As Thailand is a contracting state of the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards, international arbitral awards can, in principle, be enforced in Thailand. However, not all awards will necessarily be enforceable. The Arbitration Act BE 2545 (2002) gives courts the discretion to deny the enforcement of an award if the court determines that enforcing it would be contrary to “public order or the good morals of the people” (often referred to as “public policy”). Similarly, the Arbitration Act allows a court to set aside a domestic award if its recognition would violate public policy. This discretionary power of the court is prescribed by the law and does not require any party to make an argument on public policy grounds to trigger such power.
A recent Supreme Court judgment demonstrates that a court considering an award will review the legality of the arbitral proceedings as well as the content of the award. In this case, the Supreme Court set aside an award on the grounds that it violated public policy because it was the result of arbitration that did not proceed in accordance with the relevant law.
Under Thai bankruptcy law, after the Bankruptcy Court accepts a request for rehabilitation of a debtor, all civil proceedings against that debtor, including arbitration proceedings, must be stayed until the court orders otherwise or until the rehabilitation case ceases. In this matter before the Supreme Court, however, the arbitrator continued with the arbitration and went on to render an award even after the court had accepted the request for rehabilitation. The award was later challenged to be set aside on the grounds that continuing with the arbitration was against public policy. While setting aside the award was arguably unnecessary, in this case (as the relevant bankruptcy law already provided that any arbitral award inconsistent with the law would have a nonbinding effect on the debtor), the Supreme Court considered this procedural error to be contrary to public policy and set aside the award under the Arbitration Act.
Both domestic and international arbitration awards may have content that is contrary to Thai public policy. One reason for this is that the flexibility of arbitration opens ways for parties to agree on various aspects of the proceedings, from the selection of arbitrators to agreeing on the governing law of a different jurisdiction. Accordingly, it is possible that the arbitrators rendering an award that would be enforced in Thailand do not have any familiarity with Thai law or have never practiced there. Moreover, the merits of a particular case could be decided on the law of a jurisdiction that could be very different from Thai law. As the judgment mentioned above demonstrates, a Thai court will review an award carefully before determining whether its enforcement would violate public policy.
Even though arbitration proceedings may take place in another jurisdiction and under foreign law, if the award (or any part of it) is going to be enforced in Thailand, it is important to engage Thai counsel early in the process for their advice on how to prevent certain errors that could jeopardize the successful enforcement of a costly and time-consuming arbitral award.
This article was first published in the October 2024 Thailand edition of The Legal Industry Reviews, an international platform that publishes news and applied law updates from industry-leading law firms worldwide. To browse the latest complete issue, please visit The Legal Industry Reviews website.
