Category Archives: Competition

DSI Crackdown on “Nominees” under FBA?

Thailand’s Department of Special Investigation (DSI) says it plans to crackdown on the use by foreigners of proxies or nominees to “operate businesses which are normally off-limits to them [foreigners]” after the agency was given authority to investigate nine more categories of ‘special cases’, reports the 7 January 2012 edition of the Bangkok Post.  As summarized here , Thailand has expansive laws prohibiting foreign ownership of local businesses.

This same article says the DSI will also investigate various recognized trans-national criminal activities, such as human trafficking and computer crimes.  The article says so-called nominee shareholding in violation of the Thailand’s Foreign Business Act  (FBA) will also be subject to a DSI crackdown similar to a crackdown on these other, generally recognized, trans-national crimes.

Perhaps jumbling two issues together, the article quotes the DIS as saying that foreigners violating the FBA are sometimes engaged in such recognized trans-national criminal activities:

The DSI had also heard reports of a group of foreign gangsters extorting protection fees from other foreigners.

Mr Tharit said some of these foreigners had used Thai nominees to set up shell companies and used them as a front to launder money and transfer the laundered money overseas.

If so, why not directly target parties involved in these illegal activities?  Why the focus on alleged nominee shareholding?  And the article does suggest a general crackdown on alleged violations of the FBA – not merely recognized transitional crimes – by listing other, quite ordinary, business activities.

The article mentions that foreigners are involved other businesses that are “off limits” under the FBA and similar laws to foreigners, such as land-trading, mining and newspaper publishing and suggest that such businesses will also be subject to this crackdown.  As described, the crackdown will apply to all violations of the FBA through the use of alleged nominees,

To provide a sense of the breadth of such a crackdown, consider that foreign owned businesses are restricted under the FBA from providing “services” of any kind.  If, as suggested in the article, this “crackdown” extends to all businesses that are “off-limits” to foreigners, it will cover many business activities that are, in international terms, considered perfectly legitimate.

For example, the Department of Business Development (DBD) of the Ministry of Commerce interprets the term “services” very broadly.  The DBD takes the position that a foreign owned Thai company which is engaged in manufacturing (and not otherwise restricted under the FBA) cannot grant a guaranty in favor of its foreign parent company without first obtaining an alien business license because of the FBA’s prohibition on foreign owned companies providing “services”.  Since multinational companies often do need to provide such guaranties as security for loan and credit lines, this interpretation of the FBA has a chilling effect on multinational companies that plan to set up a manufacturing facility in Thailand: it complicates their ability to use those facilities as collateral for credit.

The DBD has also issued guidelines and rulings on what it calls “OEM businesses”.  The DBD’s guidelines state: “[t]he business of ‘manufacturing service’, which is the manufacturing for remuneration (a service fee) according to plans, forms or manufacturing processes from time to time specified by a hirer (in some cases the hirer may also provide raw materials) which is not the manufacturing of goods for sale in general, is considered to be an ‘other [service] businesses’ under Schedule 3 (21) of the FBA …”  In other words, the DBD contends that a manufacturer that engages in “OEM manufacturing” under this rather complicated definition is providing a “service” restricted under the FBA. Will the next maker of an iPhone or iPad want to source components from Thailand if foreign owned manufacturers in Thailand are subject to these restrictions?

And it appears that this could again raise the old battle about what constitutes a “nominee” under Thailand by characterizing legitimate business structures as illegal nominee shareholding arrangements.  The Bangkok Post’s 7 January 2012 article says that:

The law, however, has a loophole in that it does not forbid foreigners from holding a majority on the board of directors or having control over voting rights.

A loophole?  As set out this article in the American Chamber of Commerce’s magazine, T-AB, characterizing these features of the FBA as mere “loopholes” is misleading and dangerous because it suggests that revising this part of the FBA does not constitute a real change of the law – it’s merely eliminating a ‘loophole”.

