People’s Democratic Republic of Lao

On June 10, 2015, an ICSID tribunal ruled in favor of our client the People’s Democratic Republic of Lao finding that the Claimant, Lao Holdings, N.V., had failed to establish that the government of Laos had approved a rival casino in violation of the claimant’s monopoly rights.

On 14 August 2012, Sanum Investments Ltd. and Lao Holdings filed parallel arbitrations pursuant to two Bilateral Investment Treaties, one between the Lao People’s Democratic Republic and the Kingdom of the Netherlands (“Lao-Dutch BIT”), and the other between the Government of the People’s Republic of China and the Government of the Lao People’s Democratic Republic (“China-Lao BIT”) (collectively the “BIT arbitrations”). In sum, Claimant’s accused Laos of expropriating its gaming assets. The assets included the Savan Vegas and Casino Co. Ltd., a hotel and casino complex, located near the Friendship Bridge spanning the Mekong River between Laos and Thailand.

In June 2014, after two years of litigation, the parties entered into a Deed of Settlement (“Deed”) resolving both BIT arbitrations. By execution of the Deed, Sanum and Lao Holdings agreed to “wholly waive and release any and all claims” against the Lao PDR that it estimated to be in the range of one billion USD (“$1,000,000,000.00”). For this billion dollar concession, the BIT arbitrations were suspended while the Respondents were afforded ten (10) months to sell their gaming assets in Laos. The Deed did not contemplate the payment of any compensation under the settlement terms, but the Government allowed the claimants’ to sale of their gaming assets to third parties within a 10-month deadline. In the meantime, the Claimants were able to continue to run the businesses subject to the “monitoring and oversight” of a government-appointed agent.

However, the Deed had not had a happy history in its short existence. On June 27, 2014, Sanum and Lao Holdings gave notice of material breach of the Deed and thereafter, requested the BIT tribunals to “revive” the arbitrations. The claimant alleged that Laos had “approved and granted” gambling concessions to third parties at the nearby Savan City, an allegedly US$10 billion financial centre and entertainment complex announced last June, in which the government is partnering with Malaysia’s Asean Union and Thai investors. Lao Holdings claimed that the approval had destroyed the value of Savan Vegas in the eyes of potential buyers, thereby frustrating the settlement. Lao Holdings also argued that, even if there had been no explicit approval, the political culture in Laos was such that Savan City must have been granted “tacit” approval for the rival casino.

The “Revival Application” hearing on the merits occurred in Singapore on April 13 & 14, 2015. Within hours of concluding the hearing on April 14, the tribunal denied Claimant’s Application for Provisional Measures pending the outcome. Thereafter, on June 10, 2015, the tribunal issued its reasoned decision. The ICSID tribunal said that the claimant had failed to establish on the balance of probabilities that the government had breached the monopoly rights. The tribunal found that Thai news reports and blog posts indicating that a casino would form part of Savan City could not be sourced to the government, and views expressed by Savan City’s promoters and affiliates that a casino would be licensed did not demonstrate that Laos had granted its approval. The actions of Savan City could not be attributed to the government, which only held a 30 per cent stake in the project.
Moreover, even if a rival casino had been approved “with a wink or a nod,” the tribunal concluded that it was satisfied that the government had exercised a contractual right in the settlement agreement to “cure” the breach within 45 days by taking steps to correct the misreporting in the media and inform the Savan City developers that no casino would be licensed. The tribunal rejected the Claimant’s arguments that the alleged breach was incurable, observing that “serious buyers would not be put off by cyber-gossip”.

In addition to a total victory on the merits, the tribunal has required Lao Holdings pay Laos’s arbitration costs.
The tribunal was chaired by the Honorable Ian Binnie QC, formerly Justice on the Supreme Court of Canada. The Co-arbitrators were Bernard Hanotiau of Belgium and Brigitte Stern of France, who joined in the unanimous decision.

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