A Practical Tip on Arbitration Clauses involving Thailand that allows you to Have Your Cake and Eat it Too

There is little dispute that international arbitration is the best way to resolve cross-border disputes.  A 2018 International Arbitration Survey carried out by Queen Mary University of London in partnership with the White & Case law firm demonstrates that international arbitration is the accepted and expected means of resolving cross border disputes.  The survey reports that 97% of the respondents stated that international arbitration is the preferred method of arbitration and “an overwhelming 99% of respondents would recommend international arbitration to resolve cross-border disputes in the future”.

This same survey reports that the most preferred seats of arbitration in Asia were, not surprisingly, Singapore and Hong Kong.  And “[t]he five most preferred arbitral institutions are still the ICC, LCIA, SIAC, HKIAC and SCC.”  If there is arbitral dispute before these organizations, the official rules will be in English, you can be confident that the arbitration clause will be honored, including the choice of language provision and that someone from a neutral third party country will serve as the independent arbitrator.

But when negotiating a contract with a Thai party it is often very difficult to get that party to agree international arbitration. The objection frequently centers on the incorrect perception that it is more expensive to arbitrate outside of Thailand and the potentially more credible claim that it will be more inconvenient and expensive for witnesses in Thailand to travel to Singapore or Hong Kong to testify.

This creates an obvious dilemma when multi-national companies want the protections of a credible international arbitration and therefore strongly prefer arbitral organizations in Singapore and Hong Kong, but the local party refuses to international arbitration citing cost and inconvenience.  There is, however, a solution that that squarely meets any legitimate objections international arbitration.

The seat of the arbitration determines the governing procedural law of the arbitration and enforceability of the award, but it does is “does not necessarily refer to where hearings will be held.”  The seat of the arbitration could be Singapore or Hong Kong, but the arbitration clause could provide that the parties agree that the actual arbitration hearings to be held in Thailand.

Indeed, the SIAC rules specifically provide that the physical place where the arbitration hearings are held can differ from the seat of the arbitration.

Proposing this form of arbitration clause, typically after a simple proposal for arbitration under SIAC or HKIAC rules is rejected, provides foreign companies with confidence about the governing procedural law of the arbitration and enforceability of the award, while also addressing any objection based on the alleged cost and inconvenience of conducting the arbitration outside of Thailand.