Can S. Alam seek international protection from Bangladesh?

The Bangladesh-Singapore BIT Case: A Question of Treaty Abuse and Investment Protection

By invoking the Bangladesh-Singapore Bilateral Investment Treaty (BIT), Mohammed Saiful Alam—founder of the S Alam Group and alleged mastermind behind a $10 billion banking scandal in Bangladesh—aims to position himself as a victim of government overreach. This bold maneuver raises critical legal and ethical questions about the misuse of investment treaties, the definition of "foreign investments," and the scope of international investment arbitration. A diversionary tactic?

According to The Financial Times, Alam’s legal team, led by the prominent law firm Quinn Emanuel Urquhart & Sullivan, has threatened legal action under the BIT, claiming that Bangladesh's actions infringe upon his rights as a foreign investor.

Although the contents of the legal notice remain undisclosed, the broader context indicates that Alam’s claim is fraught with significant legal challenges.

Domestic Investments Cloaked as Foreign

The investments Alam seeks to protect under the BIT were likely made during his time as a Bangladeshi citizen, using domestic resources. Alam and his family acquired Singaporean citizenship between 2021 and 2023, following years of dominance over Bangladesh’s banking sector and allegations of coercive acquisitions of bank shares.

This sequence of events suggests a retroactive attempt to recharacterize domestic investments as international ones, leveraging legal protections available under the BIT. Such strategies have often faced skepticism from arbitral tribunals under the International Centre for Settlement of Investment Disputes (ICSID).

Can Local Investments Qualify as Foreign?

Investment treaties are designed to encourage cross-border economic activity by safeguarding investments made by nationals of one treaty partner in the territory of another. However, Alam’s case appears to challenge the essence of this principle. His investments, reportedly funded entirely through local resources, seem to lack any substantial connection to Singapore.

This raises a critical legal issue: Can investments with domestic origins qualify as “foreign” solely due to a subsequent change in the investor’s nationality?

The Bangladesh-Singapore BIT, like most BITs, extends protections to investments “made” by nationals of one treaty partner in the other’s territory. This ensures BIT protections incentivize genuine foreign capital, expertise, and technology. Alam’s lack of financial or operational ties to Singapore undermines the rationale for invoking the treaty.

Moreover, arbitral tribunals increasingly prioritize the "substance over form" doctrine, which examines the economic realities of investments rather than their formal legal status. If Alam’s investments were purely domestic in origin, they may fail to meet the criteria for BIT protection.

The ‘Clean Hands’ Doctrine and Alleged Fraud

A further complication lies in the nature of Alam’s investments. Bangladesh’s central bank has accused him of siphoning billions through fraudulent means, triggering asset freezes and money laundering investigations. Such allegations, if substantiated, would challenge the legitimacy of his wealth and, by extension, the legality of his investments.

The “clean hands” doctrine in international law stipulates that parties cannot seek treaty protection for investments obtained through illegal activities. Should investigations confirm the allegations against Alam, his claim under the BIT would face considerable hurdles. Arbitral tribunals have consistently denied protections to investments tainted by illegality, upholding the integrity of international law.

Abuse of Investment Treaties

Alam’s acquisition of Singaporean citizenship, coupled with the renunciation of his Bangladeshi citizenship, raises additional concerns. Investment treaties are not intended to shield individuals from accountability for domestic misconduct. By renouncing Bangladeshi citizenship after amassing significant local wealth and then seeking BIT protections, Alam’s actions could be interpreted as “treaty shopping”—an attempt to exploit international legal frameworks for domestic disputes.

ICSID tribunals have previously cautioned against such practices. In cases like Phoenix Action Ltd. v. The Czech Republic, tribunals emphasized that BITs should not be used to disguise domestic disputes as international claims. Such abuse undermines the credibility of investment treaties and their purpose of fostering genuine foreign investment.

Implications for Investment Arbitration

This case highlights the vulnerabilities within the global investment arbitration system. While BITs are crucial for protecting legitimate foreign investments, they remain susceptible to exploitation by parties seeking to manipulate legal frameworks.

Permitting Alam’s claim would establish a concerning precedent, incentivizing parties to reclassify domestic disputes as international ones by altering their nationality. Conversely, rejecting the claim would reinforce the principle that BITs exist to promote authentic cross-border investments, not to shield individuals from domestic accountability.

The Bangladesh-Singapore BIT thus faces a crucial test. A tribunal’s decision in favor of Alam could weaken the treaty system’s integrity, while a dismissal of his claim would reaffirm the limits of BIT protections. For Bangladesh, this represents a strong opportunity to challenge the claim’s admissibility and defend its sovereign right to address financial misconduct.