Samui Phangan Real Estate Magazine February-March

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ealty in focus l tax corner ISSUES WITH SPECIFIC BUSINESS TAX AND HOW THESE CAN BE RESOLVED BY ARBITRATION DUENSING KIPPEN is a multi-service boutique law firm specializing in property and corporate/commercial matters and arbitration and litigation proceedings arising therefrom. DUEINSING KIPPEN is also the only such firm in Thailand that compliments its property and corporate/commercial legal expertise with a core tax law practice. DUENISING KIPPEN is also the only firm in Thailand with three Members (MCIArb) of the Chartered Institute of Arbitrators. DUENSING KIPPEN can be reached at: samui@duensingkippen.com or for more information please visit them at: www.duensingkippen.com 52 samui phangan real estate A contract involving a real estate transaction usually includes a provision for fees and taxes. Very often the burden of payment of such fees and taxes is contractually shifted to the purchaser. It is already common knowledge that the Condominium Act No. 4 B.E. 2551 (“CA”), specifically restricts the freedom of contract in this regard and regulates which party is subject to the payment of the specific business tax (“SBT”) when it comes to the transfer of a condominium from a developer to a purchaser. The restriction for condominium developers requesting payment of the SBT from the purchaser through a clause in the condominium sale and purchase agreement is well documented in the CA. Interestingly, certain regulations applicable prior to the CA seem to be well forgotten by condominium developers in Thailand. Therefore, contracts entered into prior to the enactment of the CA also frequently include clauses that shift the burden of the SBT payment to the purchaser. Developers are insisting on such payment in accordance with such an agreement by arguing that the CA which outlaws such a provision was not applicable on the date of execution of the agreement. Many buyers are unaware that such clauses have been unenforceable even prior to the enactment of the CA. Sections 35bis, 35ter and 35quarter of the Consumer Protection Act in conjunction with the corresponding Announcements for Condominium Business stated well before the applicability of the CA that the SBT is payable solely by the developer. Such regulations specifically overrule any contract term entered into by the developer and the purchaser relating to the SBT liability of the purchaser. Since the SBT at its current rate of 3.3 percent of the purchase price is a significant cost to the developer, it is not uncommon that the developer refuses to accept the applicability of the Consumer Protection Act and is unwilling to transfer the condominium to the purchaser without receiving the SBT amount first. In such an event will the purchaser need to enforce the contract and the law. However, the settlement of the issue of SBT liability or the settlement of other contractual issues between the parties through the local courts can be agonisingly slow. It is therefore important to understand that the parties have the option to settle their dispute fast and efficient through the mechanism of “alternative dispute resolution”. The “alternative” means “other than going to court”. One such longstanding alternative gaining evermore international recognition, is arbitration. Arbitration is the most commonly used formal alternative to domestic court proceedings, especially for disputes between parties in different countries. From a legal perspective Thailand was a relative “late comer” to the arbitration scene, enacting its first law governing arbitration in 1987. Then in 2002 Thailand enacted the current Arbitration Act which
eplaced the 1987 law. The Arbitration Act governs not only domestic, but also any international arbitrations conducted in Thailand. In order to submit a dispute to arbitration, it is required that both parties agree to it. Section 11 of the Arbitration Act defines such an arbitration agreement as “an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement might be in the form of an arbitration clause in a contract or in the form or a separate agreement.” The arbitration agreement needs to be in writing and signed by both parties. Thus, it is not possible for one party to unilaterally and without the approval of the other party to submit a dispute to arbitration. If the parties failed to include an arbitration clause to an agreement and a dispute arises, the dispute must be settled by the local courts as long as both parties do not agree to arbitration proceedings. Therefore, it is advisable to include a well drafted arbitration clause in an agreement, preferably in the initial contract document, before any dispute that requires a third party adjudicator arises. In our experience, once such a dispute arises, getting the parties to agree on anything, including how to resolve the dispute can be very difficult, if not impossible. But if you are going to use the arbitration alternative then its is highly advisable to select and include in your arbitration agreement a professional arbitration institute that can provide the procedural and administrative support requisite for the conduct of proper arbitration proceeding. Internationally, perhaps the most commonly known such institute is the International Chamber of Commerce’s International Court of Arbitration (the “ICC”) which is headquartered Paris, France but which conducts arbitrations worldwide. Founded in 1923, the ICC established its own rules of arbitration that govern the proceedings between the parties themselves and between the parties and the ICC. These rules of arbitration are “universal” and govern all ICC proceedings worldwide. Locally, Thailand established its own “Thai Arbitration Institute of the Alternative Dispute Resolution Office, Office of the Judiciary” (the “TAI”) to provide arbitration services within Thailand. The TAI also has its own rules that govern its arbitration proceedings. Finally, the Board of Trade of Thailand also offers arbitration services which are provided by its “Thai Commercial Arbitration Institute” and which are conducted under its own rules. The parties to an arbitration agreement are free to choose what rules should govern the arbitration proceedings by choosing one of the aforementioned service providers. It should be noted that the choice of the service provider not only has an impact on the fees charged for the arbitration service, but could also have an impact on the recourse a winning party has to claim for compensation for legal fees incurred during the arbitration proceedings Arbitration proceeding are generally quick, in fact the ICC rules generally require a decision and an award within 8 months of the arbitrator’s appointment. In the case of the TAI it is within 6 months of such appointment. Arbitration proceedings can be conducted in any language the parties choose. In general, the parties get to chose the arbitrator, thus they control their competence and may even select someone with particular expertise and experience relevant to the dispute at hand. And an award issued by any of the above mentioned arbitration institutes is enforceable in any country that is the signatory to the 1958 U.N. Convention on the recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”). Thailand is a signatory to the New York Convention and an arbitration award made here will be enforceable outside of Thailand in any other signatory country (currently 145 countries worldwide). And pursuant to the Arbitration Act any such award will also be enforceable inside of Thailand. Accordingly, formal arbitration can be an outstanding alternative to Thai court proceedings in enforcing your contractual rights, whether it relates to the unlawful contractual obligation to pay SBT or any other contractual dispute. samui phangan real estate 53
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Samui Phangan Real Estate Magazine February-March

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