KINGDOM OF LESOTHO V.

SWISSBOURGH DIAMOND MINE (PTY) LIMITED:

A DE-NOVO APPROACH TOWARDS DOMESTIC JURISDICTION IN INVESTOR-
STATE DISPUTES

- Adv. Malcolm Katrak*

ABSTRACT

On 14th August 2017, Justice Kannan Ramesh delivered a judgment in the case of Kingdom
of Lesotho v. Swissbourgh Diamond Mine (Pty) Limited and Others. This was the first case in
Singapore where an investor-State arbitral award was set aside on merits by the High Court
of Singapore. Swissbourgh had brought a claim against the Kingdom of Lesotho before the
Permanent Court of Arbitration (PCA) for unlawfully expropriating the investments in the
form of mine leases in the Kingdom. The PCA Tribunal ruled in favour of Swissbourgh,
which led the Kingdom to file an Originating Summons in the Court in Singapore. The case
raises several intriguing questions of arbitral and international investment law; the first being
the Singapore High Court’s jurisdiction to set aside a purely International dispute with two
international parties through domestic laws, second being the analysis on the merits of the
dispute inter alia aspects of expropriation and investment and the third being the
interpretation of the treaties as a whole. It is a general rule that investments shall not be
nationalised or expropriated in the territory of any state party except for a public purpose,
under due process of law and subject to payment of compensation. The judgment also
analyzes the holistic ambit of Investment Protection and generally what constitutes an
investment. The paper will analyze the judgment of the Singapore Court and critique on the
major component of the jurisdiction of the Court to set aside the award on its merit. It also
elucidates the procedure of the Model Laws and the International Arbitration Act of
Singapore which according to the author, bar the Singapore Court to take cognizance of the
PCA Tribunal’s award.

Keywords: Permanent Court of Arbitration, SADC, Swissbourgh, Kingdom of Lesotho

* Adv. Malcolm Katrak is a Law Clerk to Justice (Retd.) S. N. Variava, Former Judge, Supreme Court of India.
In the past, he has worked under Mr. D. J. Khambata, Member, Singapore International Arbitration Centre’s
Court of Arbitration and Justice S. J. Kathawalla, Judge, Bombay High Court. The author may be contacted at
malcolmkatrak@yahoo.in or 08097339076.

Electronic copy available at: https://ssrn.com/abstract=3568935

 I. INTRODUCTION

The rapid change in the structures of bilateral and multilateral investment treaties has brought
in new investments and with them, new claims. Multinationals have been woolly protected by
the treaties and hence, the right to claim compensation has arisen with extreme changes in
government policy. Overtime contentious arbitrations have increased whether through the
interpretations of bilateral investment treaties (hereinafter referred to as ‘BITs’) or
exploitation of Investor State Dispute Settlement (ISDS) clauses. The vast majority of these
arbitrations in the international fora are due to difficulties arising with the government
measures of direct expropriation or nationalisation. 1 The treatment of foreign investment is
defined as the set of principles and rules of international and national law governing
international investment, since its creation until its liquidation. Principles and rules of
international law can be both from non-conventional sources and, in particular, from the
general principles of international law or conventional sources, treaties and agreements, both
multilateral and bilateral.2 The International Court of Justice (ICJ) and its predecessor
Permanent Court of International Justice (PCIJ) have mentioned that expropriation or
nationalization should follow the principle of compensation; the ICJ in the case of Barcelona
Traction3 and PCIJ in the Factory at Chorzów4 and the case of Oscar Chinn5.

These investment treaties generally include provisions to curb such malice and by which,
each state party to the treaty undertakes to give investors from the other States involved fair
and equitable treatment, full protection and security, prompt, adequate and effective
compensation in the event of expropriation. Although, most of these treaties contain broad
definitions, which the corporations normally use to bring claims to the international arbitral
tribunals and this leads the parties to have Joint Interpretive Definitions.6

1
See Tecmed v. Mexico (2006) 10 ICSID Reports 54
2
CARREAU DOMINIQUE, JUILLARD PATRICK, DROIT INTERNATIONAL ÉCONOMIQUE, 3rd Edition,
(Dalloz, Paris, 2007), p. 461
3
[1970] ICJ 1
4
(1928) PCIJ Series A No. 9
5
1934 PCIJ (ser. A/B) No. 63
6
SHAHEEZA LALANI, RODRIGO POLANCO, THE ROLE OF STATE IN INVESTOR STATE IN
INVESTOR-STATE ARBITRATION, (Nijhoff International Investment Law Series 3, Brill 2014)

