Singapore and Malaysia were seeking an agreement on the transfer of railway land that could be described as a "win-win" situation that would leave each party better off than before, an international tribunal has said.
The arbitral tribunal made this point in a 76-page document, called an award and published last Friday, that said Malaysia-Singapore joint venture company M+S need not pay development charges for three parcels of former Malayan Railway land in Keppel, Kranji and Woodlands.
The three-member panel disclosed that Singapore had sought a levy of $1.47 billion, in keeping with its practice of imposing such charges when permission is given to develop land that appreciates in value. A 2008 valuation had put the value of these three plots at $2.8 billion altogether.
These plots, and three others in Bukit Timah, were swopped for six new land parcels in downtown Singapore in 2010, which are now being jointly developed by M+S.
But the tribunal also noted that during a hearing in July this year, Malaysian witness Nor Mohamed Yakcop had conceded that even with the charge, the agreement was "a sweet deal" for Malaysia.
"Equally we believe that the deal will have proved advantageous for Singapore even if we conclude that development charge is not payable," the tribunal said.
The panel was chaired by former English judge Lord Phillips of Worth Matravers; the other members were German legal expert Bruno Simma and former Australian chief justice Murray Gleeson.
Their decision was made known last Thursday to both countries, which issued a joint statement announcing it last Friday and said they would abide by the outcome.
Prime Minister Lee Hsien Loong said he was glad both sides were able to resolve the matter in this amicable way.
Malaysian Prime Minister Najib Razak said both countries looked forward to working closely together to further strengthen and broaden their cooperation.
The award was later uploaded on the website of the Permanent Court of Arbitration in The Hague, which acts as a registry.
The matter arose from a 1990 agreement between both countries, known as the Points of Agreement, (POA), to move Malayan Railway's station from Tanjong Pagar to Woodlands.
But the move was held up over differing interpretations of several clauses until 2010, when a landmark land swop deal between Mr Lee and Mr Najib broke the 20-year impasse.
This deal provided for the exchange of three parcels of railway land spelt out in the POA plus three plots in Bukit Timah, in return for four plots in Marina South and two in Ophir-Rochor.
No development charge was payable for these six downtown parcels, because the exchange was done on the basis that they were of equal value to the six plots offered for exchange, taking into account potential developments.
M+S was formed to develop the new plots. Malaysia's Khazanah Nasional owns 60 per cent of the company and Singapore's Temasek Holdings, the other 40 per cent.
Malaysia agreed for M+S to foot the development charges for the Bukit Timah plots, as they were not covered in the POA.
But differing interpretations over whether the POA meant development charges for the Keppel, Kranji and Woodlands plots had to be paid saw both sides agree to submit the matter for arbitration.
Malaysia, represented by Attorney-General Abdul Gani Patail, argued that the value of the three parcels would already be enhanced by Singapore's agreement for M+S to develop them according to the POA - not by the subsequent grant of planning permission - and so, there was no basis to impose a development charge.
Singapore, represented by then Attorney-General Steven Chong, argued the POA imposed an obligation on M+S to pay the development charge, in line with Singapore municipal law, to obtain planning permission. The tribunal rejected Singapore's submission.
But it said: "We hope that its resolution will be a chapter in the continued fruitful cooperation between the two countries involved."