What is Arbitration ASEAN? 6 Reasons to Choose It Over Court

What is Arbitration ASEAN-Style, and Why Does It Matter?

What is arbitration ASEAN businesses increasingly rely on instead of slow, often unenforceable court proceedings?

If you’ve entered any contracts in the Southeast Asian “ASEAN” countries, you may already have had a less-than-pleasant experience with the local court systems. A common complaint is that court proceedings are often agonizingly slow. If you’re not from the country in question, you’re also unlikely to understand the proceedings, since court language is generally that country’s official language. What’s more, a domestic court ruling generally isn’t enforceable in another country — so if you or your contract partner doesn’t live where the court is located, or your partner’s assets are located elsewhere, your domestic court “win” might end up a hollow victory. So what’s the alternative?

You may have heard of “alternative dispute resolution” — meaning, simply, “other than going to court.” One long-standing alternative gaining ever more international recognition is formal arbitration, the most commonly used alternative to domestic court proceedings, especially for disputes between parties from different countries. By “formal” arbitration, we mean arbitration prescribed by law — though for the remainder of this three-part article, we’ll simply call it “arbitration.”

Arbitration offers several important advantages over court proceedings. Arbitration proceedings are generally quite quick — often completed within 12 to 18 months. An arbitration award, unlike a normal court ruling, is also generally final, since awards cannot be challenged or appealed on the basis of the proceeding’s factual or legal determinations. Thailand’s Arbitration Act makes this clear (and, as we’ll explain in Part Two, national arbitration laws across the world — including Southeast Asia — are surprisingly uniform on this point). Under Thailand’s Arbitration Act, a court may set aside an arbitration award only if it finds one of the following:

1. A party to the arbitration agreement was under some legal incapacity.
2. The arbitration agreement is not binding under the governing law agreed by the parties, or, absent such agreement, under Thai law.
3. The applicant was not given proper advance notice of the tribunal’s appointment or the proceedings, or was otherwise unable to defend the case.
4. The award deals with a dispute outside the scope of the arbitration agreement, or contains a decision on a matter outside that scope (if separable, only that portion is set aside).
5. The composition of the tribunal or the proceedings did not comply with the arbitration agreement or, unless otherwise agreed, the Arbitration Act, or the award deals with a dispute not capable of settlement by arbitration under the law.
6. Recognition or enforcement of the award would be contrary to public order.

Crucially, a court cannot set aside an award simply because it believes the arbitrator made a mistake — even an egregious one — about the applicable law or an essential fact that should have changed the outcome.

The reason most countries, including those in Southeast Asia, limit challenges to arbitration awards this way is that they are signatories to an international treaty — the New York Convention. Under the Convention, any signatory country (currently 144) will enforce an arbitration award made in any other signatory country, except in essentially the same limited circumstances outlined above.

Arbitration can therefore provide a relatively quick judgment that is immediately enforceable almost anywhere in the world — a major advantage over domestic court proceedings in ASEAN. These are just two of the reasons we recommend considering arbitration as your contract’s dispute resolution mechanism.

That’s the essence of what is arbitration ASEAN businesses turn to when speed and enforceability matter most.