Key Takeaways
- Japanese SMEs in Thailand commonly face disputes involving joint venture partners, unpaid receivables, employment, real estate, and IP infringement
- Thailand’s three-tier court system resembles Japan’s in structure, but foreign judgments cannot be enforced in Thailand — making arbitration critically important
- Arbitration awards are enforceable in 170+ countries via the New York Convention; Thai court judgments are not enforceable in Japan
- Dispute resolution clauses must be drafted at the contract stage — once a dispute arises, it is too late
Introduction
Business disputes can emerge at any stage of your Thailand operations — an unpaid invoice, a falling-out with a joint venture partner, a wrongful dismissal claim from a former employee. Knowing your options before a dispute occurs is one of the most valuable pieces of legal knowledge a Japan-based SME operating in Thailand can have.
This three-part series covers dispute resolution in Thailand. Part 1 provides a foundational overview: the types of disputes Japanese companies commonly face, how Thailand’s court system works, and the key features of arbitration and mediation. Parts 2 and 3 will cover arbitration clause drafting and the future of ODR and AI-driven dispute resolution.
1. What Kinds of Disputes Do Japanese Companies Face in Thailand?
Common Dispute Types
① Joint Venture Partner Disputes Because Thailand’s Foreign Business Act (FBA) restricts foreign ownership in many sectors, Japanese companies often enter Thailand through joint ventures with Thai partners. Disputes over dividend policy, management direction, and executive compensation are not uncommon. For a deeper discussion of JV structures and shareholder agreements, see Entry Structure Series Part 5: JVs and Shareholder Agreements.
② Unpaid Receivables and Contract Breaches Difficulty collecting accounts receivable is one of the most frequently reported issues for foreign companies operating in Thailand. Contracts are often insufficiently documented, particularly with smaller Thai counterparties.
③ Employment Disputes Thailand’s labor laws provide strong employee protections. Terminating an employee without legally recognized cause can result in significant severance obligations. Disputes over unfair dismissal and unpaid wages are common.
④ Real Estate and Construction Disputes Disputes relating to factory leases, construction contracts, and land use arise regularly. Foreign nationals cannot own land in Thailand, and unclear rights arrangements create ongoing risk.
⑤ Intellectual Property Infringement Trademark infringement and product counterfeiting remain significant concerns for Japanese companies with brand presence in Thailand.
A Note on Cultural Differences
In Japan, the default response to a business dispute is often patient negotiation. Thailand also has a relationship-oriented business culture, but the legal framework for formal dispute resolution differs significantly from Japan. Understanding this difference at the contracting stage is essential.
2. Thailand’s Court System
Three-Tier Structure
Thailand operates a three-tier court system similar in structure to Japan’s.
| Level | Court |
|---|---|
| First Instance | Courts of First Instance |
| Second Instance | Court of Appeals |
| Third Instance | Supreme Court (Dika Court) |
Specialized Courts
Thailand has established specialized courts for certain categories of disputes:
| Court | Jurisdiction |
|---|---|
| Central IP & International Trade Court (IP&IT Court) | Trademarks, patents, copyright, international trade |
| Labour Court | Employment disputes |
| Central Bankruptcy Court | Insolvency and rehabilitation |
| Tax Court | Tax disputes (criminal jurisdiction expanded in 2025) |
For IP infringement or complex international trade matters, the IP&IT Court provides access to judges with relevant specialized knowledge.
Civil Law System — Similar to Japan
Thailand follows the Civil Law tradition, relying on codified statutes rather than case law. This is structurally similar to Japan’s legal system. Key points of similarity include the absence of a jury system and the absence of US-style discovery (compelled document disclosure).
As in Japan, judicial precedents are not formally binding under the doctrine of stare decisis, meaning outcomes can vary even in factually similar cases.
Timeframes and Costs
Thai court proceedings tend to be lengthy:
- First instance: 1–2+ years
- Appeals: An additional 1–2+ years per level
- Costs: Attorney fees plus court filing fees (calculated as a percentage of the claim amount)
Critical Issue: Foreign Judgment Enforcement
A Japanese court judgment cannot be enforced in Thailand as a matter of course. Thailand has no mutual enforcement treaty with Japan, and Thai law does not provide a mechanism for automatic recognition of foreign judgments.
This is the primary reason arbitration is so important for Japanese companies operating in Thailand. Arbitral awards, unlike court judgments, are enforceable internationally under the New York Convention.
3. Arbitration
Thailand’s Arbitration Act
Thailand’s arbitration regime is governed by the Arbitration Act B.E. 2545 (2002), which was modeled on the 1985 UNCITRAL Model Law. Japan enacted its own Arbitration Act in 2003, also based on the UNCITRAL Model Law — meaning the two countries’ arbitration frameworks are structurally similar.
Thailand’s Arbitration Act applies to both domestic and international arbitration without distinction.
The New York Convention — The Foundation of International Enforcement
Thailand acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 1959, without reservations. Japan is also a signatory. This means:
- An arbitral award rendered in Thailand can be enforced in Japan
- An arbitral award rendered in Japan can be enforced in Thailand
Key Point: A Thai court judgment cannot be enforced in Japan. A Thai arbitral award can. This is the decisive advantage of arbitration.
Thailand’s Main Arbitration Institutions
TAI (Thai Arbitration Institute) TAI operates under the supervision of the Thai judiciary and handles the largest number of arbitration cases in Thailand. In August 2025, TAI established the TAI Mediation Center (TAI-MC), introducing a Med-Arb (mediation-then-arbitration) model for combined dispute resolution.
THAC (Thailand Arbitration Center) THAC is an independent institution oriented toward international cases. Its rules and procedures align more closely with international arbitration standards, making it more accessible to foreign parties.
