Lao Holdings & Sanum v. Laos & al.

Case summary

At a glance

Parties: Sanum Investments Limited (Macau) and Lao Holdings N.V. (Netherlands) v. San Marco Capital Partners LLC, Kelly Gass and the Government of the Lao People's Democratic Republic
Case no.: SIAC Arbitration No. 414 of 2017 (ARB 414/17/QW); SIAC Award No. 084 of 2021. Court: [2022] SGHC(I) 9 (OS 6 and OS 7 of 2022, SUM 5882 of 2021)
Forum and rules: SIAC; SIAC Rules (6th edition, 1 August 2016); seat Singapore; New York law governs
Treaty: None. Arbitration clauses in Sections 35 and 42 of the Deed of Settlement of 15 June 2014
Tribunal: Prof. Gabrielle Kaufmann-Kohler (Presiding Arbitrator), Edna Sussman, Louis B. Kimmelman
Court: Singapore International Commercial Court: Philip Jeyaretnam J, Vivian Ramsey IJ, Douglas Jones IJ
Sector: Casino and gaming
Outcome: All claims dismissed (11 August 2021): most were barred by collateral estoppel under New York law and the rest failed on the merits. The SICC refused to set the award aside or to set aside leave to enforce it (1 June 2022).
Amount: Claimed: at least USD 153.36 million, later capped at USD 40 million. Awarded: nothing. The claimants bear the arbitration costs of SGD 945,746.44 and must pay Laos USD 348,770.00 towards them. They must also pay USD 437,200.00 to San Marco and Kelly Gass and USD 513,655.00 to Laos, about 60% of each side's legal costs.

The dispute

Sanum, a wholly owned subsidiary of Lao Holdings, held 80% of the company that owned the Savan Vegas Hotel and Casino in Laos; the Government of Laos (GOL) held the remaining 20%. The two sides settled their first investment treaty arbitrations in a Deed of Settlement of 15 June 2014, which required the casino to be sold. When Sanum did not sell by the deadline, GOL took control of the casino in April 2015 and appointed San Marco, with Kelly Gass as its president, to manage and sell it. The casino was sold to Macau Legend for USD 42 million. An earlier SIAC tribunal (ARB 143/14/MV) had already rejected the investors' counterclaims that GOL breached the Deed. The investors then sued San Marco and Gass for breach of fiduciary duty, breach of the Management Contract and conversion; a Delaware court sent those claims to arbitration, and GOL joined the arbitration as third respondent. The respondents argued that the claims were barred by collateral estoppel and res judicata under New York law, by the Henderson v Henderson rule under Singapore law, and as an abuse of process.

Key holdings

Collateral estoppel can bind parties in privity with a party to the earlier case. San Marco and Gass managed and sold the casino as GOL's appointed "agent", so they were in privity with GOL, even if they also owed fiduciary duties to the investors. Award ¶¶ 147–156
Every requirement of collateral estoppel was met. The earlier SIAC tribunal had decided the same issues, expressly or by necessary implication: no mismanagement of the casino, a sale run in good faith, a fair and reasonable 28% tax, and no proven loss. Those findings were essential to that award and decide this case. The investors had a full and fair opportunity to argue them, and their exceptions (conflicting decisions, different procedural opportunities, new evidence) failed. All claims except the conversion claims are therefore barred. Award ¶¶ 209–246
The Henderson v Henderson rule is procedural under Singapore law and can apply in a Singapore-seated arbitration. It did not apply here, because the investors could not have brought these claims in the earlier arbitration: San Marco and Gass had not consented to be joined to it, and the 2013 SIAC Rules did not provide for consolidation. The Tribunal also rejected GOL's arguments of abuse of process based on lack of candour or on fraud in other proceedings. Award ¶¶ 272, 284–290, 299–301
The conversion claims failed. There was no evidence that San Marco or Gass took the money in the BCEL and JDB bank accounts, and Sanum did not prove that it owned the slot machines or that these respondents seized them. The claims on the JDB loan and the cage and vault cash were barred by collateral estoppel. The Tribunal refused to draw adverse inferences from the destruction of the Savan Vegas servers. Award ¶¶ 112, 312–323
Costs follow the event, with adjustments. GOL was entitled to costs as an intervening party. The Tribunal took account of the late Henderson defence, the investors' partial success on interim applications and the unclear description of GOL's fee arrangement. The investors bear all arbitration costs and 60% of the respondents' legal costs. Award ¶¶ 343–350
The SICC held that applying collateral estoppel breached neither natural justice nor public policy. The investors were heard on the estoppel defence, and any error in applying it would be an error on the merits, which the court does not review. A decision based on a preclusion doctrine does not shock the conscience. SICC Judgment ¶¶ 38–50
The SICC also upheld the costs order in favour of GOL. The investors had a fair chance to address GOL's fee arrangement. The arrangement is not champerty or maintenance, since it concerns the defence of a claim. Rule 37 of the SIAC Rules gives tribunals a broad discretion that covers these costs. The applications to set aside the award and the enforcement order were dismissed. SICC Judgment ¶¶ 52–61

Procedural history

15 June 2014The investors and GOL sign the Deed of Settlement, which suspends the first treaty arbitrations.
29 June 2017Award in the earlier SIAC arbitration (ARB 143/14/MV): the investors' counterclaims are dismissed by majority, with a dissent by Carolyn Lamm.
12 July 2017The Delaware District Court dismisses the investors' suit against San Marco and Gass in favour of arbitration under the Deed.
19 December 2017The investors file their Notice of Arbitration. The arbitration is deemed to have commenced on 27 December 2017.
9 April 2018The SIAC Court grants GOL's application to join the arbitration. The Tribunal is constituted on 4 July 2018.
25 October 2018Decision on Jurisdiction: the Tribunal has jurisdiction over GOL. On 23 October 2018 it had refused the respondents' application for early dismissal.
26 July – 1 August 2020Remote hearing on Zoom.
11 August 2021Award: all claims dismissed and costs awarded against the investors.
2 September 2021Ex parte order (ORC 4993) grants the respondents leave to enforce the award. The investors apply to set aside the award on 12 November 2021 and the order on 20 December 2021.
1 June 2022The SICC dismisses both applications ([2022] SGHC(I) 9).

Tribunal, counsel and experts

Decided by: Gabrielle Kaufmann-Kohler President — appointed by the institution
Edna Sussman Co-arbitrator — appointed by the claimant
Louis B. Kimmelman Co-arbitrator — appointed by the respondent
Philip Jeyaretnam Judge, Singapore International Commercial Court
Vivian Ramsey Judge, Singapore International Commercial Court
Doug Jones Judge, Singapore International Commercial Court
For the claimant: Stinson Leonard Street LLP · WongPartnership LLP
For the respondent: Drew & Napier LLC · David J. Branson
Experts: James Searby (claimant) · William Bryson (claimant) · Andrew Black (claimant)