Doing Business In: Thailand
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Formal name: The Kingdom of Thailand
Population: Approximately 69,310,000 (2019)
Average annual population growth: 0.2% in 2018
Capital city: Bangkok
Major cities and districts: Bangkok; Samut Prakan; Nonthaburi; Udon Thani; Chonburi; Nakorn Ratchasima; Chiang Mai; Hat Yai; Pak Kret; Si Racha; Pra Pradaeng; Lampang; Khon Kaen; Surat Thani; Ubon Ratchathani; Nakorn Si Thammarat
Official language: Thai
Currency: Thai Baht
Per Capita Income: 17,990 PPP dollars
Foreign Investment: Foreign direct investment (FDI) is an important element of Thailand’s economic development, and the country is one of the major FDI destinations in the region. According to the UNCTAD World Investment Report 2018, after several consecutive years of decline, FDI flows have largely recovered. They multiplied by 3.7 between 2016 and 2017, reaching USD 7.6 billion. This recovery was due to increased investment by European Union countries and strong inflows from ASEAN countries and Japan. Through the Investment Promotion Act, offering more incentives to invest in advanced technologies, innovative activities and research and development, and the Eastern Economic Corridor (EEC) Act, which offers benefits to investors in this zone (tax subsidies, right to land ownership, issuing of visas), FDI flows should show satisfactory results in 2019. The amount of FDI increased by 15% in 2017 and reached USD 219 billion dollars, or 50.7% of the country’s GDP.
Japan and Singapore are by far the largest investors in the country and account for more than half of FDI inflows. Malaysia, the United States, Netherlands, the People’s Republic of China, Indonesia, Taiwan, the United Kingdom, and Hong Kong are also major investors. Manufacturing and financial and insurance activities attract nearly 70% of all FDI inflows. Investments in real estate, commerce and information and communications are also important.
Thailand is among the countries with the most significant reforms in business regulation over the past few years; those reforms have facilitated the setting-up processes and reduced the time to start a business from 27.5 days to 4.5 days. The country has improved considerably its ranking in the World Bank’s Doing Business metric, and it occupies 27th position in the Doing Business 2019 ranking, losing one position from the previous year. The rights of borrowers and creditors have been strengthened as well as the system of land administration.
Foreign invested projects in 2018 by sector (amounts in millions of Baht): Agricultural Products (16,288); Minerals and Ceramics (5,405); Light Industries/Textiles (3,942); Metal Products and Machinery (88,048); Electric and Electronic Products (36,790); Chemicals and paper (45,601); and Services (59,528).
Main Exports: Machinery including computers: US$42.9 billion (17.2% of total exports); Electrical machinery, equipment: $35 billion (14%); Vehicles: $30.4 billion (12.2%); Rubber, rubber articles: $15.5 billion (6.2%); Plastics, plastic articles: $14.5 billion (5.8%); Gems, precious metals: $11.9 billion (4.8%); Mineral fuels including oil: $10.6 billion (4.2%); Meat/seafood preparations: $6.6 billion (2.6%); Organic chemicals: $6.1 billion (2.5%); and Cereals: $5.7 billion (2.3%)
Main Imports: Electrical machinery, equipment: US$45.6 billion (18.2% of total imports); Mineral fuels including oil: $42.7 billion (17%); Machinery including computers: $29.6 billion (11.8%); Gems, precious metals: $15.9 billion (6.4%); Iron, steel: $12.5 billion (5%); Vehicles: $10.2 billion (4.1%); Plastics, plastic articles: $9.6 billion (3.8%); Articles of iron or steel: $7.5 billion (3%); Optical, technical, medical apparatus: $6 billion (2.4%); and Organic chemicals: $5 billion (2%)
Summary of Thailand’s Political System: Until 22 May 2014 the politics of Thailand were conducted within the framework of a constitutional monarchy, whereby the prime minister was the head of government and a hereditary monarch was head of state. The judiciary is independent of the executive and the legislative branches. Since the coup d’état of 22 May 2014, the 2007 Constitution has been revoked, and Thailand has been under the rule of a military organization called National Council for Peace and Order (NCPO), which has taken control of the national administration. The chief of the NCPO abolished the national assembly and assumed the responsibilities of the legislative branch. The court system, including the Constitutional Court, still remains in existence, even without the Constitution.
Elections for a civilian government were held in 24 March 2019, and the new prime minister and the government will be announced soon.
