Ever since the period of rapid economic growth during the early 1990s, Thailand has seen a constant stream of investments in infrastructure and construction projects, with particular emphasis on the use of project financing in build-operate-transfer and build-transfer-operate (BTO) projects. Thailand has gone through its share of economic and political interruptions during this period, namely the 1997 Asian financial crisis (the Tom Yam Koong Crisis), followed by the 2006 and 2014 coups d'état.

Irrespective of the type of government in power in Thailand (i.e., military or civilian), infrastructure projects have always been given utmost importance and top priority. Some of the key infrastructure projects that have been championed by current and previous governments include:

    1. railway projects;
    2. subway and sky train projects;
    3. expressway, motorway and highway projects; and
    4. power generation projects.

With respect to railway projects, the current and previous governments have tended to initiate plans to improve the national railway system, which is drastically outdated and in need of a major overhaul. However, these plans are usually delayed, with more emphasis being given to the expansion of inner-city transportation systems, by way of subways, sky trains, roads, motorways and expressways to cover more areas in metropolitan and suburban areas. As Bangkok is a city notorious for its traffic and vehicle congestion, the government tries to promote public transport as a better means of getting into and around the inner city compared with driving.

With respect to power projects in Thailand, one issue that Thailand faces is constant change to its national power development plan, generally depending on changes in government and the sensitivities and objections of non-governmental organisations and the public in the areas of potential power project developments. This constant change and public sentiment have resulted in the shifting of project milestones for the development of certain power projects in Thailand. For example, previous power development plans required Thailand to build its first nuclear reactor unit by 2020, but this has been delayed and no major steps have been taken to reschedule it. In addition, two coal-fired power plant projects in Krabi (800MW) and Thepa district of Songkhla (2,000MW), located in the southern province of Thailand that had target commercial operation dates (COD) in 2019, have been put on hold for an unspecified period to extend the additional environmental and health impact assessment (EHIA), as there is a risk that the power plants will adversely affect the health and livelihoods of local people, and cause pollution problems. One change that has been taking place in recent years, however, is the increase in and reliability of the overall amount of renewable energy in the national grid for example, through ground-installed solar power generation projects (by very small-scale power producers), which have been jointly funded by government, cooperative and private sector investment. Some of these projects have been in operation since the end of 2016 and the second phase of the investment has recently been opened for an additional 219MW with a target COD of 30 December 2018. There is also a biomass and biogas power generation project for the three southern border provinces. There have been efforts to promote local energy independence by reducing Thailand's dependence on its neighbours for energy and fuel supplies, especially as it currently relies on overseas gas suppliers for the majority of its power projects and has been purchasing substantial power supplies from Laos. However, these efforts have not been successful so far.


One of the main methods used by the Thai government in 2017 to stimulate the economy was the initiation of major infrastructure projects, with particular emphasis on construction, and the creation of new industrial estates and special economic zones. Depending on the type of infrastructure project, the government has recently been trying to promote the use of public-private partnerships (PPPs) and shorten PPP development periods by means of a 'fast-track PPP', amending relevant laws and regulations to speed up the whole process (see Section XII).

Following the promotion and support of setting up economic development zones, especially the Eastern Economic Corridor (EEC) development project, which is the substantial expansion of the former successful Eastern Seaboard Project by incorporating three provinces in the eastern part of Thailand (Rayong, Chonburi and Chachoengsao) as well as other provinces to be announced later by a royal decree,2 the National Legislative Assembly successfully passed the Eastern Economic Corridor Act BE 2561 (2018) on 8 February 2018 and it will become effective on the date immediately following the date of its publication in the Royal Gazette. The EEC project will be a key driver to promote Thailand's economy, to both Thai and foreign investors, as there are certain provisions that contain promotional privileges to induce and encourage investment in the special economic promotion zones created inside the EEC, especially for foreign investors (e.g., a juristic person that operates its business in the special economic promotion zone and is a foreign entity under the Thailand Land Code3 could have ownership of the land within the zone for its permitted operation without obtaining approval pursuant to the Thailand Land Code, and it can own condominium for both business operation and residential purposes).4 The EEC Act also contains tax incentives.

The EEC projects covers many infrastructure categories, including aviation, maritime transportation, overland transportation and rail transportation. Priority projects under the EEC are:

    1. the development of U-Tapao international airport, to be an eastern part of Thailand's aviation hub;
    2. a high-speed train to connect Thailand's three main international airports – Suvarnabhumi, Don Muang and the newly developed U-Tapao;
    3. Laem Chabang Deep Sea Port; and
    4. Map Ta Phut Port.

The EEC projects will be conducted by either PPP (with a fast-track scheme) or public tender. To promote and support the EEC projects, the fast-track PPP scheme reduces the time and bypasses unnecessary bureaucratic procedures. The government has issued the terms of reference for point (b) above with a view to selecting bidders to invest, but has yet to release them for the other projects. This is expected to occur in 2018.