2
One such arbitral proceedings is that of Swissbourgh Diamond Mines (Pty) Ltd. and Others v.
Kingdom of Lesotho brought before the Permanent Court of Arbitration (hereinafter referred
to as ‘PCA Tribunal’).7 Broadly speaking, the claimants claimed compensation from the
Kingdom of Lesotho (hereinafter referred to as ‘Kingdom’) as their investments, namely
leases to mine certain territories in the Kingdom, were unlawfully expropriated by the
Kingdom. The PCA Tribunal elected Singapore as the seat of arbitration and rendered two
awards in the favour of Swissbourgh: a partial final award on jurisdiction and merits, and a
final award on costs. The award concluded that the Kingdom had breached various
obligations under the multilateral treaty namely Southern African Development Community
Treaty (hereinafter referred to as ‘SADC’). Thereafter, the Kingdom brought an Originating
Summons (OS) No. 492 of 2016 before the Singapore High Court to set aside the award in its
entirety on the basis that the PCA Tribunal lacked jurisdiction and that the award exceeded
the scope of submission.

The OS No. 492 was brought before Justice Kannan Ramesh and intriguing propositions were
put forward.8 This was the first case in Singapore in which an investor-State arbitral dispute
award was sought to be set aside on its merits. The Honourable judge set aside the award in
its entirety and observed that the investment treaties are fine-tuned to balance the interests of
host States and investors, and it would be ultimately counteractive to treaty’s object and
purpose to extend its protections to situations clearly beyond its contemplation.9

Ideally, a State may do whatever it wants in its territory and the right to control its economic
affairs is an inherent aspect of state sovereignty. The parties chose an ad-hoc arbitral tribunal
under Article 28(2) of Annex 1 of the SADC Protocol on Finance and Investment (hereinafter
referred to as the ‘Investment Protocol’) to submit their disputes to the PCA Tribunal.10
Further, the Singapore Court analysed provisions of the International Arbitration Act

7
The PCA Tribunal rendered a partial final award on jurisdiction and merits on 18th April 2016 and a final
award on costs on 20th October 2016
8
See Kingdom of Lesotho v. Swissbourgh Diamond Mines (Pty) Limited and others [2017] SGHC 195
9
Id.at 168
10
SADC Protocol on Finance and Investment, 18th August 2006 (entered into force 16th April 2010)

3
(hereinafter referred to as ‘IAA’) and Articles of the Model Law for the purposes of deciding
jurisdiction.11 This paper will analyse the propositions laid before the Court in OS No. 492 by
the parties with respect to jurisdiction of the Singapore Court. As regards the submission of
disputes and challenge to jurisdiction of the PCA Tribunal on the framework of three core
elements - jurisdiction ratione temporis, jurisdiction ratione materiae and jurisdiction ratione
personae, the author will try to provide a brief of the issue albeit the same does not constitute
the essence of this paper. Justice Petrus Millar Neinaber, nominated Arbitrator by the
Kingdom, dissented in the PCA Tribunal correctly; he analyzed the situation of the shuttering
dispute arisen between the parties and the dispute of expropriation. He thought that the true
dispute was the expropriation dispute, which was beyond the PCA Tribunal’s jurisdiction.
Through this paper, the author aims at critiquing the arguments put forward by the Kingdom
and accepted by the Singapore court to bring the dispute under its ambit. To facilitate this, the
author has tried to analyze the dispute holistically including the arguments made in front of
the PCA Tribunal, the award passed by the PCA Tribunal and particular emphasis on Justice
Neinaber’s dissent.

II. OVERVIEW OF THE CASE

For the purposes of brevity, it is necessary to understand the factual scenario of the case in
two halves. The first being the alleged expropriation dispute which arose against the
Kingdom prior to the proceedings in the SADC Tribunal and the second being the
proceedings before the SADC Tribunal. The expropriation proceedings in the domestic
sphere i.e. Courts of Lesotho were particularly against the cancellation of mining leases and
expropriation through legislations passed by the Kingdom. On the other hand, the
proceedings before the SADC Tribunal can be divided into two parts: the first being the
procedure before the SADC Tribunal by following the provisions of the SADC Treaty and
the second being the procedure of arbitration before the PCA Tribunal through the SADC
Investment Protocol.

