Lao Holdings NV v Government of the Lao People's Democratic Republic

• Jurisdiction: Singapore
• Judge: Quentin Loh JAD,Sir Vivian Ramsey IJ,Douglas Jones IJ
• Judgment Date: 10 September 2021
• Neutral Citation: [2021] SGHC(I) 10
• Year: 2021
• Published date: 14 September 2021
• Hearing Date: 15 January 2021,16 January 2021
• Plaintiff Counsel: Lin Weiqi Wendy, Chong Wan Yee Monica (Zhang Wanyu), Ling Jia Yu (Lin Jiayu) and Ho Yi Jie (WongPartnership LLP)
• Defendant Counsel: Cavinder Bull SC, Lim Gerui, Tan Yuan Kheng (Chen Yuanqing), Lim Qiu Yi Regina and Tan Sih Si (Chen Shisi) (Drew & Napier LLC)
• Citation: [2021] SGHC(I) 10
• Court: High Court (Singapore)
• Docket Number: Originating Summonses Nos 5 and 6 of 2020

Quentin Loh JAD, Vivian Ramsey IJ and Douglas Jones IJ: Introduction

This case concerns applications by the plaintiffs, Lao Holdings NV (“LH”) and its wholly-owned subsidiary, Sanum Investments Limited (“Sanum”), to set aside two arbitral awards made in arbitrations conducted under bilateral investment treaties (“BITs”) with the defendant, the Government of the Lao People’s Democratic Republic (“GOL”).

The first arbitration (the “ICSID Arbitration”) was conducted by LH under the Agreement on encouragement and reciprocal protection of investments between the Lao People’s Democratic Republic and the Kingdom of the Netherlands (16 May 2003), (entered into force 1 May 2005) (the “Laos-Netherlands BIT”). The second arbitration (the “PCA Arbitration”) was conducted by Sanum under the Agreement between the Government of the People’s Republic of China and the Government of the Lao People’s Democratic Republic Concerning the Encouragement and Reciprocal Protection of Investments (31 January 1993), (entered into force 1 June 1993) (the “Laos-PRC BIT”).

Background

The underlying dispute concerns claims of expropriation and other BIT-related claims in relation to the plaintiffs’ investments in the Laotian gaming and hospitality industry. This is an extremely protracted dispute and has been the subject of multiple decisions from the Singapore courts. In the past, the same parties have sought to question the applicability of the Laos-PRC BIT and the interpretation of its dispute resolution article, which resulted in the decisions of Government of the Lao People’s Democratic Republic v Sanum Investments Ltd [2015] 2 SLR 322 (“GOL v Sanum (HC)”) and Sanum Investments Ltd v Government of Lao People’s Democratic Republic [2016] 5 SLR 536 (“Sanum v GOL (CA)”). The business of developing and operating casinos and slot clubs in Laos has also spawned litigation involving the Laotian entities through which the business was conducted, which resulted in Sanum Investments Limited v ST Group Co, Ltd and others [2020] 3 SLR 225 and ST Group Co Ltd and others v Sanum Investments Ltd and another appeal [2020] 1 SLR 1. The background facts to the dispute have been canvassed at length in these prior decisions. As such, we only set out the salient facts for the present proceedings.

LH is a company incorporated in the Netherlands. Sanum is a company incorporated in Macau and is the wholly-owned subsidiary of LH.¹ John K Baldwin (“Mr Baldwin”) is the owner of 50% of LH and the Chairman of Sanum’s board of directors.

The plaintiffs partnered with a Laotian conglomerate, ST Group Co Ltd (“ST Group”), and its related entities and individuals from 2007 to 2013 to conduct their business. In partnership with ST Group, the plaintiffs invested in projects including the Savan Vegas Hotel and Casino Complex (“Savan Vegas”), which was built and operated successfully, the Paksong Vegas Hotel and Casino Complex (“Paksong Vegas”), which was never developed, and multiple slot clubs. These slot clubs included the “Lao Bao Club” at the border crossing station between Savannakhet Province and Vietnam, the “Ferry Terminal Club” at the border crossing station with Thailand, the “Thanaleng Club” near the border of Vientiane Prefecture and Thailand, and a slot club at the Paksan Hotel in Bolikhamxay Province (the “Paksan Club”).

The ICSID and PCA Arbitrations were part of a complex web of disputes. By late 2011, relations between the plaintiffs and ST Group had deteriorated and disputes arose between them. ST Group ceased cooperation with Sanum, initiated litigation against it and shut Sanum out of the Thanaleng Club. The plaintiffs pursued its claims against the ST Group in separate arbitration proceedings at the Singapore International Arbitration Centre (the “ST SIAC Arbitration”).

