Investors’ protection under the ASEAN Comprehensive Investment Agreement in view of Malaysia’s anticipatory termination of the KL-Singapore High Speed Rail (HSR) Project
After his stunning election win in May 2018, Malaysian Prime Minister Mahatir Mohamad announced that his government will drop the Kuala Lumpur-Singapore high-speed rail (HSR) project which was due to be completed by 2026, although the Prime Minister also suggested that the project might be revisited later. This comes in the midst of the Malaysian government’s assessment of its total debt exceeding RM1 trillion.
On 16 July 2018, Malaysian Economic Affairs Minister Mohamed Azmin Ali announced that Malaysia will send an official representative to Singapore to discuss the HSR project by the end of July 2018. However, till date, Singapore has yet to receive any formal notification of Malaysia’s plans to terminate the HSR project. Singapore Transport Minister Khaw Boon Wan said in Parliament on 9 July 2018 that there has been no reply from Malaysia to Singapore’s diplomatic note sent on 1 June 2018 to seek clarification on the HSR project. Based on preliminary estimates, the Singapore government has spent more than S$250 million on the HSR project as of end May 2018. In the circumstances, the future of the HSR project remains uncertain.
Singapore has indicated that it will exercise its rights to compensation if the HSR project were to be terminated. Likewise, investors in the HSR project may wish to consider various avenues of relief that may be available if their investments in the HSR project are prejudiced. These could include not only the possibility of submitting contractual disputes to third-party arbitration or adjudication under the dispute resolution provisions of a contract, but also commencing arbitration proceedings directly against the Government of Malaysia for breaches of the 2009 ASEAN Comprehensive Investment Agreement.
The 2009 ASEAN Comprehensive Investment Agreement, which entered into force on 24 February 2012, provides a number of protections for investors of one Member State of ASEAN who have made investments in another Member State. These include, inter alia, the right to be accorded fair and equitable treatment with respect to their investment, full protection and security, and most-favoured nation status, as well as the right to bring judicial or arbitration claims directly against the host State for alleged breaches of its obligations under the Agreement.
Eversheds Harry Elias has extensive experience advising and representing commercial enterprises with respect to international dispute resolution and the conduct of commercial and investment arbitration both in South East Asia and throughout the world.
To download the text of the ASEAN Comprehensive Investment Agreement, please see http://investasean.asean.org/index.php/page/view/asean-free-trade-area-agreements/view/757/newsid/871/asean-comprehensive-investment-agreement.html
Author:
Francis Goh
Partner & Head of International Arbitration, Eversheds Harry Elias LLP