Thai-Lao Lignite Co., Ltd. v. Government of the Lao People's Democratic Republic (I)

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Type of case:
Investor-State
Date of introduction:
26 June 2007
Status of the case:
Decided in favor of investor
Claimant's Country of Origin:
Thailand
Respondent:
Laos
Institution:
Ad hoc Arbitration

Documents of the case

Rory O. Millson Appointed by the State
William B. Conway Appointed by the investor
James H. Carter President

Lawyers, other representatives, expert(s), tribunal’s secretary

Award

THE PARTIES

1.
Claimant Thai-Lao Lignite (Thailand) Co., Ltd. ("Thai-Lao" or "TLL") is a limited company organized under the laws of Thailand in 1990 for the purpose of investing in and operating mining and power generation projects. It was established specifically to develop a project to locate, extract and convert suspected lignite coal reserves in the undeveloped Hongsa area of Laos into electricity for sale into Thailand (the "Hongsa Project") at issue in this arbitration. Mr. Siva Nganthavee, a Thai national ("Mr. Siva"), has served at all relevant times as its Chief Executive Officer.
2.
Claimant Hongsa Lignite (Lao PDR) Co., Ltd. ("HLL") is a limited company organized under the laws of the Lao People’s Democratic Republic in 1992 by TLL, which owns a 75% interest in HLL, for the purpose of exploring and facilitating the development of a mining concession related to the Hongsa Project. The other 25% interest in HLL is owned by Agriculture Forestry and Import-Export Development Co., Ltd. of the Lao People’s Democratic Republic ("AFIE"), a state-owned enterprise.
3.
Respondent Government of the Lao People’s Democratic Republic ("GOL") is the Government of the nation often referred to as Laos.
4.
The parties are represented by the following counsel:

For Claimants
David Huebner, Esq.
Susan Rosenthal, Esq.
Sheppard Mullin Richter & Hampton LLP
41/F Raffles City Office Tower
268 Xizang Road Central
Huangpu District, Shanghai 200001
China

For Respondent
Fredrick E. Sherman, Esq.
Thomas E. Lynch, Esq.
Jones Day
222 East 41st Street
New York, NY 10017-6702
USA
and
Chong Yee Leong, Esq.
Chong Boon Leong, Esq.
Rajah & Tann 4 Battery Road
#26-01 Bank of China Building
Singapore

THE HONGSA PROJECT AND ITS GOVERNING AGREEMENTS

5.
The Hongsa Project is a plan, with associated rights, to dig mines, construct and operate lignite-fired electricity generation plants with total capacity of 608 megawatts (later increased to 1,400 megawatts) sited adjacent to the mines, construct roads and transmission lines to provide access to the remote site and build other infrastructure to support the operation and enlist the goodwill of the residents of the area.
6.
Lignite is the lowest grade of coal and has a low energy density. Often referred to as "brown coal" because of its brownish-black color, lignite generally has a high inherent moisture content (sometimes as high as 66%), as well as a high ash content (approaching 50%) compared to bituminous coal. It generally has a high sulfur content as well. Lignite is used almost exclusively as fuel for steam-electric power generation.
7.
Because of its low energy density, it is inefficient to transport lignite long distances, and lignite is not traded extensively on the world market compared with higher grade anthracite and bituminous coal. Lignite is generally mined in stripping pits and is often burned in power stations constructed in very close proximity to those open-pit mines.
8.
In 1990 Mr. Siva read reports describing certain sandstone formations in particular areas in Laos. In 1991 he heard that there was an area in Laos near Hongsa village where the ground smoked when it rained. Mr. Siva was aware that such formations and phenomena often indicate the presence of coal deposits, and he believed that such deposits could pose a significant business opportunity because of projections of serious power shortages in Thailand in the future. At that time there was no lignite extraction in Laos, and Lao electricity generation efforts focused on hydroelectric power. Mr. Siva incorporated TLL for the purpose of investigating and potentially developing a Laos-based coal mining project.
9.
Mr. Siva financed an expedition to Laos and later visited the potential site himself. Preliminary collection of rocks and soil during those trips confirmed the likely presence of lignite coal in a remote area of Laos’ Xayaburi (a.k.a. Sayaboury) Province, near the village of Hongsa, in an undetermined quantity.
10.
Mr. Siva approached the GOL to seek a mining concession in order to facilitate more detailed surveying and analysis of potential lignite deposits. On 29 May 1992, the GOL and TLL executed an agreement entitled "Agreement of Lignite Survey and Mining in Hongsa District, Udomchai Subdistrict, People’s Democratic Republic of Laos" ("The First Concession Contract") (Ex. C-2), which granted TLL the right to conduct lignite survey and mining operations in a 20-square-kilometer region of Hongsa for a term of 15 years, renewable thereafter for successive five-year periods. The First Concession Contract further provided that TLL must establish a new company, HLL, as a joint enterprise between TLL and AFIE "in order to perform the target and objectives" of the concession thus conveyed. Profit from the joint enterprise was to be distributed 75% to TLL and 25% to AFEE.
11.
On 21 July 1993 TLL and the GOL executed a document entitled "Additional Agreement [re] Lignite Mine Survey and Exploration Project Hongsa... and Memorandum [re] Lignite Power Station Construction Project in Hongsa... ("The Second Concession Contract’) (Ex. C-3). That agreement increased the concession area from 20 square kilometers to 60 square kilometers and authorized TLL to proceed with feasibility studies regarding the construction of a lignite-fired power station within the concession area.
12.
During negotiation of The Second Concession Contract, the Parties discussed the need for a comprehensive Project Development Agreement (the "PDA") that would form the integrated basis for developing the Hongsa site. The PDA was negotiated in Vientiane, Laos over a period of 18 months beginning in March 1993 and was entered into by TLL and the GOL as of 22 July 1994 (Ex. C-l). It is a "build/own/transfer" agreement granting TLL an "exclusive mandate and rights to implement the Project in accordance with the terms and conditions" of the PDA for a period of 30 years running from commencement of electricity generation operations. (Section 2.2) The PDA required TLL to fund the Hongsa Project and manage its operation, but to transfer it to the GOL after the 30-year term.
13.
The PDA defines and references the two Concession Contracts as "Prior Contracts" and states:

"The rights and benefits of TLL contained in this Agreement may not be limited in any way by any statements made in the Prior Contracts... but may be broadened or made more extensive by the Prior Contracts..." (Section 19.11) "[T]his Agreement and the Prior Contracts should be read and construed so as to maximize the rights and benefits to TLL or Hongsa Lignite as the case may be and not to subtract from them in any way."

14.
The PDA provides that Lao law shall govern with respect to four specific issues and that New York law shall govern the agreement in all other respects. Section 18.1 states:

"The laws of the Lao People’s Democratic Republic shall apply (I) with respect to the authorization and execution of this Agreement by the Government, (II) with respect to the FIL [Foreign Investment Law] in force on the date of execution of this Agreement by the Government, (III) with respect to any of the laws of the Lao People’s Democratic Republic and the specified consents specifically referred to by name in this Agreement as being applicable, and (IV) with respect to the lease and the mineral rights deed. With respect to overall governing law and construction and to all other matters not specifically mentioned in the preceding clauses (I)-(IV), this Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, United States of America, without reference to principles of conflict of laws, unless otherwise agreed to by both parties hereto."

