Guide to Arbitration Rules and Procedures in Lao PDR
Our Country Chapters set out key aspects of the arbitration framework of each jurisdiction highlighted in our website, covering basics like judicial hierarchy and domestic arbitral institutions to substantive issues such as conflicts of laws and the extent of adoption of the UNCITRAL Model Law.
1. Legal System and Framework
The legal system of Lao PDR emerged and gradually developed from a combination of the civil law system, socialist legal system and the traditions of the Lao people’s ethnic groups. There are two types of legislation in Lao PDR: (a) legislation of general application and (b) legislation of specific application.
(a) Legislation of general application consists of:
- Laws passed by the National Assembly;
- Resolutions of the National Assembly;
- Resolutions of the National Assembly Standing Committee;
- Presidential Decrees;
- Decrees of the Government;
- Resolutions of the Government;
- Orders or Decisions of the Prime Minister;
- Orders, Decisions or Guidelines of the Minister or head of the organisation under the supervision of the Government;
- Orders, Decisions or Guidelines of the Provincial Governor or Mayor;
- Orders, Decisions or Instructions of the District Governor or Head of Municipality; and
- Regulations of the Village Chief.
(b) Legislation of specific application includes:
- Presidential Decrees on the promulgation of a law;
- Presidential Decrees or Decisions on granting an award or appointing a person for any position or a specific task; and
International treaties and agreements that Lao PDR has ratified also form part of the law.
For Laos, the national laws applicable to both domestic and international arbitration are:
- the Law on Resolution of Economic Disputes No. 51/NA, dated 22 June 2018 (“LRED“) which sets out the principles, regulations and measures for economic dispute resolution through arbitration or mediation; and
- the Law on Civil Procedures No. 13/NA, dated 4 July 2012 (“Law on Civil Procedure“) which governs the dispute resolution procedures for civil matters, including recognition and enforceability of domestic and foreign arbitral awards.
The People’s Courts constitute the judicial branch of the State and consist of:
1. The Supreme Court
The People’s Supreme Court is the highest judicial organ of the State. It adjudicates matters on appeal, and manages and supervises the organisation, administration, operation and performance of the Local Courts and Military Courts nationwide.
2. The Local Courts
The Local Courts consist of:
2.1 The People’s Appellate Court
The People’s Appellate Court is one component of the court system of Lao PDR. It adjudicates the appeals of the decisions of first instance of the People’s Provincial and City and Juvenile Court.
2.2 The People’s Provincial and City and Juvenile Court
The People’s Provincial and City and Juvenile Court adjudicates at first instance those cases which are not within the jurisdiction of the People’s Zone Court. It also adjudicates the appeals of the decisions of first instance of the People’s Zone Court.
2.3 People’s Zone Court
The People’s Zone Court adjudicates at first instance those cases which are within the jurisdiction of People’s Zone Court.
The Commercial Chamber of the People’s Provincial and City and Juvenile Court has jurisdiction to recognise and enforce an arbitral award. Per the above, an appeal of a decision of the People’s Provincial and City and Juvenile Court would be adjudicated by the People’s Appellate Court.
The main source of law in Lao PDR with respect to international arbitration is the LRED, as set out in question 1.1 above.
Lao PDR is a member of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the New York Convention 1958) which was ratified on 17 June 1998 and put into effect on 15 September 1998. Lao PDR recognises and enforces arbitration awards from foreign or international arbitration under the Law on Civil Procedure.
Lao PDR has not adopted the UNCITRAL Model Law.
The LRED does not draw a distinction between international and domestic arbitration.
Under Article 16, the Centre for Economic Dispute Resolution (“CEDR“) or the Offices for Economic Dispute Resolution (“OEDRs“) will take into consideration disputes which meet the following criteria:
- the dispute involves a breach of economic contract or business operations;
- the disputing parties have agreed to submit the dispute to arbitration or mediation;
- the dispute has not been referred to the People’s Court for consideration or the Court has not rendered a final decision; and
- the dispute is not related to national security, social security and public order or environment.
For details on the roles of CEDR and OEDRs, please see question 2.1 below.
There are several circumstances under the LRED where domestic courts take part in the conduct of the arbitration process. These are where a party to the dispute:
- seeks the seizure or confiscation of any property (Article 41);
- challenges an arbitral award (Article 47); or
- seeks to enforce an arbitral award (Article 52).
In relation to recognition and enforcement of an arbitral award, Article 53 of the LRED (to be read with Article 42 of the Law on Civil Procedure) states that “The recognition and enforcement of foreign or international arbitration awards should be implemented in accordance with the law on civil procedure of the Lao PDR.”
2. Arbitral Institutions
The key arbitral institution is the Organization for Economic Disputes Resolution, which consists of the CEDR and OEDRs. Pursuant to Articles 60 and 61 of the LRED, CEDR and OEDRs serve essentially the same functions, which include:
- making recommendations to the Minister of Justice to appoint or remove mediators and arbitrators from the list of mediators and the list of arbitrators;
- endorsing or hearing challenges to the appointment or changing of a mediator/mediation Committee or arbitrator/arbitration Committee for each dispute resolution in accordance with the laws; and
- communicating with the disputing parties and coordinating with the relevant sectors to facilitate a mediator (or mediation Committee) or arbitrator (or arbitration Committee).
