Our Practice Areas
International Trade Disputes in Thailand
Cross-border commerce presents significant growth opportunities, but it also carries inherent risks of complex disputes. From receiving defective goods and non-payment under a Letter of Credit (L/C) to cargo damage during maritime transit, international trade disputes can disrupt operations and threaten a company’s financial stability.
For business leaders, particularly at Small and Medium-sized Enterprises (SMEs) and Startups, navigating a dispute with a foreign counterparty can be daunting. There is often a lack of clarity on where to begin: Which court has jurisdiction? Is arbitration the better path? What evidence is critical for success? This uncertainty can lead to costly delays and strategic missteps.
1. What Constitutes an "International Trade Dispute" in Thailand?
Under Thai law, not every dispute involving a foreign party qualifies as an “international trade case.” The designation is reserved for specific civil cases directly related to cross-border commercial activities, as defined by the Act for the Establishment of and Procedure for the Intellectual Property and International Trade Court, B.E. 2539 (1996).
Common Scenarios of International Trade Disputes:
- Defective Goods: A Thai company imports manufacturing equipment from Germany, only to discover it fails to meet the specifications outlined in the sale and purchase agreement (SPA).
- Letter of Credit (L/C) Non-Payment: A Thai rice exporter ships goods to a buyer in Africa under an L/C, but the issuing bank refuses payment, citing alleged discrepancies in the shipping documents.
- Cargo Damage: A shipment of frozen seafood from Thailand to Japan is spoiled during transit due to a failure in the refrigerated container provided by the sea carrier.
- Breach of Agency Agreement: A Thai distributor’s exclusive agreement with a European manufacturer is unlawfully terminated, leading to a dispute over lost profits and inventory.
To navigate these situations, understanding key terminology is essential:
- Governing Law: The national law chosen by the parties to interpret their contract and resolve disputes.
- Jurisdiction/Venue: The clause specifying which country’s courts will hear any legal action.
- Arbitration Clause: A contractual agreement to resolve disputes through a private, non-governmental process rather than through public courts.
- INCOTERMS: A set of globally recognized rules published by the International Chamber of Commerce (ICC) that define the responsibilities of sellers and buyers for the delivery of goods under sales contracts (e.g., FOB, CIF).
- Letter of Credit (L/C): A financial instrument issued by a bank that guarantees payment to a seller, provided that the terms and conditions stated in the L/C are met.
- Bill of Lading (B/L): A critical document in sea freight that acts as a receipt for goods, a contract of carriage, and a document of title.
Pre-Contract Checklist for SMEs & Startups
The most effective strategy is proactive risk management. Before signing any international contract, businesses should confirm the following:
- [ ] Dispute Forum: Will disputes be resolved in a court (in which country?) or through arbitration?
- [ ] Governing Law: Which country’s laws will apply to the contract?
- [ ] Language: What is the official language for legal notices and proceedings?
- [ ] Evidence Retention: Is there a clear protocol for saving all contracts, purchase orders, invoices, and communications (including emails and chat messages)?
2. The Right Forum: The Central Intellectual Property & International Trade Court
When an international trade dispute arises in Thailand, the primary judicial venue is the Central Intellectual Property and International Trade Court (IPIT Court).9
Established by a specific act of parliament in 1996, the IPIT Court is a specialized court staffed with judges who possess expertise in complex commercial, trade, and intellectual property matters. This specialization is designed to promote efficiency and predictability, as the judges are well-versed in the unique documents and practices of international trade, potentially leading to faster resolutions than in a general civil court.
Official Information:
- Address: The Government Complex, Chaeng Watthana Road, Laksi, Bangkok, Thailand.
- Official Website: http://www.ipitc.coj.go.th.
Although its primary jurisdiction covers Bangkok and its surrounding provinces, the Central IPIT Court currently hears cases from across the entire Kingdom, as no regional IPIT courts have been established to date. However, the choice of forum is not always straightforward and depends heavily on the contract and the nature of the dispute.