Summary of Thailand’s Legal Framework: The Thai legal system is a statutory law system, which means it is mostly based on written law passed by the legislature. The primary sources of law are the Constitution, which was the supreme law, legislation such as Codes and Acts, decrees and custom.
WTO and Free Trade Agreements: Thailand has been a member of the World Trade Organization since 1 January 1995 and a member of the General Agreement on Tariffs and Trade since 20 November 1982.
It has the following trade agreements in effect: ASEAN Free Trade Area (AFTA), Thailand-Australia FTA, Thailand-New Zealand CEP, Thailand-Japan EPA, Thailand – Chile FTA, ASEAN-China FTA, ASEAN-Australia-New Zealand FTA, ASEAN-India FTA (Goods), ASEAN-Korea FTA and ASEAN-Japan CEP 2. Thailand is not a party to the United Nations Convention on Contracts for the International Sale of Goods (CISG).
FORMS OF DOING BUSINESS
Establishment of a Thai Company
There are two types of companies in Thailand: private limited companies and public limited company.
A private limited company is formed by registration with the Department of Business Development (DBD), under the Ministry of Commerce (MOC). The structure of a private limited company must include a minimum of three shareholders who enjoy limited liability on par with the values of their shares. Directors, on the other hand, generally have no special liability for the debts of the company in the case of bankruptcy or liquidation, unless they personally cause loss to the company, act contrary to the company’s objectives, or act against the law.
In order to set up a private limited company in Thailand, the promoters or shareholders must get an approval and reserve the name of the company. For reference, investors may observe the name reservation guidelines of the business development office under the MOC. The approved corporate name reservation is valid for thirty days, with no extension.
A Memorandum of Association (MOA) must be filed with the DBD after the name reservation has been approved. There must be at least three individual promoters to prepare and register the MOA. The MOA must include the following:
- The name of the proposed company and its address;
- The proposed company’s business objectives;
- A declaration of limitation of shareholders’ liability;
- The amount of share capital to be registered, and the value per share;
- Names, addresses, occupations, and signatures of the shareholders and the number of shares subscribed by each of them; and
- The registration of incorporation for the company.
The government fee to register a limited liability company is charged at a minimum of THB 5,500 for every THB 1 million registered capital and a maximum of THB 275,000, plus minimal certification fees and stamp duty of THB 2,000.
A public limited company is a company established for the purpose of offering shares for sale to the public. The shareholders’ liability is limited up to the amount paid on their shares. The purpose must be indicated in the memorandum of association of the company.
The Public Limited Company Act B.E.2535 identifies the structure of public limited company as follows :
- Number of shareholders: 15 persons or more;
- Registered capital: no minimum amount of registered capital;
- Shares’ value and payment: Each share must have the same value and must be fully paid upon issuance;
- Number of directors: at least five persons, at least half of whom must have a registered address in Thailand.
The government fee to register a public liability company varies, depending on the amount of registered capital, and starts at Baht 1000 for registered capital of one million Baht.
Foreign Investment in a Thai company
Thai laws impose restrictions on foreign ownership of Thai companies. These restrictions are stipulated in the Foreign Business Act 1999 (FBA) and specific laws governing certain sectors, e.g., the Banking Act, Insurance Act, and Land Act. In addition, some companies may choose to incorporate a foreign ownership limit in their articles of association.
The FBA is the primary and principal legislation that governs and regulates foreign entities’ activities in Thailand. As a general rule, foreign entities who wish to conduct business activities in Thailand are subject to the provisions and restrictions contained in the FBA. A foreign entity is prohibited from undertaking certain businesses as stated in the lists attached to the FBA (the “Lists”).
The undertaking of the type of businesses specified under List 1 is absolutely prohibited. However, a foreigner who desires to engage in business specified in List 2 or List 3 is required to obtain permission from the Ministry of Commerce (MOC) or from the Director-General of the Department of Business Development (DBD), in either case with certain governmental approvals.
Further restrictions on foreign ownership in specific sectors, such as telecommunications, banking, or insurance, are set out in specific laws pertaining to these sectors, such as the Telecommunications Business Act 2006, the Financial Institution Business Act 2008, the Life Insurance Act 1992, or the Non-Life Insurance Act 1992.
Exceptions, with or without conditions, are granted to foreign entities that meet the following qualifications:
- They are granted promotional privileges by the Board of Investment (BOI);
- They are granted promotional privileges by the Industrial Estate Authority of Thailand (IEAT); or
- Based on international treaties that Thailand has entered into such as the Treaty of Amity and Economic Relations between Thailand and the United States (Treaty of Amity), the Thai-Australia Free Trade Agreement (TAFTA), the Japanese Thai Economic Partnership Agreement (JTEPA), and others, qualified entrepreneurs may file a request for the issuance of a Foreign Business Certificate from the Director-General of the Department of Business Development.