SUMMARY HISTORY OF THE HONGSA PROJECT

15.
During the period from 1994 through 1997, TLL and HLL commissioned a number of studies for development of the Hongsa Project, performed road construction in Laos and discussed financing arrangements with a number of parties. Claimants provided the funds for all of these activities from their own resources and advances by related entities (principally a firm named South East Asia Power Co. Ltd. or "SEAP"), as well as from Thai bank borrowings.
16.
As was required by the PDA, TLL organized an additional company, Thai-Lao Power Co., Ltd. ("TLP"), under the laws of the Lao People’s Democratic Republic to "implement" that agreement and to be the operating company for the Hongsa Project. The PDA stated that the contract "shall be assigned" to this company. (Section 5.1) At the outset, TLL was TLP’s controlling shareholder, and the GOL held one percent of equity capital in TLP and was entitled to name one non-voting representative to its board. (Section 5.3) The GOL also received profit-sharing rights equivalent to 50 percent of "that portion of Net Profits which exceeds the eighteen percent internal rate of return threshold...starting in the first profit-making year." (Section 9.2)
17.
At various times during the history of the Hongsa Project, the GOL sought to increase its ownership interests beyond the 25 percent interest in HLL and the one percent in TLP that it controlled. In mid-2000, Claimants offered to amend the PDA to accommodate these requests by granting the GOL a 10 percent ownership interest in TLP, but no such amendment was ever agreed and executed.
18.
A critical aspect of the proposed financing was agreement for sale of the power to be produced from the Hongsa Project to the Electricity Generating Authority of Thailand ("EGAT"). In June of 1993 the Governments of Laos and Thailand agreed on a Memorandum of Understanding (the "Thai-Lao Power Purchase Memorandum") under which it was intended that approximately a half dozen new Lao power generation plants would supply up to 1,500 megawatts of electricity to Thailand by 2000. The purchaser of this power was to be EGAT. TLL and the GOL acknowledged in the PDA that the Thai-Lao Purchase Memorandum would operate on a "first come, first served" basis in terms of allowing various projects in Laos to be included in this 1500 MW "quota;" but Claimants wished, and the GOL recorded its "intent," that the Hongsa Project be included. (Section 4.15)
19.
Consistent with those plans, in September 1996 TLP and EGAT executed a Memorandum of Understanding for the Purchase of Power ("MOU") by EGAT. (Ex. C-54) The MOU contained material terms for what was intended to be a detailed Power Purchase Agreement to be executed and to be subject to final approval by the Governments of Thailand and Laos. The MOU provided that EGAT would purchase the full capacity of the Hongsa Project for an initial term of 25 years.
20.
On 18 December 1997, officers of TLP and EGAT initialed a Power Purchase Agreement ("PPA"), as contemplated by the 1996 MOU. (Ex. C-57), but that PPA remained subject to approval of several governmental entities in Thailand and Laos.
21.
Beginning in approximately the middle of 1997, the Thai economy was severely depressed by what came to be known as the "Asian Financial Crisis" of 1997-2000. The Thai baht was devalued significantly against the dollar. Other Asian currencies depreciated significantly as well, resulting in inflation, increases in interest rates, declines in sales and production and crisis-level instability in the Thai economy.
22.
This crisis led the Thai Government to suspend conclusion of any further arrangements for the purchase of electric power from Laos. Although TLL and the GOL continued to correspond with Thai authorities, seeking agreement that the Hongsa Project would be included as a favored project under the Thai-Lao Power Purchase Memorandum quota, there was no significant progress in moving the Hongsa Project or most of the other contemplated Lao power projects to development until approximately late 2004. Nevertheless, Claimants continued to fund various Hongsa Project expenses.
23.
Claimants allege that the GOL gave only faint-hearted support for the Hongsa Project in its communications with the Government of Thailand during this period, favoring other electricity generation projects in which the GOL had a greater economic interest and at the same time pressing Claimants to give the GOL a larger ownership share in the Hongsa Project. Respondent denies these allegations and alleges that delays instead were largely a result of Mr. Siva’s inability to make successful arrangements with any joint venture partner.
24.
The Asian Financial Crisis also had adverse effects on various business interests of Mr. Siva and his family in Thailand, making it more difficult for Claimants to finance the Hongsa Project and highlighting the importance of their finding a suitable joint venture partner. Accordingly, throughout the Asian Financial Crisis period and afterwards Claimants continued their efforts to identify and enter into arrangements with a joint venture partner who might help overcome governmental roadblocks and paralysis and also provide significant financing for the Hongsa Project.
25.
After considering a number of potential candidates, Mr. Siva selected Banpu Public Co., Ltd. ("Banpu"), which is Thailand’s largest private energy company. On 19 January 2005 Mr. Siva, the two Claimants, TLP and TLL’s related company SEAP signed a preliminary joint development agreement with Banpu. (Ex. R-143) The same parties executed a final Joint Development Agreement and a "New Supplementary Agreement" on 5 April 2005. (Ex. R-147, R-148)
26.
Disagreements thereafter arose between Claimants and Banpu, however, and by letter dated 18 July 2006 an attorney for Claimants and Mr. Siva sent Banpu a notice of termination of their Joint Development Agreement. (Ex. C-150)
27.
By letter dated 8 August 2006, the GOL wrote to Mr. Siva expressing displeasure over Claimant’s termination of the Banpu Joint Development Agreement. (Ex. C-154) The letter summoned Claimants to a meeting in Vientiane and stated that the GOL would "proceed to further necessary measures to develop the Hongsa Project at our own discretion" if Claimants were unable to appear.
28.
Claimants’ representatives and Banpu representatives did meet with the GOL on 10 August 2006, at which time Claimants explained that they planned to replace Banpu with a new venture partner, Castlepines Finance Pty. Limited ("Castlepines"), an Australian company. Indeed, TLL had signed a Memorandum of Understanding with Castlepines on 20 July 2006, just two days after terminating its agreement with Banpu. (Ex. R-178) Claimants also told the GOL that they were in negotiations with EGAT for that entity to take a 30 percent equity interest in the Hongsa Project.
29.
Claimants’ explanations of the situation and their new plans at that meeting were not satisfactory to the GOL, and an internal GOL memorandum of 31 August 2006 from the Prime Minister’s Office approved a lower official’s request that a notice of default be sent to Claimants and that a new investor/developer be selected. (Ex. C-69)
30.
By letter dated 4 September 2006, the GOL sent Claimants a Notice of Default demanding that four alleged contractual defaults be cured within 30 days. (Ex. C-155) The alleged violations of Article 6 of the PDA were, in particular:

"i. Your failure to produce the Project Definite Study by end February 2005;

"ii. Your failure to procure the due execution of the Power Purchase Agreements pursuant to the Project by end December 2005;

"iii. Your failure procure [sic] the execution of the Engineering Procurement Contract for the Project by end December 2005;

"iv. Your failure to procure the due execution of the Fuel Supply Agreement for the Project by end December 2005."

31.
The Chairman of the GOL’s Committee for Planning and Investment reported to the Prime Minister on 7 September that the Notice of Default had been sent, with a 30-day cure period, and that Banpu "is willing to pay for all legal expenses for the GOL if Thai-Lao Power brings the case against GOL." (Ex. C-200) This Banpu commitment later was confirmed. (Ex. C-164)
32.
By letter of 2 October 2006, Claimants advised Banpu of their willingness to withdraw their notice of termination of the Banpu Joint Development Agreement (Ex. C-158); and by letter of the same date, they informed the GOL that Claimants disagreed with the allegations of contractual default asserted by the GOL. (Ex. C-157)
33.
The GOL nevertheless determined to go forward with a decision to terminate and sent Claimants a letter dated 5 October 2006 containing a Notice of Termination of the PDA. (Ex. C-161) The Notice did not refer to any specific provisions of the PDA on which the purported termination was grounded.
34.
On that same day Banpu wrote to Claimants rejecting their reconciliation overtures. Banpu advised that the situation was not reconcilable and that it considered the Joint Development Agreement to be terminated. (Ex. C-160)
35.
The GOL sent Claimants Notices of Termination of The First and Second Concession Contracts on 11 October 2006. (Ex. C-162, C-163)
36.
The GOL thereafter entered into new project development arrangements with Banpu, the terms of which were not disclosed in the arbitration, except that the GOL now appears to have a 20 percent equity interest in the Hongsa Project.
37.
There has not yet been any additional physical development of the Hongsa Project beyond the work done by Claimants, although Banpu has commissioned additional studies. No mines have been dug, and no power plant construction has begun.

COMMENCEMENT OF THE ARBITRATION AND SELECTION OF THE TRIBUNAL

38.
Claimants commenced this arbitration against the Respondent by Notice of Arbitration dated 26 June 2007, which included a request for interim relief "preventing the Government from unlawfully converting Claimants’ assets; exploiting Claimants’ documents, know-how, and investment; or taking any steps to divest, deny, or impair Claimants’ rights under the PDA and the prior contracts referenced therein."
39.
Claimants assert jurisdiction pursuant to Article 14 of the PDA. It provides, in pertinent part:

ARTICLE 14

SETTLEMENT OF DISPUTES

"14.1 Arbitration. (i) In the event that a dispute arises out of this Agreement including any matter relating to the interpretation of this Agreement, each party shall use its best efforts to settle the dispute amicably through consultation in good faith with the other party or, if both parties agree, through ad hoc non-binding mediation in the Lao People’s Democratic Republic to be structured by the parties in order to provide a framework for the Government and TLL to attempt to arrive at a settlement which is acceptable to both of them. Whether amicable consultations, ad hoc non-binding mediation, or neither is used by the parties, if no settlement is reached within thirty days of the date on which such dispute first arises, then either party may submit the dispute to arbitration conducted in Malaysia at the Kuala Lumpur Regional Centre for Arbitration in accordance with the UNCITRAL Rules; provided, that, this clause shall not be construed to prevent any party from bringing any action in a court of competent jurisdiction for injunctive or other provisional relief. It is specifically understood by the parties that such dispute may be submitted by either party to arbitration regardless of the magnitude thereof, the amount in dispute, or whether such dispute would otherwise be considered justiciable or ripe for resolution by any court or arbitral tribunal. In the event that such dispute has been submitted to arbitration as described herein, any ad hoc mediation efforts shall immediately cease.

"(ii) The arbitration shall take place at a time noticed by the arbitral panel regardless of whether any of the parties fails to participate. The proceedings shall be conducted in the English language. There shall be three arbitrators appointed in accordance with the UNCITRAL Rules.

"(iii) Each arbitration shall be conducted in Kuala Lumpur, Malaysia, and the parties agree to exclude any right of application to any court or tribunal of competent jurisdiction in connection with any question of law arising in the course of any arbitration.

"(iv) The Director of the Kuala Lumpur Regional Centre for Arbitration shall appoint the arbitrators for each arbitration. Only persons who are attorneys or former judges with experience in international commercial agreements and, in particular, the implementation and interpretation of power purchase agreements under New York law shall be appointed as arbitrators. No arbitrator shall be a present or former employee or agent of, or consultant or counsel to, either party or an affiliate of either party. In no case shall admission to practice law in Malaysia be a requirement to service as an arbitrator.

