Thailand Law Journal 2010 Spring Issue 1 Volume 13

In the case, the arbitral tribunal awards the private investor a significant amount of damages and determined the disputed terms of the concession for the parties to comply for the rest of the concession term. The award was challenged in the newly-established Administrative Court. The court then set aside the arbitral award on the ground of “public policy” violation. According to its reasoning, the arbitral award was based on a particular terms of the concession contract in dispute. The terms were inserted after the original concession contract was entered into by an agreement to modify the original contract. The agreement, however, was not obtained the compulsory approval from the cabinet. The court reasoned that the modified and inserted terms were not binding and enforceable under the principles in the public laws. The arbitral award that was based on such terms was, therefore, contrary to the principle of “public policy” and should be set aside. An interesting aspect of this case is that the parties themselves have never disputed over the existence and binding effect of the modified and inserted terms. The court found such irregularity from its own enquiry into the facts in the case. Such enquiry is a part of the ordinary process in administrative cases in which the courts take quite an active role in summoning evidence and witnesses to gather all necessary information on its own initiative.

Questions that have arisen from this case comprise how the problem of enforceability of a contractual term should be considered, and who should have the discretion to determine the question. In a line of reasoning, the enforceability of a contractual term is within the authority of the arbitral tribunal just like any other questions involving interpretation and construction of contracts and laws. If this discretion to interpret the contracts and laws can be reviewed by a national court, then almost all parts of arbitral awards that inevitably relate to interpretation and construction of contracts and laws can also be reviewed. Such situation will significantly undermine the enforceability of arbitral awards. Moreover, in the particular fact of this particular case, the court implicitly reasoned that although the failure to obtain the compulsory approval from the cabinet was an internal process of the government, the private party should have known the fact because the concession and the dispute was such a high-profile instance that all relevant facts become known to the public via various media. The private party, therefore, was estopped from invoking the fact that the failure was an internal process of the government which was beyond its control. The fact, however, may also be looked at from another point of view. The fact that the modification of the concession contract was not approved by the cabinet, if the private party should have known the fact, should also become known to the cabinet itself because they acquiesced with the same set of facts as the private party, and even more. Nobody has ever challenged or even questioned the enforceability or binding effect of the clause in dispute until the court raised the issue. The case is currently under the process of appeal to the Supreme Administrative Court. So, it still waits to be seen the final outcome and interpretation of the relevant laws.

It is unclear at the moment as to the effect of this way of reasoning on other cases involving recognition and enforcement of arbitral awards. However, if we take into consideration the peculiar nature of the facts surrounding this particular case, it is highly unlikely that the case will be established as a general precedent for other cases.

3.5 Arbitration Roles in FTA, Trade and Investment Disputes
Another sphere that has seen growth in arbitration in Thailand is the free trade agreements (FTA) and the bilateral investment treaties (BIT). Over the past decade, Thailand has entered into many bilateral investment treaties with various countries to promote the flow of investment between the contracting states. More recently, Thailand has embarked on the FTA movement by entering into several free trade agreements and been in the negotiation process with several others. One important issue that keeps coming up in the negotiation of such agreements and treaties is the mechanism to settle disputes between nationals of a contracting state with the other contracting state. It has become a well-accepted practice in the agreements and treaties to incorporate arbitration as a main mechanism to settle such disputes¹⁷.

In most of such treaties and agreement, arbitration under the auspices of the International Centre for Settlement of Investment Disputes (ICSID) has been frequently adopted. However, since Thailand has only signed the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965 but yet to ratify the convention, most of such treaties and agreement stipulate either the ad hoc arbitration under the UNCITRAL arbitration rules or the additional facility of the ICSID as another alternative. The investors in dispute with the government of another contracting state will have the discretion to choose the forum in which they would like to pursue their claims. Although the treaties and agreement usually stipulates the court or other competent tribunals of the contracting states as a choice to choose from, as a practical matter, investors are likely to prefer arbitration to national courts.

In the course of negotiating such treaties and agreement, the issue of ratification of the ICSID convention has often been asked. So far, the responsible authority has raised the issue to consult with other organizations and the public from time to time.

Given the negative public sentiment toward arbitration in disputes involving state agencies caused by several high-profile cases in which state agencies are ordered to pay a hefty amount of damages to private parties, it may take a lot more time for Thailand to ratify the convention. What concerns the most about ratification of the convention is the relinquishing of supervision and review on the arbitral awards which may drastically affect the public interest of the Thai public. Moreover, in the views of many, the benefits that Thailand can reap from such ratification are minimal, if any. There is no substantiated proof to show that ratification of the convention will induce more investment. Although it may be one of the factors that investors take into consideration when they decide on where they want to put their money in, it is more likely that they will place more weight on other factors and the determinative factor is usually where they can generate the most rate of return on investment. Thailand may finally ratify the convention, but it will surely require more and more consideration until it is certain that the benefits engendered by the ratification outweigh any drawback that the convention will trigger.

3.6 Proposal for “ASEAN Panel of Arbitrators”
As it has been shown from various sources, arbitration in Southeast Asia is doing well. Several countries have embarked on the bandwagon of promoting the practices of international commercial arbitration with a mixed success. Each country and each organizations carrying out this challenging task all has their own way of implementation of this inspiring goal. The action plan of each organization is inherently based on the social and economic condition of their respective country as well as their familiarity of arbitral practices. It is quite observable that each organization as well as each country in which they operate possesses some comparative advantages of their own.

In the long run, however, to promote arbitration further in this lovely and ever dynamic region, some infrastructure of arbitration has to be strengthened to lay a solid foundation that can accommodate future boundless achievement for all members of ASEAN. One specific area that can mutually be developed and nurtured is those involving arbitrators. In the meantime, every organization can handle arbitral proceedings with their own set of arbitrators. There is no obstacle to carry on the development of arbitration in this tradition. It is certain that all organizations and countries can handle their arbitration practice without undue difficulty. But if we take a look further about what is better for arbitration, it should be clear that the larger pool of arbitrators that parties can choose from, the better the parties will become more comfortable with arbitration. At least, they will not feel constraint of having to choose arbitrators from the oligopoly of elite arbitrators. Although there are no restrictions as to the qualifications or nationality of arbitrators as long as they are impartial and independent to make their own informed decision, it is very difficult for newcomers to establish themselves in the field of international commercial arbitration. Usually, parties will be likely to appoint someone who has experience in arbitration to be arbitrators in their disputes, but such experience cannot occur in the first place if he or she has not been appointed in a case. Moreover, even if a party wants to appoint a newcomer as an arbitrator, the party may not have sufficient resources to consult with in the quest for seeking a qualified person to be the arbitrator, especially if they want to look beyond their economy.