Reed Smith Client Alerts

This article was originally published in Practical Law Arbitration. Reproduced with permission. This article is co-written by Reed Smith Pte Ltd and Resource law LLC who together form the Reed Smith Resource Law Alliance in Singapore. Reed Smith LLP is licensed to operate as a foreign law practice in Singapore under the name and style, Reed Smith Pte Ltd (hereafter collectively, “Reed Smith”). Where advice on Singapore law is required, we will refer the matter to and work with Reed Smith’s Formal Law Alliance partner in Singapore, Resource Law LLC, where necessary.

In Swissbourgh Diamond Mines (Pty) Ltd and others v Kingdom of Lesotho [2018] SGCA 81, the Singapore Court of Appeal dismissed an appeal by South African investors against a lower court’s decision to set aside an arbitration award, in favour of them, against the Kingdom of Lesotho.

Auteurs: Kohe Hasan Ang Liseah

* Kohe Hasan is a Partner in Reed Smith's Singapore office and a Director of Resource Law LLC. Liseah Ang is an Associate at Resource Law LLC.

Speedread

The Singapore Court of Appeal has dismissed an appeal by South African investors against a lower court’s decision to set aside an arbitration award, on jurisdiction and merits, rendered by an ad hoc international arbitration tribunal constituted under the auspices of the Permanent Court of Arbitration (PCA) and seated in Singapore. The court further held that the PCA tribunal had no jurisdiction to hear the appellants’ investment treaty claim against the Kingdom of Lesotho for participating in the disbanding of a dispute resolution body established by a multilateral treaty.

Although the decision in the case is fact-specific, it indicates the willingness of Singapore courts to undertake a critical review of investor-state awards where the seat of the arbitration is Singapore. The Singapore courts’ comprehensive review of the arguments put forth by both parties serves to provide valuable guidance for future cases in Singapore and beyond. (Swissbourgh Diamond Mines (Pty) Ltd and others v Kingdom of Lesotho [2018] SGCA 81 (27 November 2018).)

Background

Article 28 of Annex 1 to the Investment Protocol, which entered into force on 16 April 2010, reads as follows:

"Article 28

Settlement of Investment Disputes

1. Disputes between an investor and a State Party concerning an obligation of the latter in relation to an admitted investment of the former, which have not been amicably settled, and after exhausting local remedies shall, after a period of six (6) months from written notification of a claim, be submitted to international arbitration if either party to the dispute so wishes.

2. Where the dispute is referred to international arbitration, the investor and the State Party concerned in the dispute may agree to refer the dispute either to:

(a)The [South African Development Community] tribunal;

(b)The International Centre for the Settlement of Investment Disputes (having regard to the provisions, where applicable, of the ICSID Convention and the Additional Facility for the Administration of Conciliation, Arbitration and Fact-Finding Proceedings); or

(c)An international arbitrator or ad hoc arbitral tribunal to be appointed by a special agreement or established under the Arbitration Rules of the United Nations Commission on International Trade Law.

3. If after a period of three (3) months from written notification of the claim there is no agreement to one of the above alternative procedures, the parties to the dispute shall be bound to submit the dispute to arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law as then in force. The parties to the dispute may agree in writing to modify these Rules.

4. The provisions of this Article shall not apply to a dispute, which arose before entry into force of this Annex."

Article 28(1) of Annex 1 sets out the requirements which have to be satisfied for the PCA tribunal to assume jurisdiction over the claim, and thus serves as the benchmark against which acceptance of the Kingdom’s consent to arbitration is to be measured. It contains at least three key jurisdictional requirements: 

  • There must be an “investment”.
  • The investment must have been “admitted”.
  • There must be a dispute which “concern[s] an obligation of the [Kingdom] in relation to [that] admitted investment”.