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

By John Formichella

john@fosrlaw.com

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.