"(v) At any oral hearing of evidence in connection with any arbitration, each party or its legal counsel shall have the right to examine its witnesses and to cross-examine the witnesses of the opposing party. No evidence of any witness shall be presented in written form unless the opposing party shall have an opportunity to cross-examine such witness, except as the parties may otherwise agree in writing or except under extraordinary circumstances where the interests of justice require a different procedure.

"(vi) Any award or determination of the arbitral panel shall be final, nonappealable, binding, and conclusive upon the parties, and judgment may be entered in any court of competent jurisdiction. The parties waive to the extent permitted by law any rights to appeal or any review of such award by any court or tribunal of competent jurisdiction.

"(vii) The costs of arbitration shall be borne by the losing party, unless otherwise determined by the arbitration award.

"(viii) The Government believes that the Supreme Court of the Lao People’s Democratic Republic would enforce an arbitral award rendered pursuant hereto against assets of either party in the Lao People’s Democratic Republic."

40.
The parties subsequently agreed that each side would appoint one Arbitrator and that those two Arbitrators would select the Chairman, and that the International Chamber of Commerce Court of International Arbitration ("ICC") would replace the Kuala Lumpur Regional Centre for Arbitration as Appointing Authority. The ICC thereafter considered and rejected a challenge by Claimants addressed to the qualifications of the arbitrator appointed by the Respondent. However, the appointing services of the ICC were not required, and selection of the Tribunal was completed on 4 April 2008.
41.
The following Tribunal was thus constituted:

James H. Carter, Esq. (Chairman)
Sullivan & Cromwell LLP
125 Broad Street
New York, NY 10004-2498

William B. Conway, Jr., Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, DC 20005-2111
(Appointed by Claimants)

Rory O. Millson, Esq.
Cravath, Swaine & Moore LLP
825 Eighth Avenue
New York, NY 10019-7475
(Appointed by Respondent)

PLEADINGS AND CLAIMANTS’ PETITION FOR INTERIM RELIEF

42.
The Tribunal conducted an initial conference with counsel for the parties in New York, NY on 27 May 2008, at which time a procedural schedule for both the briefing of Claimants’ Petition for Interim Relief and the merits hearing was agreed. The schedule thereafter was memorialized in Procedural Order No. 1 of 25 August 2008, as varied slightly thereafter.
43.
Claimants filed a Statement of Claim and a Petition for Interim Relief pursuant to UNCITRAL Rule 26, which empowers the Tribunal to take "any interim measures it deems necessary in respect of the subject matter of the dispute," on 26 June 2008. The interim relief requested was an order:

(a) "that Respondent not execute or otherwise conclude any agreement or take any other action to award, transfer, sell, lease, or otherwise demise to any third party the assets, benefits, rights, interests, and/or privileges conveyed to Claimants in the PDA, including Claimants’ exclusive rights to exploit lignite deposits at the site and develop the Project; and

(b) "that Respondent pay to Claimants their costs incurred on this Petition, including attorneys fees."

44.
Claimants contended, in support of their Petition for an order directing that no transfer of rights in the Hongsa Project be made, that the PDA remained in effect because Respondent had not complied with the PDA’s requirements for a termination:

"15.1. Term; Termination, (a) This Agreement shall remain in effect until the Transfer Date (including any extensions thereof pursuant to Section 2.3 hereof), unless written notice of termination is given by one party to the other pursuant to the provisions hereof.

"(b) This Agreement may be terminated (i) by TLL at any time prior to two years from the date hereof, if during such time TLL determines that the implementation of the Project is not feasible; (ii) by TLL if any of the conditions precedent set forth in Article 7 hereof is not met and is not otherwise expressly waived by TLL; and (iii) in addition, in the event that either party is in default under this Agreement after having been given notice by the other party and a reasonable opportunity to cure pursuant to Article 13 hereof, if the non-defaulting party wishes to terminate this Agreement, it may do so upon the approval of the arbitration panel constituted in accordance with Article 14 hereof.

"In the event of termination of this Agreement, compensation shall be paid to TLL or the Government, as the case may be, as determined by the arbitration panel constituted in accordance with Article 14 hereof which shall include TLL’s total investment cost plus a premium and consideration of the Lenders and Investors in the event of a default on the part of the Government."

45.
Respondent filed a Statement of Defense, Opposition to the Petition for Interim Relief and Counterclaims on 29 August 2008. Respondents opposed the Petition on the grounds that Claimants’ lack of progress and failure to come to terms with a strong partner to finance and help operate the Hongsa Project constituted a repudiation of the PDA and a failure to perform within a reasonable period of time. The GOL argued that Article 14 did not require it to complete an arbitration and obtain an award in order to invoke those alleged facts as a basis for termination.
46.
Claimants filed a Reply responding to the GOL’s pleading on 24 September 2008

RULING ON CLAIMANTS’ REQUEST FOR INTERIM RELIEF

47.
A second procedural conference, which included oral argument of Claimants’ Petition for Interim Relief, was held on 3 October 2008 in New York, NY. Procedural Order No 2 of 7 October 2008 contained the following ruling on the Petition:

"The Tribunal considered Claimants’ Petition for Interim Relief, pursuant to Article 26 of the UNCITRAL Arbitration Rules, at a hearing on 3 October 2008 and in accordance with the parties’ prior written submissions. The Tribunal at that time indicated its preliminary view that the Project Development Agreement dated as of July 22, 1994 between Respondent and the first Claimant may be terminated only in accordance with the terms of Article 15.1 of that Agreement and has not yet been terminated. The Tribunal considers that, having given its view on this matter, no further action is required on the Claimants’ Petition for Interim Relief, and it therefore is denied."

MEMORIALS AND HEARING

48.
A further schedule was agreed, and Claimants submitted their Opening Memorial and supporting materials on 19 December 2008.
49.
Respondent submitted its Opening Memorial and supporting materials on 20 February 2009.
50.
Claimants submitted their Reply to Respondent’s Opening Memorial on 10 May 2009.
51.
Respondent submitted its Reply Memorial on 15 June 2009.
52.
A hearing was held at the Kuala Lumpur Regional Centre for Arbitration in Kuala Lumpur, Malaysia on 13, 14, 15, 16 and 17 July 2009. The witnesses testifying on behalf of Claimants were: Mr. Wirach Nimmanwathana, Mr. William Caven Hutchinson, Mr. Siva Nganthavee and Mr. Andrew J. Delaney. The witnesses testifying on behalf of Respondent were: Mr. Khammone Phonekeo, Dr. Bountiem Phissamay, Mr. Xaypaseuth Phomsoupha, Mr. Michael Anthony Blackman, Mr. Chanchai Jivacate, Mr. Sivath Sengdouangchanh, Mr. Harsha Basnayake, Mr. Daniel Beaulne and Mr. Paul H. Rapisarda. Each witness submitted one or more written witness statements or expert reports and was subject to oral examination.
53.
The parties submitted simultaneous post-hearing briefs on 14 September 2009.

THE PARTIES’ CONTENTIONS

54.
The contentions of TLL and HLL are straightforward. Claimants maintain that they are, respectively, a party to and an intended third-party beneficiary of the PDA, which is enforceable in accordance with its terms. They claim that the GOL has violated the PDA by improperly seeking to terminate it, without cause and without following prescribed procedures. Claimants also contend that the GOL failed to provide governmental support for the project, as provided in the PDA, and that this activity or inaction, for which no separate relief is sought, explains the length of time that has passed without development of the Hongsa Project.
55.
Claimants originally sought, in the alternative, either injunctive relief restoring them to their rights under the PDA or damages in accordance with Section 15.1(b), which refers to compensation for TLL, as determined by an arbitration tribunal, "which shall include TLL’s total investment cost plus a premium and consideration of the Lenders and Investors in the event of a default on the part of the Government." At the conclusion of the hearing, Claimants modified their request for relief to seek a determination that they may now terminate the PDA based upon breach by the Respondent. Claimants computed their damages from that alleged breach at the conclusion of the hearing, on the basis of the evidence presented, to be U.S.$172 million of invested capital plus U.S.$275 million in the value of lost opportunity, for a total of U.S.$447 million.
56.
Respondent contends, first, that neither Claimant has standing to bring the present claims. GOL argues that TLL lacks capacity to enforce the PDA, that HLL has no right to claim under the PDA and that other affiliated organizations that are not parties to the arbitration, namely TLP and SEAP, have asserted no claims and have no right to claim under the PDA.
57.
The Respondent further argues that it did not breach the PDA. Respondent claims, first, that material conditions precedent were never satisfied, so that the PDA never was completed as an enforceable contract. The GOL also argues that, even if the PDA is an enforceable contract, the GOL did not breach it because termination was both substantively justified and procedurally proper.
58.
The Respondent also argues that Claimants are not entitled to recover damages for any breach of the PDA. They maintain, first, that the compensation "formula" of Section 15.1(b) of the PDA is unintelligible or unenforceable as a penalty. The GOL further contends that Claimants are not entitled to damages for lost profits because they have not demonstrated that TLL was capable of carrying out the Hongsa Project or that the contracting parties contemplated recovery of lost profits, and that Claimants have not proved alleged lost profits with reasonable certainty.

