Ruling ends KL-S’pore dispute over rail land tax

SINGAPORE — A Malaysia-Singapore joint venture company will not have to pay Singapore development charges for three parcels of former railway land in Keppel, Kranji and Woodlands, a three-member international tribunal ruled on Thursday, resolving amicably a sticking point arising from a land swap deal in 2010.

The charges were determined by Singapore to be S$1.47 billion, payable by M+S, a joint venture owned by Temasek Holdings and Malaysia’s Khazanah Nasional.

Announcing the decision yesterday morning, both countries said they were satisfied with the arbitral process. Singapore Prime Minister Lee Hsien Loong said the Republic fully accepts the tribunal’s decision. “It allows us to put this matter behind us. I am happy that Singapore and Malaysia have been able to resolve this dispute in this impartial and amicable way,” he said.

Under the 1990 Points of Agreement (POA) on Malayan Railway land in Singapore, Malaysia agreed to return to Singapore lands that it held here for railway operations in exchange for a joint-venture company to develop the lands.

In 2010, Mr Lee and Malaysian Prime Minister Najib Razak agreed for the Keppel, Kranji and Woodlands parcels to be returned to Singapore, in exchange for land in Marina South and Ophir-Rochor to be developed by M+S.

However, the two countries disagreed on whether development charges should be paid for the three parcels of land and submitted the matter for arbitration in January 2012.

Details of the decision by the tribunal — comprising former English judge Lord Phillips of Worth Matravers, former Chief Justice of the High Court of Australia Murray Gleeson and German judge Bruno Simma — were released on the Permanent Court of Arbitration’s website yesterday.

Based on the document, Singapore had argued that M+S would be subject to the Republic’s municipal law when carrying out the developments, including the need to obtain planning permission — which entailed paying development charges.

Malaysia had submitted that no development charge would have been payable under the POA, which had specified the nature of development that M+S was to undertake once the three parcels of land had been transferred. Had M+S proceeded to develop the three parcels according to the POA, it would not have been liable to pay development charges. Imposing the obligation to pay development charges as a precondition to developing the parcels would be contrary to Singapore’s obligations under the POA, Malaysia argued.

The tribunal said the dominant factor in its analysis was the “true interpretation” of the 1990 POA. It rejected Singapore’s submission that the wording of the POA expressly provided for the payment of development charges.

If M+S had opted to receive the three parcels — Malaysia did not take up that option but instead opted for parcels of land in Marina South and Ophir-Rochor, for which no development charges were paid — it would have been entitled to carry out the developments specified without having to pay development charges, it ruled.

The tribunal was also of the opinion that in 2008, when then-Singapore Foreign Minister George Yeo sent a letter to his Malaysian counterpart which included valuations of the three parcels with a footnote that M+S would have to bear development charges, he had “unwittingly misrepresented the effect of the POA”. The Malaysians did not agree that the statements were correct, but did not challenge them, leading Singapore to believe it had accepted that development charges were payable, the tribunal found.

It noted that arbitration has been conducted in the cordial and friendly manner that the Prime Ministers intended, and hoped that “its resolution will be a chapter in the continued fruitful cooperation between the two countries involved”. Each party is to bear its own costs.

The tribunal’s award document revealed that a hearing was held in London from July 15 to 18 this year, where Mr Yeo and Malaysian former Minister in the Prime Minister’s Department Nor Mohamed Yakcop testified.

Mr Yeo wrote on his Facebook yesterday: “Disappointed that Singapore lost the case but stakes in good bilateral relations are much greater”.

Mr Lee said the full and successful implementation of the POA in 2011 has paved the way for joint development projects and closer collaboration between Singapore and Malaysia. “These include links in transport connectivity, and trade and investment. I look forward to making progress on them, and working with (Malaysian Prime Minister Najib Razak) bilaterally, and in ASEAN to benefit both countries,” he said.