11
The Court laid its emphasis on Article 34(2)(a)(iii) of the Model Law read with Section 3 of the IAA to bring
the dispute under its ambit.

4
The Kingdom is a member of the Southern African Development Community, which is an
intergovernmental socio-economic organisation comprising of 15 Southern African States.12
The SADC was established by the Treaty of the Southern African Development Community
on 17th August, 1992. Thereafter, on 18th August 2006, the SADC signed a Protocol on
Finance and Investment, to promote economic growth of the region. 13 However, this was
entered into force only on 16th April 2010. It is through Article 28 (2) (c) of Annex 1 of this
protocol that an ad-hoc arbitral tribunal was formulated for the purposes of resolving disputes
between the Kingdom and Swissbourgh. On the other hand, the defendant in OS No. 492, i.e.
Swissbourgh Diamond Mines, was a company registered under the laws of the Kingdom of
Lesotho. In 1987, Swissbourgh had submitted applications first for prospecting leases and
then for five mining leases in five different regions of the Kingdom: the Matsoku, Motete,
Rampai, Orange and Patiseng. Thereafter, several tributees were formulated to carry out
works in these regions, which resulted in tributees sub-leasing the Mining Leases provided to
Swissbourgh.14 During Swissbourgh’s application in 1986 for mining leases, the Kingdom
and South Africa entered into a large-scale commercial joint venture being the Lesotho
Highlands Water Project (LHWP). Pursuant to this, the Lesotho Highlands Development
Authority (LHDA) was created to implement, operate and maintain the LHWP. Due to a
tumultuous political environment in the Kingdom, Colonel Elias P Ramamema became the
country’s new leader. Thereafter, the expropriation disputes between the Kingdom and
Swissbourgh started; one alleged reason for the same was the interest of Kingdom in the
mining areas leased to Swissbourgh.15

Mid-1991 saw the Kingdom’s Commissioner of Mines issue notices to Swissbourgh alleging
that it had breached its obligations under the Mining Leases. The Commissioner thereafter
ordered Swissbourgh to remove their property from the mining areas and proceeded to cancel
the mining licences. The tributees and Swissbourgh obtained an order in 1995 from the High
Court to set aside the cancellation of Mining Leases in 1991. The 1991 proceeding was

12
Treaty of the Southern African Development Community, 17th August 1992 (entered into force on 30th
September 1993)
13
Supra fn 10
14
Supra fn 8 at pg. 7
15
Id. at 8, 10, 12

5
swiftly followed by the Kingdom granting leases of the mining areas to LHDA for the
purposes of water storage and electricity generation. Several litigations followed before the
High Court wherein the prayers asked for included the cancellations of Mining Leases.

On 20th March 1992, the Kingdom’s Military Council passed the Revocation of Specific
Mining Leases Order of 1992, which revoked the mining leases as well as the Tributing
Agreements.16 Although the order of 1992 was considered null and void by the Chief Justice
of High Court and affirmed by the Court of Appeal in 1995, attacks on Swissbourgh were
occurring on a monthly basis.17 One such act included the Kingdom enacting two pieces of
legislation, the Lesotho Highlands Development Authority (Amendment) Act 18 and the
Lesotho Highlands Development Authority (Validation of Activities in respect of Phase 1A
and Phase 1B Scheme) Act.19 The Acts enabled the Kingdom to expropriate any area that fell
within the LHWP, subject to compensating the holders of the valid mine licences. The
Rampai area was first to be expropriated by October 1995 others swiftly followed. In 1996,
Swissbourgh commenced proceedings against the Kingdom to recover damages in respect of
the mining licences and another proceeding in 1998 was followed for the Rampai
expropriation. On 28th April 1999, the Lesotho High Court decided that the Rampai Lease
was void ab initio and on appeal, the Court of Appeal affirmed the decision of the High
Court. Swissbourgh did not proceed with the 1996 proceedings as according to them the same
would have suffered the same defect as Rampai Lease. With no other resort, Swissbourgh
requested the Government of South Africa to intervene and exercise diplomatic protection
with regard to their investments and even approached the Supreme Court of Appeal of South
Africa albeit in vain.20

