The “last four lines” of a contract — the dispute resolution clause — is often signed without a second reading. Yet once a dispute breaks out, those four lines can decide the fate of the business. Two patterns are particularly common among Japanese companies expanding into Thailand: “Governing law: Japanese law, Jurisdiction: Thai courts” (a seemingly safe combination), and “the parties may elect arbitration or litigation by mutual agreement” (a superficially flexible clause). Both are fragile when actually used.
In Part 5 of the “Thai Contract Essentials” series, we examine the comparison between Thai courts and international arbitration, the key provisions of the Thai Arbitration Act B.E. 2545 (2002), enforcement of foreign arbitral awards under the New York Convention, common pitfalls, and sample clause wording. This is the sister topic of the “governing law” discussion in Part 1 (fundamentals). Please also see Part 2 (sale and distribution), Part 3 (employment vs services), and Part 4 (leases and the 30-year rule).
Why Dispute Resolution Must Be Designed Together with Governing Law
A dispute resolution clause has four components:
- Governing Law — the substantive law governing interpretation and performance
- Mode of Dispute Resolution — litigation, arbitration, or mediation
- Jurisdiction / Seat — which court or which arbitral seat
- Language — language of proceedings and documents
These must be designed together. Choosing Japanese law as the governing law but letting disputes go to Thai courts triggers the enormous burden of proving Japanese law (a foreign law) in the Thai language before a Thai court. By comparison, Japan has consolidated international jurisdiction rules (Article 3-7 and following of the Code of Civil Procedure) and a foreign judgment recognition regime (Article 118). Thailand has no equivalent consolidated regime and relies on the territorial jurisdiction rules of the Civil Procedure Code.
Litigating in Thai Courts — Language, Time, and Cost
Basic jurisdiction
As a rule, the courts of the defendant’s domicile or the place of performance have jurisdiction (Civil Procedure Code Sections 4 and 5). Specialised courts have exclusive jurisdiction in their areas: the Labour Court, the Central Intellectual Property and International Trade Court (IP&IT Court), the Tax Court, and the Central Bankruptcy Court.
The absolute Thai-language rule
Proceedings in Thai courts are conducted exclusively in Thai. English contracts, evidence and submissions must be translated; foreign witnesses testify through interpreters. Disputes over translation cost and quality frequently become a preliminary battleground.
Time and cost
In practice, first-instance proceedings are said to take around 1 to 3 years, with appeals pushing the total to 5 to 10 years in some cases. Court fees are 2% of the claim (capped at THB 300,000), and cost-shifting of attorney fees to the losing party is narrower than under Japanese practice.
Enforceability
Enforcement against assets located in Thailand is available. Enforcement abroad depends on whether the destination jurisdiction recognises Thai judgments — and, as discussed below, the reverse direction (Japanese judgment enforced in Thailand) is practically very difficult.
Jurisdiction Agreements under Civil Procedure Code Section 7
Thai Civil Procedure Code Section 7 allows the parties to agree in writing on a specific court as having exclusive jurisdiction. The validity requirements are: (i) written form, (ii) clear agreement, and (iii) the chosen court being a Thai court.
A key caveat: where the agreement nominates a foreign court, Thai courts that have jurisdiction under Thai law may still be able to accept the case notwithstanding the exclusive foreign jurisdiction clause, under prevailing practice. If the goal is to move disputes out of Thai courts, arbitration is more reliable than a foreign-court jurisdiction clause, both from an enforcement and a court-exclusion perspective.
Note also that labour disputes (exclusive jurisdiction under the Act on Establishment of Labour Courts B.E. 2522) and consumer cases (Consumer Case Procedure Act B.E. 2551) have restrictions on party autonomy over jurisdiction. As discussed in Part 3 on employment contracts, an arbitration clause in an employment contract may not actually prevent the employee from filing in the Labour Court — an important constraint when designing dispute resolution clauses for employment arrangements.
The Thai Arbitration Act B.E. 2545 (2002) — Core Structure
Written form and separability (Section 11)
An arbitration agreement must be in writing. This includes an arbitration clause in a contract, a standalone arbitration agreement, and exchanges by telegram, fax, or email. It is also satisfied where one party alleges the existence of an arbitration agreement in its claim and the other party does not dispute it.
