Railway Land Arbitration (Malaysia/Singapore)

• Jurisdiction: Derecho Internacional
• Judge: Lord Phillips,Simma,Gleeson
• Court: Arbitration Tribunal (International)
• Date: 30 October 2014

Arbitration Tribunal.2

(Lord Phillips, President; Gleeson and Simma, Members)

Railway Land Arbitration

(Malaysia/Singapore)1

Arbitration Procedure and evidence Issues introduced at late stage in proceedings Admissibility of evidence Jurisdiction Reliance on equitable considerations

General principles of international law Equity Estoppel Good faith Negotiations between States Shared misapprehension about municipal law of one party to negotiations Liability of joint venture between two States to tax in one of the States Estoppel Requirements of representation, reliance and detriment Equitable considerations Inequity of allowing detriment to one party to outweigh concession by the other

Territory Land in one State held by another State Limitation on use of land Potential for development Applicable legal regime Railway land held by Malaysia in Singapore Points of Agreement, 1999 Joint Statement, 2010 Establishment of joint company to develop land Whether subject to Singapore development charge

Treaties Interpretation Principles Vienna Convention on the Law of Treaties, 1969 Common intention of the parties Negotiating positions Subsequent practice Amendment Whether subsequent agreement amending earlier treaty Principle of good faith

Summary: The facts:Until 1963 Singapore, an island at the southern tip of the Malay Peninsula to which it was joined by a causeway (see Map No 1, [162 ILR 618]), was under British rule. In 1963 it joined with Malaya

and two other former British territories to form the Federation of Malaysia but in 1965 became an independent State. During the period when both Singapore and the Malay Peninsula were part of the British Empire, a railway was constructed from Malaya to the terminal at Tanjong Pagar/Keppel in the centre of Singapore (see Map No 2, [162 ILR 619]) where customs, immigration and quarantine checks (CIQ) were carried out. As a result of various agreements between the different authorities in Malaya and Singapore, the part of the railway located in Singapore came to be owned by the Malayan Railway Administration and the land associated with the railway was conveyed by Singapore to Malaysia, sometimes as freehold but more frequently as leasehold. In most cases the leases provided that the land could only be used for the purpose of running the railway and any land no longer required for that purpose could be recovered by Singapore on payment of compensation

On 27 November 1990 the Governments of Malaysia and Singapore concluded the Points of Agreement on Malayan Railway Land in Singapore (the POA).3 The POA provided for the closure of the Tanjong Pagar/ Keppel station, the relocation of the terminal to a different site and the creation of a new company, M-S Pte Ltd (M-S), jointly owned by Malaysia (60%) and Singapore (40%), in which the freehold of parcels of land at Keppel, Kranji and Woodlands (the three POA parcels) would be vested with a view to the development of those sites. Under the POA, the remaining railway land would revert to Singapore. The POA were not, however, implemented during the course of the next twenty years.

Beginning in 2008 further negotiations took place during the course of which Singapore offered a new set of options for the relocation of the terminal and the CIQ facilities, something which had become a matter of urgency to Singapore. These options included the possibility of swapping the three POA parcels for parcels of land of equivalent value for development. In addition, Singapore offered to transfer to M-S three further parcels of land at Bukit Timah (the Bukit Timah parcels). During these negotiations, Singapore stated that a development charge (DC) would be payable on the development of the three POA parcels and, therefore, on any parcels of land for which they might be swapped. Malaysia did not contest that assertion. DC was a development tax levied in Singapore on the appreciation in the value of land which followed when permission for development of the land was granted. It was not payable on land sold by the Singapore Government for development purposes, because in that case the sale price itself reflected the increase in value.

The negotiations concluded with the adoption of a Joint Statement on 24 May 2010 (the 24 May 2010 Joint Statement) under which the two Governments agreed that the transfer of the terminal would proceed and that

M-S would receive the three POA parcels and the Bukit Timah parcels with the option of swapping them for land in Marina South and Ophir-Rochor. That option was taken up by M-S

The two Governments later differed over whether DC was payable on the land acquired by M-S. It was common ground that whether DC was payable in respect of the land in Marina South and Ophir-Rochor depended upon whether it would have been payable on the three POA parcels. The two Governments agreed to refer that issue to arbitration.

Held (unanimously):M-S would not have been liable to pay DC on the three POA parcels if those parcels had been vested in M-S and if M-S had developed them in accordance with the land uses set out in the Annexes to the POA.

