Thai and Australian Foreign Business Law and the Impact of the Thailand Australia FTA

• Author: Nucharee Nuchkoom Smith
• Pages: 22-32

JICLT

Journal of International Commercial Law and Technology

Vol. 10, No.1 (2015)

22

Thai and Australian Foreign Business Law and the

Impact of the Thailand Australia FTA

Nucharee Nuchkoom Smith

Abstract: When Thailand and Australia entered into a Free Trade Agreement in

2005 the public focus was largely on the trade in goods an d the benefits that would accrue

to each country with a more open market. What appears to have been largely neglected i s

that the Thailand Australia Free Trade Agreement also covers trade in services, foreign

direct investment including commercial enterprises, and the movement of per sons. This

paper describes th e foreign business laws that operate in each jurisdiction. It will be seen

that those of Thailand are much more r estrictive of foreign entry than those of Austr alia.

Thailand provided additional concessions to Australian companies allowing them to operate

in selected sectors such as consulting services, communications and education. Australia in

its response reiterated that Australia was already a largely open market and Thailand was

welcome to establish businesses and invest in Australia subject to the limited r estrictions

that apply to all foreign investors. Both countries agreed to facilitate the m ovement of

persons associated with businesses established in the country of the other party. It is clear

that Australia was the major beneficiary from these initiatives. This needs to be balanced

against the fact that Australia had granted Thailand major concessions in opening its market

to tariff and duty free entry of most Thai goods.

1. Introduction

When laypersons think of a free trade agreement they focus immediately on the impact on the trade in

goods. If it is a developing country there may also be some discussion of foreign direct investment (FDI).

There would be much l ess focus on trade in services. This appears to be the case with the Thailand

Australia Free Trade Agreement (TAFTA) which entered into force in 2005. What appears to have been

largely neglected is that TAFTA also covers trade in services, foreign direct investment including

commercial enterprises and the movement of persons. This paper focusses on these aspects.

As will be seen, the approaches adopted by Thailand and Australia to the regulation of foreign

business are quite different. As result of the TAFTA negotiations, Thailand granted concessions to

Australia in relation to a commercial presence in Thailand and in the movement of key personnel between

Australia and Thailand. Australia’s response was to reiterate its fairly liberal foreign regime but offered

concessions in relation to movement of persons.

2. Thai Foreign Business Law

Foreign businesses in Thailand are governed by the Foreign Business Act B.E.2542 (1999).1 This Act was

proclaimed on 4th March 2000 replacing an earlier Act which was seen as inadequate to meet Thailand’s

current legal obligations as a member of th e WTO an d its commitments under GATT. Th e Act requires

foreigners to obtain a permit before they can operate their business in Thailand.

Section 4 of the Act2 identifies a foreigner as a natural person who is not of Thai nationality; a

juristic person which is not registered in Thailand; and a juristic person which is registered in Thailand

and in which 50% or more of the shares ar e held by a non-Thai or by a juristic person which is n ot

registered in Thailand or 50% or more of the capital was similarly invested. Finally, it is a foreign

business if it is a limited partnership or partnership which has as its registered manager a natural person

who is not of Thai nationality.

1 Foreign Business Act also called Alien Business Act BE 2542 (1999) at http://www.thailawonline.com/en/thai-

laws/laws-of-thailand/96-foreign-business-act-1999.html accessed 15 October 2011.

2 Ibid.