It generally takes 60 days from the submission date of the application to know the outcome. Government fees range from THB 20,000 to THB 500,000, depending on the business.
Business operating licenses may be required depending on the nature of each business, which is governed by its own special legislation.
Further, once the newly incorporated company hires an employee, the company must register with the Social Security Office for social securities fund and workmen’s compensation fund contributions.
Restrictions on ownership of land: The Land Code prohibits any foreign entity from having ownership in land. Under the Land Code ‘foreign entity’ definition is stricter than the definition under the FBA, and a Thai entity will be treated as if it was a foreign entity if 49% or more of its registered shares are owned by a foreign entity. Foreigners, however, may own up to 49 percent of the units in a condominium.
M&A Approval and Process
The applicable legislation relating to mergers and acquisitions (M&A) in Thailand varies depending on the target, i.e., the company to be acquired or merged.
- The acquisition of shares in a Thai Company Limited is governed by Sections 1238-1243 CCC (Civil and Commercial Code of Thailand).
- In the case of a Thai Public Company, the Public Limited Company Act 1992 (PLCA) applies and, in relevant cases, the Securities and Exchange Act 1992 (SEC Act).
- For the acquisition of Thai PLC listed on the Stock Exchange of Thailand, additional rules and regulations of the Stock Exchange of Thailand (SET) and rules and regulations of the Securities Exchange Commission (SEC) are relevant, e.g., tender offer requirements.
- With respect to the acquisition of assets in a Thai company, the rules of the Civil and Commercial Code (CCC) apply, as may Section 107 PLC-Act.
In addition, numerous other laws, regulations and legal aspects may be applicable:
- Trade Competition Act
- Permission and reporting requirements for companies promoted by the Thailand Board of Investment (BOI)
- Permissions by the Industrial Estates Authority of Thailand (IEAT)
- Foreign Business Act
- Land Code restrictions for acquisitions of land-owning companies
- Employment issues and local labor laws
- Intellectual property
- Borrowings and liabilities
- Disputes and litigation
A representative office operates a service business in Thailand for its head office, an affiliated company or a group company in another country. It renders these services without any income except for the remuneration of expenses, and has no legal form in the sense that the representative office cannot receive any purchase orders, sign sale and purchase agreements or negotiate business (neither on its own account nor on behalf of the parent company). A representative office can only sign those contracts that are essential for its own operations, e.g., lease of the premises. A representative office renders non-revenue-raising services to a foreign-domiciled head office through engaging in a limited range of activities such as:
- Sourcing of local goods or services in Thailand
- Inspecting and controlling quality and volume of goods which the head office purchases in Thailand
- Disseminating information about new products and services of the head office
- Reporting to the head office on local business development and activities, and/or
- Providing advice in various fields relating to goods distributed by the head office to the distributors or consumers
A representative office is always considered to be foreign. This status has as its main consequence that the representative of the representative office or a director of the foreign company will have to apply for a foreign business license before the start of the operations.
To work legally in Thailand, a foreigner must apply for a work permit. A work permit is a legal document that states a foreigner’s position, current occupation or job description and the Thai company for which he is working. It also serves as a license to perform a job or an occupation allowed for foreigners inside Thailand, as some occupations are restricted only to Thai citizens.
Foreigners entering Thailand are not permitted to work, regardless of their type of visa, unless they are granted a work permit. Those who intend to work in Thailand must hold the correct type of visa to be eligible to apply for a work permit.
To secure a work permit in Thailand, a foreigner needs a non-immigrant visa. The non-immigrant visa must be obtained before entering Thailand.
Once the foreigner has a non-immigrant visa, he may begin to process the work permit. The work permit process would take seven business days to accomplish. The work permit application is processed at the Ministry of Labor.
A foreigner is eligible to apply for a work permit as long as he has a non-immigrant visa or a resident visa, has an available employer who will provide documents for work permit, and the occupation he will perform is not prohibited to foreigners.
A Thai company, to be eligible to employ a foreigner with a work permit, must have at least two million Baht in registered capital.
In December 2017, the government of Thailand published a new PPP Strategic Plan which sets out the sectors in which infrastructure projects can be developed as Public Private Partnerships (PPPs) and also lists out the projects within the PPP pipeline. This new Strategic Plan reaffirms the importance of developing infrastructure to the Government and economy of Thailand and presents new opportunities for both Thai and foreign infrastructure developers and investors.
