PPP Law, 3-Airport High Speed Rail: Foreign Arbitration Is Welcome

The concession contract for the 3-airport high speed rail clearly specifies that if the concessionaire and the government project owner cannot resolve any of their disputes amicably within 60 days, either side could bring the dispute to a Thai court of competent jurisdiction, quite likely the Central Administrative Court, which typically has the power to hear concession contract cases.

Nowhere does the agreement refer to arbitration proceedings under the Arbitration Rules of the Arbitration Institute, the Ministry of Justice of Thailand as the ultimate means of dispute resolution people were accustomed to in the past for this type of contract.

The absence of the Thai arbitration requirement in this concession agreement, as well as in other modern public-private partnership (PPP) agreements—yes, it is a new trend— leaves both parties with the freedom at a later stage to agree to resolve their dispute by way of arbitration, Thai or foreign.

ICC or UNCITRAL

Concessionaires, regardless of nationalities, quintessentially prefer foreign arbitration, notably to be held in a neutral third country such as neighboring Singapore or Hong Kong, under internationally recognized foreign arbitration rules, including the International Chamber of Commerce or the United Nations Commission on International Trade Law or UNCITRAL.

Even with higher expenses when compared with their local counterpart, these arbitration proceedings at a third-country venue under foreign rules seem to offer comfort and peace of mind to concessionaires, who rightly or wrongly believe—based on previous precedent cases— that they might be able to get a favorable arbitral award and take it back to Thailand for an enforcement in a Thai court.

Your Thai Law Experts

Such foreign arbitration is at this point an open possibility in any large PPP concession agreement with a Thai government project owner.

With an analogy drawn to a Thai court hearing, foreign arbitration proceedings can be characterized as a private legal battleground overseas for both parties, represented by their foreign lawyers at the hearing, backed up by Thai law firms in Bangkok, obtaining and examining testimonial evidence from the testimony of each side’s Thai law expert witnesses, Thai lawyers qualified to practice law in Thailand, offered in the English language, before a panel of foreign arbitrators who act as if they were judges.

Something contentious and captivating, very similar to the U.S. House Intelligence Committee and Judiciary Committee’s impeachment investigations you have seen on cable TV in recent weeks.

 

Prior Cabinet Approval

One caveat: any foreign arbitration to resolve a PPP dispute can be agreed to by both contractual parties only after a prior Thai Cabinet approval has been released.

The Cabinet approval, considered routine and not difficult to obtain, has always been a pre-requisite for a foreign arbitration proceeding in a government PPP or procurement contract all along, evidence that the Thai government, although under the duty to promote arbitration in Thailand under Thai arbitration rules, is also broad-minded enough to permit foreign arbitration.

3-Airport Request for Proposal

In fact, the Request for Proposal or RFP for the 3-airport high speed rail readily envisaged the need for foreign arbitration in the case that the concessionaire is a foreign entity.

The RFP unequivocally stipulates that if the parties cannot resolve any dispute under the concession agreement within 60 days, either party may bring the dispute to a Thai court of competent jurisdiction, except where the concessionaire is a foreign legal entity or where there are other necessities, in which case the parties can resolve their dispute by arbitration with the prior approval of the Cabinet before the concession agreement is signed.

Arbitration Exception Culled from Concession Contract

By way of implication, the RFP already foresees the need of the foreign concessionaire to have a choice of a foreign arbitration proceeding. Verbatim, only the word, “arbitration” is cited, without any indication of Thai or foreign arbitration.

Generally, the prior Cabinet approval is not required for a Thai arbitration.

The foreign arbitration exception in the RFP was finally removed from the actual concession agreement as the concessionaire is a Thai entity, albeit with foreign shareholders. The Thai concessionaire, with the agreement of the project owner and the prior Cabinet approval, can always opt for foreign arbitration to add to its leverage in a dispute—of course, even a concessionaire of Thai nationality believes they can benefit from arbitration conducted abroad.

Arbitration Act of 2002

The Arbitration Act implements the New York Convention, to which Thailand is a party, and helps concessionaires from multiple countries put their arbitration clause into action and protects the award granted under any arbitration rules, foreign or Thai.

Once you agree to arbitrate, the Arbitration Act ensures that your arbitration agreement is respected and the opposing party cannot litigate through court without giving arbitration a chance, barring exceptional circumstances. Your good lawyers can poke holes in the opponent’s case to find you those extraordinary scenarios where you can avoid arbitration if you foresee that the alternative dispute resolution may potentially work against you.

People often mix up the Thai Arbitration Rules of the Arbitration Institute, the Ministry of Justice with the Arbitration Act; they have nothing to do with each other.

The Thai arbitration rules are the Thai equivalent of the ICC and UNCITRAL arbitration procedures, which govern how parties appoint arbitrators and how they proceed in an arbitration proceeding.

The Arbitration Act is a legislation that protects you and your arbitral awards, even though you are a foreign entity and the award was rendered under a foreign rule.

Wirot Poonsuwan is Senior Counsel and Head of Special Projects at Bangkok law firm Blumenthal Richter & Sumet and can be contacted at wirot@brslawyers.com.

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