In fact, changing the FBA to prohibit such practices – which the National Legislative Assembly attempted to do in 2007 – will make Thailand less competitive, chill investment in Thailand, possibly violate Thailand’s WTO obligations and would, in many situations, amount to compulsory divestiture of businesses by foreigners.  As stated at that time in a position paper by the Joint Foreign Chambers of Commerce in Thailand, amending the FBA to eliminate these “loopholes” would: “necessarily criminalize structures that are legal under current law.”

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NBTC Notification Restricting “Foreign Domination” – Some Context

It’s hard to see what sort of involvement by a foreigner in Thailand’s telecommunications sector is not up swept into the notification restricting “foreign domination” over Thailand’s telecommunications businesses recently issued by the acting National Broadcasting and Telecommunications Commission (NBTC).  The NBTC’s notification goes far beyond the restrictions found in Thailand’s already expansive Foreign Business Act (FBA).

As reported in this PriceSanond News piece, the acting NBTC recently issued a notification restricting “foreign domination” over telecommunications businesses.  It was published in the Thai Government Gazette on 30 August 2011 and became effective the following day, 31 August.   The notification applies to all current holders of and applications for Type-2 (with network) and Type-3 licenses, meaning that it applies to companies that currently operate a business based on a permission, concession or contract with CAT or TOT. In other words, it applies to current participants in the telecommunications sector. The notification lists the following ten examples of what the NBTC claims is “foreign domination” of a telecommunications business:

1. direct or indirect share holding by foreigners or foreigners’ agents;

2. use of apparent agents (nominees);

3. holding of shares with special voting rights;

4. participating in appointing or having control over the board of directors or senior officers of the licensee;

5. a financial relationship such as having a corporate guarantee or a loan with a lower-than-market interest rate;

6. licensing or franchising;

7. management or procurement contracts;

8. joint investments (by a licensee and foreigners);

9. transactions involving transfer pricing; and

10, any other behavior which provides direct or indirect control to a foreigner over a licensee.

“…any other behavior…”  That catch-all phrase seems about as expansive as you can get.

So Why Issue this Notification Now?

Just a hunch, but the Thailand’s telecommunications sector is lucrative, and the competition has become fierce.  The relationship between Thailand’s second largest telecommunications carrier, DTAC, and its third largest telecommunication, True, has been particularly contentious.  And of course time is running out for this NTBC: new members are supposed to be appointed to the NBTC this Monday.

But first some more background:

In April of this year, DTAC challenged a deal between True and CAT Telecom public limited company (CAT) in Thailand’s Central Administrative Court.  CAT is a state-owned company that runs Thailand’s international telecommunications infrastructure, including its international gateways, satellite, and submarine cable networks connections.  CAT was formed out of a government agency and is often still thought of as a government agency.

At that time, the Bangkok Post reported that Somkiat Tangkitvanich, the vice-chairman of the Thailand Development Research Institute (TDRI), “said the deal amounted to a ‘pseudo-concession’ and should be investigated for compliance with the law.”

About two months later, in mid-June, “True Move…filed a criminal complaint against its bigger rival DTAC for having a foreign state enterprise as a major shareholder, which it claims is a violation of the Foreign Business Act”, reported the Bangkok Post.  The Bangkok Post went onto report: “True Move has no plan to file a complaint against Advanced Info Service even though the mobile market leader also has a complicated shareholding structure, said Athueck Asvanont, vice-chairman of parent True Corporation.”  Interesting.

And filing this criminal complaint, of course, had nothing to do with the complaint which DTAC earlier filed with the Central Administrative Court over what the TDRI’s Somkiat Tangkitvanich said amounted to a “pseudo-concession“.  The Bangkok Post reported in this same article that True’s Athueck “rebutted the claim that the petition represented retaliation against DTAC for filing a case with the Central Administrative Court seeking to scrap the contentious deal between CAT Telecom and True Corporation.”

