The Myanmar Brewery ownership dispute has further escalated after Singaporean company Fraser and Neave said it received a Notice of Arbitration from its local partner last week.
Military-owned partner Union of Myanma Economic Holdings Limited (UMEHL) is seeking to force the foreign firm to sell its majority stake to UMEHL over an alleged breach of contract regarding a share sale.
The dispute stems from an alleged violation of a right of first refusal for partners to purchase each others’ shares in the venture before offering them to a third party, a condition that 45 percent owner UMEHL claims Fraser and Neave breached, according to media reports.
Fraser and Neave was formerly a partner of Dutch firm Heineken in Southeast Asia breweries until last year, and also had a longstanding partnership with UMEHL in Myanmar. In 2012 control of Fraser and Neave was bought for US$2.2 billion by Billionaire Charoen Sirivadhanabhakdi’s ThaiBev company.
Fraser and Neave subsequently sold its other beer production investments to Heineken, but the Dutch firm did not take on the Myanmar stake and the now Thai-majority owned Fraser and Neave retained its 55pc share in Myanmar Brewery.
As they seek to force Fraser and Neave to sell its stake, UMEHL claims the sale of Fraser and Neave to ThaiBev violated the Myanmar Brewery joint venture agreement, media reports said.
Although Fraser and Neave officials declined to confirm where the pending arbitration would take place, a source with knowledge of the situation said it should be held in Myanmar using Myanmar arbitration.
Edwin Vanderbruggen, a partner with Myanmar law firm VDB Loi which is not connected to the dispute, said it is common for Myanmar parties to a contract to insist any arbitration should take place in Myanmar.
In theory this makes the enforcement of an arbitration award within Myanmar easier, he said.
“In most deals that I see with a Myanmar party, such party would bring up their preferences for arbitration in Myanmar,” he said, adding foreigners are wary of this and prefer an international arbitration set of rules and foreign venue.
While in theory arbitration could be quicker than litigation, such proceedings often turn out to be “long, protracted, exhausting battles that hurt both parties involved with huge legal costs, loss of focus and reputational damage,” said Mr Vanderbruggen.
He added most arbitration cases result in some kind of a settlement.
Both Fraser and Neave and UMEHL officials declined to comment on the dispute.
Source: Myanmar Times