The Arbitration Act 2002 was recently amended by the Arbitration Act (No. 2) (Amendment Act), effective from 15 April 2019. The Amendment Act is designed to promote Thailand as the regional hub of international arbitration, and to attract more foreign arbitrators and foreign arbitration counsel to Thailand. This is a welcome move to liberalise the Thai arbitration market as part of Thailand's ongoing attempt to reduce restrictions imposed on foreign investors and investments. The Amendment Act expressly allows parties to arbitration proceedings or Thai courts (as the case may be) to appoint foreign arbitrators to conduct the proceedings in Thailand, and parties to engage foreign arbitration counsel to arbitration proceedings in Thailand. Once appointed or engaged, the foreign arbitrators or arbitration counsel will be required to obtain a certificate from the relevant authorities or arbitration institutions to obtain smart visas, which are designed to give privileges including, inter alia, longer visa terms and less frequent reporting obligations to the immigration offices.
Another welcome development is the introduction of the new TAI Arbitration Rules (TAI Rules 2017), which apply to all TAI arbitration proceedings commenced after 31 January 2017, unless otherwise agreed by the parties. The aim of the TAI Rules 2017 is to promote the greater efficiency of TAI-administered proceedings and to reduce the ability of either party to use delaying tactics. Key changes include the process for challenging arbitrators, under which the arbitral tribunal will decide on the outcome of the challenge, unless the TAI deems it appropriate to appoint an independent umpire to consider and make a ruling on the challenge. The TAI Rules 2017, for the first time, also give an arbitral tribunal the power to grant interim measures. Although it remains to be seen how the Thai courts perceive the interim measures granted by an arbitral tribunal, this in itself is a step towards less judicial interference in arbitration proceedings. Other practical key changes include rules on the consolidation of proceedings, the procedural timetable for more efficient proceedings, service and filing by email, the confidentiality of proceedings, and the latest update of arbitration proceedings conducted via electronic methods (e-arbitration).
ii Arbitration developments in local courtsThai courts' authority to set aside foreign arbitral awards
Although not themselves regarded as a source of law, Supreme Court judgments practically have a strong persuasive authority. In the past few years, the number of Supreme Court judgments on arbitration law being published has steadily increased. This may be because of the rising popularity of arbitration as a means of dispute settlement, which in turn leads to more legal issues on Thai arbitration law being appealed to the Supreme Court. It is worth mentioning that, since Supreme Court judgment No. 13534/2556 (AD 2013), the Supreme Court has on several occasions emphasised that Thai courts have no authority to set aside awards made in foreign countries. This is generally recognised as a departure from a Supreme Court decision in 2009 in which the Supreme Court, relying on Section 40 of the Arbitration Act 2002, held that Thai courts have the power to set aside an arbitral award notwithstanding the place where the award was made. The 2009 decision led to Thailand being widely criticised for rejecting the internationally accepted principle that only the courts that have jurisdiction over the place where an award was made can set aside the award, and other courts can determine only whether to enforce such arbitral award within their jurisdiction. This signifies a change of perspective in the Thai arbitration law landscape, and is a welcome attempt to bring Thai arbitration law and practices into line with international arbitration practice.
Interpretation and enforcement of arbitration clauses
In 2017, Supreme Court judgment No. 1115/2560 (AD 2017) provided its interpretation of an arbitration clause in a subcontract agreement, which reads as follows: 'If the decision of the Contractor is not acceptable for the Subcontractor, the Subcontractor may proceed with dispute resolution mechanism as stipulated in [the arbitration clause] of this Agreement. However, the parties are not bound to always do so.' In this regard, the Supreme Court found that such provision does not force the parties to pursue a dispute only by means of arbitration; it also permits the parties to resolve their disputes by litigation or arbitration. Thus, the Court ruled that a party to an agreement is entitled to commence litigation without being required to first submit a dispute to arbitration.