Several weeks later, the Ministry of Commerce (MOC”) announced that DTAC appeared to be employing an illegal nominee structure in violation of the FBA. This development was summarized on this blog here.

Row Within MOC on FBA Claim Against DTAC

As blogged here and reported in the Bangkok Post, in early July, shortly after the elections but before a new government was formed and appointed new ministers, there was a row within the MOC itself about how to handle the matter.  The Bangkok Post provided this description of the row:

The head of the Business Development Department is challenging his boss’s order for the department to take legal action against DTAC on its nationality, saying the instruction is a “direct political intervention” and “illegitimate”.

The department, a unit under the Commerce Ministry, insisted on submitting its committee’s original findings to the police and ask them to determine whether the law had been broken, and if so, to take further action.

The move openly challenges Commerce Minister Alongkorn Ponlaboot, who had yesterday demanded that Banyong Limprayoonwong, director-general of the ministry’s Business Development Department, press the charge against DTAC. “He [Mr Alongkorn] has no authority or obligation under the Foreign Business Act (FBA) to force me to accuse a company of being foreign-owned,” Mr Banyong said.

“Mr Alongkorn’s decision cannot be regarded as a government policy. It is a direct political intervention,” Mr Banyong said

Shortly afterwards a new government was formed.  The old ministers were replaced with new ones.  And the FBA case appears to have drop off the radar (for now at least).

What about the NBTC and its Notification?

The NBTC which issued the notification restricting “foreign domination” in telecommunications businesses is also about to be replaced with new members. Its members were also appointed before the July elections.  The NBTC’s notification on “foreign domination” of telecommunications businesses was published just one week before new members are supposed to be appointed to the NBTC.  As expained here:

The Thai Senate is scheduled to select members of the National Broadcasting and Telecommunications Commission (NBTC) this Monday, 5 September 2011.  The current acting NBTC recently issued a controversial notification restricting “foreign domination” over telecommunications businesses shortly before the Senate was scheduled to select new members.  The Bangkok Post reports that the selection process has been “punctuated by fierce lobbying”.  If the Senate fails to select members of the NBTC by 11 September, the cabinet then appoints members to the NBTC, reports the Bangkok Post.

“Fierce lobbying” for seats on what would be a rather pedestrian regulatory body elsewhere?  The Senate has the first shot at appointing new members to the NBTC.  But if they are unable to do so by 11 September, the new Thai cabinet is supposed to make the appointments.

What this Means for Thailand: the Larger Picture

Leslie Lopez, a writer for the Straits Times Straits Times in Singapore, recently made the following observations:

Thailand’s manufacturing sector is one of the most robust in the region because of liberal foreign investment rules, and that in turn has made the country a regional hub for industries such as car manufacturing and electronics.

But the services sector is highly regulated in favour of local groups.

Thailand also ranks as one of the last countries in the region to fully deploy advanced wireless technology, largely because of the absence of a regulatory agency with the necessary clout to rein in the powerful state enterprises and push ahead with the licensing of new services.

As a result, the country continues to suffer from a lack of foreign investment in the sector.

***

“The setting up of the NBTC will get the reform process going. That is key,” says investment analyst Thitithep Nophaket, who covers the telco sector for Phatra Securities in Bangkok, referring to the new watchdog body.

Yes; setting up an NBTC that is not beholden to any business interest is important.  Eliminating or at least curbing laws that can be used to take out effective foreign competitors would also help.  Let’s see if it happens.

FCPA Compliance Work Just Got Harder in Thailand

Thai laws are not unique in creating perverse incentives that lead to unintended and unwanted consequences.  On 21 July 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) into law. The Dodd-Frank Act primarily introduces major changes in the regulation of the financial services industry, but it also permits “whistleblowers” (click on this link for background on this part of the Frank-Dodd Act) in Foreign Corrupt Practices Act (FCPA) and securities fraud cases to claim a 10% to 30% reward in enforcement actions where the penalties recovered exceed U.S.$1 million.  Was this good policy or not?  I can see arguments on both sides of this issue, but I have major reservations and fear this could be a serious mistake.

