Allen & Gledhill successfully represented Democratic Socialist Republic of Sri Lanka in an investment dispute case with a hotel investor
A&G News 30 March 2020
Allen & Gledhill successfully represented Democratic Socialist Republic of Sri Lanka (the “Respondent”) in an arbitral dispute in respect of land owned and/or held by Raymond Charles Eyre (the “First Claimant”) and the Sri Lankan company that he controlled (collectively, the “Claimants”), which was later acquired under the Sri Lankan Land Acquisition Act by the Respondent.
The Claimants contended that the acquisition had frustrated their efforts to develop an international hotel on the plot of land for investment purposes. The Claimants also argued that the Respondent had not provided adequate compensation for the acquisition, which led to the Claimants’ substantial loss of profits.
The Tribunal heard jurisdictional objections as a preliminary issue at the Respondent’s request. This evolved into a highly contentious dispute in relation to the standing of the Claimants to bring a claim under the International Centre for Settlement of International Disputes Convention and the United Kingdom – Sri Lanka Bilateral Investment Treaty (collectively, the “Treaties”) as well as whether the Tribunal had jurisdiction over the subject matter in dispute. One of the key arguments put forth by the Respondent stems from the First Claimant’s lack of beneficial interest in the shares of the Sri Lankan company which owned the land. By the time the dispute was heard, these shares were held by a Singapore-incorporated company which in turn introduced issues of Singapore law relating to alleged existence of such beneficial interest. In view of the Singapore law angle, our Firm lent its expertise in trust disputes, corporate and commercial law in crafting written as well as oral arguments on the Singapore law aspects of the dispute. UK counsel had conduct of the international and English law aspects of the matter.
Upon hearing parties, the Tribunal ultimately upheld the Respondent’s preliminary jurisdictional objections on the basis that the Claimants were unable to prove that on the facts, there was investment in the land which warranted protection under the Treaties. The Tribunal thereby dismissed the Claimants’ case in its entirety.
The decision clarifies that investments made through a Singapore-incorporated company may in appropriate cases qualify for protection under the Treaties, thereby recognising the commercial reality that it is commonplace for locally incorporated companies to have indirect foreign control. That said, it must still be proven that the investment in question is deserving of protection under the Treaties. This matter recognises the increased role that Singapore counsel may play in international investment treaty arbitration, especially since Singapore always has been and remains an attractive jurisdiction through which foreign investment may be made.
Representing the Respondent was Allen & Gledhill Partner Andrew Chan.