16
Kingdom of Lesotho Military Council’s Revocation of Specific Mining Leases Order of 1992.
17
See, For a detailed report of the Swissbourgh case 1991-96(1) LLR 27 (CA)
18
Lesotho Highlands Development Authority (Amendment) Act (No. 5 of 1995)
19
Lesotho Highlands Development Authority (Validation of Activities in respect of Phase 1 A and Phase 1 B
Scheme) Act (No. 6 of 1995)
20
Van Zyl v Government of RSA [2007] SCA 109 (RSA)

6
II.1. WORKING OF THE SADC:

There were several procedural issues with the SADC from the date of its signing on 17 th
August 1992. The major issue was the procedure of dispute resolution. Article 9 (1) (g) of the
SADC Treaty established the SADC Tribunal, however, no judges were appointed to the
Tribunal until 2005. In 2009, Swissbourgh brought their claims under the SADC Treaty for
the violations of Article 4 (c) and Article 6 of the SADC Treaty. These Articles are broad in
nature and lay down general undertakings to be followed by the Member-States. Whilst the
Tribunal under Article 9 (1) (g) was sub-judice on the matter, the SADC member states
passed the Investment Protocol which entered into force on 16th April 2010.

The SADC Tribunal was heavily criticized in its decision in Campbell v. Zimbabwe, which
led Zimbabwe to propose in the SADC Summit the cancellation of the renewal of the terms
of judges of the SADC Tribunal, who were to retire in October 2010. 21 This resulted in the
stagnation of the SADC Tribunal and left the office inoperable. The Justice Committee
advised the SADC Council of Ministers and the SADC Summit that the dissolution of the
SADC Tribunal has left a ‘legal vacuum’. This led the SADC Summit to unanimously adopt
a new Protocol on the SADC Tribunal that restricted the Tribunal’s jurisdiction to inter-State
disputes and abolished jurisdiction over cases brought by individuals or legal entities other
than States on 18th August 2014.22 The SADC Tribunal wanted to determine the Swissbourgh
claim on an urgent basis which led Swissbourgh to commence arbitral proceedings against
the Kingdom by a Notice of Arbitration, pursuant to Article 28(1) of Annex 1 of the
Investment Protocol.23

21
Mike Campbell v. Republic of Zimbabwe [2008] SADCT 2; See generally, Precious Ndlovu, Campbell v.
Zimbabwe: A moment of truth for the SADC Tribunal, 11 South African Development Community Law Journal
Trust (2011)
22
This SADC Protocol was never entered into force thus having no validity.
23
Article 28(1) of Annex 1 of the Investment Protocol reads as follows,
‘Disputes between an investor and a State Party concerning an obligation of the latter in relation to
an admitted investment in the former, which have not been amicably settled, and after exhausting
local remedies shall, after a period of six months from written notification of a claim, be submitted to
international arbitration of either party to the dispute so wishes.’

7
II.2. AMBIT OF SECTION 28 (2): THE SHUTTERING AND EXPROPRIATION
DISPUTE:

The Investment Protocol along with 11 annexures was signed on 18th August 2006 and
entered into force on 16th April 2010. Article 28 was subsequently utilized by Swissbourgh to
commence arbitral proceedings before the PCA Tribunal. The main issue before the PCA
Tribunal and the Singapore Court was the analysis of Article 28 of Annex 1 of the SADC
Investment Protocol. Essentially, the dispute boiled down to expropriation claims and
therefore, Swissbourgh could not have brought this claim under Article 28 in any manner
whatsoever. The dispute, with respect to the expropriation claim, arose before the SADC
Investment Protocol was brought into force. Article 28 (4) plays a vital role in analyzing
whether the expropriation dispute could have been brought before the PCA Tribunal. Article
28 (4) of Annex 1 reads as follows,

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

Thereby, the expropriation dispute was never arbitrable under Article 28 of Annex 1 of the
SADC Investment Protocol.

