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Class Action Proceeding in Thailand

11 Oct Class Action Proceeding in Thailand

On 8th April 2015 the amendment of the Civil Procedure Code B.E. 2558 (2015) was promulgated in the Royal Thai Government Gazette. This amendment to the Civil Procedure Code introduced class actions, a type of lawsuit which is new to the Thai legal system.

Originating from Anglo-Saxon law the class action is a kind of lawsuit in cases with several injured parties who do not all have to start their own legal actions in order to receive a court reward out of the class action case. Therefore, the class action can provide efficiency and facilitate justice in certain cases with a large number of parties. It can bring justice for injured persons who would otherwise not seek compensation. Even small claims of numerous people can add up to a considerable or even huge value of the aggregated claims. The typical model case would be a consumer protection case with many injured individuals against the responsible corporation. In theory class actions strengthen the procedural rights of less privileged social groups. Can the practice of class action in Thailand keep this promise? We will monitor class action cases.

The initial concept of draft law on Class Action Act was mainly adopted from the United States Federal Rules of Civil Procedure. It might be worth to carefully study the application of the US class action law in Thailand as class actions until now foreign to the Thai legal system are well-established in the United States. This even more as the new Thai class action is surprisingly vague regarding central issues, e.g. regarding the group of people who shall be bound and entitled by the class action called “class members” under the new law (the new law contains a provision for the opting-out of class members, but is not clear as to whether a person will be a class member eo ipso by fulfilling the statutory requirements or whether a constitutional act is required).

On the other hand the new class action amendment contains provisions for the procedure during and in preparation of court hearings, e.g. regarding evidence owned by the counterparty, the testimony and questioning of parties, matters in dispute etc. which in such detail are not even regulated in the Thai Civil Procedure Code for all other types of procedures which involve no class action.

There are limitations as to what extent US interpretations and precedents can be used to interpret the new Thai class action law, as the common law system of the US is based on different principles and a different legal culture than the Thai system which follows the continental-European civil law.

The introduction of the class action into the Thai Civil Procedure Code amounts to an exception to the fundamental principle that the right to sue lies only with the party who is affected in their own rights. This principle which is comparable to the Anglo-Saxon “locus standi” governs the Thai civil procedure as prescribed in Section 55 of the Thai Civil Procedure Code: only the persons whose rights are involved is entitled to submit a lawsuit to a civil court. By contrast, under the new class action law a plaintiff and the plaintiff’s attorney will have an extraordinary leading role and submit a lawsuit for all “class members” who will be bound by the decisions of the court in the class action case. This also means that the class members will automatically forfeit their rights to bring a new lawsuit as Section 144 of the Civil Procedure Code prescribes that an adjudicated case may generally not tried again. If a person regarded as a class member wishes to avoid being bound by the class action case, they would need to formally opt-out.

The class action lawsuits which may be filed must involve wrongful acts or breach of contracts or other forms of losses arising from specific laws; environment law, consumer protection law, security and exchange law, competition law and labor law as well.

The plaintiff of class members can file a lawsuit together with a request to commence a class action to the Court. Thereafter, the Judge will consider and send the copy of those to the defendant. If the request is approved, the Judge will send the notice to class members and publish on the well-known newspaper 3 days continually so in case any member would exclude from this class (opt-out), shall send a correspondence to the Court within the prescribed period. The notice shall include the important information i.e. the rights of the class member, binding of final judgment, detail of Court and case.

 

Q&A 

1.  What is the class action?

Class action is a special kind of lawsuit which allows to bring claims of many people who will not all become plaintiffs themselves to a civil court, typically in cases with many injured people or consumer cases.

 

2. What is the definition of “Class” under this law?

A group of persons (more than 2 persons) having identical rights arising from common issues of fact and law and possessing identical characteristics that are specific to the class even if there are variations in the type of damages suffered by each person.

 

3. Which is the Court jurisdiction for this class action?

All Courts of Justice (except District Court) e.g. Civil Court, Provincial Court, Tax Court, Labor Court, Central Intellectual Property and International Trade Court etc. but not includes Administrative Court and Constitutional Court.

