Case of the Day: Thai-Lao Lignite v. Laos
Posted on July 19, 2012
The case of the day is Thai-Lao Lignite (Thailand) Co. v. Government of the Lao People’s Democratic Republic (2d Cir. 2012). We first saw the case in my post of August 25, 2011. I have also reported on two related cases under 28 U.S.C. § 1782, one a request for judicial assistance to obtain discovery from Laos itself, the other a request for judicial assistance to obtain discovery from Électricité de France International in order to uncover Laotian assets from which the judgment against Laos could be satisfied.
In the prior post, I described the facts as follows:
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.
The case revolved around arbitrability. The twist was that Laos wasn’t asserting that it had not agreed to arbitrate, but that its adversary, Thai-Lao Lignite, was not a proper party to the arbitration agreement. The judge’s basic conclusion, though, was that under the agreement such questions of arbitrability were for the arbitrator to decide.
The Second Circuit has now summarily affirmed. Citing Republic of Ecuador v. Chevron Corp., 638 F.3d 384 (2d Cir. 2011), it held that Laos was bound by its agreement to arbitrate under the UNCITRAL rules, which in turn gave questions of arbitrability to the arbitrator.