Past experience shows, however, that as a result of political and bureaucratic obstacles almost all infrastructure projects in Thailand fail to proceed in a timely manner, despite continuous pushes by the government. Some of the obstacles arise from speculation over the financing of the major infrastructure projects, which technologies to use and which routes should be given priority. As regards infrastructure financing, unlike previous governments, which had proposed seeking domestic funding from Thai banks, the current government has been debating whether to seek external financing, perhaps in the form of a soft loan from overseas technology providers and contractors. To avoid any further delays, it is likely that in 2018, the government will finally settle on the specific structure to be used. Needless to say, the Thai people are eagerly awaiting this, with high hopes but some trepidation.


i Transactional structures

Ownership structures in project finance transactions in Thailand will vary from project to project and depend on a number of factors. These factors include whether there is any government participation in the project and whether there exist any specific laws or regulations that govern the type of project being developed.

For example, Thailand has in the past used the BTO structure for a number of its infrastructure projects, namely the projects for the construction of its expressways, sky trains and many telecommunication projects for land lines and mobile phones. Additionally, the government and state-owned enterprises have used build-own-operate and build-own-operate-transfer structures for waterworks projects.

ii Documentation

The principal documentation used in the energy sector in project finance transactions in Thailand are power purchase agreements, engineering, procurement and construction (EPC) contracts and operation and maintenance agreements. Other supporting agreements and documents used will depend on the nature of the power project; for example, in a gas-fired power project, a gas sale and purchase agreement and gas pipeline construction agreement may be necessary. In addition, if the land used in the project or land used for the transfer of electricity is not owned by the project company, a land lease agreement or land utilisation agreement may also be required. As for the financing, principal agreements include credit facility agreements, which in most cases involve multiple types of credit facilities and security agreements under the Business Security Act BE 2558 (2015), which comes into force in July 2016: pledges, mortgages, bank guarantees, assignment and novation of project documents, assignment of proceeds and direct agreements.

iii Delivery methods and standard forms

The standard forms used for construction contracts in Thailand will vary depending on the type and scale of the project. The EPC contract is generally the most widely accepted and preferred form of construction contract, particularly in project finance transactions. The form of EPC contract used is also usually based on FIDIC contracts. Owing to the tax structure in Thailand, the EPC contracts for each project are normally separated into a supply contract and a construction contract.

The reason for the wide adoption of the EPC contract for project finance transactions is the preference of most lenders for a project agreement that is internationally recognised, with sufficient precedent practices covering any issues that may arise. Parties to EPC contracts, including the lenders providing financing for the project, are therefore reassured knowing that there are extensive precedents and many experts to deal with any potential disputes, which, under EPC contracts, are generally referred to arbitration.


i Management of risks

The key risks stakeholders face with respect to project finance transactions and construction contracts are delays, increased costs and potential non-completion of the works for such projects. While it is common for the construction-related elements of the project finance transaction to face delays, more recently the factors that have led to delays and non-completion of the works have been external, rather than coming from within the project.

For example, there have been a number of legal and regulatory changes to Thai laws in the past few years that have contributed to the delays and non-completion of projects. The clearest example of this has been the increase in Thailand's minimum wage. The immediate impact when the increase in minimum wage was announced was the effect it had on the contractors' and subcontractors' ability to continuously hire sufficient workers to complete the works in projects they have been contracted for. Various contractors and subcontractors have made it clear that they were not able to fulfil their commitments in the projects because they were unable to afford a sufficiently skilled workforce. While the increase in the minimum wage has resulted in an influx of labour from neighbouring countries seeking higher pay, these workers generally fall into the unskilled labour category and are not sufficiently well trained to carry out more complex construction contracts such as infrastructure and power projects.

As in other jurisdictions and in line with international practice, the lenders and developers in these projects will try to ensure that the contractors or subcontractors are required to maintain a sufficient workforce for the duration of the EPC contract. In addition, in the event that the contractors or subcontractors appear to be unable to meet the milestones set in the EPC contracts, the lenders and developers will include mechanisms that will allow for the developer to hire another contractor or subcontractor to complete the unfinished works at the cost of the existing contractor or subcontractor.

