Key developments of the past year
32 Are there any emerging trends or hot topics in your jurisdiction?
The EU-Singapore FTA and the IPA (signed in October 2018) are the first bilateral trade and investment agreements concluded between the EU and an ASEAN member state. This is a huge step forward in the promotion of trade and investments between Singapore and the EU. The IPA incorporates all aspects of the EU’s new approach to investment protection, including the Investor Court System. Once it comes into force, the IPA will replace BITs between Singapore and EU member states including Belgium-Luxembourg, Bulgaria, the Czech Republic, France, Germany, Hungary, Latvia, the Netherlands, Poland, Slovakia, Slovenia and the United Kingdom.
The European Parliament gave its consent to the EU-Singapore FTA and the IPA on 13 February 2019. The ratification process is under way for both the agreements. The IPA will come into force upon ratification by each EU member state.
The substantive provisions of the IPA include protection from expropriation, FET, MFN and NT. A party breaches FET obligations if its measures constitute:
- a denial of justice;
- a fundamental breach of due process;
- manifestly arbitrary conduct; or
- harassment, coercion, abuse of power or similar bad-faith conduct (article 2.4(2)).
Various footnotes in the IPA clarify the scope of the provisions for greater certainty (eg, footnote 9 of Chapter Two (Investment Protection) clarifies that the sole fact that the covered investor’s claim was rejected, dismissed or unsuccessful does not constitute a denial of justice).
Article 2.6 of the IPA provides that neither party shall directly or indirectly nationalise, expropriate or subject to measures having the effect of nationalisation or expropriation, the covered investments of covered investors except for:
- a public purpose;
- in accordance with due process of law;
- on a non-discriminatory basis; and
- against payment of prompt, adequate and effective compensation, which is the fair-market value immediately before expropriation or impending expropriation becoming public knowledge.
Valuation criteria used to determine fair market value may include going-concern value, asset value, including declared tax value of tangible property, and other criteria, as appropriate. Annex 1 further clarifies that expropriation includes both direct and indirect expropriation and Annex 2 clarifies that when Singapore is the expropriating party, any expropriation of land shall be upon the payment of compensation at market value in accordance with the Land Acquisition Act (Chapter 152), and should be for a public purpose or incidental to a public purpose.
The IPA’s unique feature is that it provides for a permanent Investment Court System (ICS), which is a two-tier tribunal consisting of the Tribunal of First Instance and an Appeal Tribunal. The Tribunal of First Instance consists of six members (two each nominated by the EU and Singapore, and two members who are neither nationals of a European Union member state nor Singapore, to be jointly nominated by the European Union and Singapore) appointed for an eight-year term (article 3.9). The IPA also provides for a permanent Appeal Tribunal with six members appointed for an eight-year term (article 3.10). A provisional award shall be issued by the Tribunal of First Instance within 18 months of the date of submission of the claim and if no party appeals within 90 days of the issue of the provisional award, the award shall become final (article 3.18). The grounds for appeal are:
- error in the interpretation or application of the applicable law;
- manifest error in the appreciation of facts, including the appreciation of relevant domestic law; and
- grounds provided in article 52 of the ICSID Convention in so far as they are not covered by the other two grounds in the IPA.
Grounds in article 52 of the ICSID Convention are as follows:
- the tribunal was not properly constituted;
- the tribunal manifestly exceeded its powers;
- corruption of a member of the tribunal;
- serious departure from a fundamental rule of procedure; and
- failure to state the reasons of the award.
The IPA also provides for a mediation mechanism (article 3.4 and Annex 6). There are specific provisions governing transparency of proceedings; article 3.16, Annex 8 deals with the ‘Rules on Public Access to Documents’, ‘Hearings’ and the possibility of third persons making submissions. All documents and hearings before the Tribunal will be publicly accessible and the Secretary-General of the United Nations, through the UNCITRAL Secretariat, is designated as the repository (article 5 of Annex 8).
In case of third-party funding, the IPA requires the disclosure of the name and address of the funder to the Tribunal and to the other disputing party, and the notification has to be made at the time of claim submission, or as soon as third-party funding is agreed upon, given or granted (as applicable) (article 3.8).
The decision of the Court of Justice of the European Union (CJEU) in Slowakische Republik (Slovak Republic) v Achmea BV, Case C-284/16 (6 March 2018) (Achmea) raised many questions regarding the compatibility of the Investor State Dispute Settlement (ISDS) mechanism in IIAs involving EU member states with EU law. Similar to the EU-Singapore IPA, the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada also provides for ICS. In its Opinion 1/17 dated 30 April 2019, the CJEU has held that ICS in the CETA is compatible with EU law. The aforementioned decision of the CJEU has provided much-required clarity on the compatibility of the ICS mechanism contemplated in other IIAs like the EU-Singapore IPA and the EU-Vietnam FTA, with EU law.
Judicial engagement in investor-state arbitrations
Singapore courts have heard two cases arising out of two Singapore-seated investor-state arbitrations. In Sanum Investments Ltd v Government of the Lao People’s Democratic Republic  5 SLR 536, which concerned a challenge to the applicability of the China-Laos BIT to Macau, the Court of Appeal had to examine state succession principles, and interpret fork-in-the-road clauses. The case of Kingdom of Lesotho v Swissbourgh Diamond Mines (Pty) Ltd ( 3 SLR 12) was the first case that concerned an application to set aside an award on the merits of an investment treaty arbitration seated in Singapore. The Singapore Court of Appeal affirmed the High Court’s decision to set aside the award in Swissbourgh Diamond Mines (Pty) Ltd v Kingdom of Lesotho ( 1 SLR 263) on the basis that, among other things, the investors did not have a protected investment as required under the dispute resolution provision of the relevant investment instrument and had failed to adequately exhaust local remedies. This case is yet another illustration of the Singapore court’s ability and willingness to deal with complex issues arising in investment treaty cases, and adds to the Singapore jurisprudence in such cases.
Proposed amendments to the IAA
The Ministry of Law, Singapore has issued a public consultation (26 Jun 2019 to 21 Aug 2019) proposing certain amendments to the IAA. These include:
- introduction of a default mode of appointment of arbitrators in multi-party situations;
- provision for parties, by agreement, to request the arbitrator or arbitrators to decide on jurisdiction at the preliminary stage;
- explicit provision recognising that an arbitral tribunal and the High Court have powers to enforce obligations of confidentiality in an arbitration;
- allowing a party to the arbitral proceedings to appeal to the High Court on a question of law arising out of an award made in the proceedings, provided parties have agreed to opt in to this mechanism;
- proposal that parties should have the option to limit or waive by agreement, the annulment grounds set forth in section 24(b) of the IAA and article 34(2)(a) of the UNCITRAL Model Law, but may not limit or waive by agreement, the annulment grounds in section 24(a) and article 34(2)(b). Such an agreement can only be made after the award has been rendered; and
- proposal to empower the court to make an order providing for costs of the arbitration following a successful application under section 24 of the IAA or article 34(2) of the UNCITRAL Model Law to set aside an award, whether wholly or in part.
The authors are grateful to their colleague Brunda Karanam for the considerable assistance given in respect of the research and preparation of this chapter.
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