Arbitration In Thailand Takes A Big Step Backwards - Foreign Representatives Subject to Harsh Criminal Penalties

Arbitration in Thailand Takes a Big Step Backwards - Foreign Representatives Subject to Harsh Criminal Penalties

As the vast majority of disputes subject to arbitration in Thailand are governed by Thai laws, foreign representatives, advocates and lawyers have been effectively shut out of the system

RE: "Arbitration in Thailand Takes a Giant Leap Forward"; Legal Era (October 2019)

Perhaps we spoke too soon when the Thai Government amended the Arbitration Act.

In April 2019, Thailand's Arbitration Act was amended to welcome the participation of foreign citizens as arbitrators and advocates in arbitration proceedings conducted by the Thai Arbitration Institute ("TAI") and the Thailand Arbitration Center ("THAC"). The amendments established a detailed procedure for a foreign arbitrator to obtain a certificate, visa, and work permit for the duration of the arbitration proceedings.

As stated in the 2019 amendments, the same procedure would apply "mutatis mutandis" to foreign representatives (often foreign advocates and foreign lawyers):

Section 23/6. For arbitration proceedings in the Kingdom, the parties to the dispute may appoint one or several foreigners to be their representatives to act on their behalf, and the provisions of this Chapter shall apply to the said representatives mutatis mutandis.

Arbitration Act (No. 2); (B.E. 2562; 2019)

As it turned out, despite the legislative intent of the 2019 amendment, foreign representatives are still prohibited from engaging in arbitration work if the underlying dispute is governed by the laws of the Kingdom of Thailand. As the vast majority of disputes subject to arbitration in Thailand are governed by Thai laws, foreign representatives, advocates and lawyers have been effectively shut out of the system. And while a party may appoint "one or several foreigners to be their representatives", such foreign representatives are nevertheless prohibited under immigration and labor laws from working in Thailand as duly appointed party representatives.

Black's Law Dictionary defined the Latin term, "mutatis mutandis", as "all necessary changes having been made" or "with the necessary changes". Thus, in order for the 2019 amendments to Thailand's Arbitration Act to have their intended effect, all necessary changes should be made to allow foreign representatives (advocates and lawyers) to secure their certificates, visas, and work permits – in exactly the same manner as foreign arbitrators.

Thailand's Ministry of Labor apparently disagrees. An intense interagency dispute has arisen between the Ministry of Justice (which administers the Arbitration Act) and the Ministry of Labor (which regulates labor and employment). The Ministry of Labor has long published a list of "Prohibited Occupations for Foreigners." In April 2020 (one year after the Arbitration Act was amended), the Ministry of Labor issued a notification under the curiously named "Emergency Decree on Foreign Working Management" to expand the list of prohibited occupations.

The notification adopted broad new restrictions on foreign citizens engaged in certain professional services, including legal and accounting services. Under the "Emergency Decree", arbitration services are defined as legal services to be provided solely by Thai citizens (though not necessarily by licensed Thai attorneys) with two notable exceptions: (1) services provided by an arbitrator; and (2) services provided in relation to cases which are not governed by Thai law.

The Ministry of Labor appears to be more concerned with nationality than the quality of legal services. After all, a license to practice law is not required in Thailand to represent a party in arbitration. Under Thailand's "Lawyers Act" (B.E. 2528; 1985), a license to practice law is only required "to appear in court, prepare a plaint or answer, appellate plaint or appellate answer for both Court of Appeal and the Supreme Court, motion, petition or statements incidental to a court proceeding on behalf of another person…"

Thus, any Thai citizen (whether lawyer or layman) may be appointed as a party representative in arbitration – regardless of the law governing the dispute or the representatives knowledge thereof. However, a foreign citizen may only be appointed as a party representative in relation to disputes which are not governed by Thai law.

The revised notification adopted even more onerous restrictions against foreign accounting (and auditing) professionals, who are broadly prohibited from performing even secondary or tertiary support functions (including accounting education, consulting, development, training, and use of computers, software, and electronic devices).

Any foreign person – including any foreign lawyer, accountant, or auditor – who works in violation of the "Emergency Decree on Foreign Working Management" is subject to imprisonment for a term not exceeding five years or a fine of two thousand Baht (or both).

Foreign professionals providing such controversial services (even with a valid certificate, visa and work permit in hand) should expect to receive an unannounced visit from Officer Friendly to inspect visas and work permits, to interrogate employees, and to otherwise ensure that the foreign professional is not providing services which are restricted for Thai citizens.

Few foreign professionals are eager to be imprisoned in Thailand for work permit violations. (Indeed, some Thai jails are already overcrowded with rising numbers of student protesters and political prisoners. One can only imagine the potential synergies among imprisoned students and foreign legal and accounting professionals sharing the same jail cells. The possibilities are endless…).

Not surprisingly, several leading international arbitration practitioners have already relocated to Singapore, apparently preferring to work under the international-standard rules of the Singapore International Arbitration Centre (SIAC).

The final outcome of the ongoing interagency dispute between the Ministry of Justice and Ministry of Labor with respect to the participation of foreign lawyers and advocates in arbitration remains to be seen, though the Ministry of Labor has certainly won the latest battle. For the time being, given Thailand's harsh criminal penalties, arbitration advocacy is the exclusive domain of a modest number of bilingual or multilingual Thai arbitration practitioners (other than disputes governed by foreign laws, as noted above).

The multicultural teams of local and foreign practitioners -- which had previously experienced so much success before arbitral tribunals in Thailand – are effectively prohibited for the foreseeable future (praevisum futurum).

As a practical matter, foreign practitioners could not appear alone (solo) before arbitral tribunals in Thailand due to the simple reason that the Arbitration Act (Section 25, Paragraph 2) requires that evidence be introduced under the Code of Civil Procedure. Thus, foreign practitioners have always appeared together (ab ipsis) with experienced Thai litigators in cooperative multicultural legal teams.

In the author's humble opinion, the Thai legal industry has little to fear from a handful of experienced foreign practitioners. Foreign competition and multicultural cooperation can only improve the quality of professional legal services in the long run.

Apparently, when it comes to foreign lawyers and representatives, mutatis non mutandis est.

Disclaimer – The views expressed in this article are the personal views of the authors and are purely informative in nature.