Why more foreign investors in Thailand are including international arbitration clauses in their contracts which include Bangkok as the venue to settle disputes

In 2020 foreign investors into Thailand will increasingly choose Bangkok as a venue to settle disputes, rather than going to settle their disputes at arbitration in Singapore or other cities in South-East Asia (such as Singapore), which are more costly venues and do not have geographical proximity to their disputes. Thailand is a signatory to the New York Convention (“NYC”) on Arbitral Awards and the awards made in Thailand can be enforced in the other jurisdictions which are also signatories to the NYC, approximately 160 jurisdictions in total.  A Singaporean award would have no significant advantage over a Thai award when it comes to enforcement in a foreign jurisdiction.

Changes in 2019, in Thailand, have given foreign lawyers the right to be appointed to appear in all arbitration disputes in Thailand and made the appointment of foreign arbitrators easier because of fast track smart visas, thus making Bangkok a more attractive, arbitration-friendly and cost-effective base for settling disputes in South-East Asia. If parties decide to refer a dispute to be arbitrated under ICC rules in Bangkok they can select arbitrators which are highly experienced in high-value disputes in niche areas from anywhere in the world (e.g. London) and the cost of the venue for hearing the case in Bangkok can be lower than in other nearby cities (e.g. Singapore). The advantage of the new rules allowing foreign arbitrators to work in Thailand is reduced when selecting a local arbitration institute such as THAC or TAI because arbitrators’ fees are capped at a level which is lower than international standards thus making it a less attractive venue for foreign arbitrators to adjudicate on disputes. That said, there is a small pool of quality foreign arbitrators based in Bangkok that can appear at arbitrations under the local arbitral rules and venues provided by THAC and TAI in Bangkok.  Some parties may wish to select the ICC arbitral rules and set the venue in Bangkok because arbitrators’ fees are capped at a higher level, thus making it more attractive for foreign arbitrators based overseas to appear in Bangkok.

As part of the Thai government’s drive to increase arbitration tourism in Thailand and by making Thailand more foreign investment-friendly in relation to foreign businesses entering contracts with the Thai government, it recently made changes to the Arbitration Act 2002 which was amended by the Arbitration Act (No. 2) (Amendment Act), effective from 15 April 2019 which expressly permits the appointment foreign lawyers to appear in proceedings in Thailand, whereas previously this was restricted to Thai nationals who should be engaged in international arbitrations involving Thai parties and Thai law or where enforcement was sought in Thailand (thus overturning the Royal Decree Naming Occupation and Profession Forbidden to Aliens (No.3) B.E. 2543(2000)). Foreign arbitrators are also able to get a smart visa to enter Thailand to serve on arbitral panels on an ad hoc basis under separate law reforms.

Investors will also have to consider a range of other factors to ensure a cost-effective and high-quality outcomes when putting arbitration clauses in their contracts, such as what costs will be recoverable under various arbitral rules, what standard of arbitrators and lawyers are available to run a dispute. For example, when choosing local arbitral rules such as THAC which mirror SIAC rules and Thai law, lawyers’ fees are not recoverable, this is also true according to the Thai Arbitration Act – because in Thai law there is no presumption that the losing party pays, this is a significant drawback for the local rules, that said, this can be avoided by a well-drafted contract which allows arbitrators to award lawyers’ fees to the losing party. There are other ways in which they can make it more cost-effective and we highly recommend they have their contracts drafted by lawyers highly experienced in dispute resolution and who can advise on the appropriate course of action.

Our dispute resolution department has handled arbitration matters before the Thai Arbitration Institute, the Thai Chamber of Commerce, the American Arbitration Association and arbitration matters in Thailand conducted under the International Chamber of Commerce rules. The team has also played a significant role in arbitration proceedings conducted under the SIAC rules in Singapore and under the rules of the International Center for the Settlement of Arbitration Disputes, Washington, D.C. All our foreign lawyers are now able to act international arbitration disputes in Thailand.

For more information about drafting international arbitration clauses in commercial agreements and settling disputes in arbitration in Thailand, please contact me by email on dsouthern@pricesanond.com  or by phone at the office on 026791844 (ext.105).