We have seen how the Thai Customs Department’s bounty system creates perverse incentives in the enforcement of Thai Customs laws.  Is there something here for U.S. regulators to learn from Thailand?

The bounties from several recent high several high profile FCPA cases would have exceeded 100 million dollars.  As James Tillen, George Clarke, and Kevin Mosley from Miller & Chevalier reported in Corporate Compliance Insights:

If a Siemens whistleblower had been eligible for the 30% reward proposed in the current draft of the legislation, he or she could have received a windfall of $496 million.  In the 2009 case against Kellogg Brown & Root (KBR) and former parent company Halliburton, the DOJ imposed a $402 million fine and the SEC assessed $177 million in disgorgement, for a total of $579 million in penalties.  The windfall for a whistleblower in that case could have totaled $173 million.

By contrast, consider the relatively “meager” incentives the Thai Customs Department offers tipsters.  Consider the results of that incentive system.  Imagine the possibilities here.

In a recent New York Times article, Sean McKessy, chief of the new S.E.C.’s whistle-blower office, said: “The program “will strengthen our ability to carry our mission and it will save us much time and resources in the process.”  Mr. McKessy is quoted in this same article as saying the small agency: “has already received an uptick in quality tips, including lengthy letters laying our elaborate schemes.”  The agency has a new website here with easy to follow instructions on how to submit tips.

If you don’t want to complete the form or if you are concerned about the repercussions of submitting a tip directly, simple Google “FCPA whistleblower” and I am sure you will have no problems finding one of several U.S. firms that will happily help in submitting a tip.  The rewards are great.  I ran this same search several times here in Thailand and each time I found several such firms on the front page of my Google search results.

The United States Chamber of Commerce is not happy about this (please do not confuse AMCHAM Thailand with the U.S. Chamber of Commerce, although I personally sympathize with their concerns on this issue).  According to the New York Times, David Hirschmann, president and chief executive of the Chamber’s Center for Capital Markets Competitiveness says:

In approving this new whistle-blower rule, the S.E.C. has chosen to put trial lawyer profits ahead of effective compliance and corporate governance…This rule will make it harder and slower to detect and stop corporate fraud.

The dig at “trial lawyer profits” is a cheap dig, but he has a point.  It’s early days, but having been involved in several internal FCPA investigations here, having seen how the Thai Customs incentives work in practice and now seeing the early signs of how the whistleblower program is being promoted on the internet, I think its a strong point.  There are other troubling signs.

A whistleblower doesn’t need to report violations internally in order to obtain a reward.  The FCPA Blog comments:

Whistleblowers will run to the SEC whenever there’s a whiff of overseas bribery. They won’t talk about it with their bosses inside the company first. Why should they? That would be like giving away a lottery ticket. And why expose themselves to retaliation? If they go straight to the SEC, they’re immune from corporate discipline. So they’ll go to the feds, taking with them as many internal emails, audit documents, and bank records as they can carry.

I hope I am proven wrong, but my hunch is that this new development will make FCPA compliance work harder, much harder, here in Thailand.  I have seen how things tend to work here and the incredible challenges that foreign companies already face in places such as Thailand.  Stifling the supply side is important, but we really need to see more action curbing the demand side.

Diageo – Victim or Perpetrator?

The Thai press has reported  extensively on the settlement reached between the major multinational alcoholic beverages company, Diageo plc, and the U.S. Securities and Exchange Commission (SEC) after Diageo self-reported violations of the U.S. Foreign Corruption Practices Act (FCPA). Most of the coverage seems to consist of speculation – or perhaps “hints” is the better word – about the identity of the “Thai government official and foreign political official” retained by Diage to provide “lobbying services…in connection with several important tax and customs disputes that were pending between Diageo and the Thai government”.  This is understandable.  The SEC’s Order (in particular, pages 5 and 6) instituting the claim, imposing a cease and desist order and civil penalties provides plenty of hints.  Fingering the ‘bad guy’ makes for simple and exciting press.

