US Ambassador Hartwick attends Washington DC conference flanked by the Executive Delegation representing United Lao Action Centre & the Lao Fund Incorporation.

"DEVELOPMENT ISSUES AND POLICIES" April 25, 2004 Washington DC USA

Speaker: Mrs. Kay Danes
Human Rights Advocate for Foreign Prisoner Support Services
PO Box 5401 West End QLD Australia 4101
Web: http://www.foreignprisoners.com

Background

Kerry and Kay Danes worked in Laos for a number of years as highly respected Security Managers of a Jardine Securicor Company [UK]. On 23 December 2000, the Danes were taken hostage by Laotian authorities when one of their clients, a major foreign investor known as Gem Mining Lao, fled the country following a series of death threats and pending unlawful expropriation of their US$2 billion dollar sapphire concession.

On 19th January 2001, the Lao Government committed itself to 'hostage-taking' when a Laotian official Bounmaly Vilayvong, Lao Government spokesperson and Colonel of the secret police leading their case, told the ABCs reporter [Geoff Thompson] in Vientiane that the Government could free the Danes if another couple, the founders of Gem Mining Laos, made themselves available.

'The Danes Case' has been well documented throughout the world and predominately in Australia as being one of the most prominent legal cases where 'misuse of law through government corruption' has been applied. Australian diplomatic negotiations over 11 months finally brought about the Danes release on November 2001. The couple were granted a Presidential Pardon by Lao PDR President Khamtay Siphandone and returned to Australia where their three young children waited anxiously.

Opening Address to Conference by Kay Danes:

US Ambassador Hartwick, members of the United Lao Action Centre [ULAC] and Lao Fund Inc; distinguished guests from New Zealand and Japan, representatives of the National Democratic Institute; and the Fund for Reconciliation and Development - Ms Susan Hammond, members of the international media, and friends.

It is a privilege to be here with you today and to contribute to the current discussion of granting Normalized Trade Relations [NTR] to the Lao People's Democratic Republic [PDR].

Let me first say that I am very fond of Laos and its people and for a number of years, considered Laos to be my home. Our children, though still quite traumatised by our experience when we were victimized by members of the Lao PDR Government, have surprisingly fond memories of their life in Vientiane and the many friends they left behind.

I too have a strong desire to one-day return to Laos and in that time, I hope to see a great deal of change towards freedom and democracy.

Statement

Human Rights Organizations are appealing for UN Intervention in Laos amidst reports from eyewitness testimony that Hmong [ethnic Laotians] seeking repatriation are being murdered or secretly imprisoned. For whatever reason, the International Community are prevented by the Lao PDR Government from witnessing the true fate of these displaced people. Subsequently, the US Embassy in Laos has reported that the success of this repatriation project demands international intervention to ensure a positive outcome is achieved. Such intervention is vital to ensure transparency and to uphold the integrity of the promised amnesty from the Lao PDR Government to those seeking repatriation. Such interventions are also vital in enabling greater protections for Investors to the Lao PDR, which is an issue, that we are gathered here today to discuss in greater detail. I hope that our views may be acknowledged by US Congress and the State Department.

I would like to submit through the United Lao Action Centre 'ULAC,' a detailed report on 'Development Issues and Policies for the International Conference on Laos April 25, 2004 held in Washington DC USA'. This report contains information that has been collated from a broad cross section of sources in the hope that it will be conducive to the current debate - Normalized Trade Relations [NTR] Lao PDR. The sources of contribution are obtained through conversations with former foreign investors to Laos; discussions with current foreign investors to Laos; official reference material from Government and Non-Government Organizations; opinions from eye witnesses residing in Laos who's safety necessitates anonymity; Laotians and Foreigners abroad; findings by Political Analysts; considerations from Legal Fraternity; observations from security professionals; Intelligence Agencies; and general sector [opinions].

