In this interview with Asia Law Portal, Pisut Rakwong and David Lawrence of Pisut & Partners explain the dispute resolution system in Thailand and how companies and foreign investors might effectively navigate it.
What is the current institutional architecture for commercial arbitration in Thailand?
Commercial arbitration is handled by two main organisations, the Thailand Arbitration Center (THAC) and the Thailand Arbitration Institute (TAI). Other institutions for resolving disputes through arbitration exist but are not often used by foreign investors.
How are disputes adjudicated and what domestic and international institutions serve as venues for disputes with a Thai genesis or component?
In agreements with a Thai genesis, many parties elect to arbitrate their disputes in Singapore (primarily SIAC), Hong Kong (HKIAC) or another so-called “neutral” location. Domestically, as above, the THAC and the TAI are the main domestic institutions for arbitration.
What should companies operating in Thailand be most aware of to avoid disputes?
Disputes are unavoidable in some cases, but companies can reduce their risk of finding themselves in a dispute by: (i) carefully choosing business partners; (ii) ensuring their agreements are well-prepared in accordance with local law, as opposed to trying to use agreements drafted in other jurisdictions; (iii) mitigate their risks by conducting due diligence before entering into the agreement and monitoring the activities of the counterparties throughout the course of the agreement; and (iv) ensure that the company complies with local laws and regulations.
And should disputes occur, resolve them effectively and efficiently?
Depending on the various circumstances surrounding the dispute, if the counterparty is willing to settle the dispute, it can be done by way of a settlement agreement which binds the parties. Alternatively, the party may propose that the dispute be referred to the recently-founded Mediation Center at the THAC, to explore the possibility of reaching an agreement between the parties. If the dispute cannot be resolved by way of the foregoing, the dispute shall be referred to the Courts of Justice or arbitration institution, as the case may be.
Proceedings in the court of first instance, take approximately one year or longer to reach a judgment on the merits. Arbitration matters take a similar lengthy of time to reach the rendering of the arbitral award. However, the enforcement of the arbitral award shall be referred to the court of first instance again, which is a time-consuming process.
In all disputes, it is important to fully understand all of the claims that may be brought by the counterparty, which may not seem to be directly related to the disputed matters but can cause great inconvenience to managers and directors, especially those coming from abroad. It is advisable that a qualified lawyer should be involved from the first signs of a potential dispute so that the company can navigate the dispute properly.
What should foreign investors be most aware of in relation to the potential impact of disputes should they enter and operate in Thailand?
Foreign investors should be most aware of the potential for a dispute to interrupt their business operations. Depending on the nature of the dispute, disruptions could be relatively minor, such as employees losing productivity in order to prepare for litigation. On the other hand, in some cases, the counterparty could obtain an injunction ordering the business to cease certain activities critical to their business operations. Failure to strictly comply with local laws and regulations increases the chance of such disruptions, whether by the counterparty or by enforcement actions from a government agency.
What is the future of dispute resolution in Thailand and are there any changes that domestic or international corporate sector should be planning for?
Thailand is aiming to become a regional arbitration hub and is working to achieve higher quality and efficiency in their arbitral institutions. For the Courts of Justice, they are attempting to develop electronic filings and otherwise modernize the system in accordance with the Thailand 4.0 initiative.
How should foreign corporate investors assess and plan for any legal issues associated with investment in Thailand?
It is advisable to engage quality legal representatives early in the decision-making process so that not only their legal knowledge but their experience can facilitate the investment process while simultaneously reducing foreseeable legal risks.