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THAILAND

Chirachai Okanurak and Pisut Attakamol

A. LEGISLATION AND RULES

A.1 Legislation

International arbitration in Thailand is governed by the Thai Arbitration Act B.E. 2545 (2002) (“Act”).

The Act was recently amended in 2019 to insert a special chapter[1], which is aimed at easing restrictions on foreigners acting as arbitrators and counsel in arbitrations conducted in Thailand. The amended Act allows the parties to appoint foreigners as arbitrators and/or counsel for arbitration conducted in Thailand. A foreign arbitrator/counsel may request for a certification letter from the arbitration institution under whose rules the arbitration will be conducted, and use the certification letter to apply for a visa and temporary permit to stay in Thailand under the immigration laws, and then to apply for a work permit to perform his/her duty as an arbitrator/counsel in Thailand during the period specified in the certification letter issued by the arbitration institution.

However, the arbitration institutions that are eligible to issue the certification letter under the amended Act are limited to only the government departments or institutions established under specific legislation, and which have a mission relevant to resolving disputes by arbitration. Taking into account the above restriction, the only eligible local institutions that can issue certification letters are limited to certain local arbitration institutions in Thailand. Other leading international arbitration institutions, such as ICC, SIAC and LCIA, will not be eligible to issue the certification letter for the purpose of applying for a visa and work permit for a foreign arbitration conducting arbitration in Thailand.

The amendments signal the Thai government’s support towards international arbitration in Thailand, and in facilitating foreigners participating in arbitrations in Thailand, and should go some way to achieving greater diversity and inclusion in the field of arbitration in Thailand, as well as facilitating the attempt to make Thailand a desirable location for international arbitration proceedings.

A.2 Institutions, Rules and Infrastructure

There are three primary arbitration institutions in Thailand, The Thai Commercial Arbitration Committee of the Board of Trade of Thailand (TCAC), the Thai Arbitration Institute (TAI) and the Thai Arbitration Center (THAC).

Other organizations active in the field of arbitration in Thailand include the Security and Exchange Commission, which established arbitration proceedings in 2001 for claims arising under its own laws between securities companies and private clients, as well as the Department of Insurance, which established the Office of Arbitration in 1998 to handle arbitral proceedings relating to claims under insurance policies. Shortly thereafter, the Department of Insurance issued a regulation requiring all insurance companies to include an arbitration clause in their policies, a development that allows beneficiaries of insurance policies to choose to process their claims through arbitration or in the court, at their discretion. In the event the beneficiary decides to refer its claim to arbitration, insurance companies are required to participate in the arbitral proceedings. These regulations have led to a significant filing of arbitration cases with the Department of Insurance.

A.2.1 TCAC

The TCAC has been one of the pioneers in the arbitration field in Thailand and is active in promoting arbitration in the business community. The Committee revised its arbitration rules in 2003 to align them with the Act. Nevertheless, the TCAC is infrequently utilized in practice and the TAI is certainly the more prominent and active institute.

A.2.2 TAI

TAI is the most active arbitration institute in Thailand. It was originally established in 1990 under the umbrella of the Ministry of Justice. Currently, TAI is affiliated to the Office of Judiciary, which assures non-intervention policy and provides a safeguard from any domestic political interference. The TAI rules apply to all arbitrations organized by the TAI, except where the parties agree to use other rules and with the consent of the Executive Director of TAI.

The TAI revised and reissued its arbitration rules in 2017, which include a number of changes aimed at addressing problems that arose under the 2003 TAI rules. The changes contained in the 2017 TAI rules are designed to promote speed, efficiency and fairness in proceedings, however, a number of these changes are potentially problematic, such as (i) the new rule on arbitrator challenges, which may be found to contradict the Thai Arbitration Act; (ii) the means of enforcing an interim measure granted by an arbitral tribunal without a Thai court order; and (iii) the capability and practicality of a tribunal complying with the new time period requirements for arbitration proceedings.

A.2.3 THAC

The THAC was established in 2015, pursuant to the Act on Arbitration Center (2007), in order to support and promote international arbitration, with the aim of providing an arbitration center with modern facilities in Thailand that meets international standards and can serve as the center of arbitration in the ASEAN countries. The THAC has its own set of arbitration rules, modeled on the 2013 SIAC Arbitration Rules.

B. CASES

As the vast majority of arbitration cases remain confidential and the primary bodies administrating arbitrations in Thailand do not publish case records, cases generally only become a matter of public record when their enforcement is challenged in Thai Courts.