Areas that require private participation include the development of urban rail transit lines; toll roads in metropolitan areas; public logistics ports; and high-speed rail lines. Areas in which private participation is encouraged are the development of telecommunication networks; high-speed internet networks; intercity toll roads; logistics depots; common ticketing; airport ancillary services; water treatment facilities; water supply and irrigation systems; public education institutions; public health infrastructure; pharmaceutical and medical equipment facilities; science, technology and innovation infrastructure; digital economy infrastructure; convention centers; shelters for the low to middle income, the elderly, the handicapped and underprivileged people; freight rail lines; airports; cruise terminals and facilities; and power infrastructure.
In order to promote investment into Thailand, the Board of Investment (BOI) under The Investment Promotion Act, B.E. 2520 (1977) encourages the services sector by providing various incentives, such as:
- an exemption of corporate income tax for up to 13 years, 50 percent reduction in corporate income tax for up to 8 years, an exemption of import duties on machinery or raw or essential materials;
- Non-tax incentives such as 100% foreign ownership (except for activities included under the FBA’s List 1 or stated in other laws);
- a right to own land and a right to bring in foreign skilled workers and experts to work into Thailand.
Foreign businesses in the services sector that wish to take advantage of such investment incentives should take the following issues into account:
- criteria for project approval, such as environmental protection and minimum capital investment and project feasibility;
- criteria for foreign shareholding, such as the requirement that Thai nationals hold 51% of the registered capital of a Thai entity as well as other conditions as specified in other laws
The BOI may set foreign shareholding limits for certain activities eligible for investment promotion as deemed appropriate.
There are additional incentives for investment in the Eastern Economic Corridor (EEC) or Special Economic Development Zones (SEZ). Apart from the Investment Promotion Act, B.E. 2520 (1977), there are investment incentives under other acts such as The Industrial Estate Authority of Thailand Act, B.E. 2522 (1979) and The Petroleum Act, B.E. 2514 (1971).
Infrastructure development in Thailand has accelerated in recent years, bringing numerous opportunities for foreign-based engineering, procurement and construction (EPC) firms looking to participate in projects in the country. Potential investors need a thorough understanding of the legal and regulatory framework before expending time, energy and capital pursuing opportunities. The most significant law relating to the participation of foreigners in business activities in Thailand is the Foreign Business Act BE 2542 (1999). The Lists under the FBA place restrictions on a number of activities in which engineering and construction firms might seek to engage, such as architectural, engineering and construction services, as well as wholesale or retail trading with registered capital under 100 million baht and other ancillary services. A company that has half or more of its shares held by non-Thais will be deemed as “foreign” under the FBA and thus subject to its restrictions.
Foreign companies and foreign majority-owned Thai companies wishing to engage in these activities in Thailand must first obtain a foreign business license or foreign business certificate from the Department of Business Development at the MOC. Each separate business will be scrutinized for the purposes of assessing compliance under the FBA. A company with a foreign business license as architects, for example, may not automatically engage in engineering or construction activities. Foreign companies must also be aware of professional licensing requirements, so they are well advised to comply with the regulations of the relevant professional organizations.
The Franchise business in Thailand is currently unregulated and requires no license, although there are many well-known franchise restaurants and brands operating in the Kingdom. The Trademark Act, the Trade Competition Act, Patent Act, Copyright Act, Trade Secret Act, and Trade Competition Act, and Foreign Business Act apply and have a significant impact on the franchise businesses. Under the pending draft of Thailand’s Franchise Business Act, “franchise” is defined as the operation of a business in which one party called a ‘franchisor’ agrees to let the other party, the ‘franchisee,’ operate the business using the forms, systems, procedures and intellectual property rights of the franchisor, or to use its rights to operate a business during a specified time or in a specified area, such operation being under the direction of the franchisor’s business plan, and the franchisee having a duty to reimburse the franchisor.
Under the current draft version, the franchisee will require a franchise license, and the franchise agreement has to be in written form and registered with the Ministry of Commerce. A Franchise Commission Agency will be created as a regulatory body.
Thailand’s International Business Centre (IBC) regime was enacted on 28 December 2018 and became effective the following day.
Corporate income tax was reduced to the rate of 8 per cent, 5 per cent or 3 per cent on qualifying services income received from affiliates; the applicable rate depends on the level of annual expenditure in Thailand, being THB60 million, THB300 million and THB600 million, respectively.