But there is another, more fundamental, issue here: why is it that some Thai agencies seem to attract more than their fair share of corruption cases?  “Bribery is particularly concentrated in a few governmental sectors in charge of large financial transactions: the Land Department, Tax and Customs Department, the Transport Department, and the Police Department”, according to the Business Anti-Corruption Portal’s report on Thailand. The Diageo matter involved the Customs Department, and that is not surprising.

The Bangkok Post reports that: “Numerous business surveys have placed the Customs Department at the top of the list of government agencies with serious corruption and transparency problems.”  A large part of the problem at Thai Customs is the incentive system for rewarding tipsters and Customs officials who uncover alleged violations of Thai customs laws.  The Bangkok Post reports:

Previously, officials would get cash rewards of 25% while outsiders would get 30%. However, there were no ceilings. There were cases involving billion-baht shipments where the rewards would be staggering. This led to officials spending too much time trying to find fault with shipments.

Reform in the form of reducing numbers has been the approach, but many question if reducing ‘the take’ rather than changing the underlying policy is really effective. Many also ask why such a system was allowed in the first place; the Bangkok Post reports: “Pornsil Patchrintanakul, the deputy secretary-general of the Board of Trade says the cash rewards should have never existed.”

And why allow any form of pernicious incentive system like this to continue even if the incentives are more modest? Another Bangkok Post article reports: “Even capping the ceiling of each case at 5 million baht might not solve the problem.  For shipments of larger value, officials could simply break them down into smaller cases that meet the 5-million-baht limit.”   The prior Bangkok Post article provides part of the answer about why real reform is so difficult:  “A senior Finance Ministry official said there once was a proposal to abandon the reward system but there was serious opposition from the Customs Department.”

But another, less reported, legal ruling highlights the flaws in Thailand customs law regime: the WTO Ruling and WTO Appellate Body ruling in the Philipp Morris case.  The WTO case concerned the valuation of imported cigarettes, but the fact that the imported products in this particular WTO case were cigarettes should not divert attention to its more important findings.  The rulings by the WTO panel and a WTO Appellate Panel are far more important for what they say about the rule of law in Thailand.

The WTO not only found that Thailand failed to comply with its international obligations in setting values for these imported products for tax purposes, but also that: “Thailand…fail[ed] to publish laws and regulations pertaining to the determination of a VAT for cigarettes and the release of a guarantee imposed in the customs valuation process.”  It is may be hard to garner sympathy for a cigarette producer, but this case was not about protecting the Thai public from cigarettes.  How is any company importing goods into Thailand supposed to do business when its imports are subject to unpublished laws and regulations?

If the subject matter of the dispute, cigarettes, is still a concern, consider this from the WTO: “Philippines challenged the Thai government system under which certain government officials simultaneously served on the board of TTM, a state-owned domestic cigarette manufacturer.”  This wasn’t a public health issue.  It was a trade issue pure and simple.

But even more troubling, according to the WTO’s summary of the case: “[t]he Panel also found that Thailand acted inconsistently …by failing to maintain or institute independent review tribunals or process for the prompt review of guarantee decisions.”  No independent review of decisions made by officials with strong financial incentives to find violations?

This is not about cigarettes or even about the alcoholic beverages that Diageo produces and imports.  It’s about the rule of law.  And the inevitable friction between: (a) legal regimes that permit officials to exercise unfettered discretion when identifying violations pursuant to unclear – or here – unpublished regulations; and (b) and increased enforcement of foreign anti-corruption laws.  Clashes are inevitable.

The U.S.’s FCPA prohibits the payment of bribes to gain a business advantage.  In US vs Kay the fifth circuit held that prohibited payments (illegal bribes) not only include payments to obtain, say, government concessions or contracts, but also include payments made to reduce import duties and reduce taxes if they are made to obtain an unfair business advantage.  But what if they are simply necessary to even do business at all in a particular country?