STANDING

59.
TLL is a signatory of the PDA, but the GOL contends that TLL lacks standing to assert rights under that Agreement because Article 2.2 of the PDA provides that "all of TLL’s mineral and exploration and other incidental or related rights contained" in the PDA "have been fully vested in" HLL, and Article 5.1 of the PDA provides that the other rights granted to TLL by the PDA were to be assigned by TLL to the "Company", i.e., TLP. TLL agreed to transfer these rights because the 1994 Laos Foreign Investment Law (the "FIL") required that Lao-incorporated entities hold the rights in order to qualify for an investment license for construction and operation of power plants.
60.
The GOL argues that, under New York law, a party who assigns to another all of its rights under a contract containing an arbitration clause loses the right to pursue arbitration to enforce those rights. Alternatively, the GOL argues, if TLL failed to assign the PDA to TLP, then TLL would have remained responsible for the obligations imposed by the PDA with respect to construction, operation and transfer of power plants but would have lacked the investment license required to perform those obligations. TLL therefore, under this hypothesis, arguably would have no right to enforce the PDA because of legal incapacity to perform its obligations under the PDA.
61.
Claimants respond that TLL is a party to the PDA and had not assigned its rights to TLP at the time of the alleged termination. Claimants note that the PDA does not specify when the required assignment to TLP was to take place and argues that Respondent has waived any objections to the status or pace of such assignment by not objecting to the fact that it was not made during the 12 years between 1994 and 2006. Claimants also note that Section 2.1 of the PDA states that the Agreement is to be assigned "in whole or in part" by TLL, so that it was contemplated that TLL could retain direct interests in the PDA. Finally, Claimants state that TLP was not made a party to the arbitration because the GOL had advised that termination of the PDA "terminates the business activity" of TLP. (Ex. C-166)
62.
The Respondent challenges HLL’s standing because HLL is not a signatory of the PDA and, even if HLL is an intended beneficiary of the PDA, HLL has no right to enforce the PDA because HLL’s Lao investment license mentions only the Second Contract and not the PDA.
63.
Claimants assert that HLL has standing as an intended beneficiary of the PDA and that the status of its investment license is irrelevant to its standing to assert rights in this proceeding.
64.
Claimants also argue that the GOL has waived any objection to their standing to assert rights under the PDA by dealing with them consistently as the proper parties to that Agreement for a dozen years. Claimants note that the Respondent dealt with them both for years and treated them, together with TLP and SEAP as the "Companies" under the Banpu Joint Development Agreement, which the GOL approved, without distinction as to formal entities within the group of companies control by Mr. Siva.
65.
The Tribunal agrees with Claimants that they have standing to bring these claims. TLL is a party to and HLL is an intended beneficiary of the PDA. There is no evidence that either of them has assigned away its rights to do so. As we appreciate Lao law, it requires only that the company intended to operate the eventually completed facilities maintain an investment license, and TLP was so licensed at all relevant times.
66.
The Tribunal rejects Claimants’ request to amend their claims, at the conclusion of the hearing, to add TLP as a party. The request is untimely and, in any event, unnecessary to support the claims that TLL and HLL have made.

CONDITIONS PRECEDENT TO ENFORCEABILITY OF THE PDA

67.
Article 7 of the PDA recites the following conditions precedent:

"7.1. Conditions Precedent. The rights and the obligations of the parties under this Agreement (other than those relating to licenses and consents, immigration controls, security, dispute resolution, proprietary information, assignment, and termination) shall be conditional upon:

"(i) the signing of the financing documents and their approval by TLL, TLL’s receipt of the initial disbursement of funds thereunder, and the receipt of commitments for such equity as are required by TLL in order to satisfy the requirements of the Lenders and Investors;

"(ii) the documents relating to the security provided for the financing having been entered into by each of the parties thereto;

"(iii) The granting of the Specified Consents set forth in Schedule 5 hereto;

"(iv) the due execution and delivery to TLL of the power of attorney under the signature of the Vice Chairman of the Committee on Planning and Cooperation of the Lao People’s Democratic Republic as per Schedule 7 hereto to execute and deliver this Agreement and to approve in all respects the transactions contemplated hereby on the part of the Government;

"(v) the due delivery to TLL of the Government’s Cabinet notification number authorizing the entering into and delivery of this Agreement on the terms and conditions contained herein and approving in all respects the transactions contemplated hereby as per Schedule 7 hereof;

"(vi) the due execution and delivery to TLL of the certificate of the Ministry of Justice of the Lao People’s Democratic Republic certifying in all respects the legality of this Agreement and the entering into of this Agreement under the Laws of the Lao People’s Democratic Republic as per Schedule 8 hereof;

"(vii) the due execution and delivery to TLL of the form of Government legal opinion as per Schedule 9 hereto;

"(viii) the due execution and delivery to the Government of the officer’s certificate under the signature and seal of the board of directors of TLL in favor of Siva Nganthavee as per Schedule 10 hereto; and

"(ix) the due execution and delivery to the Government of the TLL board of directors resolution authorizing the entering into of this Agreement by TLL on the terms and conditions contained herein and approving in all respects the transactions contemplated hereby.

68.
Respondent contends that many of these conditions never were satisfied and that that fact made important performance obligations of the PDA "conditional" until the conditions were fulfilled. Respondent further argues that the PDA was "incomplete" because, even if enforceable, the PDA was "flawed" and would not support development of the Hongsa Project without its replacement by more complete documents.
69.
Claimants maintain that all of these conditions were for their benefit and therefore that Claimants are entitled to and have waived them. They note that Section 15. l(b)(ii) of the PDA states: "This Agreement may be terminated... (ii) by TLL if any of the conditions precedent set forth in Article 7 hereof is not met and is not otherwise expressly waived by TLL." (Emphasis added) Claimants also note that they and Respondent have performed under the PDA for many years without anyone suggesting that the document was not complete and effective and that the GOL did not invoke incompleteness or unenforceability as a basis for its Notice of Termination of the PDA.
70.
The Tribunal agrees with Claimants that there are no unfulfilled conditions or incomplete terms sufficient to bar their enforcement of the PDA because Claimants were entitled to and did waive those conditions that were for its benefit and because throughout Claimants’ involvement with the Hongsa Project all parties treated the PDA as in force and applicable to their activities. The parties contemplated at various times that the Agreement would be supplemented, amended or reformed; but they considered that such changes should await completion of a Power Purchase Agreement, which did not occur. Respondent did not invoke failure to fulfill conditions precedent or incompleteness of the PDA as a basis for termination at any time prior to the arbitration.
71.
The Tribunal also notes that the dispute resolution provisions of the PDA are excluded from Article 7.1 by its terms, which implies that the parties considered the PDA sufficiently complete to support disputes about its other terms, whether or not all the listed conditions precedent were satisfied.

THE CLAIM OF BREACH BY IMPROPER TERMINATION OF THE PDA

72.
Claimants’ primary assertion is that Respondent breached the PDA by improperly purporting to terminate the PDA. Claimants allege that the GOL had no proper basis for termination and in any event did not follow permissible procedures for termination.
73.
Respondent claims that it had a valid basis for termination and has recast the grounds for termination of the PDA set forth in its Notice of Termination to group them under the heading of repudiation. The GOL asserts that Claimants repudiated the PDA through demonstrated inability to perform within a reasonable time and failure to provide adequate assurances of future performance.
74.
The original suggestion in the Notice of Termination that Claimants had missed specific milestones for performance under the PDA essentially has been abandoned. The evidence made clear that any such specific milestones were waived as a result of the Asian Financial Crisis and subsequent events.
75.
Respondent claims that the conduct of Claimants amounted to a repudiation of the PDA; and if this were so, Respondent would have been entitled under New York law to terminate the PDA without following the contractually prescribed procedure for termination under Section 15.1 However, the case cited by Respondent on this point, J. Petrocelli Construction, Inc. v. Realm Electrical Contractors, Inc., 15 A.D.3d 444, 790 N.Y.S.2d 197 (2005), makes clear that whether a contractual repudiation has occurred in any given instance is necessarily a question of fact.
76.
Respondent makes much of the fact that approximately 14 years passed between the execution of the PDA and Respondent’s attempt to terminate that agreement. In effect, Respondent argues that at some point the sheer passage of time without the successful development of an operational power project must be taken as a repudiation. However, as uncontroverted testimony in the proceeding established, approximately the first four of those 14 years were marked by active development activity on the part of the Claimants with which Respondent was evidently satisfied. During the following six years the Asian Financial Crisis paralized progress and the Thai Government refused to execute new power purchase contracts. The result was that all power project development in Laos effectively came to a halt during this period. Over the remaining four years Claimants sought a development partner and eventually entered into a joint development agreement in 1995 with Banpu, a respected power development company with whom Respondent continues efforts to develop the Hongsa Project to this day. In 1996, as indicated, Claimants dismissed Banpu and were subsequently ousted by Respondent from the Hongsa Project. Based on this record, the Tribunal finds that the Respondent has failed to prove that Claimants met the standard for repudiation under New York law. In the years after the end of the Asian Financial Crisis, the diligence of Claimants was not entirely clear; but given the long lead times required for development of electric generation projects and Banpu’s lack of progress since 2006, the Tribunal finds that the Claimants’ lack of success during this period did not amount to a contractual repudiation.
77.
Respondent also argues that Claimants’ dismissal of Banpu after Respondent had given them "fair warning" that it would not tolerate a further change of partners was further indication that Claimants had repudiated the PDA. The Tribunal is not persuaded, however, that the Respondent had any right under the contract to issue ultimatums of this kind, nor that the dismissal of Banpu amounted to a repudiation. That a party would need an equity partner is unremarkable in the context of electric generation project development, and the Claimants were under no obligation to develop the Hongsa Project with any partner in particular. It may be that if Claimants had continued to change development partners and if such dithering had continued over a longer period of time a tribunal would have entertained a request by Respondent for termination of the PDA. As it is, the answer to this hypothetical question can never be known. Respondent elected unilaterally to attempt a self-help remedy and oust Claimants rather than seek arbitral determination of the parties’ rights as the PDA required. The Tribunal finds that the attempted termination of the PDA based on Claimant’s dismissal of Banpu was not permitted under the PDA.
78.
Finally, Respondent argues that Claimants repudiated the PDA by failing to provide adequate assurances of Claimants’ ability to perform the PDA after request by Respondent. As a general matter, the doctrine of adequate assurances is applicable under New York law only to contracts for sale of goods that are subject to Uniform Commercial Code Article 2. New York courts have only sparingly extended the doctrine further.
79.
In the principal case cited by Respondent, Norcon Power Partners, L.P. v. Niagara Mohawk Power Corp., 92 N.Y.2d 3458, 682 N.Y.S. 2d 664 (1998), the New York Court of Appeals upheld a requirement for adequate assurances with respect to a long term agreement for the sale of electricity. However, the court emphasized its unwillingness to promulgate a sweeping expansion of the application of the doctrine because such an approach "might clash with our customary incremental common-law development process, rooted in particular fact patterns and keener wisdom acquired through observations of empirical application of a proportioned, less than absolute, rule in future cases." Norcon at 467 (emphasis added). Consistent with this conservative approach, the court in Norcon extended the doctrine of adequate assurances to the contract in question only because of its similarity to a contact for the sale of goods:

A useful analogy can be drawn between the contract at issue and a contract for the sale of goods. If the contract here was in all respects the same, except that it was for the sale of oil or some other tangible commodity instead of the sale of electricity, the parties would unquestionably be governed by the demand for adequate assurance of performance factors in UCC 2-609. We are convinced to take this prudent step because it puts commercial parties in these kinds of disputes at relatively arm’s length equilibrium in terms of reliability and uniformity of governing legal rubrics.

Norcon at 468.

80.
While the PDA relates to the overall subject of electricity as did the contract at issue in Norcon, the PDA is a contract for the development of an electric generation project rather than a contract for the sale of electricity. As such, the PDA involves complexities of interaction between the parties that simply are not present in a contract for the sale of goods or a contract analogous to a sale of goods. For that reason the Tribunal declines to extend the doctrine of adequate assurances to the PDA and accordingly finds that, even assuming that adequate assurances of performance were not given by Claimants, the failure of Claimants to provide adequate assurances upon request by Respondent would not constitute a repudiation of the PDA.
81.
In sum, based on the record before us, The Tribunal finds that Claimants did not repudiate the PDA under any of the theories advanced by Respondent and that Respondent has not established that it had a proper basis on which to terminate the PDA in 2006.
82.
As regards the form of that attempted termination, Claimants assert, as they did in their Petition for Interim Relief, that the GOL improperly sought to terminate the PDA by is unilateral Notice of Termination and failed to follow the procedures required by Section 15.1 of the PDA, quoted above. That Section provides, in pertinent part:

"...in the event that either party is in default under this Agreement after having been given notice by the other party and a reasonable opportunity to cure pursuant to Article 13 hereof, if the nondefaulting party wishes to terminate this Agreement, it may do so upon the approval of the arbitration panel constituted in accordance with Article 14 hereof."

83.
In its Procedural Order No. 2, this Tribunal recorded its preliminary view that the PDA may be terminated only in accordance with the terms of Article 15.1 and therefore had not yet been terminated. It is undisputed that Respondent did not base its Notice of Termination on the approval of an arbitration panel.
84.
Respondent thereafter refined its arguments in this respect, contending that any investment license was held pursuant to the Lao 1994 Foreign Investment Law (the "FIL") (Ex. R-201) and that the license (on which all rights with respect to the Hongsa Project depended) could be terminated in accordance with the FIL without regard to any special termination provisions of the PDA.
85.
However, to give credence to Respondent’s arguments in this respect would be tantamount to reading any mutual obligation of the parties right out of the PDA. A sovereign must be presumed to control the application of its own laws. If Respondent could simply by withdrawing TLP’s investment license nullify its fundamental obligations under the PDA, the PDA would be rendered meaningless because Respondent could accomplish such result at will. The Tribunal does not believe that was the intent of the parties. Undoubtedly, TLP required an investment license under the PDA to move forward; but we hold that this requirement did not absolve Respondent of the obligation to follow the prescribed provisions of Section 15.1 in order to terminate the PDA.
86.
The Tribunal therefore concludes that Respondent breached the PDA by improperly depriving Claimants of their rights to proceed with performance and did not properly terminate the PDA.

OTHER CLAIMS OF BREACH OF THE PDA

87.
In addition to their claims based on improper termination of the PDA, Claimants maintain that Respondent committed material breaches of the PDA by (a) failing to honor contractual obligations to support the Hongsa Project, and (b) colluding with Banpu to deprive Claimants of their rights in the Hongsa Project.
88.
The GOL responds that id did everything reasonable to support the Hongsa Project through appropriate communications with the Government of Thailand, but that the Asian Financial Crisis made it difficult to persuade that government to move forward with approval of any of the Laotian power projects for a number of years. The Claimants have made the same point regarding their own inability to progress during those years. Respondent also points out that the lignite-fired Hongsa Project presents a risk and cost profile different form those of the various Laos hydropower projects and that EG AT might properly favor some of them over the Hongsa Project as development priorities for those reasons. In light of these facts, the Tribunal is not convinced that the Respondent could have done more than it did to support the Hongsa Project or that it violated its commitments under the PDA to provide such support.
89.
The Claimants’ arguments that the Respondent acted with improper motives in favoring other electric general projects over the Hongsa Project in its negotiations with the Government of Thailand, whether because the GOL had a larger economic interest in those projects than in the Hongsa Project or otherwise, are therefore beside the point. The Tribunal finds that the GOL did not fail to support the Hongsa Project as required by the PDA.
90.
As discussed above, in August of 2006 TLL terminated its contract with Banpu, the GOL summoned Claimants for consultations, and the GOL made an internal decision to oust Claimants. Banpu assured the GOL that it would bear the Respondent’s legal costs of any proceeding that resulted from that action, and the GOL thereafter contracted with Banpu (on terms that Respondent declined to disclose) to carry on with the Hongsa Project without Claimants. The Claimants assert that these undisputed actions by the GOL in concert with Banpu constitute a separate violation of the PDA.
91.
The Tribunal need not address these allegations, since we have concluded above that Respondent breached the PDA by its improper attempt to terminate the PDA without cause, and Claimants seek no separate damages based on the allegations of collusion as a further breach.

CONCLUSIONS REGARDING BREACH AND LIABILITY

92.
The Tribunal therefore finds that the Claimants’ rights under the PDA were taken from them by an improper attempt to terminate the PDA, that Respondent is liable to Claimants for any damages caused by that action, and that the PDA now is effectively at an end and should be declared to be terminated as a result of this proceeding, as Claimants have requested.

DAMAGES

93.
Section 15.1(b) of the PDA refers to payment of compensation by the GOL, in the event of termination of the PDA due to a default on the part of the GOL, as has occurred here,

"as determined by the arbitration panel constituted in accordance with Article 14 hereof which shall include TLL’s total investment cost plus a premium and consideration of the Lenders and Investors."

