VIENTIANE, Lao PDR--(BUSINESS WIRE)--Macau-based Sanum Investments announces that, in the wake of filing two international arbitral claims worth more than US$500 million against the Government of the Lao People’s Democratic Republic (Lao PDR), its executives have recently learned they risk potential arrest, as advocated by an official audit report prepared by senior Lao officials.
After seeing business licenses and permits in the country arbitrarily cancelled over the past two years, Sanum officials have hoped for a reprieve from increasingly opaque Lao officials. Instead, the company has been hit with a questionable “audit” of one of its most important remaining assets in the country, along with US$23 million in baseless tax claims. The report that followed this audit also contained a shocking recommendation that the directors and senior executives of Sanum be charged with criminal offences if the bogus tax demands were not immediately satisfied.
As many as a dozen senior management staff members working in the Lao PDR are now at risk, as are the executives who are outside of the country. They have been forced to remain outside the country, for fear of being arrested upon re-entry. The arrest recommendation appeared to be legally unsound and contradicting international law, given that there is no credible reason for a Lao Court to impute the non-payment of contested taxes by a company to its staff.
Jody Jordahl, President of Sanum, believes that he would likely be one of the first arrested upon re-entry into the Lao PDR. “We were treated as VIPs when the Lao government courted us to invest in Lao PDR. As soon as we began turning profits, the relationship cooled,” Jordahl said. “Now we are not only fighting to protect our investments in the country, but also the safety of our remaining staff on the ground.”
In August of this year, Sanum and its parent company launched arbitral claims against the Lao PDR for violation of investment protection treaties the country had signed with China and the Netherlands. Those claims will be heard by independent tribunals with the authority to order the Lao Government to compensate foreign investors.
“This is a clear demonstration of what happens when the rule of law is not followed. Zealous, self-serving bureaucrats in Lao PDR are being given license to take advantage of foreign investors,” said Jordahl.
One of the claims under the Netherlands treaty arises from a series of antagonizing lawsuits launched against Sanum by its local business partner, ST Group earlier this year.
The dispute between Sanum and ST Group arose when the latter refused to honor its obligations under the master agreement it had concluded with Sanum in 2007.
“More specifically, ST Group orchestrated a judicial taking of our jointly-owned slot machine business, the Thanaleng Clubs, which was earning more than US$2 million net profit a month,” Jordahl said. “With the help of Lao officials, members of the Lao judiciary, armed local police and Lao custom & immigration officials, ST Group was able to take over the business by force.”
Well-connected to senior Lao government officials, ST Group was also able to arrange for a kangaroo court to hear and accept every unjustified claim that ST Group brought against Sanum. Lao Judges then gave Sanum 48 hours of official notice to present its case in that lawsuit, thereby facilitating ST Group’s takeover of a facility that Sanum had built into a $200 million enterprise. Sanum was given little more than one hour to present in court. Worse yet, the panel of judges returned, within half an hour, to issue what appears to have been a pre-ordained 8-page, typed opinion.
The Lao Court also levied an unheralded US$5 million fine against Sanum. Incredibly, orders to seize Sanum’s bank accounts to pay the fine were entered on the day before the hearing took place. Seizures of Sanum bank accounts actually commenced before the trial had even begun.
All of these misdeeds are occurring at the same time that Lao PDR is just weeks away from joining the World Trade Organization. WTO representatives will be meeting again at the end of October, when they are expected to vote on the WTO admission of the country.
“If the scrutiny that comes from WTO accession and two looming investment treaty arbitrations isn’t enough to ensure the rule of law in Lao PDR, one has to wonder whether it will ever be safe for foreign investment to return,” said Jordahl. He added that, according to sources on the ground, Sanum is not the first foreign investor to have suffered from arbitrary seizures and unfair legal and tax proceedings at the hands of Lao officials.
“We’re not just taking this action for our financial backers. We employ over 2,000 people in the country, and we feel a deep obligation to protect their livelihoods,” Jordahl added. “Our goal remains to receive fair and equitable treatment from the Lao officials.”
For more information, please visit www.shameonlaos.com.
About Sanum Investments
Sanum Investments Limited is a Macau, China, based investment and development company. Sanum is primarily focused on development projects in the Lao People’s Democratic Republic, but is also currently involved in developments elsewhere in Asia, including Thailand and Cambodia. Sanum is a partner in and manager of several hotel and casino projects throughout Lao including Savan Vegas in Savannakhet.