Judgment of the High Court of Singapore on the Set Aside
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IN THE HIGH COURT OF THE REPUBLIC OF SINGAPORE [2017] SGHC 195 Originating Summons No 492 of 2016 Between Kingdom of Lesotho … Plaintiff And (1) Swissbourgh Diamond Mines (Pty) Limited (2) Josias Van Zyl (3) Trustees of the Josias Van Zyl Family Trust (4) Trustees of the Burmilla Trust (5) Matsoku Diamonds (Pty) Limited (6) Motete Diamonds (Pty) Limited (7) Orange Diamonds (Pty) Limited (8) Patiseng Diamonds (Pty) Limited (9) Rampai Diamonds (Pty) Limited … Defendants JUDGMENT [Arbitration] — [Award] — [Recourse against award] — [Setting aside] [Arbitration] — [Arbitral tribunal] — [Jurisdiction] [International law] — [International investment law] — [Bilateral investment treaty] — [Investor-State arbitration] TABLE OF CONTENTS INTRODUCTION............................................................................................1 BACKGROUND TO THE DISPUTE............................................................4 THE DEFENDANTS............................................................................................4 THE MINING LEASES AND THE TRIBUTING AGREEMENTS ...............................5 THE ALLEGED EXPROPRIATION OF THE MINING LEASES AND COURT PROCEEDINGS ..................................................................................................7 PROCEEDINGS IN THE SADC TRIBUNAL........................................................11 THE PCA ARBITRATION................................................................................15 Arbitral proceedings ................................................................................15 The Award ................................................................................................19 Interpretation of the Award......................................................................22 PARTIES’ CASES .........................................................................................23 PRELIMINARY OBJECTION: JURISDICTION OF THIS COURT ....25 PARTIES’ SUBMISSIONS .................................................................................25 MY ANALYSIS................................................................................................29 Section 10(3) of the IAA ...........................................................................29 Article 34(2)(a)(iii) of the Model Law .....................................................30 APPLICABLE LAW AND PRINCIPLES OF TREATY INTERPRETATION .....................................................................................37 FIRST OBJECTION: JURISDICTION RATIONE TEMPORIS..............46 PCA TRIBUNAL’S FINDINGS ..........................................................................47 THE DISSENTING OPINION.............................................................................48 PARTIES’ SUBMISSIONS .................................................................................50 MY ANALYSIS................................................................................................53 Past arbitral decisions .............................................................................53 (1) Lucchetti v Peru ..........................................................................54 (2) Mondev v USA.............................................................................59 (3) Chevron v Ecuador .....................................................................62 (4) ATA v Jordan...............................................................................66 (5) Jan de Nul v Egypt ......................................................................72 Relevant considerations for determining the distinctness of the dispute .75 Application to OS 492 ..............................................................................79 SECOND OBJECTION: WHETHER THERE WAS AN “INVESTMENT” – JURISDICTION RATIONE MATERIAE .................83 PCA TRIBUNAL’S FINDINGS ..........................................................................84 PARTIES’ SUBMISSIONS .................................................................................86 MY ANALYSIS................................................................................................90 The right was not an “investment” ..........................................................90 Bundle of rights ......................................................................................101 Defeasible benefit or advantage.............................................................104 Investment arising before Annex 1’s entry into force ............................106 THIRD OBJECTION: WHETHER THE INVESTMENT WAS “ADMITTED”..............................................................................................107 PCA TRIBUNAL’S FINDINGS ........................................................................107 PARTIES’ SUBMISSIONS ...............................................................................108 MY ANALYSIS..............................................................................................110 The meaning of “admission” .................................................................111 Whether the Mining Leases were admitted ............................................117 FOURTH OBJECTION: WHETHER THERE WAS AN “OBLIGATION IN RELATION TO” AN ADMITTED INVESTMENT...........................118 PCA TRIBUNAL’S FINDINGS ........................................................................118 THE DISSENTING OPINION...........................................................................119 PARTIES’ SUBMISSIONS ...............................................................................119 MY ANALYSIS..............................................................................................123 FIFTH OBJECTION: WHETHER THE DEFENDANTS EXHAUSTED LOCAL REMEDIES ...................................................................................133 PCA TRIBUNAL’S FINDINGS ........................................................................133 THE DISSENTING OPINION...........................................................................134 PARTIES’ SUBMISSIONS ...............................................................................136 MY ANALYSIS..............................................................................................140 General principles..................................................................................140 (1) Local remedies ..........................................................................142 (2) Exhaustion.................................................................................146 Application to OS 492 ............................................................................147 SIXTH OBJECTION: WHETHER THE DEFENDANTS WERE “INVESTORS”.............................................................................................156 PCA TRIBUNAL’S FINDINGS ........................................................................158 PARTIES’ SUBMISSIONS ...............................................................................159 MY ANALYSIS..............................................................................................161 CONCLUSION ON SETTING ASIDE......................................................167 COSTS OF THE ARBITRAL PROCEEDINGS ......................................169 This judgment is subject to final editorial corrections approved by the court and/or redaction pursuant to the publisher’s duty in compliance with the law, for publication in LawNet and/or the Singapore Law Reports. Kingdom of Lesotho v Swissbourgh Diamond Mines (Pty) Limited and others [2017] SGHC 195 High Court — Originating Summons No 492 of 2016 Kannan Ramesh J 4–6 January, 6, 15, 28 March; 4 April 2017 14 August 2017 Judgment reserved. Kannan Ramesh J: Introduction 1 This is the first case in Singapore in which an investor-State arbitral award on the merits is sought to be set aside. It engages intriguing questions of arbitral and international investment law which have yet to be considered by a Singapore court. 2 The Kingdom of Lesotho (“the Kingdom”) is a member of the Southern African Development Community (“the SADC”), an inter-governmental socio- economic organisation comprising 15 Southern African States. The SADC was established by the Treaty of the Southern African Development Community (17 August 1992) 32 ILM 116 (entered into force 30 September 1993) (“the SADC Treaty”) on 17 August 1992. The SADC Treaty also established a Kingdom of Lesotho v Swissbourgh Diamond Mines (Pty) Ltd [2017] SGHC 195 tribunal (“the SADC Tribunal”) to ensure adherence to and to interpret the Treaty, with the jurisdiction to adjudicate disputes and issue advisory opinions. One of the SADC’s objectives is to promote the economic growth of the region, to which end the SADC signed a Protocol on Finance and Investment (“the Investment Protocol”) on 18 August 2006 (entered into force 16 April 2010). Importantly, amongst the various protections that the Investment Protocol conferred on investors was the option of referring certain investor-State disputes to international arbitration, under Annex 1 to the Investment Protocol (“Annex 1”). Various fora were provided therein, one of which was the SADC Tribunal. This complemented the existing procedural protection of referring disputes to the SADC Tribunal under the provisions of the SADC Treaty. 3 The defendants in this application claimed that their investments, namely leases to mine certain territories in the Kingdom, were unlawfully expropriated by the Kingdom between 1991 and 1995. Having