A. LEGISLATION AND RULES
A.1 Legislation
International arbitration in Thailand continues to be governed by the Arbitration Act, B.E. 2545 (2002) (“AA“), the major provisions of which have remained unchanged since its enactment.
A.2 Institutions, rules and infrastructure
On 26 September 2024, the Thai Arbitration Institute (TAI) published “Rules on Arbitration Proceedings with TAI as an Appointing Authority under UNCITRAL Rules or Other Rules”, B.E. 2567 (2024) (“AA Rules“). The AA Rules set out the processes for TAI to act as an appointing authority in arbitration proceedings under the UNCITRAL rules (chapter 2 of the AA Rules), which closely resemble the mechanisms provided under the UNCITRAL rules. Moreover, the AA Rules apply mutatis mutandis to arbitration proceedings under other arbitration rules where TAI is assigned to act as an appointing authority (article 3 paragraph 2 of the AA Rules).
B. CASES
B.1 Judicial review over an awarded interest – SC Decision No. 1873-1874/2567 (2024)
In 2021, the council of ministers passed an amendment to the Thai Civil and Commercial Code (CCC) to reduce statutory and default interests. In short, the amended CCC reduces the default interest from 7.5% PA to 5% PA. The amended CCC became effective on 11 April 2021. Since then, the Supreme Court of Thailand (SC) has had chances to consider cases where the awarded default interest is inconsistent with the default interest under the CCC.
In SC Decision No. 1873-1874/2567 (2024), the parties entered into a share sale and purchase agreement. The seller failed to transfer the shares to the buyers, which led the buyers to commence an arbitration against the seller. The arbitral tribunal issued an arbitral award against the seller, ordering the seller to pay damages together with a default interest of 7.5% PA. The arbitral award was issued before the CCC was amended. The seller then filed a setting aside application with a Thai court and resisted the buyers’ enforcement application, which led to an appeal to SC.
Among other things, the SC considered whether the enforcement of the awarded default interest would violate the public order and good moral under section 45 of the AA, which closely resembles the public policy ground under the New York Convention. The SC found that the awarded default interest of 7.5% PA for the defaulted sums as from 11 April 2024 was inconsistent with the amended CCC, which reduced the default interest from 7.5% PA to 5% PA from 11 April 2024 onwards. The SC held that the enforcement of the awarded default interest in that portion would violate the public order and good moral under section 45 of the AA. The SC then granted leave to enforce (a) the awarded default interest of 7.5% PA for the defaulted sums until 10 April 2024 and (b) the awarded default interest of 5% PA for the defaulted sums as from 11 April 2024, subject to changes in the default interest and currency exchange rules.
The SC’s treatment of an interest as the issue relating to public order and good moral has been consistent. In the past, in SC Decision No. 5063/2565 (2022), the same issue was presented to the SC and the same conclusion was reached. Moreover, it is clear that, even though the arbitral tribunal correctly applied the default interest by the time of an arbitral award, if there is any change to the law regarding the default interest later, a Thai court can still revise the awarded default interest to be in line with the law.
B.2 Meaning of the non-arbitrability – SAC Decision No. Or. 1203/2567 (2024)
The Thai legal system adopts a dual-court approach whereby administrative courts[1] are established to adjudicate administrative disputes exclusively, with the Supreme Administrative Court (SAC) being an apex court. Such administrative disputes include the setting aside and enforcement of arbitral awards relating to an administrative contract dispute.[2] When engaged in such arbitration-related cases, administrative courts apply the AA.
We previously reported in last year’s yearbook about SAC Decision No. Or. 672/2566 (2023) where the SAC demonstrated its limited curial intervention approach when interpreting the scope of public order and good moral under the AA. Now, in SAC Decision No. Or. 1203/2567 (2024), the SAC endorsed such ruling and went on to give further clarification of the AA. Here, parties disputed over an arbitral award relating to a landline expansion concession. In summary, a concessionaire commenced arbitration against a state party for its breach of the concession, due to the state party’s action relating to fee adjustments. In the end, the arbitral tribunal found for the concessionaire, ordering the state party to pay damages to the concessionaire. Following this, the state party filed a setting aside application with the administrative courts; and the concessionaire filed a cross-petition to enforce the arbitral award.
Among other things, the state party advanced the argument in the sense that the arbitral tribunal adjudicates some matters which fall outside its authority. In proceeding with the analysis of this argument, the SAC took the opportunity to clarify the distinction between (a) the non-arbitrability ground under section 40 paragraph 3(2)(a) and section 45 of the AA and (b) the excess of power ground under section 40 paragraph 3(1)(d) and section 44(d) of the AA. Interestingly, the SAC explained that the non-arbitrability ground connotes certain types of disputes which, having considered their nature, cannot be resolved by means of arbitration. The state retains its monopoly to adjudicate these types of disputes and does not allow parties to contract out its power to arbitration, e.g., a criminal case. The SAC referred to this notion as “objective arbitrability.” According to the SAC, this notion is a different concept from the excess of power ground which refers to a scenario where an arbitral tribunal acts in manner beyond an arbitration agreement. The SAC referred to the following example as a case concerning the excess of power aspect: If parties agree to arbitrate only a dispute concerning a defect, an arbitral tribunal cannot adjudicate any other dispute than that concerning a defect. Returning to this case, the SAC concluded that the parties’ argument falls under the category of excess of power and finally held that the arbitral award is within the scope of the arbitration agreement. The SAC thus enforced the arbitral award.
