Herbert Smith's Bangkok office wins judgment for one of the world's largest water companies for the enforcement of arbitral award

This June, the Administrative Court in Thailand ruled in favour of a Joint Venture (the JV) created by one of the world's largest water companies and its subsidiary in Thailand in connection with its disputes in relation to the enforcement of an arbitral award. Herbert Smith's Bangkok office represented the JV in the original arbitration and the four years of challenges faced by the JV since the award was issued.

Disputes arose between the parties in relation to the calculation of the management fee and special remuneration under a contract entered into between the parties.  An arbitration was commenced under the rules of the Thai Arbitration Institute. The tribunal rendered an award in favour of the JV. 

The award was challenged in Thailand's Administrative Court on grounds[1] that:

• the award contained decisions beyond the scope of the arbitration agreement; and
• the enforcement of the award would be contrary to the public policy of Thailand because: (a)  the award was issued without considering the fact that the JV lodged the case after the expiry of the prescription period; and (b) the effect of the award was that the JV received more income than the other party.

After four years of consideration, last month the Court decided that the award was not contrary to public policy and could be enforced. The Court reasoned that:

• the tribunal did not raise the expiry of the prescription period in its consideration; therefore, the award could be enforced and was not contrary to public policy; and
• the disputes related to the performance of obligations under the contract; therefore, the Tribunal was empowered by the contract to adjudicate on, and grant an award in relation to, this matter.

The JV can now enforce the award in Thailand, unless the other party exercises its right to appeal the judgment to the Supreme Administrative Court of Thailand.

Bangkok partner Surapol Srangsomwong led both the arbitration and the Administrative Court case on behalf of the JV.

[1] The grounds available to challenge an award in Thailand are contained in Section 40 of the Thai Arbitration Act B.E.2545 (2002) which states that an award may be challenged if:

1. The party filing the motion can furnish proof that:

a. A party to the arbitration agreement was under some incapacity under the law applicable to that party;

b. The arbitration agreement is not binding under the law of the country agreed to by the parties, or failing any indication thereon, under the law of Thailand;

c. The party making the application was not given proper advance notice of the appointment of the arbitral tribunal or of the arbitral proceedings or was otherwise unable to defend the case in the arbitral proceedings;

d. The award deals with a dispute not within the scope of the arbitration agreement or contains a decision on matter beyond the scope of the arbitration agreement. However, if the award on the matter which is beyond the scope thereof can be separated from the part that is within the scope of arbitration agreement, the court may set aside only the part that is beyond the scope of arbitration agreement or clause; or

e. The composition of the arbitral tribunal or the arbitral proceedings was not in accordance with the agreement of the parties or, unless otherwise agreed by the parties, in accordance with this Act.

2. The court finds that:

a. The award deals with a dispute not capable of settlement by arbitration under the law; or

b. The recognition or enforcement of the award would be contrary to public policy.