Q&A – Jorge Menezes | Lawyer: ‘The bilateral treaties to which China is a party tend to apply to Macau’

Lawyer Jorge Menezes comments on a case judged by the Court of Appeal of Singapore involving a Macau-based American company.

Macau Daily Times – You have been a lawyer for Sanum. How relevant is this decision for the dispute?
Jorge Menezes – Yes, but I was not involved in this dispute in Singapore, nor the Arbitration to which this Singapore Judgment refers. This decision is relevant because it reverts a decision from a Singapore lower court which held that Sanum could not resolve its disputes with the Laos Government through international arbitration. The Singapore Court of Appeal Judgment determines that the Arbitration can proceed. Therefore, Sanum will now continue prosecuting its arbitration action against the Laos Government under the Bilateral Investment Treaty between China and Laos.

MDT – What was decided in the previous decision from a Singapore High Court judge?
JM – The High Court took the view, contrary to a rather eminent Arbitration Tribunal, that the Bilateral Investment Treaty (BIT) – which had been entered into by China in 1993 – did not cover the Macau SAR. He was also of the view that the particular dispute in question was not within the BIT scope.

MDT – The Court of Appeal took a different view on these matters…
JM – The Court of Appeal decided that the BIT actually covers the Macau territory and, on the other hand, that the dispute fell within the BIT, which aims at protecting the foreign investment in another party’s territory, demanding that certain standards of conduct be followed by each party regarding foreign investors from the other party.

MDT – Bearing in mind that Singapore is not a party to this bilateral treaty, why was this decision taken by a Singaporean court?
JM – The parties to the dispute chose Singapore as the seat of the arbitration. And according to the relevant laws, the seat of the arbitration determines which courts have jurisdiction over the arbitration and its award, as well as the law governing such disputes. Although arbitral awards are not normally appealable, they can still be challenged in court if they did not meet certain standards of due process.

MDT – Why is this decision being deemed so relevant by experts in the field?
JM – The law on international arbitrations is similar throughout the world, as countries tend to follow a common model law.  More importantly, Singapore, where SIAC is located, is one of the three most relevant arbitration centres in the world together with New York and London, and surely the most used and reputed one in Asia. There is a strong jurisprudence in Singapore on international arbitrations, with very experienced and knowledgeable judges. This, together with the fact that there are many arbitrations conducted in Singapore, presents this as of extreme relevance. Also, I believe this is the first time that an Arbitration Tribunal and a Court looked, from an international law’s viewpoint, into the impact of Macau’s handover to China.

MDT – What view did the Court of Appeal take on this matter?
JM – The court reviewed international laws, particularly the Vienna Convention on the Law of Treaties and the Vienna Convention on Succession of States, to conclude that, despite a certain level of autonomy granted to Macau by the 1987 PRC-Portugal Joint Declaration and the Basic Law, the bilateral treaties to which China is party also tends to apply to Macau.  The court conveys that the default position under international law is that the Chinese treaties would automatically apply to Macau upon its reversion to China. The China-Laos BIT applies to Macau upon the handover unless the two parties did something to exclude the applicability of the BIT to Macau.
Therefore, it is presumed that the BIT would extend to Macau from December 1999. The court tells us that the internal rules of a country (including the Basic Law) do not override international law: internal laws of a state cannot be invoked to justify the non-performance of a treaty. We should bear in mind that the treaty is between two parties, China and Laos, and the internal position of one of the parties should not suffice to take a position that affects both.

MDT – But wasn’t it the case that both China and Laos produced documents informing that their view, as contracting parties, was that the treaty would not extend to Macau?
JM – Yes. But the court applied a rule of public international law according to which the parties’ position after the dispute has arisen is no longer relevant. It is called the ‘critical date’ doctrine. This doctrine prevents the contracting party being sued from relying on evidence that was generated only after the dispute had arisen. Hence, it disregarded those letters.

MDT – How relevant is this to Macau?
JM – This is overwhelmingly relevant to Macau because it tells us that Macau may be under international obligations that we had not envisaged. This influential judgment is telling us all that under public international law, the treaties to which China is a party do extend to Macau, unless China excluded Macau through the appropriate international procedure.  According to the doctrine cited by the court, treaties to which Portugal was party ceased being applicable to Macau in December 1999; and treaties to which China was party would extend to Macau upon China resuming sovereignty of this territory, unless steps had been taken to disapply the presumption derived from international law in the context of state succession in relation to a particular treaty.  In other words, there is a whole set of public international law obligations and rights that, pursuant to this judgment’s doctrine, apply to Macau. It may be the case that Macau residents and local companies have rights over third countries that we didn’t know we had.
And the reverse is also true. Macau may be under international obligations towards foreign countries and foreign investors that the government had not thought to be bound by. Actually, foreign investors in Macau could bring international arbitrations against the Macau government if they come to believe that Macau did not fulfil obligations enshrined in treaties entered by China with other countries.

MDT – What treaties are we talking about, and what do you think that should be done?
JM –  don’t know as I haven’t researched it. But I believe that Macau should take this seriously. This is a very well-written and grounded judgment from a reputed court that seconded an eminent international Arbitration Tribunal. We now have two influential voices advancing the same arguments and conclusions. Macau needs to know to the utmost detail what its international obligations are. Our legislators, our officials, our companies and business people need to know. For instance, we cannot legislate [while] ignoring potentially applicable treaties. Not knowing our international obligations may place Macau in the position of producing legislation and engaging in practices that breach such obligations. We need to know. The Macau Government should appoint an informal group of jurists and experts that would list all Chinese treaties to which this doctrine may apply and extend to Macau, then see whether this doctrine applies to each of them or not.
Finally, a political position would have to be taken together with China. We need to undertake a procedure that clarifies which rules apply to Macau and which don’t. We can’t just pretend that this didn’t happen. Transparency is one of the most relevant principles of the rule of law, and so is knowing in advance what our rights and obligations in the international arena are.