Authorities have seized hundreds of slot machines from a China-based casino and hotel operator in Laos after it lost an appeal to overturn a court ruling to pay tens of millions of dollars in back taxes and penalties, according to the firm’s management.
Sanum Investments Ltd. Said that a three-judge panel in a Lao appeals court issued an official seizure order on Wednesday for property it owned valued at U.S. $6 million—consisting of “hundreds of slot machines” from the Vientiane-based Thanaleng Slot Club, in which Sanum was a majority shareholder.
The three judges had declared that the decision was made “in order to protect the interests of the government,” the company said in a statement.
“[The appeal upheld] a decision stripping Sanum of all ownership interest in the Thanaleng Slot Club, without compensation,” it said.
Sanum says that it had initially invested more than U.S. $85 million in Laos and is one of the country’s largest employers and claims that its holdings in Laos are now worth some U.S. $400 million.
It said that more than U.S. $10 million of that initial investment went into the development of the Thanaleng club, in which Sanum was a 60 percent shareholder, with the remaining 40 percent held by local minority shareholders.
The company claims that after its investments became profitable, “the government began working against them.”
It said that last year the government sent “armed police” to forcibly evict the firm from the club, which was earning net profits of around U.S. $3 million per month at the time, and “unlawfully” gave control of the business to the minority shareholders.
“When Sanum attempted to assert its rights in court, the government, in collusion with the judiciary, gave little regard to due process or the rule of law, and the clearly arbitrary proceedings ended after less than 30 minutes of deliberation, with the court … unlawfully stripping Sanum of all ownership rights in the Thanaleng Slot Club,” it said.
Threat of arrest
Sanum President Jody Jordahl said he was appalled by the treatment his company had been subjected to by the Lao government after investing so heavily in the country.
“It seems inconceivable that, whilst Sanum has actively and legitimately sought to promote economic development within Laos with its business activities since its arrival in the country in 2007, it is not being granted any real access to justice, something we would surely be afforded elsewhere,” he said.
“It is an understatement to say that we are disappointed that we have had to relocate our executive staff for their safety, and it is no less disheartening to know that this will have wider long-term negative ramifications for the Lao economy, its investor relations, and its citizens.”
Sanum said that the Ministry of Finance had recently recommended the arrest and imprisonment of senior executives connected with Sanum if taxes it says the company owes are not immediately paid.
The Ministry of Finance and the Department of Tax filed a request with a commercial court earlier this year to force Sanum to pay over U.S. $23 million in retroactive taxes, which the company says it does not owe.
The company said authorities have threatened to seize the Savan Vegas casino and entertainment complex—its last remaining asset in the country—if it does not pay the taxes.
Lao officials have refused to comment on the casino, but an official from the Lao Ministry of Planning and Investment, speaking on condition of anonymity, had told RFA that its policy is not to make any response about the company.
The threat of the casino’s seizure comes after Sanum filed a lawsuit against the Lao government in August with the World Bank’s International Centre for the Settlement of Investment Disputes alleging that the government had broken international treaties it signed promising to protect foreign investment.
The lawsuit said Laos violated multiple treaties in imposing the U.S. $23 million in back taxes and penalties, which went back on written promises and agreements, and in threatening to use the tax claims as an excuse to auction off the company’s investments.
The International Centre for the Settlement of Investment Disputes, an independent arm of the World Bank, and an ad hoc tribunal expected to hear the company’s suit against the Lao government are authorized to issue binding damages awards, Sanum said. The suit is awaiting arbitration.
Laos, one of 10 member states of the Association of Southeast Asian Nations (ASEAN) that seeks to promote economic growth across the region, has welcomed massive investment from China, Thailand, and Vietnam in recent years.
The World Trade Organization’s recent approval of Laos’ membership is expected to help the landlocked communist nation of 6.5 million people grow its economy. Following approval by the Lao parliament, the country should officially join the WTO in early 2013.
But cases like Sanum’s could discourage foreign companies from investing in Laos, Jordahl said.
“We are still holding out for a favorable resolution, and hope that the government of Laos sees the potential impact that this sort of treatment of foreigners will inevitably have in the long-term,” he said.
“An amicable settlement of this matter would at least go some way towards demonstrating that Laos’ recent accession to the WTO is not without merit, and that the Lao government can do more than pay lip service to the rule of law.”
Reported by Joshua Lipes.