Democracy blooms? – Thailand’s legal market | Asia Business Law Journal
Thailand is on the cusp of monumental change as a military regime prepares to loosen its grip on power. But how will this change affect the legal landscape? John Church reports
If no one changes the script at the last minute, Thailand is poised for its first democratic election since a 2014 military coup. The poll is scheduled for 24 February 2019.
The term “democratic election” is used in a looser sense, considering political gatherings were banned until only recently, in December, and the slapped-together opposition parties that have since registered, or are still waiting to have registrations approved, are contending with a well-oiled pro-regime party (Palang Pracharath, or PPRP). Late changes to 350 electoral boundaries have caused a supposedly independent Electoral Commission to come under fire with claims of gerrymandered electorates, and reports of massive vote buying in the form of regime handouts to low-income earners and the elderly have also emerged.
But things must at least be seen to be on the democratic uptick if Thailand is to see a return of much-needed Western foreign investment, and if the country is to rejoin the fold of countries developed enough to rule by methods other than authoritarian.
“The elections in Thailand are very important as the world will be watching,” says Franck Fougere, managing director of Ananda Intellectual Property law firm, foreign trade adviser to the French government and former president of the Franco-Thai Chamber of Commerce. “It is time for Thailand to return to a true democratic regime and the elections are a clear opportunity to boost investor confidence in the country and increase foreign direct investment. Hopefully, Thailand will send a strong signal to the world that it has appeased its internal political divisions and successfully managed to preserve good economic growth while bringing back democracy to the people.”
Warot Wanakankowit, founding partner at the law firm Warot Business Consultant, says real change will occur “as the new government … shall face more scrutiny than the current government because it will be considered the democratically elected government. In my opinion, the new government may be a hung parliament, so there will be a lot of factors that might create instability for the new government.
“However, having said that, I would still expect the economy in Thailand to do well in 2019. Also, after the election, I hope to see more investment from foreigners in Thailand.”
Other lawyers are divided on the completeness of change to democracy but most maintain an optimism that at least things are moving in the right direction, which should bode well for growth.
“My guess is that the elections will lessen the political tension which is being felt at the moment and will be good for business,” says Jayavadh Bunnag, senior partner and managing director at International Legal Counsellors Thailand (ILCT), member of the Council of State’s committee to revise laws on business organizations, and president of the International Law Association of Thailand. “The prevalent feeling is that the pro-government alliances will restore the current prime minister [and coup leader Prayut Chan-o-cha] to power.
“However, the new government will consist of coalition parties and this will change the political landscape. As far as business is concerned, this will bring about less predictability in policy decisions, for example, on new and pending infrastructure projects. However, the change should not adversely affect day-to-day business, as this is governed by existing laws.”
Bunnag says full-service law firms would not be affected by changes brought about by the general election. “Corporate law practice is dictated by the general business environment rather than politics and its diversified base will see it through most situations,” he notes. “On the other hand, firms that run ‘boutique’ or transactional practices will be more vulnerable to change.” He says practice areas that will continue to do well in 2019 will be mergers and acquisitions, real estate, IP and corporate advisory work. “It is inevitable that there will be a lot of political bickering after the general elections, but all in all, I think stability will remain.”
There are, however, more negative views. One law firm representative gave his views on the condition of anonymity, a rare consideration for this journal even as it covers the more and less liberal states across the region. “Unfortunately, corruption has thrived under the military regime,” the lawyer says.
“The junta, like its democratically elected predecessors, has consciously avoided any meaningful reform of law enforcement and the criminal justice system. Such reforms are undoubtedly necessary to support Thailand’s social and economic progress. Thus, an atmosphere of impunity continues to prevail.”
Jirapong Sriwat, partner at Nishimura & Asahi (Thailand), points out that in the past four years, Thailand’s participation in a number of international undertakings has been suspended due to its lack of democracy. “The EU has delayed free trade agreement negotiations with Thailand and banned the country from exporting certain products to the EU, as it is only willing to come to the table with a democratically elected government,” he says. “In light of this, as the long-awaited general election draws closer, anticipation of international recognition and increased foreign direct investment grows.”
