M'sian court rules Laos not obliged

The previous concession was terminated by the Laotian government in 2006 due to lengthy project delays. 

According to a press release from the Laotian Ministry of Planning and Investment, the High Court of Malaysia, which is the initial trial court for this case, reached a judgement on December 27 to set aside an arbitration award instructing the Laotian government to compensate Thai-Lao Lignite (Thailand) Co Ltd to the tune of US$56 million (about Bt1.68 billion) together with accrued interest. 

The tribunal was appointed by the government of Laos and Thai-Lao Lignite (Thailand) Co Ltd in accordance with the UN Commission on International Trade Law (UNCITRAL). It was agreed that the arbitration proceedings would take place in Kuala Lumpur. 

The arbitral proceedings were initiated to resolve the dispute, which had arisen from the exercise of the right by the government of Laos to terminate (a) the Coal Mining Prospecting and Exploitation Agreement, which granted Thai-Lao Lignite (Thailand) the right to conduct a prospecting research, to survey and to distribute the lignite reserves located in Hongsa district, Xayaboury province, which was entered into in 1992; and (b) the Project Development Agreement, which gave Thai-Lao Lignite (Thailand) the right to exploit the lignite reserve and to conduct a feasibility study of the power plant project since 1994. 

The Laotian government exercised its rights to terminate the agreements after determining that Thai-Lao Lignite (Thailand) Co was not able to begin implementing them due to difficulties it had itself created.

Finally, the Laotian government was concerned that if the development of the project in Hongsa district, which was considered as an essential natural resource of the country, was further delayed, it would affect any benefits that Laos would obtain from the project in the future. 

Moreover, the government had given plenty of time and opportunities for Thai-Lao Lignite (Thailand) Co Ltd to commence the project – 13 years in total – yet the project still had not commenced. 

In addition, Thai-Lao Lignite (Thailand) ignored notices from the government issued pursuant to the terms of the concession agreement to propose any plans to remedy the defaults or breaches within the timeline set by the government in the notices, the ministry statement said. 

Therefore, the termination of both the Concession Agreements in 2006 was necessary for the Laotian government, which considered the timely commencement of the project to be of the utmost benefit to the country. 

Thereafter, in order to ensure the actual commencement of the project’s operation, the Laotian government arranged an auction for the coal-fired power project development in Hongsa district, in order to find a company with the capability and suitability to conduct a feasibility study of the project. The auction was held transparently with participation from many private entities. 

Thai-Lao Lignite (Thailand) did not participate in this auction. Yet, in 2007, it petitioned the arbitration panel in Kuala Lumpur, Malaysia requesting for compensation from the Laotian government to the amount of $170 million, due to the termination of the concession agreements. 

The arbitration panel reached an initial decision at the end of 2009 and ordered, in the award, for the Laotian government to compensate Thai-Lao Lignite (Thailand) $56 million, together with other accrued interest. 

The Laotian government disagreed with the arbitration award, believing the award of the arbitration panel was based on an important jurisdictional error. 

Thus, the Laotian government filed a petition to the High Court of Malaysia in Kuala Lumpur in 2010, requesting the revocation of the arbitration award. 

Finally, on December 27 last year, the court reached a judgement to set aside the arbitration award. 

The Laotian government said it affirmed that the development of the coal mine in Hongsa district, Xayaboury province is a project which will create the utmost benefits not only for Laos but also to Thailand. Furthermore, this project will help strengthen the relationship between Laos and Thailand in the years to come, it said. 

The decision to terminate the Concession Agreements given to Thai-Lao Lignite (Thailand) Co Ltd in 2006 was based on what would fundamentally be of utmost benefit to the country, it said. 

Moreover, the auction to find new individual developers for the project was transparent and justified, whereby the capability and ability of the new developers to conduct and further develop the coal mine project were taken into consideration, it said.