Kingdom of Lesotho v Swissbourgh Diamond Mines (Pty) Limited and others

31 August, 2017

Sam Wordsworth QC, together with Paul Tan of Rajah and Tann, acted for the Kingdom of Lesotho in the first ever application in Singapore for an investor-State arbitral award on the merits to be set aside. The decision engaged wide-reaching issues on international law and also Singapore’s international arbitration law that had yet to be considered by the Singapore courts.

The defendants in the challenge proceedings had claimed that their investments in the Kingdom of Lesotho had been unlawfully expropriated, and launched a claim before the Southern African Development Community (“SADC”) Tribunal. However, the tribunal was subsequently shut down, and the defendants brought a claim before an investment treaty tribunal administered by the Permanent Court of Arbitration (“PCA”) that the Kingdom had breached its obligations under the SADC Treaty and Annex 1 of the SADC Protocol on Finance and Investment by contributing to the shutting down of the SADC tribunal.

The PCA Tribunal found in favour of the defendants and granted an award directing, by way of the appropriate remedy, that the parties constitute a new tribunal to hear the expropriation claim.

The Kingdom sought to have the Award set aside on the basis that the PCA Tribunal lacked jurisdiction or that the Award exceeded the scope of the submission to arbitration.

The Singapore High Court granted the Kingdom’s application, setting aside the Award in its entirety in exercise of its power of set aside under Article 34(2) of the UNCITRAL Model Law (applicable by virtue of Singapore’s International Arbitration Act).

Much of the decision rested on the Court’s reading of Annex 1 of the SADC Protocol. Notably, Article 28(1) of Annex 1 provided that 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… be submitted to international arbitration”.

The Kingdom’s challenge to the jurisdiction of the PCA Tribunal was based on a number of grounds, including that:

(i)            The right to submit disputes to the SADC Tribunal was not an “investment” under Article 28(1) of Annex 1, nor was it “admitted”;

(ii)           The dispute over shutting down the SADC Tribunal did not concern any obligation of the Kingdom in relation to the purported investment;

(iii)          The defendants failed to exhaust local remedies; and

(iv)            The Protocol did not protect the investments of domestic investors.

The challenge was successful in relation to each of the above.

Read the judgment in full here.