With respect to project finance transactions, another risk is that the parent company or shareholder of a developer will be required to provide a form of guarantee to the project lenders. Ideally, shareholders (in most cases the overseas parent company of the local special purpose vehicle (SPV) formed to develop the project) would choose project finance, as the structure provides for non-recourse financing. However, owing to various factors, primarily economic and commercial in nature, there has been an increase in lenders requiring the parent company to provide a form of parent or corporate guarantee, or some kind of sponsor support against any default or non-compliance by the SPV under the terms and conditions of the financing agreements. Aside from the costs involved in procuring such parent or corporate guarantees or sponsored support, these requirements make it difficult for developers to sell their interest in these projects to other investors.

ii Limitation of liability

Under the Civil and Commercial Code of Thailand (the CCC), contracting parties are allowed to establish limitation of liability clauses in an agreement to the extent that they are not contrary to public policy or good morals, in which case the agreement shall be void in accordance with the CCC. Once the parties successfully enter into an agreement, failure by either of the parties to perform its respective duties or obligations may constitute a claim for damages against the breaching party. Pursuant to the general provision regarding the scope of compensation for damages in the CCC,5 the breaching party is principally responsible for two kinds of damages:

    1. direct damages; and
    2. indirect damages arising from special circumstances, which are only payable at the discretion of the court if the non-breaching party is able to demonstrate that the circumstances were foreseen or ought to have been foreseen by the breaching party.

Under Thai law, punitive, contemptuous and aggravated damages are not covered under the category of compensatory damages and it is unlikely that the courts will award these types of damages to the claiming party.

iii Political risks

Political risk with respect to investment in Thailand is one topic that has been quite contentious in a period spanning over a decade, with causes and mitigating factors varying constantly. In both 2006 and 2014, the Thai military orchestrated a coup d'état, taking over control of the government from a civilian government on both occasions, and installing a temporary military government tasked with writing a new constitution, initiating several reforms and organising a general election to return power to a civilian government. The justification for these coups was to return stability to the nation, as there were numerous protests against the governments in charge at the time. Furthermore, the present temporary government installed by the military completed the draft of a new constitution to replace Interim Constitution BE 2557 (2014) and, latterly, this draft was promulgated and became effective on 6 April 2017 as the Constitution of the Kingdom of Thailand BE 2560 (2017) (Constitution BE 2560 (2017)). Constitution BE 2560 (2017) provides the process that will lead to a general election to return power to a civilian government.

On the macroeconomic level, because of the aforementioned political instabilities the economy is moving at a slower pace than expected, with foreign investment in certain sectors moving to more stable jurisdictions, and, more importantly, large-scale infrastructure and construction projects initiated by previous governments being delayed or even cancelled. To mitigate these risks and to provide reassurance to investors, for the most part any new government has attempted to allow projects initiated by the previous government to continue, with only necessary changes to their structure should any irregularities be found (particularly relating to corrupt practices), which they seek to resolve in a satisfactory manner. Additionally, new governments have attempted to provide alternatives to projects that were cancelled, while giving priority to the investors involved in the cancelled projects on a case-by-case basis.

With respect to the risk of nationalisation, businesses and investments in Thailand that have obtained investment promotion privileges from the Board of Investment (BOI) are covered by the provision in the Investment Promotion Act BE 2520 (1977) (the BOI Act), which provides that the state shall not nationalise the activity of any promoted person.6 In addition, Constitution BE 2560 (2017) specifies that persons shall enjoy rights in property, without differentiating between the property rights of locals and foreigners, provided that the rights are obtained and are governed by the relevant laws.7 Constitution BE 2560 (2017) also provides that expropriation of immovable property shall not be made except by virtue of any law specifically enacted for affairs of the state, and for fair compensation to be paid in the event of any expropriation under such laws.8

As Thailand is a Member State of the Multilateral Investment Guarantee Agency (MIGA), cross-border investments made in Thailand by any other Member State may apply for its investment to be insured by MIGA.


Security for loans and other types of credit facilities are generally and presently governed by the CCC and the Business Security Act. Under the CCC, security can take three forms:

    1. mortgage;
    2. pledge; and
    3. guarantee.

The mortgage and pledge are types of security backed by assets, while the guarantee is security backed by a guarantor's credit, irrespective of whether the guarantor is an individual or a business entity. While the mortgagee and the pledgee who take assets as security have a preferential right over the mortgaged or pledged assets, creditors who take the guarantee as security have no preferential right over the assets of the guarantor.

Assets that can be mortgaged are all kinds of immovable property and certain kinds of movable property, provided that they are registered according to relevant specific laws, such as machinery under the Machinery Registration Act BE 2514 (1971). For the mortgage to be legally valid and enforceable, the mortgage contract must be made in writing and registered with the competent officials.

A guarantee is evidenced by a guarantee agreement whereby the guarantor agrees to pay to the creditor if the borrower fails to perform its obligation. There have been some amendments to the CCC9 in relation to guarantees and mortgages being issued to increase the rights and protection of guarantors and mortgagors. Key amendments include:

    1. joint and several liability provisions in a guarantee being void for guarantors who are individuals;
    2. requirements to specify details of guaranteed obligations in the guarantee agreement for the guarantee of future debts;
    3. requirements for creditors to serve notices on guarantors and third-party mortgagors in cases of default by primary obligors;
    4. the third-party mortgagor's liability will be limited to the mortgaged property only and will not be liable for any shortfall in the enforcement proceeds and the secured debts; and
    5. contract provisions that are contrary to certain provisions of the CCC Amendment Act will be void.