Clearly, there are good and bad elements in every government so I think it unfair to say that the whole of the Lao PDR Government is corrupt. In my experience, I have met a small percentage of Lao PDR government officials who are quite genuine in wanting greater democracy in Laos. Hopefully over time these individuals will find a way to make their opinions heard without compromising their personal safety.

This report outlines examples of the deception and corruption of some Laotian officials seeking to undermine the development of Laos. Included are examples of extortion by Lao PDR tax officials, numerous broken promises in relation to specific investment projects, as well as, countless examples of breeches of State and International Laws [see in depth report of case Danes vs. Lao PDR Government 2000-2001].

Will NTR provide greater protections for investors to Laos? Will Embassies like the US Embassy in Laos have the power or legislative authority to enable 'fair hearings' for US investors experiencing difficulties or harassment from local authorities? Embassies are currently prevented from interfering in the private matters of investors, as are governments. Further, Foreign Aid Organisations also fail to support investor protection and as stated "are only concerned with the projects they are personally involved with". Surely foreign aid organisations have a responsibility to support investors to enable the successful and continual development of Laos for all parties? The World Bank has recently announced several new strategies tabled for 'investigation'. One of which is: "Protecting Investors - coming soon!" No doubt when it does eventually come, it will be seen as a welcome relief to many investors to have aid organizations such as the World Bank, taking a greater interest in implementing safeguards in support of investors and their rights. However, sadly for many investors, this new approach by the World Bank will arrive a little too late. It remains to be seen what exactly the World Bank will propose in establishing safeguards and if they will implement an enforceable solution to support foreign investor protection.

Some foreign diplomats claim that foreign investors need only 'demand rule of law' but the reality of this statement is fraught with danger. The Lao PDR government is a communist dictatorship protected by the laws of sovereignty and will not tolerate such demands.

Personally having lived and worked for a number of years in Laos as a Security Manager for an International Company, I have witnessed and experienced first hand, the obstacles confronting local and foreign investors. Most importantly, the difficulties in conducting a lawful service amidst an environment rife with corruption and a government that is unable to enforce or abide by its own laws and International agreements.

Laos is a country shackled by a political system that corrodes normal practice through mismanagement and corruption. Granting NTR without safeguards and without guarantees is hazardous for investors and yet still, investors are encouraged or enticed to invest in Laos by the promotion of good bilateral relations between States.

Do bilateral relations and trade agreements favour or promote protection for investors or foreigners? The answer is NO. There are too few safeguards to prevent the reality of arbitrary arrests, illegal expropriation and non-compliance of agreements.

What sense does it make to sign agreements if they are not going to be upheld? If one secures a loan from a bank to purchase a car or property and does not honour the commitment to pay on the banks terms, the car or property is re-possessed and penalties applied. These simple agreements protect the integrity of the relationship between the parties. But when the signing of agreements are between governments and investors seeking to support the economic development of a nation, the breaking of such agreements should be treated with more severe consequences. After all, what is the point of signing agreements if they are not enforceable?

The Lao PDR Government has a long history of violating State and International laws. There are many examples of violations but one in particular occurred when in 1994, an investment project was granted a 15 year concession agreement with an option to extend to 25 years. The agreement with the Lao PDR Government contained clauses governing its operation, termination and resolution of disputes. In addition to the terms, that the investors employ two Lao PDR Government officials to monitor and maintain concise records relating to the foreign investment project.

In June 2000, the Company Directors identified and accused several high level officials of false and malicious representations which resulted in unnecessary legal disputes between the investor and the State. The investors presented comprehensive written evidence to support their claims, but they were never given any opportunity to argue their case. Despite their efforts to resolve their difficulties they continued to suffer significant interference, wilful destruction of property and the eventual unlawful expropriation of their entire investment. It was a loss of millions of dollars and according to the rules of arbitration governing this particular project and many of the other investment projects in Laos, the Lao PDR Government agreed to abide by certain dispute resolutions in accordance with the UNCITRAL Rules of December 5, 1976 and any modifications thereto, just as stated in the US-Laos Bilateral Trade Agreement. However, the Lao PDR Government did not abide by the terms of the agreement as promised but instead sought to imprison the Investors arbitrarily. The investors narrowly escaped Laos with their lives but not without first being financially destroyed.

