UPDATE: Thailand has filed their opening brief – if you must the PDF is here.
The competent German Regional Court in Landshut ruled on 20 July 2011 that the Thai Boeing 737 impounded at Munich airport on 12 July 2011 following a court decision be released against the payment of a bank bond of 20 million euro. The Thai Government has since declared that it does not intend to secure the release of the aircraft by paying the bond.
The proceedings at Landshut Regional Court are expected to continue in the second half of August. It is not clear how long they will last.
The aircraft was impounded after an international arbitration panel ruled in summer 2009 that the Thai state should pay compensation to the company Walter Bau AG. The judgement is final. In line with the Investment Protection Treaty between Germany and Thailand, the German Government expects the Thai Government to fulfil its obligation under the judgement as soon as possible.
Reports in the Thai media about ongoing proceedings in New York in this connection are misleading. The proceedings in New York merely concern the question as to whether a compulsory enforcement is also possible in the US. This will do nothing to alter Thailand’s obligation to pay compensation.
An early resolution of this case would restore the confidence of German and other foreign investors in Thailand and would send out a positive message about the further development of German-Thai relations.
The German construction company Walter Bau AG was a shareholder in the consortium which constructed the Don Muang Tollway in Bangkok in the 1980s. Due to the repeated intervention of the Royal Thai Government regarding the contractual conditions for the investment, the consortium was not able to run the project profitably.
The German Government repeatedly called on the Royal Thai Government to resolve the issue amicably by paying adequate compensation to the company. However, no mutual agreement could be reached. In 2005, the insolvency administrator of Walter Bau initiated an arbitration procedure in accordance with the Thai-German bilateral treaty concerning the encouragement and reciprocal protection of investments.
On 1 July 2009 an international arbitration panel in Geneva issued a final judgement in favour of Walter Bau. The Royal Thai Government was ordered to pay 36 million euro in damages to the company for breaching its obligations set out in the contract. An appeal against this ruling is no longer possible.
The Royal Thai Government was asked repeatedly to comply with the judgement and pay the compensation. However, no payment has been made.
As a preliminary measure to enforce the international arbitration ruling, the insolvency administrator of Walter Bau successfully called on a German court to impound a Boeing 737 airplane in Munich on 12 July 2011.
The Bangkok Post quotes Panitan with the Thai government response to the statement issued by the German Embassy:
The Thai government spokesman has warned the German Foreign Ministry to be cautious in demanding that Thailand compensate a German company that invested in the Don Muang Tollway.
Panitan Wattanayagorn, deputy secretary-general to the Thai prime minister and acting government spokeman, said Tuesday that the German Foreign Ministry should get its facts right, to protect bilateral relations.
Mr Panitan said he had understood that the German Foreign Ministry recognised the separation of the executive and the judiciary, and he was surprised that the German Foreign Ministry that seen fit to comment on the justice system.
Mr Panitan insisted that the legal dispute between the Thai government and Walter Bau was in the process of an appeal and many legal aspects of the case had yet to be considered. He said the Thai Foregn Ministry was about to explain the issue to its German counterpart right away.
Bilateral relations had been good at the levels of their governments and their people, the present issue was sensitive and the German Foreign Ministry had to be careful and ensure it has the correct information, Mr Panitan said.
The acting government spokeman said the Thai government expected good cooperation from the German government in the matter of the application to extradite fugitve former prime minister Thaksin Shinawatra, as it was reported that Germany had granted entry to Thaksin.
BP: Panitan’s mention of Thaksin relates to the fact that the ban on Thaksin entering Germany has now apparently been lifted – as blogged about by Saksith here.
Some comments below:
1. Can Walter Bau (WB) enforce the judgment?
Yes. Per a long-term reader who wishes to remain anonymous – although can state based on this person’s background they are very well-qualified to comment on US federal court procedure:
The procedure governing stays of money judgments pending appeal is governed by Federal Rule of Civil Procedure (“FRCP”) 62(d). The appellant can obtain a stay of judgment by offering a supersedeas bond, which must be approved by the district judge, or by moving for a stay without bond. If the district judge for some reason rejects the motion, then the appellant may apply to a 2d Circuit motions panel for a stay with bond under Federal Rule of Appellate Procedure (“FRAP”) 8(a)(2).
BP: Should note that yes Thailand is appealing, but this is an appeal of the ENFORCEMENT of the arbitration award in the US. The reader also notes that a search of the US federal court system shows no “supersedeas bond or a stay, either by the district judge or the 2nd circuit”.
2. Is the decision final?
Yes and no. The arbitration award is final and a US Court has entered final judgment – see this post – but the enforcement of the award is not ‘final’ in the sense that Thailand is appealing the enforcement to the U.S. Court of Appeals, Second Circuit. Nevertheless, the award can still be enforced. BP would say the German government statement is more accurate than what Panitan or Thani have stated – not sure BP would have used the term “compulsory enforcement”. Yes, Thailand is wanting a new hearing, but as the US Court has stated there are only “very limited” grounds for review of an award (page 9 of PDF) – this summary of the law and this article supports this. Thailand’s chances to deny enforcement seem very slim.
[BKK lawyer comments:
I would quibble only slightly with your statement that “the enforcement of the award is not ‘final’ in the sense that Thailand is appealing the enforcement to the U.S. Court of Appeals, Second Circuit.”
The arbitration award is final (no longer appealable) and enforceable worldwide, regardless of the pending appeal or its outcome in the U.S. 2d Circuit. The 2d Circuit is not reviewing the award itself (i.e., it cannot overturn the award, which requires Thailand to pay Walter Bau); it is only reviewing the lower court’s entry of the award as a judgment in the N.Y. federal court. Even if that particular judgment is reversed, the arbitration award stands and remains enforceable everywhere.]
BP: So will the Germans respond? Will Kasit comment on the German Embassy statement?
btw, comments are enabled although they are moderated and may take a few hours to appear.
*Changed headline to make it more accurate.