Thailand / April 4 2024
The Thai Supreme Court, Decision No. 7150/2561, has issued an important decision clarifying the scope of arbitral authority in construction contract disputes. The case involved a contractor’s challenges to an arbitration award over incomplete work and claims for additional compensation on a large development project.
The key facts are that in August 2011, the contractor entered into a 500 million baht subcontract to construct and install a decorative water fountain feature and landscape lighting for the convention center project. As work progressed, the contractor alleged there were oral agreements to perform substantial additional work upgrading the golf course facilities.
However, in March 2013 before this additional golf work was fully rendered, the project owner terminated the subcontract citing deficiencies in the contractor’s original fountain and lighting work scope. The parties then proceeded to arbitration as required under their contract’s dispute resolution clause.
The arbitration tribunal issued an award holding the contractor liable for 588,113.82 baht in damages, representing costs the owner incurred to remedy deficient work after termination. The tribunal rejected the contractor’s claim for separate compensation for the additional golf course work, finding there was no written agreement as contractually required to expand the work scope.
On appeal, the Supreme Court made the following key rulings:
The arbitrators properly exercised their jurisdiction over disputes concerning the admitted water fountain and lighting work scope under the subcontract’s broad arbitration clause. However, the tribunal exceeded its authority by deciding the contractor’s claim for the additional golf course work, which required a separate written agreement to incorporate it into the arbitrable subcontract per legal requirements. This portion of the award was annulled as violating Thai arbitration law’s public policy grounds.
The intellectual property rights claim over the fountain’s logo design was correctly rejected as already compensated under the design services fees in the original subcontract pricing. The fact that the contract was terminated did not void the arbitration clause, permitting the tribunal to award damages relating to deficient completed work despite the termination.
The Supreme Court therefore upheld the core findings while annulling the award only as to the unincorporated additional golf work claim.
Key Takeaway:
This Supreme Court decision provides useful guidance on grounds for Thai courts to annul arbitral awards and the need for arbitral tribunals to carefully examine whether alleged additional work was properly incorporated in writing into the underlying arbitration agreement’s scope. Arbitrators exceed their jurisdiction by deciding claims over work that was not validly added to the contracted scope through proper documentation, which can result in awards being annulled on public policy grounds under Thai arbitration law. Clear documentation of any change orders authorizing extra work is crucial for the arbitrability of claims seeking compensation for that additional scope.