Additionally, and relevantly to these proceedings, the plaintiffs claimed that GOL officials began to renege on earlier commitments, and that they had embarked on a series of arbitrary and discriminatory actions designed to enrich GOL officials and ST Group at the plaintiffs’ expense. Accordingly, the plaintiffs each sought relief for GOL’s alleged violations of the protection provided to the plaintiffs’ investments under the respective BITs.

he arbitration proceedings

On 14 August 2012, the plaintiffs initiated two arbitrations against GOL (together, the “BIT Arbitrations”). The ICSID Arbitration was submitted by LH pursuant to Article 9 of the Laos-Netherlands BIT to the International Centre for Settlement for Investment Disputes (“ICSID”) under the Rules Governing the Additional Facility for the Administration of Proceedings by the Secretariat of the International Centre for Settlement of Investment Disputes (the “ICSID Additional Facility Rules”). On the same day, 14 August 2012, Sanum commenced the PCA Arbitration as ad hoc proceedings pursuant to Article 8(5) of the Laos-PRC BIT, which was administered by the Permanent Court of Arbitration. These were conducted under the 2010 UNCITRAL Arbitration Rules (the “UNCITRAL Rules”).

The arbitral tribunal in the ICSID Arbitration (the “ICSID Tribunal”) consisted of Professor Bernard Hanotiau, appointed by LH, Professor Brigitte Stern, appointed by GOL, and the Honourable Ian Binnie CC QC as president. The arbitral tribunal in the PCA Arbitration (the “PCA Tribunal”) consisted of Professor Bernard Hanotiau, appointed by the Sanum, Professor Brigitte Stern, appointed by GOL, and Dr Andrés Rigo Sureda as presiding arbitrator. We refer to both the ICSID and PCA Tribunals collectively as the “BIT Tribunals”.

The ICSID Arbitration and the PCA Arbitration were distinct and separate proceedings and were not consolidated. However, they involved significantly overlapping factual matrixes, shared common party-appointed arbitrators (albeit with different presiding arbitrators) and the tribunals reached substantively the same conclusions. Moreover, the proceedings were largely conducted in parallel and were the subject of joint hearings attended by the two party-appointed arbitrators and the two presiding arbitrators.

Sanum’s claims in the PCA Arbitration were primarily that:² In October 2008, GOL stripped a joint venture company, Paksong Vegas and Casino Co Ltd (“PV”), of its monopoly rights that had been granted to it under a project development agreement dated 10 August 2007 signed by, inter alia, Sanum and GOL (“the PV PDA”). Sanum held 60% of the shares in PV, while GOL and ST held 20% each. After the monopoly rights were stripped, GOL then ordered PV to return a land concession in December 2008, and then terminated the PV PDA in April 2010. This related to Paksong Vegas. In March 2011, GOL ordered Paksan Club to be shut down following a dispute between Sanum and ST Group over the revenue. This was despite a licence granted to Savan Vegas Co Ltd (“SV”), another joint venture company, to operate the Paksan Club. In 2011, GOL failed to keep promises to approve a land concession to Sanum in the Laos-Thailand Friendship Bridge III Economic Zone Development, which was intended to be used to build a welcome centre and slot club known as “Thakhaek Club” (also referred to as the “Thakhet” or “Thakhek” Club in the various submissions and documents). In 2012, GOL commenced court proceedings which were “arbitrary, discriminatory and fundamentally unjust” to assist ST Group in dispossessing the plaintiffs of their interest in the Thanaleng Club.

LH’s claims in the ICSID Arbitration concerned allegations relating to Savan Vegas, the Lao Bao Club, the Ferry Terminal Club, and the Thanaleng Club.³

Against both these claims, GOL raised a threshold defence that the plaintiffs’ claims should not be entertained given the evidence of bribery, corruption, and embezzlement.⁴ GOL also brought a counterclaim seeking damages due to Sanum’s embezzlement of funds from SV (“the Embezzlement Counterclaim”). This counterclaim was not eventually pursued.

Given the lengthy procedural history in each of the BIT Arbitrations, we summarise the key events in the following timeline, and provide elaboration subsequently as necessary.

S/N	Date	Event
1.	14 August 2012	LH and Sanum file their respective Notices of Arbitration
2.	9 August 2013	GOL files jurisdictional objection in the PCA Arbitration
3.	13 December 2013	PCA Tribunal finds that it has jurisdiction
4.	10 January 2014	GOL files HC/OS 24/2014 to challenge the PCA Tribunal’s ruling on jurisdiction
5.	15 June 2014	The plaintiffs and GOL enter into the Settlement Deed, together with a Side Letter executed on 18 June 2014
6.	19 June 2014	Consent orders are signed by the BIT Tribunals to suspend the BIT Arbitrations
7.	4 July 2014	The plaintiffs file applications in the BIT Arbitrations alleging that GOL had materially breached the Settlement Deed’s terms (“the First Material Breach Applications”)
8.	20 January 2015	The Singapore High Court releases judgment in HC/OS 24/2014: GOL v Sanum (HC), disagreeing with the PCA Tribunal on its ruling on jurisdiction
9.	10 June 2015	The First Material Breach Application is dismissed by the ICSID Tribunal (the PCA Arbitration was held in abeyance given the High Court’s decision in GOL v Sanum (HC))
10.	26 April 2016	LH files a second application in the ICSID Arbitration to revive the proceedings on the basis of GOL’s material breaches of the Settlement Deed
11.	29 September 2016	The Singapore Court of Appeal reverses the High Court’s decision and reinstates the PCA Tribunal’s ruling on jurisdiction: Sanum v GOL (CA). Sanum files a second application in the PCA Arbitration to revive the proceedings on grounds mirroring LH’s 26 April 2016 application.
12.	15 December 2017	The BIT Tribunals (respectively) grant both applications to revive the

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