An uncertainty about the enforceability of arbitration clauses in state contracts was finally settled with the publication on April 29 2002 of the new Arbitration Act, BE 2545 (2002). The effective date of this Act was April 30 2002.
The uncertainty arose following the enactment of the Act for Establishment of and Procedure for Administrative Court in October 1999. This included within the jurisdiction of the Administrative Court disputes arising under state contracts, meaning contracts between a government agency (such as EGAT or PTT) and a private sector party (such as a petrochemical or power project company).
Section 15 of the new Arbitration Act provides that the parties to a state contract may agree to refer any dispute to arbitration, and any such arbitration agreement is binding on all parties. The new Arbitration Act has removed the uncertainty concerning the enforceability of arbitration provisions commonly found in power purchase agreements, gas sale agreements and other state contracts. Rights under such agreements are frequently assigned to lenders in project financings in Thailand.