Is Thailand Really Appealing Walter Bau’s Arbitration Award in a US Court?


No.  But reading some of the reports in the Thai press you might get that impression.  “once the legal dispute was decided by the [US] court, the Thai government would live up to its responsibility”  “it was inappropriate for the German government to make such a demand when the legal dispute had not yet been settled [on appeal in the US].  “This is being appealed.”  So this appeal challenges the merits of the arbitration award, right?

That’s is not what Thailand’s own appellate brief says.  In fact, it says the exact opposite.  On page six: “The New York Convention affords the district court no power to vacate the Final Award [the arbitration award that is supposedly on appeal], and Thailand did not ask the district court to do so.”

While quotes from Thai politicians in the Thai press seem to suggest otherwise (maybe something got lost in the translation?), Thailand’s own appellate brief get’s it right: Thailand cannot challenge the arbitration award and it is not trying to do so.  U.S. law does not allow it do so and the New York Convention – a treaty that governs the recognition and enforcement of international arbitration awards – also does not permit a U.S. court to overturn the arbitral award in favor of Walter Bau and against the Thai government.  This is about as basic as it gets.

So what is the appeal about?

Basically Thailand argues that the US district court applied the wrong standard of review in determining whether Walter Bau and Thailand agreed to arbitrate the dispute when it confirmed the arbitration award.  It’s about the “arbitrability” of the dispute.  Thailand argues that the US district court was obliged – under U.S. law – to take a “fresh look” at whether there was an agreement to arbitrate. The US district disagreed, saying: “Thailand has already conceded, as it must, that it entered into two treaties that expressly provide for arbitration…” and this is a dispute about the scope of this undisputed arbitration obligation, something which the arbitral panel itself has the authority to decide.

The US District adds: “While the Court finds it unnecessary to review the Arbitrators’ Award de novo [legal language for a “fresh look”], it is important to note that…there is serious doubt as whether, even on a de novo review, Thailand would be able to turn over the Arbitrators’ well reasoned award.”

I’d agree that this is worth noting.  Thailand’s appellate brief dismisses this comment as dicta (probably right), but it’s nonetheless very important dicta.

What does Thailand want the US Appellate Court to do?

Thailand wants the appellate court to remand – meaning, return – the matter to the US District Court with instructions that the US District Court conduct a fresh review of the arbitrability of the dispute.  Thailand also wants the order confirming the arbitration award in the US District Court to be vacated.  To be fair, Thailand is also essentially arguing that if the correct standard of review is applied, the US District Court should decide that this dispute was not properly subject to arbitration under US law.

When Does a US Court Decide the Underlying Dispute Between Walter Bau and Thailand?

Never.  The US doesn’t have jurisdiction over the underlying dispute and it doesn’t have authority to set aside the international arbitration award issued in Geneva, Switzerland.

So how is this Resolved?

By all accounts the arbitration award is final.  Other than the somewhat confusing references to the pending appellate court proceedings in US, no one has suggested otherwise.  This means that Walter Bau continues to pursue Thai assets until Thailand complies with the award and pays, Walter Bau seizes enough Thai assets to satisfy the award, Walter Bau gives up (that doesn’t seem likely) or some sort of settlement is reached between Walter Bau and Thailand.

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Comments

  • BKK lawyer  On July 30, 2011 at 11:11 pm

    Very good, clear breakdown of what’s been happening.

    What do you think of this development (as reported in The Nation)? “The OAG also filed a case at the Thai Administrative Court asking it to terminate the international arbitration tribunal’s decision.”

    Abhisit said recently that Thailand would pay the award if the US appeal is lost (a non sequitur because, as you note, the US appeal is not an appeal of the award itself). But now it seems the Thai AG is initiating a new challenge to the award itself — in the friendly home courts.

    • Douglas Mancill  On July 30, 2011 at 11:41 pm

      Thank you. I am having trouble finding it, but I found this: The prime minister said a separate legal battle between the German company and the government was underway in New York, and that the Thai side was going to file an appeal with a court in the United States on July 29. Therefore, he said, there should have been no urgent need for German authorities to impound the plane.
      “Thailand is ready to follow the final court verdict even if it means we will have to pay the money. The government will not escape from the responsibility. Besides, we have lots of assets,” he said. http://www.nationmultimedia.com/home/Kasit-seeks-a-meeting-with-German-deputy-FM-over-i-30160380.html

      There is presumably something that directly reports on the appeal? If you can find, can you post. Otherwise, I will keep looking and see if I can find it.

      • Douglas Mancill  On July 30, 2011 at 11:49 pm

        OK, I read your comment more closely (no coffee yet). You are talking about the AG’s proposal to bring the dispute to Thailand? A third legal battle? I don’t see why that needs to happen. The arbitration award is final. The point of arbitration is avoiding parallel proceedings and endless appeals. At this stage, it’s all about recognition and enforcement in jurisdictions where Walter Bau has reasonable prospects of enforcing the international award.

      • BKK lawyer  On July 31, 2011 at 2:59 am

        I think you found it — headline “Bring case to Thailand”, link http://www.nationmultimedia.com/home/2011/07/30/national/Bring-case-to-Thailand-30161496.html.

        The report first says the AG encourages (‘taunts’ is more like it) Walter Bau to file an enforcement proceeding in Thailand. Further on it says the AG has filed a case in the Thai courts “to terminate the international arbitration tribunal’s decision,” which sounds like a (dubious) collateral attack on the award. Also contrary to Abhisit’s statement that Thailand would pay according to the award.

    • Douglas Mancill  On July 31, 2011 at 12:30 pm

      Thanks. Where to begin?