In 2019, the Supreme Court took a revised stance in its judgment No. 3427/2562. The dispute resolution clause in the agreement provided that the parties must first attempt to amicably and in good faith resolve any disputes or disagreements arising out of the parties' agreement for the first 60 days, and if within those 60 days, the parties are unable to come to an agreeable solution, then parties may refer such dispute to arbitration. In this instance, after considering testimony of an expert witness, the Supreme Court opined that an agreement of such nature demonstrates that the parties, in entering into such an agreement, did not wish for disputes to be litigated and adjudicated by the court. Thus, the term may being present in the said clause indicates the parties' agreement to refer the unresolved dispute to arbitration, not the local courts, upon the expiry of the 60-day period. The term may does not provide a party with the right or option to instead litigate a case before the courts. The key point to be derived from these cases is that although permissive language (together with admissible evidence) may be interpreted in favour of parties' agreement to arbitrate, mandatory language (as opposed to permissive language) should be used in the context of an arbitration agreement to ensure the binding effect of the arbitration agreement. Debates on these Supreme Court judgments go so far as considering the extent to which the Court took into account the intention of the parties to insist on arbitration, and the extent to which the Court perceived such arbitration clause as being invalid and unenforceable.
Appointment of arbitrators
During the past few years, there have been disputes over the validity of an arbitration clause that provides for an even number of arbitrators in the administrative courts. The issue arises because there was a transition in arbitration law in 2002, when the Arbitration Act 1987 was replaced by the Arbitration Act 2002. Both Acts allow parties to fix the number of the arbitrators by themselves. However, while the Arbitration Act 1987 did not explicitly provide that the number of the arbitrators has to be odd, the Arbitration Act 2002 specifically provides that the number of arbitrators shall be odd, and if the parties agree to an even number, the arbitrators appointed by the parties shall jointly appoint an arbitrator who shall act as the chairperson of the arbitral tribunal.
Some disputes in the administrative courts between state enterprises and private companies involve arbitration clauses providing for an even number of arbitrators because they were made at the time that the Arbitration Act 1987 was in force. In 2016 and 2018, the Supreme Administrative Court in two cases held that such arbitration clauses were valid since they were made during the time that the 1987 Act was in force, and the Arbitration Act 1987 did not require an odd number of arbitrators. The transitional provision of the Arbitration Act 2002 also endorses the validity of those arbitration agreements made in accordance with the Arbitration Act 1987. However, since the Arbitration Act 2002 was effective at the time of those disputes, the arbitration proceedings in relation to such disputes must be conducted in accordance with the provisions of the Arbitration Act 2002. Thus, arbitral tribunals constituted when the Arbitration Act 2002 was effective must be composed of an odd number of arbitrators.
Qualifications and challenges to arbitrators
Similar to the UNCITRAL Model Law, Section 19 of the Arbitration Act 2002 stipulates that an arbitrator may be challenged in circumstances that give rise to justifiable doubts as to his or her impartiality or independence. For instance, an arbitrator who received a subscription form for new shares of a party before an arbitration and subsequently granted the right to buy such shares to an employee under his supervision was deemed to have an obligation to disclose such fact, because this circumstance was likely to give rise to justifiable doubts as to his impartiality or independence. Having failed to do so, the arbitrator was disqualified by the Supreme Court.
Furthermore, the Arbitration Act 2002 also imposes liability on arbitrators for civil actions conducted as an arbitrator with the intent to cause gross negligence giving rise to damage to any party.
There has been some discussion among the responsible authorities and practitioners with regard to the need to provide stricter guidance on the ethical conduct of arbitrators and the prevention of unethical actions. The TAI has its own code of ethics for arbitrators, and in 2015, arbitration rules adopted by the THAC included rules relating to the conduct of arbitrators.
Recently, concern over the impartiality of arbitrators has been reflected in disputes between government agencies and the private sector in Thailand. Administrative contracts between the government agencies and the private parties in question are reviewed and sometimes drafted by a public prosecutor. When a dispute arises from such contracts that include an arbitration clause, government agencies often appoint public prosecutors to be both the attorney and the arbitrator for a case. There have been many cases where a party from the private sector has alleged that the public prosecutor appointed as arbitrator to the court of justice or the administrative court lacked the necessary qualifications of being fair and impartial, because public prosecutors playing different roles are from the same office. Nevertheless, there has yet to be a case where arbitrators who were selected from the Office of Public Prosecutor have been removed because of this reason.
