If you’re doing business in Thailand, you may already have experience with the local court system. A common complaint among the local business community is that court proceedings here are agonizingly slow. A non-Thai businessperson also often struggles to follow the proceedings, since Thai is the official language of the courts. And a domestic court ruling generally isn’t enforceable in another country — so if one or both parties doesn’t live in Thailand, or holds assets elsewhere, a domestic court “win” can end up being a hollow victory.
So what’s the alternative? You may have heard the term “alternative dispute resolution” — meaning, simply, “other than going to court.” One long-standing alternative gaining ever more international recognition is arbitration, the most commonly used formal alternative to domestic court proceedings, especially for disputes between parties in different countries. Thailand was a relative latecomer to arbitration, enacting its first arbitration law in 1987, before replacing it with the current Arbitration Act in 2002. The Act governs both domestic and international arbitrations conducted in Thailand.
Submitting a dispute to arbitration requires both parties’ agreement. Section 11 of the Arbitration Act defines an arbitration agreement as one in which the parties agree to submit to arbitration all or certain disputes — existing or future — arising from a defined legal relationship, whether contractual or not. This can take the form of an arbitration clause within a contract, or a separate standalone agreement, but it must be in writing and signed by both parties. One party cannot unilaterally submit a dispute to arbitration without the other’s agreement — if no arbitration clause exists and a dispute arises, the matter must go through the local courts unless both parties separately agree to arbitrate. It’s therefore advisable to include a well-drafted arbitration clause in a contract from the outset, before any dispute arises — once a dispute exists, it can be very difficult, if not impossible, to get the parties to agree on anything, including how to resolve it.
If you do choose arbitration, it’s highly advisable to specify a professional arbitration institute in your clause — one that can provide the procedural and administrative support a proper arbitration requires. Internationally, the best-known such institute is the International Chamber of Commerce’s International Court of Arbitration (the “ICC”), headquartered in Paris but conducting arbitrations worldwide. Founded in 1923, the ICC maintains its own universal rules governing proceedings between the parties and between the parties and the ICC itself. Locally, Thailand established the Thai Arbitration Institute of the Alternative Dispute Resolution Office, Office of the Judiciary (the “TAI”), which has its own governing rules. The Board of Trade of Thailand also offers arbitration services through its Thai Commercial Arbitration Institute, conducted under its own rules.
Parties are free to choose which institute’s rules will govern their arbitration. This choice affects not only the fees charged, but also a winning party’s potential recourse to claim compensation for legal fees incurred during the proceedings.
Arbitration is generally fast: ICC rules typically require a decision and award within 8 months of the arbitrator’s appointment, while the TAI requires one within 6 months. Proceedings can be conducted in any language the parties choose, and the parties generally select their own arbitrator — giving them control over the arbitrator’s competence, and the option to choose someone with specific expertise relevant to the dispute.
An award issued by any of these institutes is enforceable in any country that is a signatory to the 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). Thailand is a signatory, meaning an arbitration award made here is enforceable in any of the roughly 145 other signatory countries worldwide — and, under the Arbitration Act, is also enforceable within Thailand itself. Formal arbitration can therefore be an excellent alternative to Thai court proceedings, and it’s highly advisable to include provision for it in commercial contracts here in Thailand.