Judging by the recent run up in the share price of ASX-listed mining company Kingsgate Consolidated Limited, investors may be punting on a successful resolution of its long running dispute with the Thai Government. (Kingsgate also announced that it continues negotiations for the sale of its gold-silver exploration and development project in Chile, which may also be a contributing factor in the share price rise.)
Kingsgate commenced arbitration proceedings against the Thai Government under the Thailand-Australia Free Trade Agreement (TAFTA) in 2017 following the Thai Government's 2016 order suspending mine operations. This is the first significant test of TAFTA's provisions.
In its latest ASX release, Kingsgate states that "negotiations between the Company and the Royal Thai Government are now entering the final stages. Kingsgate has also been advised that the arbitral tribunal is now ready to issue the award after a lengthy period of deliberations".
The parties have jointly requested that "the arbitral tribunal hold the award until 31 October 2021, to allow the parties a short extension to conclude their settlement negotiations."
Interestingly, the 23 September release makes no reference to compensation by the Thai Government for Kingsgate's losses. Kingsgate's Chairman was previously quoted as stating "[t]here is a definition of expropriation in the Tafta agreement and this certainly fulfils that and so we want full compensation.”
The release sets out a non-exhaustive range of steps as part of settlement negotiations. But no reference to compensation. That does not mean that there will be no compensation as part of any settlement but it seems odd that it was not mentioned. A likely sticking point in the negotiations.
Other disputes between the Thai Government and foreign companies have shown how hard it is to extract compensation from the Government, even with the benefit of an arbitral award. Kingsgate's approach presumably takes these difficulties into account.
It will be interesting to see if Kingsgate can conclude a successful resolution and whether the Thai Government will honour any settlement commitments.
Thailand Update – 23 September 2021
October 2021
© PELEN 2021
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