Commercial Litigation a Sign of Woes of the Courts

The case involves a pair of French businessmen, one of Southeast Asia’s most elegant hotel chains and runs to the core of the many pitfalls in doing business in Cambodia.

When Pierre Ader, 48, arrived in Cambodia in 1996 and decided to become one of the first foreign in­vestors in the country’s nascent property sector alongside his friend and colleague Jean-Francois Henin, his plans were largely untested.

“We immediately decided to build serviced apartments because we saw there was a very big need at that time,” Mr Ader said in a recent interview in Phnom Penh.

Mr Ader is CEO of Fine Sky In­vestment Cambodia, which owns the Les Jardins du Bassac residential estate on Norodom Boulevard. And after a decade and a half of doing business here, Mr Ader now says Cambodia’s court system has failed to protect him and his business, a deterrent perennially cited by Cambodia’s business community.

After having successfully initiated one project, Mr Ader and Mr Henin signed a deal to build a luxury hotel in Siem Reap under the company name Victoria Angkor Co Ltd.

But in 2001, Mr Henin sold his stake to a man by the name of Francois Gontier, who according to French media reports and documents provided by Mr Ader, has since accumulated convictions in France for criminal activities including the transfer of funds without shareholder knowledge and acting without shareholder authorization.

Then things got worse. Mr Ader filed a complaint last year, accusing Mr Gontier of breach of trust for a string of allegations stretching back to 2005, including the alleged use of company funds to buy real estate, the transferring of company funds out of Cambodia, the failure to hold shareholder meetings and unilaterally changing accountants.

Mr Gontier then countersued for defamation. However, Siem Reap prosecutor Ty Sovannthal has proceeded with neither complaint, causing both men to appeal to prosecutors at the Court of Appeal.

Mr Gontier did not answer questions by e-mail and his lawyer, Kao Soupha, declined to comment. A woman at the head office of his company in Paris, Electricite et Eaux de Madagascar, which is listed on the Paris stock exchange, said Mr Gontier would be unavailable until the end of this month.

If Mr Gontier looses, Mr Ader said, he risks much sterner consequences in France where shareholders will demand answers about how funds from the company’s assets in Cambodia have been administered.

But seeing his case dropped at the first hurdle, he said he is not holding out much hope.

The court case being battled out between Mr Ader and Mr Gontier comes as the government—with support from the International Finance Corporation and Asian Development Bank—are training a group of 54 candidates to become commercial arbitrators in Cambodia’s National Arbitration Center.

Analysts said the institution will provide an alternative commercial dispute mechanism to resolve business disputes quicker and less expensively than if they entered the court system.

“For Cambodia’s future it is critical that investors feel comfortable with the judiciary,” said Bradley Gordon, managing partner at Gordon & Associates, a legal consultancy in Phnom Penh. “It is definitely one of the top issues.”

Mr Gordon said that the introduction of the National Arbitration Center would greatly help with improving investor confidence in Cambodia.

“There is general concern. Investors always ask us about rule of law and about the judiciary,” he added.

“In a general sense we all know that Cambodia, Vietnam and Thailand have a long way to go until their legal systems meet the kind of standards that we are accustomed to in the West,” said Marc Lavoie, managing partner at Cambodia Capital, a financial consultancy firm. “I think it will deter some investors clearly.”

Siem Reap prosecutor Ty Sovannthal confirmed last week that he had decided not to proceed with the cases of Mr Ader and Mr Gontier, though he did not explain why and referred all questions to the plaintiffs’ lawyers.

Mr Ader’s lawyer Ly Vengheng, said the provincial court had decided not to proceed with either Mr Ader’s or Mr Gontier’s complaints because it did not deem them as criminal matters.

(Additional reporting by Phann Ana)

 

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