For the pledge of assets in physical form to be legally valid and enforceable, the pledgor must deliver the pledged assets to the pledgee or its authorised representative. The pledged property can be kept either by the pledgee or by a third party on behalf and for the benefit of the pledgee. Although there is no legal requirement, a written pledge agreement should be executed by both parties to the pledge.

In addition to the security package available under the CCC, security by way of assignment is a security typically used in project financing, and that, despite not having specific provisions prescribed to it, is subject to certain requirements set out in the CCC. An assignment of rights under specific contracts must be made in writing and can be set up in relation to the party to the contract or a third party only if a written notice is delivered to the party to the contract or the party to the contract agrees to the assignment in writing. To assign the rights and, in most cases, the obligations of the contracting party, the creditors and the borrower will enter into an assignment agreement (which in many cases will involve a form of novation of obligations of the contracting parties), either absolutely or conditionally. In practice, these assignments include the right to receive monetary claims, the right to receive proceeds and step-in rights.

Apart from securities under the CCC, additional forms of security have become available under the Business Security Act. Under this Act, a security provider may provide security to a security receiver in the form of a business security contract. The following forms of security can be provided under the Act:10

    1. the ongoing business of the security provider;
    2. rights of claim;
    3. movable property used by the security provider in its business operation, such as machinery, inventory or raw materials used in the manufacture of goods;
    4. immovable property, if the security provider directly operates the business relating to immovable property;
    5. intellectual property; and
    6. other properties as prescribed by the ministerial regulations.

The security receiver in the business security agreement must be a financial institution or other person as prescribed in the ministerial regulations (e.g., a financial institution as determined in the Thai laws and regulations governing financial institutions; a trustee on behalf of a trust pursuant to the Trust for Transactions in Capital Market Act; a securities company pursuant to the Securities and Exchange Act; a foreign commercial bank that provides facilities in a syndicate with financial institutions; and juristic persons having a business objective of hire-purchasing and leasing or lending).11

Moreover, unlike the pledge under the CCC, assets provided as security under the Business Security Act do not have to be delivered into the possession of the security receiver or its authorised representative.12 Therefore, the security provider still retains the flexibility in its business operations while securing its debt obligations with the creditor. The security provider may not pledge the secured property under the Business Security Act as a security against payment of further debt, otherwise the said pledging shall be void.13 The business security contract must, however, be registered with the registration officer and contain the details as prescribed under the Business Security Act.14 Once registered, the security receiver will be deemed a secured creditor under Thai laws, including bankruptcy laws, and shall have the right to receive repayment of debt from the secured property prior to unsecured creditors, whether or not the right in the property has been transferred to a third person.15

In addition to the security package mentioned above, the shareholders or the holding company (also, in practice, generally referred to as the sponsor) of the project company are usually required, in addition to a guarantee, to provide sponsor support in favour of the creditor by entering into a sponsor support agreement. This agreement will assure the creditor that should any cost overrun or cash shortfall occur in the project, the sponsor will provide financing to the borrower. The financing provided by the sponsor is made either by equity support or subordinated loan support. This sponsor support agreement may also provide some other specific covenants required by creditors in each project, such as a covenant to maintain a certain shareholding in the project company and special support for specific circumstances, such as flooding, which may not be sufficiently covered by insurance packages.


With respect to the construction contract, it is common in Thailand for the project company to require the contractor to provide the bid bonds, advance payment bonds, performance bonds and retention of money or warranty bonds. The amount of bonds may vary from 5 to 20 per cent of the value of the work, and will also depend on the period and the type of the project. These bonds are normally in the form of parent guarantee, bank guarantee from a reputable bank or a standby letter of credit.

In general, the project company or the contractor (as the case may be) is required to obtain construction and erection all risks insurance, third-party liability insurance, inland transport insurance, marine cargo insurance, workmen's compensation insurance or employee's liability insurance. The lenders providing financing for the project usually require, on a case-by-case basis, the project company or the contractor (as the case may be) to obtain additional insurance such as business interruption insurance and flood insurance, depending, among other things, on the type of the project.


i Enforcement of security

The enforcement of a guarantee can be carried out by the creditor simply sending a written notice to the guarantor to perform its obligations under the guarantee once the debtor is in default.16 While a pledge is enforced by public auction only,17 if the proceeds from enforcement are insufficient to pay its debt, the debtor will remain liable to the creditor for the remaining balance unless the parties agree otherwise.18 As for the enforcement of a mortgage, the creditor can either file for court judgment for the mortgaged property to be seized and sold by public auction or claim foreclosure of the mortgaged property if the conditions specified in the CCC are met.19 Moreover, without a court judgment, the enforcement of a mortgage can be carried out by public auction if there are no registered mortgages or preferential rights on the mortgaged property.