94.
Claimants submitted testimony by one of the negotiators of the PDA on their behalf that the term "premium" in Section 15.1(b) was understood by all to refer to lost profits, "as well as any additional share premium to be expected from listing [shares of] the project’s developer" on a stock exchange. (Wirach Statement, para 64) The reference to "Lenders" and "Investors," he said, was "to provide a basis for compensating those parties for impaired loans or lost equity." (Id., para. 65)
95.
Respondent took the position that the language of Section 15.1(b) on damages is unintelligible and that, if it was intended to refer to both investment costs and lost profits, would constitute double counting or an unenforceable penalty.
96.
Claimants submitted claims for damages under two headings: (a) their costs incurred for the Hongsa Project through 31 December 2007, which Grant Thornton Specialist Advisory Services Ltd. ("Grant Thornton"), an independent member firm of the international accounting firm of that name, calculated initially as U.S.$179 million (the "Hongsa Project Investment Cost Report," Ex. C-178), and (b) a calculation of the net present value of the Hongsa Project over its lifetime, on the assumption of either 720 MW or 1,800 MW installed capacity (the "Hongsa Project Valuation Reports," Ex. C-179 and C-180), the net present value of which, as of the end of 2008, was computed by Grant Thornton prior to hearing to be either U.S.$153.5 million (720 MW scenario) or U.S.$387 million (1,800 MW scenario). Claimant ultimately relied on the 1,800 MW scenario.
97.
Respondent submitted opposing damages studies critiquing both the methods and the computations of the Claimants’ reports. Ernst & Young Solutions LLP submitted an investment cost report (Exhibit to Expert Report of Mr. Harsha Basnayake), and Duff & Phelps LLC submitted a valuation report (Exhibit to Expert Report of Mr. Daniel Beaulne).
98.
Each of the expert firms submitted reply reports, and witnesses from the three firms and another expert, Mr. Rapisarda, testified at the hearing.
99.
At the conclusion of the hearing, after taking into account various adjustments occasioned by the experts’ testimony, Claimants calculated that their "investment costs" related to the Hongsa Project totaled U.S.$172 million and that the value of the completed Hongsa Project to Claimants, had they been allowed to complete it as a 1,800 MW project, would have been U.S.$275 million, net of the costs of building the project. Claimants seek the sum of these two calculations, U.S.$447 million, as damages.
100.
Respondent maintained that a claim for both recovery of Claimants’ costs ("reliance" damages) and loss of opportunity ("expectation" damages) constitutes double counting and that imposition of both forms of damages, whether as a result of application of the termination damages "formula" of Section 15.1(b) of the PDA or otherwise, would constitute an impermissible penalty. Respondent also contested the calculation of both the alleged costs of TLL and the asserted value of the Hongsa Project and argued that Claimants would not have been capable of developing the Hongsa Project alone and therefore could not justify a claim for loss of that opportunity.
101.
However, the GOL’s expert witnesses from Ernst & Young agreed that the records produced by Claimants supported expenditures of U.S.$23.2 million paid by Claimants or their affiliates to non-affiliated entities for the benefit of the Hongsa Project.
102.
There was other evidence concerning the Claimants’ investments in the Hongsa Project besides the experts’ testimony. The Banpu New Supplementary Agreement (Ex. R-148) established the equity value of the project at U.S.$100 million, of which Banpu was to pay half and Mr. Siva was to pay half. It recites and acknowledges in paragraph 4 that Mr. Siva’s equity contribution to the venture would be comprised of the existing rights and assets contributed to the Hongsa Project by TLL, HLL and TLPC, "which shall be deemed to be in the amount of US$50 million" as of 2005. The bank lenders to Mr. Siva were to own 40 percent of the joint venture, leaving Mr. Siva with 10 percent, which he retained the right to transfer.
103.
The Castlepines Memorandum of Understanding (Ex. R-178) recites that the "existing sunk costs" of the Hongsa Project as of 2006 would be U.S.$40 million, "subject to a due diligence to be commissioned/undertaken" by Castlepines.
104.
Respondent refused to produce any documents evidencing any valuation of the Hongsa Project by the GOL or Banpu in connection with their agreements concerning it after Claimants’ participation was terminated. A former Banpu employee who testified at the hearing professed to have no idea of any range of such value, although a Banpu "Interim Report for the Bankable Feasibility Study for Hongsa Coal Project, Lao PDR" (Ex. C-202) was produced in redacted form and did state that an "economic analysis" had been prepared.
105.
At the conclusion of the hearing, Claimants sought to assert an alternative claim for quantum meruit damages. Respondent objected to addition of such a claim.

CONCLUSIONS REGARDING DAMAGES

106.
As discussed above, on 5 October 2006 GOL purported to terminate the PDA without first obtaining the approval of an arbitration panel as required by the termination provision of the PDA. This is a default on the part of GOL under the PDA. Article 13 governs "default" and Section 13.1 of that Article provides, in pertinent part, that "[d]efaults hereunder shall include the failure of any party to comply with its obligations set forth in this Agreement." This default was not merely technical, but rather resulted in the ouster of TLL from the Hongsa Project without giving TLL the opportunity to respond to GOL’s complaints or cure any default.
107.
Section 15.1 of the PDA governs compensation in the event of termination of the PDA for breach:

"In the event of termination of this Agreement, compensation shall be paid to TLL or the Government, as the case may be, as determined by the arbitration panel constituted in accordance with Article 14 hereof which shall include TLL’s total investment cost plus a premium and consideration of the Lenders and Investors in the event of a default on the part of the Government."

Thus, "in the event of a default on the part of the Government," as here, Section 15.1 provides that compensation shall be paid to TLL "which shall include TLL’s total investment cost plus a premium and consideration of the Lenders and Investors."

108.
In construing the terms of Section 15.1 ((a) "TLL’s total investment cost"; (b) "plus a premium"; and (c) "consideration of the Lenders and Investors"), we apply New York law as provided by Section 18.1 of the PDA.
109.
"In interpreting a contract, the intent of the parties governs." Am. Express Bank, Ltd. v. Uniroyal, Inc., 562 N.Y.S.2d 613, 614 (1st Dep’t 1990), appeal denied, 572 N.E.2d 52 (N.Y. 1991). "A contract should be construed so as to give full meaning and effect to all of its provisions." Id. "[I]t is well settled that when parties set down their agreement in a clear, complete document, their writing should... be enforced according to its terms." 5. Road Assocs., LLC v. Int'l Bus. Machs. Corp., 826 N.E.2d 806, 809 (N.Y. 2005) (quotation omitted). "Words and phrases are given their plain meaning." Am. Express Bank, 562 N.Y.S.2d at 614. "Rather than rewrite an unambiguous agreement, a court should enforce the plain meaning of that agreement." Id. "When the terms of a contract are clear and unambiguous, the intent of the parties must be found within the four comers of the document, and the court must enforce it without recourse to parol evidence." ABS P'ship v. AirTran Airways, Inc., 765 N.Y.S.2d 616, 620 (1st Dep’t 2003) (citations omitted).
110.
The terms of Section 15.1 will be enforced as written and in accordance with the plain meaning of its terms unless they are ambiguous. Whether a contract is ambiguous is a question of law. E.g., Kass v. Kass, 696 N.E.2d 174, 180 (N.Y. 1998). "A contract is unambiguous if the language it uses has ‘a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion." Greenfield v. Philles Records, Inc., 780 N.E.2d 166, 170-71 (N.Y. 2002) (quoting Breed v. Ins. Co. of N. Am., 385 N.E.2d 1280, 1282 (N.Y. 1978)). "Thus, if the agreement on its face is reasonably susceptible of only one meaning, a court is not free to alter the contract to reflect its personal notions of fairness and equity." Id. at 171. Language is not ambiguous simply because the parties urge differing interpretations. Moore v. Kopel, 653 N.Y.S.2d 927, 929 (1st Dep’t 1997); see also Bethlehem Steel Co. v. Turner Constr. Co., 141 N.E.2d 590, 593 (N.Y. 1957). Conversely, "[a] contract is ambiguous if the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings." N.Y. City Off-Track Betting Corp. v. Safe Factory Outlet, Inc., 809 N.Y.S.2d 70, 73 (1st Dep’t 2006) (quotation omitted). "The existence of ambiguity is determined by examining the ‘entire contract and consider[ing] the relation of the parties and the circumstances under which it was executed,’ with the wording to be considered ‘in the light of the obligation as a whole and the intention of the parties as manifested thereby.’" Riverside S. Planning Corp. v. CRP/Extell Riverside, L.P., 869 N.Y.S.2d 511, 516 (1st Dep’t 2008) (quoting Kass, 696N.E.2d at 181).
111.
The following discussion treats the three components of compensation under Section 15.1 in turn. The Tribunal concludes that, pursuant to Section 15.1, Claimants are entitled to an award of U.S.$40 million as their "total investment cost," "plus a premium" of U.S.$4 million, and also to interest. No other damages are warranted.1

"TLL’s Total Investment Cost"

112.
Claimants seek to recover almost U.S.$179 million in total investment cost damages due to GOL’s default. As laid out in Claimants’ and Respondent’s experts’ reports, Claimants’ asserted damages (C178 at 41) and Respondent’s response (6/15/2009 E&Y Report at 18) to those damages are:

Project Cost CategoryClaimants’ Expert (US$)Respondent’s Expert (US$)
1. Road Construction 7,552,248 6,720,601
2. Financial Consulting 1,663,754 1,585,296
3. Engineer Consulting 12,702,343 12,097,683
4. Management Fee 5,186,604 5,800
5. Legal Consulting 629,359 616,674
6. Administrative Expenses 8,050,985 0
7. Survey Expenses 8,032,042 1,011,852
8. Interest Expenses 126,053,749 0
9. Exchange Loss 9,099,736 0
TOTALS:178,970,82122,037,907

