A. LEGISLATION AND RULES
A.1 Legislation
International arbitration in Thailand continues to be governed by the Arbitration Act B.E. 2545 (2002), with its latest legislative amendment made in 2019.
A.2 Institutions, rules and infrastructure
In 2021, the Thai Arbitration Institute (TAI), one of the main arbitration institutions in Thailand, issued the TAI Arbitration Rules (No.4) B.E. 2564 (2021) as an amendment to its original rules, TAI Rules B.E. 2560 (2017). TAI Rules (No. 4) 2021 came into force on 1 October 2021 with three main effects:
- Repealing the TAI Small Claims Arbitration Rules B.E. 2563 (2020).
- Repealing the provisions concerning class arbitration.
- Recognizing expedited arbitration, details of which shall be discussed respectively.
For the first effect, the TAI Small Claims Arbitration Rules 2020 came into force on 16 August 2020, and its main purposes were to facilitate and accelerate proceedings for small claims[1] arbitration in addition to reducing expenses incurred in an ordinary proceeding. According to these rules, the arbitral proceeding is to be completed within 45 days from the date that the arbitral tribunal was appointed. Nonetheless, after a year of enforcement, the TAI Small Claims Arbitration Rules 2020 was repealed by the virtue of article 3 of the TAI Rules (No. 4) 2021. The reasons for the repeal were not given, but it is understandable because most of the provisions in the TAI Small Claims Arbitration Rules 2020 served the same purpose as the provisions of the expedited arbitration newly issued.
Regarding the next effect, the concept of class arbitration was first announced in the TAI Arbitration Rules (No. 3) B.E. 2563 (2021) and came into effect on 16 July 2021. It was an initiative to apply the concept of class action to arbitration. According to these rules, in commencing a class arbitration, there must be at least three claimants who have the same factual background and principles of law in determining the case. Nevertheless, all provisions with respect to class arbitration were repealed after 14 months of enforcement by virtue of article 6 of the TAI Rules (No. 4) 2021. There was no explanation for this repeal, nor has there been any movement on reapplying or issuing new provisions concerning class arbitration.
As for the last effect, the concept of expedited procedure is now recognized and available for arbitral proceedings under TAI Rules. This concept is not entirely new to arbitration in Thailand as it has been recognized by The Thailand Arbitration Center (THAC) Arbitration Rule[2] since 2015. The main purposes of expedited arbitration are to promote and develop expedited arbitration in accordance with
agreements of disputing parties or the nature of small claim disputes. Although expedited arbitration, according to the TAI Rules (No. 4) 2021, has a similar purpose to the TAI Small Claims Arbitration Rule 2020 earlier mentioned, it has its own unique characteristic that slightly differs compared to the TAI Small Claims Arbitration Rules 2020.
Starting with the commencing of expedited arbitration, the TAI shall allow parties to conduct expedited arbitration only if the parties mutually agree to do so or the aggregate amount in dispute of the claim and counter-claim of such dispute does not exceed THB 5,000,000 (approximately USD 150,000)[3]. After TAI’s approval, the entire expedited arbitration proceeding, as stipulated in appendix 1 of the TAI Rules 2017 within the No. 4 (2021) amendment, shall supersede any previous arbitration clause between the parties[4]. Additionally, pursuant to the TAI Rules 2017 with its No.4 (2021) amendment article 3/2 paragraph four, the parties shall be deemed to be bound by appendix 1 of the TAI Rules (No. 4) 2021. For an expedited arbitration, only one arbitrator shall be appointed unless the circumstances of the case suggest otherwise[5]. Regarding the arbitral proceeding, the arbitral tribunal may consult with the parties and decide to determine and render the dispute on the basis of documentary evidence[6]. Moreover, with respect to the proceeding, it strictly provides that the expedited arbitration shall be completed within 60 days from the date of the arbitral tribunal appointment[7]. In this regard, the award shall be rendered within 15 days from the due date of the documentary evidence submission in case the arbitral proceedings are conducted based solely on documentary evidence or from the completion date of the arbitral proceedings[8]. It is worth noting that, except in a case of extreme necessity or force majeure, an extension of the time limit mentioned above shall not be granted to the parties[9]. The form of an arbitral award can be made in a summary form unless the parties mutually agree that no reasons are to be given[10]. Notwithstanding the above, the application of an expedited arbitration can be revoked at any period upon request by any party or as the TAI deems appropriate. However, such revocation shall not affect any previous proceeding, and it shall be deemed that the previous arbitral proceedings are conducted pursuant to general Rules, mutatis mutandis[11]. As a result, with the expedited arbitration, the parties will conveniently and promptly reach a conclusion as to the arbitral award, but given the flexibility of the proceeding, any party may request to go back to an ordinary proceeding at any time if there is an extraordinary circumstance causing the expedited arbitration to be improper for application to the dispute or to have an effect on the interest of justice.
In summary, the TAI Rules (No. 4) 2021 repealed its previous Rules on Small Claims Arbitration and the provisions concerning class arbitration. It then recognized and added expedited arbitration to the TAI Rules (No. 4) 2021. The said effects were enforced on 1 October 2021.
