Key Takeaways
- Arbitration clauses must specify five elements: institution, seat, governing law, number of arbitrators, and language
- TAI suits cost-conscious domestic disputes; THAC is better oriented for international cases; SIAC is the ASEAN gold standard
- A clause that simply says “disputes shall be resolved by arbitration” is a “pathological clause” — and may render arbitration unavailable when you need it
- For JV shareholder agreements, a multi-tier clause (negotiation → mediation → arbitration) paired with deadlock provisions is the most robust design
Introduction
Part 1 of this series explained why arbitration is so important for Japanese companies in Thailand — primarily because Thai court judgments cannot be enforced in Japan, while arbitral awards can be enforced under the New York Convention.
This article goes further: how exactly should you draft the arbitration clause? The choice of institution, seat, language, and number of arbitrators determines the cost, timeline, and practical usability of your arbitration clause. Getting these details right at the contracting stage makes all the difference.
1. Why Arbitration Clause Design Matters
Because Thailand has no mutual judgment enforcement treaty with Japan, a Japanese court judgment cannot be enforced in Thailand, and a Thai court judgment cannot be enforced in Japan. Arbitral awards, by contrast, are enforceable in 170+ countries under the New York Convention (Thailand acceded in 1959, without reservations).
Critically, arbitration requires prior agreement — both parties must have consented to arbitration in their contract. Once a dispute has arisen, a party that does not want to arbitrate will simply refuse to agree, leaving you with the courts as your only option.
This is why the arbitration clause must be designed carefully at the drafting stage.
2. The Five Essential Elements of an Arbitration Clause
Every arbitration clause should explicitly address the following five elements:
| Element | Description | Examples |
|---|---|---|
| ① Institution | Which institution administers the arbitration and under whose rules | TAI / THAC / SIAC / JCAA / ICC |
| ② Seat of Arbitration | The legal “home” of the arbitration (distinct from the physical venue) | Bangkok / Singapore / Tokyo |
| ③ Governing Law | The law applied to the substance of the contract | Thai law / Japanese law / English law |
| ④ Number of Arbitrators | One (faster, cheaper) or three (more balanced, better for complex disputes) | 1 or 3 |
| ⑤ Language | Language of the arbitral proceedings | English / Thai / Japanese |
If any of these elements is missing or ambiguous, parties may dispute the procedural framework at the outset — delaying the arbitration before it has even begun.
3. Comparing Thai Arbitration Institutions: TAI vs. THAC
TAI (Thai Arbitration Institute)
TAI operates under the supervision of Thailand’s judiciary and handles the largest volume of arbitration cases in Thailand.
Key Features
- Government-backed credibility and established track record
- Primarily used for domestic Thai cases
- Lower fees (percentage-of-claim fee structure)
- Thai language-centric but English proceedings are available
- August 2025: TAI-MC (TAI Mediation Center) established, introducing Med-Arb model
Best Suited For
- Domestic commercial disputes with Thai counterparties (sale of goods, services, leases)
- Small to medium-sized disputes where cost is a priority
- Cases governed by Thai law
THAC (Thailand Arbitration Center)
THAC is an independent private institution positioned for international cases.
Key Features
- Greater institutional independence
- Rules aligned with international arbitration standards
- Proactive English-language capability
- Incorporates international arbitration practices (IBA Rules, etc.)
- Growing caseload in international matters
Best Suited For
- International disputes with foreign parties
- Cases requiring English proceedings
- International disputes where SIAC-level cost is not warranted
TAI vs. THAC Comparison
| Factor | TAI | THAC |
|---|---|---|
| Governance | Government (judiciary) | Independent (private) |
| Primary focus | Domestic, smaller cases | International, larger cases |
| Fee level | Lower | Moderate |
| English capability | Available (limited) | Proactive |
| Med-Arb | Yes (TAI-MC) | Confirm separately |
| International recognition | Limited | Growing |
4. International Arbitration Institutions
SIAC (Singapore International Arbitration Centre)
SIAC is widely regarded as the gold standard for arbitration in the ASEAN region. “Bangkok-seated / Bangkok-governed / SIAC-administered” arbitration clauses are increasingly common even in Thailand-related contracts.
