Wednesday, February 24, 2016

Class Action Lawsuits: Thailand

Although this is relatively new statute,  you may want to read this primer on the new Class Action Law here:

Tuesday, February 2, 2016

Data Protection: Thailand

By John Formichella

While more countries are working towards more comprehensive personal data protection laws, Thailand so far has not enacted any specific statutory law governing the handling and protection of personal data. With the issue of privacy and data protection becoming a more complex and robust discussion with advances in technology, data leaks, etc., and the fact that data knows no boundaries, it is likely that Thai authorities will be addressing this topic sooner rather than later. 

General principles dealing with the protection of personal data are currently scattered over many laws (including, amongst others, the Constitution of the Kingdom of Thailand, the Civil & Commercial Code, the Penal Code, the Telecommunication Business Act, the Financial Institutions Act, and the National Health Security Act). Such laws do not offer comprehensive protection and apply only to specific situations and/or industries. Further, the Official Information Act sets out restrictions on the collection, use or disclosure of personal data maintained by the government only.

Without clear regulations in place, there is much uncertainty among private businesses on their obligations with respect to handling personal data of their customers, clients, employees, etc.

Aiming to end this situation a Personal Data Protection Bill was drawn up several years ago, but so far still has not been passed into law. With the Cabinet now having approved this bill in principle, there is speculation that Thailand will one day have proper regulations in place governing this important issue. However, it is still unclear if and when the proposed bill will eventually be enacted as binding law.

If the Personal Data Protection Bill became law in the form as it currently is, a data controller would need to comply with the following:

a)      Unless permitted by law, the collection, usage or disclosure of personal data without the consent from the data subject is prohibited;

b)       A data controller must inform the data subject on the purpose for which the respective personal data is collected and obtain the data subject’s consent. Collected personal data can be used or disclosed for the approved purposes only;

c)      If a data controller intends to use or disclose personal data beyond the purpose for which consent has been obtained, he will need to inform the data subject and obtain additional consent;

d)      The collection of sensitive data (e.g. data related to sexual conduct, criminal history, health, national origin, race, political opinions or religious beliefs) is only permitted within the strict limitations of the law;

e)    Except where the data subject expressly consented otherwise, any processing of personal data for marketing purposes is not permitted;

f)      Measures must be implemented to ensure that collected personal data is protected against loss, alteration and modification;

g)     A Personal Data Protection Committee would be established and hear any claim lodged by a data subject concerning the abuse of personal data; and 

h)      Violations would be punishable under criminal law and permit the data subject to claim for damages.

This article contains information in summary form and shall be understood as general information only. It is not to be understood as and is not to be relied upon as legal advice.

© John P. Formichella. All rights reserved.

Brief Intro: U.S.-Thai Treaty of Amity

By John Formichella

Since 1968, the Treaty of Amity & Economic Relations Between the Kingdom of Thailand & the United States of America (the “Treaty”) has afforded U.S. nationals and corporations exemptions to Thailand’s Foreign Business Act, which restricts the business activities of foreigners.

We start first with Foreign Business Act, then onto the Treaty, as a basis of understanding the Treaty's effect on the FBA. 

I.             The Foreign Business Act

The Foreign Business Act B.E. 2542 (1999) (the “FBA”) prohibits and restricts foreign natural and juristic persons from engaging in various businesses, which are listed in three schedules to the FBA. Schedule 3 is very broad and covers most economic activity with some narrow exceptions. A foreign juristic person is either a legal entity incorporated outside Thailand or a juristic person incorporated in Thailand of which foreign natural persons or foreign-incorporated entities hold more than 50% of the value of its capital. The result is that if a business falls under the prohibitions of the FBA, foreign nationals may hold up to but not exceeding 49% of the business unless the business qualifies for a special license. One such license is a Foreign Business Certificate under the Treaty.

Treaty of Amity & Economic Relations Between the Kingdom of Thailand & the United States of America

The Treaty arose out of a desire to promote the friendly relations that traditionally existed between the Kingdom of Thailand and the United States of America. Under the Treaty, U.S. nationals and corporations that qualify for privileges under the provisions of the Treaty are not considered “aliens” under Thailand’s Foreign Business Act (Proclamation of the Revolutionary Junta, No. 281, et seq., 1972).