Dispute Type | Likely Forum | Key Considerations & Legal Basis |
|---|---|---|
Breach of International Sales Contract | IPIT Court (if no arbitration clause) | Pros: Public process, creates precedent. Cons: Slower, less confidential. Basis: Sec. 7(5) of IPIT Court Estab. Act. |
Dispute with an Arbitration Clause | Arbitration (e.g., TAI, THAC, ICC) | Pros: Confidential, flexible, parties can select expert arbitrators. Cons: Can be costly, very limited appeal rights. Basis: Arbitration Act, B.E. 2545.12 |
Carriage of Goods by Sea Claim | IPIT Court | Specialized area frequently litigated in court. Basis: Carriage of Goods by Sea Act, B.E. 2534 16; Sec. 7(5) of IPIT Court Estab. Act. |
Enforcement of a Foreign Arbitral Award | IPIT Court | The court serves as the gateway for making a foreign award legally enforceable in Thailand. Basis: Arbitration Act, B.E. 2545 12; New York Convention.13 |
Anti-Dumping Complaint | Administrative Process (DFT), then Judicial Review (IPIT Court) | The initial investigation is administrative. The court reviews the legality of the final administrative order. Basis: Anti-Dumping Act, B.E. 2542.4 |
Disclaimer: This table provides general guidance only. The correct forum depends on the specific facts and contractual terms of each case. Professional legal advice is essential.
Table 1: Forum Mapping for International Trade Disputes in Thailand
3. Deep Dive: Case Types Under the IPIT Court's Jurisdiction
Section 7 of the IPIT Court Establishment Act specifies the types of international trade cases that fall within the court’s jurisdiction.
3.1 Civil Cases on International Sale, Exchange, or Services
This category covers disputes from SPAs, manufacturing agreements, and cross-border service contracts. Remedies typically include damages or specific performance. A critical point for foreign parties is that Thailand is not a contracting state to the UN Convention on Contracts for the International Sale of Goods (CISG). Consequently, disputes are governed by the law specified in the contract or, in its absence, by Thailand’s Civil and Commercial Code.
3.2 Cases on International Carriage
For maritime disputes, the primary governing law is the Carriage of Goods by Sea Act, B.E. 2534 (1991). Common claims involve cargo damage, loss, or delay in delivery. A crucial deadline for businesses to be aware of is the strict one-year prescription period (statute of limitations) to file a lawsuit, which runs from the date of delivery. Failure to file within this period will result in the claim being permanently barred.
3.3 Cases on International Financial Transactions
These disputes often revolve around Letters of Credit (L/C). L/Cs are typically governed by the Uniform Customs and Practice for Documentary Credits (UCP 600), published by the ICC, which is incorporated by reference into the L/C itself. While the UCP 600 is a set of contractual rules and not Thai law, Thai courts will enforce its provisions if the parties have agreed to them.
3.4 Cases on International Insurance
This includes disputes over marine cargo and other international trade-related insurance policies, such as claims for coverage that have been denied by the insurer.
3.5 Cases on Anti-Dumping (AD) and Subsidies (CVD)
These are trade remedy actions initiated when a domestic industry alleges injury from unfairly priced (dumped) or subsidized imports. The investigation is conducted by the Department of Foreign Trade (DFT) under the Anti-Dumping and Countervailing Act, B.E. 2542 (1999). The IPIT Court’s role is to conduct a judicial review of the DFT’s final determination.
3.6 Enforcement of Arbitral Awards
As many international contracts contain arbitration clauses, a key function of the IPIT Court is the recognition and enforcement of arbitral awards. This process is governed by the Arbitration Act, B.E. 2545 (2002). Thailand’s accession to the New York Convention of 1958 facilitates the enforcement of awards made in other member countries. The grounds for a Thai court to refuse enforcement are very limited and are aligned with international standards, such as violations of public policy or fundamental procedural unfairness.
4. How to Prepare When a Trade Dispute Arises
When a dispute emerges, a systematic and prompt response is vital.
- Step 1: Gather and Preserve All Evidence
Your documentation is your most powerful asset. Compile a complete and chronological file containing:
- The contract, Purchase Orders (POs), Invoices, Packing Lists
- Bill of Lading (B/L) or Air Waybill (AWB)
- Proof of payment (SWIFT/TT confirmations), all L/C documentation
- All relevant communications: emails, chat logs (e.g., WhatsApp)
- Third-party inspection reports, photos, and videos of any defective goods
- Step 2: Conduct a Strategic Contract Review
Immediately locate and analyze the key dispute resolution clauses in your contract to understand the agreed-upon “rules of the game”:
- Governing Law: Which country’s law applies?