This feature of the FCPA and other foreign anti-corruption laws puts businesses, particularly foreign businesses, in a very awkward position when they have to deal with less than transparent foreign government agencies.  It often places companies doing business in those jurisdictions with few, if any, legitimate options.  And it is not limited to only the Thai Customs Department.

What might be characterized in the U.S. as payment made to obtain an “unfair” business advantage is often seen as a necessary payment so as even to be able to do business.  It doesn’t provide the business with an unfair business advantage.  It is often simply seen as an unsavory requirement for doing any business at all in some jurisdictions.

This is not a justification for such payments and I am not involved in or familiar enough with Diageo’s situation to say if that is what happened here, but this clearly does happen in practice in Thailand.  More developed countries are more aggressively enforcing their own anti-foreign corruption laws, and this is a positive development.  But the increased enforcement on the supply of the corruption problem must be matched by increased reform on the demand side.

Laws that provide unfettered discretion to officials and provide for little or no independent review on how such discretion is exercised are big part of the problem on the demand side.  As long as local vested interests can use such laws to tilt the playing field in their favor, they will do so.  And in doing so, they undermine local economies, create business environments conducive to corruption and – this is often missed – generate friction with the increasingly robust anti-foreign corruption regimes of more developed economies.  And because these uneven playing fields place foreign companies subject to regulation in countries with robust foreign anti-corruption laws in impossible situations, these same foreign companies will, naturally enough, often press harder for serious enforcement of international conventions and obligations that are designed to level the playing fields.

Aggressive efforts to enforce rights and obligations under the WTO, the UN Convention, the New York Convention and other international treaties and conventions will play an increasingly important role in efforts to level the playing field going forward.   We are now only seeing the early signs of this.

Claims of Political Interference in DTAC FBA Probe

We said it would get interesting.  Over the last two days the press have carried stories about conflicts within the Ministry of Commerce (MOC) over the probe into DTAC for allegedly violating the Foreign Business Act (FBA).  Page one of the business section of today’s Bangkok Post provides a good summary (“http://www.bangkokpost.com/business/telecom/246620/official-defies-instruction-to-file-suit-against-dtac”).  The whole story should be read, but first a few snippets:

The head of the Business Development Department is challenging his boss’s order for the department to take legal action against DTAC on its nationality, saying the instruction is a “direct political intervention” and “illegitimate”.

The department, a unit under the Commerce Ministry, insisted on submitting its committee’s original findings to the police and ask them to determine whether the law had been broken, and if so, to take further action.

The move openly challenges Commerce Minister Alongkorn Ponlaboot, who had yesterday demanded that Banyong Limprayoonwong, director-general of the ministry’s Business Development Department, press the charge against DTAC. “He [Mr Alongkorn] has no authority or obligation under the Foreign Business Act (FBA) to force me to accuse a company of being foreign-owned,” Mr Banyong said.

“Mr Alongkorn’s decision cannot be regarded as a government policy. It is a direct political intervention,” Mr Banyong said.

The article goes onto to describe the difference between Business Development Department’s report and the report from Mr. Alongkorn’s committee as follows:

Mr Banyong’s panel is less certain about the legal implications and planned to ask the police to investigate further for more evidence.

The original complaint against DTAC was raised by True Move, the country’s third largest mobile operator. It alleged that DTAC is 71.35% held by foreigners and their nominees.

***

A telecom veteran, who asked not to be named, said the legal move by True Move could also spell trouble for mobile leader Advanced Info Service on its shareholding structure.

“Even though True said it would not do the same with AIS, the outcome of the DTAC case will inevitably put pressure on AIS’s shareholding structure, particularly under the administration of the new Pheu Thai-led government,” he said.

