Since the military coup earlier this year, devastating scenes of brutal violence and deep civil unrest have continued to emerge from Myanmar, along with allegations of human rights breaches and telecommunication black-outs. To darken the picture further, the pandemic has sunk its teeth into the country. Some 15,000 lives have been lost to the virus so far, while the death toll as a result of the Feb. 1 coup topped 1,000 in August, according to the Assistance Association for Political Prisoners activist group.


For businesses, all this means navigating an increasingly murky terrain as contracts are tested and operations impacted. Uncertainty has driven out some, but other businesses are weary of severing ties. All the while, the question remains of whether the government is liable to pay compensation for the business losses of foreign investors, who expect to protected by bilateral treaties.

Chester Toh, co-head of Rajah & Tann’s Myanmar practice says while there are “avenues of recourse” for businesses, “the prospects are not great.”

The 2016 Myanmar Investment Law and 2017 Myanmar Investment Rules provide some protection for foreign investors holding a Myanmar Investment Commission permit or endorsement, Toh says, including “guarantees of non-discriminatory treatment of foreign investors, protections against expropriations as well as fair and adequate payment of compensation in the event of expropriations.”

But the threshold is “fairly stringent, given that an aggrieved investor will have to demonstrate that the state of emergency has the equivalent effect of an ‘indirect expropriation’ which effectively deprives the investor of the benefits of its investment in the country.”

Under the Myanmar Investment Law, disputes between a foreign investor and the country of Myanmar have to be resolved amicably through the Investor Grievance Mechanism. If they are not, “investors may bring claims through a contractually agreed forum, such as arbitration, national courts, or mechanisms provided under the applicable investment treaties. From a practical perspective, it is uncertain whether the Investor Grievance Mechanism would be effective or impartial,” Toh says.

William D. Greenlee, a partner at DFDL, says the question of liability is dependent on the terms of the bilateral treaty, and “as the government is concerned, none of the laws, investment benefits under the laws have changed or been amended.”

The government has said “foreign investor rights would remain” and “agreements entered into by the previous government would be honoured,” says Greenlee pointing to the recent government approval of more than 15 foreign investment applications. “Therefore, it is likely that the government would argue that the losses are occurring due to general business slowdown and not as a result of the government not meeting with any obligations that it may have,” he adds.

Another detail of note is Myanmar’s 11 signed bilateral investment treaties, eight of which are in force, and, according to Toh, have measures that are “generally more favourable towards investors” compared to the Myanmar Investment Law.

“For example, there may be recourse in the case of war or other armed conflict, civil disturbances, national state of emergency, revolt, insurrection, riot or other similar situations. As such, there could be grounds under such provisions to explore compensation, and the BITs provide access to investor-state dispute settlement mechanisms and more specifically investment arbitration, which offers investors a neutral forum to seek redress,” Toh says.

There is no denying that the environment in Myanmar has drastically changed. Currently, the business climate is “muted at best” with little sign of recovery ahead in the near term, Toh says. “Realistically, Myanmar’s economy has been on a ‘firefighting’ mode since the state of emergency was declared,” Toh says, noting business confidence from foreign investors is low with “many foreign executives having left Myanmar.”

But the overall picture of uncertainty has thrown legal work into overdrive. Toh says lawyers have their hands full with everything from “advising on security considerations arising from employee detentions” to “privacy issues associated with the State Administrative Council’s (SAC) introduction of a draft Cyber Security law.”

“We have also been approached for advice on how companies can enforce or suspend their contractual obligations, and the manner in which one can restructure inter-company arrangements so that companies in Myanmar can pay their offshore suppliers. In this regard, our past experience in advising companies in the earlier days of military rule before NLD took power has proved to be helpful as we look to navigate a more complex and restrictive regime,” Toh says, adding there has been a “noticeable” drop in deal activity on the trans-actional side and an increase in companies “looking to wind down or suspend operations.”

Greenlee also notes a glut of restructuring work in the market and some de-registrations and dissolution-related advisories.

“Clients are also asking us for advisory and strategy regarding any legal restrictions for outflow of funds invested in Myanmar and what are the possible ways,” he says, adding that companies operating in Myanmar have kept the firm busy with advisory and compliance requests. “Some investors in the energy sector are requesting for advice regarding force majeure clauses and they can be used as a tool to protect their investments,” he says.

All the while, a worsening COVID-19 situation has added to a climate of anxiety. The picture is unlikely to brighten anytime soon.

“The impending cash crunch is worrying, with the local currency in free fall,” Toh says. “In a span of less than 10 years since the currency was floated, it has depreciated by 100 percent and there is no sign of a turnaround. The caretaker government will need to come to grips with the COVID-19 pandemic and the stuttering economy.”

With elections expected to be at least two years away, it will likely take time for things to stabilise, says Toh, adding the coup has “seriously shaken the confidence of foreign companies and it will take years for the country and its economy to recover to pre-coup level.”

“My view is that it will be tough for the country to woo back investors,” he says.


To contact the editorial team, please email