In early August 2012, China-based Lao Holdings and its wholly owned subsidiary, Sanum Investments, filed a suit at the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID) to stop the Lao government from seizing $400m-worth of its assets. The move could hurt Laos' bid for membership in the World Trade Organisation (WTO) and dent its reputation in the international business community.
“About a year and a half ago we started running into a couple of issues [in Laos] and it has deteriorated since then,” said Jody Jordahl, president of Sanum. “We were most recently stripped of ownership [of the Thanaleng Slot Machine Club] in the Vientiane Friendship Bridge, and in that project alone we invested $25m. We have [also] lost numerous other concessions and licences. Our largest project to date, the Savan Vegas integrated resort, is now under threat from the Ministry of Finance and Tax Department, so we are looking at a potential closure any day now.”
Citing a failure by the government to uphold a stable economic and legal environment, Sanum contended that the judicial branch and tax authorities in Laos have taken steps to enable companies owned by a well-connected Lao family to seize control of Sanum’s projects. Over five years, Sanum invested $85m in assets in Laos, which are now worth $400m. The move to seek arbitration at the ICSID was Sanum’s bid to block the government’s expropriation of its properties.
“We have followed every possible avenue in the country,” said Mr Jordahl. In the company’s most recent case, Sanum was taken to trial by its local partner, ST Group, on 48 hours’ notice. “We were given less than 48 hours' notice before [a] hearing, which took place a few weeks ago,” explained Mr Jordahl.
“[We had] less than an hour to present our case [and] witnesses. The judges deliberated for less than half an hour, and [they] came out with an eight-page pre-written report which awarded all ownership of our project to [the] ST Group. We were the only ones that invested $25m in that, and our minority partners [the ST Group] did not invest any capital. The government also hit us with a $5m punitive damage fine, and at the end of the proceedings it gave us a notice of seizure of all of Sanum’s accounts in the country. [Yet] the seizure notice had been signed two days before the hearing. So the chances of that being fair and objective are very slim.”
The move by the Lao government to expropriate Sanum’s assets may hurt its membership bid to the WTO, and it could provoke criticism from the international business community. Sanum manages several hotel and casino projects throughout Laos, and it remains to be seen whether the government’s actions contravene the international investment treaties it signed under the auspices of the ICSID.
“Sanum is one of the largest employers in the country,” said Mr Jordahl. “We [employ] more than 2000 Lao citizens [and] we have trained more than 10,000 staff members. We have paid more than $7m in customs and immigration fees, and we have generated tens of millions of dollars in revenue for the people of Laos and the government’s tax revenue. We have done a lot of good things for the country and it seems as if none of that matters at this point. If this is the way the government honours its contractual commitments, then they may not be ready for WTO membership or integration into the larger global community.”
fDi tried, unsuccessfully, to contact the Lao government for a comment.