As regards the enforcement of property secured as a security in a business security agreement, the security receiver may, without a court judgment:

    1. foreclose on the secured property if:
      • the debtor owes payment of debt that is of the principal equivalent to or more than the value of the secured property; and
      • the debtor has not paid interest for five years and there is no other registered security or other preferential rights on the secured property;20 or
    2. sell the secured property by public auction for payment of debt.21

    In addition, if the security is an ongoing business, the enforcement shall be conducted by a security enforcer licensed by the Business Security Registration Officer.22

    ii Bankruptcy proceedings

    The Bankruptcy Act BE 2483 (1940) (as amended) (the Bankruptcy Act) prescribes that a secured creditor does not need to file a claim to participate in proceeds sharing in a bankruptcy proceeding since it has priority over the security provided to it prior to the order of receivership.23 However, a secured creditor may elect to file a claim to participate in proceeds sharing in a bankruptcy proceeding under certain conditions.24 Any creditor filing a claim in a bankruptcy proceeding must file its claim with the receiver within two months of the date of publication of the order of absolute receivership.25 If the debtor has fraudulently26 or preferentially,27 as the case may be, transferred its assets during the period as specified under the Bankruptcy Act prior to or after the filing of application for bankruptcy, the court is empowered to cancel transfer of assets or any acts carried out with the intention of giving undue preference to a creditor.


    i Licensing and permits

    The main regulations and legislations that govern social and environmental issues when undertaking project finance transactions and construction contracts are the Enhancement and Conservation of National Environmental Quality Act BE 2535 (1992) (as amended) (the Environment Act) and the Factory Act BE 2535 (1992) (as amended) (the Factory Act). Pursuant to the Environment Act, several environmental assessments and reports are applied especially to certain activities or projects, including:

      1. Environmental impact assessment (EIA): for the purpose of environmental quality promotion and conservation, some of projects or activities are required to prepare an EIA for submission to the relevant authorities for approval prior to the construction or operation or at the stage of conducting a feasibility study for any projects that a government agency jointly undertakes with private enterprises.28 For example, projects that require the preparation and submission of an EIA include rail transportation, air transportation, state highway projects and irrigation projects.29
      2. Initial environmental examination (IEE): IEEs are usually required for small-scale projects that may affect the environment. Most of the projects that require the preparation of an IEE are usually located on land in the reserved forest areas, such as land in the Phuket, Krabi and Chonburi provinces.
      3. EHIA: projects or activities that may have a severe impact on a community are required to prepare an EHIA and shall arrange a public hearing for people and stakeholders; the report contains comments from an independent agency. Projects or activities deemed to have a severe impact on a community include mining according to the mining law, an air transportation system where a runway is constructed or expanded to 3,000 metres or more, thermal power plants such as coal power plants with a total capacity equal to 100MW or more, biomass power plants with a total capacity of 150MW or more, natural gas power plants with a total capacity of 3,000MW or more and all sizes of nuclear power plants.30

    With respect to the Factory Act, an environment and safety assessment is a measure that stipulates that any person requesting a certain type of factory operation permit or a certain type of factory expansion permit (e.g., for a solar power plant that generates, transmits and distributes electricity with a generation capacity of up to 1MW or a thermal power plant with any generation capacity) shall prepare a report on preventive and mitigation measures relating to the impact of the operation or expansion on environmental quality and safety, and submit it together with the application form for the factory operation permit or factory expansion permit, as the case may be.31

    ii Equator Principles

    At the time of writing, Thai banks have not yet adopted the Equator Principles and, as such, project finance transactions and construction contracts are not required to comply with them. There have, however, been instances of Thai banks providing cross-border financing for the development of infrastructure projects that require the projects to comply with the Equator Principles. The reasoning behind this requirement seems to be the possibility of the projects being refinanced in the future by financial institutions that require compliance with the Equator Principles.

    iii Responsibility of financial institutions

    Financial institutions, as lenders in project finance transactions, may be responsible for any administrative, civil or criminal liabilities if they are regarded as an administrative agency. In general, the administrative procedure only applies where at least one of the parties in an agreement is an administrative agency or state official, which is deemed an administrative case under the administrative laws. State financial institutions are designated as administrative agencies (e.g., Krung Thai Bank Public Company Limited, Export-Import Bank of Thailand, Government Savings Bank and other government-owned financial institutions established under specific laws).


    i PPP

    PPP projects in Thailand are governed by the Private Investments in State Undertakings Act BE 2556 (2013). The project proposal shall be prepared by the host agency;32 the process and implementation of each project will depend on the project's value, which can be summarised as follows:

      1. for projects having a value of at least 5 billion baht,33 the Cabinet is empowered to approve the private entity selection result from the bidding and draft investment contract;34 and
      2. for projects with a value of between 1 billion and 5 billion baht for medium-sized projects and less than 1 billion baht for small projects, the relevant ministry is empowered to consider the private investments in state undertakings.35

    The PPP project must comply with the strategic plan, which is proposed by the responsible ministry.36 At present, there is a project pipeline under the PPP strategic plan for 2015–2019, which categorises PPP projects into two types: projects that require private sector investment and projects in which the private sector should be encouraged to invest.