The PCA Tribunal, therefore, analysed the particular claim as a shuttering dispute. Unlike the
expropriation dispute, the shuttering dispute arose post 2010 due to the shutting down of the
SADC Tribunal because of the Kingdom. Thus, the rationae temporis of the PCA Tribunal’s
jurisdiction was the shuttering dispute. However, the PCA Tribunal went further and outside
the submission to facilitate, under the guise of shuttering dispute, the expropriation dispute. 24
Justice Nienaber authored a strong dissenting opinion to this. He disagreed that the PCA
Tribunal had jurisdiction. He thought that the dispute was properly characterized as the
expropriation dispute, which pre-dated the entry into force of the Investment Protocol, rather
than the shuttering dispute. The PCA Tribunal, thus, lacked jurisdiction rationae temporis.25

24
Supra fn 8, passim
25
Id at 21

8
In investment treaty disputes, the tribunal’s jurisdiction can be analyzed within the
framework of three core elements: (i) The Tribunal lacks jurisdiction rationae temporis if the
dispute falls foul of temporal restrictions in the investment treaty. (ii) A dispute is beyond the
tribunal’s jurisdiction rationae materiae if its subject matter is not capable of being submitted
under the investment treaty (iii) The tribunal lacks jurisdiction rationae personae if one of the
parties before it lacks standing in the arbitration proceedings.26 Justice Kannan ruled that the

“(a) PCA Tribunal lacked jurisdiction rationae temporis over the dispute, which arose
before entry into force of Annex 1 and thus fell foul of Article 28(4) of Annex 1. (b)
Secondly, the PCA Tribunal lacked jurisdiction rationae materiae because the dispute
did not have the necessary connection to an “investment” within the meaning of Article
28(1) of Annex 1. (c) Thirdly, the defendants’ purported investment had not been
“admitted” within the meaning of Article 28(1). (d) Fourthly, the dispute was not one
which concerned an “obligation” of the Kingdom “in relation to” the defendants’
purported investment within the meaning of Article 28(1). (e) Fifthly, the dispute was
not one in relation to which the defendants had exhausted local remedies, which was
requirement under Article 28(1) (f) Sixthly, the PCA Tribunal lacked jurisdiction
rationae personae over Swissbourgh and the Tributees, who were not capable of
qualifying as “investors” for the purposes of Article 28(1) of Annex 1 and thus lacked
standing to commence the arbitration.”

Justice Kannan was right in setting aside the award on its merit in its entirety as the
arbitrators had gone beyond the submission and thereby lacked jurisdiction. However, the
question which remains unanswered is whether the Singapore Court had jurisdiction
themselves to set aside the PCA Tribunal’s award in the first place.

26
GARY BORN, INTERNATIONAL COMMERCIAL ARBITRATION, III (Wolters Kluwer, 2nd Edn., 2014)

9
 III. ANALYSING THE JURISDICTION OF THE SINGAPORE COURT:

In Singapore, an application to set aside the arbitral award is made by an Originating

Summons.27 The procedure to be followed is in Order 69 Rule 2 of the Rules of the Court
which allows the filing of the application to a Judge, to appeal against the ruling of the
arbitral tribunal under Section 10 of the Act or Article 16 (3) of the Model Law or to set aside
an award under Section 24 of the IAA or Article 34 (2) of the Model Law. 28 It is argued that
none of the conditions are satisfied to bring the case before Justice Kannan through neither
Section 10 of the IAA nor Article 34 (2) of the Model Law. Swissbourgh challenged the
Kingdom’s ability to bring the present action under Section 10(3) of the International
Arbitration Act or Article 34 (2) (a) (iii) of the Model Law.

Section 10 (3) of the IAA states that, ‘If the arbitral tribunal rules – (a) on a plea as a
preliminary question that it has jurisdiction; or (b) on a plea at any stage of the arbitral
proceedings that it has no jurisdiction, any party may, within 30 days after having received
notice of that ruling apply to the High Court to decide that matter.’ This section could not
apply to an arbitral award dealing with both jurisdiction and merits. The award passed by the
PCA Tribunal rendered two awards, one of which was a partial final award on jurisdiction
and merits.

To bring the PCA Tribunal’s award under this Section, it must be shown that the award was
more in the nature of an interim award which dealt with aspects of jurisdiction and did not
delve into the merits of the case. However, it can be argued that the true dispute was the
expropriation dispute and without any express ruling on the same, the PCA Tribunal
impliedly did not go into the merits of the case.29

27
AQZ v. ARA [2015] 2 SLR 972
28
Id.
29
The PCA Tribunal used the Expropriation dispute as a secondary dispute to bring the same under the ambit of
the Shuttering dispute

