Introduction: Why do administrative contracts matter?
In countries with a Dual Court System (e.g. France, Germany and Thailand) the type of courts are divided into: (1) the court which has the competent jurisdiction over disputes arising out of private matters and (2) the court which has the competent jurisdiction over disputes arising out of public matters.
Thus, prior to bringing an action to the court, an injured party that has suffered a breach of contract may need to consider which court has the competent jurisdiction over the contract.
Should your contract be considered as a matter which falls under the Administrative Court, you will need to file an action with the Administrative Court and various special legal effects will apply to your contract (see below).
In this article, we will address certain crucial issues in light of the dispute regarding the administrative contract in Thailand.
The Administrative Contract under Thai Law
The administrative contract is a contract with special characteristics. Your contract will be considered as an administrative contract when the following criteria are met.
I. Parties to the Administrative Contract
The administrative contract is a contract in which at least one party is an administrative agency or a person acting on behalf of the State (collectively, the “Administrative Party”). The administrative agencies include:
- the government organizations;
- the state enterprises which are established by virtue of the Act or Royal Decree;
- other state agencies, i.e., the public organization and independent administrative organization; and
- the agencies entrusted to exercise the administrative power or carry out administrative acts, i.e., the state-owned company operating the public services.
II. Characteristics of the Administrative Contract
The administrative contract is distinct from an ordinary contract, given that it is meant to allow an administrative agency to develop public services. Accordingly, an administrative contract must have an element of public service or administrative power. Some types of administrative contracts include:
- the concession contract;
- the public concession contract;
- the contract for the provision of public utilities;
- the contract for the exploitation of natural resources;
- the contract where the Administrative Party allows other partiesto operate or directly participate in operating public services; and
- the contract containing a term exhibiting a special characteristic of the State’s privilege so that the exercise of the State powers or provision of the administrative affairs which is a form of public service can be achieved.
Should the above two criteria be met, your contract will be characterized as an administrative contract. The Supreme Administrative Court of Thailand (the “Supreme Administrative Court”) has characterized various contracts as an administrative contract in its ruling, e.g., (1) the agreement of sale and purchase of transport helicopters concluded with the Royal Navy (Supreme Administrative Court Order No. 291/2560) and (2) the agreement of sale and installation of the computers concluded with the Deposit Protection Agency (Supreme Administrative Court Decision No. Or. 596/2560).
However, in some cases, even when one of the contractual parties was an Administrative Party, such contracts were not considered as administrative contracts since they bore no characteristics in relation to the public service or administrative power. For example, in Supreme Administrative Court Order No. 105/2549, the lease of the warehouse agreement concluded with Marketing Organization for Farmers was not considered as an administrative contract since the private party therein did not operate or directly participate in operating public services.
Significant Legal Effects of the Administrative Contract
The administrative contract has certain special legal effects which are based on a concept regarding the public services. They are as follows:
I. Power of the Administrative Party to unilaterally amend the contract
In the ordinary private contract regime, consent of the parties is required to amend a contract,
However, to carry out the public services, in some occasions, the Administrative Party may have to fine-tune the operation of public service in order to maintain the efficiency of public services in a dynamic society. Requiring consent of the private party to amend the administrative contract yields the opposite result. Hence, in such instances, the Administrative Party has the power to unilaterally amend the administrative contract without having to obtain consent of the private party.
Such power may be acquired by (1) stipulating contractual terms in the administrative contract or (2) the virtue of the law specifically governing certain issues, e.g., Section 68 Bis of Forest Act, B.E. 2484 (1941) which empowers the Administrative Party to, in certain causes, amend the concession area without having to obtain consent of the private party.
II. Termination of the Administrative Contract
In the ordinary private contract regime, a contract may be terminated by consent of the parties. A party may unilaterally terminate a contract only when, inter alia, the other party is in breach of the contract.
