Lignite is a low-quality coal used for generating electricity. The Hongsa region of Laos, near the Thai border, has it, and in the early 1990s, Thailand needed to import electricity. And so a joint venture was born. Thai-Lao Lignite, a Thai company, entered into a Project Development Agreement with the Lao government giving it exclusive exploration and mining rights in the region. The idea was that Thai-Lao Lignite would build a Lignite-fired power plant on the Lao side of the border, and Laos would sell the electricity to Thailand. The PDA called for Thai-Lao Lignite to organize another entity, Thai-Lao Power Co., under Lao law, and to assign its rights and obligations under the PDA to the Lao company. Thai-Lao Lignite never made the assignment, and the Lao government dealt with Thai-Lao Lignite as though it were a proper party to the PDA. The PDA had an arbitration agreement calling for arbitration in Malaysia at the Kuala Lumpur Regional Centre for Arbitration under the UNCITRAL Rules.The substantive law governing the contract was the law of New York. A dispute developed …
Thai-Lao Lignite demanded arbitration. The parties agreed that the ICC would replace the Kuala Lumpur Regional Center as the appointing authority. The tribunal issued an award in favor of Thai-Lao Lignite in 2009.
I’ve written about the case several times before. First was Judge Kimba Woods’s decision confirming the arbitral award over an objection that the tribunal had wrongfully decided a question of arbitrability. Second and third, I wrote about some questions of post-judgment discovery. Last, I covered the Second Circuit’s summary order affirming the judgment, its denial of a petition for rehearing en banc, and Laos’s filing of a petition for a writ of certiorari: the case is on my Supreme Court watch list.
Now the Malaysian courts have thrown a monkey wrench into the case by annulling the award. In today’s case of the day, the court, without much analysis—and with no discussion of the New York decisions—held that part of the dispute was not arbitrable. There’s no question that under the New York Convention, the Malaysian courts are proper courts to set aside the award. The docket does not reflect any proceedings in New York on account of the annulment, but no doubt we will soon see motions seeking to reopen the judgment and arguments about the preclusive about the effect, if any, to be given to the judge’s decision to confirm in light of the later Malaysian decision annulling the award.
The new decision is obviously a victory for Laos, but in a strange way it could be a defeat, too. It seems to me that whatever the chances of Supreme Court review were before the annulment, they are lower now, because the issue of arbitrability isn’t as clean as it was before. I’ll keep you posted on how this develops.
Photo credit: Library of Congress