Advantages
- Highest international recognition and credibility in Asia
- Well-developed, predictable procedural rules
- Large and diverse panel of arbitrators
- Singapore’s robust legal infrastructure supports the process
Disadvantages
- Higher fees (institution fees + arbitrator fees)
- Less suitable for small disputes (claim value under a few million yen)
Best Suited For
- Medium to large international commercial transactions
- Multi-party transactions involving non-Thai parties
- Cases where the highest level of international enforceability is required
JCAA (Japan Commercial Arbitration Association)
JCAA is Japan’s leading arbitration institution and a viable option for Japan-Thailand disputes.
Advantages
- Familiar to the Japanese party; Japanese-language proceedings available
- Lower fees than SIAC
Disadvantages
- Thai parties may resist (“Why should we use a Japanese institution?”)
- Lower recognition in ASEAN compared to SIAC
- Limited enforcement track record in Thailand
Best Suited For
- Cases where the Japanese party has strong negotiating leverage
- Cases requiring Japanese-language proceedings
- Cases where enforcement in Japan is the primary concern
ICC (International Chamber of Commerce)
ICC is the world’s largest international arbitration institution, headquartered in Paris.
Key Features
- Strong track record in large infrastructure, energy, and M&A disputes
- Scrutiny mechanism (ICC Court reviews draft awards) ensures high quality
- High cost — may be prohibitive for SMEs
Best Suited For
- Large international projects (infrastructure, energy, cross-border M&A)
- Cases where award quality and global authority outweigh cost concerns
How to Choose — A Decision Framework
Is the dispute value above JPY 50 million AND involves multiple countries?
→ YES → Consider SIAC or ICC
→ NO ↓
Is this primarily a domestic Thailand matter? Cost is a priority?
→ YES → Consider TAI
Is international capability / English proceedings important?
→ YES → Consider THAC or SIAC
Is Japanese language a priority, and is Japan the likely enforcement jurisdiction?
→ YES → Consider JCAA5. Model Clause Language
The following model clauses are provided for illustrative purposes. Before incorporating any clause into an actual contract, consult a qualified professional to adapt it to the specific circumstances.
Pattern A: TAI Arbitration (Standard for SMEs)
English
Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity thereof, shall be finally settled by arbitration in accordance with the Rules of the Thai Arbitration Institute. The seat of arbitration shall be Bangkok, Thailand. The number of arbitrators shall be one (1). The language of the arbitral proceedings shall be English.
Use case: Mid-sized commercial contracts with Thai counterparties (supply, services, distribution agreements)
Pattern B: SIAC Arbitration (Medium to Large International Transactions)
English
Any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration administered by the Singapore International Arbitration Centre (SIAC) in accordance with the Arbitration Rules of the Singapore International Arbitration Centre for the time being in force. The seat of arbitration shall be Singapore. The Tribunal shall consist of three (3) arbitrators. The language of the arbitration shall be English.
Use case: Large commercial transactions, joint ventures, cross-border M&A
Pattern C: Multi-Tier Clause (JV Shareholder Agreements)
English
(1) The Parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement through negotiation. Either Party may give written notice setting out the nature of the dispute. The Parties shall negotiate in good faith for thirty (30) days following such notice (or such longer period as the Parties may agree in writing).
(2) If the dispute has not been resolved by negotiation within the period in Clause (1), either Party may refer the dispute to mediation administered by the Thai Arbitration Institute Mediation Center (TAI-MC) in accordance with its mediation rules.
(3) If the dispute has not been resolved by mediation within thirty (30) days after commencement of mediation proceedings (or such longer period as the Parties may agree), either Party may refer the dispute to arbitration in accordance with the Rules of the Thai Arbitration Institute. The seat of arbitration shall be Bangkok, Thailand. The number of arbitrators shall be three (3). The language of the arbitral proceedings shall be English.