10

Electronic copy available at: https://ssrn.com/abstract=3568935

The Kingdom further argued that the award had been issued after the first phase of the
bifurcated proceedings, which dealt with “jurisdiction and liability” as opposed to the
potential second phase concerning remedies.30 This argument does not hold water for two
reasons. Firstly, the “Partial Final Award on Jurisdiction and Merits” was neither preliminary
nor limited to a ruling on jurisdiction. The PCA Tribunal analysed the circumstances, which
includes the alleged breach by the Kingdom and whether Swissbourgh can be recounted as
investors. After pondering on these issues, the PCA Tribunal came to the conclusion that the
Kingdom had violated the provisions of the SADC Treaty. Secondly, assuming even if there
is a marginal discussion of the issues of liability, the same award cannot be brought before
the High Court. In the case of AQZ .v ARA, Judith Prakash J. precluded the plaintiff from
relying on Section 10 (3) of the IAA to set aside an award which predominantly concerned
jurisdiction but also marginally addressed the issues of liability. 31 Section 10 (3) of the IAA is
derived from Article 16 (3) of the Model Law and does not apply to an award that deals with
the merits of the dispute, however marginally. It can be further argued that the Tribunal’s
decision on jurisdiction where there are substantial questions of fact as to the scope of the
arbitration agreement and even if a full hearing has taken place before the arbitrators, the
Court should not be allowed to reopen evidence.32 Section 10 (3) works as a discretionary
power based on the ruling of the tribunal. Rightly so, the Court used its discretion to not
allow the Kingdom to proceed with Section 10 (3) of the IAA to grant reliefs in domestic
court.

In Swissbourgh, the Court did not rely on Section 10 (3) to reason its jurisdiction. Justice
Kannan refused to set aside the Award under Section 10 (3) of the IAA. However, he added
that he had jurisdiction under Article 34 (2) (iii) of the Model Law read with Section 3 of the
IAA. Section 34 (2) (a) (iii) of the Model Law states that an arbitral award may be set aside
on proof that:

“The award deals with a dispute not contemplated by or not falling within the terms of
the submission to arbitration, or contains decisions on matters beyond the scope of the
submission to arbitration, or contains decisions on matters beyond the scope of the

30
Supra fn 8 at 26
31
‘Redfern and Hunter analyzed the corresponding provision of Article 16(3) of the Model Laws’ REDFERN
AND HUNTER, INTERNATIONAL ARBITRATION (Oxford University Press, 6th Edn., 2015)
32
Supra fn 27

11

Electronic copy available at: https://ssrn.com/abstract=3568935

 submission to arbitration, provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted, only that part of the award
which contains decisions on matters not submitted to arbitration may be set aside.”

Justice Kannan’s reasoning for taking the dispute through Section 34(2)(a)(iii) of the Model
Law was that Article 28 (4) of Annex 1 explicitly barred the submission of disputes which
have arisen prior to the coming into force of the Investment Protocol. The parties had
submitted their dispute to an ad hoc tribunal pursuant to Article 28 (2) (c) of Annex 1 of the
Investment Protocol. The first limb of Article 34 (2) (a) (iii) concerns the situation where “the
award deals with a dispute which is not contemplated by or not falling within the terms of the
submission to arbitration.”33 Thus, according to the Honourable Judge, the dispute was
beyond the bounds of the arbitration agreement and falls outside “the terms of the submission
to arbitration” which therefore engages the first limb of Article 34(2)(a)(iii). His reliance is
on Born’s International Commercial Arbitration Treatises, “An award will also be subject to
annulment if an arbitral tribunal purports to decide issues that are not within the scope of the
parties arbitration agreement… it is sometimes suggested that the excess of authority basis
for annulment under Article 34(2)(a)(iii) of the Model Law and similarly worded legislative
provisions does not apply to claims that the award decided issues outside the scope of the
arbitration agreement (as distinguished from claims outside the scope of the parties’
submissions in the arbitration)”34

The opposing argument must start with the analysis of the said Article. In the Court of
Appeal’s decision of CRW Joint Operation v. PT Perusahaan Gas Negara (Persero) TBK,
the Court had an opportunity to analyze the said section.35 The court said that Article 34 (2)
(a) (iii) is not concerned with the situation where an arbitral tribunal did not have the
jurisdiction to deal with the dispute which it purported to determine. Rather, it applies where
the arbitral tribunal improperly decided matters that had not been submitted to it or failed to
decide the matters that had been submitted to it or failed to decide matters that had been
submitted to it. Thus, a general understanding would mean that the said article refers to
33
Supra fn 8 at 30
34
Supra fn 26 at 3295
35
CRW Joint Operation v. PT Perusahaan Gas Negara (Persero) TBK [2011] 4 SLR 305

