Dispute Resolution Mechanisms in Thailand Across Various Industries
Article by Anne Coulon, Regional Legal Adviser, DFDL Thailand
This article considers the various modes of dispute resolution used the most in Thailand, with particular reference to several key industry sectors of Thailand.
Even where significant commercial interests are at stake, a dispute need not necessarily lead to an all-out confrontation. The opposing parties may attempt to settle their dispute through negotiation, and sometimes, mediation. Negotiation is a widely used mode of dispute resolution, featuring in most standard arbitration clauses in Thailand. Mediation is also very fitting as a mode of dispute resolution as it supports the resolution of a dispute through a deliberated focus on shared interests by the parties. Yet, this method is not extensively used in Thailand outside the courts, partly because of the difficulties of enforcing a mediated settlement and due to the absence of a universally recognised framework for the direct enforcement of international mediated settlement agreements (a gap that the 2019 UN Convention on International Settlement Agreements Resulting from Mediation, the “Singapore Convention on Mediation”, aims to fill). In Thailand, it is possible however to enforce a mediated settlement through a submission of the issue to a THAC’s single arbitrator (as per the Thailand Arbitration Center Rules on Arbitration under the Mediated Agreement B.E. 2560/2017).
When negotiation and/or mediation have failed, what is needed is a decision by an outside party, which is both binding and enforceable. The choice then is generally between arbitration before a neutral tribunal and the recourse to a court of law.
In the aviation industry, high value cross-border transactions are the norm. Long-term contracts are usually entered into by the parties and those arrangements typically last for years, decades even. The industry is also characterised by a typically small number of suppliers of goods and services. In this specific environment, parties will be usually adamant to preserve good working relationships, even if a dispute has arisen.
For preventing disputes related to regulatory and compliance matters; airlines, airports, financial institutions or any other stakeholder must be able to identify applicable regulations and to keep up with any change. The right processes and tools must be set up for mergers, acquisitions, restructuring and joint-ventures of airlines. Leasing or financing aircraft and engine agreements must be drafted carefully to set out the required redelivery or return condition. Having filed or registered transaction documents under Cape and non-Cape Town Convention jurisdictions to provide protection for security interests and title-retention rights is also crucial in the event of a dispute.
Aviation disputes have traditionally been resolved through litigation or arbitration in Thailand. Mediation, which focuses on parties’ interests rather than rights, could be a fitting dispute resolution mechanism but one that remains under-used.
Banking, Finance and Technology
Banking and finance disputes may arise from any type of financing agreements, derivative transactions or asset management issue; whilst disputes in IT range from IT systems development and implementation to intellectual property. With increasingly sophisticated markets and complex products; transactions in the bank, finance or technology industries call for specialised dispute resolution methods handled by knowledgeable experts.
For the prevention of disputes, matters pertaining to corporate banking, loan syndication or cross-border lending call for particular skills in loan and security agreement or financial leasing agreement drafting. A thorough knowledge of local law and practices is also paramount to identify risks in related transactions and to prevent disputes. Complex financial products such as securitization, derivatives, and structured finance require an in-depth understanding of transaction documents and market practices, and parties must actively lookout for the same so as to avoid future disputes.
Generally, in the banking, finance and technology industries, besides a high level of expertise, cost- and time-efficient resolution of disputes is highly desirable; and arbitration in Thailand has gained a place of choice in the administration of disputes in those sectors.
Employment and Labour
Terms and conditions of employment, working time and overtime payment, relocation of workplace; all can give rise to disputes between employers and employees. Additional complexities incur if the employees are non-Thai nationals with elements of foreign labour law added to the mix. Employers with international businesses thus face a myriad of foreign employment laws and compliance issues as well as local cultural considerations must be mastered so as to avoid unnecessary exposure in the event of labour disputes with employees.
In Thailand, employment disputes may be settled by Mediation at the Labour Department. If the latter fails, litigation may happen. Institutions such as the Thailand Arbitration Centre (“THAC“) generally encourage the insertion of a mediation clause in expatriate agreements, so as to avoid litigation.
Energy, Mining and Infrastructure
Entities in the energy, mining and infrastructure industries operate in a complicated and highly regulated environment. Any project from negotiation through construction and into the operation and maintenance phase must be developed with care and regard to compliance. Contractual disputes including sale and purchase, farm-in/farm-out, joint venture, drilling and operator agreements may occur.
In the energy, mining and infrastructure industries, arbitration is generally favored as a mode of dispute resolution rather than litigation before Thai courts to reflect the preponderance of cross-border transactions in those sectors and the awareness of the widespread enforceability of arbitral awards. Naturally, commercial dispute litigation is also aplenty before Thai courts.
Real Estate and Construction
Real estate and construction disputes take many arise for many reasons: omission and errors in a contract document; technical issues; unexpected site conditions; default of performance by the owner or contractor and/or sub-contractor, issues with an engineer or project manager, etc. Most contracts in the real estate and construction industry would contain a structured dispute resolution clause to account for various kinds of disputes that may arise in the lifecycle of a project.
Disputing parties may fall back on litigation as the primary dispute resolution method for this sector in Thailand, although construction contracts commonly contain an arbitration clause for the settlement of disputes.
The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
Regional Legal Adviser
Senior Legal Adviser
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