International Arbitration Institutions SIAC (Singapore International Arbitration Centre), JCAA (Japan Commercial Arbitration Association), and ICC (International Chamber of Commerce) are also available options. These are discussed in detail in Part 2: Drafting Arbitration Clauses and Choosing an Institution.
Advantages and Disadvantages of Arbitration
| Factor | Details |
|---|---|
| Advantage: International enforcement | Enforceable in 170+ countries under the New York Convention |
| Advantage: Confidentiality | Proceedings and awards are not public (unlike court judgments) |
| Advantage: Arbitrator expertise | Parties can select arbitrators with relevant industry expertise |
| Advantage: Procedural flexibility | Parties choose the language, seat, and governing law |
| Disadvantage: Cost | Arbitrator fees add to total costs; less suitable for small claims |
| Disadvantage: No appeal | Arbitral awards are generally final and cannot be appealed |
| Disadvantage: Agreement required | Arbitration is only available if both parties agreed to it in advance |
4. Mediation
Thailand’s Mediation Act B.E. 2562 (2019)
Thailand enacted a dedicated Mediation Act in 2019, establishing a legal framework for both court-annexed and private mediation. Mediated settlement agreements now carry defined legal effect. This is conceptually similar to Japan’s ADR Act (2004), which established a certification framework for alternative dispute resolution providers.
Court-Annexed vs. Private Mediation
- Court-annexed mediation: After a case is filed, the court may recommend mediation. A court-appointed mediator facilitates the process.
- Private mediation: Parties agree to use an outside mediator or mediation institution before or after a dispute arises. TAI-MC (established August 2025) is one such option.
TAI-MC and the Med-Arb Model
The newly established TAI Mediation Center (TAI-MC) introduced a Med-Arb model: the parties first attempt to resolve the dispute through mediation, and if mediation fails, the matter proceeds to arbitration. Crucially, the mediator and arbitrator are different individuals, preserving neutrality.
The Singapore Convention on Mediation
The Singapore Convention on Mediation (2019) is an international treaty designed to give cross-border enforcement effect to settlement agreements reached through international commercial mediation — playing a role analogous to the New York Convention for arbitration.
- Japan: Signed in 2020, not yet ratified
- Thailand: Not yet signed or ratified
If Thailand ratifies this convention, mediated settlements will become a far more practical option for international commercial disputes. This trend is discussed further in Part 3: ODR, AI, and the Future of Dispute Resolution.
Why Mediation Matters for Japanese Companies
Mediation is particularly well-suited to:
- Preserving ongoing relationships: Where the counterparty is a long-term partner or JV co-investor, preserving the relationship may be more important than “winning”
- Speed and cost: Mediation is generally faster and less expensive than arbitration or litigation
- Cultural fit: Thailand’s relationship-oriented business culture and emphasis on “face” make mediation a culturally compatible process
5. Comparison: Litigation vs. Arbitration vs. Mediation
| Factor | Litigation | Arbitration | Mediation |
|---|---|---|---|
| Duration | Long (years) | Medium (1–2 years) | Short (weeks to months) |
| Cost | Medium | Higher (arbitrator fees) | Lower |
| Confidentiality | Low (public) | High (private) | High (private) |
| International enforcement | Low (no mutual treaty) | High (New York Convention) | Limited (for now) |
| Impact on relationship | Adversarial | Adversarial | Preserving/restorative |
| Appeal | Yes (three tiers) | Generally no | N/A (proceed to other method if failed) |
| Best suited for | Complex disputes on facts/law | International commercial, large disputes | Ongoing relationships, priority on speed |
6. Practical Tips — What to Do at the Contracting Stage
The Dispute Resolution Clause Is Everything
The most important practical point: always include a dispute resolution clause in your contracts. Without one, Thai courts will have default jurisdiction — and the foreign judgment enforcement problem described above applies in full.
Multi-Tier Dispute Resolution Clauses
A well-designed clause might look like this:
① Good-faith negotiation between the parties (e.g., 30 days) ② If unresolved, mediation (e.g., through TAI-MC) ③ If mediation fails, arbitration (e.g., under TAI or THAC rules)
This multi-tier structure keeps costs proportionate to the severity of the dispute and preserves the relationship in early stages. In JV shareholder agreements (SHAs), it pairs well with deadlock provisions — see Entry Structure Series Part 5 for details.
Five Elements Every Arbitration Clause Needs
- Institution (TAI / THAC / SIAC / JCAA, etc.)
- Seat of arbitration (Bangkok / Singapore / Tokyo, etc.)
- Governing law (Thai law / Japanese law, etc.)
- Number of arbitrators (1 or 3)
- Language of proceedings (English / Thai / Japanese, etc.)
The specific drafting of arbitration clauses — including model clause examples — is covered in Part 2: Drafting Arbitration Clauses and Choosing an Institution.
Summary
When a dispute arises in Thailand, your options are litigation, arbitration, or mediation. Given that foreign court judgments cannot be enforced in Thailand, arbitration — with its New York Convention enforcement power — is the most important tool available to Japanese companies.
The best way to protect yourself is to design your dispute resolution strategy at the contracting stage. A well-drafted clause costs very little; a poorly drafted one can cost everything.
See also: Thailand’s FBA Reform and What It Means for Japanese Companies — changes to the FBA framework may affect how you structure your operations and, by extension, how you design dispute resolution mechanisms.
Coming in Part 2: How to draft arbitration clauses, and a practical comparison of TAI, THAC, SIAC, and JCAA — with model clause language.
For advice on dispute resolution clause drafting or managing disputes with Thai counterparties, 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.