A.        Privileges for Americans. Under the Treaty, any U.S. person or entity, a branch office of a U.S. company or a U.S.-owned Thai company is permitted to do almost anything a Thai company is permitted to do, except:

(i)         own land;

(ii)        engage in the telecommunications business;

(iii)       engage in the transportation business;

(iv)       engage in fiduciary functions;

(v)        engage in the banking business by accepting deposits;

(vi)       exploit land or other natural resources; and

(vii)      engage in the domestic trade of domestically produced agricultural products.

B.         Prerequisites for Registration under the Treaty. A U.S. company or U.S.-owned Thai company seeking to obtain protection under the Treaty must comply with the following requirements:

(i)         the company must be established under Thai law or U.S. law;

(ii)        more than 50% of the company’s shares must be owned by U.S. nationals;

(iii)       the majority of the shareholders by number must be U.S. nationals or U.S. entities (juristic                     persons);

(iv)       more than half of the authorized directors of the company must be either U.S. and/or Thai                     nationals;

(v)        if any one of the authorized directors is authorized to sign alone on behalf of the company, such             authorized director must be either a U.S. or Thai national and not be a third country national;                 and,

(vi)       if more than one director is authorized to sign on behalf of the company, the majority of such                 authorized directors must be either U.S. or Thai nationals and not a third country national.

This article contains information in summary form and shall be understood as general information only. It is not to be understood as and is not to be relied upon as legal advice.

© John P. Formichella. All rights reserved.

Thailand’s Licensing Facilitation Act

By John Formichella 

The Licensing Facilitation Act B.E. 2558 (2015) (the “Act”) was introduced in July in order to simplify the bureaucratic systems that control how licenses, permits, registrations and other notifications are granted under Thai law. The Act represents a key step in the fight against government agency inefficiency and corruption, providing for greater efficiency, accountability, continuity, public confidence, and transparency.

For more information, please see the following:

Primer to Legal Underpinnings of Courts and Thai Business Organizations

By John Formichella

Thailand’s body of law is based on civil law principles and systems, although aspects of common law are incorporated by custom. For example, although judicial precedent does not apply as it does in common law countries, in practice Supreme Court decisions are considered highly persuasive and followed by the lower courts. 

Thailand’s civil and criminal court system is based around the Court of Justice, and incorporates the Supreme Court, the Courts of First Instance (which are located in all Provinces, and include the Specialized Courts in Bangkok), and the Court of Appeal. Regional Courts of Appeal hear cases from across Thailand and either endorse or revise the decisions of the lower courts. The Administrative Courts, meanwhile, settle disputes between the private sector, Government, and State agencies.

Alternative dispute resolution practices are a key component of the country’s legal system. After the 1987 Arbitration Law was amended in 2002, the Thai Arbitration Institute (“TAI”) became the Kingdom’s central arbitration body. Thailand was among the first to adopt the 1958 New York Convention on the Uniform Enforcement of Arbitral Awards. As a signatory, awards made in other signatories’ jurisdictions may be enforced in Thailand; foreign judicial judgments, however, may not be enforced as Thailand is not a party to a treaty to implement such enforcement, and a separate action will need to be initiated in this regard. However, not all is lost with a foreign judgement as foreign judgments may be used as evidence in Thai courts.

Business Organizations

There are several types of business organization in Thailand, with varying governance rules, and tax applications. Below is a brief description of the main types:

Public & Private Limited Companies

A Public Limited Company is formed in order to offer shares to the general public and is taxed as an individual juristic entity. Individual shareholders pay tax on their earnings, while foreign corporate shareholders pay tax on all dividends. Public limited companies must have a minimum of 15 persons.

A Private Limited Company, meanwhile, must have a minimum of 3 persons. Taxed as a juristic entity, capital is divided into equal par value shares.