We’re not going to delve much further into this politically charged morass here, other than to make the obvious observation that it is morass.  Laws such as the FBA lend themselves to this sort of political controversy in Thailand.  There are views on what constitutes an illegal nominee under FBA Section 36, but much of this is contested terrain – perfect ground for political battles having little to do with sound policy or providing Thailand with a better IT infrastructure.

It is also safe to say that these sorts of controversies do not instill investor confidence in Thailand.  More about that later.

Early Comments on the FBA Investigation into DTAC

The Bangkok Post reported that the Ministry of  (“MOC”) issued a 35 page report addressing claims that DTAC is an “alien” under the Foreign Business Act (FBA): “Commerce Ministry investigators have made a preliminary finding that some Thai nominees hold shares on behalf of foreigners in the mobile firm DTAC”. (http://www.bangkokpost.com/business/telecom/245480/dtac-probe-finds-nominees)

That report was to be forwarded to the Royal Police, but more about that below. Continuing with the Bangkok Post report: “Mr. Yanyong [of the MOC] said the preliminary investigation had found some Thai shareholders were nominees for foreign groups led by Telenor, a Norwegian state enterprise.”  In other words, this case turns on the so-called “nominee shareholder” prohibition contained in FBA Section 36, as we originally suspected.

The report is not public and it’s early days, but we can make a few observations and comments about this matter.   For example, what the MOC’s “findings” do and do not mean.  And what they suggest about the MOC’s views on what constitutes nominee shareholding under FBA Section 36.

First and foremost, the MOC’s findings, preliminary or otherwise, are not law.  We are a long way off from anything that can remotely be considered law.  Even if this matter gets to the Royal Police, they actually investigate the matter and they decide some of the Thai shareholders are nominees, that finding by the police and anything the police decided is also not law.  The matter must still go to the prosecutors who must then decide if they want to prosecute.  And if they do prosecute and a Thai Court reaches a substantive decision, there are the inevitable appeals.

A comment, reported in the 8 July 2010 edition of the Bangkok Post (http://www.bangkokpost.com/business/telecom/246011/political-appointee-asserts-role), appears to confuse this point:

Sanya Sathirabutr, a political adviser to Alongkorn Ponlaboot, a Democrat MP and acting deputy commerce minister, said yesterday his investigative team had the authority to decide the nationality of the company and hoped to make a decision by Monday.

Not quite.   If it gets that far, that decision will need to be made by a Court.

But even if the MOC’s findings are not law, they are important.  The press reports give us a glimpse into the MOC’s thinking on this matter.  “‘We have no authority to ask for the financial documents. We need to pass on the duty to the Royal Police instead,’ he [an MOC official] said.”  He appears to be referring to alleged loan arrangements with some of the Thai shareholders.

In practice, when making inquiries about possible nominee status, the MOC looks for evidence of the financial ability of Thai shareholders to fund an acquisition of shares with their own money.  A simple review of bank statements is generally conducted at the company registration stage.  The alleged focus on loan agreements in the DTAC case goes beyond this, but it is consistent with our general theory about what, in the MOC’s eyes, distinguishes genuine investors from nominee investors: evidence that the Thai investor had the ability to and did in fact fund an investment with his or her own funds.

From an administrative perspective, you can see why this approach is attractive.  The so-called “nominee” provision found in Section 36 turns on intent: why did this Thai investor buy these shares?  Did he do so as a genuine investor or as a nominee of foreigners?   MOC officials cannot read minds, but they can read financial statements.  Whether that, by itself, is sufficient and how those records should be read is another matter – a matter that also has not yet been decided.

And the there must also be a prosecution.  FBA Section 36 is a penal provision providing for, among other things, imprisonment of up to three years.  From a prosecutor’s perspective, absent an unequivocal admission from the Thai investor (say, a written deed of nominee shareholding signed by the Thai shareholder), how do I, the prosecutor, prove this investor intended to help foreigners circumvent the FBA?  If the Thai shareholder says he is a genuine investor, how do I prove otherwise?

This case, if it proceeds, will need to address these and many other difficult questions.  It will be interesting.