 

4. What is prescription period under this law?

The prescription period depends on the kind of claim as regulated in the Civil and Commercial Code. Once the Court allows to proceed in class action, a prescription of each class member will stop running when the class action suit was filed.

 

5. How to opt-out of the class?

– Giving a notice of opting-out of the class to the Court within the prescribed period which specified in the notice which sent by the Court to each member;

– If failure to give notice to opt-out of the class after the expiration of the period prescribed by the Court, he/she shall request the leave to the Court and be allowed.

 

6. What is the effect after opting-out of the class?

If he/she opted-out of the class, he/she has the right to file a separate individual lawsuit on own behalf, but not in the form of class action. Moreover, he/she cannot file a motion to intervene or join as a plaintiff in the class action.

 

7. Will the defendant notice about the class action proceeding?

Yes, the Court will send the lawsuit together with a request of class action to the defendant. Thereafter, the Court will question both parties before approving the class action proceeding.

 

8. What is the condition for class action proceeding?

The Court will allow to proceed as a class action if found that:

1. The case and allegations on which its bases its case are clear and are equally applicable to both the plaintiff and the class members;

2. The plaintiff can demonstrate specific and sufficient identical characteristics apply to the Class;

3. The number of class members is numerous and it would be burdensome and inconvenient if proceeding under non-class action;

4. Proceeding under class action would provide justice more efficiently than proceeding under the non-Class Action; and

5. The plaintiff can sufficiently demonstrate that he/she is one of the class members and meets the qualifications of the law; and that the plaintiff and the plaintiff’s attorney will represent the class effectively and fairly.

9. Who is the class representative and what’s her/his role?

A class representative will be appointed by the class members to be a plaintiff. The class representative must share a common cause of action and have common arguments with the class member.

He/she would exercise due diligence in guarding the interests of the class since the interests of the class representative coincide with those of the class, and in guarding those interests, the claims and arguments raised by the class representative would also be beneficial to the class.

10. What’s the role of plaintiff’s attorney?

The plaintiff’s attorney is the person who prepares the list of injured person who suffered damages from the same facts and laws. The plaintiff’s attorney also files evidence and advance all expenses pertaining to the costs of proceedings, which includes the cost of seeking evidence and costs of publicizing and sending notices of the class action to class members.

11. What’s the enforcement procedure in class action?

The judgment will bind plaintiff and all class members, however, each member cannot enforce it by him/herself because the Director General of the Department of Legal Execution would make arrangements with respect to enforcement of the class action judgment whereby a class member can submit an application for repayment of the judgment debt from a legal execution officer within the time period prescribed by the Court.

However, a class member has the right to file an objection to another class member’s application for repayment of judgment debt. If an objection is filed against a class member’s application, the legal execution officer should conduct an inquiry hearing and make one of the following orders:

1. Dismiss the application for repayment of judgment debt

2. Grant full repayment

3. Grant partial repayment

General remarks regarding

29 Jul General remarks regarding the tax base of companies enjoying tax incentives of the Board of Investment

The Board of Investment of Thailand (BOI) promotes certain business projects by attractive Corporate Income Tax exemptions. Only the income derived from the business promoted by the BOI is exempted from Corporate Income Tax. In practice this leads to many disputed questions, as many companies which hold a BOI certificate receive income not only from the business promoted by the BOI, but also from additional, i.e. non-promoted, sources of income.

The computation of the Tax base of Corporate Income Tax is governed by the Revenue Code. The Revenue Department has issued a Notification regarding the computation of the tax base of BOI promoted companies which enjoy tax privileges. Under the Revenue Department’s Notification a BOI company’s needs to be computed according to Thai Accounting Standard and you should seek always advice from a qualified tax advisor. Please note that this article only serves to give you a brief overview over a highly complex and partly controversial topic and cannot replace professional tax advice in any case.