Sriwat says that upon restoration of democracy in Thailand, the nation’s credit rating is expected to be enhanced and Thailand will become a more attractive investment destination for foreign countries. “With the launch of the EEC [Thailand’s Eastern Economic Corridor development plan] in place, the businesses of financing and building infrastructure may be of particular interest to foreign investors.”
Daniel Chernov, managing partner at Siam ADR, is more succinct. “Foreign investment cannot thrive in the absence of basic civil liberties,” he says. “We hope that all basic civil liberties [freedom of speech, freedom of press, freedom of assembly] will be restored following the pending election.”
Adds Nathapong Tongkaew, a partner at Domnern Somgiat & Boonma (DSB): “Currently, some countries are reluctant to cooperate with the Thai government due to the status of our government. Those countries should be more willing to provide support to Thailand after the election. However, the election and the formation of the government may delay legislative procedures.”
Veeranuch Thammavaranucupt, a senior partner at Weerawong Chinnavat & Partners, says her firm anticipates that M&A activity will continue as usual, as government policy generally remains neutral for foreign investment. “The business activities of major investors are likely to be unaffected by the upcoming election,” says Veeranuch. “However, having said that, for certain sectors such as power, infrastructure and public-private partnership [PPP] related businesses, investors are unlikely to make major decisions now pending clear policies from the new government.”
Kudun Sukhumananda, founding partner of Kudun and Partners, says that, “while the military government has kept things going and tried to steer the country forward, the upcoming elections will: (1) occupy everyone’s time and attention, precluding reform or significant change until after the election; and (2) likely result in a semi-populist government that will focus on social measures to the possible exclusion of economic reforms and adjustments needed to permit the Kingdom to compete on the world stage.
“It’s too early to predict how the election will affect the legal system, but the points noted above will surely tie up the legal system in protracted disputes about foreign ownership, rights of the individual versus rights of government and the rights of businesses.”
Threenuch Bunruangthaworn, executive partner at ZICO Law (Thailand) in Bangkok, says that while she cannot predict the direction of policy of a newly elected government, she believes that the current business trend and government policy in the digital sector will remain one of the main focuses of the upcoming government and the 2019 market.
“The growth of the digital market and transformation of business into digital platforms and integration with online segments will play a significant role in 2019,” says Bunruangthaworn. “In the past few years, we have seen numbers of clients seeking our advice on e-commerce and fintech business. Moreover, authorities have become cautious of the digital trend by issuing and amending laws and regulations to support this digital trend. We believe that the digital market still has the potential to grow in 2019.”
It’s not just technology where the regime has been busy working at full steam introducing new legislation aimed at accommodating free market principles, and the pace of change has meant the quality of legislation has suffered in some instances.
“An elected parliament is expected to produce better-quality legislation, i.e. one that has been thoroughly considered and reviewed, instead of passing laws that are impractical to implement and then having to withdraw them, as is the present experience,” says Bunnag of ILCT.
One example of where the legislation may have fallen short of effectiveness is the amendments to the Trade Competition Act (TCA). Sriwat, from Nishimura, says that following the enactment of the new TCA in 2017, which addresses certain legal loopholes existing under the previous legislation, five new “Notifications of the Trade Competition Commission” were issued on 1 November 2018. “With regards to the mergers and acquisitions aspect, although the TCA prohibits mergers and acquisitions that may result in material decrease in trade competition, currently no threshold for the prohibited mergers and acquisitions has been officially published as binding regulations,” says Sriwat. “Currently, the drafts of the notifications stipulating the merger control are in the final stages of examination by the government gazette. Upon the enactment and enforcement of such notifications, mergers and acquisitions in Thailand would be subject to the merger control regime, and may be subject to the merger filing requirement.”
Bunruangthaworn, from ZICO, adds that there is no actual precedent or official interpretation of the new Competition Act and its related regulations. “The major amendment includes the merger control issue,” she says. “According to the previous act, the business operators need to obtain OTCC’s (Office of the Trade Competition Commission) approval for merger of the businesses that may result in monopoly or unfair competition. However, under the new act, the businesses that intend to merge are subject to both pre-merger approval and notification, and post-merger notification.
