The dispute between Thai-Lao Lignite (TLL) and the Lao government has taken a new twist benefiting the latter, with the recent verdict by a Malaysian court setting aside an arbitration award that Vientiane was ordered to pay the Thai firm.
At the heart of the dispute is a 1,878-megawatt minemouth power plant in Hongsa district of Laos. Siva Nganthavee of Thai-Lao Lignite claims BanpuPower, a subsidiary of Banpu Plc, entered into a joint venture with his group to acquire information about a coal mine concession and a feasibility study for the project. (Photo courtesay of Banpu Plc)
The verdict of the High Court in Kuala Lumpur on Dec 27, 2012 nullifies the previous award granted in 2009 to TLL.
The company, founded by businessman Siva Nganthavee, sought US$57 million in compensation after the Laotian government "improperly terminated" its power-development agreement (PDA) with the company in 2006.
TLL won a concession from the Lao government in 2000 to develop a coal-fired power plant, the output of which would be sold to Thailand.
The arbitration award was sought in Malaysia because it is deemed easier to enforce an arbitration award in a third country than it is to enforce a judgment of the court in the countries of the parties to the dispute. If Vientiane loses the case in a final ruling, the Laotian government's assets in Malaysia could be seized and liquidated to be paid to TLL as the award.
"The award is now void. Laos's government does not owe any sum to TLL or Hongsa Lignite [the company set up by TLL in Laos]," said David Branson, the US lawyer representing the Laotian government in the case.
Mr Branson said the court also ordered TLL to commence a new arbitration award but limit compensation to the PDA alone.
If the Thai firm does so, then Laos will accept the arbitration procedure, he said.
"When TLL is ready to start the new procedure, the Laotian government will cooperate and proceed with the arbitration as the High Court ordered," said Mr Branson.
TLL can petition to the Appeals Court in Kuala Lumpur within 30 days from Dec 27.
The company spent three years seeking enforcement of the arbitration award. In 2010, the New York State Supreme Court and the UK High Court confirmed the award.
It is awaiting a ruling from a French court, which is expected early this year.
Including interest, the company said damages now stand at US$71 million.
Laos appealed last year to the Kuala Lumpur court, saying it has new evidence. Mr Branson said the previous arbitration ruling was fundamentally wrong given the fact that the arbitrators judged the compensation based on the mining contract's investment of roughly $40 million.
However, the contract that was terminated was the PDA for the power plant, on which TLL spent very little. Consequently, the Laotian government believes the compensation should come from damages caused by termination of the PDA, not the mining contract.
Mr Branson said during last month's hearing that whatever the ruling is, both sides could appeal to the Appeals Court and then the Federal Court. That process normally takes two years to complete.
TLL now has two choices _ file a petition with the Appeals Court or commence a new arbitration award.
In a separate court case, TLL filed a lawsuit against Banpu Plc, one of Asia's leading coal miners.
Banpu won concessions after the Lao government scrapped its contracts with TLL. The claimant stated that Banpu had misled Laos in order to win the concessions.
Thailand's Civil Court last September ordered Banpu to pay 31 billion baht in damages to Mr Siva and his associates.
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- Writer: Nalin Viboonchart