KUALA LUMPUR : The Laotian government has vowed to fight further against an arbitration award ruling in favour of Siva Nganthavee's group in another lawsuit linked to Banpu Plc's Hongsa project.
The Kuala Lumpur court yesterday began hearing Vientiane's petition for the reversal of an arbitration award granted in 2009.
The Malaysian court ruled in that year that Vientiane pay US$57 million in compensation to Mr Siva's group for improperly breaching a project development agreement (PDA).Including interest, total damages are $71 million.
The original contracts had been awarded to Mr Siva's group in 1994 to operate a lignite-fired power plant in Hongsa, Laos.
But David Branson, a US lawyer representing Vientiane, yesterday said the arbitration ruling was "fundamentally wrong", given that Mr Siva had actually spent very little on the project.
He pointed out there were two separate contracts _ a mining concession and the PDA for a power plant, both originally awarded to Mr Siva's group.
In reality, Mr Siva spent most of the $40-million claimed amount on the lignite mining project, not on the power plant. But the arbitration was ruled on the PDA termination.
Vientiane is using this as a ground for the appeal.
"The arbitrator made a big mess. It's a terrible award ... a big mistake," said Mr Branson.
The Kuala Lumpur court scheduled another hearing in the case for next Monday, with a ruling likely to be made next Thursday.
Whatever the ruling, Mr Branson said either side could proceed to the Appeal Court and then the Federal Court, which is the equivalent of the supreme court in Malaysia. The process normally takes two years to complete.
Founded by Mr Siva, Thai-Lao Lignite (TLL) won a concession from the Laotian government in 2000 to develop a coal-fired power plant of which output will be sold to Thailand. In 2004, Banpu Plc, Thailand's top coal miner, entered into a joint venture with TLL for the project.
But the Laotian government scrapped the project in 2006, citing a lack of development. Two months later, the concession was awarded to Banpu.
The Laotian government's representatives, led by Outakeo Keodouangsinh, deputy director-general of the Planning and Investment Ministry's Investment Promotion Department, attended the hearing but declined to comment on the case at this stage.
Mr Branson further stated that Laos had the right to terminate the power contract after Mr Siva spent 14 years doing nothing about the project.
"Mr Siva invited Banpu to be a partner in TLL because Banpu could operate the power plant project, but Mr Siva couldn't. Bankers will not lend money unless you have already developed a power plant," he said.
Mr Siva claimed TLL had obtained a new partner, Australia's Castlepine Finance, to replace Banpu, but Mr Branson said there was no confirmation that either could operate the power plant.
Mr Siva also filed another lawsuit with the Thai court against Banpu for misleading the Laotian government to terminate the TLL concession.
In September this year, the Thai Civil Court ordered Banpu to pay 31 billion baht in compensation to Mr Siva. Banpu has vowed to appeal the ruling.
James Berger, a lawyer with King & Spalding LLP representing Mr Siva, said his client sought to enforce the arbitration award with the New York State Supreme Court in June 2010 and two months later with the UK high court. Both confirmed the award.
Mr Siva has also sought to confirm the award confirmation in French, and a French court is expected to make a ruling early next year.
Mr Berger said the case would have a negative effect on foreign investors' confidence in Laos due to uncertainties in doing business with the government.
But Mr Branson said foreign investors will not consider just a single case as a factor in doing business in Laos.
"It's ridiculous to think like that. The Laotian government is just exercising its right under the law to go to court. It's lawful," he said.
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Writer: Nareerat Wiriyapong & Nalin Viboonchart