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Phuket Law: Arbitration in Asean – Legal rights in agreements enforced

As a firm that specialises in international arbitration to resolve commercial disputes, Duensing Kippen often hears the question, “People actually arbitrate in Thailand?” or something to that effect. One must admit that Thailand is not regarded as being an “arbitration friendly” jurisdiction – at least not in the international context.


Jerrold Kippen

Saturday 25 February 2017, 10:00AM


The Asean Comprehensive Investment Agreement upholds arbitration rights for intra-Asean investors. Image Asean
The Asean Comprehensive Investment Agreement upholds arbitration rights for intra-Asean investors. Image Asean

On the other hand, private contract parties are free to enter arbitration agreements in Thailand and every year hundreds of such proceedings take place and are seated in Thailand.

Furthermore, what is often forgotten, Thailand is currently party to 22 free-trade agreements and 37 bilateral investment treaties which generally provide for arbitration as a, or the, dispute resolution mechanisms between Thailand and foreign investors.

One of the most recent, and arguably one of the most important of such treaties, is the Asean Comprehensive Investment Agreement (the “Asean Agreement”).

The ASEAN Agreement is a multi-lateral treaty between the ten member States of the Association of South-East Asian Nations (“ASEAN”) which was agreed to in February 2009 (in Thailand as it happens) and which entered into force on 29 March 2012. The ASEAN Agreement is intended to assist the creation of “a free and open investment regime in ASEAN in order to achieve the end goal of economic integration [within ASEAN]”. Thus, the ASEAN Agreement’s central purpose is to encourage investors from ASEAN states to invest in other ASEAN states by giving them (with some exceptions and reservations) enforceable rights to protect their investments.

THE NEW MODEL

We have previously provided an overview of the common rights and remedies that investment agreements provide to investors. The decades leading up to the end of the 20th century saw a proliferation of investment agreements entered. Currently, there are over 3,000 bilateral and multilateral investments agreements in force worldwide. And by in large the consensus is that this has fostered global prosperity and lifted hundreds of millions, if not billions, out of poverty.

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However, and perhaps ironically, one indicator of the success of these treaties was the dramatic increase in investor-State disputes and arbitrations to resolve them. Since investment has been most needed and most attractive in developing States, these States have most often been the States involved in such disputes and, inevitably, these States have lost some of these arbitrations. As a result, dissatisfaction with investment agreement rights and remedies regimen grew more vocal as the turn of the century approached. Developing States argued that the investment agreements had given too much protection to the investor at the cost of the interests of the States’ citizens.

In response, in 2002 the United States drafted a new model investment treaty (and first used it in the 2005 United States-Uruguay bilateral investment treaty), which incorporated a number of provisions meant to address these concerns. For example, the traditional investment treaty model prohibits an investment State from expropriating an investment by enacting a law that devalues the investment. Such action can lead to monetary damages payable by the State bound to the traditional investment agreement model. Developing/investment target States complained that this impedes their ability to reasonably protect its citizens and environment without risk of monetary damages being payable to investors.

Thus, the new model excludes any non-discriminatory measure by the investment State that is designed and applied to protect legitimate public welfare objectives, such as public health, safety and the environment, from the definition of “expropriation”.

The ASEAN Agreement now incorporated this same rights provision and, as we will see below, several other of the new investment model provisions regarding the enforcement of an investor’s rights by arbitration.


This is the first article in a series on ‘Arbitration in Asean’ by DUENSING KIPPEN, an international law firm specialising in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in 45 other countries. Visit them at: duensingkippen.com

 

 

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