Registered & Unregistered Ordinary Partnerships

In a Registered Ordinary Partnership, all particulars must be submitted to the Thai Ministry of Commerce, e.g. company objectives, partnership contracts, etc. Profits are subject to two levels of taxation, as individual profits are also deemed to be taxable.

In an Unregistered Ordinary Partnership, 2 or more persons conduct a business without being formally registered. Such partners are taxed as natural persons, but each needs to file their own personal tax return.

Branch & Representative Offices

A Branch Office conducts business on behalf of a parent company based abroad. Such company must remit a minimum of THB 3 million of working capital in Thailand. A Branch Office is considered a juristic person for tax purposes.

A Representative Office differs from a Branch Office in that it doesn’t engage in revenue-earning activities in Thailand; thus, no taxes are due, except in certain cases.

Joint Ventures & Sole Proprietorships

A Joint Venture is not considered a legal entity under Thailand’s Civil and Commercial Code. Any agreement between parties is valid only so long as it adheres to Thai law. Normally Joint Ventures are implemented via a Private Limited Company vehicle, and therefore income is subject to corporate tax.

Sole proprietors, meanwhile, can participate in any type of business activity, except those regulated by the Thai government. Taxation is calculated on a progressive personal tax rate.

Consideration under the Foreign Business Act

The Foreign Business Act (“FBA”) is a key law in the regulation of foreign business operations in Thailand. Indeed, for all foreign direct investment in Thailand, the FBA is a starting point of consideration. It imposes shareholding restrictions on a number of different types of business, which can be divided as follows:

• Businesses not permitted for foreigners to operate, e.g. certain types of media business (running a TV station, radio broadcasting), trading land, extracting Thai herbs, etc.;

• Businesses involving national security (including firearms maintenance and sales), businesses affecting natural resources or the environment, or arts and culture, and domestic land waterway or air transportation (including domestic airline businesses); and

• Businesses in which Thai nationals are not yet ready to compete, such as legal or accounting services, retailing where the total minimum capital is less than THB 100 million or where the minimum capital of each shop is less than THB 20 million, and wholesaling where the minimum capital of each shop is less than THB 100 million. Other types of business under this category include rice milling and flour production from rice and farm produce.

The last two types of business mentioned above are permitted for foreigners to operate on a case-by-case basis by the Ministry of Commerce.

According to the FBA, majority foreign ownership of a company means that non-Thai juristic persons and/or non-Thai nationals are the registered owners of more than 50% of a company’s share capital. Foreign ownership under the FBA is thus determined not by voting or dividend rights, but by share ownership.

Should foreign investors find the FBA an impediment to investing in Thailand, there are some exceptions to the FBA such as Thailand's Board of Investment, a Foreign Business License, or status under the Treaty of Amity and Economic Relations between Thailand and the United States. For more information on the Treaty of Amity, see the following:

This article contains information in summary form and shall be understood as general information only. It is not to be understood as and is not to be relied upon as legal advice.

© 2015 John P. Formichella. All rights reserved.

Monday, February 1, 2016

Licensing for E-Commerce and Direct Marketing in Thailand

By John Formichella

Business-to-Consumer (“B2C”) commerce has grown exponentially over the past 10 years in Thailand as a result of the utilization of new digital platforms. The sales volume of B2C electronic commerce (“E-commerce”) doubled from 63,425 Million Baht in 2007 to 121,392 Million Baht in 2012, which is 47.75 per cent growth. In 2013, B2C businesses accounted for 79.7 per cent of total E-commerce business.

Internet access has created opportunities for SMEs to enter new markets at a considerably lower cost than establishing a typical commercial presence. This is evidenced by the fact that in 2013 more than 50 per cent of E-commerce entrepreneurs were small enterprises; nearly 40 per cent of which operated exclusively on the Internet. For large enterprises, E-commerce has become a key tool in the expansion of market share by providing the ability to connect with individual customers, whilst also enhancing competitiveness and driving innovation. With the rapid expansion of the Internet and development of E-commerce goods and services, entrepreneurs can now communicate directly with Internet users/consumers with purchasing power, and can access E-commerce websites anytime and from everywhere. E-commerce businesses now offer ever-more sophisticated products and almost every kind of service. As with any commercial endeavor, regulations are soon to follow based on a number of variables, including claims of fraud or violation of consumer laws.