Use case: JV shareholder agreements (SHAs), long-term partnership agreements, any contract where preserving the relationship is important
This multi-tier clause works in tandem with deadlock provisions in JV SHAs — see Entry Structure Series Part 5 for a fuller discussion.
6. Common Mistakes and How to Avoid Them
① “Exclusive jurisdiction of Thai courts” with no arbitration clause
A clause that simply submits disputes to Thai court jurisdiction forfeits the advantages of arbitration — including New York Convention enforcement. If you are the seller, lender, or creditor in a Thailand transaction, this is a significant disadvantage.
② The Pathological Clause
A clause that says “disputes shall be resolved by arbitration” without specifying the institution, seat, or rules creates what practitioners call a “pathological clause.” When a dispute arises, the parties are likely to disagree on which institution to use, and the arbitration may stall before it begins.
Bad example: “Any dispute under this Agreement shall be resolved by arbitration.” Good example: A clause specifying institution, seat, language, and number of arbitrators (see model clauses above).
③ Mismatch Between Governing Law and Seat
Choosing Thai law as governing law with Singapore as the seat of arbitration is perfectly valid. However, it is important to understand that the lex arbitri (the procedural law of the arbitration) is determined by the seat — so Singapore law would govern the arbitration procedure, while Thai law governs the substance of the contract. Confusing these two concepts can lead to unintended outcomes.
④ Thai Counterparty Resistance to International Arbitration
If your Thai counterparty objects to SIAC or other international institutions, consider:
- Proposing TAI or THAC: “It’s a Thai institution” often reduces resistance
- Setting the seat in Bangkok: Eliminates the need to travel to Singapore
- Balanced arbitrator panel: Propose one Japanese, one Thai, and one neutral third-country arbitrator
7. Japan-Thailand Comparison
Japan Arbitration Act (2003) vs. Thailand Arbitration Act (2002)
| Factor | Japan | Thailand |
|---|---|---|
| Model | UNCITRAL Model Law 1985 | UNCITRAL Model Law 1985 |
| New York Convention | Party (1961) | Party (1959, no reservations) |
| Domestic/international distinction | None (unified) | None (unified) |
| Primary institution | JCAA | TAI / THAC |
| Interim measures | Court application available | Court application available |
Both countries’ arbitration frameworks are based on the same UNCITRAL Model Law, making the basic structure familiar to Japanese legal practitioners.
Japan-Thailand Investment Agreement
Japan and Thailand are parties to the Japan-Thailand Economic Partnership Agreement (JTEPA, in force 2007), which includes an investment chapter with investor-state dispute settlement (ISDS) provisions. However, ISDS applies only to disputes between investors and the state — not to disputes between private companies.
Summary
Arbitration clause design is a cornerstone of risk management for Japanese companies in Thailand. The key points:
- Always specify all five elements (institution, seat, governing law, number of arbitrators, language)
- Match the institution to the case: TAI for cost-sensitive domestic matters, THAC or SIAC for international cases, JCAA when Japan-side enforcement is the priority
- Avoid pathological clauses — “resolved by arbitration” alone is not enough
- Use multi-tier clauses for JV/SHA contexts — negotiation → mediation → arbitration
- For Thai party resistance, TAI/THAC or a Bangkok seat often resolves the objection
Coming in Part 3 (Final): How technology is transforming dispute resolution — ODR, AI arbitration, and the ASEAN ODR Network.
For advice on arbitration clause drafting or dispute management in Thailand, please feel free to contact us. Thai law matters are handled in collaboration with JTJB International Lawyers’ Thai-qualified attorneys.
This article is for general informational purposes about Thailand’s legal system and does not constitute legal advice under Thai law. For specific matters, please consult a Thai-qualified legal professional. Our firm works in collaboration with JTJB International Lawyers’ Thai-qualified attorneys.