“Regarding the verbal interpretation from officers, the OTCC has semi-judicial power to enforce the new act and impose administrative penalties. Even though there is a risk in relying on the verbal interpretation because there is no clear guideline on the pre-merger approval and notification and post-merger notification, court precedents, and official interpretation of the cases, the OTCC works the closest to the implementation of the new act and is likely to have the best understanding of the new act.
“For example, the OTCC has the authority to give approval for a business merger, which may result in a monopoly. In this case, we may rely on the OTCC interpretation of the new act in regard to the approval. However, we might suggest to clients to seek official discussion with the OTCC for certain matters. In addition to the official interpretation of the OTCC, we also examine and study the new act and integrate our opinion with the OTCC’s interpretation.”
Thanathip Pichedvanichok, managing partner of Thanathip & Partners, says there remain subordinated legislation to be enacted in order for the TCA to become fully effective. Such subordinate legislation include: (1) merger control, for example notifications on pre-merger approval and post-notification procedures; (2) thresholds for presuming dominance; (3) nature of asset or share acquisition that would be considered a merger under the TCA; and (4) enforcement or imposition of penalties by the OTCC.
“While it appears that the deadline for issuing such legislation (i.e. 365 days from the effective date of the TCA) has recently passed, based on our consultation with officers of OTCC, there has yet to be any specific date or timeframe for such legislation to be issued, but it is expected to be in the very near future.”
The year ahead
Apart from the impact of a return to democratic elections, lawyers are tipping 2019 as a big year for business and law firm activity.
“In 2019, we anticipate that government policy will continue to be business friendly for domestic and international investors,” says Thammavaranucupt, of Weerawong. “The focus will continue to be on infrastructure and the value-based economy, including targeted industries and services, for example new technologies, agriculture and both activity- and areas-based industry. The development of the EEC paves the way for infrastructure and related businesses such as air, sea, rail, highway and digital technology projects. The FDI framework will remain the same with certain incentives, tax exemptions and tax holidays for promoted activities. Our team has been busy advising on all of these areas.”
Thammavaranucupt gives as an example the regime’s relaxing of rules regarding asset management. “The Thai Securities and Exchange Commission (SEC) has issued regulations allowing Thai asset management companies to establish mutual funds that invest in certain securities, for example, shares, bonds and mutual fund units, outside Thailand,” he says.
“Further, the SEC has allowed domestic REITs [Real Estate Investment Trusts] and infrastructure funds to raise funds by way of borrowing from financial institutions or an offering of bonds for sale to investors, while in the past REITs and infrastructure funds could only raise funds by way of a capital increase and issuance of additional REIT and infrastructure funds units.
“In addition, Thailand has relaxed foreign ownership restrictions on asset management companies. Foreigners can now own up to 100% in asset management companies licensed by the Bank of Thailand that engage in investments in non-performing loans owned by Thai banks.”
Thammavaranucupt says M&A activity has been strong for several years as the government maintains a business-friendly investment framework. “There are ongoing domestic and cross-border transactions for Thai and international clients who are developing businesses in new markets,” he says. Recently, there has been an increase in foreign investment in new technologies and e-businesses, for example Alibaba, Grab and Go-Jek.”
Wanakankowit agrees that FDI will remain one of the most active practice areas in 2019 as the new government promotes the EEC. “The incentives, both tax related and non-tax related, are very attractive for foreign corporations,” he says. “M&A will be also doing well in 2019 as big Thai companies like ThaiBev, Central Group and Charoen Pokphand Group are expanding their businesses in domestic and overseas markets. On the other hand, there are also many foreign companies that are looking for business partners with Thai companies in order to do business either with the government or with the private sector.”
He says tax practice will also be one to watch as the Revenue Department has recently issued new regulations such as transfer pricing (TP) rules. “Therefore, both multinational corporations and Thai conglomerates will need to consult with tax lawyers to prepare themselves for tax audits by the revenue officers.”
Chavalit Uttasart, a partner at Siam City Law Offices (SCL), says Thailand joined the Base Erosion and Profit Shifting (BEPS) programme in 2017 and had committed to align its tax systems with the principles laid out in BEPS to eliminate harmful tax practices. One of its commitments is to introduce a transfer pricing legislation.
