​​​​​​​Nathee Silacharoen, 
David Beckstead,
Sakolrat Srangsomwong,
Norrapat Werajong,
​​​​​Chandler MHM, Bangkok

​​​​​Introduction

After obtaining a favorable arbitral award, the prevailing party may need to enforce that arbitral award against the other party in a country where such party’s assets are located. In Thailand, arbitral awards made in proceedings offshore may not be set aside or appealed against. Therefore, the tactic of requesting that an arbitral award not be enforced by a Thai court has been used in several cases as a last resort by losing parties. 
Using public policy as the ground to prevent the recognition of an arbitral award in Thailand is not uncommon, making it an important issue for further analysis. As such, this article examines recent developments in relation to public policy, as determined by Thai courts, in refusing the enforcement of arbitral awards in Thailand. 

What does the law say? 

Thailand is a signatory to the New York Convention and has adopted the UNCITRAL Model Law for its local arbitral procedural law, which at the time of writing is the Arbitration Act 2002, as amended (the “Arbitration Act”). Under the framework of the Arbitration Act, similar to other states whose domestic law is based on the Model Law, there are limited grounds which a Thai court may rely upon to refuse enforcement of an arbitral award. In summary, such reasons are as follows:

(1)    a party to the arbitration agreement was under some incapacity; 
(2)    the arbitration agreement is not binding; 
(3)    proper advance notice of the arbitral tribunal appointment or the arbitral proceedings was not given to the party against which the arbitral award is sought to be enforced, or such party was otherwise unable to participate in the arbitral proceedings; 
(4)    the arbitral proceedings were not conducted as agreed by the parties;
(5)    the arbitral award deals with disputes beyond the scope of the arbitration agreement or involves disputes that cannot be resolved by arbitration; or
(6)    an enforcement of the arbitral award will be contrary to public order and good morals of the people.

Issues regarding the capabilities of the parties to the arbitration, legality of the arbitration agreement, and due process of the arbitral proceedings depend on the facts and evidence adduced by the relevant parties. To the extent permissible by law, there is not much room for Thai courts to exercise discretion in determining those issues.

To increase the chance of success in objecting to a request for enforcement of an arbitral award in Thailand, particularly in a situation where there are no issues with the formation of the arbitral tribunal or undue process in the course of the arbitral proceedings, the losing party may allege a violation of “public order or good morals of the people” (which is also commonly referred to as "public policy"). This is the most common approach. That said, unlike other grounds for annulment, the courts may refuse to enforce an arbitral award based on public policy grounds even if it is not raised by the parties. 

The lack of a definition of public policy under Thai law means there is no rule for the court to follow. Thai courts must consider their approach to how public policy grounds are applied to requests to refuse enforcement of arbitral awards on a case-by-case basis. The result is that there is no clear-cut interpretation   by Thai courts in determining public policy grounds.  

Interpretation – what is public policy?

"Public policy" is a highly subjective term that refers to the fundamental notions of morality and justice that are necessary for the protection of the common interests of the state and is widely acknowledged among practitioners to vary based on place and time. As mentioned above, pursuant to the Arbitration Act, courts may refuse to enforce an arbitral award which is contrary to the “public order and good morals of people”.

Nevertheless, given that “public order and good morals of people” are ephemeral concepts that change over time in response to sociopolitical factors against which they are considered, the terms are usually evaluated on a case-by-case basis. Judgements of the Thai Supreme Court are the only available source providing examples of the application of public policy in the context of the Arbitration Act. 

Common issues – Examples of Thai courts applying public policy

The following judgements provide examples of the issues that Thai courts usually consider when interpreting public policy in the context of the Arbitration Act.

Whether the reliefs granted in the arbitral award are contrary to Thai law

• In Supreme Court Case No 6292/2561 (2018), relating to a dispute arising from a share purchase agreement between a Thai and a Korean entity, the arbitral tribunal ordered the respondent to pay compound interest to the claimant on default interest. As Thai law prohibits interest to be calculated on interest during the period of default, the Thai Supreme Court concluded that this section of the award was prohibited by law and that the enforcement of this section of the award in Thailand would be contrary to public order.

Whether the application of law in the arbitral award is wrong

• In cases where Thai law is the governing law of the contract, there are cases concerning the period of limitation provided by law. In Supreme Court Cases No 7635/2562 (2019) and No 13570/2556 (2013), the Thai Supreme Court found that the arbitral tribunal determined the beginning of the period of limitation incorrectly. On the basis that there was a wrong application of the relevant Thai law, it was concluded that the enforcement of the award would be contrary to public order. 

Whether the underlying agreement is voided by Thai law

• In Supreme Court Case No 840/2561 (2018), it was found that the execution of the underlying agreement was prohibited under the law and was void because the claimant, as a foreign entity, was not allowed to purchase condominium units in Thailand. Since the arbitral award required the respondent to refund the sum paid to the claimant under such agreement, the Thai Supreme Court refused recognition and enforcement of the award.
• The above case suggests that the Thai Supreme Court has maintained the same approach that it took previously in a landmark case rendered in 2006 relating to an Engineering Procurement and Construction contract (EPC) between a state enterprise and a foreign contractor. This EPC contract was considered unlawful and void by the Thai Supreme Court on the basis that the management of the state enterprise gained undue benefits from executing the contract. Although the arbitral tribunal ruled in favour of the claimant (i.e., the contractor) for payments for the construction work, the Thai Supreme Court refused to enforce the arbitral award on the basis of its finding that it was contrary to public order.

Whether the enforcement of an arbitral award would be contrary to Thai law

• In Supreme Court Case No 13535/2556 (2013), the arbitration was conducted in Singapore and there was no issue concerning the validity of the arbitration agreement, formation of the arbitral tribunal, or validity of the proceedings. However, the losing party (which was a Thai entity) was under bankruptcy proceedings and the prevailing party which sought to enforce the arbitral award in Thailand did not comply with Thai bankruptcy laws. The Thai Supreme Court declined to enforce the arbitral award as the enforcement would have been contrary to public order. 

Judicial review 

The public policy exception is a basis for Thai courts to refuse enforcement of an arbitral award under the Arbitration Act. It appears that if a Thai court considers an arbitral award to be harmful to "public order or good morals", the public policy exception might be used as a safeguard to protect the essential principles and morality of the state.

As a party to the New York Convention, Thai courts are required to uphold the Convention’s provisions in the context of an application to recognize and enforce a foreign arbitration award rendered in another contracting state. Despite the narrow criteria for applying public policy exemptions under the New York Convention, Thai courts appear to thoroughly examine the merits of a case in order to determine whether an award would be contrary to Thailand's public order or good morals. Although it remains unpredictable as to whether Thai courts will examine the merits of a particular case, the courts usually tend to do so   in situations where violation of public policy is contended.

Conclusion

Thailand is bound by the provisions of the New York Convention under which limited and narrow international standards for the application of public policy grounds should be applied.  However, in practice, Thai courts tend to apply a local standard of public policy with a broad interpretation. This exception is often used to justify Thai courts’ review on the merits of arbitral awards. As a result, it is important look for practical and acceptable approaches for dealing with arbitration matters to ensure that the arbitral award will survive review by a judicial body in Thailand.