The IBC regime provides various tax incentives for 15 years, such as:
- Dividends received by IBC from its subsidiaries are exempted from Thai tax;
- Withholding tax exemption under certain criteria;
- Flat personal income tax rate exemption.
To obtain such exemptions one has to meet the following requirements:
- maintaining paid up capital of at least THB10 million;
- employing at least 10 skilled employees.
If a company with IBC status fails to satisfy the criteria for more than one consecutive year, the IBC status may be revoked and the tax incentives clawed back, with penalties and surcharges, from the first year the incentives were granted.
Repatriation of profits: In addition to paying dividends, profits may be repatriated through various means including payment of royalties and/or service fees.
Foreign exchange controls: The Exchange Control Act, B.E. 2485 (A.D. 1942), as amended, governs all matters involving foreign exchange. As a general rule, all matters involving foreign currency are regulated by, and require the permission of, the Bank of Thailand. Since May 22, 1990, however, foreign exchange control has been considerably relaxed by the Bank of Thailand. At present, certain transactions in Thai Baht or foreign currency can be performed virtually without restriction, and only a few require approval from the Bank of Thailand.
Individuals in transit may normally bring foreign currency and negotiable instruments into Thailand without limit. They may also freely take out of the country all foreign currency they had brought in, without limit. Individuals in transit, however, may not take out Thai currency exceeding 50,000 Baht per person, except for trips to countries bordering Thailand (Myanmar, Laos, Cambodia, Malaysia and Vietnam), where an amount of up to 500,000 Baht is allowed. There is no restriction on the amount of Thai currency that may be brought into the country.
There are usually no restrictions on the amount of foreign currency or negotiable instruments that a resident may bring into Thailand. All such currency and instruments must be sold to, or deposited into, a foreign currency account with a commercial bank within seven days from the date of receipt or entry into the country, however.
There is no restriction on the import of foreign currency in the form of investment funds, offshore loans, etc. Such foreign currency, however, must be sold or exchanged into Thai Baht, or deposited in a foreign currency account with an authorized bank, within seven days from the date of receipt or entry into the country. An application form F.T. 3 or F.T. 4 must be submitted to an authorized bank for each transaction involving the sale, exchange or deposit of such foreign currency in an amount exceeding USD 5,000 or its equivalent.
Transfer pricing rules
Guidelines have been issued to counter aggressive inter-company pricing practices and to ensure that such payments are reflected at market value. These guidelines are intended to prevent the manipulation of profits and losses within a group of related companies and to ensure that goods and services traded between related companies are priced at an arm’s length value. The Revenue Department has the power to assess income resulting from transfers which it deems are below market value.
State-Owned Enterprises and Privatization
As of October 2017, the Royal Thai Government held majority ownership in 56 state-owned enterprises (SOEs), which include 46 non-financial SOEs concentrated in key economic sectors such as communications, power generation and distribution, transportation, and water management and ten financial SOEs; including a state-owned bank, a government pawnshop, and eight specialized financial institutions (SFIs). [Any update since 2017?]
In 2016, SOE total assets amounted to 14.9 trillion baht (US$450.8 billion) while revenues amounted to 4 trillion baht and profits amounted to 291 billion baht. The average return on assets for all SOEs was 1.6%. SOE’s total investment budget is budgeted at 800 billion baht (US$24.2 billion) for FY2017.
The Stock Exchange of Thailand (SET) is the national stock exchange of Thailand. At the end of 2017, the Stock Exchange of Thailand had 688 listed companies with a combined market capitalization of 17.92 trillion baht or US$560 billion. [Any update since 2017?]
The Trade Competition Act 1999 (“TCA”) was amended on early 2017 and became effective at the end of 2017 with the purpose of improving the autonomy and impartiality of the Office of the Trade Competition Commission of Thailand (OTCC), which is currently a separate legal entity. As a result, it now has power to impose various sanctions, including financial penalties, and to issue cease-and-desist orders to suspend, cease, or amend any anticompetitive conduct to ensure an equal, level playing field, which is a longstanding policy goal.
The TCA applies to various sectors of business operators and, in certain cases, state enterprises. It provides additional factors to weigh in regard to abuse of market dominance, expands the scope of the definition and requirements in regard to merger control, grants a right to claim compensation by the injured person, and sets a clear prohibition on unfair trade practices.
