This report analyses the legal foundations for the design and implementation of PES schemes in the Lao PDR and provides recommendations to address potential legal barriers. Key challenges that may limit the supply effectiveness and efficiency of PES schemes in the Lao context include investment risks to buyers and sellers; liability risks to agents; potentially high transaction costs due to administrative requirements; and restrictions in the range of legally eligible ES supply actions. Drivers of these challenges include aspects of the land tenure system; land use restrictions (including access) that may limit the range of eligible supply actions; approval and registration requirements that may apply to some supply actions; requirements of business registration and the payment of taxes that may apply to ES sellers; feasibility of PES contracting and enforcement; and potential challenges in establishing an impartial, accessible and fair mechanism for grievance, conflict resolution and redress.