Michael Kirk (1996):
Land Tenure Development and Divestiture in Lao P.D.R.

3. Resource Legislation within a Broader Legal and Regulatory Framework

The current valid land and forest legislation can only then be put into practice at the local level and also be accepted by the various interest groups when, on the one hand, an independent judiciary is workable, or on the other that alternative arbitration authorities are recognized. It is only workable when further legal instruments are both available and usable, such as contract law, a tax law, a family and inheritance law, or the certainty of foreign investment. There exists without doubt a lot of interest in the further development of an independent justice system in Laos, but so far there is neither a consistent concept about how this should occur, nor is there experience which stems from the recent past.

Independent Judiciary

With the Law on Supreme Court (1989), the fundamentals of a judiciary independent of both the executive and the legislature were created in Laos (see Figure 2). In principle, it has been guaranteed that it is the business of the court to enforce law at all levels, from the lowest authorities, right up to the Supreme Court. But in practice, constructing it is more difficult than expected. High officials in the Ministry of Justice as well as administrators and above all lawyers complain about the hindrances and delays in the creation of an efficient jurisprudence which has to resolve conflicts about property rights to natural resources more and more. The basic reasons for this are:

• The conflicting parties have as yet no trust in a judiciary which has been organized along Soviet lines for decades and which was not committed to the separation of powers. The independence of the courts is in doubt. Numerous court cases involving questions of ownership of land, are pending since neither the traditional, extra-legal attempts at resolution through negotiation and reconciliation were successful, nor are the parties prepared to take their disputes to court. [FN 20]
• The reservations of the opposing parties are justified in that the majority of judges are still not clear about their new role in a civil society. What is lacking here is up-and-coming judges who have experience with independent judiciaries abroad. What is also lacking is training for judges holding office in the Provinces and Districts, as, for example, is practiced by NGOs in Cambodia. [FN 21]
• The immediate result of this is that judges delay decisions, shy away from final judgments and leave unresolved cases pending. This is thoroughly in keeping with Buddhist-influenced tradition in this country of striving for joint solutions and avoiding irrevocable decisions. But this hinders investment decisions, creates legal uncertainty and scares off foreign investors.
• The uncertainty of the judges makes the work of lawyers considerably more difficult. Judges are often unfamiliar with the flood of new laws; they often have no copies of them. They try to defeat processes for formal reasons which means that lawyers always have to appear with the "law under their arms" so as to be able to convince judges of the legality of a case and also of their own jurisdiction.
• The position of lawyers is additionally weakened by the State because no legal bar exists. The old bar which was dependent upon the State was dissolved at the beginning of the 90s without another one being put in its place.

Thus lawyers posses no instrument for self-organization and self-control. While rules for ethical and professional responsibility for the exercise of the legal profession remain to be set, attorneys at law now have greater responsibility in the implementation and adjudication of the laws and regulations and the settlement of legal disputes (Schneider/El-Erian 1994). A Law on Notaries has indeed existed since 1991, but it was not possible to get information about the contents of this law. Hence the question is still open about the rights notaries have and in how far they take over tasks which are set down in the Decree on Document Registration (see below), and also about who appoints them.

A sophisticated legal system in which attorneys at law can practice hardly exists. There is a lack of courts of first instance at the provincial, and above all the district level, since decentralized jurisdiction had little meaning in a centrally planned economy and society. Above and beyond this, there is still currently a lack of a Court of Appeals and qualified judges to preside over it.

There is the basic problem, not only in formulating laws, but also in setting up institutions, and of the indiscriminate takeover of foreign legal systems: since there was little willingness to take on the legal system in the tradition of the French mold from the time of the Kingdom of Laos, instruments and principles of the Anglo-Saxon and French legal system as well as Chinese experience is being introduced, and reforms and regulations of the Soviet norm are still being experimented with. The development of jurisprudence is accordingly contradictory and lacking in uniformity.

Even well-established land and credit markets are currently still inefficient since it is impossible for banks and other creditors to enforce the repossession of mortgaged land if those taking out credit are unable to pay their loans, and banks then claim the land as collateral. Judges shy away from such decisions which additionally reduces the faith in the security of property rights.

