SRPP Publication l 19 May 2021
Passawan Navanithikul (Founding Partner) and Viparvee Chaemchaeng (Associate)
Introduction to Thailand Aviation Law (Part II)
Litigation and Dispute Resolution
Availability of rights of detention in relation to aircraft and unpaid debts
If a creditor possesses an aircraft, it may retain such aircraft until all obligations (which must be related to the aircraft) have been performed by the debtor.
If an aircraft registrant fails to pay any fees under the Air Navigation Act, the competent official may retain such aircraft or suspend the cabin crew to use such aircraft until all fees have been paid.
A regime of self-help - Availability of a lessor or a financier of an aircraft to reacquire possession of the aircraft or enforce any of its rights under the lease/finance agreement
Under Thai law, there is no concept of self-help to facilitate the lessor or financier to repossess its aircraft. If the underlying agreement is terminated and the lessee fails to comply with a demand to return the aircraft, the lessor/financier must submit a claim to the court in order for the court to order that the aircraft be returned to the lessor/financier.
An alternative is the lessor may submit a deregistration of the Certificate of Registration application together with the application to export the aircraft to the CAAT. If the CAAT determines that the termination of the underlying agreement is sound and has a legal basis, it would approve the deregistration and the lessor may repossess the aircraft under CAAT Regulation No. 23 on Application of Registration, Acceptance of Registration and De-registration of Aircraft.
Generally, there is no specific court to which aviation disputes are required to be submitted. The court which has jurisdiction over the dispute is conditioned upon the substance of the dispute, i.e., whether it is civil, criminal, or administrative in nature. For example, if there is a dispute between a state authority (e.g., the CAAT or DOA) and an air operator, the administrative court will have jurisdiction. With respect to civil and criminal cases, the Civil Court and Criminal Court would have jurisdiction respectively.
Service requirements for the service of court proceedings
The notice of court proceedings must be delivered to the domicile of the relevant party, regardless of whether or not their domicile is in Thailand.
Types of remedy granted by the courts or arbitral tribunal
During the court proceedings, the court may order preventive or protective measures with respect to the asset in dispute(including an injunction or a seizure order). On the other hand, an arbitral tribunal is not vested with the power to grant any preventive or protective measures. If a party to the dispute wishes to implement such measures, it must submit a request to the competent court to order such preventive or protective measures before or during the arbitration proceedings.
Rights of appeal
A judgment of a court may be appealed to the Court of Appeal and/or the Supreme Court, provided that the legal requirements in the Civil Procedure Code are satisfied. On the other hand, an enforcement of an award by the arbitral tribunal may not be appealed unless it falls within the exemption under the Arbitration Act B.E. 2545 (2002); e.g., such award contradicts the public order or good morals of the Thai people.
Under Thai law, force majeure is defined as any event which could not be prevented even though a person has taken the appropriate measures and due care as may be expected from such person in that situation and in such condition. A party that cannot perform its obligations due to the occurrence of force majeure is excused from such performance. For creditors, if the performance of the debtor becomes impossible, the creditor has the right to terminate the contract under the Thai Civil and Commercial Code.
With respect to a payment obligation, in practice, an argument that such payment obligation cannot be performed due to force majeure may not be sound unless the force majeure is a failure in the central banking and financing system. However, this also depends on the underlying agreement as well as the factual circumstances surrounding the formation and performance.
Commercial and Regulatory
Jurisdiction approach and regulate joint ventures between airline competitors
The Trade Competition Act B.E. 2560 (2017) (TCA) is the current and main legislation governing trade competition in Thailand, which is under the supervision of the Trade Competition Commission (TCC). Under the TCA, competitors are not allowed to enter into cartels which create either a monopoly or a business operator with a dominant position, or which may substantially lessen competition in the following manners:
fixture of purchasing or selling prices or commercial conditions;
limiting quantity of goods or services;
bid rigging; or
fixing geographical sale and purchase areas.
