What is Arbitration? An overview from JNP Legal

Arbitration is a pre-court process, alternative to the traditional in-court litigation, which allows an uninvolved third-party to provide an unbiased, nonpartisan, fair – not necessarily legal – judgment.

All arbitration cases processed under the Law of Thailand must follow the procedures and rules which are stated within the provisions of the Arbitration Act 2002. In the context of voluntary arbitration, where both parties willingly enter the process with the intention to quickly and privately settle a dispute, the parties will choose between Ad hoc and Institutional arbitration. By choosing institutional arbitration, the two parties are intentionally inviting the intervention of an institution, with its own established framework of rules and arbitrators, to handle the process. The Thailand Arbitration Institute (TAI) can provide this service. Unlike institutional arbitration, ad hoc allows the parties involved to freely choose all aspects of the procedure, including the arbitrator(s), the law applicable, as well as the venue and schedule of the debate. Any form of voluntary arbitration is known as ‘Out-court’ arbitration in Thailand.

The selected arbitrator from the Arbitration Centre has to issue a writ which legally binds the parties to accept the award. However, if one of the parties refuses to follow the writ, the opposing party can forward the writ to court for a further order of execution. This can be done at any court where the losing side has assets or holdings that can be used as reimbursement. The final arbitral award is recognised and binding in Thai court regardless of the country in which it has been awarded as they are bound by Thailand’s signatory to New York’s 1958 Convention on Recognition and Enforcement of Foreign Arbitral Awards as well as the 1923 Geneva Protocol. Any party seeking enforcement must file a petition to the Thai court – no later than three years from the date in which the award has been given – and follow full and separate court proceedings required under the Thai court.

Most arbitration cases in Thailand revolve around contract disagreements or commercial disputes. Law restricts arbitration in cases where contracts are not involved due to the possible complexity that may come with cases such as criminal offences. Presently, arbitration is preferred by most corporate entities for the privacy that comes with the process; most firms have arbitration written into their contracts as a way to settle disputes away from court to avoid unnecessary negative press.

Unlike a court judge, arbitrators are less likely to be bound by the statutes of the law and therefore are more likely to rule on what they consider fair – after taking in all possible evidence into account. However, inclusion of all evidence provided by either side may allow baseless, inaccurate and/or untruthful testimonies to enter the system to bring unfair advantage to the, perhaps, more financially powerful side, leading to the loss of objectivity and fairness. Having said that, it is also the informality of procedures that brings a more relaxed environment to the debate, encouraging a friendlier atmosphere in which to find solutions.
With disputes involving more than two opposing parties, the arbitration process becomes more complicated and lengthy as some contracts may have arbitration clauses whilst others don’t. Even when all parties demand the use of arbitration in their contracts, it is difficult to have more than two parties entering into arbitration without it being explicitly agreed in the contracts beforehand – so multiparty arbitration can become overly convoluted.

Overall, the prevailing question is that of the cost and time that comes with arbitration; it is common to assume that arbitration is cheaper and quicker than the litigation process. Arbitration may be cheaper than litigation, with fewer punitive and lead-on costs as well as a possible subtraction of the cost of a solicitor. However, the arbitration process has recently become increasingly expensive: the discovery process in litigation has now also become a norm in arbitration cases, which not only coaxes an increase in the fees paid, but also lengthens the time taken. Furthermore, because parties can bring their case to court for a more desirable resolution or enforcement of the given award, there would be an additional cost of litigation to the prior cost of arbitration – nullifying the point of arbitration in the first place. In comparison to litigation, arbitration can be a quicker and more convenient process due to the open scheduling of an unburdened system; instead of following the schedule of a court facing crowded work and caseloads, arbitrators and their clients can follow a faster decision making process. Just as they are not always cheaper, some cases will not be any quicker, the cost and time would depend on the details of the case, as well as the attitudes of the parties involved.

In conclusion, despite its various pitfalls, arbitration still remains one of the most popular ways of resolving disputes for the privacy it guarantees and the non-hostile environment that is created by the informality of the process. Whether arbitration is better or more practical than litigation will depend purely on the case presented: its complexity, the value of its rewards, the jurisdiction, and the number of parties involved.

1 If the parties chose instead to use an international institution such as the International Chamber of Commerce. In this case, arbitration can be very flexible, giving the parties involved the opportunity to pick a jurisdiction they would prefer.

By Victoria Render: intern at JNP Legal during June-July 2014, conducted under supervision of Nippita Pukdeetanakul