2007 Report on Investment Disputes and Expropriation

UNCLAS SECTION 01 OF 02 VIENTIANE 000490 SIPDIS FOR EAP/MLS - BESTIC FOR EB/IFD/OIA GOETHERT FOR L/CID McDONALD FOR CA/OCS/EAP - VAUSE SIPDIS E.O. 12958: N/A TAGS: CASC ECON EINV KIDE OPIC PGOV PREL LA SUBJECT: 2007 Report on Investment Disputes and Expropriation Claims for Laos Ref: State 55422 ¶1. The Embassy is unaware of any changes to the below noted disputes since submission of the 2006 report. Please note the Embassy no longer has contact information for the Claimants. ¶2. a. Claimant A b. 1991 c. According to Claimant's attorney, Claimant asserts that he entered into a joint venture agreement with the GOL in 1989 to develop hotel and tourist properties. The parties amended the lease agreement in 1990 at the GOL's request, to substitute the property originally agreed upon for properties near the Lang Xang Hotel, near the Mekong River. Claimant A further asserts that in 1991 the GOL requested a $200,000 loan to assist in moving 20 families squatting on the premises, and then terminated the joint venture lease when Claimant refused to forward the money. Claimant A's attorney met with GOL officials in Vientiane in May 1997 to discuss an amicable resolution of the dispute, but on June 30, 1997, Claimant A filed suit in Federal District Court, Portland, Maine. In May 1998, the U.S. Embassy sent a diplomatic note to the Lao Ministry of Foreign Affairs containing procedural questions on the deposition of witnesses in Laos for use in the case. The Ministry responded to the note in July 1998. According to Claimant A's lawyer, the court case was dismissed without prejudice on Claimant A's motion in the spring or summer of 1998. After dismissal, Claimant A's attorney informed the U.S. Embassy that a European government, which he declined to identify, had offered to mediate the claim. Although the GOL reportedly refused such mediation, the attorney believed the GOL might change its position. The U.S. Government is aware of no recent action on this claim. Claimant A has not recently communicated with the Embassy on the status of this claim, and the Embassy no longer has any contact information for Claimant A. ¶3. a. Claimant B b. 2000 c. Claimant B signed a Cooperation Agreement with the GOL in 1992 to explore and mine gold and in 1993 was granted a twenty-year mining license and a 10 square kilometer concession in Phaphon, Pak Ou District, Luang Prabang Province. Claimant B reports investing over $10 million in the mining project. In 1995, Claimant B subcontracted with a Chinese company to perform mining and extraction services at one of its sites. The sub-contractor refused to leave the site after the contract expired and claims to have a contract dispute with Claimant B. Between 1995 and 2000, Claimant B made repeated representations to the GOL to remove the sub-contractor from the site, to no avail. Claimant B was unable to access and work at the site due to its occupation by the former sub-contractor. During this period, the Embassy sent several letters under cover of diplomatic notes to high-ranking Lao officials, noting U.S. Government concern about Claimant B's situation. None of these letters were answered. Embassy personnel also raised the case with Lao officials in the central government and in the province. In 2000, the Lao PDR government accused Claimant B of various "mistakes," including violations of the concession agreement and of Lao law, and incorrect reporting of financial information. Lao authorities repeatedly required Claimant B to appear for questioning and to provide additional documentation, sometimes at short notice. In early 2001, Claimant B left Laos and reportedly was consulting with American attorneys regarding possible legal options. The Embassy has not heard from Claimant A since 2003 and has no current contact information. ¶3. a. Claimant C b. 2000 c. Claimant C, a U.S. citizen, owns a 12 percent share in a mining company in Laos. The company's majority investors are from Denmark and New Zealand. Claimant C has not taken an active part in the management of the company. In 1994, the company signed a concession agreement with the Lao government for a sapphire mine in Bokeo province. In 1999, the government appointed an ad hoc committee to investigate internal disputes concerning claims by other parties to ownership of the company. The Lao government reported that the company had provided false financial information and caused environmental damage, among other problems. In December 1999, the company received a notice from the government suspending its export of raw and semi-processed VIENTIANE 00000490 002 OF 002 sapphires, the company's main source of income. In April 2000, the government notified the company that it was terminating the concession agreement. The majority investors left the country. The majority investors subsequently were accused of criminal misconduct in the operation of their business. In November 2000, the company informed Lao government officials that it would not continue to attempt to resolve the dispute through negotiations and instead would file a lawsuit against the Lao government. The majority investors were convicted in absentia in February 2001, and sentenced to 20 years imprisonment and fined $55 million in damages. No action has been taken against Claimant C. Claimant C informed the Department of State that he intends to request the assistance of the U.S. Congress and U.S. Government and was considering taking his own legal action against the Lao government. The Embassy has not recently been contacted by Claimant C and has no current contact information. MCGEEHAN