Chandler & Thong-ek Law Offices look at the current issues and challenges in the country’s finance sector


Thailand has healthy financial institutions following the 1997/8 restructuring, comprising:

15 commercial banks
14 branches of foreign banks
48 representative offices of foreign banks
86 various other financial institutions

Thai banks have in recent years provided 50% or more of loans for major project financings in Thailand, compared to playing a minor role in the past. Thai banks play important roles not only as lenders of both Baht and US dollars, but also as security agents and inter-creditor agents in project financings.

Recent major financings include:

Bangchak Solar

Solar power plants

$ 12 million/Bt 1.5 billion

April 2013 - ADB

Khanom (KEGCO)

920MW gas-fired power plant

$ 660 million

December 2013

Xe Pien Xe Namnoy

410 MW hydropower project

$ 703 million

February 2014

Nava Nakorn Electricity Generating

Gas-fired power plant

$ 528 million

May 2014

2014 May change in Government

Martial law was declared on May 20 2014, and lifted on April 1 2015. There has been little impact on business in the private sector. The civil service and civil courts are operating normally. Following promulgation of a new constitution (the 20th since 1932), a general election will be conducted. This is a familiar cycle in Thailand. The interim government is in the process of approving major infrastructure projects.


This paper assumes the reader is familiar with project financing in general, and is limited to a summary of the unique elements of Thai project financings.

No special government approvals are required for project financings, other than the usual approvals associated with unsecured loan transactions, security by way of mortgage and licensing required under Thai laws. The liberalisation of exchange controls in the early 1990’s largely eliminated concerns about exchange controls in project financings, although Bank of Thailand (BoT) approval is required for the opening of offshore bank accounts by Thai borrowers. Since 2005, the BoT has declined to approve requests to open offshore reserve accounts, with limited exceptions.

No Thai government guarantees have been available in recent years, even for projects involving state enterprises as borrowers.

Assuming more than one lender group (for example, foreign commercial bank lenders, Thai commercial bank lenders, export credit agencies, and international financial institutions), there will usually be a need for a separate security or inter-creditor agreement between lenders, security agents and borrower, setting forth the details of security, timing of establishing security interests, coordination and voting procedures, procedures for enforcement of security and sharing of proceeds from enforcement of security and insurance.

There are a number of differences between US law market practice, English law market practice and Thai law market practice, which need to be addressed.

The governing law issue is frequently resolved in practice in favour of foreign law to govern the common terms agreement and foreign credit agreements. Foreign law will also govern certain security, such as charges over foreign bank accounts, guarantees of foreign persons and assignments of project documents governed by foreign law. Thai law will be the governing law under Baht credit agreements and security documents regarding property rights in Thailand.

Dispute resolution provisions generally prescribe submission to courts, foreign or Thai. Foreign court judgments are not enforceable in Thailand. There are several recent precedents for dispute resolution by international arbitration. Arbitration awards are enforceable in Thai courts, subject to exceptions along lines of those in the New York Convention.

Recent developments in the financial sector

The rate of corporate income tax has been reduced to a flat rate of 20% until December 31 2015, with certain exceptions. The rate of personal income tax has also been reduced and ranges from 5% to 35% based on an individual’s taxable income. VAT remains at 7%.

The BOI changed its investment promotion policy in December 2014 from reviewing projects based on sectors/industries to reviewing individual projects. The new policy grants two packages of investment incentives: activity-based incentives and merit-based incentives.

Generally, there have been no changes in BIT (approx. 41 in effect) and double tax treaties (approx. 59 in effect).

Several years ago “infrastructure funds” were authorised by the SEC, and during the past year several infrastructure funds have closed to provide funding for infrastructure projects.

No project has been initiated under the new PPP (public-private partnership) Act enacted in 2013. The new PPP Act streamlines the project agreement process for private investment by way of loans and/or equity in state projects. The key step remaining to implement the PPP is publication of the “Strategic Plan”.

To date, no Thai bank has adopted the Equator Principles, the widely used guidelines for assessing and managing environmental and social issues in project lending.