An arbitration agreement is independent (separability) from the main contract, and remains valid even if the main contract is invalid or terminated.
Kompetenz-Kompetenz (Section 24)
The arbitral tribunal has the power to rule on its own jurisdiction, including on challenges to the validity of the main contract.
Appointment and nationality of arbitrators
Parties may freely agree on the number of arbitrators and the method of appointment (Sections 13 and 14). Absent agreement, the default is one arbitrator, or three in international cases. Foreign arbitrators are permitted; nationality restrictions were removed by the 2002 amendment.
Grounds for setting aside an award (Section 40)
Grounds include incapacity, invalid arbitration agreement, deprivation of the right to present the case, excess of jurisdiction, procedural violations, non-arbitrability of the subject matter, and public policy violations. The application to set aside must be filed within 90 days of receipt of the award. Recent Thai Supreme Court decisions are said to show a tendency to interpret the scope of arbitration agreements broadly (specific case numbers should be verified against primary sources).
Recognition and enforcement of foreign awards (Sections 41–44)
Foreign arbitral awards are enforceable in Thailand through these provisions, via the New York Convention framework discussed below. The application must be filed within 3 years of receipt of the award.
Thai Domestic Arbitration Institutions — TAI and THAC
Thai Arbitration Institute (TAI)
Established in 1990 under the Office of the Judiciary. TAI is the oldest arbitration institution in Thailand and handles primarily domestic disputes, with Thai as the default language of proceedings. Costs are comparatively modest.
Thailand Arbitration Center (THAC)
Established in 2015 as an independent body under the Ministry of Justice, THAC is focused on international commercial arbitration. Its THAC Arbitration Rules are modelled on UNCITRAL. English-language proceedings and foreign arbitrators are permitted, and e-arbitration infrastructure is being expanded.
Rule of thumb
For purely domestic transactions (both parties Thai, Thai-language performance), TAI is a natural fit. For international transactions, Japanese-company counterparties, or English-language contracts, THAC is usually the better choice.
International Arbitration Options — SIAC, HKIAC, JCAA, ICC
| Institution | Base | Language | Typical use for Japanese companies |
|---|---|---|---|
| SIAC (Singapore International Arbitration Centre) | Singapore | English | Standard choice for Asia deals; neutral seat |
| HKIAC (Hong Kong International Arbitration Centre) | Hong Kong | English / Chinese | Strong for China-related matters |
| JCAA (Japan Commercial Arbitration Association) | Tokyo / Osaka | Japanese / English | Japanese-company counterparties; Japanese-law contracts |
| ICC International Court of Arbitration | Paris | Multiple | Large or complex matters |
The seat of arbitration determines the lex arbitri and is distinct from the physical venue. Key factors when selecting a seat include: (i) an arbitration-supportive judiciary, (ii) being a New York Convention state, (iii) political and geographic neutrality, and (iv) rational set-aside procedures. Japanese companies using SIAC typically designate Singapore as the seat.
The New York Convention — The Decisive Factor for Enforcement
The 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) provides a framework under which an arbitral award made in one contracting state is recognised and enforceable in other contracting states. As of 2026 there are over 170 contracting states. Thailand acceded on 21 December 1959 and Japan on 20 June 1961. Singapore and Hong Kong are likewise contracting states.
Grounds to refuse enforcement are exhaustively listed in Article V of the Convention: incapacity, invalid arbitration agreement, deprivation of the right to be heard, excess of jurisdiction, procedural violations, public policy violations, and so on. In Thailand, applications for enforcement are made under Sections 41–44 of the Thai Arbitration Act.
Foreign Judgments in Thailand — A Notable Gap
Thailand is not a party to any multilateral convention on the recognition and enforcement of foreign judgments. Under the Civil Procedure Code, recognition is examined case by case on a reciprocity basis. In practice, establishing reciprocity is extremely difficult, and direct enforcement of a Japanese judgment in Thailand is generally not feasible. Japan has a recognition regime under Article 118 of its Code of Civil Procedure, so the logic of “recognition on the Japanese side” can be constructed; but the reverse has little established practice, and the arrangement is effectively one-way.