The Thai government is increasingly aware of how E-commerce is impacting consumers and the economy. In response to the emergence of E-commerce, in 2010 Thailand’s Ministry of Commerce (“MOC”), via Notification on Commercial Registration (No. 11) B. E. 2553 (2010) under the Commercial Registration Act B. E. 2499 (1956), started requiring businesses involved in the sale of goods and services by electronic media – specifically platforms open to users to offer their products or services – to register with the Department of Business Development (“DBD”). An entrepreneur is required to register his/her business with the DBD within thirty (30) days from the start of business. Late registration entails a 2,000 Baht fine as well as a continuing fine of 100 Baht per day until compliant.

In addition, the MOC recently amended its policies to make registration of “Direct Marketing” businesses under the Direct Sales & Direct Marketing Act B. E. 2545 (2002) (“Act”) a prerequisite to operating an E-commerce business. Under the Act, an entrepreneur whose business involves marketing goods or services by means of data communication “directly” to consumers, and whose goods or services are expected to be purchased by and delivered to consumers via online mechanisms (such as payment gateways and delivery ordering), must now register with the Office of the Consumer Protection Board (“OCPB”). The scope of the Act affects vendors of online goods and services selling directly to consumers; the Act does not apply if the activity is limited to advertising goods or services online for promotional purposes. Failure to register a Direct Marketing business with the OCPB incurs criminal liability of one (1) year imprisonment and/or a 100,000 Baht fine; additionally, a fine not exceeding 10,000 Baht per day will also be levied until registration is complete.

From a public policy point of view, the above-mentioned requirements can be seen as part of wider government measures to enhance Thailand's standing in the digital economy. Measures are intended to instill trust in the markets by imposing certain responsibilities on E-commerce businesses, especially in terms of being able to identify owners of E-Commerce businesses via registration obligations, and greater reliability in relation to electronic transactions. A DBD-registered E-commerce business may also apply for “DBD Verified” and “DBD Registered” trust marks from the DBD as certification of its credibility to gain consumers’ confidence.

Further, the Thai government – by way of various other laws and regulations – affords protection to consumers and businesses who engage in E-commerce, including the Electronic Transactions Act (which, among other things, provides safety measures regarding electronic signatures), the Computer Crimes Act and Offences Re: Electronic Payment Cards in the Thai Criminal Code (which provide protections against economic crime and fraud), and consumer protection laws such as the Direct Sales & Direct Marketing Act (which aims to directly protect consumers).

In summary, Direct Marketing business registration and E-commerce business registration are both components of a larger legal infrastructure established by the Thai government to boost public confidence, and provide enhanced consumer protection measures. For foreign investors, such infrastructure is a clear signal of Thailand’s readiness to become a secure E-commerce market and support digital businesses.

This article contains information in summary form and shall be understood as general information only. It is not to be understood as and is not to be relied upon as legal advice.

© John P. Formichella. All rights reserved.

Using Drones in Thailand

By John Formichella

The Thai Ministry of Transportation has issued a notification categorizing Externally Piloted Aircraft (“Drones”) into two groups depending on their purpose of use:

(1)  Drones for the purpose of recreation (e.g. as a hobby, entertainment or sport);      and,

(2)  Drones for purposes other than those specified in (1) above as follows:

      i)    reporting on news/traffic;
      ii)   photography/filming;
      iii)   research and development of aircraft; and
      iv)  other purposes.

The maximum permitted drone weight for both the above categories is 25 kg.

The Ministry of Transportation’s new Notification on the Rules to Apply for a License and Conditions to Control and Launch Unmanned Aerial Vehicles in the type of Externally Piloted Aircraft B.E. 2558 (2015) (“Notification”) became effective on 28 August 2015, and imposes tighter controls on the launch and control of unmanned aerial vehicles in Thailand.

Under the Notification, drone users are required to apply for a license to launch and control drones with the Ministry of Transportation, must be over 20 years old (except drones used for recreation under 2 kg in weight, where users must be over 18 years old), and must never have been imprisoned for drugs or customs related offences. Registration with the Director-General of the Civil Aviation Department is also required.

