A Possible Solution to the Arbitration Row with Walter Bau?

The dispute between Walter Bau AG and the Thai government goes far beyond the Boeing 737 currently impounded in Munich, Germany.   Walter Bau has an arbitration award against the Thai government – not against any Thai person – and the amount of that arbitration award exceeds the value of the impounded aircraft.  That means additional assets can be seized if Walter Bau can make a prima facie claim they are owned by the Thai government and not subject to sovereign immunity.  If it happens, it will likely happen without warning or notice.  And this creates an on-going headache for the Thai government that is not limited to this one incident.

Walter Bau’s administrator has demonstrated that he will aggressively use every procedural mechanism available to him to recover on this claim.  That is his job, and like him or not, he seems to be good at it.  He employed a similar technique before. He says he was forced into this position because the Thai government ignored his earlier requests to resolve this matter amicably.  I don’t know if this is true or not.

But I do know that arbitration is intended to provide for prompt enforcement of arbitration awards.  Arbitration is designed to avoid endless appeals and certainly lengthy stays of enforcement pending an appeal.  This is why arbitration is attractive to the international business community. Enforcement is typically not delayed during an appeal.

As one other lawyer in this area wrote: “Most arbitral awards are voluntarily complied with and do not require judicial enforcement.”  There is a plan to appeal the judgement Walter Bau obtained in the Southern District of New York to confirm the arbitration award, but Walter Bau is not going to refrain from enforcing the arbitration award while an appeal is pending before a U.S. Circuit Court when “an international award…has substantially greater (executory) legal force than a domestic court decision.”

The New York Convention requires that the states that have ratified it to recognize and enforce international arbitration agreements and foreign arbitral awards issued in other contracting states, subject to certain limited exceptions. And those exceptions are very limited.

On the other hand, the current Prime Minister, Khun Abbhisit, says the Thai government has strong arguments to prevail on the appeal it plans to file and that if the government loses that appeal, they will pay.  Unfairly or otherwise, Walter Bau’s administrator doesn’t believe this.

The Thai government refuses to put up a bank guarantee now for release of the airplane.  If they did put up a bank guarantee now, it could be construed as a tacit admission that they own the plane.  It creates other obvious problems and it’s not surprising that no bank guarantees will be provided for the release of the plane alone.

Moreover, even if Walter Bau’s seizure of this asset is set aside, it can pursue other assets of the Thai government.  And even if the seizure of this one asset stands, Walter Bau can and presumably will still pursue other assets to make up for the shortfall between the value of this plane and amount of its award. The headaches for the Thai government will continue.  This dispute is really not about the plane.  It goes beyond the plane, and that point seems to get lost in the controversy surrounding this matter.

But there is a solution: why doesn’t the Thai government simply propose – unilaterally, on its own – to put up a bond for the full award amount plus a bit on top to cover costs to the U.S. court in return for a stay on all efforts to enforce the award, including the seizure of the jet in Munich?  In other words, the jet is released and no other assets of anyone are seized to enforce this arbitration award.

This is what large companies do to avoid a prevailing claimant from interfering in their operations while an appeal is pending on what they firmly believe to be an unjustified award or judgment.  If they can’t get the judgment stayed – and its very hard to stay a judgment on an arbitration award – they bond around it to avoid unexpected levies that will interfere with business operations and tarnish their reputation.  No matter how strongly a company may disagree with an award or judgment, this simply makes good business sense.

The current prime minister says he is confident Thailand will win on appeal.  Thailand certainly has enough money to bond around this award.  Why don’t they do so?  They don’t stand much to lose if, as Khun Abbhisit says, they expect to win on appeal.

If the Thai government wins, they get the money back. If not, Walter Bau gets paid.  While the bond is in place, Walter Bau would agree to be stayed from seizing any other assets from the Thai government or anyone else to enforce the award.  No one is harassed with surprise levies by Walter Bau and the Thai government can go about its business without worrying about getting blind-sided with a boat, plane or bank account getting seized in some foreign jurisdiction.

Since Thailand has not even yet filed an appeal in the second circuit, this risk of getting blind-sided with an asset seizure could go on for years.  This is not good for Thailand.