Statutory Law on Commerce and (Foreign) Investment

Above and beyond the possibilities for enforcing laws through an efficient judiciary, further legislation is required to make land rights valid and to ensure the transfer of landed property. The multitude of co-existing laws for regulating the passage of business in the private sector for regulating family law once again underlines how partly unsystematic and ad hoc the legal and regulatory framework has been set up. It was not possible to realize the idea of a coherent consistent civil code, ("Code Napoléon" or "Bürgerliches Gesetzbuch"). Even if legislation does not exist as a unified whole, Laos has in this case laid the important cornerstones of framework legislation in a very short time (see Figure 2).

Figure 2: Legal and Regulatory Framework for Resource Tenure Legislation

The Business Law (1994) is already an improved version of a previous decree. Its purpose is to promote all economic sectors "in view of market economy" (Art. 1). Different types of enterprises are defined, whereby joint enterprises with local and foreign partners are of particular significance in the forest sector (Art. 4) The particular interests of national security in the case of forests is set out so that business in this sector is subject to close control. The rights and obligations of joint ventures are further set out in the Foreign Investment Law, and specific joint ventures are additionally dealt with in Decree 186.

The Foreign Investment Law (1994) is also a reworked version of earlier decrees (World Bank 1994, 1995a). It emphasizes that the foreign investor's assets and investment will be fully protected by the legislation and that they "...will be kept from confiscation, seizure or nationalization, except in the case of public interest" [FN 22] (Art. 3). Two forms of foreign investment are possible: joint ventures between foreign and local investors and fully foreign-owned investment. In both cases, investors are entitled to lease land and to transfer their rights and interests from the leased land. Limitations exist in the forestry sector: in agreement with Decree 186, only joint venture projects are possible for reasons of State interest.

The law controls detailed taxation stipulations of investors, including possible tax exemptions: measured against earlier decrees, a better standardization has been achieved, and a better system of tax incentives have been created. Important for investors is that the transfer of benefits or funds generated in the Lao PDR to their own country or to a third county is not restricted. Planned joint ventures must be approved by the Foreign Investment Management Committee (FIMC) in all cases, the swift processing of which is guaranteed by law. Disputes between foreigners and a Lao partner are to be solved by a special Arbitration Committee so the legislator here forms an additional, informal authority - before going to court.

The planned Implementing Decree for the Lao Foreign Investment Law (revised draft version from 27.4.1994) refers specifically to Article 14 of the Constitution for the protection of various ownership systems: it follows in detail the Foreign Investment Law, by articulating detailed management standards and procedures to facilitate effective implementation of the Law. The legislation has not only matured in a very short time through the reworking of older decrees; it has made decisive steps for a practicable implementation. Linking the foreign investment legislation with the land tenure-related law is within the possible contractual regulations for the utilization of forests and forest land. This is in regard to:

• Decree 169 with the Forestation Business Contract for the management of degraded forests of land without forest cover between the Ministry of Agriculture and Forestry (MAF) and foreign investors (alongside further possible contract partners);
• Decree 186, in which joint ventures are planned together with a Lao State-owned enterprise. Government policy is to fully replace concessions by a system of contract logging (FOMACOP 1995). If no commercial logging of natural forests is intended, no such arrangement is necessary for plantation development operations.
• Land Tax Decree which fixes tax charges for leased land.

The tendency towards over-regulation and all-encompassing control by the State can also be seen in the Contract Law from 1990: contracts and possible contract partners are defined in detail, conditions and terms regarding a contract are outlined including restrictive rules when the written form of the contract is compulsory. [FN 23] In this case, with the high rate of adult illiteracy in Laos, about half the adult population would remain excluded from the possibility of being able to make a contract with a value of more than US $5 (Lao PDR 199_a). Here alone one can already see how removed from reality this law is, a law which can never correspond to the economic conditions, since it operates with nominal quantities and pays no attention to inflation, or rather it would require permanent adaptation to legislation.

There is only vague information about the registration of such contracts (from the court registrar or, in rural areas, from the village administration committee), and any links with the Decree on Document Registration (1993) are nowhere to be recognized. A mortgage, which is an important instrument of functioning land markets, is dealt with in the same way as various contract forms which have a significance as land tenure institutions: sale contracts, loan contracts, lease contracts, service contract, and here as well, joint venture contracts. The Decree is seen as being almost too restrictive for an economy which is organized upon market economy principles and blocks project work when it comes to the conditions and terms of a contract.