    Recent PPP transactions include the development of many urban rail transit systems, which are in the process of project preparation or selecting a private partner, and the development of toll roads in major metropolitan urban areas, for which project appraisal reports are being prepared.37

    ii Public procurement

    The general public-bidding law in Thailand is the newly enacted Public Procurement and Administrative Act BE 2560 (2017) (the Public Procurement Act), announced in the Royal Gazette on 24 February 2017. It became effective on 23 August 2017.38

    The Public Procurement Act has been issued to set a standard by focusing on public disclosure for transparency and opening up to fair competition. The Act also states that the fundamental principle for tender procedures by the state for procurement should be to provide the most benefit to the public and ensure the following: quality of materials, transparency of the procurement process, efficiency and effectiveness of the procurement process, and assessment of the procurement and its verification.39 The authority with responsibility for carrying out reviews of applications will depend on the procurement entity, and upon selection of the candidate, the parties shall enter into an agreement approved by the Office of the Attorney General.40


    The main law governing foreign investments and businesses in Thailand is the Foreign Business Act BE 2542 (1999) (as amended) (FBA). As a general rule, the term 'foreigner' used in the FBA refers to both foreign individuals and foreign companies, whereby a company is deemed to be a foreign company in the event more than 49 per cent of the registered capital in the company is held by one or more foreign individuals or foreign companies. The FBA sets out the rights and limitations of foreigners with respect to business activities in Thailand, which can be divided into the following three categories:

      1. business activities in which foreigners are unconditionally prohibited from engaging;
      2. business activities that may affect national security or safety, art, culture, custom, native manufacturing or handicraft production, natural resources, or the environment; and
      3. business activities in which Thai nationals are not sufficiently equipped to compete with foreigners.

    The business activities in point (b) above may be engaged in by foreigners upon obtaining specific permission from the Minister of Commerce with the approval of the Cabinet, and the business activities in point (c) above by obtaining permission from the Director-General, with the approval of the Foreign Business Board. In addition, exemption from the FBA restrictions mentioned above may be available if the foreigner has been granted investment promotion status by the Board of Investment or has been granted permission with respect to certain business activities by the Industrial Estate Authority of Thailand.

    i Removal of profits and investment

    According to Ministerial Regulation No. 13 (BE 2497) (as amended) issued under the Exchange Control Act BE 2485 (as amended), there are no restrictions on an authorised agent (a commercial bank licensed in Thailand to operate exchange control transactions) providing loans to a Thai entity in foreign currency, provided that relevant rules and regulations as prescribed by the exchange control officer are complied with. Any profits received by the project company in Thai baht may also be converted into foreign currency provided that there is an underlying transaction that requires payment to be made in the foreign currency and documentary evidence to this effect is provided to the authorised agent. If no such evidence is provided, the foreign currency can be deposited into the project company's foreign currency deposit account provided that the outstanding amount at the close of the business day does not exceed US$5 million or its equivalent.41

    Transfers of funds from Thailand may be made on the condition that the project company submits the relevant required documents to the authorised agent for each type of transaction as specified under the Notice of the Competent Officer: Rules and Practices regarding Currency Exchange to the authorised agent together with a foreign currency transaction form in cases where the foreign currency sold or exchanged for the transfer exceeds or is equivalent to US$50,000. Generally, the documents required to be submitted are those that evidence or support the underlying transaction for the transfer. For example, the transfer of profits to the head office abroad will require an audited financial statement for the current fiscal year of the project company.

    In cases where the project company receives proceeds from the exportation of goods, the project company is required to take receipt of the foreign currency proceeds within 360 days of the date of exportation and, once received, the company must bring these proceeds into Thailand and immediately sell or deposit the foreign currency with an authorised agent.42 The foreign currency must be sold or deposited with the authorised agent within 360 days of the date the authorised agent notifies the project company that the foreign currency proceeds have been received into the account of the project company.43 The project company may request an exemption from the above requirements from the Bank of Thailand, and should submit the required evidence and documents;44 if the project company is exempted from the above requirements, it need not bring the foreign currency proceeds into Thailand.


    i Special jurisdiction

    In Thailand there are no specific courts or tribunals when dealing with project finance transactions or construction contracts. However, if a dispute arises from any transaction in Thailand relating to a specific law, that specific law shall be complied with and the dispute shall be conducted under specific court procedures; for example, the Central Intellectual Property and International Trade Court, the Administrative Court or the Central Labour Court.

    ii Arbitration and ADR

    Alternative dispute resolution can be divided into three types: arbitration, mediation and other forms of alternative dispute resolution such as expert determination.