Long has the AA been devoid of a clear notion of non-arbitrability, similar to other New York Convention jurisdictions, but no more. Closely following SAC Decision No. Or. 672/2566 (2023), SAC Decision No. Or. 1203/2567 (2024) is considered a good signal that the SAC has continuously welcomed internationally recognized principles of arbitration to the Thai legal system.
B.3 Judicial review over an awarded interest – SC Decision No. 1873-1874/2567 (2024)
Section 42 paragraph 1 of the AA provides that an enforcement application must be filed with a Thai court “within the period of three years as from the date on which an arbitral award is enforceable.” A question arises as to the meaning of the term “enforceable,” particularly where an arbitral award has been set aside by a lower court and an apex court later reverses a setting aside decision. In the 2023 edition of this yearbook, we addressed this issue through the lens of Council of State Ruling No. 1391/2565 (2022). Now, this issue has been tested and finally confirmed by the SAC.
As a precursor to SAC Order No. 603/2567 (2024), there was a decade-long litigation in the Administrative Court. The parties entered into a contract for the construction of a scientific facility for a state university. A dispute arose as to construction and escalation payments, which led to an arbitral tribunal issuing an arbitral award, and ordering a state party to pay damages to a contractor. The arbitral award was issued on 19 May 2011. Later, the state party filed a setting aside application with the Central Administrative Court (CAC). On 31 March 2015, the CAC handed down a judgment setting aside the arbitral award (“2015 CAC Decision“). The contractor lodged an appeal to the SAC. In the end, on 23 April 2021, the SAC issued a judgment (“2021 SAC Decision“), reversing the 2015 CAC Decision and dismissing the state party’s setting aside application. However, it should be noted that, during these times, the contractor had never lodged any formal enforcement application. It only defended the setting aside case brought by the state party. Therefore, in the 2021 SAC Decision, the SAC did not grant leave to enforce the arbitral award.
Having obtained a favorable decision from the SAC, on 17 November 2023, or approximately two years after the 2021 SAC Decision, the contractor filed an application to enforce the arbitral award with the CAC. However, the CAC refused the enforcement application, holding that it was filed beyond the three-year limitation under section 42 paragraph 1 of the AA, since such limitation was triggered on 19 May 2011, which is the date on which the arbitral award was issued. Dissatisfied, the contractor once again lodged an appeal with the SAC. According to the contractor, given that the arbitral award had been set aside as a result of the 2015 CAC Decision, there was no such thing as the arbitral award to be enforced as from 31 March 2015. The arbitral award had been resurrected by virtue of the 2021 SAC Decision. Therefore, the three-year limitation under section 42 paragraph 1 of the AA should run from 17 November 2023, which was the date of the 2021 SAC Decision, not 19 May 2011.
This time, in SAC Order No. 603/2567 (2024), SAC concurred with the CAC’s order. The SAC held that there was no provision under the AA which required an enforcement application to wait for a setting aside case to be settled first. Rather, the AA allows for a setting aside case and an enforcement case to run in parallel. To support its interpretation, the SAC referred to section 43 paragraph 1(6) of the AA which allows a court to adjourn an enforcement case to wait for an outcome of a setting aside case. Thus, the SAC confirmed that the three-year limitation under section 42 paragraph 1 of AA, since such limitation was triggered on 19 May 2011; and the contractor is time-barred from filing the enforcement application. Accordingly, the SAC upheld the CAC’s order dismissing the enforcement application.
As a key takeaway, even though a favorable arbitral award can be secured, a winning party cannot let its guard down. In particular, a winning party is advised not to gamble its case on an outcome of a setting aside case against an adverse party, as a successful defense against a setting aside case is not always tantamount to an enforcement of an arbitral award. Rather, it should file an enforcement application as soon as possible.
[1] Administrative courts have two instances: Administrative Court of First Instance and SAC.
[2] Without going into too much detail, an administrative contract is exemplified in section 3 of Establishment of Administrative Courts and Administrative Court Procedures Act, B.E. 2542 (1999) as a contract (a) in which at least one party is an administrative agency or a person acting on behalf of the state and (b) of which the essence relates to concession, provision of public services, construction of public works or exploitation of natural resources. The General Assembly of Judges of Supreme Administrative Court further passed Resolution No. 6/2544 (2001) to include a contract that allows a private party to directly engage in the provision of public services and a contract that contains a clause exorbitante as additional examples.