Perhaps this solution is not possible with the current government.  Perhaps emotions run so hard with the current government that this sort of compromise is not possible.   But a new government will likely come in soon, and I don’t see why it could not agree to this sort of arrangement.  There are plenty of good practical and policy reasons to do so.  It demonstrates that Thailand does honor arbitration awards.  It prevents Walter Bau from seizing other assets that it claims, rightly or wrongly, belong to the Thai government and are not subject to sovereign immunity.

It seems like a sensible way to cut the Gordian knot and bring all of this to an end.

Arbitration with the Thai Government?

In recent years, the Thai government has expressed an ambivalent attitude towards the use of arbitration in disputes between private parties and the Thai government.  I discuss this in some detail in an article published in March 2010 and posted on our website here: http://www.deaconsbk.com/knowledge/arbitration-and-thai-government-agencies.php.

The recent seizure in Germany of an aircraft used by the HRH Crown Prince Maha Vajiralongkorn’s has generated controversy and consternation for everyone involved (http://www.bangkokpost.com/news/local/247273/german-court-begins-hearings-on-royal-jet), but I want to focus on what this may mean for the use of arbitration to settle disputes with the Thai government and some puzzling comments by Thai government officials about international arbitration.

First, this case was not submitted to international arbitration because of an arbitration clause in a contract with the Thai government but rather because of an arbitration requirement in a bilateral investment treaty (BIT) between Thailand and Germany.  A policy of prohibiting or restricting the use of arbitration clauses in contracts with the Thai government would not have made any difference in this case.  The dispute was still subject to international arbitration.  But it’s still relevant to the broader question about the Thai government’s attitude towards international arbitration.

In my March 2010 article I also asked how Thailand would respond to to treaty obligations to arbitrate disputes even if it refused to agree to arbitration clauses in contracts with the government.  Is this an example of what we can expect to see?  I hope not.

Putting aside the controversy over ownership of the plane and the obvious sensitivities of this issue, this case highlights problems with Thailand’s ambivalence towards international arbitration provisions and awards generally.  Even though the seizure of this plane was not the result of an agreement containing an arbitration clause, it could stiffen resistance to the use of arbitration clauses in contracts with the Thai government.  This is not a good result for Thailand or foreign investors who want to participate in Thailand’s ambitious infrastructure development plans.

And some of the comments in the press (perhaps they’re not getting it right?) coming from Thai officials are baffling.  For example:

Mr Abhisit said the Office of the Attorney-General is in the process of appealing to the Southern District Court of New York, which last year ruled in favour of Walter Bau and ordered Thailand to pay compensation to the firm.

Mr Abhisit said the government will submit the appeal on July 29.

The reference to the U.S court proceedings is odd for several reasons.  First, why does a German court need to wait on a U.S. court decision to enforce an international arbitration award from a respected UN arbitral body? How is this at all relevant?  Second, even in the U.S., a judgment confirming the award would be immediately enforceable unless the trial court or an appellate court orders a stay of execution.  No word of any stay of execution. So why even comment on the U.S. court proceedings?

But more important, what does all of this tell us about the use of arbitration to settle disputes with the Thai government going forward?  Will it make it make it harder to negotiate contracts with arbitration clauses. Will it be harder to enforce arbitration awards?  Or will the Thai government quickly settle unfavorable arbitration awards to avoid this sort of embarrassment?   The latter, of course, would be preferable, but we will need time to assess the fall out from all 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.

Marked Increase in International Enforcement of Foreign Anti-Corruption Laws

The noose is tightening.  The U.S. has had its Foreign Corrupt Practices Act (FCPA) since the 1970s, but aggressive enforcement is a relatively recent phenomena.  A decade ago there were hardly any active cases, but now there are estimated to be well over 150 cases.  The U.S. used to be an outlier, but now other countries are starting to enforce their own foreign anti-corruption laws, including Germany, Japan and the UK with its new, very strict, anti-corruption law.