B. CASES
B.1 Interpretation of an arbitral agreement and the enforcement of an arbitral agreement
To explain the background, this case relates to a dispute between two main parties – Party A, the plaintiff and a distributor; and Party B, the defendant and a truck manufacturer (collectively referred to as the “Parties“). Party A and Party B entered into a Distributor Agreement (“Agreement“), whereby Party A was a distributor of Party B’s trucks and products. The Agreement contains an arbitration clause whereby the Parties agreed to settle any dispute arising out of or in relation to the Agreement by arbitration.
The Agreement was a one-year term contract, from April 2015 to April 2016, but renewable upon 6-months’ advance notice from any party. The Parties, however, needed to renegotiate some terms of the Agreement before executing a new agreement. In May 2015, Party B requested to conduct a compliance due diligence on Party A, which included disclosing some trade secrets of Party A. Hence, they agreed to execute an undertaking agreement not to disclose such trade secrets. Later on, Party A expressed its intention six months in advance to renew the Agreement. However, Party B refused to agree with Party A on the reason that it would conduct its business of selling trucks in Thailand independently.
In this regard, Party A claimed that Party’s B action, refusing to renew the Agreement, was an abuse of rights and an act of bad faith as Party B was bound to renew the Agreement upon Party A’s advance notice. Therefore, Party A submitted a claim against Party B on the ground of Party B’s wrongful act, stating that it caused damages to Party A by failing to renew the Agreement, with the Central Intellectual Property and International Trade Court (“IPIT Court“).
The IPIT Court ruled that the dispute between the Parties was a dispute related to the Agreement, which contained an arbitration clause. Party B and Party A already submitted a claim and counterclaims, respectively, to an arbitral tribunal in Tokyo, Japan. Moreover, after the preliminary hearing, the IPIT Court found no reason that an arbitral agreement should be null and void or any reason to refuse the enforcement of the arbitral agreement. Thus, the IPIT Court struck out the case pursuant to section 14 of the Arbitration Act B.E. 2545 (2002).
Party A appealed the IPIT Court’s order to the Appeal Court, but the Appeal Court upheld the order. Party A then appealed the issue to the Supreme Court, which ruled the following.
Considering the fact that Party A alleged that Party B acted in bad faith and that such action was considered an abuse of rights, Party B took advantage of Party A’s trust and reputation. In addition, Party B breached and violated Party A’s trade secret causing damages to Party A. In light of this, the Supreme Court believed that the nature of Party A’s claim and allegation was based on a legal relationship created between Party A and Party B by the Agreement, as Party A claimed that Party B requested to conduct a compliance due diligence which later led to the violation of Party A’s trade secret, and clause 19 of the Agreement provided a non-disclosure clause on information with respect to the Agreement. Furthermore, it appeared to the Supreme Court that Party B had already submitted a complaint against Party A to an arbitral tribunal in Tokyo, Japan to settle the dispute arising from the Agreement, and Party A mentioned the fact concerning the disclosure of its trade secret in its statement of defense and counterclaim in the same arbitration case. Consequently, the Supreme Court concluded that given the facts earlier mentioned, the dispute concerned with trade secrets stated in Party A’s complaint (in the IPIT Court) was a dispute with respect to the Agreement. In other words, the disputed issues must be determined by considering the Agreement as well. Therefore, the matter of the case is related to the Agreement and subject to the arbitration it, as specified in the Agreement itself.
As a result, when the given facts point to clause 32 in the Agreement providing that a dispute arising out of or in relation to the Agreement between the Parties must be settled and determined by the arbitral tribunal in Tokyo Japan, such clause must be considered as an arbitration clause pursuant to section 11 paragraph one of the Arbitration Act B.E. 2545 (2002). Additionally, there was no reason for the arbitration agreement to be null and void. When Party A filed a lawsuit with the IPIT Court against Party B without first submitting the dispute to an arbitral tribunal, Party A was, therefore, in breach of section 14 of the Arbitration Act 2002. The lower courts duly determined the case, and the case was struck out of the court’s consideration.
In conclusion, the Supreme Court upheld the lower courts’ order.
As an analysis, this Supreme Court Judgment mirrors and affirms the principle that if parties execute an arbitration agreement, the parties shall be bound by the arbitration clause, and matters that are subject to the arbitral agreement are not limited to direct disputes arising from the contract but includes those related disputes that have a connection with the main arbitral agreement as well.
[1] A small claim arbitration means a claim that has aggregate amount in dispute, calculated from claim and counter-claim, not exceeding THB 2,000,000 pursuant to article 4 of TAI Rules on Small Claims Arbitration B.E. 2563 (2020).
[2] Article 85 and 86 of THAC Rules B.E. 2558 (2015)
[3] Article 3/2 of TAI Rules 2017 with its No. 4 (2021) amendment
[4] Article 3/2 paragraph three of TAI Rules 2017 with its No. 4 (2021) amendment
[5] Article 1 of Annex 1 of TAI Rules 2017 with its No. 4 (2021) amendment
[6] Article 3 of Annex 1 of TAI Rules 2017 with its No. 4 (2021) amendment
[7] Article 2 of Annex 1 of TAI Rules 2017 with its No. 4 (2021) amendment
[8] Article 5 of Annex 1 of TAI Rules 2017 with its No. 4 (2021) amendment
[9] Article 4 of Annex 1 of TAI Rules 2017 with its No. 4 (2021) amendment
[10] Article 5 paragraph two of Annex 1 of TAI Rules 2017 with its No. 4 (2021) amendment
[11] Article 6 of Annex 1 of TAI Rules 2017 with its No. 4 (2021) amendment
