Tag Archives: Thailand

Case of the Day: Schneider v. Kingdom of Thailand

The case of the day is Schneider v. Kingdom of Thailand (2d Cir. 2012). Schneider was the German equivalent of the bankruptcy trustee of Walter Bau AG, a German firm whose predecessor in interest had made an investment in a Thai toll road between 1989 and 1997. Walter Bau initiated an arbitration under the German-Thai BIT, which applied to disputes concerning “approved investments made prior to [the Treaty’s] entry into force ….” By agreement of the parties, the arbitration was conducted under the UNCITRAL Rules.

Thailand objected to the tribunal’s jurisdiction on the ground that the investment was not an “approved investment” because Walter Bau had not obtained the appropriate certificate from the Thai Ministry of Foreign Affairs. Walter Bau responded that the investment was an “approved investment” because the Thai government had approved it in various ways. The tribunal found that it had jurisdiction and that the investments were indeed approved investments. After a hearing on the merits, the tribunal awarded Walter Bau more than € 30 million.

Walter Bau sought confirmation of the award in the Southern District of New York. Thailand moved to dismiss on the grounds that the tribunal had lacked jurisdiction. The judge concluded that the issue whether the investment was an “approved investment” was “an issue of arbitration agreement scope” rather than a “question of agreement formation” and, on a deferential standard of review, confirmed the award. Thailand appealed.

On appeal, the Second Circuit affirmed. The court rejected the motion judge’s framework, however. Whether the courts are to make an independent determination on the “approved investment” questions did not turn, as the judge thought, on whether the question was one of contract formation or one of contract scope. Rather, it turns on whether “there was clear and unmistakable evidence of the parties’ intent to commit that question to arbitration.” Without such evidence, the scope of an agreement to arbitrate is presumptively for the court. But with such evidence, questions of arbitrability are for the arbitrator. Here, the parties agreed to arbitrate under the UNCITRAL Rules, and Rule 21 provides:

The arbitral tribunal shall have the power to rule on objections that it has no jurisdiction, including any objections with respect to the existence or validity of the arbitration clause or of the separate arbitration agreement.

As the court held in Republic of Ecuador v. Chevron Corp., 638 F.3d 384 (2d Cir. 2011), agreement to arbitrate under the UNCITRAL Rules is, given Rule 21, “unmistakable evidence” that the parties intend to submit such questions to the arbitrator. The court rejected Thailand’s effort to distinguish Ecuador v. Chevron on the grounds that it involved a motion to stay rather than a motion to confirm. Therefore, Walter Bau won, despite the motion judge’s incorrect reasoning.

Case of the Day: Thai-Lao Lignite v. Laos

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.

Case of the Day: Kudu Co. v. Latimer

The case of the day is Kudu Co. v. Latimer (E.D. Tex. 2011). Kudu sued for confirmation of a Thai arbitral award against Latimer. Latimer first moved to dismiss on the grounds that he had not been served with process. The dispute centered on whether Latimer actually resided at the Texas address where he was served with process. The court denied the motion to dismiss, apparently concluding that the address where service was made was Latimer’s “dwelling or usual place of abode,” see Fed. R. Civ. P. 4(e)(2)(B). But when Latimer later moved to dismiss on the grounds that the court could not exercise personal jurisdiction, the magistrate judge concluded that Latimer was a resident of Thailand and recommended granting the motion. This is somewhat curious, for obvious reasons. The magistrate judge sought to square the circle by suggesting that on the evidence before him when he ruled on the first motion. Maybe this is so, but it’s not clear why Latimer wouldn’t have put before the court the evidence regarding his residence when he moved to dismiss on the basis of insufficient service of process.