“Who Will Take Responsibility for Our Loss?”
The Xe Pian-Xe Namnoy Dam Collapse and the Demand for Accountability
Xe Pian-Xe Namnoy is a 410-megawatt hydropower complex under construction in the Xekong River basin in southern Laos. On July 23, 2018, one of the complex’s auxiliary dams collapsed, unleashing a wall of water that killed at least 71 people and flooded thousands of homes and family farms. The floodwaters reached into northern Cambodia, destroying crops and property some 80 kilometers away.
One year later, nearly 5,000 Lao villagers made homeless by the disaster remain displaced and live in temporary camps, surviving hand to mouth on meager rations and daily allowances. After surviving the loss of their homes, loved ones and farms, they are being traumatized yet again by being denied adequate food, housing and dignity in the camps. Most are unable to return to their homes, and their futures remain highly uncertain. Thousands more people have suffered damage to property and have not been compensated. “We had no idea the flood was coming. I heard people yell outside my house, ‘Flood! Run, brothers and sisters!’ I ran outside and found the water already rushing over my door. My wife and daughter had not yet returned from the rice fields. I took refuge on a nearby roof, sick with worry. When the rescue team took us to the emergency shelter, I didn’t rest but ran here and there searching for my family. Finally, I spotted my daughter sitting alone, crying. I ran to hug her, and we both cried together. I couldn’t find my wife. I grabbed my daughter’s hand and we walked to another camp, where we finally found my wife. It was a miracle. From the moment the flood hit, I thought we would all die. I don’t know who will take responsibility for this loss of life, and I don’t know what’s next for my family and the others. If we settle down again in the same village, we will live with the fear of not knowing when this might happen again.”
To date, no one has been held accountable for the catastrophe. Yet a growing body of evidence suggests that the dam’s lead developer and builder, the Korean firm SK Engineering & Construction, may have caused the collapse by cutting corners in order to maximize profits. An independent investigation commissioned by the Lao government has ruled out force majeure, or an unforeseeable “act of god” such as a natural disaster, as the cause of the collapse. Korean media have reported that SK Engineering & Construction significantly altered the design of the project, including by lowering the walls of the collapsed auxiliary dam, in order to save money. A Stanford University researcher found that the failed dam was built on a sinkhole. SK Engineering & Construction has denied responsibility.
Regardless of the scope of SK Engineering & Construction’s apparent negligence, the Korean firm did not develop and finance the USD1.02 billion project alone. Three other firms joined SK Engineering & Construction in a private-sector consortium that contributed USD306 million to the project: Korea Western Power, Ratchaburi Electricity Generating Holding of Thailand, and the Lao government-owned Lao State Holding Enterprise. Ratchaburi Electricity Generating Holding, in addition to being a developer, was the project’s construction supervisor, making it directly responsible for oversight of SK Engineering & Construction’s work.
The Lao government was not just a developer of the project through Lao State Holding Enterprise; it also holds the ultimate authority for overseeing a project located within its borders.
A number of other entities helped fund the project and get it off the ground. Four Thai banks, Krung Thai Bank, Ayudhya Bank, Thanachart Bank and the Export-Import Bank of Thailand, loaned the developers USD714 million to build it. The law firm that structured the loan publicly disclosed the behind-the-scenes role played by the Asian Development Bank in moving the project forward, including by contractually committing to refinance part of the loan at a later date.
The Korean government and Thai governments also backed the project through entities they control. The Korean government provided a loan to the Lao government to develop the project, and it owns a number of shareholders of the dam’s developers. Meanwhile, the Thai government owns the major buyer of the dam’s electricity, one of the banks that provided the project loan, and shareholders of the Thai developer.
A project of this scale and risk needed a sizeable amount of insurance coverage to get off the ground. Most of that insurance protected the developers and banks. But USD50 million in liability coverage, backed by the U.S. firm AIG and the Korean insurers Samsung Fire & Marine and Korean Re, covers losses suffered by third parties. The displaced Lao villagers, many of whom lost everything, are largely unaware of the coverage. Even if they knew about it, making claims in a country where the judiciary lacks independence and repression is pervasive could prove perilous.
All of these actors have enabled the project to varying degrees. And all will profit from it – in some cases for years to come. Under international law and human rights frameworks, they bear responsibility for the suffering the collapsed dam has caused.
Entities that enabled and profit from Xe Pian-Xe Namnoy must take the following actions to ensure that adequate remediation is provided:
- The Lao and Cambodian governments should ensure people affected by the collapse have access to effective remedy through judicial and/or non-judicial grievance mechanisms, as appropriate. The Lao government should also ensure that conditions at the camps holding displaced people are immediately improved and that people are allowed to return to their former villages and land if they wish.
- The Korean and Thai governments, which backed the project through entities they control, should ensure affected people have access to effective remedy, including judicial remedy, and ensure that responsible corporations domiciled in their jurisdictions are held accountable.
- SK Engineering & Construction and Ratchaburi Electricity Generating Holding should establish a fund and an accessible claims process through which affected people in Laos and Cambodia can receive adequate compensation payments and restitution for the damage and harm caused. Compensation must be adequate to cover all of the losses and harms suffered due to the Xe Pian-Xe Namnoy project and include a process to fully restore community lives and livelihoods.
- Xe Pian-Xe Namnoy Power Company Ltd., the joint venture created to develop the project, and the debt investors Krung Thai Bank, Ayudhya Bank, Thanachart Bank and the Export-Import Bank of Thailand should contribute to the fund and the establishment of the claims process.
- AON Thailand, the project’s insurance advisor, along with AIG, Korean Re, Samsung Fire & Marine and Asia Capital Re, should cooperate with their clients, the developers of the dam, to establish an insurance claims process, making the USD50 million in liability coverage directly available to claimants.
- All shareholders of the four developers of the dam should use their leverage with the companies to ensure adequate redress.