Registered controllers must then comply with all provisions specified in the Notification, including pre-launch and flying restrictions for the purposes of safety and privacy, restrictions concerning areas of use as stated in the Aeronautical Information Thailand Publication, restrictions concerning hours of use, and other requirements such as keeping a minimum horizontal distance of at least 50 meters (150 feet) between drones and people, others vehicles and buildings.

The Director-General has the authority to grant permission to comply with different flying requirements when requested to do so in writing by registered controllers.

Operation of drones above 25 kg in weight (regardless of purpose) requires permission from the Director-General and is assessed on a case-by-case basis. Such drones may only be launched and controlled after written permission from the Minister of Transport has been obtained.

This article contains information in summary form and shall be understood as general information only. It is not to be understood as and is not to be relied upon as legal advice.

© John P. Formichella. All rights reserved.

Legal Framework of Employer/Employee Relations: Thailand

By John P. Formichella/Suchart Meesomboonpoonsuk

Blumenthal Richter & Sumet

Fundamental labour law in Thailand is governed by basic law: the Civil Commercial Code, the Labour Protection Law, the Labour Relations Law, the Act Establishing the Labour Court and Labour Procedure, Social Security Law, and Workmen’s Compensation Law.

A. Civil and Commercial Code

Title VI: Hire of Services of The Civil and Commercial Code provides general rights and obligations of the relationship between an employer and employee pursuant to the employment contract, remuneration, transfers of contractual rights, termination of the contract, etc.

B. Labour Protection Act

The Labour Protection Act, B.E. 2541 (the “Act”) prescribes minimum working standards for the purpose of protecting employees against exploitation by employers. The Act includes provisions for general labour protection, protection for children and women, minimum remuneration, wage bond, severance pay, welfare and safety at work, employees welfare fund and labour inspectors.

C. Labour Relations Law

The Labour Relations Act, B.E. 2518 (the “Labour Relations Act”) governs working relations to promote a good understanding between employers and employees. The provisions cover collective agreements between employers and employees on the rights and duties of workers, the settlement of the labour disputes, lay-off and strike, organizations of the employers and the employees.

D. Labour Court and Labour Procedure Law

The Act Establishing the Labour Court and Labour Procedure, B.E. 2518 establishes labour courts as a forum for actions on disputes under employment agreements, collective agreements on working conditions, complains under the Labour Protection or Labour Relations Laws, etc. This Act also establishes legal procedures for actions in these courts.

E. Social Security Law

The Social Security Act, B.E. 2533 establishes a system of labour welfare measures for the majority of Thai workers. Employers, Employees, (self-employed persons will also be able to join in the fund once implementing regulations have been issued.) and the government are all required to contribute to the Social Security Fund (the “Fund”) at the rates and in the circumstances prescribed in the Act. Employees and self-employed persons who participate in the Fund will be entitled to compensation in the event of injury, illness or death which is not related to work, childbirth, or disability. The Social Security Office is responsible for the administration of the Fund.

F. Workmen’s Compensation Law

The Workmen’s Compensation Fund was establishes under the Workmen’s Compensation Act, B.E. 2537 to ensure that proper compensation will be paid to employees when the employees suffer from injury, sickness or die as the result of their work or from diseases resulting from the nature or conditions of the work or of such disease arising from the work as the Ministry of Interior may prescribe. This objective is accomplished by prescribing employers to enroll and make contributions to the Workmen’s Compensation Fund and by having the Department of Labour Protection and Social Welfare pay the above compensation, which employers are obligated to pay under the labour protection law, instead of the employers.

In addition to the above-mentioned laws, there are the Provident Fund Act, B.E. 2530, the Employment Provision and Employment Seekers Protection Act, B.E. 2537, the Ministerial Regulations and the Notification issued from time to time by the Ministry of Labour and Social Welfare.

The above should is not intended to be legal advice and should not be relied upon as legal advice accordingly.

© John P. Formichella, 2016 All Rights Reserved