether the bilateral investment treaty (“BIT“), of which Singapore is not a party, applies to Macau. In doing so, the HC considered that two diplomatic letters (the “Two Letters“) between the People’s Republic of China (“PRC“) and Lao People’s Democratic Republic (“Laos“), which clearly expounded the countries’ position on the issue, were most crucial.
The PRC resumed sovereignty over Macau Special Administrative Region of China (“Macau”) after Portugal handed over administrative power in 1999. This was agreed between the PRC and Portugal in 1987. Prior to the handover, the BIT between the PRC and Laos was signed in 1993. The PRC-Laos BIT is silent on its application to Macau.
The defendant, Sanum Investments Ltd (“Sanum”), was incorporated under the laws of Macau. In 2007, Sanum began investing in the gaming and hospitality industry of Laos. Disputes subsequently arose and Sanum commenced arbitral proceedings in 2012 against the Government of Laos, in accordance with the dispute resolution article of the PRC-Laos BIT. The Government of Laos disputed the jurisdiction of the arbitral tribunal (“Tribunal“) on the basis that the PRC-Laos BIT did not apply to Macau. However, the Tribunal held otherwise.
The Government of Laos, relying on s 10 of the International Arbitration Act (“IAA”), sought a review of the Tribunal’s ruling by the HC. In addition, it sought to admit fresh evidence – the Two Letters that were only obtained after the arbitration proceedings had begun. The first letter was from the Laotian Ministry of Foreign Affairs. It declared Laos’ position that the PRC-Laos BIT did not apply to Macau and sought the views of the PRC Government. The second letter was the reply from the PRC Embassy in Vientiane, Laos. The PRC affirmed Laos’ view that the PRC-Laos BIT did not extend to Macau “unless both China and Laos make separate arrangements in the future”.
The HC had to determine the following preliminary and substantive issues:
- Whether the application raised only international law issues which are non-justiciable.
- Whether the Two Letters should be admitted as further evidence.
- Whether the PRC-Laos BIT extends to Macau.
- Whether Sanum’s expropriation claims fall outside the scope of Art 8(3) of the PRC-Laos BIT.
Decision and observations
The HC held that a question of international law is justiciable if it bears on the application of domestic law. In determining the rights of parties seeking to review the arbitral tribunal’s ruling under the IAA, the HC had to first consider the international law issue of whether the PRC-Laos BIT applies to Macau. The HC also held that the court has discretion whether to admit fresh evidence based on reasonable conditions. As the Two Letters generally satisfied the three requirements of the Ladd v Marshall test (after the HC made the first condition less stringent), they were admitted.
The HC found the Two Letters were most crucial in determining whether the PRC-Laos BIT extends to Macau. In the HC’s view, the Two Letters clearly expounded the agreed position that the PRC-Laos BIT does not apply to Macau. The HC also adopted a restrictive reading of Art 8(3) of the PRC-Laos BIT and determined that the Tribunal did not possess subject-matter jurisdiction over Sanum’s expropriation claims because it was not a dispute over the amount of compensation.
(a) Justiciability of Arbitral Tribunal Decisions on BITs
The mere fact that the disputed decision stems from an investment treaty arbitration does not mean that the review of it concerns only questions of international law. The parties had invoked their right under s 10(3)(a) of the IAA, a Singapore statutory provision, to have the HC review the Tribunal’s ruling on jurisdiction. This issue evidently has a bearing on the application of Singapore law. The HC is unable to determine the parties’ rights without first considering the international law issue – whether the PRC-Laos BIT applies to Macau. The standard of review under s 10 of the IAA and Art 16(3) of the Model Law generally entails a fresh examination of the issues decided by the arbitral tribunal in its award. It is not a limited standard of review. The standard is the same regardless of whether the dispute is purely commercial or involves the interpretation of international treaties.
(b) Admittance of Further Evidence in the HC
Section 37(4) of the Supreme Court of Judicature Act governs the receipt of further evidence in appeals to the Court of Appeal. Fresh evidence can only be admitted if there are “special grounds”, which has been interpreted to mean the three Ladd v Marshall conditions. There is no equivalent provision for originating summons commenced in the High Court. In exercising its discretion whether to admit such evidence, the HC took the view that the three Ladd v Marshall requirements must be satisfied, with a slightly less stringent first condition. On the facts of the present case, the HC held that all three limbs of the Ladd v Marshall requirements were satisfied.
(c) The PRC-Laos BIT Does Not Extend to Macau
The HC observed that the Vienna Convention on the Law of Treaties 1969 (“VCLT“) and the Vienna Convention on the Succession of States in respect of Treaties 1978 (“VCST“) are rules of customary international law. They apply even if the parties involved are not parties to the conventions. The effect of Art 29 of the VCLT and Art 15 of the VCST is that a treaty is binding on the entire territory of each contracting state unless it (a) appears from the treaty; or (b) is otherwise established that the contracting states had intended otherwise. The HC held that the Two Letters satisfied the latter requirement. Read as a whole, they clearly expounded the PRC’s and Laos’ agreed position that the PRC-Laos BIT did not apply to Macau. The Letters also had the effect of establishing a subsequent agreement within the meaning of Art 31(3)(a) of the VCLT, and hence were taken into account.
In the HC’s view, the other BITs were generally of limited utility as no definitive conclusions could be drawn from comparing the nuances between each of them.
(d) Scope of the PRC-Laos BIT’s Dispute Resolution Clause
In determining the limited scope for submission of a dispute to arbitration, the HC examined the wording of Art 8 of the PRC-Laos BIT, in the context of the political environment in which the PRC-Laos BIT was signed. The HC recognised that both the PRC and Laos being communist states had concerns about their lack of control over international tribunal decisions in the early 1990s. The HC also highlighted that even though the purpose of the BITs is to promote investments, every BIT represents a negotiated bargain between two contracting states and should not be lightly displaced.
The above observations by the HC were made in obiter given that the HC had already decided that the PRC-Laos BIT does not apply to Macau.
The present case demonstrates that international law issues are justiciable by the Singapore Courts if they bear upon the application of Singapore law. The possible exceptions, however, may be when the issues raised concern solely about the exercise of sovereign or legislative prerogative in matters of high policy such as sovereign immunity, deployment of troops overseas, boundary disputes or recognition of foreign governments.
In determining the territorial scope of treaties, the intention of the parties to the treaty is most important. In addition, Article 31(3)(a) of the VCLT allows subsequent agreements to be taken into account. Parties relying on the provisions of BITs should therefore be mindful that these subsequent agreements could potentially affect the interpretation of the BIT provisions. As the VCLT and VCST are generally seen as rules of customary international law, they might still apply even if the parties are not parties to the conventions.
Parties relying on BITs should also note that every BIT represents a negotiated bargain between two contracting states and the provisions therein reflect the extent to which the sovereignty of each contracting state has been curtailed. The bargains struck in BITs should therefore not be lightly overlooked without due consideration of the context in which they are made.
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