Additionally, even though the Air Navigation Act does not provide any specific regulations restricting joint ventures between airline competitors, any joint ventures should not result in foreign dominance. That is, the result of the joint venture must be Thai dominant; i.e., having at least 51% of shares owned and held by Thai nationals.
The ‘relevant market’ for the purposes of mergers and acquisitions
The “market” under the TCA is defined as the relevant market of goods or services of the same nature or those which are substitutable and shall be determined from the specification, price or purpose of the goods or services and the area in which such goods or services are being distributed or provided.
The TCC further issued a notification regarding guidelines determining the market definition and market share. In essence, the relevant market is considered from the relevant product market and the relevant geographic market. Key considerations of determining the relevant market includes the demand substitutability, supply substitutability and potential competition.
A notification system whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from regulatory agencies
In general, the TCA provides that a pre-merger approval from the TCC is required for a merger of businesses which may result in monopoly or a business operator with a dominant position in the market.
Additionally, a business operator may also pre-consult and request the TCC’s determination in matters relating to operations: (a) which may be an abuse of a dominant position; or (b) cartels and bid rigging, unfair trade practices, and unreasonable agreements with foreign entities that are at risk of violating the TCA. The TCC’s determination shall be binding upon the applicant only according to the scope, period and condition specified by the TCC. If it appears that the information provided to the TCC, in order to make a determination, was materially incomplete, or a condition imposed by the TCC was violated, the TCC may revoke such determination.
On the other hand, a business operator is required to file a post-merger filing in case such merger results in the significant lessening of competition in the market.
Mergers vs full-function joint ventures
There are no separate rules for different types of joint ventures and mergers. The TCC’s interpretation is that the establishment of a new joint venture company does not fall under the definition of a “merger” under the TCA and is therefore not subject to the TCA. However, to the extent that the effect of a joint venture constitutes a “merger” (as defined in the TCA), the merger control provisions of the TCA shall apply, e.g. where the creation of a joint venture company involves an amalgamation, asset or share acquisition constituting a “merger”.
However, note that the foreign ownership restriction described are still applicable; i.e., foreigners are not allowed to own over 49% of the shares in a Thai airline.
Merger control clearance
A pre-merger application may be submitted to the TCC. The TCC shall consider such application within a period of 90–105 days from the date of submission and shall notify the applicant of the result. The applicable fee for such pre-merger application is THB 250,000.
For pre-consultation, this could be considered within a period of 60 days from the date of submission. The applicable fee for such pre-consultation application is THB 50,000.
As for the post-merger notification, such merger must be notified to the TCC within seven days from the date of the merger. There are no applicable fees for such notification.
Aviation sector specific rules in relation to financial support for air operators and airports, including (without limitation) state aid
There are no specific rules which govern financial support for air operators and airports.
However, the business of air carriage transportation is classified as a “promoted business” under the Investment Promotion Act B.E. 2520 (1977), and therefore is granted certain tax privileges and non-tax privileges.
Additionally, on 3 November 2020, due to the COVID-19 pandemic, the Thai cabinet has approved a soft loan scheme for seven private airlines (Thai AirAsia, Thai AirAsiaX, THAI Smile Airways, Thai Lion Air, Thai Vietjet, Bangkok Airways and Nok Air) in an amount equivalent to THB 24,000 million, which shall be co-ordinated with the Export-Import Bank of Thailand.
There are no available state subsidies.
Passenger personal data
The Personal Data Protection Act B.E. 2562 (2019) (PDPA) is the main legislation governing the collection, use and disclosure of personal data. Under the PDPA, personal data is defined as information pertaining to a natural person that enables the identification of such natural person, whether directly or indirectly. As a general rule, consent (which can be in writing or electronic form) from passengers must be obtained prior to or at the time of collection, usage or disclosure of personal data of passengers. In collecting and using personal data, the airlines and airports must also use such data in accordance with the intended purpose that was informed to the passengers and may only transfer such data provided that the recipients have adequate data protection standards.