- Dispute Resolution: Is there a jurisdiction clause (specifying a court) or an arbitration clause (specifying the seat and rules)?
- Notice Requirements: Are there specific deadlines or methods for formally notifying the other party of a claim?
- Step 3: Seek Specialized Legal Counsel Early
Consulting with lawyers experienced in international trade disputes at an early stage is crucial. They can provide an objective assessment of your case’s merits, estimate potential costs and timelines, and advise on the viability of seeking interim protective measures—such as a court order to freeze the other party’s assets—to ensure there are funds available for recovery if you win.20
Table 2: Typical International Trade Dispute Process Flow
Stage | Court Litigation (IPIT Court) | International Arbitration |
|---|---|---|
1. Dispute Arises | Pre-action correspondence, evidence gathering. | Pre-action correspondence, evidence gathering. |
2. Commencement | Filing a formal Plaint with the IPIT Court. | Filing a Notice of Arbitration with the relevant institution (e.g., THAC, ICC). |
3. Interim Measures | Application to the IPIT Court for urgent relief (e.g., asset attachment) under the Civil Procedure Code.22 | Application to the Arbitral Tribunal (or a court) for interim relief. |
4. Proceedings | Pleadings, discovery, and witness hearings in a public court setting. | Written submissions, document production, and private hearings before the arbitral tribunal. |
5. Outcome | Judgment - subject to appeal. | Final Award - very limited grounds for challenge. |
6. Enforcement | The judgment creditor applies to the Legal Execution Department (LED) for enforcement (e.g., asset seizure). | The award creditor must first apply to the IPIT Court for recognition, and then proceed to the LED for enforcement.2 |
This process flow reveals a critical distinction: a court judgment can be enforced directly, whereas an arbitral award requires an additional court recognition step before enforcement can begin. This is a key strategic consideration for businesses weighing their options.
5. Conclusion
International trade disputes are complex, but Thailand’s legal framework provides clear mechanisms for resolution through the specialized IPIT Court and internationally recognized arbitration procedures. The most critical factor for a successful outcome is proactive preparation—from drafting robust contracts with clear dispute resolution clauses to meticulously preserving evidence and seeking expert legal advice the moment a problem arises. An informed and timely strategy is the best way to protect your business interests, manage costs, and achieve an effective resolution.
If your business is facing a cross-border trade dispute or you wish to strengthen your international contracts to prevent future issues, contact our team for an initial assessment. We are ready to provide guidance tailored to your specific situation from within our practice areas.
Frequently Asked Questions (FAQ)
Not necessarily. The correct forum depends on the jurisdiction clause in your contract and whether the nature of the dispute falls within the IPIT Court's specific mandate under the law. If your contract contains a valid arbitration clause, you are generally required to use arbitration.
Delaying action. Many claims, particularly in shipping, are subject to strict time limits, such as the one-year prescription period under Thailand's Carriage of Goods by Sea Act. Waiting too long can result in the permanent loss of your right to claim and the degradation of critical evidence.
An L/C is a bank's conditional promise to pay a seller on behalf of a buyer, provided the seller presents documents that strictly comply with the L/C's terms. Disputes often arise from minor discrepancies in these documents, which can give the bank grounds to refuse payment.
Yes. Thailand is a signatory to the New York Convention. To enforce a foreign award, you must file a petition with the competent Thai court (typically the IPIT Court) to have the award formally recognized and rendered enforceable in Thailand under the Arbitration Act.
The contract/PO, invoice, packing list, bill of lading (or air waybill), proof of payment (TT/SWIFT), and all correspondence with your counterparty, including emails and chat messages.
The timeline varies significantly. A straightforward case in the IPIT Court may take 12-24 months to receive a first-instance judgment. Arbitration can sometimes be faster. Complex cases involving appeals can take several years to reach a final resolution.
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