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

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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