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Presentation of Prof. Mochtar Kusuma-Atmadja : Arbitration in the 1990s: Developments in East Asia : Arbitration in the Southeast Asian Region
Thailand
On August 13, 1987, the Arbitration Act of Thailand became
law and pursuant to Section 4 of the Act, the Ministry of
Justice's Arbitration Institute promulgated both the
Arbitration Rules and Conciliation Rules in April 1990.
While the Arbitration Act's provisions govern arbitration in
Thailand generally, the Arbitration Rules and Conciliation
Rules govern arbitration and conciliation specifically at the
Ministry of Justice's Arbitration Institute. Parties wishing
to arbitrate in Thailand follow one of the two courses: they
simply agree to arbitrate privately under the rules of the
Arbitration Act, or they agree to resolve their dispute at the
Arbitration Institute under the Arbitration Rules. The
Institute allows latitude while providing an experienced forum
to guide the parties through the process. This helps speed up
the process. Furthermore, it ensures that the parties follow
the Rules and the Act, thus minimizing the possibility of a
collateral attack on the arbitral award based on the argument
that the Arbitration Act was not properly followed.
Preliminary Rules
A threshold determination is whether the parties entered
into an arbitration agreement. For a binding arbitration
agreement, Section 6 requires that it be written. Section 5 of
the Act defines an arbitration agreement as an "agreement or an
arbitration clause in a contract whereby the parties agree to
submit present or future civil disputes to arbitration...".
While the precise meaning of "civil dispute" remains unclear,
the term certainly includes all ordinary commercial agreements.
Section 10 of the Act allows a party to stay a court proceeding
and proceed with arbitration if the arbitration agreement
covers the dispute. Before staying the court proceeding, the
court examines the arbitration agreement to determine its
validity.
Under the Arbitration Rules, before commencing arbitration
the Director of the Arbitration Institute must convene the
parties to try to reach a settlement. If the Director deems
it appropriate and the parties agree, a conciliator is
appointed and conciliation is conducted under the Conciliation
Rules, which are quite flexible. It allows parties to
exclude or vary any of the Conciliation Rules at any time.
Basically, under the conciliation procedure an impartial
conciliator mediates the parties' dispute and arrives at a
mutually agreeable settlement. If they cannot reach a
settlement, the conciliator is not eligible as an arbitrator or
counsel with respect to that dispute. Similarly, the
conciliator is unavailable as a witness in any subsequent
arbitral or judicial proceedings. The obvious intent of these
rules is to encourage parties to discuss settlement openly and
freely without fear that opponents will use such candor against
them if conciliation fails and arbitration or litigation
follows.
Regardless of whether the parties agree to arbitrate their
differences, they may agree to submit their dispute to the
Arbitration Institute for conciliation. The conciliation
procedure is ideal for parties whose differences are slight and
who wish to preserve their commercial relationship. Also,
parties may use conciliation to test the likely resolution of
their dispute in arbitration. The conciliator's suggestions
generally derive from, inter alia, fairness, trade customs, and
previous practices, all of which an arbitrator would consider
in making an award decision.
Arbitral Process
Under the Arbitration Rules, if conciliation fails, the
parties begin the arbitral process. A party may appoint anyone
to assist in the arbitration, and the parties are free to
agree on the language or languages in which to conduct the
arbitral proceedings. Furthermore, the parties may agree on
the number of arbitrators to be selected. Barring such an
agreement, the Rules specify that there will be one or three
arbitrators. Under the Rules, when justifiable doubts exist as
to the impartiality of a particular arbitrator, the non-
sponsoring party may challenge the appointment. A substitute
arbitrator is appointed if the sponsoring party agrees with the
challenge. Otherwise, the parties submit the matter to the
Arbitration Commission for determination. Under the Act, a
party must challenge an opponent's appointee in court.
Both the Arbitration Act and the Arbitration Rules provide
the arbitrator and the parties wide discretion in tailoring the
proceedings to the special circumstances of each case. The
Arbitration Act is quite broad regarding the actual
proceedings, and the Arbitration Rules are similarly
broad. An advantage to arbitration under the Rules instead
of the Act is that the Rules, with their pre-set procedures, do
not require the parties to either draft an extensive
arbitration agreement with elaborate arbitration procedures or
leave the procedure entirely up to the arbitrator's discretion.
