Diamond in the Rough: Singapore High Court sets aside Lesotho investor-State Award
In another ground-breaking case, the Singapore High Court has set aside an investor-State arbitral award on the basis that the tribunal exceeded its jurisdiction. This case follows on from the recent judgment in Sanum Investments Ltd v Government of the Lao People’s Democratic Republic  SGCA 57, in which the Singapore Court of Appeal found that an investor-State arbitral tribunal did have jurisdiction to hear claims against the Government of Laos. It further demonstrates the willingness and competence of the courts of Singapore to deal with issues concerning public international law and investment arbitration.
The facts underlying the High Court’s judgment in Kingdom of Lesotho v. Swissbourgh Diamond Mines Pty. Ltd. & 8 Others  SGHC 195 concerned investments made in the late 1980s by a South African businessman, together with his associated companies and trusts, in diamond mines located in Lesotho, an independent enclave completely surrounded by South Africa. The investors alleged expropriation of their investments and commenced proceedings in 2009 before a standing tribunal established under the 1992 Southern African Development Community Treaty (the SADC Tribunal and SADC Treaty respectively). However, the SADC Tribunal was dissolved prior to reaching a resolution of the expropriation claims, following a diplomatic backlash arising from previous decisions against Zimbabwe in wholly unrelated proceedings. Importantly, Lesotho had approved the resolutions that led to the dissolution of the SADC Tribunal.
Following failed efforts to resurrect the SADC Tribunal, the investors instead brought fresh proceedings in 2012 under a protocol to the SADC Treaty which had come into force in April 2010 (the "Investment Protocol"). The Investment Protocol provided for disputes between an investor and a State Party to be resolved by international arbitration, provided that the dispute in question arose after entry into force of the Investment Protocol. In order to satisfy this requirement, the investors alleged additional breaches of the SADC Treaty, namely that Lesotho had participated in the “shuttering” of the SADC Tribunal without providing alternative means for the investors to pursue their expropriation claims, thereby contravening its obligations to provide "fair and equitable treatment" (Article 6) and "access to courts and tribunals" (Article 27), among others.
An ad-hoc tribunal was established to hear the dispute, administered by the Permanent Court of Arbitration (PCA) and with its seat in Singapore. In April 2016, a majority of the three-person tribunal found Lesotho to have breached the SADC Treaty and granted relief to the investors in the form of a “partial final award” requiring that a new tribunal be established to hear the expropriation claims, with the same jurisdiction as the SADC Tribunal prior to is dissolution. A separate costs award was issued in October 2016, ordering Lesotho to pay the investors’ costs.
1 PCA Case No 2007-02
2 ICSID Case No ARB/08/2