The Lao Ministry of Planning and Investments presents a completely false picture of the facts and legal status of the arbitration, according to the claimant, Thai-Lao Lignite Company Limited (TLL), a company of Thailand’s Nganthavee Group.
Thai-Lao Lignite discovered the lignite mine and was awarded a mining concession from the Lao government’s Foreign Investment Management Committee in 1992 and a second power concession in 1994. The Nganthavee Group was in the process of developing the project and, in 2005, entered into a joint venture with Banpu Plc.
After TLL terminated Banpu in August 2006, the contract required the project to revert solely to TLL. Instead, Laos terminated both contracts with TLL in October 2006 and awarded the deal to Banpu in a no-bid concession in December 2006. TLL presented evidence that Banpu used confidential documents and information invested in and developed by TLL.
The Lao government statement quoted by your newspaper falsely states “[t]he government, therefore, was compelled to terminate the project concessions in 2007” (the year was 2006) and also further falsely says that Laos requested proposals from “other potential contenders”, when the truth is that the deal was quickly given to Banpu.
In 2007, according to the 1994 contract, TLL filed for arbitration against the Lao government and, in November 2009, won the case and was awarded $56 million – not $25 million, as the report incorrectly claims. The report correctly admits that “the Lao government refused the enforcement of the award and refused to pay even $1.
The report says that it “requested the Malaysian court, where the arbiter was seated, to set aside’ the award in 2013”. This would have been years after the award was issued in TLL’s favour and far beyond the 90-day statute of limitations contained in the Malaysian Arbitration Act. Nevertheless, the Malaysian court improperly allowed the Lao government to proceed and ruled that TLL had to file two separate arbitration cases for the mining and power agreements, rather than combining them. It did not rule on the merits.
Laos then incorrectly states that the Malaysian court’s 2017 ruling brought “the long case to an end, with a clear and important victory for the Lao government”. In fact, the Malaysian courts made a purely procedural ruling and never adjudicated the substantive issue at the arbitration, which was Laos’ illegal termination of TLL’s concession and award of the deal to Banpu. TLL has hired a new legal team and is presently filing new arbitrations, litigations and other proceedings against Laos. The case is not over and only has to be refiled.
Far from being “a clear and important victory”, Laos’ actions during the 11-year period from 2006-2017 show its lack of protection for foreign investors and consistent refusal to pay arbitration awards against it, despite Laos being a signatory of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).
On June 29, the latest US State Department 2017 Investment Climate Statement about Laos said: “Investors report that corruption at all levels of the public sector and government administration remains a major concern.” The 2012 Transparency International Corruption Perceptions Index ranked the country 160th out of 176 countries.
Sanum Investments in Singapore is another example of the Lao government’s expropriation and refusal to pay, as is the infamous Gem Mining (“Danes”) case. It has never honoured or paid an award or judgement made against it.
Even worse is that the Lao government profited financially from the termination of TLL and delivering the project to TLL’s partner, Banpu. Under TLL’s contracts, Laos was prohibited from owning shares in the Hongsa project. But this time the Lao government required Banpu to give it a big share after taking the project away from TLL.
According to the website of Hongsa Plc, www.hongsapower.com, the shareholders are Banpu Power Plc (BPP) with 40 per cent, RH International (Singapore) Corporation Pte Ltd, a subsidiary of Ratchaburi Electricity Generating Holding Plc (RATCH) with 40 per cent, and Lao Holding State Enterprise (LHSE) with 20 per cent. Thus, Laos gained 20 per cent of a $3.5-billion project, or Bt23 billion, from its illegal acts.
Now that the extent of the damages to TLL are more clearly shown by Ratchburi’s recently announced doubling the size of the project and Banpu Power’s IPO, TLL is confident that the future proceedings will be able to award the correct level of damages to the plaintiff.