If the carrier discloses personal data in violation of the PDPA, e.g., without consent of the owner, or uses the data against the purpose of collecting the personal data as well as not ensuring that there are safe measures in place to store the personal data, the owner may require the carrier to suspend or delete its personal data. Additionally, depending on how the data was lost, the carrier may be subject to civil, criminal, or administrative liability pursuant to the PDPA. For example, if the data was disclosed against the purpose of collecting and caused damage to the owner, the carrier may be subject to: (i) civil liability (punitive damages); (ii) criminal liability (a fine of no more THB 500,000 and/or imprisonment of no more than six months); and (iii) an administrative fine of no more than THB 3 million.
Protection of intellectual property
Intellectual property rights are mainly protected by:
The Patent Act B.E. 2522 (1979).
The Copyright Act B.E. 2537 (1994).
The Trademark Act B.E. 2534 (1991).
The Department of Intellectual Property (DIP) is the government agency responsible for creation, registration, and protection of intellectual property rights. A central registration system for trademarks and patents is also available for public searches.
Denial of boarding rights and/or cancelled flights
The MOT issued a notification on the procedures and remedies for late and cancelled flights, which provides that the airline shall compensate the passenger by providing food and beverage accommodation, arranging an alternative flight, and/or making monetary compensation.
Late arrival and departure of flights
Similar to the above, the airline would have to remedy and compensate the passengers according to such notification, the type of remedy depending on the period and length of delay. The airline’s failure to provide the remedy and compensation according to such notification is subject to criminal penalties.
The airport authorities
The airport authorities are mainly governed by the Air Navigation Act. Under such act, one of the main obligations imposed on the airport authorities include arranging and implementing a civil aviation security plan (which should be in line with the National Civil Aviation Security Plan issued by the Civil Aviation Board). Additionally, if the airport operator provides services to the general public, it can only collect fees that are permitted under the act, e.g., service fees from out-going and in-going passengers, landing or taking off service fees, aircraft storage service charges, ramp service charges and any other service fees prescribed in the sub-legislation.
General consumer protection
The Consumer Protection Act B.E. 2522 (1979) (Consumer Protection Act) provides that if a specific law has already prescribed the provisions on consumer protection, the Consumer Protection Act shall be applied to the extent that it is not redundant or contradicts with such specific legislation.
Global distribution suppliers (GDSs) operating in Thailand
Notable GDSs in Thailand include FedEx, DHL and UPS.
Ownership requirements pertaining to GDSs operating in Thailand
Foreign ownership restrictions may be applicable to GDSs under the Air Navigation Act and the Foreign Business Act.
Vertical integration permitted between air operators and airports
Vertical integration is possible; however, it should not result in the creation of a monopoly, or reduce or limit competition in a manner prescribed in the TCA.
Nationality requirements for entities applying for an Air Operator’s Certificate in jurisdiction or operators of aircraft generally into and out of jurisdiction
As stated above, an AOL may only be obtained by a Thai national.
Potential developments affecting the aviation industry
Currently, government authorities have issued relaxation and safety measures due to the COVID-19 pandemic in order to assist and support airline operators. Some of these regulations include exemptions or reductions of charges and fees that would normally be levied on air operators, e.g., rent fees, parking charges and landing charges.
Another interesting piece of legislation to keep an eye on is the incorporation of the Geneva Convention into Thai domestic law. Even though Thailand has signed the Geneva Convention, at present, it has not enacted any provisions of such convention into domestic law. Considering the lack of regulations with respect to aircraft mortgages, and public interest in creating other types of security interest, it is possible that such issue may be reconsidered in the near future (after the cabinet’s decision to repeal a draft aircraft mortgage act in 2015).
Please click here to the Introduction to Thailand Aviation Law (Part I)