12
situation where the arbitral tribunal exceeded/failed to exercise the authority which the parties
had consensually provided. The decision of CRW Joint Operation was negated by Justice
Kannan as mere obiter dicta. Although he further added that the words ‘ambit of reference’
used in the CRW Joint operation judgment do not only refer to what the parties actually
submit for decision but also the reference of the arbitration agreement and its bounds.36 This
interpretation is fallacious and defeats the purpose of the said article. The article can be
merely interpreted to conclude that the arbitral tribunal exceeded its jurisdiction and acted
beyond the powers provided to it under the arbitration agreement.

Swissbourgh relied on Article V (1) (c) of the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards. This is a corresponding provision to Section 31 (2)
(d) of the IAA albeit the Convention pertains to the setting aside of an award while the latter
concerns the refusal to recognise or enforce an award. The said section assumes that the
tribunal has the requisite jurisdiction over parties and that it relates to the scope of the
arbitration agreement. Through this, the award can be set aside only where it decides matters
exceeding the scope of the dispute which the parties submitted for arbitration, but not where
the entire submitted issue itself exceeds the scope of the arbitration agreement as in the
Swissbourgh case.37

IV. ANALYSIS OF THE INVESTMENT PROTOCOL AND THE SADC

TREATY:

McLachlan, Shore & Weiniger analyze the following strata in an investor-State treaty
arbitration. Firstly, the law applicable to the substance of the dispute (lex causae); this is the
substantive law applied in the treaty interpretation of the treaty is International law. Secondly,
the law applicable to the arbitration agreement between the investor and the State; this,
according to McLachlan, is relevant where the arbitration is found in an investment contract
to which the investor and the States are parties. Thirdly, the law applicable to the arbitration

36
Supra fn 8 at 33
37
See also, Aloe Vera of America, Inc. v. Asianic Food (S) Pte Ltd. and Another [2006] 3 SLR(R) 174

13
procedure itself (lex arbitri).38 The law governing the arbitration procedure would be the
municipal law. Applying the Singapore law as the “lex arbitri”, the arbitration was one which
can be categorized as International within the meaning of Section 5 (2) of the IAA. It cannot
be denied that the applicable law is not within the ambit of Section 3 (1) of the IAA, which
gives the Model Law, “the force of law in Singapore”. To understand the jurisdictional
challenges the court is required to interpret the arbitration agreement. The court analyzed
Article 28 (4) and the Vienna Convention on the Law of Treaties (hereinafter referred to as
‘VCLT’). Treaties should not be interpreted either liberally or restrictively. 39 To this extent,
an interpretation of the SADC Treaty and Annex 1 must be analyzed on the basis of its
objects and purposes. Thus, McLachlan’s principle of systematic integration can be used,
which recognizes that treaties are themselves creatures of international law and not a “self-
contained closed legal system”.40 On the basis of this, the Court held that the submission was
a shuttering dispute which was within the PCA tribunal’s jurisdiction ratione temporis, the
Swissbourgh’s right to submit the dispute to the SADC Tribunal was not an “investment” and
nor was it “admitted” under Article 28(1) of Annex 1 and that the defendants failed to
exhaust all local remedies, in particular, an Aquilian action for financial loss.

Article 31(1) of the VCLT enshrines the principle of ordinary meaning. It functions on a
presumption that a person advocating a meaning other than the ordinary meaning of words in
the treaty bears the burden of establishing the special meaning and the meaning must emerge
in the context of the treaty as a whole. Thus, it is more on the basis of progressive
encirclement where the interpreter starts under the general rule with the ordinary meaning of
the terms of the treaty, analyzes in their context and in light of the treaty’s object and
purpose, and by circling through this three steps inquiry iteratively closes upon the proper
interpretation by the interpreter. The aforesaid conclusion drawn by Justice Kannan was on
the basis of his interpretation of the SADC Treaty and corresponding Protocols. The obvious
purpose of the Investment Protocol is to incentivize the investment by providing various
protections to the investors and the SADC members. The preamble to Annex 1 provides for a

