Laos prevails in Hongsa power plant court case

The Federal Court in Malaysia has granted the final award to the Lao government, ending the case, the Lao Ministry of Planning and Investment said in a press statement.

The government granted two separate concessions relating to coal mining and construction of a 700MW thermal power plant in the Hongsa region, Xayaboury province, in 1992 and 1994 respectively.

Nearly 13 years after the concessions were granted, the said investor had consistently failed to fulfill its commitment by never achieving the full development of the Hongsa thermal power project.

The government, therefore, was compelled to terminate the project concessions in 2007 in order to maintain the country's development plan.

To avoid any further delay, the government requested potential investors including Banpu Public Company Limited to submit a proposal for the timely development of the power project.

The proposal submitted by Banpu Public Company Limited was later selected out of two other contenders due to Banpu's proven experience in power plant development as well as its expertise in coal mining.

Banpu Public Company Limited immediately fulfilled its commitment and, as a consequence, three 600MW generators totalling 1,800MW, which are responsible for electricity production for sale to both Electricite du Laos and the Electricity Generating Authority of Thailand, had been installed within the commercial operations schedule.

"The government of the Lao PDR is proud to have put the long delayed Hongsa power project into operation to serve the needs of both Thailand and the Lao PDR," the ministry said in the statement. However, the disappointed Thai-Lao Lignite Co., Ltd. initiated an arbitration process in Kuala Lumpur against the Lao government, claiming breach of contract. Over the Lao government's strong objections, Thai-Lao Lignite Co., Ltd. wrongfully sought damages from the two concession contracts initially granted to Thai-Lao Lignite Co., Ltd.

The arbitrators also erred in allowing the damages, which in their December 2009 ruling awarded over US$25 million to Thai-Lao Lignite Co., Ltd. with interest running at 9 percent per year. The Lao government refused the enforcement of the erroneous arbitration award and, simultaneously, requested the Malaysian court, where the arbiter was seated, to �set aside' the award in 2013.

After reviewing the case, the High Court in Kuala Lumpur decided to set aside the arbitration award in its entirety. After almost three years of legal appeals by the investor, on August 17, 2017, the Federal Court in Malaysia denied the Thai-Lao Lignite Co., Ltd.'s appeal thus bringing the long case to an end, with a clear and important victory for the Lao governmentใ