“The Thai economy is one which encourages foreign investment, and TP legislation will hopefully provide clear and unequivocal rules on compliance, which will in turn encourage investors into the Kingdom,” he says. “One of the major criticisms of the law is that compliance with TP only applies to companies and corporations with an annual turnover of THB200 million (US$6.11 million) or more. Annual turnover alone is not an accurate indicator for transfer pricing purposes. Hence, further clarification should be put in place to ensure the effectiveness of TP in the Thai economy.”
In the area of tax, Uttasart says the Land and Construction Act passed the approval of parliament on 16 November 2018. It will become effective in 2020, replacing the current Housing and Land Act and Local Development Tax Act, which imposes tax at 12% of the annual fee and gives discretion to land officials to unfairly assess the land tax.
Thailand’s Board of Investment (BOI) and the EEC development plan provide incentives for foreign investors, but in general, foreign-owned companies are restricted from engaging in certain restricted business activities in Thailand unless a foreign business licence is obtained from the Ministry of Commerce (MOC).
However, says Sriwat, as the issuance of the licence is largely subject to the discretion of MOC officers, the procedures may be time-consuming and the outcome unpredictable. “As a more convenient and straightforward alternative, business operators that fall within criteria set out by the BOI and the EEC may apply for investment benefits and privileges,” he says.
“In doing so, foreign investors would be permitted to operate specific businesses in Thailand without the uncertainty of the discretion of MOC officers. In addition, depending on the privileges obtainable in the specific business, foreign investors may also be eligible for additional benefits including corporate income tax reduction or exemption, the right to bring in skilled labour, and the right to own land in Thailand.”
Sriwat adds that, in addition, investors operating the targeted business (for example, robotics and digital industries) in certain zones of Chachoengsao, Chonburi and Rayong may be granted additional incentives such as work permit exemption, the right to lease land for up to 99 years, and the lowest personal income tax rate in ASEAN of 17%.
“With regard to the relaxation of the Foreign Business Act, in September it was reported that the Foreign Business Commission has resolved to remove three restricted businesses from foreign business restriction, namely the provision of service businesses lending money to affiliated companies in Thailand, leasing of areas and public utilities to affiliated companies, and consulting services to affiliated companies in the fields of management, marketing, human resources and information technology.”
Sriwat says this resolution is to be proposed to cabinet for its consideration. If approved and enacted into binding law, it is anticipated that the amendment would further provide foreign investors with ease of doing business in Thailand, without impeding the business operation of Thai investors.
However, while big foreign companies enjoy BOI incentives and tax holidays, the lawyer who requested anonymity says smaller enterprises are often subjected to red tape shakedowns for items such as visas for business, and leases from lands departments.
“Multinationals and SMEs (small and medium-sized enterprises) operate in distinctly different environments,” he says. “Multinationals promoted by the Thailand’s BOI may be fully foreign-owned, may be approved to own land during the period of investment promotion, and may enjoy streamlined procedures for long-term visas and work permits.
“In contrast, most foreign-invested SMEs and small businesses are required to have local partners owning a majority of their shares. This requirement often results in improper shareholding arrangements, such as nominee shareholders, with disputes arising frequently between foreign investors and nominee shareholders.
“Foreign-invested SMEs and small businesses are frequent targets of civil fraud, bureaucratic corruption and official harassment. Foreign-owned SMEs commonly operate in a regulatory environment that is openly hostile to foreign investment, while BOI-promoted companies are often exempt from such corruption and harassment.”
The lawyer says these challenges for SMEs and small businesses are perhaps greater in the provinces than in Bangkok, as local politicians and bureaucrats operate with greater impunity outside of the watchful eye of their Bangkok-based superiors. “In certain provinces, corruption has become so prevalent that law firms cannot function in a legitimate manner,” he says.
Tech and blockchain
There are a few high-impact technologies or applications that are being developed and tested in the Bank of Thailand’s (BOT) regulatory sandbox. One of them is blockchain technology, in which the BOT has been working closely with the financial industry to apply to various banking applications.
Kullarat Phongsathaporn, a partner at Baker McKenzie in Bangkok, says this initiative starts with a pilot project to offer blockchain-based letters of guarantee. “Initially tested in the central bank’s regulatory sandbox, the program was built to be able to scale up to meet an expected increase in letter of guarantee issuances through electronic channels and by offering a single, shared data structure,” says Phongsathaporn. The solution is also expected to help deliver new business opportunities with other banks in the region.