Vacating the Award
Section 24 of the Act allows the court to deny enforcement
of an arbitration award. The court's judgement regarding a
challenge to an award cannot be appealed except in specific
situations. Section 24 of the Act, which gives courts a
wide latitude to review arbitral awards, resulted from a
dilemma facing the Act's drafters regarding how to ensure that,
on the one hand, the court would generally respect the sanctity
of the arbitral award but, on the other hand, arbitral awards
inherently contrary to public order would be struck down.
Exactly what the drafters considered contrary to the public
order or which criteria they anticipated using in making such a
determination is unclear. The court is left to determine
whether awards are contrary to the public order on a case-by-
case basis.
Parties considering arbitration proceedings in Thailand
should concern themselves with the courts' broad power to
review arbitral awards, especially since the Act is relatively
new. Nevertheless, parties can minimize the courts'
opportunities to vacate an award by agreeing to apply
substantive law and procedural rules which are not radically
contrary to Thai law or policy. Unfortunately, taking such
precautions negates the arbitration's beneficial aspects. Thus,
the potential of a court vacating an award under Section 24
adds uncertainty and reduces the appeal and utility of
arbitration.
Enforcement
Enforcement of a Thai arbitration award is fairly simple
under the procedure provided in Section 23 of the Act. When the
party against whom enforcement is sought lacks assets in
Thailand sufficient to satisfy the award, the New York
Convention provides for enforcement in any member country where
that party has sufficient assets. Thailand acceded to the New
York Convention on 21 December 1959. However, before an
international treaty becomes operative in Thailand, the
Parliament must promulgate domestic legislation in compliance
with the treaty. The Military Government promulgated domestic
legislation complying with the New York Convention on 10 March
1960, in the form of a domestic decree but at the time the
military regime governed without a parliament. Some legal
scholars thus argue that Thailand is not a member of the
Convention because Parliament never properly ratified it.
Although the Thai government never acted to resolve the matter,
the Thai courts and observers generally accept Thailand as a
member of the New York Convention and abide by its terms.
The Working of Aliens Act
The Working of Aliens Act B.E. 2521 (1978) prohibits non-
Thai nationals from working in certain fields and requires
aliens to obtain work permits to work in others. Thus, a
non-Thai lawyer cannot render legal services to a client in
Thailand unless he obtained a work permit prior to the Act's
implementation (22 July 1978) and qualifies to continue
practicing under the clause. The Act also prohibits aliens form
representing clients in arbitration or acting as arbitrators.
The Working of Aliens Act presents two important problems for
businessmen in Thailand. First, the Act certainly prohibits
the businessman's counsel from presenting a case before an
arbitral tribunal. Secondly, the Act requires the parties to
select Thai arbitrators, reviving doubts as to the national
bias. If Thailand decides to promote itself as a regional
arbitration centre, the government must relax the Act's
prohibition of foreign attorneys as it applies to arbitration.
This Act seriously undermines the attractiveness to foreign
investors of arbitrating in Thailand.
Arbitrating in Thailand is potentially an ideal compromise
between leaving dispute resolution to Thai courts and
arbitrating disputes abroad. However, the attraction of
arbitrating in Thailand is greatly reduced by Thailand's
present rules governing arbitration. To some degree, the broad
reviewability of arbitral awards by Thai courts returns the
dispute to the forum originally sought to be avoided. This
defeats the purpose of using a choice of law provision to
remove the dispute from the uncertain applications of national
law and policy. The prohibition against aliens' participation
in the arbitration process also reduces Thailand's draw as a
site for arbitration. International arbitration is highly
attractive to foreign investors because of the global
uniformity of its procedures and the ability to select their
own lawyers to litigate on their behalf anywhere in the world.
The inability of foreign lawyers to participate in the
arbitration process removes this attractive feature. Thus, the
decision to arbitrate in Thailand cannot be automatic. It
requires a foreign investor to specifically assess the value of
the various factors and weigh the potential benefits against
the risks. The result is unfortunate because, with modest
reforms, Thailand could provide an ideal forum for arbitration
and by extension, a more attractive site for foreign
investment.
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