The U.S-Thai Treaty of Amity allows American citizens and companies to maintain full ownership and bypass foreign business licensing requirements in Thailand. It also provides legal protection against the nationalization of assets without fair compensation.
However, it is important to understand that this process has several limitations and restrictions. In addition, a foreign-certified company may require an additional license for regulated activities.
National Treatment
The Treaty of Amity affords American companies and their shareholders national treatment in Thailand. That means that they are exempt from the foreign investment restrictions of the Foreign Business Act and can operate on the same basis as Thai companies. However, it does not mean that they are exempt from other restrictions imposed by Thai law. This can include a requirement that at least 51 percent of the company’s shares must be held by Thai citizens.
In addition, a company operating under the Treaty of Amity will have to meet the minimum capital requirements set by the FBA for the types of business activities it plans to undertake. It also must register with the Ministry of Commerce in order to be exempt from the FBA’s restrictions.
Corruption continues to be a major concern for investors in Thailand. Although a significant number of firms that comply with the strict standards of the Foreign Corrupt Practices Act (FCPA) have succeeded in Thailand, those that do not have an effective compliance program may suffer a competitive disadvantage. In addition, gratuity payments to civil servants who are responsible for the enforcement of government regulations remain common, and can be very difficult to avoid.
OPIC provides debt financing and political risk insurance to support U.S. investments in Thailand, including equity investments, loans and loan guarantees, technical assistance, and leases or consigned inventory or equipment. Its coverage includes protection against currency inconvertibility, political violence, and expropriation.
Streamlined Registration Process
The Thailand Treaty of Amity allows American investors to take a majority or wholly owned stake in Thai companies and to be exempt from many restrictions imposed by the Foreign Business Act (FBA). Companies seeking protection under the US-Thai Amity must submit documents verifying that they are in compliance with Thai law. The commercial service office at the US Embassy in Bangkok reviews and certifies these documents.
Upon completing this step, the applicant must submit original copies of all required documents to the Department of Business Development of the Ministry of Commerce. The department will notify the applicant if the company is eligible to operate in Thailand. In the event that the company is not eligible to operate, the commercial service will provide an explanation of the reasons why the company cannot be granted treatment under the US-Thai Amity.
Thailand’s trademark law was revised in 1992 to strengthen penalties for infringement and to broaden the scope of the law to include services, certification marks and collective marks. However, it still lacks clarity as to the protection of Internet domain names and it has yet to accede to the Madrid Protocol on international registration of trademarks.
The country’s stock exchange, SET, promotes corporate governance and social responsibility among its listed companies. It also focuses on sustainability guidelines and the importance of balancing the economy, society and environment. The government is likewise pushing for transparency in the natural resources sector by promoting the Extractive Industries Transparency Initiative (EITI).
Exemption from Foreign Business License Requirements
Companies and individuals that meet the requirements of the US-Thai Treaty of Amity are granted “national treatment,” which means they can maintain majority or full ownership of their company, branch office or representative office in Thailand, and do business on the same basis as Thai citizens. In addition, the Treaty exempts these companies from most restrictions on foreign investment imposed by the Foreign Business Act of 1999. The only limitations are those related to domestic trade in indigenous agricultural products and land and natural resource exploitation, which are regulated under specific laws.
Nevertheless, it is important for companies contemplating business in Thailand to seek qualified legal advice, because adherence to local laws is not always guaranteed. For example, bribe-taking in public sector procurement remains common, as documented by the U.S. Trade Representative’s Special 301 Report. Moreover, the courts have sometimes refused to enforce international arbitration awards on grounds that are inconsistent with the laws of Thailand.
In these and other circumstances, the Overseas Private Investment Corporation (OPIC) can provide debt financing and political risk insurance to support business investments in Thailand. In addition, OPIC can also assist with technical assistance and the provision of consigned inventory or equipment. Those seeking protection under the Treaty of Amity should present certified notarized copies of all of these and other documents to the Director General of the Department of Business Development at the Ministry of Commerce.
Ownership Rights
In accordance with the 1966 treaty, American investors may form companies with majority foreign ownership and engage in a wide range of business activities, including domestic trade in agricultural products, land and natural resource exploitation, liberal professions, and some insurance services. The ministry of commerce retains discretion to permit exceptions from these rules based on other international treaties Thailand has entered into.
Investors are encouraged to seek legal advice from firms that specialize in Thai law and the US business environment. Investors should also bear in mind that violations of Thai business regulations are penalized with heavy fines.
Under the 1966 treaty, American investors may establish limited-liability corporations (LLCs), partnerships or sole proprietorships. The LLC is similar to a private company in the United States and is popular among U.S. investors because it offers personal liability protection for owners. The other two entities allow only a percentage of the company’s shares to be held by foreign nationals.
The Overseas Private Investment Corporation (OPIC) provides debt financing, political risk insurance and private equity capital to support business investments in Thailand by U.S. private investors. In addition to this direct support, OPIC has a variety of technical assistance and consigned inventory or equipment available to help businesses get started in Thailand. Interested parties should contact the Commercial Service office in Bangkok for more information on how to access these resources.
