Citation: Supreme Court Decision 10057/2555
Court: Thailand Supreme Court
Relevant Legislation: Thai Arbitration Act BE 2545 (available here)
In this matter, parties to an arbitration had decided that certain issues would be decided by the court, and that the tribunal would be bound by the court’s decision in rendering its award. After the court of first instance gave a decision relating to those issued, an award was issued by the tribunal taking into account the court’s decision. However, as this award was issued before the court of first instance decision could be appealed for final judgment by the higher courts, the Thai Supreme Court refused to enforce the arbitral award. IAA student editors for Thailand Patrick Liu and Mimi Tanapathong report.
I. BACKGROUND
The case between Bangkok Insurance Public Limited Company (“the Plaintiff”) and Nam Seng Insurance Public Limited Company (“the Defendant”) arose from the Plaintiff’s application to the courts to enforce an arbitral award.
The parties had submitted a dispute to an arbitral tribunal under the General Insurance Association (“the Association”). Article 22 of the Association’s Arbitration Regulations (“Art. 22”) stipulates that “The arbitral tribunal must decide in accordance with the principles of law and justice and record the agreements made between the disputants.”
According to the report dated 1st June 2000 (“the Report”), the parties agreed that the arbitral tribunal would follow the judgment of the court on the first issue regarding whether the incident was caused by the negligence of the driver, who was insured by the Defendant. At the time, the civil court of Minburi province was in the process of taking evidence on this issue. The Court of First Instance later decided that the incident was indeed caused by the driver’s negligence; however, this was not final, as the Defendant appealed to the Court of Appeals.
Subsequently, without waiting for the judgment from the Court of Appeals or the Supreme Court, the arbitral tribunal held that the Defendant was liable to the Plaintiff for damages.
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II. ISSUES FOR THE COURT
The issue before the court is whether the arbitral award is enforceable, as it followed the decision of the Court of First Instance, instead of waiting for the final judgment from the Court of Appeals or the Supreme Court, and thus, may be in violation of the parties’ arbitration agreement and Art. 22.
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III. DECISION OF THE COURT
In coming to its decision, the Supreme Court referenced paragraph 1 of s.146 of the Civil Procedure Code, which states that “Where final judgments or orders of two courts of different instances referring to the same indivisible act of performance are conflicting, the judgment or order of the higher Court shall prevail.”
Since the arbitral award was granted before the final judgment of the Court of Appeals or the Supreme Court was issued, it might contradict the judgment of such higher courts, which would prevail per paragraph 1 of s.146.
Although the Report did not specifically state that the judgment the parties agreed for the tribunal to follow must be one rendered by the Court of Appeals or the Supreme Court, such intention may be inferred from paragraph 1 of s.146.
Therefore, as the arbitral award contradicted the parties’ agreement, the court refused to enforce the arbitral award under s.43(5) of the Arbitration Act B.E. 2545.
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IV. COMMENTS
This case touches upon the principle of party autonomy, which grants the parties ample opportunity to agree on the procedural aspects of the arbitral proceedings. The tribunal and the courts are usually bound to give effect to the parties’ intentions, provided that such agreement does not contravene certain mandatory procedural requirements as stipulated in the Arbitration Act B.E. 2545. For example, the parties cannot agree that the tribunal would only hear evidence submitted by one party in deciding whether negligence occurred, as doing so would jeopardize each party’s opportunity to present its case to the tribunal.
Given that a parallel litigation was pending in the courts in this case, the parties wished to avoid conflicting outcomes, and thus agreed that the courts’ decision as to whether the incident was caused by the negligence of the insured driver would be followed by the tribunal. At first glance, it seemed prudent for the parties to try to avoid conflicting decisions between the courts and the tribunal. However, the parties did not consider that judgments of the Court of First Instance are subject to appeal, and that the issue might consequently reach the Court of Appeals or even the Supreme Court, each of which may come to a different decision. Accordingly, the parties failed to clearly state which court had the power to produce a judgment that the tribunal would rely on. Such ambiguity required judicial interpretation to resolve, and the result was not surprising; the decision of the higher court shall prevail.
As such, in exercising their autonomy, parties are advised to take into account every possible outcome of such agreement, and avoid unclear wording that may lead to an unanticipated result. The present case is an example of the consequences of such ambiguity – the parties suffered substantial delay and increased expenses as following the appeal against the judgment of the Court of First Instance, they belatedly learnt that the arbitral award they laboriously managed to secure was unenforceable owing to breach of the unclear agreement. The ambiguity thus adversely affected three of the core values of arbitration, namely, cost and time efficiency, and easy enforceability of the arbitral award.
Had the parties clearly provided that the tribunal shall follow the decision of the “final judgment”, be it the judgment of the Court of First Instance, the Court of Appeals, or the Supreme Court, the arbitral proceedings would likely have been suspended pending judgment. Subject to other valid objections, which did not arise in this case, the resulting arbitral award would have been enforceable, as the tribunal would have complied with the parties’ agreement. Ensuring that provisions pertaining to the tribunal’s power to rule on a dispute in an arbitration agreement are clear and precise is therefore vital to eliminate uncertainties, prevent subsequent challenges, and ultimately, ensure the enforceability of the arbitral award.
This article may be cited as follows: Patrick Liu and Mimi Tanapathong, “Thailand Case Update: Implications of Parties’ Agreement to Rely on Court Decisions in Arbitration (Supreme Court Decision 10057/2555) International Arbitration Asia (6 February 2016) <http://www.internationalarbitrationasia.com/Implications-of-an-Agreement-to-Rely-on-Court-Decisions-in-Arbitration>.
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