The list of benefits from this innovation include:
- Digitized, streamlined, transparent and paperless process;
- Shared platform, eliminating need for individual banks to invest in their own;
- Strengthens security and reduces forgeries;
- Highly secured networks for document filing and retrieval;
- Improved service delivery;
- Processing time significantly reduced; and
- Reduced operating costs for business operators.
“On a longer horizon, blockchain technology is also planned to be applied to supply chain finance to improve authentication efficiency, which would facilitate real sector activities,” says Phongsathaporn. “Apart from the electronic letters of guarantee (e-LGs), a separate project sees the central bank exploring, for example, supply chain finance.”
Phongsathaporn says the BOT, in collaboration with the Public Debt Management Office, Thailand Securities Depository (TSD), Thai Bond Market Association and selling agents, has initiated a pilot called the Distributed Ledger Technology (DLT) Scripless Bond Project, which utilizes blockchain technology. “This project would significantly speed up saving bond allocations to retail investors, from 15 days to two days, as well as granting more flexibility for bond issuers,” she says. “The initiative is considered one of the world’s first uses of DLT or blockchain in bond sales.”
Another collaborative milestone is led by the BOT, a technology partner, R3, and eight participating banks, and is called Project Inthanon, which will co-develop a new way of conducting interbank settlements using wholesale central bank digital currency (CBDC). Like other central banks, BOT’s goal is not to immediately bring CBDC into use, but rather to explore its potential and implications for back office operations.
“These efforts should pave the way for faster and cheaper transactions and validation due to less of an intermediation process needed compared to the current systems,” says Phongsathaporn. “Project Inthanon Phase 1 is expected to be completed by the first quarter of 2019, after which the BOT will publish a project summary.”
Other than in the financial industry, blockchain has been used in developing a national infrastructure called Thailand’s National Digital ID (NDID), an intermediary and open infrastructure with blockchain-based technology that provides online service providers with standardized ways to identify and authenticate their subscribers or customers using existing digital identifications, and then allow them to access a variety of services remotely.
Examples of digital identifications include: (1) User accounts for governmental services, such as the Revenue Department and the Department of Business Development; (2) Internet banking accounts; and (3) e-Wallet accounts.
The three major components in a digital ID architecture are: (1) Identity provider; (2) relying party; and (3) authoritative source (e.g. Department of Provincial Administration).
“The NDID will be launched in a limited pilot phase among bank staff in January 2019, and then go public soon after,” says Phongsathaporn. She says NDID is not a centralized national identification depository such as is used in countries like India, with its Aadhaar digitized identification project. Instead, NDID is an infrastructure that allows facilitating the authentication and identification of individuals or businesses, which will be beneficial to many industries, including the financial industry.
The principal idea behind the NDID is that in almost all transactions nowadays, there needs to be authentication of the identity of the user, which is usually done by signature or declaration of consent to commit the parties to the transaction. In the past, this authentication would require the parties to physically attend the location of service providers, such as banks, together with a plethora of documents to prove that he or she is the person on the record.
“The regulation of the collection of information is based on a set of principles of consent, with data subjects having the right to correct inaccurate information, as well as to restrict data processing and to be forgotten,” says Phongsathaporn. “Furthermore, with regard to IT risk management and cyber security, the participating banks will have to comply with certain assessment and inspection procedures to ensure the preparedness of the security system and prevent any loopholes that may compromise the integrity of the customers’ privacy.”
She notes one point of interest with the NDID is the introduction of biometric factors for e-KYC (know your customer) purposes, such as the use of fingerprints, iris scanning and facial recognition for authentication. “However, it has been proposed that the scope within which biometrics may be used should be limited,” she says, “due to, among other reasons, the fact that there remains a possibility of false matching, which may cause uncertainty with regards to the accuracy of the identity of the customers, and may be exposed to spoofing attacks. So the integration of biometric authentication could be an area that needs to be properly regulated.”