Even countries that had ranked low in terms of enforcement (http://www.transparency.org/news_room/in_focus/2011/oecd_progress_2011) are now starting to prosecute foreign anti-corruption cases. The first guilty plea was very recently secured under Canada’s Corruption of Foreign Officials Act. Korea recently indicted two representatives of a logistics company for alleged corrupt activity in China. And now Australia has charged six for allegedly bribing officials in Malaysia, Indonesia and Vietnam to win currency contracts. (http://www.morningstar.co.uk/uk/markets/newsfeeditem.aspx?id=148573656291621)

Perhaps unknown to many, but Note Printing Australia Limited (http://www.polymernotes.org/resources/npasecurency/npa_securency04.pdf) prints bank notes for many countries, including Malaysia, Indonesia, Vietnam and, according to its recent annual report, Thailand. There has been no suggestion that Thai officials were involved in this matter, but this does mean that Australian business persons operating in Thailand can no longer rely on a relaxed anti foreign corruption regime in Australia. The Reserve Bank of Australia issued a press release containing the following:

Over the past several years much has been done to tighten controls and strengthen governance so as to avoid any re-occurrence of the alleged behaviour:

  • Those charged with offences are no longer with the companies;
  • The use of sales agents has ceased;…

“The use of sales agents has ceased.”  The use of sales agents is a common tactic used to circumvent foreign anti-corruption law.

The point of all of this is that foreign corruption laws are no longer a U.S. specific issue.  Other countries are now actively enforcing their foreign anti-corruption laws.  It’s taken awhile, but the playing field is visibly changing and what had been considered “business as usual” is becoming much less acceptable – not only for U.S. companies, but also now for Japanese, Canadian, UK, Korean and Australian companies as well.

Another Attempt to Expand the FBA?

There have been at least two attempts to make the Foreign Business Act (“FBA”) more restrictive by changing the definition of an “alien” business under the FBA to make it more expansive – to cover businesses that are not currently covered by the FBA. Both attempts have failed. And both attempts generated tremendous negative sentiment in the foreign business community. Now, following True’s claim that DTAC is in violation of the FBA, The Nation (www.nationmultimedia.com/2011/06/16/business/Foreign-Business-Act-may-be-tightened-after-DTAC-r-30157910.html) reports there may be yet another try to expand the scope of the FBA.  We don’t need this.

Again, it appears that a re-definition of what is an “alien” company is under consideration.  And again claims are raised that this is necessary because of uncertaintiy in this area.  In fact, the FBA is not at all unclear on the definiton of an “alien” under the FBA.

The definition of an alien business under FBA Section 4 is quite clear.  It does not refer in any sense to control or even economic benefit.  It simply refers to share ownership.  This definition, in the FBA and its predecessor, NEC 281, has remained unchanged for about 40 years.  In reliance on this definition tens of thousands of preference share companies have been formed.  The Ministry of Commerce has previously said these structures were acceptable under Thai law. 

But it seems as though there might be another go.  The Nation reports: “…the shareholding issue would be central to the amendment, as the law now focuses on factual figures, not the sense of ultimate ownership…”

Maybe something got lost in that translation, but this sounds like the old argument that companies could be held liable for violating the spirit of the Foreign Business Act (FBA).  The “sense of ultimate ownership”?  Not sure what that means.  The FBA provides for severe criminal penalties and the dissolution of businesses.  Subjecting foreigners to these severe penalties based on something as nebulous as the “sense of ultimate ownership”  doesn’t sound comforting.

The Nation goes onto to quote the MOC:

…the process of proving the nationality of a company was complicated, as it involved a money trail. Likewise, to prove whether DTAC is a Thai or a foreign company, investigation into investments, shareholding ratios and the distribution of returns to shareholders would be necessary…

Actually, when you look at the definition of a company’s “nationality” in FBA Section 4 none of these factors are mentioned.  The definition is quite clear (an earlier blog post provides the definition).  You simply look at share ownership. Section 4 doesn’t mention or even hint at any of this other stuff (except shareholder ratios).

The politicians are making more sense on this than the officials.  From the Democrats:

Buranat Samutharak, spokesman of the Democrat Party, said he had doubts over why TrueMove initiated the complaint, as it was the duty of the state agencies, not the private telecom operators, to examine which companies may or may not circumvent the Foreign Business Act and bring them to prosecution.

The complaint “is just to make it become front-page news, which hurts both of them”, he added.

And this: Supachai Jaisamut of the Bhum Jai Thai Party said the legal case between the two companies did not bring any benefit to consumers.

This is NOT a political blog, but it’s interesting how the politicians – from all of the political parties that are quoted as having anything to say on this subject – make a lot more sense than the bureaucrats.  It’s also reassuring.

