THE USE OF ARBITRATION IN
THE ADMINISTRATIVE CONTRACT
: THE RECOMMENDATION FOR
THAILAND
Natthinee Sereechettapong
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
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
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.
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 have legal ability to
conclude the arbitration clause in administrative
contracts or not, was left open to be determined by
law-makers of the countries.
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.
DOMESTIC LAWS
 England
and Wales
are representative of common law countries.
 have no administrative court.


have no restriction on 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 restriction on the use
of arbitration in administrative contracts.
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 prohibit a public entity’s recourse to
arbitration.


 Ex

creating different environment for the parties when
bargaining over the arbitration clause.
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.
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.
RECOMMENDATIONS FOR THAILAND

The cabinet resolution:
 may be imposed by misconception of the Thai
government.
 should be revised.
Q&A