Playing in the sandbox
As part of the banking regulatory reforms initiative, the BOT aims to improve Thailand’s digital banking and SME financial services in several ways, including:
- Easing and clarifying IT regulations and regulatory sandbox compliance requirements;
- Easing certain regulatory limitations on digital banking businesses;
- Promoting financial services for SMEs; and
- Improving the operational procedures of financial institutions and streamlining the regulatory application process via the use of e-documents and e-applications.
With regard to regulatory sandbox compliance requirements, Phongsathaporn says the BOT has set a timeline that by the first quarter of 2019 it will have implemented a revised IT risk management policy to allow innovations such as cloud computing and core banking service technologies to be used by financial institutions without the constant need to apply for a new permit in each case. The BOT will also have to define the term “significant impact” used in its regulatory sandbox guidelines in order to clarify which innovation requires a test period in the sandbox.
The BOT will also ease the regulatory limitations on digital banking businesses by March 2019. This policy includes the introduction of a minimum standard to be observed by financial institutions.
Second, she says the Office of Securities and Exchange Commission (SEC) has created multiple regulatory sandboxes available for securities and derivatives businesses, as well as for innovative products such as robo-advisers, algorithmic trading, and algorithm-based investment advice. “Another SEC sandbox, which is also blockchain-based, aims at the integration of fintech with support securities clearing houses, depositories and registrars,” she says. “Other sandboxes, including those for e-trading platforms (ETPs) and electronic know your customer (KYC) technology, are also available. These changes are part of the SEC’s 2018-2020 plan to enhance the potential and competitiveness of Thailand’s capital market by reducing the switching costs, and by streamlining other processes by eliminating unnecessary legal and regulatory hurdles.”
Finally, the Office of Insurance Committee (OIC) has launched a sandbox program to enable insurers, agents, and fintech players to beta test their Insurtech innovations.
The amended draft Personal Data Protection Bill, as prepared and revised by the Ministry of Digital Economy and Society, was published for public consultation in September 2018. The draft bill adopted many concepts of the EU’s GDPR, says ZICO Law’s Bunruangthaworn, especially extraterritorial applicability, that is, the law will apply to all personal data collected, used or disclosed by a data controller or a data processor residing in Thailand, regardless of where the data are collected, used or disclosed.
Bunruangthaworn says the key features of the draft bill are:
- A broader definition of “personal data”, which are defined as any information or data of a person that can directly or indirectly identify an individual by reference to the facts, data or any materials of an individual, excluding information relating to a deceased person;
- Explicit consent of a data owner is not required for collecting personal data if it is necessary for the performance of a contract to which the data subject is a party, or in order to take steps at the request of the data subject prior to entering into a contract. The provision allowing any exceptions other than the above-mentioned to be prescribed later by secondary regulation has been removed;
- The court will be empowered to order punitive damages as much as twice the actual damages caused;
- New rights of a data owner have been added, for example, the right to obtain a copy of data undergoing processing, and the right to data portability;
- A statute of limitation for civil cases for compensation of damages is three years from the date of knowledge of the cause of action and the identity of the responsible person, or 10 years from the date on which the breach of personal data was committed.
Bunruangthaworn says this version of the draft bill is not the final version to be submitted to the National Legislative Assembly for approval. “As the bill is still in the early stages and will require several [reviews] before coming into effect, the specific timeframe for the draft act to be enacted and become effective cannot be determined at this stage,” he says.
“Compliance with this law could be challenging for all business operators, not only in the digital sector but also other sectors, and for both Thai operators and foreign operators no matter that the business operation is taking place in Thailand or abroad. We, therefore, strongly recommend that all business operators dealing with Thai customers have a well prepared and a good understanding of the requirements under this law.”
After more than a decade, Thailand was removed from the US Priority Watch List on 15 December 2017 for IP policies and enforcement, due to corrective actions the country has taken. Fougere, from Ananda, says the US Trade Representative has now added Thailand to the Lower Watch List category. “This reflects Thailand’s efforts to combat counterfeiting more effectively as well as the growing confidence of IP owners to bring IP infringement cases before Thai Intellectual Property Court,” says Fougere.
“We see, for example, a growing number of patent litigations in the country, and 2018 has been marked by a few landmark decisions in this regard. Thailand is no longer a country of major production of fake products. Due to increasing production costs in Thailand, counterfeiters have moved to China and to neighbouring countries, which means that we can now focus more on customs enforcement to stop counterfeit items coming into Thailand, or in transhipment, rather than on local production.”
