Legal issues of general application

Government permission

What government approvals are required for typical project finance transactions? What fees and other charges apply?

Project finance transactions involving foreign and local parties are permitted in Thailand. No project finance-specific governmental approval is required. Parties are required to comply with other general laws (eg, exchange control regulations).

In registering certain securities under Thai law with the relevant government body, registration fees would apply. A mortgage registration requires a fee of 1 baht for every 100 baht of the mortgage amount with the maximum fee amount of 200,000 baht and other nominal transactional fees. Registration fees for business collateral registration vary depending on the type of collateral.

Registration of financing

Must any of the financing or project documents be registered or filed with any government authority or otherwise comply with legal formalities to be valid or enforceable?

A loan agreement in an amount exceeding 2,000 baht must be evidenced in writing and signed by the borrower to be enforceable in Thai courts. A share pledge agreement is enforceable against the respective company or any third party only if the creation of the pledge is reflected in the share register book of the respective company and the respective share certificate is in the possession of the pledgee or its agent. A mortgage agreement over immovable property or over certain types of movable properties must be registered with the competent authority. A business collateral agreement must also be registered with the Department of Business Development.

An agreement made in a foreign language is required to be translated into Thai prior going to the courts, except in the Intellectual Property and International Trade Court, which in its discretion may waive the requirement. In addition, as a condition of admissibility into evidence of agreements in court, the applicable stamp duty is required to be affixed on certain types of agreements (eg, loan agreement, guarantee agreement, hire of service agreement) within 30 days of bringing the document into Thailand (if it is signed abroad), or within 15 days if it is signed in Thailand.

Arbitration awards

How are international arbitration contractual provisions and awards recognised by local courts? Is the jurisdiction a member of the ICSID Convention or other prominent dispute resolution conventions? Are any types of disputes not arbitrable? Are any types of disputes subject to automatic domestic arbitration?

The award rendered by the arbitral tribunal shall be recognised and enforced in a Thai court under the New York Convention for recognition and enforcement of arbitral award and the Thai Arbitration Act BE 2545 (2002). Thailand is a member of the New York Convention. Arbitral award shall be enforced by a Thai court upon due application of a party seeking to enforce the award. Generally, the court will not review the merit of the dispute again since it has been considered and decided by the arbitration tribunal. However, a Thai court may refuse to recognise and enforce the arbitral award based on several grounds as prescribed in section 40 of the Thai Arbitration Act, for example, if the court sees that the arbitral award is against Thai laws, public order or is immoral.

Thailand is not a contracting state to the ICSID Convention. However, Arbitration and arbitral awards using ICSID and ICC arbitration process are enforceable in Thailand through the process in the Thai Arbitration Act.

Arbitrable disputes are limited to civil issues such as business and commercial disputes. Disputes arising out of administrative contracts, such as public-private partnership agreements, may also be arbitrable provided that a cabinet resolution approving the government agency’s agreeing on the arbitration is required.

Law governing agreements

Which jurisdiction’s law typically governs project agreements? Which jurisdiction’s law typically governs financing agreements? Which matters are governed by domestic law?

The parties may agree on the governing law provision in the project agreements and financing agreements. If the project agreement or financing agreement is governed by foreign law (the law other than Thai law), in the event that there is any proceeding taken in the courts of Thailand for the enforcement of the agreement, the choice of such foreign law agreed by the parties as the governing law will be recognised and applied, but only to the extent to which such law is proven to the satisfaction of the courts of Thailand (which satisfaction is within the discretion of the courts) and is not considered by the courts of Thailand to be contrary to the public order or good morals of the people of Thailand.

The general rule of severability may apply to the terms that are contrary to the public orders or immoral meaning that the ability to void or unenforceability of any provision may not affect the other remaining provision. Project agreements, for example, land lease agreements and domestic power purchase agreements, are typically governed by Thai law. Offshore supply agreements and onshore EPC agreements may be governed by foreign law depending on the agreement among the offshore supplier, onshore contractor and the owner. Finance documents of domestic projects that are domestically funded are generally governed by Thai law. However, certain types of security document, (eg, assignment of rights under the EPC contracts that are governed by foreign law, or guarantee agreement by foreign parent company) may be governed by foreign law.

Submission to foreign jurisdiction

Is a submission to a foreign jurisdiction and a waiver of immunity effective and enforceable?

Any agreement providing the courts of a foreign jurisdiction to have exclusive jurisdiction to settle any dispute may not be enforceable in Thailand.

However, Thai law is silent on the effect of the irrevocable submission to the jurisdiction of a foreign court, of the appointment of agents for service of process for the purposes of proceedings before such court and of the waiver to objection of venue. We are not aware of any basis under Thai law to find such submission, appointment and waiver invalid.

A judgment of a foreign court will not be enforced by the Thai courts but may, at the sole discretion of the Thai courts, be admissible in evidence in an action in the Thai courts. They may re-try the entire case on its merits.

An express waiver of sovereign immunity made in writing may be effective. Nevertheless, the government agencies generally may be sued in the courts and may not raise a defense of sovereign immunity. In any case, Thai law expressly prohibits the seizure of state property.