In a closely-watched landmark judgment, the Singapore Court of Appeal has allowed a Macanese investor to proceed with expropriation claims against the Lao Government under a 1993 People’s Republic of China-Laos bilateral investment treaty (PRC-Laos BIT). In Sanum Investments Ltd v Government of the Lao People’s Democratic Republic  5 SLR 536, the Court of Appeal unanimously upheld the arbitral tribunal’s decision on jurisdiction, finding that the PRC-Laos BIT applies to Macau notwithstanding that Macau was not under PRC sovereignty when the treaty was entered into.
From 2007, Sanum (a Macanese investor) began investing in the gaming and hospitality industry in Laos through a joint venture with a Laotian entity. Disputes later arose between the Lao Government and Sanum which culminated in Sanum starting arbitration against the Lao Government in 2012 pursuant to the People’s Republic of China-Laos Bilateral Investment Treaty which entered into force from June 1, 1993 (PRC-Laos BIT). The PRC-Laos BIT is silent on its applicability to Macau which, as of 1993, was under the administrative control and sovereignty of Portugal. Following the handover in 1999, the PRC resumed sovereignty over Macau and established it as a Special Administrative Region. Although not an issue in this case, the PRC-Laos BIT is also silent on its applicability to Hong Kong.
Among other claims, Sanum alleged that the Lao Government had deprived it of the benefits to be derived from Sanum’s investments through the imposition of unfair and discriminatory taxes. Sanum’s expropriation claim was brought under Article 8(3) of the PRC-Laos BIT, which provides that “if a dispute involving the amount of compensation for expropriation cannot be settled through negotiation within six months as specified in paragraph 1 of [Article 8]”, the dispute “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 paragraph 2 of this Article [i.e. Laotian courts]”.
Before the tribunal, the Lao Government raised two jurisdictional objections
- The PRC-Laos BIT did not extend to Macau.
- Because Sanum sought both a determination as to (i) whether an expropriation had occurred; and (ii) the amount of compensation therefore falling due, Sanum’s claim was not arbitrable as it was beyond the permitted subject matter prescribed under Article 8(3) of the PRC-Laos BIT.
The tribunal, which designated Singapore as the seat of arbitration in consultation with the parties, found that it had jurisdiction to hear the claim because (i) the PRC-Laos BIT applies to Macau, and (ii) the subject matter of Sanum’s claim fell within Article 8(3) of the PRC-Laos BIT.
Applying the Moving Treaty Frontiers Rule (explained below), the tribunal found that there was nothing in the text of the PRC-Laos BIT and on the facts that otherwise established and thus displaced the presumption that the PRC-Laos BIT applies to Macau. Reading Article 8(3) in context, the tribunal also concluded that Sanum’s expropriation claims (i.e. (i) whether an expropriation had occurred; and (ii) the amount of compensation therefore falling due) fell within Article 8(3) as a narrow interpretation (i.e. that only disputes involving the amount of compensation for expropriation would be arbitrable) would leave Article 8(3) without effect.
The Lao Government challenged the tribunal’s jurisdiction in an application under s 10(3) of the International Arbitration Act (Cap. 143A, 2002 Rev Ed) (IAA) before the Singapore High Court. Where Singapore is the seat of arbitration, Singapore courts are obliged under s 10(3) of the IAA to conduct a de novo review of a tribunal’s jurisdiction in deciding any jurisdictional challenge – in this respect, there is no difference in the treatment of jurisdictional awards in commercial arbitration and investment treaty arbitration.
The High Court admitted two diplomatic communications (Notes Verbales), both post-dating the Award, which the Lao Government introduced as new evidence to show that both the PRC and Laos considered that the PRC-Laos BIT did not apply to Macau (2014 Notes Verbales) and held that the tribunal had no jurisdiction.
Sanum appealed against the High Court’s decision on jurisdiction and Laos sought to admit two further Notes Verbales to confirm the authenticity of the prior 2014 Notes Verbales (which was disputed in the lower court).