Alleged FBA Violation in the News

Yesterday’s Bangkok Post (http://www.bangkokpost.com/business/telecom/242184/true-move-lays-charge-against-dtac) reports on another example of the Foreign Business Act (FBA) being used in a dispute between two business rivals, again highlighting the danger of failing to comply with this law and how alleged evidence of non-compliance can be found in some surprising places.  This time it’s in the telecommunications industry.  And today it is headline news in The Nation (http://www.nationmultimedia.com/2011/06/15/business/DTAC-Its-not-True-30157864.html) and front page news on the first page of the Business Section of the Bangkok Post (Expect posts about that in the next day or so.) Yesterday’s Bangkok Post reports:

True vice president Athueck Asavanand said the company sent a representative, Suphasorn Honchaiya, to file a complaint with the police against Dtac for violating Section 4 of the Foreign Business Act (1999), which limits foreign telecom ownership to 49 per cent .

This quote is a bit odd since Section 4 of the FBA simply defines the term “alien” and that definition says nothing about voting control. Was it really evident from DTAC’s corporate registration papers that it was majority foreign owned?  Seems unlikely.

Or is True claiming that that DTAC is unlawfully using Thai nominees under FBA Section 36 to make it appear as though DTAC is not an alien?  This is typically the claim when ultimate control and the economic benefits of control rest with a foreign party.  And the absence of any reference  to control or economic benefit in FBA Section 4 makes it an unlikely basis for a claiming that a company is violating the FBA.

The more common claim is that a foreigner is illegally employing Thais as “nominees” in violation of the FBA’s section 36.  That is, the company appears Thai based on ownership of share capital as reflected in the company registration papers, but some or all of the Thai are actually nominees of the foreigners.  They aren’t real investors. This is a complicated area, but the current test appears to be whether the Thais are genuine investors in the sense that they had and used their own funds to acquire their shares and those shares provide sufficient economic benefit to the Thais so that it would be hard to say they are not genuine investors.

But there is another way to claim a company is foreign majority owned or using nominees, and that is through documents the parties themselves have signed or announcements the company itself has made.  That seems to be the claim here:

He said Dtac reported a 49 per cent foreign shareholding to the Commerce Ministry, but Telenor notified the stock markets in Norway and Singapore that it owns 66.50 per cent of Dtac

In some cases the registration papers say that Thais owns a majority of the shares, but other documents, such as a shareholder agreement or even a “trust deed”, are claimed to provide evidence that the shares are really owned by foreigners. Here, True appears to be claiming this admission was made in filing on a public stock exchange, adding a new twist to these sorts of claims and providing further food for thought (and fodder for more blog posts).

This article in the Bangkok Post supplies all we know about the case, and more facts may come to light out in the days to come.  But it’s interesting to see that the article points to the same red flags of a FBA violation previously mentioned on this blog.

Enforcement of the FBA is real.  The Ministry of Commerce (MOC) announced the formation of task force of 25-30 MOC officers to search company records for evidence of nominee shareholding.  B&M reports at least one guilty verdict.  There are certainly many more investigations we don’t read about, and those investigations are more than just an administrative and costly nuisance, since they represent an existential threat to a company: they challenge the company’s very right to conducts its business and threaten business dissolution. More commonly, in business disputes between disgruntled business partners or competitors FBA allegations are raised for leverage.  Here, we appear to be getting a glimpse of the bigger FBA iceberg because it involves major players in Thailand’s contentious telecommunications industry

Thailand’s 30% Graft Tax

The Thai Federation of Industry (TFI) reports in the Bangkok Post that “businesses can be asked to kick back up to 30% of contract values to state officials”. This is based on anecdotal evidence, but you can’t expect precise measurements on this sort of thing. And that number is not particularly surprising.

The more cynical view would be: “So what? This is Thailand. Live with it or leave.” But I think there is good reason for hope. In that same article: “Dusit Nontanakorn, chairman of the Thai Chamber of Commerce (TCC) and the Board of Trade said Thailand should follow the example of Hong Kong” and went on to say:

If we don’t start today, there will be no map of Thailand left. Can we stop paying respect to those who are rich but cheat, and start to wai those who are poor but honest?”

This is not the first time that we have heard a prominent person in Thailand comment on corruption, but those are strong words.  And he is absolutely right about the corrosive effect of corruption on states.

The article goes on to report:

The chamber recently created a corruption situation index (CSI), which it intends to update every six months to gauge the attitudes of respondents toward corruption and the effectiveness of measures to stop improper practices.