The following types of income are regarded as derived from the BOI business of a BOI company:

  • Income from the sale of products or output or performance of services within a project that receives the BOI promotion, but not exceeding the maximum manufacturing output or other specification of the BOI certificate.
  • Income from sale of by-products and semi-manufactured products as set forth in the BOI certificate.
  • Income from the sale of machines, components, equipment, tools and property used in operating the BOI promoted business that has become unusable.
  • Interest income or other income derived in the normal operation of the business as approved by the Office of the Board of Investment and the Revenue Department.

In the case that the BOI Company engages in BOI promoted and non-promoted businesses the profits/losses of both types of businesses are combined according to a set of rules and the sum of both is referred to as combined operating result. However, first the profits/losses of both types of businesses are calculated separately according to Thai Accounting Standards.

Where a clear separation is not possible or practical such as in the case of sale of machinery or property used in both types of business, the company’s income shall be prorated as follows: A ratio must be found which reflects the real proportion of the BOI promoted business and the non-promoted business of the company.

To be on the safe side and avoid any argument with the Revenue Department in cases of doubt regarding the proportion of both business types, promoted and non-promoted, a “safe” ratio can be chosen, as the Revenue Department construes the tax exemption rather narrowly. Your accountant and tax advisor need to answer this question based on the peculiarities of your company. Furthermore, to be on the safe side the company can set up a separate new company for each of its new BOI projects which also seems to be in line with the new BOI policy.

Another hot topic in this context is the treatment of losses of BOI businesses, how such losses may be deducted from profits of non-BOI businesses of the same company, and how they may be carried forward to subsequent accounting years. As the Central Tax Court and the Supreme Court have been scrutinizing the practice of BOI companies to offset losses of different BOI projects against their non-BOI revenues, I would like to outline the basic principles of treatment as they can be found in the relevant sections of the law.

  • Section 31 paragraph 4 of the Investment Promotion Act sets forth the general rule for carrying forward losses as follows: In the case where a loss has been incurred during the period of receiving exemption of juristic person income tax, the Board may grant permission to the promoted company to deduct such annual loss from the net profits accrued after the expiration of the period of exemption of juristic person income tax for a period of not more than five years from the expiry date of such period. The promoted company may choose to deduct such loss from the net profit of any one year or several years.

The above mentioned Notification of the Revenue Department complements this general rule by providing some guidance for the case that a promoted company has tax-exempt and non-tax exempt profits/losses as follows:

  • Section 4.2 (a) of the Notification provides that in the case that a BOI-promoted business shows net loss and a non-BOI business shows net profits, the promoted company is entitled to deduct the net loss from the promoted business from the net profit of the non-promoted business.
  • And Section 4.2 (b) of the Notification provides that where the tax-exempt business sustains losses in any relevant year and the non-exempt business has net profits in the same year but sustained losses in previous years, the company must use the losses of the non-exempt business first and can apply the losses from the tax-exempt business only to offset against the remainder.

The above rules as contained in the Investment Promotion Act and the Revenue Department’s Notification still are not clear enough if a company has more than one tax-exempt business. For example, if tax-exempt business A sustains a loss and tax-exempt business B earns profit it is thinkable to take the loss of business A to offset against a profit from non-exempt business C. However, according to the Revenue Department’s tax ruling dated 17th May 2005 the promoted company has to calculate the net profits/losses by taking into account all tax-exempt businesses together.

As a side note: Just recently the Finance Ministry has proposed a change of the current BOI practice to close loopholes which made it possible to decrease the income tax payable by taking advantage of the BOI practice to grant one BOI privilege for several projects to one company. The BOI has responded by explaining that a new company should be set up for each BOI promoted project. At the moment it is unclear to what extent the BOI will finally depart from its current practice. We will monitor any new development and report about it.

Christian Moser

Senior Associate

PPP and Civil Construction Projects in Thailand (Newletter March 2016 Part 5)

24 Mar PPP and Civil Construction Projects in Thailand (Newletter March 2016 Part 5)

Newsletter Juslaws & Consult (J&C) – March 2016 Part 5: PPP and Civil Construction Projects in Thailand 

5 planned mega infrastructure projects (rail and highways) expected to cost about Bt334 billion might be considered for Public Private Partnerships Fast-Track scheme, one of them is the Bt152-billion Bangkok-Rayong high speed-rail project. The PPP Fast-Track scheme will shorten the consideration of projects from 24 months to 8. The recent amendments on PPP Act says that non infrastructure projects with investment between Bt1 billion and Bt5 billion or infrastructure projects with an investment of less than Bt1 billion will not have to go through the PPP Policy Committee.

