4 March 2019

The Amended Law on Economic Dispute Resolution

On 22 June 2018, the National Assembly passed the amended Law on Economic Dispute Resolution No. 51/NA (“Amended Law on Economic Dispute Resolution”), which came into force on 5 December 2018. The Amended Law on Economic Dispute Resolution marks the second amendment of the law since its introduction in 2005. The provisions and structure of the Amended Law on Economic Dispute Resolution are relatively similar to the first amendment in 2010, however, there are notable changes demonstrating the attempt to streamline and internationalise the process of alternative dispute resolutions in Laos through this amendment. This article offers an overview on developments contained in the Amended Law on Economic Dispute Resolution and suggestions for future development.

Developments in the Amended Law on Economic Dispute Resolution

While most contracting states to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (“New York Convention”) focuses their efforts into developing commercial arbitration law as an independent instrument, the development of law on alternative dispute resolution in Laos continually exhibits the attempt to regulate not only arbitration but also mediation. These two different methods of dispute resolution are intertwined due to the requirement that parties shall mediate before having the right to arbitrate in Laos. The Amended Law on Economic Dispute Resolution also continues to endorse this approach.

The Amended Law on Economic Dispute Resolution reflects the intention of regulators to promote mediation and arbitration as an alternative to dispute resolution through the increase of transparency and reduction of procedural timeframes. Examples include introduction of the concept of fair proceedings, requirement for mediator and arbitral tribunal to make a procedural plan, requirement for arbitral tribunal to issue a decision in three months, introduction of the process to determine the mediator and arbitrator fees by the Ministry of Justice and Government of Lao PDR, and decrease of the timeline for several procedures, including the selection of mediator and arbitrator.

It is clear that Lao regulators recognised that a number of problematic features existed in the previous version of the law. For instance, it was previously stipulated that in order for parties to apply to resolve a dispute by way of alternative dispute resolution, mediation or arbitration agreement may be submitted as a supporting document. This, particularly for arbitration, is contrary to the general principle under the New York Convention where express consent by the parties to arbitration shall strictly be provided. The Amended Law on Economic Dispute Resolution addresses this issue by requiring an agreement to resolve a dispute in the Centre or Office of Economic Dispute Resolution as a compulsory supporting document.

Previously, the number of arbitrators was strictly set to three. Although this requirement is not contrary to international practice, it excludes the right of the parties to tailor the arbitration process as well as the possibility to save cost by appointing a sole arbitrator to conduct arbitration proceedings. The Amended Law on Economic Dispute Resolution partially tackles this defect by allowing the parties to choose the number of arbitrators between one and three arbitrators.

The Amended Law on Economic Dispute Resolution further abandons the conservative provision on the recognition of foreign award, which requires a court to take the nationality of the parties, broad compliance with national laws, and value and location of the parties’ assets into consideration in the enforcement of foreign arbitration award. It now merely subjects the enforcement of foreign arbitral award to general civil procedure law. With the current civil procedure law and the Amended Law on Economic Dispute Resolution limiting the scope of court intervention in the enforcement of domestic arbitration awards to the consideration of compliance with Lao law, it is to be expected that such limitation may also be applied to the enforcement of foreign arbitration awards, thereby reducing the scope of court intervention with the recognition of foreign arbitral awards.

Another notable development in the Amended Law on Economic Dispute Resolution is the addition of a provision on the right of foreign mediator and arbitrator to administer dispute resolution. The Law on Economic Dispute Resolution states that a foreign mediator and arbitrator have the right to resolve a dispute only when one or both parties is a foreign individual, juristic person, or incorporated entity. This clause may have been introduced with the aim to promote domestic mediation and arbitration. However, given the developing stage of affairs of Laos as a venue for alternative dispute resolution coupled with the fact that foreign investors are required to form a ‘domestic’ entity in Laos to conduct business, this newly introduced restriction on foreign alternative dispute resolution may render Laos a less attractive venue for investment. The relationship of this condition with Article 5 of the same law, which allows a foreign individual, juristic person, or incorporated entity engaging in international trade or foreign investment in Laos to choose foreign arbitration, also needs further clarification.

Suggestions and Reflections

The Amended Law on Economic Dispute Resolution serves both as an attempt to promote alternative dispute resolution mechanism, and as evidence of the effort of Lao government to develop mediation and arbitration in Laos in the light of international developments. Nevertheless, given that some changes are relatively new and foreign to previous experience of relevant authorities and investors, further clarification and guidelines from the Lao government as to the interpretation and implementation of the law would be particularly helpful in ensuring the uniformity of application of the Amended Law on Economic Dispute Resolution.

Recently, the United Nations General Assembly also adopted the United Nations Convention on International Settlement Agreements Resulting from Mediation (“Singapore Mediation Convention”), which marks the first international model law in the field of mediation. Given that the signatory stage will be in August 2019, the reaction of Lao government to this international instrument is not yet clear. Nevertheless, as the Singapore Mediation Convention aims at mitigating legal barriers for the enforcement of mediation settlement, one would expect that, if this instrument is adopted by Lao government, the Amended Law on Economic Dispute Resolution may have to be further amended to accommodate and absorb such principles.

If you have any questions or require any additional information, please contact Cess Principe, Tuchakorn Kitcharoen, or the ZICO Law Partner you usually deal with.

This alert is for general information only and is not a substitute for legal advice.