B.1 Challenge of discretion of the arbitral tribunal in regard to a matter of fact is not permitted under the Act

In the matter considered in Supreme Court Case No. 544-545/2562 (2019), the Supreme Court affirms an established principle that section 43 of the Act does not entitle the person against whom the award will be enforced to challenge the exercise of discretion of the arbitral tribunal in regard to a matter of facts based on the evidence presented in the arbitral proceedings. The appellant argued that the arbitral tribunal interpreted the contract differently from the contract terms, and thus outside the scope of the arbitration agreement. Such argument was dismissed by the Supreme Court, which rules that such argument amounts to an indirect challenge of the finding of facts by the tribunal.

B.2. Third party’s right to arbitrate against insurance company under arbitration agreements entered into between the insured and the insurance company

In the matter considered in Supreme Court Case No. 1527/2562 (2019), the Supreme Court applies a principle of third-party beneficiary contract to affirm that a third party who was not an original contracting party to an arbitration agreement may step in and exercise its right to arbitrate where the relevant term of the arbitration agreement provides such right to a benefit of the third party.

The brief facts, in this case, are as follows; a truck was insured under two insurance policies. The first policy is compulsory motor insurance under the Road Accident Victims Protection Act. The second policy is voluntary motor-liability insurance. Both policies contain similar clauses that provide the right to “a person entitled to claim under the policy” to select to resolve any disputes arising out of or in connection with the policies by arbitration under the Office of Arbitration of the Department of Insurance. The claimant was injured by the insured truck, and sued the truck driver in a civil court on the ground of tort, and filed arbitration proceedings against the insurers under the two insurance policies. The Supreme Court ruled that the claimant was “a person entitled to claim under the policies,” and had the right to elect to file an arbitration claim against the insurers under the relevant policies, even though the claimant had separately filed a civil claim in court against the truck driver.

B.3. Filing a lawsuit in a court did not prevent the claim from time-bar if the claim had to be resolved by arbitration.

In the matter considered in Supreme Court Case No.2082/2562 (2019), the claimant first filed a lawsuit for breach of contract in court, but the claim was subsequently dismissed by the court as it found that the claim was subject to a valid arbitration agreement. When the claimant submitted the claim to arbitration, the claim was already time-barred, and the arbitral tribunal dismissed the claimant’s claim based on that ground. The claimant applied to the court to set aside the award, claiming that the prior filing of the lawsuit to the court should stop the claim from being time-barred. The Supreme Court rules that the dispute/claim was subject to an arbitration agreement, which had to be submitted to arbitration, and could not be resolved by the court. Therefore, the fact that the claimant first filed the lawsuit to the court did not prevent the claim from time-bar and there was no ground to set aside the award.

B.4 Interpretation of the term “may” in an arbitration agreement

In the matter considered in Supreme Court Case No.3427/2562, a construction contract contained an arbitration clause which provides that, if a dispute or controversy has arisen between the parties relating to, or in connection with the construction contract, including the breach, termination, or validity thereof, if there is a request from one party, the parties must try their best effort and in good faith to first resolve the dispute among themselves by mutual conciliation within 60 days from the date of receipt of a notice of dispute from one party. If the dispute cannot be amicably resolved within 60 days, any party “may” submit the dispute to arbitration under ICC Rules and the seat of arbitration shall be Singapore.

The Supreme Court interpreted the term “may” in this contract, in light of the facts derived from the defendant’s witness who drafted the contract who testified in confirmation that the purpose of putting the arbitration clause was because the parties did not wish to resolve any dispute amongst themselves in court. He further explained the contemplated intent of the term “may” stipulated in the contract to emphasize the two-stage process of the resolution of the dispute, that the parties should attempt to resolve the dispute by mutual conciliation first, and if the conciliation fails, a party may go to arbitration. But the parties did not contemplate an option to go to court at all. In addition, the defendant also presented an expert witness who interpreted the term “may” as giving an option to a party to submit the unresolvable dispute to arbitration, but it was not to be extended the interpretation to mean that either party may opt to go to court. The plaintiff did not prove otherwise but only submitted that the term “may” was broad enough to entitle the plaintiff to file the claim with a Thai court.

The Supreme Court agreed with the defendant’s proof and submission and ruled that the term “may” in this contract should not be interpreted to allow the plaintiff to file this claim to a Thai court but should be interpreted in light of the contemplated intention of the parties that they wanted their disputes under the contract to be resolved by mutual conciliation and then arbitration and the plaintiff’s claim was dismissed.

 

[1] Chapter 2/1, which composes of new provisions relating to foreign arbitrators/counsels from section 23/1 to section 23/6.

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