Thailand will have a new Bt2.1-trillion 20-year plan to develop the motorway network. The country see these investments to bring a multiplier effect by more than two times worth Bt5.7 trillion for the economy. The plan for 2016-36 will cover 21 routes with a combined length of 6,612 km. The Public Private Partnership (PPP) scheme will be used as the investment model. Juslaws & Consult will be awarded as official PPP consultant of these projects during 2016 and will provide professional legal and business advice in some of the key projects.

On the other hand, one of the largest infrastructure projectsin Asia will begin in 2016: the double-track railway project that will link China and Thailand. The project is part of the Pan-Asia Railway Network’s central route, which will connect the countries of China, Laos, Thailand, Malaysia and Singapore. The Thai Government expects to have the civil construction contracts completely signed during the first quarter of 2016. In addition to this the Transport Ministry announced that 17 infrastructure megaprojects more with a value of 927 billion baht will be tendered in 2016 and 2017.

Part 1: Petroleum Concessions in Thailand

Part 2: GTCC Membership

Part 3: Boi Seminar

Part 4:Thailand Japan Young Entrepreneurs Networking

Part 5: PPP and Civil Construction Projects in Thailand

Part 6: 2016 Acquisition of Hotels & Resorts in Thailand and Due Diligence Report

Petroleum Concession in Thailand (Newsletter March 2016 Part 1)

Newsletter Juslaws & Consult (J&C) – March 2016 Part 1: Petroleum Concessions in Thailand

Thailand is opening its 21th bidding round for oil and gas exploration concessions by the middle of 2016. The current concessions will expire around 2021. The next bidding round has been delayed due to intervention from NGOs, in particular environmental activists.

The oil and gas concessions in Thailand are particularly interesting for petroleum companies asthe Thai government is participating in the profits from oil and gas exploration at a rate of totaling roughly 67% which is less than in the neighboring countries, where the government share on average equals 74%. In the case of Thailand the government share consist of sliding scale royalty based on production, a specified (50 percent) petroleum income tax applied to profits, and a special-benefit windfall profit tax. On the other hand the average discovery size in Thailand is small compared to other countries in Southeast Asia (7 million barrel of oil equivalent). In the new bidding round Thailand will offer 29 petroleum blocks – comprising 23 onshore blocks and six offshore blocks in the Gulf of Thailand – stretching over 66,463 square kilometers. One can expect a discovery of 1 to 5 trillion cubic feet of gas and 20 to 25 million barrels of crude oil.

In Thailand today the oil and gas exploration is dominated by U.S. companies besidesthe Thai PTT. The two big player in the industry in Thailand are at the moment Chevron and PTT. PTT emerged from the former state-owned Petroleum Authority of Thailand, back then under the control of the Ministry of Industry. After privatization PTT became PTT Public Company Limited, a huge holding company with several affiliate companies. Oil refinement is currently conducted by by Bangchak Petroleum Public Co., Ltd., Star Petroleum Refining Co., Ltd., Thai Oil Public Co., Ltd., and PTT Aromatics and Refining Public Co., Ltd. PTT is a significantshareholder in most of Thailand’s oil refining companies.The new biding round was preceded by substantial legislative changes of the regulatory framework governing the oil and gas license system. Environmentalists had urged a conversion from the existing concession system to production sharing contracts. The new legislation instead provides a choice for the petroleum companies between these two systems. If you would like to find out more about the different types of license agreementsforthe oil and gas industry, please contact us.

Part 2: GTCC Membership

Part 3: Boi Seminar

Part 4:Thailand Japan Young Entrepreneurs Networking

Part 5: PPP and Civil Construction Projects in Thailand

Part 6: 2016 Acquisition of Hotels & Resorts in Thailand and Due Diligence Report

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