113.
The figures in the table for Respondent’s expert are amounts for which the expert asserted there was evidence of payment, not just that the expense was incurred. The Legal Consulting cost does not include legal fees in connection with the present arbitration.
114.
Although the parties disagree as to what is included by the term "TLL’s total investment cost," this term is unambiguous. Giving these words their plain meaning, "total investment cost" means the total amount of money that Claimants together, on behalf of TLL, reasonably and unavoidably actually expended out-of-pocket in the normal course of preparation for performance or in performance up until the date of breach. Cf. Restatement (Second) of Contracts § 349 (1981) (defining reliance interest as "including expenditures made in preparation for performance or in performance"). This would include, for example, money spent purchasing necessary materials, labor costs and expenses to obtain necessary permits. It would not, however, include extraordinary or avoidable costs incurred by Claimants, such as costs incurred as a result of Claimants’ borrowings or defaults on loans.
115.
Even if the term "total investment cost" were ambiguous, we are not persuaded by Claimants’ offer of parol evidence. Mr. Wirach testified that during the negotiations the parties "briefly discussed the phrase ‘total investment cost’ and agreed that it was intended to include out-of-pocket development costs plus interest and financing costs, which is its plain meaning." (Wirach Witness Statement ¶ 63.) We do not credit Mr. Wirach’s statement to the extent he claims that the parties agreed that the term "total investment cost" would encompass not only "out-of-pocket development costs" (which we find is the "plain meaning" of the term) but also "interest and financing costs." We reject Mr. Wirach’s statement that the "plain meaning" of the term "total investment cost" includes interest and financing costs. We find that it was not the agreement of the parties at the time of contract that GOL would reimburse TLL for investment costs beyond "out-of-pocket developments costs." Thus, interest and financing costs are not recoverable as part of "TLL’s total investment cost."
116.
In order to recover interest and financing costs, then, Claimants must satisfy the requirements under New York law regarding consequential damages. "Consequential damages, designed to compensate a party for reasonably foreseeable damages, ‘must be proximately caused by the breach’ and must be proven by the party seeking them." Bi-Economy Market, Inc. v. Harleysville Ins. Co. ofN.Y., 886 N.E.2d 127, 131 (N.Y. 2008) (quoting 24 Lord, Williston on Contracts § 64:12 (4th ed.)). "As a general matter, a nonbreaching party may recover damages beyond those which naturally and directly flow from the breach only when ‘such unusual or extraordinary damages [were] brought within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting.’" Globecon Group, LLC v. Hartford Fire Ins. Co., 434 F.3d 165, 176 (2d Cir. 2006) (quoting Kenford Co., Inc. v. County of Erie, 537 N.E.2d 176, 178-79 (N.Y. 1989)). "There is significant New York authority for the proposition that a party seeking consequential damages must identify specific contractual provisions demonstrating that recovery of such damages was contemplated by the parties." Id. (citing Sweazey v. Merchants Mut. Ins. Co., 571 N.Y.S.2d 131, 133 (3d Dep’t 1991); High Fashions Hair Cutters v. Commercial Union Ins. Co., 535 N.Y.S.2d 425, 427 (2d Dep’t 1988)). Even if a specific provision were not required, "such damages must, at a minimum, comport with the intent of the parties to the contract." Id. "The nature, purpose and particular circumstances of the contract known by the parties are some of the factors to be considered in determining what was in the reasonable contemplation of the parties at or prior to the execution of the contract." Rose Lee Mfg., Inc. v. Chemical Bank, 588 N.Y.S.2d 408, 411 (2d Dep’t 1992) (citing Kenford, 537 N.E.2d at 178-79).
117.
Claimants fail to meet this test. First, as stated above, The Tribunal finds that it was not the intent of the parties, in Section 15.1 or otherwise, to award Claimants interest and financing expenses as investment costs in the event of a breach on the part of GOL. Claimants’ assertions that GOL knew that Claimants were going to finance the development costs and that it was commercially reasonable to do so, even if credited, do not establish that GOL contemplated and agreed to reimburse the interest accrued on those loans, the fees and interest associated with Claimants’ default, or Claimants’ foreign currency exchange losses. Second, Claimants cannot establish that the interest and financing costs incurred were the proximate result of GOL’s breach. The loans were entered into by Claimants and began to accrue interest well before any breach on the part of GOL, which occurred on October 5, 2006. Any interest and financing costs during the period prior to GOL’s breach are not recoverable because they were not incurred as a result of the breach. With respect to interest and financing costs incurred after the breach— assuming arguendo that Claimants established that GOL agreed to reimburse these costs, which they did not—Claimants have failed to establish that it was an early termination of the agreement that caused these costs to be incurred. What is more likely is that various intervening causes, such as Claimants’ own insolvency, Claimants’ delay in their performance under the PDA, and/or the Asian Financial Crisis caused these costs to be incurred. Third, Claimants are not entitled to an award of financing costs because they have failed to establish the amount of these costs with a reasonable degree of certainty. "[C]ertainty of amount... is an element of consequential damages." Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89, 111 (2d Cir. 2007). "In addition to proving that the existence of damage is reasonably certain, and that the damages were foreseeable and within the contemplation of both parties, a party claiming consequential damages must also prove the amount of damage with ‘reasonable certainty.’" Id. (citation omitted). The submissions and records with respect to these loans were in large part unsupported and unreliable. As a result, Claimants have not met their burden to establish these costs with reasonable certainty.
118.
Of the nine categories of expenses Claimants seek to recover, categories one through seven are out-of-pocket development costs and thus covered by total investment cost, whereas categories eight and nine (interest and financing costs), as discussed above, are not covered by total investment cost nor otherwise recoverable as consequential damages.
119.
Under New York law, with respect to general direct damages such as these out-of pocket expenses, Claimants need only provide a "stable foundation for a reasonable estimate" of damages resulting from the breach in order to be entitled to general damages. Tractebel Energy, 487 F.3d at 110-11 (quoting Freund v. Washington Square Press, Inc., 314 N.E.2d 419, 421 (N.Y. 1974)). "New York courts have significant flexibility in estimating general damages once the fact of liability is established." Id. at 112 (collecting cases).
120.
Four categories (categories one, two, three and five) yield a total range between U.S.$21 million (Respondent’s expert) and U.S.$22.5 million (Claimants’ expert)—the parties’ experts are in relative agreement. The remaining three categories (categories four, six and seven), however, result in a wide range between U.S.$5,800 (Respondent’s expert) and U.S.$21.3 million (Claimants’ expert). The parties’ experts were not successful in narrowing the bases of their disagreement on the amounts attributable to these categories as a result of the evidence at the hearing.
121.
The Tribunal finds that the total investment cost is U.S.$40 million, which is the amount agreed by Claimants to represent "existing sunk costs of the Projects" in the Memorandum of Understanding between TLL and its new venture partner, Castlepines. (R178 at 3.) This investment valuation is generally consistent with the amount claimed by Claimants’ expert for categories one through seven, which totals approximately U.S.$43.8 million. This figure is below the U.S.$50 million "[h]istoric expenditures" total that GOL and Banpu acknowledged were the "expenses that had been incurred by the developer prior to April 5, 2005" (C192 at 1), but we credit the U.S.$40 million valuation in the Castlepines agreement as more recent and presumptively more accurate. Thus, we award Claimants U.S.$40 million as their "total investment cost" pursuant to Section 15.1.

"Premium"

