Thai Law Insights

The Choice or Application of Substantive Law in Disputes Accepted for Thai Arbitration: Some Evaluation from the View of a Thai Practitioner

Chatchawarl (Charles) Sornsurarsdr

Introduction

The Thai Arbitration Act of 2002 (the “Act”) effective 30 April 2002, which repealed and replaced the former Arbitration Act of 1987, contains new salient provisions to accommodate a variety of modern international civil and commercial disputes.  The new provisions of the Act include a key section on applicable law.  These provisions follow UNCITRAL’s Model Law on International Commercial Arbitration (“UNCITRAL’s Model Law”).  This is considered a new provision when compared to the former Thai Arbitration Act, which was silent in terms of a clear choice of law provision. This development of law on arbitration (lex arbitri) shows Thailand’s effort to build up and facilitate Thailand as one of the popular venues for arbitration in this region or the world.

Applicable Law Provision under Section 34 of the Act

Section 34 of the Act is a key provision which deals with the determination of which substantive law should be applied when considering a dispute accepted for arbitration.  The chosen applicable law in this respect recognized by the Act shall be in the forms of (i) applicable substantive law; or (ii) any national legal system to the substance of dispute.  In the absence of the chosen applicable law thereto, 'Thai law', including law on conflict of laws, shall be applied as an arbitral tribunal deems applicable

The above-mentioned Section also recognizes that the dispute can be decided based on ‘ex aequo et bono’ whereby the arbitral tribunal may decide on the dispute on the basis of principles it believes to be just, without reference to any particular body of law. This provision of the Act is similar to Article 28 of the UNCITRAL’s Model Law.

Some Observations on Applicable Law

In the Thai text of Section 34 of the Act, it infers that the arbitral tribunal shall decide in accordance with 'law' chosen by the parties.

However, per Article 28 of the UNCITRAL’s Model Law, it clearly states that the arbitral tribunal shall decide the dispute in accordance with the ‘rules of law’ chosen by the parties. The UNCITRAL’s Model Law per se intends to broaden the range of options available to the parties as regards the designation of the law applicable to the substance of the disputes, thereby referring to the choice of ‘rules of law’ instead of ‘law’.

Per the UNCITRAL’s Model Law explanatory note, the 1980 UN Convention on Contracts for the International Sale of Goods or “CISG” may be treated as a choice of rules of law chosen by the parties because it has been elaborated by an international forum which has not yet been incorporated into any national legal system of many countries.

The question may arise per Section 34 of the Act whether the provision thereof includes 'rules of law" or not.  It is questionable further that even though CISG may be chosen by the parties to govern the merits of the disputes, the arbitral tribunal taking place in Thailand (as place of arbitration) may decide the dispute based on CISG indirectly  under the convention application provision even though Thailand has not, to date, become a contracting state to CISG.

For CISG’s legal impact on Thailand, please read the author’s notes on CISG applicability under “Re-examining the application of the UN Convention on Contracts for the International Sale of Goods (CISG) from a Thai legal practitioner’s perspective” @ www.csbc-law.com.