(1) The POA were an international treaty binding as a matter of international law which fell to be interpreted in accordance with the principles of international law codified in the Vienna Convention on the Law of Treaties, 1969. In applying those principles, it was important not to lose sight of the object of the exercise which was to ascertain the common intention of the parties at the time that the treaty was concluded (paras. 413).

(2) Under the terms of the POA, as concluded in 1990, DC would not have been payable on the three POA parcels if M-S had developed them in accordance with the Annexes to the POA. The evidence regarding the intention of the then Prime Minister of Singapore in negotiating with Malaysia about the railway land was not of assistance in interpreting the POA, as it was the shared intention of the parties to an agreement which was relevant. Neither the context, nor the object and purpose of the POA afforded any guidance on this issue. The issue had to be resolved by giving the terms of the POA an interpretation which both accorded with the ordinary meaning of the words used and produced a result that was commercially sensible. The natural meaning of the POA, together with the Annexes, was that Malaysia by releasing the balance of the railway lands to Singapore was providing consideration both for the receipt by M-S of the lands and for the permission to develop them. Although subsequent conduct which established the agreement of the parties regarding the interpretation of a treaty was a factor to be taken into account, the practice of Malaysia and Singapore did not indicate agreement on the question whether DC was payable and was of no assistance in the interpretation of the POA (paras. 11069).

(3) The subsequent conduct of the Parties did not alter the position regarding the liability to DC. The 24 May 2010 Joint Statement did not amend the POA so far as the liability to DC was concerned. Although both Parties had proceeded in 2010 on the assumption that DC was payable, that assumption was based upon a misunderstanding of the POA and did not indicate an intent to amend the POA. Nor could Malaysia's failure to challenge Singapore's assertions that DC was payable give rise to an estoppel. Estoppel required representation, reliance and detriment. It would be inequitable if the consequence of the shared misapprehension regarding the liability to DC was that the POA were deemed to have been amended. The amount of DC payable in respect of the three POA parcels, 1.47 billion Singapore dollars, would have been a detriment to M-S which far outweighed the benefit of the additional concessions made by Singapore. Consistent with the equities of the situation, Malaysia had accepted that DC should be payable in respect of the three Bukit Timah parcels (paras. 170207).

The following is the text of the Award of the Tribunal:

TABLE OF CONTENTS

paras.
A.	The Parties and Their Representatives	12
B.	The Dispute	36
C.	The Joint Company	7
D.	Relief Requested	89
(i) Singapore's Request	8
(ii) Malaysia's Request	9
E.	Procedural History	1040
F.	Principles of Interpretation	4143
G.	A Summary of the Issues	4446
H.	The Structure of this Award	47
I.	Development Charge	4857
(i) The general principles	4851
(ii) Sales of land by the Government	5257
J.	Background to the POA	5868
K.	The Negotiation of the POA	6977
L.	Initial Steps Towards the Implementation of the POA	7881
M.	Impasse	8284
N.	The POA Revived and Revised as Set Out in the Joint Statement of 24 May 2010	8597
O.	Events After 24 May 2010	98109
P.	The Correct Interpretation of the POA at the Time of its Conclusion	110170
(i) Singapore's submissions in outline	111114
(ii) Malaysia's submissions in outline	115117
(iii) The value to the Parties of the railway lands	118123
(iv) Prime Minister Lee Kuan Yew's dinner	124133
(v) The nature of the transaction	134139
(vi) Singapore's municipal law	140145
(vii) The ordinary meaning of the terms of the POA	146162
(viii) The subjective intention of the Parties	163
(ix) The subsequent conduct of the Parties	164169
(x) Conclusions	170
Q.	The Effect of the Conduct of Malaysia in and After 2008	171207
(i) Did the 24 May Joint Statement, and the negotiations leading up to it, constitute an agreement that evidenced the intention of the Parties at the time the POA was negotiated in 1990?	188
(ii) What was the nature of the agreement contained in the 24 May Joint Statement?	189190
(iii) What is the true interpretation of the 24 May Joint Statement?	191198
(iv) Estoppel	199207

R. Decision

GLOSSARY OF DEFINED TERMS

24 May Joint Statement	Joint Statement on Singapore-Malaysia Leaders Retreat between Prime Minister Lee Hsien Loong and Prime Minister Dato Sri Mohd Najib Tun Abdul Razak, 24 May 2010, Singapore (Exhibit S-65)
CIQ	Customs, immigration and quarantine
DC	Development charge, a...