One of the most important concerns for foreign investors before they make a decision is the regulation and mechanism for disputes resolution in the country in which they want to invest. In Thailand, disputes may be settled through the typical mechanisms of litigation to alternative dispute resolution by arbitration, which can provide more flexibility to foreign investors compared with traditional proceedings.
Litigation in Thailand
Thai courts have jurisdiction to hear litigation cases where the defendant is domiciled, or when the subject matter of the dispute arises in Thailand. Therefore, a foreigner may bring a litigation case to Thai courts if the opposing party is domiciled in Thailand, or if the contract in dispute was formed, or the breach occurred, in Thailand.
The Court of Justice in Thailand is divided into three tiers.
The Court of First Instance (Sarn Chun-Ton) consists of many courts located throughout the country, each of which has a separate geographical jurisdiction to rule on various types of litigation cases. All litigation cases have to commence in one of these courts. As a general rule, a civil complaint has to be submitted to the court of where the defendant is domiciled, or within the cause of action arose, regardless of whether the defendant has domicile within the country.
Appellate Courts. There are two categories of courts at the appellate level:
(1) The Court of Appeal (Sarn U-Thorn) is the second tier and has jurisdiction to hear appeals against judgments of the courts of first instance, except for cases within the newly formed Specialised Court of Appeal.
(2) Specialised Court of Appeal (Sarn Uthorn Chumnun Piset) is also the second tier and has jurisdiction to hear appeals against judgments of certain specialised courts of first instance, such as the Labour Court, the Intellectual Property and International Trade Court, the Revenue Court, Bankruptcy Court, and Juvenile and Family Court.
The Supreme Court (Sarn Dika) is the highest court, which reviews appeals against judgments of the Court of Appeal or the Specialised Court of Appeal. However, appeals will not be heard by the Supreme Court unless the appellant applies for leave to appeal to the Supreme Court. If refused, the judgment of the Court of Appeal or the Specialised Court of Appeal, as the case may be, will be final as of the date it was handed down.
All pleadings and submissions shall be made in the Thai language, including documents or evidence. Advocates who represent a party to litigation must be licensed Thai lawyers, as foreign lawyers are not permitted to represent. A foreign party will have to sign a deed of appointment to appoint a Thai licensed lawyer to represent them in the proceedings.
Witness examination hearings and affidavits shall be made in, or be interpreted into, Thai if they were made in other languages. Upon completion of witness examination, each party may submit a written closing submission to the court, and a judgment will be made in one or two months. A party who disagrees with the judgment of the lower court may appeal to an appellate court within a month after reading.
A foreigner can file a lawsuit or be sued in a Thai court, even if the foreign defendant is not domiciled in Thailand. In that case, the plaintiff can submit a lawsuit to the court where the plaintiff is domiciled. If the foreign defendant fails to answer the lawsuit within the required period, a default judgment may be rendered, provided that the service of process was properly done.
Where a lawsuit is filed in a Thai court against a foreign defendant who is not domiciled in Thailand, the plaintiff may apply to the court to conduct a service of process via an international postal service. If the foreign defendant carries out business, or has an appointed service agent in Thailand, the plaintiff may conduct the service of process at the place of business of the defendant, or at the service agent appointed by the defendant.
Choice of foreign law
The parties’ choice of foreign law as the law applicable to their contractual relationship is generally recognised and given effect by Thai courts, unless the application is contrary to the public order and good morals of Thai citizens. The party wishing to rely on the application of foreign law has a burden to prove such foreign law to the satisfaction of the Thai court.
Enforcing foreign judgments
A judgment rendered by a foreign court is not recognised or enforced directly in a Thai court, as the country does not have any bilateral or multilateral treaties with any jurisdiction. A party who has obtained a foreign court judgment and wishes to enforce the foreign judgment against a defendant in Thailand is required to start new proceedings in a Thai court.
Related costs and fees
In a judgment, the court has discretion to make an order relating to costs and fees. Usually, the court will order the losing party to bear the costs and fees, in the amount deemed appropriate by the court, with due regard being paid to the reasonableness and good faith of the parties’ contentions, or the conduct of the case by the parties
Arbitration in Thailand
Parties who wish to resolve their contractual disputes by arbitration are required to enter into an arbitration agreement, where the parties mutually agree to submit their dispute to be resolved by a tribunal of arbitrators. The agreement to arbitrate can be made either before or after the dispute arises, although the latter is rare. When the agreement to arbitrate exists, and is valid, the parties are bound to refer the dispute to arbitration, and not to a national court.
If a party brings a lawsuit to a national court in breach of the arbitration agreement, the opposing party may apply to the national court to stay (strike the lawsuit from the court’s docket) to allow the parties to resolve the dispute by arbitration.
The Arbitration Act 2002 provides the legislative framework that governs the conduct of an arbitration seated in Thailand. Thai arbitration law does not separate arbitration law regimes between domestic and international arbitrations. The act was largely adopted from the UN Commission on International Trade Law (UNCITRAL) Model Law on International Arbitration to ensure its compliance with internationally recognised arbitration principles. It also provides a duty of Thai courts for recognition and enforcement of arbitral awards rendered in other countries.
Unlike court proceedings, the parties to an arbitration agreement have more liberty to agree on the procedural issues in the conduct of arbitration proceedings. They may agree that the arbitration proceedings be conducted in any language of their choice, and choose their arbitrators. A foreign party may appoint a foreign lawyer as the representative in an international arbitration proceeding. The parties may also agree that the hearings be conducted at any venue of their choice.
The parties to an arbitration agreement may agree that the arbitration is subject to arbitration rules of a particular arbitration institution. Local arbitration institutions in Thailand are as follows:
(1) The Thai Arbitration Institution (TAI) is an organisation under the supervision of the Office of the Judiciary of Thailand, but has its own arbitration rules, which were amended in 2017.
(2) The Office of the Arbitration Tribunal of the Thai Chamber of Commerce and Board of Trade of Thailand. This institution has its own arbitration rules largely based on the ICC International Arbitration Rules.
(3) The Thailand Arbitration Centre (THAC) was established in 2007, and recently announced its own arbitration rules, which are similar to the 2013 arbitration rules of the Singapore International Arbitration Centre.
Recourse against the award
The only available recourse for the losing party in arbitration is to apply to a competent court (i.e., the court of the seat of arbitration) to set the award aside, or to challenge the award at the time of enforcement. Unlike an appeal by appellate courts, the competent court does not have jurisdiction to review or revise the merit of the award, or the discretion of the arbitral tribunal as to the quantum of damages.
Thai courts generally recognise and enforce arbitration awards if the parties involved are entitled to rely on the terms of relevant international conventions to which Thailand is a party. At present, Thailand is a member state of the New York Convention 1958, and the Geneva Convention 1927.
Unless the parties to an arbitration agree otherwise, the arbitral tribunal shall have the power to determine liability for the fees and expenses incidental to the arbitral proceeding, and the arbitrator fees. Where the parties agree to conduct the arbitration proceedings under institutional arbitration rules, the applicable rules may provide specific details on the liability for costs and fees.
Given the flexibility and benefits in relation to recovery of legal costs, the parties to a commercial contract should consider arbitration as the preferred mechanism for potential disputes. An arbitration agreement or clause should be made when the parties enter into commercial contracts.
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