Arbitration gamble does not pay off for Donaco

Last year, we wrote about the NSW Supreme Court freezing order granted to preserve 148 million shares in ASX-listed Donaco International Limited, pending the outcome of arbitration in Singapore.  The arbitration concerned Donaco’s purchase of the Star Vegas, a Cambodian casino.  Donaco alleges that the Thai vendors breached a non-compete clause in the sale agreement by continuing to operate a neighbouring casino, as well as a secret casino hidden behind a supermarket façade.  The vendors are counterclaiming for damages.

Donaco goes all in

By way of update, Donaco has recently increased its claim to US$240 million but the proceedings continue to suffer lengthy delays.  Although the average duration of a sole arbitrator claim in Singapore is 11-12 months from filing to final award, in this case, at the time of writing, more than 18 months have passed since Donaco filed the claim.  As there is reportedly a further four-month delay for reasons unknown (due to the confidential nature of arbitration proceedings), the matter will not be heard until early 2020.

Arbitrator deals a losing hand

Meanwhile, a Cambodian arbitrator who was separately hearing a dispute regarding the Star Vegas lease has now issued an award in favour of the lessor, finding that the termination of the lease was warranted in circumstances where Donaco had not paid rent for five months.  Donaco argues that the reason it had not paid rent was that the lessor had stopped collecting the rent in cash, as had become customary under the lease agreement.

The arbitrator has also rejected claims by both parties for damages and legal costs.

Not ready to fold

Donaco has already filed an appeal in Phnom Penh against procedural aspects of the arbitration, and will separately file an appeal against the substantive decision.  The arbitration award cannot be enforced until it is registered and enforced by a court with competent jurisdiction. 

We will provide further updates on both sets of proceedings as they come to hand.

For further information on any of the issues raised in this alert, or advice on overseas dispute resolution, please contact one of our leading international arbitration practitioners.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.