122.
The Tribunal rejects Claimants’ argument that the term "premium" in Section 15.1 is a synonym for lost profits. Claimants’ witness stated that during the negotiations, "there was no disagreement over what was meant by use of the phrase ‘plus a premium’... [which] was intended to be the lost profit that [TLL] would have made during the remaining exclusive operations period if there have [sic] been no termination, as well as any additional share premium to be expected from listing the project’s developer on the SET." (Wirach Witness Statement ¶ 64.) Although Respondent did not offer any parol evidence as to the meaning of the term "premium," it argues that the term was not intended to mean lost profits because GOL would not have agreed to pay both expenses, via the "total investment cost" provision, and "lost profits," because that would provide double recovery of Claimants’ expenses. (E.g., Respondent’s Reply Memorial at 38.) We do not credit Mr. Wirach’s statement to the extent he claims that the parties agreed that the term premium would encompass lost profits. The Tribunal finds that it was not the intention of the parties at the time of contracting that GOL would provide double recovery to TLL in the event of a default on the part of Respondent. This would put TLL in a better position than had the contract been performed and is not a rational interpretation of the contract or the intent of the parties. Thus, the term "premium" does not mean lost profits.2
123.
Our conclusion is supported by New York’s law on "lost profits." Under New York law, "a party may recover lost profits if (1) its alleged lost profits were caused by the breach; (2) the damages were fairly within the contemplation of the parties when contracting; and (3) the damages can be proven with a reasonable certainty." Merlite Indus., Inc. v. Valassis Inserts, Inc., 12 F.3d 373, 376 (2d Cir. 1993) (quoting Kenford Co., Inc. v. County of Erie, 493 N.E.2d 234, 235 (N.Y. 1986)).
124.
Claimants failed to prove an entitlement to lost profits. First, Claimants have failed to establish causation. In order to show causation, Claimants must prove that GOL’s breach directly and proximately caused Claimants’ damages. Nat’l Market Share, Inc. v. Sterling Nat’l Bank, Inc., 392 F.3d 520, 525 (2d Cir. 2004) (citing Wakeman v. Wheeler & Wilson Mfg. Co., 4 N.E. 264, 266 (N.Y. 1886); Exxon Co. v. Sofec, Inc., 517 U.S. 830, 839-40 (1996) ("Although the principles of legal causation sometimes receive labels in contract analysis different from the ‘proximate causation’ label most frequently employed in tort analysis, these principles nevertheless exist to restrict liability in contract as well.")). "Moreover, damages ‘may be so remote as not to be directly traceable to the breach, or they may be the result of other intervening causes, and then they cannot be allowed.’" Id. at 526 (quoting Wakeman, 4 N.E. at 266). Here, The Tribunal finds that the lost profits, if any, were caused not by GOL’s breach but rather by Claimants’ own difficulty in finding financing for the Hongsa Project, among other causes not attributable to GOL’s breach. Second, Claimants have failed to establish that lost profit damages were "fairly within the contemplation of the parties" at the time they entered into the PDA. Merlite, 12 F.3d at 376. "There is significant New York authority for the proposition that a party seeking consequential damages [such as lost profits] must identify specific contractual provisions demonstrating that recovery of such damages was contemplated by the parties." Globecon Group, 434 F.3d at 176 (citing Sweazey, 571 N.Y.S.2d at 133; High Fashions Hair Cutters, 535 N.Y.S.2d at 427). Section 15.1, as we have held, does not provide for lost profits. In any event, as discussed above, Claimants have not otherwise established that recovery of lost profit damages was contemplated by the parties here. Third, even if TLL could show that awarding lost profits was in the reasonable contemplation of the parties at the time of the contract and was caused by GOL’s breach, as it might perhaps have been, for example, if GOL had seized the Hongsa Project on the verge of its successful completion. TLL is not entitled to any award of lost profits on the present facts because it has failed to prove the amount of lost profits with "reasonable certainty." Merlite Indus., 12 F.3d at 376. Where the party seeking to recover lost profits is a new business, "a stricter standard is imposed for the obvious reason that there does not exist a reasonable basis of experience upon which to estimate lost profits with the requisite degree of reasonable certainty." Kenford, 493 N.E.2d at 235. Here, the valuation estimates are far too speculative and fail adequately to take into account the extremely low probability of the Hongsa Project’s completion under Claimant’s leadership given Claimants’ financial position and history of performance.
125.
Nor does The Tribunal assign any weight to Mr. Wirach’s statement that the term "premium" was agreed by the parties to include "any additional share premium to be expected from listing the project’s developer on the SET." (Wirach Witness Statement ¶ 64.) Claimants did not adduce any evidence or proposed calculations for what the amount of this listing premium should be.
126.
The term "premium" is not defined in the PDA. Without an express definition, "[w]ords and phrases are given their plain meaning." Am. Express Bank, 562 N.Y.S.2d at 614. Webster’s Dictionary contains the following definitions of "premium," among others: "a sum over and above a regular price paid chiefly as an inducement or incentive" and "a high value or a value in excess of that normally or usually expected." (See Merriam-Webster Online Dictionary, available at http://www.merriam-webster. com/dictionary/premium.) Those definitions establish that the plain meaning of "premium" carries with it an inherent degree of judgment.
127.
In the totality of the circumstances, the Tribunal finds that the term "premium" was intended by the parties to mean an allowance for a reasonable return on Claimants’ total investment costs to be set by the arbitration panel in its judgment. We find that an allowance of 10 percent on Claimants’ total investment cost is a reasonable premium in this case. This premium is consistent with the 10 percent figure cited by Respondent in the context of what courts have deemed reasonable in quantum meruit cases involving construction contracts in which courts have allowed a contractor to recover actual job costs plus an allowance for overhead and a "reasonable percentage as its profit."3 (Respondent’s Closing Memorial at 22 (citing Najjar Indus., Inc. V. City of New York, 451 N.Y.S.2d 410, 413 (1st Dep’t 1982).)
128.
This premium will be applied as a one time allowance. As discussed above, The Tribunal awards Claimants บ.ร.$40 million for the total investment cost pursuant to Section 15.1. As a result, the premium to be added to these costs is บ.ร.$4 million.

"Consideration of the Lenders and Investors"

129.
The next issue concerns the words "consideration of the Lenders and Investors" in Section 15.1. The Tribunal concludes that they do not add anything to the appropriate total compensation in the circumstances of this case.
130.
Although "Lenders" and "Investors" are defined terms under the PDA, the term "consideration" is not defined. Claimants’ witness Mr. Wirach stated that during the negotiations, "[b]ecause [the parties] had already discussed at length at other times the intended project finance structure of the Project, [GOL] understood that financial partners, i.e. ‘Lenders’ and ‘Investors,’ were going to be introduced into the project at certain times in the future" and that "the interests of such third parties could be adversely affected by any termination." (Wirach Witness Statement ¶ 65.) As a result, according to Claimants, "[i]t was easily agreed that it made sense to require the arbitration panel hearing any termination request to consider the interests of the lenders and investors in the project and to provide a basis for compensating those parties for impaired loans or lost equity." (Id.) But no Lenders or Investors acquired interests in the Hongsa Project or in TLL separate from the interests of Claimants, and we find, under the circumstances, that the parties did not agree or intend that GOL would be responsible to pay unspecified sums to unidentified third parties in the event of a default. Even if that were the intent of the parties, this provision was never triggered because the Hongsa Project had not gotten off the ground by 2006. Thus, it is irrelevant to the damages inquiry in this matter. In any event, Claimants have not established the amount that should be awarded or why any such damages should be part of an award to Claimants.
131.
Accordingly, no damages will be awarded separately for "consideration of the Lenders and Investors."

Pre- and Post-Award Interest

132.
Under New York law, Claimants are entitled to interest on the amount of damages awarded (1) from the date of breach through the date of this award, and (2) from the date of award until payment or entry of judgment on the award. New York law sets the rate of interest on court judgments at nine percent per annum simple interest, N.Y.C.P.L.R. § 5004, and we consider this a reasonable rate to apply in this arbitration.
133.
Claimants therefore are entitled to nine percent simple interest beginning on the date of GOL’s breach, 5 October 2006, through the date of this Tribunal’s award. That interest through 4 November 2009 is U.S.$12,210,000. Claimants also are entitled to an award declaring that nine percent simple interest shall continue to accrue until the award is satisfied or reduced to court judgment.

COUNTERCLAIMS

134.
Respondent alleged that Claimants’ delays in developing the Hongsa Project and alleged repudiation of the PDA caused the GOL damages of the following types:

a. The GOL has been denied the opportunity of recovering its share of profits from mining operations at Hongsa as promised by Claimants under the Prior Contracts;

b. The GOL has not been able to recover substantial tax revenue, fees, and concession rents that should have been generated from the mining operations;

c. The GOL has not received the benefit of training of Laotian labor and technologists that Claimants were obligated to provide under the Prior Contracts; and

d. The GOL has lost the use of the revenues that were to have been generated by the mining operations.

135.
The GOL requested "such damages on its Counterclaims as are established in the course of these proceedings plus appropriate interest." Respondent in fact did not establish the fact of or the amount of any damages flowing from these counterclaims.

COSTS

136.
Section 14.1 (vii) of the PDA states: "The costs of arbitration shall be borne by the losing party, unless otherwise determined by the arbitration award."
137.
Article 38 of the UNCITRAL Rules provides:

"The arbitral tribunal shall fix the costs of arbitration in its award. The term costs includes only:

"(a) The fees of the arbitral tribunal to be stated separately as to each arbitrator and to be fixed by the tribunal itself in accordance with article 39;

"(b) The travel and other expenses incurred by the arbitrators;

"(c) The costs of expert advice and of other assistance required by the arbitral tribunal;

"(d) The travel and other expenses of witnesses to the extent such expenses are approved by the arbitral tribunal;

"(e) The costs for legal representation and assistance of the successful party if such costs were claimed during the arbitral proceedings, and only to the extent that the arbitral tribunal determines that the amount of such costs is reasonable;

"(f) Any fees and expenses of the appointing authority as well as the expenses of the Secretary-General of the Permanent Court of Arbitration at The Hague."

138.
Both Claimants and Respondent have claimed the costs of legal representation as part of the costs to be awarded in this arbitration.
139.
The fees of the arbitral tribunal in this matter, which have been funded equally by Claimants and Respondent, total U.S.$336,075, as follows: Mr. Carter, U.S.$107,250; Mr. Conway, U.S.$102,825; and Mr. Millson U.S.$126,000.
140.
The travel and other expenses incurred by the Arbitrators total U.S$42,215.48. The arbitral tribunal has not required the services of any expert.
141.
The travel and other expenses of witnesses are to be borne by the party who submitted each witness’s testimony.
142.
No fees or expenses of any appointing authority were incurred.
143.
Claimants seek to recover costs in the approximate amount of U.S.$2.6 million. (See Claimant’s Closing Memorial at 24 and declarations attached thereto.) Claimants originally sought at least U.S.$3 billion in damages (see Claimants’ Statement of Claim at 36), and they have prevailed to the extent of an award of U.S.$44 million plus interest. Claimants therefore are the prevailing parties and are entitled to costs to be borne by the losing party, Respondent. Nevertheless, under the circumstances and in light of the lack of a more substantial recovery, we do not award Claimants the full amount of their claimed costs. Rather, in exercise of our discretion we award Claimants a total of U.S.$1 million in costs to be paid by Respondent.

WHEREAS, we do hereby issue the following AWARD:

144.
The PDA is declared terminated.
145.
Respondent shall pay to Claimants jointly the sum of U.S. $56,210,000.00, representing TLL’s total investment costs plus an appropriate premium, together with interest.
146.
Respondent also shall pay to Claimants jointly the sum of U.S.$1,000,000.00, representing costs for legal representation and assistance.
147.
This Award determines all claims and issues submitted to arbitration by the parties. Any claim not specifically addressed in this Award is denied.
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