Forms of security in Thai project financings

Thai law provides traditional forms of security, i.e. mortgages of land and buildings, pledges, mortgages of registered machinery, and sales with right of redemption. There is no equivalent of a “floating charge” on inventories or work-in-progress, or “charge” on a bank account. Certain classes of creditors have “preferential rights” under the Civil and Commercial Code (CCC).

A draft secured lending bill was drafted by the Ministry of Justice in the late 1990’s and was given priority status by the MoF and BoT. This bill provided for non-possessory security interests over a range of property. The bill passed 1st reading in the NLA in February 2015.

Below is a listing of unique features regarding security in Thai project financings:

• Limited forms of security: mortgage, pledge, right of retention, or creditor possessing preferential rights in nature of a pledgee.
• No floating charges; i.e. no security over moveable property (with exceptions).
• No title insurance.
• No “trustees”.
• No mortgages of leaseholds or reclaimed land.
• No assignment of “obligations”.
• Differences in mortgage registration process (land vs. machinery).
• Fixing the “mortgage amount” in Baht currency.
• Reinsurance (95% or more is a common condition).
• No “pledge substitution” concept.
• Interpretations under Foreign Business Operations Act re inter-company loans, guarantees, leases, etc.
• Bi-lateral investment treaties (approx. 41 in effect); and ASEAN Comprehensive Investment Agreement (ACIA).
• No specific security interest in bank accounts.

ASEAN Integration 2015

Below is an outline of the impact of ASEAN Integration on Thailand.


• Cross-border energy projects (JDA, Myanmar, Cambodia, Laos)
• Cross-border infrastructure (bridges, transmission lines)
• Proposed cross-border infrastructure (North-South rail, Dawei east-west road/rail links)
• Automotive sector participation
• Bank of Thailand’s preparations for regional integration of financial institutions

Regional challenges:

• No single regulator; no set of laws and regulations
• Except for the ACIA, other ASEAN agreements cannot be invoked by private investors
• Evolving from bi-lateral investment treaties to ACIA

Thai challenges:

• Restrictions on foreign businesses operation in Thailand (Foreign Business Operations Act)
• Restrictions on foreigners working in Thailand (Working of Aliens Act)
• Thai tariff protectionism
• Other non-tariff obstacles to intra-ASEAN trade, and need to fast track 12 priority integration sectors
• Corruption
• Political stability
• Increasing costs, e.g. increases in minimum wages
• Water management issues
• Border disputes between Thailand and Cambodia (onshore and offshore)
• English language
• In 2013 Thailand was removed from the list of countries at risk of money laundering by terrorist groups, having taken a number of actions
• IP Priority Watch List for the 9th consecutive year in 2015. The USA said in May 2015 it will review Thailand’s status if it makes significant progress by passing key legislative initiatives and improving enforcement.

Jessada Sawatdipong


Chandler & Thong-ek Law Offices


About the author

Jessada Sawatdipong has extensive experience in representing syndicated lenders on financing for major power projects in Thailand and in Laos PDR.

Jessada obtained his LL.B. from Chulalongkorn University; and LL.M. from University of Miami. He attended the Program of Instruction for Lawyers at Harvard Law School. He is a member and the Barrister-at-Law in Thai Bar Association. He is also a member Asia Pacific Lawyers Association and International Bar Association.


Maria Makanas


Chandler & Thong-ek Law Offices


About the author

Maria Makanas has extensive experience in representing syndicated lenders for financing in major power projects.

She received her B.A. from Brown University, M.S. in Mass Communication from Boston University, and JD from University of Connecticut. She speaks English and Thai fluently as well as conversational French. She is a member of Massachusetts Bar Association and the State Bar Association of New York.


Albert Chandler

Senior partner

Chandler & Thong-ek Law Offices


About the author

Albert Chandler is the founder of Chandler & Thong-ek Law Offices Limited, which was established in 1974. He has been practicing business law in Bangkok, Thailand, since 1969, specialising in business law, energy law, international transactions, project financing and investment projects.

Al Chandler holds a B.S. degree in Mining Engineering from University of California at Berkeley, and LL.B. from Harvard Law School.