To this, our first column in our three-part series on “Investor-State Agreements in Thailand: Encouraging Investment By Protecting Foreign Investors”, explained the different forms of rights foreign investors can make use of in public-private contracts (“PPCs”) and investment treaties (“ITs”). (See story here.)
Our second instalment focused on what legal options are available in enforcing those rights. (See story here.)
This week we look at the latest developments in how Thailand has supported rights enshrined under investor-State agreements.
Thailand can properly point to several successful foreign investor-State projects in recent years. However, in December 2003 the Civil Court of Thailand upheld a B6.2 billion international arbitration award against the Expressway and Rapid Transit Authority of Thailand (ETA), a Thai government agency, in favour of Bangkok Expressway PLC, a Thai-foreign joint-venture company, regarding their PPC to construct the Bang Na-Chonburi elevated expressway and a concession to thereafter operate it. Following this, on January 27, 2004, the Thai Cabinet passed a resolution prohibiting the inclusion of arbitration in PPC contracts involving concessions without prior approval by the Cabinet.
Then, on July 1, 2009, Walter Bau AG (a foreign contractor) was awarded approximately 30 million euros in an international arbitration regarding the construction of the Don Muang tollway. And – although this arbitration was brought under an IT – on July 28, 2009 the Thai Cabinet issued a resolution extending the 2004 resolution to all PPCs.
Both Cabinet resolutions, as well as other instances where Thai courts have refused to enforce international arbitration awards based on interpretations, which are not in keeping with international norms, have caused concern to the foreign business community in Thailand.
Furthermore, although Thailand signed the Washington Convention in 1985, it still has not ratified it. Undeniably, these issues must be considered in the course of any potential foreign investor’s contemplation of contracting with the State in Thailand.
However, despite these issues, Thailand remains a part of the trend to protect foreign investors by way of its several IT commitments. And even with regard to PPCs themselves, it should be noted that Cabinet approval for the provision of arbitration therein has actually been granted in several instances since 2010.
A further encouraging sign is the July 14, 2015 Cabinet resolution, which amended the 2009 resolution. Pursuant to this Cabinet approval of arbitration in PPCs is now required only for:
1) contracts covered by the Private Investments in State Undertakings Act (2013), which includes all PPC for projects worth B1 billion or more; and
2) all PPCs involving concessions.
Thus, any potential investor should consider PPC contractual provisions with the Thai State, including arbitration as the means to resolve any dispute. And any applicable IT – which may still achieve what may not be obtainable by way of a negotiated PPC.
Furthermore, with little exception, the current dominant global and regional international trend is to favour protection and enforcement of rights between investors and State parties.
Thailand has always been and continues to be a responsible and active member of the global economic community. It is anticipated that Thailand will continue its path towards harmonization with internationally accepted foreign investor-State practices.
Duensing Kippen is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in 45 other countries. Visit DuensingKippen.com