The intellectual property (IP) environment in Thailand has continued to improve in recent years. In December 2017, the United States Trade Representative(USTR) moved Thailand from the Special 301 Priority Watch List to the Watch List after the out-of-cycle review conducted by USTR. Thailand remained on the WL in 2018.
While there has been improvement in official enforcement efforts, and there were no Thai markets listed in the 2017 USTR Notorious Markets Reports (released in January 2018), many concerns with IP protection and enforcement still remain. Online and mobile piracy continues to increase and physical goods piracy and counterfeiting on a commercial scale remain problematic. The United States continues to urge Thailand to impose sentences that would deter more potential offenders.
U.S. IP right owners should consider obtaining IP protection in Thailand before introducing their products or services to the Thai market. Companies may wish to require non-disclosure agreements to be signed, or seek advice from local attorneys or consult with experts in Thai IP law before disclosing their technologies to local partners.
The Department of Intellectual Property (DIP) oversees Thailand’s IP system. U.S. IP owners may register IP rights in Thailand for trademarks, patents, designs, layout-design of integrated circuits, and geographical indications. An address for service in Thailand and a local agent or attorney are generally required when filing IP applications at DIP.
As a member of the World Trade Organization (WTO) and World Intellectual Property Organization (WIPO), Thailand generally complies with international intellectual property standards established by the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Thailand is also a party to the Patent Cooperation Treaty (PCT) and the Madrid Agreement Concerning the International Registration of Marks (known as the Madrid System). Patent and trademark applicants may use these international systems for filing international patent and trademark applications when requesting protection in Thailand.
Copyrights are protected in Thailand without any registration requirement; formal recordation of copyrights at the DIP’s Copyright Office is recommended as it would be useful as evidence of ownership in the event of a dispute. A copyright notice should also be affixed to the copyrighted work.
Trade secrets, such as data, formulas, or other confidential information used in business, may be protected in Thailand if the owner provides appropriate measures to maintain the secrecy.
Thailand has a predominantly civil law legal system, but it is a hybrid of many influences. During the 19th century, Thailand legal system was developed to model the French civil system, and is thus primarily statute based, with major Codes resembling those of European civil law jurisdictions. Common law features are also evident, such as the separation of powers, as are the ancient Hindu traditions.
The Thai legal system is a statutory law system, which means it is mostly based on written law passed by the legislature. Primary sources of law include the Constitution, which is the supreme law, legislation such as Codes and Acts, decrees and custom. Judicial decisions are not binding, but in practice Supreme Court decisions are persuasive, have some precedential value, and are often used as secondary authoritative sources of law.
The judiciary of Thailand is composed of four distinct systems: the Court of Justice, the Administrative Court, military courts, and the Constitutional Court of Thailand.
In Thailand, which has signed both the New York and Geneva Conventions, arbitration is an alternative for going to court. Since 2002, Thailand has followed the UNCITRAL Model Law on International Commercial Arbitration for its own arbitration mechanism. The country now adopts the same framework for domestic and international arbitration in order to avoid complications in interpretation and execution. The present arbitration procedure in Thailand gives the parties the autonomy to frame proceedings in the manner that they deem to be most efficient. It also ensures that parties will have reasonable opportunity to be heard in respect of their claims and arguments.
Since 2000, foreigners may already serve as arbiters. Foreign lawyers may also represent their clients in arbitral proceedings.
Arbitration has been increasingly drawing attention in Thailand. Aside from the business sector, some government entities have also used this mechanism to reduce the amount of litigation in Thailand, like the Department of Insurance, the Department of Intellectual Property and the Security and Exchange Commission.
Thai courts are responsible for enforcing arbitration agreements if the parties’ contract provides for dispute resolution by arbitration. They have a duty to dispose of a filed case if they find that the agreement to arbitrate has not been followed. A court may also appoint an arbiter in case the parties fail to agree on the appointment.
While arbitral agreements cannot be considered as legal precedents, the courts and the judicial system have accepted the importance of arbitration, as well as the essential role of arbitral tribunals.
Two Thai institutes have been established to support this process: the Thai Arbitration Institute of the Office of the Judiciary and the Thai Commercial Arbitration Institute of the Board of Trade.
Recognition and enforcement of foreign arbitral judgments
Foreign arbitral awards are enforceable in Thailand, as Thailand is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (otherwise known as the New York Convention). Such an arbitral award must be submitted to the Court for recognition and enforcement within three years from the date that the award is enforceable. Such enforcement is, however, subject to the discretion of Thai courts to reject enforcement thereof on the grounds as stipulated in Sections 43 and 44 of the Thai Arbitration Act 2002.