In 2018, the plenary session of the Supreme Court also considered the issue of impartiality and independence in a case where the chairperson of an arbitral tribunal that rendered an award on a disputed incident did not disclose the fact that he had previously represented a client as a lawyer in a court proceeding that involved the very same incident. As the lawyer, the chairperson filed a defence for his client (as defendant) in the proceedings arguing that his client should not be liable. After considering the relevant facts, the Supreme Court opined that the chairperson in the arbitration would naturally take on the same view as he did in the previous case. This issue affected the impartiality and independence of the chairperson, and he was thus obliged to disclose this information to the parties in the arbitration. Even if both cases dealt with different claims and different parties, both are disputes on the same incident, and the interests arising from the cases would be similar or related. According to the decision of the Supreme Court, the chairperson's failure to disclose his involvement as a lawyer in the previous proceedings led to the award rendered by the arbitral tribunal being set aside on the grounds that the composition of the arbitral tribunal or the arbitral proceedings were not in accordance with applicable laws and that the recognition or enforcement of the award would be contrary to public policy.
iii Investor–state disputesCabinet resolutions for and against the use of arbitration
The Arbitration Act 2002 explicitly provides for the arbitrability of disputes relating to administrative contracts between government agencies and private enterprises. However, after a series of cases where government agencies lost their claims and were required to pay substantial amounts of compensation to the other parties, the Cabinet passed a resolution on 28 July 2009 prohibiting the use of arbitration clauses in contracts between state agencies and private parties unless the prior approval of the Cabinet was first obtained. The purpose of the resolution was to significantly reduce the chance of investor–state arbitration. However, due to a change of policy regarding foreign and domestic investments, the government has become more open to the idea of arbitration, and on 14 July 2015, the Cabinet approved an amendment to the resolution dated 28 July 2009. In effect, contracts between state agencies and (Thai or foreign) private parties that are subject to prior approval for the use of arbitration clauses are limited only to contracts under the Public-Private Partnership Act, and concession agreements (under which state agencies grant concessions).
Recent court decisions
Recent court judgments show that Thai courts incline towards the enforcement of arbitral awards even in cases where the state or state agencies are the losing parties in arbitration proceedings. Notably, on 22 April 2019, the Supreme Administrative Court handed down a judgment overturning a judgment of the Central Administrative Court that had annulled and refused the enforcement of arbitral awards granting compensation of more than 11.88 billion baht, plus interest, to a private company, Hopewell (Thailand) Limited, for the termination of a concession agreement. In the judgment, the Supreme Administrative Court found that the petition to annul and refuse the enforcement was submitted only to challenge the discretion of the arbitral tribunal (which was the matter of the parties to the agreement), and thus, the arbitral award was not found contrary to public policy.
On another occasion, the Supreme Administrative Court ruled in 2014 that, based on the arbitration award, the Pollution Control Department must pay compensation of more than 9 billion baht to a six-firm joint venture that had won a case related to a contract to construct the Klong Dan wastewater treatment plant. The Cabinet approved the payment according to the Court's judgment on 17 November 2015. However, after making some instalment payments, a government agency made a petition to the Central Administrative Court to reopen the case and request the annulment of the arbitration award. On 6 March 2018, the Central Administrative Court rendered a judgment to annul the arbitration award on the grounds that corruption (which is a public policy issue) was discovered in the bidding process for the construction of the Klong Dan wastewater treatment plant.
Other investment arbitration procedures to which Thailand is a party include two arbitration proceedings, one commenced by Walter Bau AG concerning damage arising out of a breach of obligations under the Germany–Thailand bilateral investment treaty, and the other commenced by Kingsgate Consolidated Ltd concerning the shutdown of the Chatree gold mine and a breach of obligations under the Thailand–Australia free trade agreement.
In 2019, it was reported that Thailand was resolving a multimillion-dollar dispute with oil and gas companies in relation to the costs of decommissioning infrastructure in the Gulf of Thailand. Reportedly, the private entities commenced arbitration proceedings but later suspended the same due to negotiations between the parties.
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