On 30 April 2002 a new Arbitration Act came into force in Thailand. The Thai Act is modelled on the UNCITRAL Model Law on International Commercial Arbitration. This is a substantial change from the existing legislation that was widely acknowledged as being somewhat quirky and outdated.

The Thai Act aims to promote arbitration as a means of resolving domestic and international commercial disputes, both for its own sake and in order to reduce the volume of cases filed with the Thai Courts. It applies to all arbitrations conducted in Thailand and also to proceedings in Thailand for the enforcement of domestic and international arbitration awards.

Main changes

The key changes in the Act are:

  1. An arbitration agreement with electronic signature (for instance, an exchange of emails) is enforceable. Under the previous legislation, the enforceability of such agreements was doubtful.
  2. Disputes arising out of administrative contracts can be referred to arbitration. Administrative contracts under Thai law are contracts to which one party is a government agency and which are either concession contracts or contracts for the provision of public utilities or mining. In 2001 a specialised court (the Administrative Court) was set up to deal with disputes arising out of administrative contracts. There was then confusion over whether the Administrative Court had exclusive jurisdiction to deal with disputes arising out of administrative contracts, notwithstanding the presence of an arbitration agreement. The new Act makes it clear that arbitration agreements will apply and be enforced even in the context of administrative contracts.
  3. Applications for injunctions and other interim measures may be made to a court prior to the commencement of arbitration proceedings. Previously a party was only able to make these applications once the arbitration had commenced. This meant that a party to an arbitration agreement who had not yet submitted the dispute to arbitration could not get emergency relief from the Court. Further, and also importantly, the new Act confirms that the parties may make these applications themselves. The previous legislation provided that only the arbitrators could apply to the Court for interim protection.
  4. Once the Award has been issued a party may now apply to a Court within 90 days to have the Award set aside (on limited grounds). There was previously no provision for setting aside awards. The relevant provisions are in keeping with the Model Law (that is, they concern procedural issues rather than the substantive merits of the decision) but nevertheless critics of this change argue that it may be used to delay enforcement. It remains to be seen how often this procedure will be used as a tactical gambit to pre-empt or defer enforcement proceedings by attempting to have the matter subjected to lengthy processes of review in the Thai Courts.
  5. The distinction between foreign and domestic arbitration awards has been eliminated in the context of enforcement. The grounds for refusing to enforce an arbitration award and the grounds for appeal against a court order enforcing an arbitration award are now the same, irrespective of whether the award was obtained in Thailand or elsewhere. The relevant grounds are essentially those set out in Article V of the New York Convention – that is, they are again concerned with procedural issues rather than the substantive merits of the decision.
  6. Finally, the period within which a party can bring a court action to enforce an arbitration award has been extended from 1 year to 3 years from the date that the award was issued.

There are several other more technical changes that are also generally beneficial to the progress of arbitration in Thailand. However, some parts of the new Act are less satisfactory, in particular the transitional provisions and the possibilities for abuse inherent in the section imposing civil and criminal liability on arbitrators in certain circumstances.

Other improvements

These changes are part of a push by the Thai government to promote arbitration in Thailand as an efficient and commercially viable option for resolving both international and domestic disputes. Other measures being taken to improve the quality of arbitration in Thailand include educational programmes and seminars for the judiciary to explain how arbitration works and the benefits that it offers.

Similarly, Thailand’s main body for administering arbitration proceedings – the Thai Arbitration Institute (TAI) – is taking steps to improve the standard and quality of its arbitrators by encouraging their ongoing education and exposure to arbitration practices in other countries through, for example, attendance at international conferences on arbitration. The TAI is also in the process of revising and updating its rules and upgrading its facilities with the objective of becoming a more competitive and attractive forum for arbitration proceedings.

Putting it into practice

The new Act will undoubtedly help Thailand towards its goal of "developing an arbitration system… to rival those of other countries." However, achieving this objective will ultimately depend on the willingness of the Thai government and the judiciary to abide by not only the letter but also the spirit of the new Act. This is particularly the case when it comes to the enforcement of awards.

Judges will need to be much more vigilant in guarding against the abuse of court processes to delay and even prevent enforcement. Cases will need to be managed much more effectively to keep costs (in time and money) to a minimum. In particular, the Court needs to make it clear that it will not entertain groundless challenges to enforcement, nor permit challenges to become full rehearings on the merits.

Positive signals from the government appeared about a year ago with the enactment of a Regulation of the Office of the Prime Minister apparently requiring public bodies to comply with arbitration awards. According to the Regulation, a government entity intending not to comply with an arbitration award issued against it must first refer the matter to a special Committee for its review and final decision. This procedure is designed to inject a degree of objectivity into the way that the government deals with adverse awards and will hopefully ensure that decisions regarding compliance and non-compliance with arbitration awards are made by those with appropriate expertise.

It was therefore unfortunate that these efforts to build confidence in arbitration in Thailand were undermined more recently by the government’s refusal to comply with a substantial award made against it in favour of the joint venture constructing the Bang Na – Chon Buri expressway. It may be that the stance taken by the government in this case is justified given the rather peculiar facts of the case (in particular, the circumstances surrounding the making of the underlying contract). However, there is no doubt that news of the government’s refusal to comply with the award has adversely affected the image of Thai arbitration in local and international circles.

The new Act brings long overdue and welcome changes to the face of arbitration in Thailand. We are yet to see what effect it will have in practice for parties arbitrating in this country. It is hoped that the Act will be implemented with vision and commitment and that the arbitral process will consequently become much cheaper, quicker and more certain. All signs are that this is the goal that Thailand has set itself. Certainly, if Thailand wants to become a serious player in the business of arbitration, this is what it must achieve.

Article by Joanne Poole

© Herbert Smith 2003

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