New Arbitration Act and Administrative Contracts
“Conflict is Inherent in Human Relations.”

By Chirachai Okanurak and
Wanchai Yiamsamatha

Originally Published in Public Law Net in November, 2004

I. Introduction

The issue of validity and enforceability of arbitration clauses in administrative contracts was brought to the public’s attention during the well-publicized dispute over the concession agreement between a private consortium and the Expressway and Rapid Transit Authority (ETA), in which the former was awarded Baht 6.2 billion by an arbitral tribunal which found the ETA at fault in the construction project. Currently, the consortium is seeking enforcement of the arbitral awards from ETA through the Civil Court, a court of Justice.

The Attorney-General’s Office recently requested that the case be transferred to the Administrative Court and the award be revoked by the Administrative Court, on the grounds that the enforcement of such award against a State enterprise would implicate administrative and public law and contravene public order and good morals. This has apparently been driven by the new Thai arbitration law, Thai Arbitration Act B.E. 2545 (2002).

II. The New Arbitration Act

The new Arbitration Act was enacted on 29 April 2002 and came into force on 30 April 2002. The new Act replaced the Arbitration Act B.E. 2530 (1987), which was criticized because it did not accord with the principles of international arbitration law and the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, which has been widely accepted and recognized as a prototype for international arbitration law. Therefore, a significant consideration behind the new Act was to adopt the UNCITRAL Model Law as a basis for the core development of the arbitration system in Thailand in order to keep pace with other developed economies.

The new law was also drafted for the explicit purpose of encouraging the settlement of disputes in international civil and commercial matters through the arbitration process. In this regard, the new Arbitration Act sets the same standard for enforcement of both domestic and international arbitrations, in order to promote investment at both domestic and international levels. As such, under the new Act, when an award is enforced in Thai courts, parties and judges do not have to apply a double standard differentiating between domestic and international arbitral awards.

III. Arbitration Clauses and Administrative Contracts

The question of arbitration clauses in administrative contracts, such as those in the ETA concession agreement, had been unsettled and open to debate. The new Arbitration Act resolves the question of whether arbitration clauses in administrative contracts are enforceable or not. The answer is affirmative: arbitration clauses in administrative contracts are valid and enforceable, and parties must comply with the awards as determined by the proper arbitral tribunals.

Section 15 of the Arbitration Act specifically provides that in an agreement between a governmental agency and a private party, the parties may agree to resolve any disputes pertaining to the agreement by means of arbitration, and that such arbitration agreement shall be binding upon the parties.

Another important effect of the new Act is that the arbitral awards may be revoked by the court on an application of the parties concerned. Equally significant is that disputes over the enforcement of arbitral awards in administrative contracts will now be under the jurisdiction of the Administrative Court, not the Court of Justice. Specifically, the Act provides that the appeal against an order or judgment under the Act must be made to the Supreme Court or the Supreme Administrative Court.

IV. Defining Administrative Contracts

One of the controversial issues regarding the enforcement of arbitration clauses in administrative contracts revolves around the definition of an administrative contract. The Administrative Act provides that an “administrative contract” includes an agreement:

(i) in which at least one of the parties is an administrative agency or a person acting on behalf of the State (All government agencies are administrative agencies. However, not all State Enterprises are governing agencies, only State Enterprises set up by an Act or Royal are administrative agencies, such as the Electricity Generating Authority of Thailand (EGAT), the Communications Authority of Thailand (CAT), the Bank of Thailand (BOT), the Industrial Finance Corporation of Thailand (IFCT), the Government Savings Bank (GSB), or the Metropolitan Waterworks Authority (MWA). However, the State Enterprises which are companies, such as Thai Airways International Public Company Limited (TG) and Krung Thai Bank Public Company Limited (KTB), are not administrative agencies). and

(ii) which exhibits the characteristics of
(a) a concession contract; or

(b) a public service contract; or

(c) a contract for the provision of public utilities; or

(d) a contract for the exploitation of natural resources.

As the definition makes reference to a number of examples, this is not exhaustive. To date, there are certain precedents as to which contracts constitute administrative contracts.

Part 2