However, the Organization for Economic Disputes Resolution has additional functions, such as researching and drafting laws and regulations, and to liaise with the private arbitral institutions and foreign mediators and arbitrators conducting business in Lao PDR.
Pursuant to Article 14 of the LRED, the arbitral tribunal and all parties involved have no right to disclose any confidential information or the various documents that have been submitted unless otherwise authorised by the disputing parties. Article 8 further states that the resolution of economic disputes – including arbitral proceedings – should be implemented with a guarantee of confidentiality.
4. The Law of the Arbitration and Conflicts of Law
In general, the parties to a dispute have the discretion to determine which law will be applicable for the arbitration of any dispute which may arise or which has arisen among them. Please refer to Article 5 of the LRED which states:
“Individuals, legal entities or organisations, whether domestic or foreign, have the right to select the resolution of economic disputes in accordance with of this Law.
“Any individual, legal entity or foreign organisation engages in the busines of international trade or foreign investment in the Lao PDR has the right to choose a Foreign or International Organisation for economic dispute resolution including the right to choose arbitrators or an arbitration panel, the governing law, the rules of the procedures, the location and the language as stipulated in a contract.”
There is no statute dealing with conflicts of laws. It is best for parties to agree on the applicable principles and/or rules under Article 5 of the LRED (see question 4.1 above).
Yes. Based on Article 5 of the LRED, the arbitral tribunal may recognise foreign law as the substantive law.
For a tortious claim to be arbitrable, it needs to come within the ambit of a breach of economic contract or arising from business operations, pursuant to Article 6 of the LRED. These terms are defined in the LRED:
- Economic dispute – “a conflict of interest between [legal entities and/or organisations and/or individuals] … that may arise from the breach of an economic contract or from the business operations” (see Article 2).
- Business operations – “the operation of the production, trade, services and others such activities” (see Article 3(11)).
There is no legislation that relates to conflicts of laws.
Limitation periods/Prescription are stipulated under the Civil Code of Lao PDR. The prescription refers to the period of time which grants or prejudices rights in the civil relationship as provided in Article 49 of the Civil Code. The prescription is divided into two forms:
- Acquisitive prescription – defined in Article 51 of the Civil Code as “the reasons that any persons gain rights over assets by possession and utilisation of other persons’ assets with honesty, openness, consistency and peace as if he/she is an owner”. The period is 20 years for immoveable property and five years for moveable property.
- Extinctive prescription – defined in Article 52 of the Civil Code as the “reasons that any persons cease rights as a result of the right owner not enforcing his/her rights”. The period is 10 years for construction contracts, and three years for other types of contract or compensation and other claims, unless otherwise provided under the law.
Prescriptions may not be varied, pursuant to Article 54.
5. Arbitration Agreements
An arbitration agreement is a written agreement (whether a standalone arbitration agreement or an arbitration clause contained in another contract) entered into by the parties before a dispute arises, or a separate written arbitration agreement made by the parties after a dispute arises. An arbitration agreement needs to also satisfy the requirements of the validity of a contract as provided in Articles 365 to 370 and 375 of the LRED.
There is no specific provision dealing with recognition of electronic arbitration agreements in the LRED. However, electronic agreements are recognised in Lao PDR as provided in Articles 13, 15, 18, 24, 25 and 26 of the Law on Electronic Transactions No.20/NA, dated 7 December 2012 (“Law on Electronic Transactions“).
The law on contracts is found in the Civil Code, which does not have a specific provision on the incorporation of an arbitration agreement by reference.
Article 6 of the Civil Code states:
“Common practices refer to norms that are practiced in the civil relationship for a long time and are accepted in regions, ethnics, communities or any civil relationships.
“In a case where a civil relationship issue arises which is neither covered by this Civil Code nor agreed upon by the parties, common practices can be applied insofar as they do not contradict the Constitution and laws.
“An analogy of law refers to any provisions of any law that can be applied to solve the legal issue that is not specified in this Civil Code.
“An analogy can be applied when there is no common practice.”
Based on the above article, the courts may look at the laws in other jurisdictions in order to resolve issues which are not addressed within the Civil Code.
In principle, there should be no problem with the incorporation of an arbitration agreement by reference.
Tortious claims or claims regarding fraud, in particular, may be arbitrable under the LRED so long as the arbitration agreement explicitly provides that any disputes, including tort and fraud, which arise from the original contract should be settled under the said Law. This includes where the dispute relates to the breach of the contract or relates to production or business operations, even if such disputes are not provided for in the original contract.
The key portions of the LRED in this respect are Articles 2, 6, and 16 (please see questions 1.5 and 4.5 above for further details.)
The principle of separability is not explicitly recognised in Laos. However, Article 25 of the Civil Code recognises the general principle that juristic acts (acts intended to and capable of having a legal effect) can be null and void in part, rather than in whole. An example is where a co-owner of a piece of land uses that land as collateral without the consent of the other co-owner in a contract containing an arbitration agreement. In such a case, the creditor would not be able to enforce that arbitration agreement against the second co-owner.
Accordingly, a null juristic act does not necessarily result in the invalidity of the arbitration agreement if it is a null juristic act in part.