In contrast to this, the attempt was made in the Customs Law of 1994 to gather experience made with the older decrees and to make impracticable, inefficient over-regulation and detailed regulations superfluous. Officially at least it replaces the Decree on State Tax System (No. 47 from 1989). The Customs Law provides rules regarding the import, export, and circulation of commodities. Its aim is to protect and encourage local production, promote investments and export, ensure revenues for the state budget, etc. (Art.1). At the same time, duties are to be paid according to rules and principles as proved in the tariff code. But as long as such a code and a new Tax Decree [FN 24] are not operational, the system of the State Tax Decree will continue to apply due to a lack of other alternatives (Lao PDR 199_a). [FN 25] Other parts of the previous tax legislation, such as the taxation of land, have already been dismantled and incorporated into the Decree on Land Tax (No. 55 form 1993).

Elements of Civil Law

With the Family Law (1990) and the Law on Inheritance (1990), the Lao State has already laid two cornerstones for extensive negotiable property rights to land ahead of schedule. They establish valid rules for the property relations between married couples and also sets out the rules of inheritance for land.

The Family Law differentiates between initial and acquired assets. Initial assets are property owned by the husband or wife and brought into the joint estate, or assets specially inherited by only one of the partners. Property acquired by the married couple during the marriage are defined as acquired assets. If the joint estate is to be shared, only the acquired assets will be shared. In the case of divorce, the party responsible for the break-down of the marriage will receive a smaller part of these assets.

Alongside this new statutory law, a strong, generally recognized customary family code has existed for centuries. Family conflicts are mostly solved internally within the family, and assets subject to a possible conflict remain in the hands of the whole family. As well, this strong social structure provides a stable framework for long-term investments, such as tree plantations. Checks will have to be made in the future as to what extent State Law will called upon in such disputes, whether or not both systems get into conflict, or if customary rights continue in rural areas and State jurisdiction is called into play in the urban context.

The Law on Inheritance determines who as direct heir (spouse, offspring, adopted children, step-children) will be awarded the rights to assets. It determines who is entitled to an inheritance if there is neither spouse, nor children. The rules of distribution for an inheritance, meaning also agricultural land, forests, plantations, etc., are specified here. It continues to be of significance that the Law stipulates rules regarding inheritance determined by a will (Art. 33). As with most legal systems, there is no complete freedom to dispose of the property: in Laos, a legal portion must also be granted to living children. [FN 26] Also in the Law on Inheritance it is not yet clear which effects the legislation will have both in the rural and urban context. At least - where the family is in agreement - it does not hinder land and forest plantations remaining the possession of the family under normal circumstances.

The Decree on Document Registration (No. 52 from 1993) should play a supportive function for Property Law, Contract Law, as well as for the Law on Inheritance and the Land Decree. It has indeed the task that all types of legal document pertaining to the transfer of property, use of assets, assignment of rights to individuals or juridical entities, contracts, etc., shall be registered "... to ensure their enforceability and legal value" (Art. 3). It in no way fulfills the demand to build up an extensive registration system for documents and to coordinate them with other legislative tools, such as the Law on Notaries, the Law on Inheritance and related registration of landed properties.

First and foremost the Decree on Document Registration must be looked upon as an attempt to strengthen the fiscal system in which a detailed system of registration fees is developed (Chapter II) whereby the foundations for calculating is the "... actual value of assets at the time of registration". How the asset valuation takes place is not dealt with. An important weakness in the decree is that it could hamper and impede business and the free movement of capital, since every single document has to be registered. The system will collapse if every single purchase contract regarding goods and services has to be sent to the Registration Management Office for registration. [FN 27] An attempt was made one more time to impose legislation which is too hard or virtually impossible for the average citizen to stick to which may further diminish the respect for the legislation (Lao PDR 199_:13)

Here again it is clear that a part of the legislative framework, in particular the passages for the initial phase of the transformation process, is marked by over-regulation and a keenness for detail. An omnipotent state tries to establish its influence on economic life and goes after fiscal interests above all. Many parts are unrealistic for the citizens where practicability and comprehensibility are concerned. On the other hand, a part of the legislation was, however, reformed in a painful learning process in that projects and representatives of powerful international donors (IMF, World Bank) and business men who are willing to invest have taken influence.

Loopholes in the law remain open: this is no law for mortgages, and protection for intellectual property rights has not been dealt with, which can achieve growing significance in the future because of biological diversity and the discussion about the protection of genetic resources alone. In the existing framework laws, the immense problems of coordinating them between Ministries and the regional level present themselves above all, when decentralizing, simplified administration, participation of those directly affected. The recent creation of a new Department for the coordination of legislation in the Ministry of Justice (MoJ) is only the first step here.