Thailand has made some progress on international arbitration, but it’s still a work in progress. Thailand has, for example, made it possible for foreign representatives and arbitrators to conduct and participate in arbitration proceedings in Thailand, but some restrictions on foreign representatives and arbitrators remain.
Judicial hostility towards arbitration awards against governmental bodies and other local parties also appears to have waned. For example, in March of 2019, Thailand’s Supreme Administrative Court reinstated a substantial award in favor of Hopewell Holdings Limited and against the Thai Ministry of Transport and State Railway of Thailand.
Thai Courts have employed vague and counterintuitive interpretations of public order and good morals to set aside arbitral awards. The rationale for setting aside awards was hard to identify, and when the rationale could be identified, it was often questionable. It appears now, however, that some Thai courts are less receptive to such claims, but it’s still early days.
But it would be naïve to say that foreign investors are opting for arbitration in Thailand because of these changes. Foreigners typically prefer arbitration over litigation in local Thai courts, but most foreigners are not proactively selecting Thailand as the venue for arbitrating disputes. There are still formidable challenges to international arbitration in Thailand.
Challenges to International Arbitration in Thailand:
An agreement may unequivocally provide for arbitration, but that will not stop some parties from making unabashed appeals to nationalism to thwart enforcement of an arbitration clause. Before a Thai court, these arguments are often as dressed as public policy or public morality objections. But when carefully reviewed, no plausible public policy or public morality objection is apparent.
They are frequently used to force foreign parties to participate in expensive and unnecessary parallel Thai litigation proceedings that should otherwise be barred by an arbitration clause. This still occurs even if the challenge to the arbitrability of a dispute ultimately fails. This delay resolution of the dispute creates uncertainty and adds to costs.
The pool of qualified arbitrators and lawyers able to competently represent foreign parties in arbitration proceedings, particularly arbitration proceedings conducted in the English language, is also limited. Thai arbitral institutes often cited the absence of qualified arbitrators competent in the English language to press parties to “agree” to change the language of the arbitration proceedings.
The shallow pool of qualified arbitrators and lawyers able to competently represent foreign parties is also driven, in part, by the fee structures of some of the local arbitral institutes. There is a misperception about the real costs of dispute resolution. In Thailand, the focus is often on the costs charged by the arbitral institute when the fees charged by arbitral institutes constitute a very small part of the overall cost of arbitration. Overcoming this misconception will require time.
This is another historic problem that will take time to correct. Historically, Thailand has not had sufficient resources in terms of technology or human capital to effectively handle complex English language arbitrations. It still does not have the necessary resources, and there is still resistance to making the necessary reforms. Assuming there are no setbacks in making the necessary reforms, it will take years to fix this problem.
Enforcing arbitration awards in Thailand can also be a serious challenge. Frivolous challenges are often made to awards against local connected parties. Unfortunately, there is no real cost to those who make such challenges. Further, if the award cannot be attacked directly, ancillary claims or even criminal charges have and can be made.