The creation of a local corruption situation index is also new.  Let’s hope the indexing continues.  There is ample commentary in cyber-space on how to tackle corruption and I will add some comments of my own in future blog posts, but one thing seems obvious to me: you cannot even begin to address corruption unless you shine a spot light on the problem and openly discuss it.

Putting numbers on this, particularly realistic numbers (and 30% is realistic), also helps by making the problems created by corruption more concrete.  That basically means that approximately one of three Baht or dollars spent on many public projects is not actually going into the project but into someone’s pocket. This increases the project’s price and, perhaps more important, limits potential participants in the project. In the current environment with stricter enforcement of international anti-corruption laws, more honest and capable businesses simply won’t want to participate in a project with that level of corruption.  And the Thai public suffers as a result.

To put this in historical perspective, it wasn’t so long ago that international organizations shied away from discussing corruption.  Up until the 1990s, corruption was a taboo subject for international organizations.  The US had its Foreign Corrupt Practices Act since the 1970s, but aggressive enforcement of the FCPA is a very recent phenomena.  Last year in the American Chamber of Commerce’s magazine, T-AB, I wrote: “In the prior decade, the Department of Justice (“DOJ”) did not file a single FCPA case until 2002; but last November, the DOJ announced there were more than 130 open FCPA cases. That number is expected to increase.” (www.deaconsbkk.com/knowledge/legal-update-increased-enforcement-of-the-fcpa.php). And that number has certainly increased.

There is no reason to rule out change in Thailand. It will not happen overnight, but I am optimistic that a consensus is developing in the local business community that business as usual is no longer acceptable.

Should the Trade Competition Law be Amended?

Since the Thai Anti-Competition Act (TAC) was enacted in 1999 there has not been a single successful prosecution under the TAC. Now several proposals have been put forward to change this by giving this law more teeth to secure convictions. But is this a good thing? Could the cure be worse than the disease?

Perhaps some thought should first be given to the purpose of the TAC. At the very least the purpose of this law should be explicit. Is it intended to provide consumers with a wide range of products at the lowest possible price or is it intended to serve other interests?

An article in the 3 June 2011 edition of the Bangkok Post (www.bangkokpost.com/business/marketing/240326/market-dominance-revised) reports that that some trade competition authorities contend “other factors” besides market size should also be considered to determine “market dominance”. These “other factors” include: “better access to production materials and resources, more extensive distribution channels, technology and capital advantage”.   When a business has “market dominance” under a trade competition law, it is generally also subject to regulation under that law. This is consistent with a 5 February 2010 seminar organized by the Office of The Trade Competition Commission where some said that both horizontal and vertical restraints on tradewould and should be considered to determine if at least some provisions of the TCA have been violated.

But wait a minute. Don’t customers gain if they are offered more products at better prices? Does it matter if a supplier is able to supply more products at better prices because it has better access to production materials and resources, extensive distribution channels and more advanced technology? Justice Learned Hand once observed in the seminal U.S. antitrust case against Alcoa that U.S. antitrust law does not attack monopoly power obtained through “superior skill, foresight and industry.”

The primary and – some would argue – only legitimate goal of anti-competition laws is to protect consumers from predatory business practices that artificially restrict choice and increase price for consumers. This is why prohibitions on vertical “restraints” on trade are so controversial in competition law. What some describe as a vertical “restraint” on trade others see as a more efficient and transparent means of providing consumers with a wider selection of goods at lower prices.  Should a business be handicapped under trade competition laws because it has access to better technology and production materials?  Consumers don’t benefit.

Distributors and less efficient domestic producers often take a different view of trade competition laws; they often argue that trade competition laws should serve other goals besides increasing consumer choice and lowering price. And although some anti-competition legal regimes clearly do serve other goals, they are – or at least should be – clear about their goals. Is the law intended to serve consumers or is it intended to protect other interests? Unless and until there is clarity on this fundamental point, expect a heated, but muddled, discussion about amending the TCA.

New Guest Blogger Added

The blog has been inactive for several months and to change this Douglas Mancill of  Deacons Bangkok (www.deaconsbkk.com) has agreed to assist in posting blogging articles.  Doug’s bio is here (http://www.deaconsbkk.com/the-firms-partners/douglas-mancill.php) and you can contact him direct on the articles he posts (rather than me).