Lao Legislation Underpinning International Commercial Arbitration

By: Xaypaseuth Phomsoupha

Solicitor-at-Law

Introduction

As global commerce continues to expand, so too does the complexity of cross-border disputes. Countries like the Lao People’s Democratic Republic (Laos) increasingly engage in international trade and investment, requiring effective legal mechanisms for resolving conflicts that transcend borders. Lao legislation—comprising national statutes, international conventions, and treaties—forms the foundational legal framework enabling Lao-based entities to participate in international commercial arbitration. This essay examines the role of Lao law in facilitating such arbitration, emphasising the relevance of the New York Convention -1958, the UNCITRAL Model Law on International Commercial Arbitration, and the Law on Resolution of Economic Disputes. It also highlights the practical experience of Lao law firms in representing parties in such international forums.

Statutes and National Legal Provisions

The domestic legislative environment in Laos clearly intends to align with global standards in commercial arbitration. Currently in force, the Law on Resolution of Economic Disputes (2018) lays the groundwork for dispute settlement involving economic transactions, particularly those arising in commercial contexts. This law incorporates several procedural and substantive aspects derived from the UNCITRAL Model Law, ensuring that arbitration proceedings in Laos meet international benchmarks for neutrality, transparency, and enforceability.

Lao law, in particular Article 5 of the Law on Resolution of Economic Disputes (2018), permits parties to resolve conflicts in commercial and investment disputes through international arbitration under UNCITRAL or other institutional rules. Arbitration may be conducted at recognised centres under the New York Convention-1958, subject to jurisdictional agreement and forum conveniens, allowing for flexibility and international standards in dispute resolution across cross-border trade and investment agreements.

Most importantly, the Lao PDR Supreme Court’s President issued a judicial decree on enforcing foreign arbitral awards within Laos’ jurisdiction, No. 62/PSC, dated 7 February 2019. This decree aligns with the New York Convention-1958, confirming Laos’ commitments to enforcing international arbitral decisions or refusing arbitral awards per Article V of the New York Convention-1958, as the case may be, in accordance with globally accepted legal standards.

Conventions and Treaties

One of the most significant milestones in the internationalisation of Lao arbitration law is the country’s accession to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention – 1958), which Laos ratified in 1998. The New York Convention – 1958 is critical because it requires courts of contracting states to recognise and enforce foreign arbitral awards with limited exceptions. This provides the certainty and trust necessary for foreign investors and trading partners dealing with Lao-based entities.

Laos has committed to dealing with enforceable arbitration agreements and arbitral awards from other contracting states. This enhances Laos’s credibility as a jurisdiction open to foreign business and empowers Lao businesses to seek remedies abroad with the confidence that their awards will be respected back home.

Role of UNCITRAL Model Law in Lao Arbitration Practice

The United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, adopted in 1985 and amended in 2006, provides a template for countries to harmonise their arbitration laws. Although Laos is not an UNCITRAL Model Law country, the Lao Law on Resolution of Economic Disputes has incorporated several key provisions of the Model Law, notably those related to:

– The competence-competence principle, allowing arbitral tribunals to rule on their own jurisdiction.

– The principle of party autonomy, granting parties the freedom to choose procedural rules and appoint arbitrators.

– Grounds for court intervention are limited to Article V of the New York Convention 1958, fostering the independence of the arbitral process.

– Recognition and enforcement of arbitral awards with minimal judicial interference.

These provisions have enhanced the procedural integrity and neutrality of arbitration in Laos. By aligning its domestic law with the UNCITRAL Model, Laos ensures that arbitration proceedings involving Lao parties are compatible with internationally accepted norms, thereby making the country a more attractive destination for foreign investors.

Institutional and Ad Hoc Arbitration Options

Lao entities may engage in either institutional arbitration—administered by established arbitral bodies such as the International Chamber of Commerce (ICC) or the Singapore International Arbitration Centre (SIAC)—or ad hoc arbitration, where the parties set the procedural rules of their choice. In both scenarios, Lao law provides the flexibility and legal recognition necessary for arbitration clauses and awards to be effective.

In practice, the choice between institutional and ad hoc arbitration often depends on the complexity of the dispute, the need for administrative support, and the parties’ familiarity with arbitration procedures. Lao parties, particularly those represented by experienced law firms, are increasingly comfortable navigating both environments.

The Role of Lao Law Firms in International Arbitration

Laos law firms play a crucial role in advising and representing Laos-based clients involved in cross-border disputes. Among these, Phomsoupha & Son Law (P&Son), based in Vientiane Capital, has distinguished itself with a long-standing reputation in international commercial arbitration. P&Son’s legal practitioners bring in-depth knowledge of Lao statutory law and international arbitration practices. Their experience includes drafting arbitration clauses, preparing submissions, engaging in arbitral hearings, and securing the enforcement of awards in Lao courts. Their multilingual capabilities and familiarity with both civil and common law traditions also make them well-suited to handle the procedural complexities of international arbitration.

P&Son often collaborates with foreign counsel to form a cross-border legal team, ensuring their clients receive comprehensive and culturally nuanced representation. This collaborative approach is vital in arbitrations involving multi-jurisdictional issues, such as choice of law, enforcement in multiple countries, and challenges based on public policy considerations.

Challenges and the Way Forward

While Laos has made significant progress in building a legal environment conducive to international arbitration, challenges remain. These include:

– A limited number of local lawyers capable of dealing with complex arbitration-related matters, leading to occasional inconsistencies in legal advice.

– A need for further training and capacity-building among legal professionals, judges, and arbitrators.Public awareness and business familiarity with arbitration as a viable alternative to litigation.

– To address these challenges, continued cooperation with international legal institutions, participation in training programs, and investment in legal education are essential. Additionally, establishing a local arbitral institution with international standards could bolster Laos’s position as a regional hub for arbitration.

Conclusion

Lao legislation—anchored in national statutes, global conventions like the New York Convention, and the UNCITRAL Model Law—provides a comprehensive legal framework enabling Lao entities to participate effectively in international commercial arbitration. This legal environment not only facilitates dispute resolution but also fosters confidence among foreign investors. The practical engagement of experienced law firms further strengthens Laos’s ability to navigate the complex landscape of international arbitration. As global commerce evolves, continuous legal refinement and professional development will ensure that Laos remains a credible and capable participant in the international legal order.