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Update: Court rules development charges not payable for 3 former Malayan Railway plots of land in Singapore

The Arbitral Tribunal has ruled that development charges on three former Malayan Railway (KTM) sites in Singapore in Tanjong Pagar, Kranji and Woodlands will not be payable.

THE Arbitral Tribunal has ruled that development charges on three former Malayan Railway (KTM) sites in Singapore in Tanjong Pagar, Kranji and Woodlands will not be payable.

On Thursday, the Permanent Court of Arbitration at The Hague ruled that M+S Pte Ltd would not be liable to pay development charges on the three parcels if they "had been vested in M+S Pte Ltd and if M+S Pte Ltd had actually developed the lands in accordance with the proposed land uses set out in the Annexes to the POA (Points of Agreement)''.

M+S is the joint venture company in which Malaysia's sovereign wealth fund Khazanah Nasional has a 60 per cent stake, and Singapore's Temasek Holdings, a 40 per cent one.

The decision was revealed in a joint statement by the foreign ministries of Singapore and Malaysia, which said Singapore and Malaysia were satisfied with the arbitral process.

" Singapore and Malaysia have agreed to abide by and fully implement the decision of the Tribunal."

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"Both countries look forward to working closely together to further strengthen and broaden our bilateral cooperation,'' the joint statement said.

In response to media queries, Singapore Prime Minister Lee Hsien Loong said Singapore 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.

"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 PM Najib bilaterally and in Asean to benefit both countries."

The issue arose from the resolution in 2010 of a 20-year impasse between Singapore and Malaysia over the POA signed in 1990 to relocate the Tanjong Pagar railway station to Woodlands. But this was not implemented because of differing interpretations of a few clauses.

However, in 2010, a landmark land-swop deal involving the KTM land in Singapore, negotiated between PM Lee and his Malaysian counterpart Najib Razak, closed the matter.

Malaysia, in exchange for giving Singapore its railway land in Tanjong Pagar, Kranji, Woodlands and Bukit Timah, received land in Ophir-Rochor and Marina South from Singapore in return.

But there was one outstanding issue - and this was whether Malaysia had to foot the land development charge, said to be around S$1.4 billion, going by estimates in the Malaysian media, for the sites in Tanjong Pagar, Kranji and Woodlands.

Malaysia agreed that M+S Pte Ltd should pay the development charges for the Bukit Timah parcels, but interpreted the 1990 POA to mean that these charges should not be levied for the other three sites.

Singapore's Ministry of National Development defines a development charge as a tax on the enhancement in land value resulting from the State approving a development with a higher value.

The two sides agreed to settle the matter amicably through arbitration, under the auspices of the Permanent Court of Arbitration at The Hague in the Netherlands. In January 2012, Singapore and Malaysia entered into an agreement, submitting the issue to final and binding arbitration.

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