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China-Laos Investment Pact Applies In Casino Tiff, Court Says

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New York  — An investor from the Chinese territory of Macau that sued the Laotian government for effectively stealing its casino had its arbitration against the country resuscitated by Singapore’s highest court on Thursday, with the judges finding that Macanese companies are protected by China’s bilateral investment treaty with Laos even though both countries contended otherwise.

Sanum Investments Ltd., a Macanese entity with a Dutch parent company, struck a special tax deal with the Laotian government in 2007 as part of the process of building a gambling resort near the country’s border with Thailand. The company demanded arbitration after disputes over taxes and ownership came up, and a Singaporean tribunal found in 2013 that it had the authority to hear the dispute because the once Portuguese territory of Macau had become part of China in 1999.

Laos challenged the arbitrators’ decision, however, saying letters it exchanged with China in 2014 proved that neither country meant for their treaty to cover Macau when they signed in in 1993. A judge of Singapore’s high court accepted the letters and ruled in favor of Laos, but five judges of the Court of Appeal reversed him on Thursday, saying the letters didn’t outweigh a bedrock principle of international law known as the moving treaty frontier rule.

“In our judgment, there is nothing in the text, the objects and the purposes of the [China]-Laos BIT, or in the circumstances of its conclusion, that points to an intention to displace the MTF rule such that it would lead to the conclusion that the BIT does not apply to Macau,” the judges wrote.

The Laotian government has argued that documents including a 1987 declaration by China and Portugal and a 2001 report by the World Trade Organization supported the view that its BIT with China didn’t suddenly extend to Macau. The 2014 exchange of diplomatic letters, which it said took place after informal communications, simply confirmed what had been the case all along, Laos argued.

The city-state’s top court found otherwise, however. Both parties accepted that customary international law holds that a state’s treaty obligations stretch as far as its sovereignty does, even when its borders change, the judgment said. But the judges said the text of the China-Laos BIT didn’t purport to change that, nor did Laos “otherwise establish” that the rule didn’t apply as it normally would.

Although a lower court saw the 2014 letters as simply confirming what had been clear, the Court of Appeal said the older evidence had supported Sanum’s stance. Accordingly, the judges said, the 2014 letters should be granted “no weight.”

The function of evidence that came to light after arbitration starts, they wrote, “is to corroborate and to explain. To the extent that it contradicts what has been established by the pre-existing position to give the party seeking to rely on it an evidential advantage in its case, it should not be admitted.”

Chief Justice Sundaresh Menon wrote the judgment of the court, joined by Judges of Appeal Chao Hick Tin, Andrew Phang Boon Leong and Judith Prakash, and Judge Quentin Loh.

Sanum is represented by Alvin Yeo SC, Koh Swee Yen, Monica Chong Wan Yee and Mak Shin Yi of WongPartnership LLP.

Laos is represented by Cavinder Bull SC, Lim Gerui, Darryl Ho Ping and Eunice Chan Swee En of Drew & Napier LLC. The country was represented in arbitration by David J. Branson.

J. Christopher Thomas QC and Professor Locknie Hsu were amici curiae.

The case is Sanum Investments Ltd. v. Government of the Lao People’s Democratic Republic, civil appeal numbers 139/2015 and 167/2015 and judgment number [2016] SGCA 57, in the Singapore Court of Appeal.

 

Written by: Jack Newsham

Editing by: Bruce Goldman

Source: Law360