Arbitration: the More Business Savvy, Practical International Bedfellow of Litigation in Thailand

A stable, autonomous judiciary naturally commands the trust of a nation’s citizenry while inspiring confidence and peace-of-mind among foreign actors: this is crucial in terms of their investments and commercial activities, that they will receive fair and equal treatment whenever certain dealings come into dispute when doing business in the host country. Thailand has provided just such a robust legal system with sufficient inbuilt foreign investor protection mechanisms that so far has stood the test of time. It has proven ever resilient amidst politically chaotic times, and durable enough to withstand various economic crises and disruptions that have buffeted not just the Kingdom but its neighbours and the wider ASEAN region. Litigation has naturally been the primary dispute resolution method for disputing parties.

Yet, in an increasing globalised world of complex multi-jurisdictional trade links, underlying treaties and more closely enmeshed logistics, supply and value chains, sharp increases in the level and significance of commercial disputes have inevitably ensued. This new paradigm has frequently laid bare the limits of litigation as a viable, practical and cost-effective means of solving contentious international matters. Navigating civil procedures in Thailand (as elsewhere) can be a daunting prospect for foreign parties. Litigation in Thailand may easily devolve into a long, drawn-out and costly affair, involving high lawyers’ fees, unnecessary delays while leading to a near certain breakdown in the relationship between the affected parties.

It must be highlighted however that Thailand has shown commendable foresight in championing alternative dispute resolution methods to resolve disputes in the country. Thailand has for instance adopted mediation in its Civil Code of Procedure 1934, and the Thai courts actively encourage negotiations and mediation between disputing parties wherever possible. Arbitration was given its rightful role in the Thai dispute resolution framework with the adoption of the Thai Arbitration Act B.E. 2545 (2002) (“AA”) based on the UNCITRAL Model Law on International Commercial Arbitration, signalling Thailand’s commitment to arbitration.Arbitration imposed itself as the most regularly employed alternative dispute resolution method in Thailandfor the resolution of international commercial disputes. This pattern is only likely to accelerate in the coming years given the slate of,  contracts and shareholder disputes proceedings throughout the region in the wake of the global pandemic.

What are the core advantages of arbitration over litigation in Thailand?

Arbitration typically offers lower costs and shorter time to resolution; and awards that are final and enforceable.With arbitration, the parties have full control of the process, they can choose the place and language of arbitration, and arbitral proceedings are confidential, contrary to those held in an open court. Although a number of Thai judges are trained to handle complex international commercial disputes, arbitration opens the possibility to the parties to nominate industry experts as their arbitrator(s). Since foreign judgments cannot be enforced in Thailand; it remains vastly preferable for the parties to have an arbitral award that will be recognised and enforced by the Thai courts; stemming from its accession to the 1958 New York Convention.

Arbitration still relies to a considerable extent on the purview of the Thai courts, to which arbitral awards must be submitted so that they may deliberate on whether they should be enforced in the Kingdom. But arbitration is the more business savvy, practical international bedfellow of litigation.

All in all, Thailand’s arbitral institutions handle an increasing number of matters and the tempo and dynamism of the initiatives being currently pursued (conferences, training seminars, partnerships etc.) by the Thailand Arbitration Centre (or “THAC”) is putting Thailand on the map in the eyes of foreign enterprises and commercial stakeholders as one of the preferred avenues of commercial dispute resolution in the Southeast Asian region. The number of cumulated cases resolved through arbitration by various arbitral institutions in Thailand in 2019 goes in the thousands (Source: https://thac.or.th/wp-content/uploads/2020/11/The-Annual-Repot-on-Arbitration-was-Estrablished-in-2019.pdf).

Parties to a transaction have a high control over the handling of their possible dispute provided that they have adequately drafted arbitration clauses in their respective contracts. Since arbitration is a contractually agreed dispute resolution mechanism, it is therefore very important to use the correct wording and conducting an efficient arbitration starts with drafting an effective arbitration clause. A poorly drafted arbitration clause may lead to parallel proceedings in different jurisdictions, to challenges to the arbitral tribunal’s substantive jurisdiction, affect the chances of successfully enforcing an award and bind the parties to an unnecessarily expensive or lengthy procedure. DFDL can assist you in the drafting of your arbitration clause or agreement.

Article by Anne Coulon, Regional Legal Adviser, DFDL Thailand

The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.

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