Singapore High Court exempts Lesotho from arbitral award
The High Court of Singapore has set aside an arbitral award issued to Swissbourgh Diamond Mines and South African investors who claim their mining leases had been expropriated by the Kingdom of Lesotho.
The claimants state that their mining leases were unlawfully expropriated in breach of Lesotho’s obligations under the treaty of the Southern African Development Community (SADC).
The case, according to international law firm, Hogan Lovells, is an important one as it concerns whether investors can use arbitration to resolve cases that were pending before the SADC Tribunal when it was dissolved by the SADC Summit in 2014.
The case is also of significance to those interested in investor-state arbitration in Singapore and beyond.
Singapore High Court Judge, Kannan Ramesh said that the Permanent Court of Arbitration (PCA) tribunal’s award had wrongly dealt with a dispute not contemplated by the arbitration agreement between the kingdom and the claimants, who included South African businessman Josias Van Zyl and representatives of certain South African trusts.
Regarding the award in question, the tribunal determined that Lesotho had violated its international obligations by voting with other African nations to dissolve the SADC tribunal, an intergovernmental socioeconomic organisation comprising 15 southern African states, while the Van Zyl claim was pending before that body.
The claimants had previously brought their claim over the terminated or otherwise cancelled mining leases before the SADC tribunal, which was established to ensure adherence to and interpret the SADC Treaty.
However, the SADC Tribunal could not hear the claims as it was dissolved and ultimately replaced in 2014 by a new SADC Tribunal whose jurisdiction did not extend to such disputes. It was acknowledged that this left a “legal vacuum” for pending cases.
Each member state was left to decide on an alternative forum for resolution of such cases, however, Lesotho did not do this and declined the claimants’ invitation for the claim to be resolved by arbitration before the PCA.
Judge Ramesh concluded that the investors’ right to submit disputes to the original SADC tribunal, which had been contained within an investment protocol signed by the SADC, did not amount to an “investment” as defined in that agreement. That meant that the PCA tribunal would have wrongly assumed jurisdiction over the dispute. Therefore he set the award aside in its entirety.
“As I observed earlier, investment treaties are fine-tuned to balance the interests of host states and investors, and it would be ultimately counteractive to a treaty’s objective and purpose to extend its protections to situations clearly beyond its contemplation,” the judge said in the opinion. “While the defendants are understandably disappointed with the turn their investment has taken, that cannot be cured by doing violence to a dispute resolution provision in the treaty.”
The judge noted in the opinion that this is the first case in Singapore in which a party sought to set aside an investor-state arbitral award on the merits.