New Arbitration Act and Administrative Contracts
“Conflict is inherent in human relations.”

By Chirachai Okanurak
Wanchai Yiamsamatha

Originally Published in Public Law Net On Thursday November, 2004

V. Interpretation of the General Meeting of the Judges of the Supreme Administrative Court

To clarify the matter, the General Meeting of the Judges of the Supreme Administrative Court No. 6/2544 (2001) dated 10 October 2001 considered the meaning of the “administrative contract”. Apart from the meaning provided by the Administrative Act, the General Meeting concluded that “administrative contract” also includes an agreement containing a term exhibiting a special characteristic of the State’s privilege so that the exercise of the State powers or provision of the administrative affairs which is a form of public service can be achieved. Thus, if any agreement made by an administrative agency or a person acting on behalf of the State intends to bind itself with the other party on the basis of voluntary equality and such agreement does not exhibit such characteristic, such agreement is a civil contract.

VI. Decisions of the Supreme Administrative Court

The Supreme Administrative Court ruled that the housing hire-purchase agreement between National Housing Authority (NHA) and its lessee was not an administrative contract (Order No. 27/2001). In this case, the NHA acted as a private party and did not exercise any administrative power. The contract was a civil one. The Court found that a contract between a private construction company and Chiang Mai University, a public university (which is an administrative agency), for the construction of a dormitory was an administrative contract, and thus, within its jurisdiction (Order No. 104/2001). In addition, the Court ruled that the Commercial Building Lease Agreement between the State Railway of Thailand and private party was not an administrative contract (Order No. 91/2002).

However, the Court held that the government service agreement between the Royal Thai Navy (RTN) and its former officer, whereas the officer was required to serve in the RTN for a certain period after graduation or to reimburse three times the income and expenses in connection with his education, was an administrative contract (Order No. 127/2001). This is because the contract contained a term exhibiting a special characteristic of the State’s privilege and its nature is to require the officer to serve in the RTN, which is a public service.

Decisions of the Central Administrative Court

The Central Administrative Court also ruled on certain cases. Some cases (including the RTN case discussed above) were overruled by the the Supreme Administrative Court. The Court ruled that the telephone service agreements between TOT Corporation Public Company Limited, the successor of the Telephone Organization of Thailand (TOT), and its customers or users, were not administrative contracts (Red Case Nos. 1733-1734/2002).

The rationale is that the agreements were made on a voluntary basis and were not made for the provision of a telephone network, which were the contracts for the provision of public utilities. In this case, the Court also ruled that although TOT was corporatised and no longer a State Enterprise established under the Act or Royal Decree, TOT Corporation Public Company Limited remained an administrative agency being subject to the jurisdiction of the Administrative Courts.

VII. Decisions of the Commission on Jurisdiction of Courts

Since there are more than two courts, a jurisdictional dispute will arise. Which court has jurisdiction over a particular case? To solve this issue, the Constitution of 1997 provides that a dispute on the competent jurisdiction among the Court of Justice, the Administrative Courts, Military Courts or any other Courts must be decided by a Commission. This Commission is known as the “Commission on Jurisdiction of Courts”.

It currently consists of the President of the Supreme Court of Justice as Chairman, the President of the Supreme Administrative Court, and others judges. The Act Concerning the Settlement of Disputes on the Competent Jurisdiction among the Courts B.E. 2542 (1999) was enacted to deal with this jurisdictional dispute. The Commission’s decision is final and all the courts must comply with its decision. In line with other countries adopting multi-court system, the cost of the Commission is necessary and is naturally a price to pay for opting multi-court system.

In response to the disputes between the Court of Justice and the Administrative Court, the Commission has ruled on numerous matters regarding administrative contracts. For example, the Commission ruled that the contract for construction of a hospital building between Chumporn Province and contractor was an administrative contract and thus the Administrative Court, not the Court of Justice, had competent jurisdiction over the dispute of such contract (Decision No. 10/2002). In other case, the Commission ruled that the contract for construction and laying-down of water pipelines between a local government and a contractor was an administrative contract (Decision No. 14/2002).

It was also ruled that the contract for construction of a scientific laboratory and equipment center building between a public university (Prince of Songkla University) and a contractor was an administrative contract (Decision No. 18/2002). This is because the contract was for the provision of public utilities as the building was an element and instrumental in providing education, which was a public service. In addition, the Commission held that an agreement to sell and purchase land to be expropriated by the State (Bangkok Metropolitan Administration (BMA)) pursuant to the expropriation law was an administrative court (Decision No. 23/2002). The BMA exercised administrative power to compel the landowner to sell the land and the contract was for the road construction. It was a contract for the provision of public utilities.

However, in an related case, the Commission ruled that the dispute arising from a breach of auction sale by the Customs Department and its customer was within the jurisdiction of Court of Justice, not Administrative Court (Decision No. 21/2002). The auction sale was a civil matter under the civil and commercial law.

VIII. Grounds for Setting Aside the Award

Unlike the former one, the New Act sets forth for the first time grounds for revoking or setting aside an arbitral award. Any party may apply to the Court to set aside the award within ninety days. An award may be set aside by the Court if it finds that (a) the award deals with the subject-matter of the dispute which cannot be settled by arbitration under the law; or (b) the recognition or enforcement of the award is in conflict with public order or good morals. There is no precedent on this provision.

IX. Conclusion

Under the new Arbitration Act, arbitration clauses in administrative contracts are a public matter in the sense that arbitration awards will affect the State administration or the State’s budget. This is in line with the law on administrative courts and administrative court procedure. One of the explicit reasons for setting up the Administrative Court system is to establish a forum for the review of cases and administrative contracts which may affect State administration or implicate public taxes.

As you may be aware, the new Arbitration Act resolves that the arbitration clauses administrative contracts are valid and enforceable. However, the issue of which contract is an administrative contract is not entirely settled. In addition, there is no precedent on what type of arbitral awards can be revoked or set aside by the courts. Inevitably, more and more disputes will be decided and precedents set in the future.

Clearly, under the new Act, the Administrative Courts has a bigger role in shaping the arbitration in administrative contracts. How effective and efficient the role played by the Administrative Courts still remains to be seen in the years to come.

Litigation and Arbitration Practice Group, and Administrative and Constitutional Law Practice Group