    Most of arbitration cases in Thailand are handled by the Thai Arbitration Institution (TAI), under the Alternative Dispute Resolution Office, Office of the Judiciary, Ministry of Justice. The TAI provides arbitration services under the TAI Rules of Arbitration. It also offers facilities and administration for ad hoc arbitration such as arbitration under the UNCITRAL Arbitration Rules, and arbitration conducted under the auspices of other institutions, such as the International Chamber of Commerce.

    In Thailand, the Arbitration Act BE 2545 (2002) (as amended) (the Arbitration Act) states that in the contract between a government agency and a private entity, regardless of whether it is an administrative contract, the parties may agree to apply the arbitration procedures to settle the dispute and the said arbitration contract shall be binding on the parties.45 The enforcement and enforceability of arbitral awards in Thailand is also governed by the Arbitration Act. Since Thailand is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958), a court is required to enforce an arbitral award made in a signatory country of the convention.

    The request for enforcement of an arbitral award can be made to the court having competent jurisdiction. However, the Arbitration Act also specifies circumstances in which an arbitral award may be set aside or a court may refuse to enforce an arbitral award, which are in line with the UNCITRAL Model Law on International Commercial Arbitration. Those circumstances include issues regarding capacity to arbitrate, validity of arbitration agreement, improper notice of the appointment of arbitrators or the commencement of arbitration, scope of arbitration, compliance with an arbitration agreement (e.g., number of arbitrators), non-arbitrable subject matters, finality of arbitral awards and conflict with public policy. The Arbitration Act does not provide the courts with authority for a review on the merits of a decision.46

    With respect to contracts entered into between the state and the private sector, the Cabinet passed a resolution that prohibited specifying arbitration as the dispute resolution mechanism in all such contracts, whether domestic or international. The Cabinet does permit parties to submit contracts requiring an arbitration provision for consideration on a case-by-case basis.47

    However, a subsequent resolution of the Cabinet dated 14 July 2015 resolved that arbitration may not be specified as the dispute resolution mechanism if contracts entered into between the state and a private entity – whether domestic or international, and irrespective of whether they are administrative contracts – fall into either of the following categories:

      1. contracts that need to comply with the Private Investments in State Undertakings Act BE 2556 (2013); or
      2. concession agreements where the public sector is the concessionaire.

    The Cabinet, however, agreed once again to consider requests to include an arbitration provision on a case-by-case basis.


    In any discussion of Thailand's outlook for the future, it is impossible to avoid political developments, which have in the past had major repercussions on the nation's economic development and on investment. As previously mentioned, Thailand is currently governed by a military-installed government following the coup d'état in 2014. The recent promulgation of Constitution BE 2560 (2017) means that there will be a general election to appoint a civilian government, which it was initially thought might take place before the end of 2018 but is now likely to be delayed until early 2019 because of legal issues.

    One of the strengths of having a non-civilian government is the military government's ability to bypass red tape and unnecessary bureaucratic procedures to approve and expedite large-scale projects. The existing government has already demonstrated this by the use of special powers granted to the National Council for Peace and Order (NCPO) under Interim Constitution BE 2557 (2014)48 to cut through red tape and fast-track certain types of projects. Examples of the use of this power include allowing certain types of power projects to be constructed without taking into account requirements and restrictions against such buildings under town planning laws;49 or allowing certain infrastructure projects, especially transport megaprojects and development projects, to be opened up to bidding before an EIA has been carried out.50 Even though Constitution BE 2560 (2017) has become effective, all announcements, orders and acts, including those of the NCPO or the head of the NCPO, shall also continue to be in force under Constitution BE 2560 (2017) until repeal by way of an act or order of the Prime Minister or a resolution of the Council of Ministers, as the case may be.51 At present, the use of these special powers is far-reaching and sometimes causes negative public sentiment and objections because of the perceived lack of careful consideration or of public hearings and scrutiny by any authority.

    While the government and some investors intend these powers to be used to allow large-scale projects, particularly infrastructure projects, to proceed without delay, the immediate effect is, in general, a negative reception from the public, as the use of these powers can be interpreted as allowing investors to flaunt important regulations that were put in place to protect the rights of local communities and the public. Taking into account the scale of some of the projects that are being fast-tracked, it is inevitable that these projects will be project-financed, involving syndicates of both domestic and international lenders. Owing to the sensitivity of environmental and social issues, there is an obvious reluctance from potential lenders and financial institutions when it comes to lending in large-scale infrastructure projects.

    In future, the key for Thailand will be the approach taken by the current government in initiating and successfully following through with the reforms it has announced to make Thailand more competitive and able to attract more investment in large-scale projects. Aside from tax reforms and adjusting the investment promotion status afforded to investors, the government will have to initiate and implement reforms with a long-term plan to ensure that Thailand has a sustainable economy that is less focused on being an industrial economy heavily dependent on the export of products, but rather an economy with a strong domestic market that can innovate and adapt to changing environments and economic platforms in a more globalised world.


