As Thailand develops as a regional business hub, disputes will inevitably arise. Managing these disputes fairly and systematically is critical to economic stability.
Businesses can mitigate the risk of trade disruptions by using clear contracts, protecting intellectual property, and staying informed on regulations. They can also include clauses stipulating that any disputes will be resolved through arbitration.
Fairness in business transactions
As Thailand strives to become a global business hub, the country must address issues that impact its competitiveness. Corruption remains a significant problem. According to Transparency International’s 2022 Corruption Perceptions Index, it ranks 101st out of 180 countries and is widespread across sectors. Bribes and facilitation payments are common in certain industries, while practices like the giving and receiving of expensive gifts to build business relationships also occur.
Conflict resolution is a critical element of commercial transactions. Attorneys and law firms that counsel businesses must understand the legal framework and processes for dispute settlement in Thailand, including mediation, arbitration, and litigation. By incorporating Thailand dispute resolution clauses in contracts, educating clients on best practices, and staying current with challenges and future trends, lawyers can help their clients successfully negotiate disagreements.
The country has a civil court system that includes provincial and district courts, as well as the national Court of Appeals and the Supreme Court. Judges follow an inquisitorial approach that requires parties to provide evidence such as documents, witness testimony, and site inspections. The Civil Procedure Code governs lawsuit filing, court processes, evidentiary standards, and judgment enforcement.
In addition, the Foreign Business Act, enacted by the Chuan Leekpai-controlled National Legislative Assembly in 1999, limits foreign involvement in various sectors, including agriculture, media, rice trading, real estate, land trading, mining, wholesaling and retailing, restaurants, and services. In order to operate in these sectors, companies must obtain a foreign business licence.
Enforcement of trade agreements
The occurrence of trade disputes affects businesses of all sizes and industries, affecting market access and investor confidence. As a regional trading hub, Thailand must have structures in place to resolve these disputes efficiently and fairly. This will help ensure that local companies can compete in global markets and protect their own commercial interests.
Dispute resolution mechanisms are a vital aspect of trade agreements, and can help address issues such as intellectual property in Thailand, tariff barriers, and non-tariff barriers. They also allow for the verification of compliance with international trade standards and promote fair competition.
As a WTO member, Thailand participates in international dispute settlement processes. This helps strengthen a rules-based trading system and provides assurance to foreign investors. For example, when a country exports agricultural products to Thailand at artificially low prices (dumping), it can trigger anti-dumping duties, which help level the playing field and safeguard domestic industries.
Trade disputes often involve complex issues that may require a thorough legal review. Ideally, parties should first seek informal negotiation, which involves open communication and can preserve relationships, lower legal costs, and speed up the process. Arbitration is a popular method, particularly in cases that involve international contracts or issues under international law. Court litigation is another option, but can be costly and time-consuming. Thailand recognizes foreign judgments and arbitration awards under the New York Convention, making enforcement more accessible for international parties.
Development of legal and regulatory frameworks
As Thailand continues to play a greater role in regional and global trade, it faces an increasing number of commercial issues. These range from breach of contract disputes to intellectual property conflicts, and they may require amendments to domestic laws or reliance on external dispute resolution mechanisms. As a member of the World Trade Organization, Thailand frequently files and defends complaints about dumping, countervailing duties, tariffs, or other trade barriers. These can have significant impacts on local businesses, especially small and medium-sized enterprises (SMEs), forcing them to modernize or restructure in order to remain competitive. The country also faces challenges navigating the implications of international trade agreements and implementing environmental, social, and governance standards in its domestic production processes.
Legally, a variety of dispute resolution options are available in Thailand, including the judicial system and arbitration. Arbitration is particularly favored for international matters because it is faster, less expensive, and more flexible than court proceedings. In addition, courts often encourage or mandate mediation and other alternative dispute resolution (ADR) processes before full litigation.
Aside from these formal methods of dispute resolution, the most effective way to mitigate trade disputes is to prevent them from arising in the first place. This can be achieved through clear contracts, intellectual property protection, and keeping up with current regulations. It is also recommended that businesses stipulate in their contracts that any disputes will be resolved through arbitration to avoid lengthy and costly litigation.
Improved market access
As Thailand continues to play a key role in global trade, the ability to resolve trade disputes effectively is critical for economic growth and international credibility. The resolution of a dispute can help preserve relationships with trading partners and clarify legal and regulatory requirements. It also allows businesses to take the appropriate steps to meet their business goals, including drafting clear contracts and protecting intellectual property.
Disruptions in trade can lead to costly lawsuits, loss of business, and damage to reputations. The resolution of a dispute can avoid these problems by keeping disputes private, improving communication, and preserving the rights of both parties. Dispute resolution can also help reduce costs and time to market by avoiding long, drawn-out court proceedings.
Dispute resolution is also helpful for small and medium-sized enterprises (SMEs) that lack the financial resources and legal knowledge to defend their interests in a dispute. Through mediation or arbitration, SMEs can avoid expensive legal battles and maintain their trade connections.
The resolution of a trade dispute can improve Thailand’s market access in foreign markets by removing or changing discriminatory trade barriers. For example, some major trading partners have required Thai products to undergo additional testing or have more stringent standards than the country’s own rules. By successfully challenging these barriers, the country can improve its market access and boost its exports.