In accordance with Thailand’s long-term Thailand 4.0 policy, a plan to evolve into an economy centred on innovation and knowledge as opposed to one on exporting resources and primary products, the number of patent examiners has increased from 39 in 2015 to 143 in August 2017, and patent backlog has considerably reduced in the past two years, from about 55,000 to about 20,000 applications.
Fougere says he expects to see a rise in patent applications and patent litigation cases in 2019, especially given the better quality of judgments rendered by the IP Court in Thailand.
On 18 September 2018, the Thai Department of Intellectual Property released a draft of the new Thai Patent Act. The new act is likely to be adopted in 2019. “Amendments proposed have been very well received by patent owners as clarifications are being brought to the current Patent Act (for example on worldwide novelty), and procedural changes (grace period, simple recording of licence agreements and not registration, reduction of time to request substantive examination) are being introduced to simplify and to accelerate patent prosecution overall,” Fougere says.
Adds Tongkaew, from DSB: “The IP office has increased the number of examiners to expedite examinations. The proposed amendments will also streamline the examination procedure. The scope of the formal examination will be limited only to completeness and clarity of the claims, while other issues will be examined at a later stage. The amendments also require an application to be published no later than 18 months after filing.”
Amendments to the Copyright Act (No. 4) were published in the government gazette on 11 November 2018, and will come into force on 11 March 2019. “The changes are relatively small and only relate to Thailand’s accession to the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired, or Otherwise Print Disabled,” says Fougere.
“A more significant revision to combat online infringement was proposed in February 2018, and on 14 August 2018, the Department of Intellectual Property (DIP) published a summary of the results from the public hearing and public consultation on the draft bill to amend the Copyright Act before the DIP revises the bill and proposes it to the cabinet.”
“Enforcement against online piracy should be more effective and the liability of internet service providers should be clearer,” adds Tongkaew.
Arbitration and litigation
The creation of the Thailand Arbitration Centre (THAC) is largely seen as an effort to bring arbitration in line with other major hubs in the region.
“It is an independent organization operating under the auspices of the Ministry of Justice,” explains Bunnag from ILCT, who was a member of THAC’s strategy and planning committee during its formative years. “It was not intended to replace the Thai Arbitration Institute (TAI), which is operated under the auspices of the Office of the Judiciary, but to supplement it,” he says.
“THAC focuses on the promotion of international arbitrations and prepares itself to become a regional centre of arbitration. It is instrumental in proposing (through the Ministry of Justice) changes in the laws and regulations to make Thailand more arbitration friendly.”
According to Chernov, at Siam ADR, Thailand is also a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. “Nevertheless, Thailand remains somewhat reluctant to adopt international standards governing the conduct of arbitration hearings and the enforcement of arbitral awards (both domestic and international),” he says.
“More specifically, Thailand’s bar association argues that arbitration advocacy is a legal service to be provided solely by attorneys licensed to practise law in Thailand. As a practical matter, this means that any party can object to a counterparty’s appointment of an advocate who is not duly licensed to practise law in Thailand (including foreign-licensed attorneys).
“Additionally, Thai judges are often reluctant to enforce domestic and international arbitral awards, and may require the parties to re-litigate the entire dispute in court.”
The Lawyers Act defines a lawyer as one who pleads cases in court and does not deal with lawyers working as “solicitors” or legal consultants, says Bunnag. “However, the work permit law forbids foreign lawyers from engaging in legal practice (a much broader definition) in Thailand. But foreign counsel can appear for their clients in arbitration proceedings in Thailand, provided that such proceedings do not involve Thai law and the awards will not be enforced in Thailand.”
Bunnag says foreign arbitrators can obtain short-term visas and work permits to preside in Thailand. “Changes, to which I am not privy, will continue to be made in the laws and regulations to make Thailand an international arbitration centre,” he says.
As the new year opens, the direction of Thailand’s future will soon be mapped out by an elected government and, to a degree, the will of the people. Whether Thailand will usher in a new era of progressive reform is an answer that, for now, remains written in the stars.