The practical consequence: where the counterparty’s assets are in Thailand, winning a Japanese court judgment may not actually help you. This is the decisive “litigation vs arbitration” inflection point. New York Convention awards, by contrast, have a workable enforcement route into Thailand — which is the practical reason to prefer arbitration for Thailand-related transactions.
Five Common Pitfalls for Japanese SMEs
1. Hybrid clauses
“The parties may elect arbitration or litigation by mutual agreement” looks flexible but invites fights over the validity of the arbitration agreement itself, particularly if the election right is unilateral or the exercise mechanism is unclear. Commit to one route — arbitration or litigation.
2. Pathological clauses
Non-existent institutional names (“Singapore Arbitration Court”), inconsistencies between seat and institution, or ambiguous wording — all lead to disputes about the validity of the clause before any substantive hearing begins. Always verify the exact institutional name and rule title on the official website.
3. Unspecified language
If the language of arbitration is not specified, the tribunal decides — and in disputes with Thai counterparties, Thai may be selected. Always specify the language.
4. Governing-law / forum mismatch
“Governing law: Japanese law, jurisdiction: Thai courts” creates the worst-of-both-worlds scenario of proving Japanese law in Thai language before a Thai court. Governing law and forum should be designed coherently.
5. Drift in long-term contracts
For long-term contracts like the 30-year leases discussed in Part 4, the dispute resolution clause is locked in for decades. Build in language referring to the rules “in force at the time” to absorb institutional renaming, rule revisions, mergers, or dissolutions.
Sample Clause (SIAC, Singapore seat, English)
The following is a typical template; specific transactions should always be reviewed by counsel.
Article XX. Governing Law and Dispute Resolution
(1) This Agreement shall be governed by and construed in
accordance with the laws of Japan.
(2) Any dispute arising out of or in connection with this
Agreement, including any question regarding its existence,
validity or termination, shall be referred to and finally
resolved by arbitration administered by the Singapore
International Arbitration Centre (SIAC) in accordance with
the SIAC Rules in force at the time of the commencement of
the arbitration.
(3) The seat of the arbitration shall be Singapore.
(4) The number of arbitrators shall be three.
(5) The language of the arbitration shall be English.The six essential elements: (i) governing law, (ii) arbitral institution, (iii) applicable rules, (iv) seat, (v) number of arbitrators, (vi) language. Confirm each of these is present before signing. For post-dispute procedure, please see the Dispute Resolution series, Part 1 onwards.
Summary — Five Design Points for Dispute Resolution Clauses
| # | Point | Practical implication |
|---|---|---|
| 1 | Governing law and dispute resolution are one package | Avoid “Japanese law + Thai courts” type mismatches |
| 2 | Thai court litigation is language, time and cost-heavy | Default to arbitration for cross-border deals |
| 3 | Foreign judgments are effectively unenforceable in Thailand | If the counterparty’s assets are in Thailand, choose arbitration |
| 4 | New York Convention secures enforceability of awards in Thailand | SIAC, JCAA, etc. are structurally supported |
| 5 | Avoid hybrid, pathological, and unspecified-language clauses | Be precise about institution, rules, seat, and language |
The next and final instalment (Part 6) will close the series with a look at Thailand’s electronic contracting and digital signature regime, including the Electronic Transactions Act, electronic stamp duty, and practical points.
We advise on drafting and reviewing dispute resolution clauses (jurisdiction and arbitration) for Thailand-related contracts, risk assessments of existing contracts, and responses to actual disputes, from both Japanese-law and Thai-law perspectives. We coordinate with JTJB International Lawyers’ Thai-qualified attorneys as required. Please feel free to contact us.
This article is for general informational purposes about Thailand’s legal system and does not constitute legal advice under Thai law. For specific matters, please consult a Thai-qualified legal professional. Our firm works in collaboration with JTJB International Lawyers’ Thai-qualified attorneys.