How many investors will be sacrificed in the quest for Normalized Trade Relations between Laos and the United States?

Today at this forum, we have listened to the comments of US Ambassador Douglas Hartwick who strongly supports NTR to Laos as being in the best interest of the United States. It was interesting to hear his views as he spoke candidly about the problems facing the Lao PDR Government and his hopes of influencing change in Laos. But I am personally disheartened to hear his words that have convinced me that those significant investment projects we highlighted in our discussions as being violated by the Lao PDR Government, are not even worthy of consideration or to be tabled as benchmarks by which we might learn from in our search for solutions to provide protections for future investors.

The US Investment project "Lao Gold Company Limited" was a legal entity and did operate in strict accordance with the Laws of the Lao PDR. Due to non-cooperation of the Lao PDR Government and constant restrictions and interference, this investment suffered continuously over the years which resulted in the loss of US$12 million dollars. How can anyone suggest that this US Investment is an insignificant loss?

How can US Ambassador Hartwick state that the investor may have had a better opportunity for protection had NTR been granted previously, when the Lao PDR Government has a history of breaking the many International agreements it signs?

In the case of Lao Gold Company Limited, the Lao officials were so corrupted that their prime interest was to fatten their own bank account. They did not abide by their own legal system or their own foreign investment laws. They ignored the interest of foreign investors, the respect and dignity of their own country, until the situation had deteriorated into a disaster jeopardizing the personal safety of the US investors who returned to the United States in 2001 to pursue their case, to no avail, with the US Government.

My interpretation of US Ambassador Hartwick's comments is that many former investors have suffered tremendously and lost everything but their cases will not be considered in the current debate. Furthermore, US Ambassador Hartwick concluded his remarks by suggesting that even with the signing and introduction of NTR to Laos, the first of the investors would no doubt experience a number of 'difficulties' but eventually, he hopes things will improve. Again, the question begs to be asked "how many investors will be sacrificed?" Unfortunately, US Ambassador Hartwick could not specify a number to reflect an acceptable loss. What investors to Laos really need are assurances from western governments that they will hold the Lao PDR Government accountable in the event of interference to investment projects and ongoing breeches of International laws and agreements. How can the US Government intervene if their citizens [Investors] are secretly detained by Lao authorities? The Lao law itself states that persons can be held for one year pending investigation? No Government can interfere with the sovereignty of a Nation as we have heard the Lao PDR Government proclaim repeatedly. Therefore, how can any foreign government promise to provide safeguards when they cannot even protect their own citizens from torture, ill-treatment and arbitrary detainment? Embassy's can barely provide adequate consular support to their citizens and in many cases, cannot even gain access to their citizens.

When we consider the introduction of any new policy, it is the responsibility of the International Community, foreign aid donors and governments to investigate fully whether or not current policies, agreements and laws are adhered too. This establishes the integrity of the applicant. The Lao PDR government continues to reveal their inability to function appropriately and more important, lawfully when dealing with the International Community.

I do not oppose NTR to Laos but I support the request for its delay until the Lao PDR Government is able to successfully demonstrate concrete improvements in these areas of concern. This is not a human rights issue although there are serious violations of human rights concerning investors. This is an issue of finding solutions to provide greater protection to investors who are being asked to put their faith in a system that currently presents too few guarantees. Before there is any formal granting of NTR to Laos, let the US Government first examine the problems investors of the past have faced and concerns that we have highlighted in our discussions and our reports as submitted here today. Indeed, this is a matter of due diligence and one that demands a responsible and unhurried approach to ensure the integrity of both past and future investors to Laos. The Lao PDR Government should be held accountable in administering NTR in accordance with State and International Law. Only then will we see the true benefits for Investors, the International community and foremost, the People of the Lao PDR.