      1. I don’t see how a Thai Court can terminate an international arbitration award. If it purports to do so…well, not a good idea. Indonesian courts used to (may still) issue injunctions that purported to enjoin arbitration proceedings underway outside of Indonesia even after foreign courts at the seat of the arbitration concluded that the arbitration clause was effective and the dispute was subject to arbitration. I hope we don’t see Thailand going down that path.

      2. I would like to see the arguments Thailand advances in support of its action to terminate the international tribunal’s decision. Would it be the arbitrality issue already raised, or would the Thai government also press the broad and the very problematic public policy exception it has raised before?

      3. This is not going to look for Thailand. I could go on but my five year old wants my undivided attention.

      What do you think?

      • BKK lawyer  On July 31, 2011 at 1:47 pm

        I agree … it would not be good for Thailand’s international business reputation or its reputation for respecting the rule of law.

        I understand the arbitration was conducted pursuant to a Thai-German treaty. What does the treaty say about appeals or collateral attacks on arbitration awards? It seems that such provisions would trump any public policy exceptions Thailand might assert against arb awards it doesn’t like.

  • Sam  On August 17, 2011 at 8:14 am

    Excuse my non-legally trained interjection here, but there is a nagging legal issue below, that was not answered at the end of the New Mandala comments re THE airplane seizure. This issue I raised became moot, when the big bond was posted, so everyone moved on to other matters.

    Nevertheless, I remain curious and if you have a minute, I would be appreciative of whatever legal light you might shine on the jurisdictional ‘legality’ of a ‘lower” German Court accepting the Bau complaint, AFTER a “Senior” Munich Court ruled that under German law, THE plane could not be impounded.

    As an aside, I had mixed feeling as to how the Bau plane attack was settled. It seemed to me that Thai Face re the Royals was needlessly and insultingly dragged into this fray.

    While it seems appropriate that the Thai Government paid its obligation re the original arbitration, I would have preferred that THE plane issue had been settled in some other manner.

    A legal challenge on the appropriateness of the ‘lower’ German court’s jurisdictional right to rule, appeals to my sense of justice and righting this wrong and regaining some face for the Thais.

    Anyway, just wondered if an opportunity to do this was lost.

    Thank you for your fine legal blog.

    Sam

    Here is my last NM commentary inquiry:

    “242 Sam // Aug 5, 2011 at 6:01 pm

    The Bangkok Pundit thoughtfully provides us with an analysis of a Der Spiegel article, which revealed new details on the Bau machinations re THE plane.

    http://asiancorrespondent.com/61680/der-spiegel/

    Let us add to the discussion by looking at a significant mistake in the article and, from a non-lawyer point of view, the dishonest implications of what appears to be serious ‘legal abuse’ by Bau and a “lower” Court.

    The Mistake: Spiegel says “The Munich senior district court decided that it had no jurisdiction in the case. The prince, the court said, wore a uniform and was immune from prosecution. Schneider [ Bau’s liquidator] then took the case to a court in Berlin, and was successful.”

    But as we all know, this is factually wrong. THE plane impoundment case was NOT taken to the Berlin Court. It is factually wrong what Speige writes below,

    Bau took a different and separate action re arbitration to the Berlin Court. Bau sought action in the “…. German court in Berlin asking for enforcement of the arbitration tribunal’s decision.” That “… case is now under consideration….”

    But Bau did NOT go to the Berlin Court seeking to impound THE plane, after being ruled against under German Law in a Munich Court. Instead, Bau’s Schneider shopped around for a lower court that apparently would willing and consciously ignore the “SENIOR” German Court’s ruling. A ruling that declared: Under the law, GERMAN law, GERMAN Courts have no jurisdiction to rule on any such matters as impounding this plane…..”

    http://www.nationmultimedia.com/2011/07/30/national/Bring-case-to-Thailand-30161496.html

  • Sam  On August 17, 2011 at 8:30 am

    Sorry, I tried to make more concise my comment for your quick understanding of the issue and I botched up the last few paragraphs, which should read, as follows, and I would appreciate this being appropriately substituted. Thank you.:

    ———-

    But as we all know, this is factually wrong. THE plane impoundment case was NOT taken to the Berlin Court. It is factually wrong what Speige writes,

    Below the Nation explains that another, non related matter, was taken to the Berlin Court.

    Bau took a different and separate action re arbitration to the Berlin Court. Bau sought action in the “…. German court in Berlin asking for enforcement of the arbitration tribunal’s decision.” That “… case is now under consideration….”

    http://www.nationmultimedia.com/2011/07/30/national/Bring-case-to-Thailand-30161496.html

    So Bau did NOT go to the Berlin Court seeking to impound THE plane, after being ruled against under German Law in a Munich Court. Instead, Bau’s Schneider shopped around for a lower court that apparently would willing and consciously ignore the “SENIOR” German Court’s ruling. A ruling that declared: Under the law, GERMAN law, GERMAN Courts have no jurisdiction to rule on any such matters as impounding this plane…..”

    • Douglas Mancill  On August 17, 2011 at 2:39 pm

      Thank you. I understand your point, but because I am not familiar with German law, particularly German civil procedure (which, if it is anything like U.S. law, is fairly complex), I am not in a position to competently comment on whether the lower German court had authority to order a seizure of the plane under German law. If anyone familiar with German civil procedure has some insight on this, please feel free to post a comment.

      I understand the nature of the proceedings in the U.S., but it would be interesting to see a comment on the German proceedings. I also still don’t understand why the Thai government focused on the appellate proceedings in the U.S. when the seizure occurred in Germany under German law (well, I have some hunches about why this occurred, and I will leave it at that).

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