Dr Felicity Gerry QC’s legal memo cuts off $150 million to the Myanmar military junta

Published: 31st March 2022

The latest Singaporean business to be affected by international sanctions is Emerging Towns & Cities Singapore (ETC), the developer of the Golden City complex in Myanmar.

ETC has notified the Singapore Stock exchange (SGX) that it intends to divest itself of a build-operate-transfer agreement with the Myanmar Army’s Quartermaster General’s Office that was due to last 70 years and with profits in excess of $150 million.

The decision was taken after a legal memo, drafted by barristers Dr Felicity Gerry QC and Daye Gang was filed with SGX by Myanmar activists: Justice For Myanmar.

The memo set out the necessary risk assessments for the proposed investment, including the likelihood of breach of sanctions by funds from the project reaching the Military Junta, known as the Tatmadaw and labelled Terrorist organisation.

The memo highlighted a number of business and human rights risks as well as the consequences of breach of U.S. and E.U. sanctions on Myanmar.

In addition to the ETC divestment, SGX is likely to change its approach to investment listing – progress in itself for a jurisdiction plagued by money laundering scandals. The legal memorandum found that international law and guidance places due diligence obligations on the Singapore Exchange (SGX), and possible liability on the Monetary Authority of Singapore and the Singapore Government, in relation to companies doing business with the Myanmar military.

It also found that Singapore has an international legal obligation “to investigate, prevent and cease transactions that amount to wrongful acts”, which are applicable to business transactions with the Myanmar military and its business interests. Legal remedies would be “easily pursued and enforced” against SGX if the Myanmar military’s financial organs are found to be in breach of international laws and/or compliance regulations including international human rights and humanitarian law.

SGX initiated regulatory actions against ETC after Justice For Myanmar published an investigation into payments to the Myanmar army, implicating funds raised on the SGX. ETC has commissioned two independent reviews: one by Nexia TS Advisory into contractual payments to the QMGO and fundraising; and another by Kelvin Chia Partnership into the applicability of sanctions and compliance with “applicable laws”.However, the legal memorandum found that these reviews may not address international law risks in light of the 2019 UN Independent International Fact-Finding Mission on Myanmar (FFMM) report into the Myanmar military’s economic interests, and ongoing atrocity crimes. The legal memo also raised the possibility of reputational and sanctions risks for the SGX, its regulator the Monetary Authority of Singapore, and by extension, the Singapore Government, should it not prevent continued payments from ETC to the Myanmar army.

ETC suspended trading earlier this year and on 23 March 2022 it announced it was seeking to divest its investment in Myanmar via the sale of its entire shareholdings and to cease its activity in and exposure to the Myanmar market, asking SGX for an extension of time to find and offer and seek shareholders’ approval for the proposed divestment

Singapore has been the largest foreign investor in Myanmar since 2012, having invested more than US$24 billion (S$32.2 billion) between 1988 and January 2021. Activists supported by legal expertise on international business and human rights compliance see this as an example of effective pressure on Singapore companies to cut ties with the Myanmar military and its associated businesses to undermine the regime’s political legitimacy.