    1 Chaipat Kamchadduskorn is a partner at LS Horizon Limited.

    2 Section 6 of the draft EEC Act.

    3 Section 97 of Thailand Land Code.

    4 Section 49 of the draft EEC Act.

    5 Section 222 of the CCC.

    6 Section 43 of the BOI Act.

    7 Section 37, Paragraph 1 of Constitution BE 2560 (2017).

    8 Section 37, Paragraph 2 of Constitution BE 2560 (2017).

    9 Civil and Commercial Code Amendment Act BE 2557 (2014) and BE 2558 (2015).

    10 Section 8 of the Business Security Act.

    11 Section 7 of the Business Security Act and the ministerial regulation regarding the determination of persons to be a security receiver BE 2559 (2016) (as amended).

    12 Section 5 of the Business Security Act.

    13 Section 22. Paragraph 2 of the Business Security Act.

    14 Section 13 of the Business Security Act.

    15 Section 17, Paragraph 2 and Section 29 of the Business Security Act.

    16 Section 686 of the CCC.

    17 Section 764 of the CCC.

    18 Section 767 of the CCC.

    19 In other words, there are no other registered mortgages or other preferential rights over the mortgaged property; the debtor has failed to pay interest for five years; and the mortgagor has proven to the satisfaction of the court that the value of the mortgaged property is less than the amount of indebtedness (Section 729 of the CCC).

    20 Section 37 of the Business Security Act.

    21 Section 40 of the Business Security Act.

    22 Section 61 of the Business Security Act.

    23 Section 95 of the Bankruptcy Act.

    24 Section 96 of the Bankruptcy Act.

    25 Section 91 of the Bankruptcy Act.

    26 Section 114 of the Bankruptcy Act.

    27 Section 115 of the Bankruptcy Act.

    28 Sections 46-48 of the Environmental Act.

    29 Notification of the Ministry of Natural Resources and Environment: Re: The determination of type and size of project or business required to prepare the environmental impact assessment report and criteria, process, regulation and the guideline for preparing the environmental impact assessment report (as amended).

    30 Notification of the Ministry of Natural Resources and Environment: Re: Type, size and implementing procedure of project or activity that may cause a severe impact to quality of environment, natural resources and health of a community that requires a government agency, a state enterprise, or a private enterprise to prepare an environmental impact assessment report BE 2553 (2010).

    31 Notification of the Ministry of Industry: Re: Preparation of report on the study of prevention and mitigation measures on the impact to environmental quality and safety BE 2552 (2009) and Notification of the Ministry of Industry: Re: Preparation of report on the study of prevention and mitigation measures on the impact to environmental quality and safety (No. 3) BE 2559 (2016).

    32 In Section 4 of the Private Investments in State Undertakings Act BE 2556 (2013) 'host agency' means a government agency having the status of a department or its equivalent, other state agency or local administrative organisation that invites private investment in a state undertaking.

    33 Ministerial Regulation regarding the Determination of an Additional Value of Project that has to comply with the Private Investments in State Undertakings Act BE 2556 (2013) BE 2559 (2016).

    34 Section 42 of the Private Investments in State Undertakings Act BE 2556 (2013).

    35 Notification of the Private Investments in State Undertakings Policy Committee: Re: The criteria and procedures for private investments in state undertakings in projects having a lesser value than Section 23 of the Private Investments in State Undertakings Act BE 2559 (2016), BE 2558 (2015).

    36 Section 19 of the Private Investments in State Undertakings Act BE 2556 (2013); Notification of the Private Investments in State Undertakings Policy Committee: Re: The strategic plan for private investments in state undertakings BE 2558-2562 (2015–2019).

    37 Information from the Project Pipeline under the PPP Strategic Plan 2015–2019, dated 15 September 2016.

    38 Section 2 of the Public Procurement Act.

    39 Section 8 of the Public Procurement Act.

    40 Section 93 of the Public Procurement Act.

    41 Article 23(3) of the Notice of the Competent Officer: Rules and Practices regarding Currency Exchange.

    42 Article 20 of Ministerial Regulation No. 13.

    43 Article 9 of Notification of the Ministry of Finance: Re: Directions of the Minister to authorised agents.

    44 Article 9 of Notice of the Competent Officer: Rules and Practices regarding Currency Exchange.

    45 Section 15 of the Arbitration Act.

    46 Section 43 of the Arbitration Act.

    47 Cabinet Resolution dated 28 July 2009.

    48 Section 44 of Interim Constitution BE 2557 (2014).

    49 NCPO Order 4/2559 (2016).

    50 NCPO Order 9/2559 (2016).

    51 Section 279 of Constitution BE 2560 (2017).