38
CAMPBELL McLACHLAN, LAURENCE SHORE & MATTHEW WEINIGER, INTERNATIONAL
INVESTMENT ARBITRATION: SUBSTANTIVE PRINCIPLES (Oxford University Press, 2nd Edn, 2017);
See also, Aguas del Tunari, S.A. v. Republic of Bolivia, ICSID Case No. ARB/02/3
39
‘Investor-State arbitration disputes invoking principles of public international law’ Sanum Investments Ltd. v.
Government of the Lao People’s Democratic Republic [2016] 5 SLR 536
40
Supra fn 38

14
gist of the document and contains concerns stating that the SADC Tribunal does not receive
sufficient investment.41 A view reinforced by Articles 19 and 23 of Annex 1. International
dispute settlement is provided under Article 28 (1) of Annex 1 of the Investment Protocol
which provides recourse to international arbitration. This according to Article 28 (2) can be
done either by the SADC Tribunal, ICSID, an International Arbitrator or an ad hoc Tribunal.
As mentioned above, Article 28 (4) explicitly bars disputes prior to the coming into force of
the Annexure of the Investment Protocol. This has to be read in consonance with the entire
Protocol including the objects to which it was formed for.

To the extent, the acts alleged by Swissbourgh constitute a de facto admission of

expropriation of the Mining Leases which occurred between 1988 and 1991. The PCA
Tribunal erred in characterizing the expropriation dispute under the shuttering dispute. The
award characterized the investment variously as an “international law right to seek
compensation for an expropriation of the investment.”42 This is unheard of in the procedure of
arbitration, wherein the parties have submitted disputes to the arbitral tribunal. It can be
deduced that Swissbourgh were hard done by the procedural cracks in the SADC which
affected the procedure to claim compensation from the start, assuming if it categorized as an
investment. However, claiming to have an “international right to have their claim heard by
the SADC Tribunal is utterly fallacious and ought to have been rejected by the PCA
Tribunal.”

V. CONCLUSION

The SADC Treaty constitutes not only a statement of intent and resolve to overcome the
burden of history of poverty but also an acknowledgement of the benefit of economic
integration. Be it the Treaty or provisions regarding the Tribunal the SADC Treaty, in its
various instruments has failed to an extent to provide recourse to not only investors but other

41
Preamble, Treaty of the Southern African Development Community, 17th August 1992 (entered into force on
30th September 1993)
42
Supra fn 8

15
parties. The PCA Tribunal may have exceeded its jurisdiction in providing any kind of relief
to Swissbourgh however the same can be said about OS No. 492. The comparison of the PCA
Tribunal’s award and the judgment delivered in OS No. 492 shows markedly different lines
of thought adopted by the parties. Article 34 (2) (iii) of the Model Law had no part to play in
bringing the dispute to the domestic jurisdiction. Be that as it may, the judgment does have
severe ramifications. Firstly, it opens a Pandora’s Box of litigation where every award in an
investor-State dispute may be challenged on the basis of a remote interpretation of the Clause
thereby arguing that the Tribunal exceeded its jurisdiction. Secondly, given the precedential
value it poses, the interpretation provided in the judgment of the said article according to
Justice Kannan, furthers a matter of principle. In CRW Joint Operation, the Court of Appeal
has affirmed that no State will permit a binding arbitral award to be given within its territory
without being able to review the award or, at least, without allowing the parties an
opportunity to address the court if there has been a violation of due process or other
irregularities in the arbitral proceedings.43 It would be naivety to consider that the procedure
of review should not be applicable, however, the same cannot be given a route through this
Article.

Lastly, the call taken by Justice Kannan is a bold one which may give rise to contradictory
analysis and arguments however his reasoning on the basis of merits cannot be faltered with.
The astute observation in the Partial Award by the tribunal in Saluka Invetsments BV v. The
Czech Republic, “…The protection of foreign investments is not the sole aim of the Treaty,
but rather a necessary element alongside the overall aim of encouraging foreign investment
and extending and intensifying the parties’ economic relations. That, in turn, calls for a
balanced approach to the interpretation of the Treaty’s substantive provisions for the
protection of investments.”44 The parties so to say are the yin and yang of the treaties, a
balance must be maintained. In Re Wordsworth, Samuel Sherratt QC, the case where Steven
Chong J. stated is reminiscent of the propositions and judgment in this case “this was a
matter that ticked all four boxes of complexity, difficulty, novelty and precedential value.”

43
Supra fn 35
44
ICGJ 368 (PCA 2006)

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