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Cablegate: 2008 Report On Investment Disputes And

VZCZCXRO8277
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHVN #0339/01 1650433
ZNR UUUUU ZZH
R 130433Z JUN 08
FM AMEMBASSY VIENTIANE
TO RUEHC/SECSTATE WASHDC 2062
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS

UNCLAS SECTION 01 OF 02 VIENTIANE 000339

SIPDIS

FOR EAP/MLS BESTIC
FOR EB/IFD/OIA GOETHERT
FOR EB/IFD/OIA BUTLER
FOR L/CID SWINEY

E.O. 12958: N/A
TAGS: CASC EINV ECON KIDE OPIC PGOV LA
SUBJECT: 2008 REPORT ON INVESTMENT DISPUTES AND
EXPROPRIATION CLAIMS FOR LAOS

REF: STATE 43784

1. The Embassy is unaware of any changes to the below noted
disputes since submission of the 2007 report. Please note
the Embassy no longer has contact or biographical information
for the Claimants.

2. a. Claimant A

b. 1991

c. According to Claimant's attorney, Claimant A 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 Lane 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 B
since 2003 and has no current contact information.

4. 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

VIENTIANE 00000339 002 OF 002


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 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.

4. Claimant A: Mr. Donald Scott
Claimant B: Mr. Chris Yip
Claimant C: Mr. Somkhit Vilavong

MCGEEHAN

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