It is always a prudent practice for each and every international commercial contract to include a clause stating how disputes will be resolved and in Thailand a common alternative to Thai litigation is “arbitration”. In determining if litigation or arbitration is to be adopted as a means of dispute resolution in a contract, a number of factors need to be taken into account, e.g. speed, costs and neutrality. This article serves as a quick guide to describe in what circumstances arbitration is viewed by many to be a better means of dispute resolution than litigation in Thailand.
What is arbitration?
Arbitration is one of the dispute resolution methods (among others, e.g. litigation and mediation) in which disputes are resolved privately in accordance with a selected set of institutional rules (e.g. ICC Rules of Arbitration of the International Chamber of Commerce, Thai Arbitration Rules of the Thai Arbitration Institute, Office of the Judiciary) and by an impartial expert or a panel of experts either in laws or in specialized areas relating to such dispute. These experts are nominated, chosen or agreed upon by each or every party to such dispute and commonly called “arbitrators”. In effect, these arbitrator are placed in the same position as a judge in litigation and exercise quasi-judicial capacity. Arbitration is a consensual process and can be used only if arbitration is expressly spelt out as a means of dispute resolution in a contract by all parties to such contract.
These experts are nominated, chosen or agreed upon by each or every party to such dispute and commonly called “arbitrators”.
In effect, these arbitrator are placed in the same position as a judge in litigation and exercise quasi-judicial capacity. Arbitration is a consensual process and can be used only if arbitration is expressly spelt out as a means of dispute resolution in a contract by all parties to such contract.
Advantages of Arbitration over Litigation
In general, both arbitration and litigation have pros and cons. The following are the advantageous factors that influence many contracting parties to prefer “arbitration” to Thai litigation:
Quite often, foreign contracting parties to an international contract may not be willing to litigate in the national courts of the other party, e.g. Thai courts.
Arbitration can offer neutrality both in terms of the place of dispute resolution and the nationality of the arbitrators because the parties to arbitration are not restricted by Thai laws from selecting an arbitrator of their own nationality.
Choosing the English language as a means of communication in the arbitration proceeding and adopting a neutral country as a venue of dispute resolution.
Arbitration offers the contracting parties much more procedural flexibility than litigation. Most arbitration rules preserve the ability of the parties and arbitrators to formulate the procedure as well as to set the timeline best suited to the relevant dispute. Further, the parties are permitted to choose when hearings are to be held, what degree of disclosure can be afforded and what type of documents can be presented for the purpose of hearing or resolving the dispute.
In Thai civil litigation proceedings, there are certain procedural loopholes where the parties can resort to as a delaying tactic. In addition, Thai judges are typically overwhelmed with cases on hand. Therefore, arbitration can generally be speedier than litigation because the procedural and timetable are more within the control of the parties and the arbitrators. This is different from the court proceedings in which the pre-determined procedure and formality need to be strictly followed in accordance with the Thai Civil Procedural Code.
(d) Better Understanding of Technical Skills
In litigation, the parties cannot elect the judge of their own and if the dispute in question is complex or multi-jurisdictional, it may not be easy for the judge to understand the issues involved and the surrounding circumstances in which such dispute is related or evolves. On the other hand, the contracting parties in arbitration have freedom to select either their own respective arbitrators (in the case of, for example, a panel of three arbitrators) or to discuss, determine and mutually agree upon certain skill, professional qualification or nationality required of the sole arbitrator (in the case of the sole arbitrator).
Notwithstanding the foregoing, arbitration may not be the best choice of dispute resolution for every party in every instance as it might have drawbacks depending upon a party’s particular circumstances and the transaction at issue. It is therefore necessary to make a considered decision in each case. We therefore recommend readers to consult professional legal advisors for your specific case in question. SBC Interlaw is an international law firm with significant experience in dispute resolution across countries in South East Asia and our team of lawyers is qualified and well equipped to assist you in this matter. If you need any advice on dispute resolution, please contact any of our SBC Interlaw Thailand lawyers or send an enquiry to our law firm in Thailand.
Latham & Watkins