The litigation: A joint-venture gone south

In the heart of a groundbreaking legal arbitration that unfolded within the uniquely positioned Macau Special Administrative Region (MSAR), a vivid narrative emerged, spotlighting the complex interplay of international investment, legal disputes, and the intricate dynamics of the gaming industry in Southeast Asia. This narrative is centered on the arbitration case between Sanum Investments Ltd, a Macau company with American ownership, and the Lao-based ST Group Co. Ltd, ST Vegas Co. Ltd, along with its owner, Sithat Xaysoulivong, a prominent Lao businessman and owner of ST Bank. The case, overseen by a Tribunal seated in Macau under the International Chamber of Commerce (ICC), resulted in a monumental award of approximately USD175 million in favor of Sanum Investments Ltd.

The crux of this arbitration lay in the establishment and operational disputes of slot clubs and casinos in Laos, particularly spotlighting the Thanaleng Slot Club.

Sanum’s venture into the Lao gaming industry, in partnership with the ST Group, was initiated by a mutual interest: ST and Sithat’s quest “for a partner with necessary capital and gaming expertise, and Sanum’s ambition to expand its gaming industry footprint into Southeast Asia.” This partnership, in the form of a joint-venture, commencing in May 2007, was a complex agreement wherein Sanum was to hold a 60% stake in the joint venture after an initial period favoring ST. However, the essence of their dispute concerned the management and profit-sharing arrangement of the Thanaleng Slot Club, with Sanum alleging significant investments over the years into the Laos gaming businesses.

The arbitration proceedings were intricately tied to the procedural and jurisdictional nuances of international arbitration law, particularly after a pivotal ruling by the Singapore Court of Appeal in late 2019. This ruling redirected the arbitration to be seated in Macau, contrary to an initial seating in Singapore by the Singapore International Arbitration Centre (SIAC). This decision not only emphasized the legal significance of the arbitration seat but also highlighted Macau’s emerging stature and legal framework as conducive to handling complex international arbitration cases, namely when it pertains to the gaming sector, the driver of the local economy, where giant international players are operating under concessions from the MSAR.

The Tribunal’s Final Award, rendered on October 16, 2023, unequivocally sided with Sanum, citing breaches by the respondents of their agreements. This award encompassed damages, legal costs, and compounded interest, thereby affirming the gravity of the contractual violations and the consequential financial reparations owed by the ST Group and Sithat to Sanum.

The financial crux of the arbitration highlighted the massive investments and the expected returns from those investments. Sanum Investments Ltd had invested USD85 million over the years in the Laos gaming business. This investment was pivotal in transforming the profitability of the ventures involved, particularly the Thanaleng Slot Club and the Savan Vegas Casino, before its seizure by the Lao government. The Thanaleng Slot Club, positioned at the Vientiane Friendship Bridge bordering Thailand, was notably lucrative, drawing a significant customer base from Thailand where gaming remains restricted.

The ICC Tribunal, in its Final Award, ordered the respondents—ST Group Co. Ltd., Sithat Xaysoulivong, and ST Vegas Co. Ltd.—to jointly and severally pay Sanum Investments Limited a total of USD170,210,000 in damages. This figure represents a quantification of the breach of agreements attributed to the respondents. In addition to the damages, the Tribunal also awarded USD2,713,458.15 in legal and ICC costs to Sanum Investments Ltd, alongside the USD1,787,849.22 that Sanum had previously collected from Sithat in Singapore pursuant to a court order. The award further included annually compounded interest at the US FED (Federal Reference Interest Rate), currently at 5.5% per annum, emphasizing the Tribunal’s recognition of the financial losses and legal expenses incurred by Sanum due to the respondents’ breaches.

This arbitration showcases the complexities and financial stakes involved in international gaming industry disputes, particularly in regions like Southeast Asia where legal and regulatory frameworks can be challenging.