Thailand, Southeast Asia’s second-largest economy, has been stuck in a rut ever since the political unrest there began more than two years ago. The military junta, in power since May last year, has been attempting to revive the economy with mixed results, but there’s still enough work to keep lawyers busy, finds Ranajit Dam. With additional reporting by Pracha Hariraksapitak

As Southeast Asia’s second-biggest economy, Thailand has been struggling to get things moving. Since 2012, it had been buffeted by large-scale political unrest, although that subsided after the army seized power in May 2014. But to this day, exports and domestic demand remain stubbornly sluggish; commodity prices are low, while household debt is at a record high. Growth in 2014 was only 0.9 percent – the weakest since floodhit 2011 – and it isn’t expected to be much better this year. To compound matters, in August a bomb blast in Bangkok killed 20 people, dealing a potential blow to tourism.

Speak to the country’s lawyers, though, and a less gloomy scenario emerges. “From our firm’s point of view, the change in government in May 2014 was a positive change, and a familiar cycle in Thai government – it was the seventh successful coup in 45 years,” says Niwes Phancharoenworakul, managing partner of Chandler & Thong-ek Law Offices (CTLO). “There was a drop in corruption in the private sector. Not a single project in our M&A, project financing, and energy practices was put on hold.”

He also notes that in July, Thailand’s Board of Investment (BoI) reported an increase in investment application approvals for the first half of 2015. “The value of approved projects rose by 122 percent, compared with the same period in 2014. The BoI approved 1,254 projects worth a total of 412.7 billion baht [$11.8 billion] in the first half of 2015, compared to the first half of 2014 when 744 projects worth 185 billion were approved,” he says.

STEADY FLOW

Niwes says that his firm has been kept busy in the past 18 months by a steady flow of M&A, project financing and energy projects work. This, he adds, has been helped somewhat by recent legislative changes. “There were amendments to the Civil and Commercial Code (CCC) regarding rights of surety and mortgagors,” he says. “Additionally, there is a new Business Collateral Act (pending publication) which introduces security in movables, and will have a major impact on the structure of security documents in project financings.”

Finally, he notes that there have been a number of changes to laws that have had a net positive impact for foreign direct investment. “This has included the announcement of new investment promotion projects by the BoI in December 2014, tax incentives for Special Economic Zones (SEZs), relaxation of certain visa/work permit rules to promote tourism, and adoption of a strategic plan for public-private partnership (PPP) infrastructure projects,” he says.

In the sphere of disputes, the government has maintained a policy against arbitration for dispute resolution in state contracts, says Niwes. “The Cabinet has the power to make exceptions, which it does from time to time. Because Thailand is not a litigious jurisdiction, most FDIs have accepted alternative dispute resolution by, for example, the Energy Regulatory Commission, an untested procedure. Otherwise, domestic and international arbitration provisions are commonly found in major contracts.”

However, the challenge his firm faces today is that the legal market in Thailand is growing increasingly crowded, with the entry of not just U.S. and UK law firms, but also firms from within Asia. For example, Japan’s Mori Hamada & Matsumoto opened an office earlier this year. “Maintaining our core lawyers at 40 will continue to be a challenge, with the opening of Japanese and other ASEAN law firms in Thailand,” says Niwes. “We have lost no partners for some time, and have recruited promising younger associates. Foreign firms have the continuing need for building up competent teams of Thai lawyers, in part to address the need for local language and culture, and to work in litigation which is limited to Thai licensed lawyers.”

LOOKING AHEAD

Niwes believes that ASEAN integration will continue to boost both domestic and foreign investment in Thailand, particular as a gateway to Cambodia, Laos, Myanmar and Vietnam. The recent signing in 2015 of agreements on the Dawei SEZ will allow investors to plan for the east-west corridor. There are major domestic, Chinese and Japanese railway projects in the development phase. But “it remains uncertain whether Thailand will join the TPP investment treaty. The government is reviewing the pros and cons of joining this investment treaty,” he says. Twelve countries have joined the TPP so far.

As for the work he expects his firm to do in the near future, Niwes said that CTLO needs to continue concentrating on M&A, project financing and projects. “The Thai government has a policy to promote renewable energy, and has adopted a feed-in-tariff which is expected to continue to attract investment, especially in solar, wind, and bio-mass. CTLO will take a lead on negotiation with the BoI under its new incentive and merit-based criteria, and SEZ, and cross-border focus,” he adds.