Casino operator Donaco International Ltd says it is appealing against an arbitration decision of a Cambodian tribunal that ruled the people that had sold the firm leasing rights on the Star Vegas Resort and Club in Cambodia (pictured) were justified in terminating the deal.
“While the appeal process is pending, it is business as usual for Donaco, and specifically for the Star Vegas business,” noted the casino firm in a Thursday filing to the Australian Securities Exchange.
Disputes between Australia-listed Donaco and the original Thai vendors of the property – a venue located in Poipet, a gambling hub on Cambodia’s border with Thailand and mainly serving Thai visitors – are separately the subject of pending arbitration in Singapore, which began in January last year.
Donaco noted in a Thursday filing to the Australian bourse in relation to the Cambodian tribunal decision: “The arbitration award cannot be enforced until it is registered and enforced by a court with competent jurisdiction.”
GGRAsia had reported in June last year that the three Thai vendors had initiated arbitration proceedings in Cambodia to try to settle the dispute in their favour.
Prior to that, Donaco had said in a filing that Cambodia’s Banteay Meanchey Court of First Instance had granted an injunction preventing the landlord, Lee Hoe Property Co Ltd – a firm wholly-owned by the three Thai vendors – from ending the 50-year lease.
The lease includes an option for a 50-year extension, according to Donaco’s latest filing. According to the firm, it is registered with the Cambodian authorities as a perpetual lease.
The casino firm noted in its filing on the latest aspect of the tussle: “Donaco has already filed an appeal to the Appeal Court in Phnom Penh against certain procedural aspects of the arbitration process. Donaco will now file a further appeal against the decision itself.”
The firm further stated: “Donaco notes that Article 250 of the Cambodian Civil Code provides that a registered perpetual lease can only be terminated if the rent is unpaid for three years… However, the arbitrator has ruled that this provision of the legislation can be overridden by a private agreement between the parties. This will form one of the grounds of appeal.”
According to Thursday’s filing, the original vendors had argued they had a right to terminate the lease on the grounds that rent had gone unpaid for five consecutive months.
Donaco had argued it had repeatedly asked the lessor Lee Hoe Property to provide details of a bank account where Donaco could deposit the monthly payments due under the lease. It said the lessor had not done so, and instead sent someone to collect the payments in cash, but then stopped doing even that, and barred Donaco representatives from visiting an office of the lessor. Donaco stated that it had nonetheless set aside the monthly payments so that they would still be available to the lessor.
Star Vegas is pledged as part of a Donaco loan security to Taiwan’s Mega International Commercial Bank Co Ltd, an institution also known as Mega Bank. The latter is a lender to Donaco.
Thursday’s filing noted that – notwithstanding the Cambodian arbitration finding that lease cancellation was justified – the local arbitrator had also ruled that Mega Bank’s registered security over the Star Vegas lease was not discharged by the arbitration decision.
“The arbitrator has also rejected claims by both parties for damages and legal costs,” stated Donaco.
The casino firm further observed that “if the lease is ever effectively terminated, the lease provides that all buildings, fixtures and other property on the land are owned by Donaco, and the lessor must pay compensation for those buildings and other property upon the termination of the lease”.
It said the current carrying value of the buildings and other fixtures on the land was US$33 million.
The Thai vendors sold rights to the Star Vegas casino resort business to Donaco in 2015 for US$360 million. Donaco alleges the three vendors continued to run a neighbouring business called Star Paradise that competes against the Star Vegas, contravening an agreement not to compete.
Donaco noted in its Thursday filing that in late 2017, it had sent a number of letters of demand to the Thai vendors of the Star Vegas business, relating to breaches of non-competition and related clauses.
In July the shareholders of Donaco voted at an extraordinary general meeting called by three shareholders to remove from the board Joey Lim Keong Yew and Ben Lim Keong Hoe, brothers belonging to the family that founded Malaysian gaming company Genting Bhd.
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