However, since the concept of an administrative contract is based on the public services, the termination of the contract can only be done when the precedents laid down by the Supreme Administrative Court are fulfilled. This is because the public services provided by the administrative agency must be equal, continual and adaptive. Hence, in order to maintain the continuity of the administrative contract, the contract can only be terminated in cases whereby:
- the purpose of the administrative contract is fulfilled;
- the parties to the administrative contract agree to terminate the administrative contract;
- the administrative contract is implicitly terminated, i.e., an occurrence of Force Majeure which causes the purpose of the administrative contract in vain;
- the court decides or orders that the administrative contract be terminated; and
- the Administrative Party unilaterally terminates the contract.
In cases other than the aforementioned, the administrative contract cannot be terminated, even in cases where the Administrative Party breaches the administrative contract. The Supreme Administrative Court confirms such principle, inter alia, in the Supreme Administrative Court Decision No. Or. 676/2554, in which it ruled that the private party could not invoke the fact that Department of Alternative Energy Development and Efficiency breached the administrative contract (a failure to pay remuneration) as a ground to terminate the administrative contract.
The Court which has jurisdiction over an Administrative Contract dispute
If a party wishes to initiate an action with regard to an ordinary private contract, he must file a case with the Courts of Justice.
However, if your contract is considered as an administrative contract, the Administrative Courts of Thailand (the “Administrative Courts”) will have jurisdiction over the administrative contract dispute.
Unlike the Courts of Justice, the Administrative Courts have only two levels, namely: (1) Administrative Courts of First Instance comprising Central Administrative Court and other 11 Regional Administrative Courts and (2) the Supreme Administrative Court.
The Procedure for an Administrative Contract case
Here are some significant procedures relating to an administrative contract case:
I. The limitation/prescription period
Under the Establishment of Administrative Courts and Administrative Courts Procedure, B.E. 2542 (1999), you have to file a case within 5 years from the date the cause of action is known or should have been known, but shall not be later than 10 years as from the date of such cause of action.
II. An inquisitorial system
The Administrative Courts adopt an inquisitorial system and have the power to inquire into facts not adduced by the parties. You will likely benefit from an inquisitorial system as the Administrative Courts may exercise its power to summon essential evidence to the case which may be in possession of the Administrative Party. The Courts may also conduct a trial and summon you to give a statement in cases where some issues adduced by you are unclear.
In general, there will be no witness examination in the Administrative Courts. The case will normally be conducted via submission of documents.
In practice, it normally takes 2 to 3 years until the decision is rendered in each level of the Administrative Courts, depending on the details of the case.
III. Provisional measures before the judgment
If you file a case with the Administrative Courts, you may apply for a provisional measure, i.e., a temporary order for a certain course of action, before delivery of the decision. An example of a provisional measure includes restraining the Administrative Party from repeating or continuing the breach of the administrative contract. Such an application may be submitted to the Administrative Courts at any time before the judgment is rendered. In order to succeed in your application, you will have to prove the following conditions:
- there is a ground to believe that the Administrative Party possibly breached the administrative contract;
- the Administrative Party intends to repeat or continue the breach of the administrative contract;
- you will be thenceforward sustain trouble and injury on account of the Administrative Party’s act; and
- the provisional measure requested will not constitute any barrier to administration of the State affairs or to public services.
In practice, despite a lack of a provision of the law, the Administrative Courts sometimes consider whether or not an injury is difficult to be remedied as well.
The arbitration of the Administrative Contract
Under the Thai Arbitration Act, B.E. 2545 (2002), the parties to the administrative contract may agree to settle disputes by arbitration and such an arbitration agreement shall be binding upon the parties. Thus, when there is an arbitration clause, parties must submit the case to arbitration rather than directly filing the case with the Administrative Courts.
Nonetheless, the approval of the Cabinet is required prior to including an arbitration clause in (1) the contract under the law on public-private partnership and (2) the concession contract granted by the State agency. In general, both types of contacts listed above are considered as administrative contracts. This was set out in a resolution issued by the Cabinet on July 14, 2015.
The Administrative Courts will have jurisdiction over the matters concerning the arbitration on the administrative contract, i.e., provisional measure, annulation of the arbitral award and enforcement of the arbitral award.
Need legal advice on Administrative Contracts?
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This article is written by Kosit Prasitveroj from LS Horizon and edited by Prin Laomanutsak and Seah Ern Xu from Asia Law Network.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.
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