The use of arbitration in the administrative contract : the recommendation for Thailand

1. The use of arbitration in the administrative contract : the recommendation for Thailand NatthineeSereechettapong

2. Objectives • To examine arbitration laws and practices on the administrative contract in ‘Thailand’ and some ‘European countries’ • To analyze the reason behind such practices from Law and Economics perspective • To initiate some recommendations for Thailand

3. Terms • Administrative contract • entered into by public entities with private parties in connection with public interest matters. • e.g. concession contract, public services contract • A classic form of investment contracts • Arbitration clause • A clause in which the parties undertake to settle disputes that may arise by means of arbitration. • A significant contractual device for foreign investment protection

4. Statement of problem • Thailand • Its economic improvements depend on FDI • ‘An arbitration friendly state’ at the beginning • The Cabinet resolution of 2004 and 2009 • imposed to prohibit public entities from including the arbitration clause in the administrative contracts, unless prior Cabinet approval was obtained. • has restrained international investment. • has been criticized by foreign investors.

5. International Uniform Laws • The Arbitration law in ‘Thailand’ and most of ‘European countries’ is based on the UNCITRAL model law on International Commercial Arbitration • does not detail the requirements for arbitrable matters other than “matters arising from all relationship of commercial nature, whether contractual or not”. • Whether public entities havelegal ability to conclude the arbitration clause in administrative contracts or not, was left open to be determined by law-makers of the countries.

6. International Uniform Laws • European convention on international commercial arbitration of 1961 • Article II , paragraph 1 provides that legal persons of public law have the right to conclude valid arbitration agreement. • Only Belgium has made a reservation to this provision. • Other signatories, especially countries in continental Europe, do not conform with this provision firmly.

7. Domestic Laws • England and Wales • are representative of common law countries. • have no administrative court. • have no restrictionon the use of arbitration in administrative contracts. • Other Continental European Countries • are representative of civil law countries. • Administrative court is very well developed and has jurisdiction over disputes in relation to administrative contracts. • have Ex Ante and Ex Post restrictionon the use of arbitration in administrative contracts.

8. Domestic Laws • Ex Ante restriction • conducted by the legislature and the government. • Two different ways of enactment: • 1. explicitly prohibits a public entity’s recourse to arbitration. • 2. does not explicitly prohibita public entity’s recourse to arbitration. • creating different environment for the parties when bargaining over the arbitration clause. • Ex Post restriction • conducted by the national court. • making a final decision whether to enforce an arbitration clause or set aside the award, according to domestic laws.

9. Domestic Laws • Thailand • At first, Thailand has no restriction at all. • Moreover; the new Arbitration act of 2002 expressly allows public entities to include the arbitration clause in administrative contracts, despite the establishment of administrative court in 1999. • Recently, the cabinet issued a resolution in 2004 and 2009 to prohibit public entities from including arbitration clause in such contracts, merely due to Thai government’s losses in several arbitration cases.

10. Recommendations for Thailand • The cabinet resolution: • may be imposed by misconception of the Thai government. • should be revised.

11. Q&A