June
27, 2000
A.
APPLICABLE THAI LAW
There
are presently no laws in Thailand that specifically address the sale
of goods via the Internet but the government is in the process of drafting
several pieces of legislation (see Section B hereunder). Until such
measures are implemented, all Internet transactions over which Thai
courts have jurisdiction will be governed, for instance, by reference
to the general provisions of the Civil and Commercial Code ("CCC"),
the Consumer Protection Act B.E. 2522 (A.D.1979), the Revenue Code B.E.
2481 (A.D. 1938), the Customs Law B.E. 2469 (A.D. 1926), the Excise
Tax Act B.E. 2527 (A.D. 1984), the Unfair Contract Terms Act B.E. 2540
(A.D. 1997), the Conflicts of Law Act B.E. 2481 (A.D. 1938), the Copyright
Act B.E. 2537 (A.D. 1994) and the Thai Constitution B.E. 2540 (1997).
The
lack of a specific regulatory framework may entail significant problems
as the existing laws were designed to regulate traditional commercial
sales. Yet rapid changes in telecommunications have resulted in business
practices that are vastly different from those contemplated by the existing
legislation.
The following are certain provisions that may be relevant to the sale
of goods on the Internet:
a) Sale of goods by description
-
A provision is made in the CCC for the sale of goods by description.
Section 503, paragraph 2, of the CCC states that "[I]n a sale by description,
the seller is bound to deliver property corresponding to the description."
In cases where goods do not fit the description, the buyer may refuse
acceptance of the goods and require repayment, or the buyer may claim
compensation for any loss suffered. In the online world, where text
and alterable still pictures are commonly used to aid in a description,
there is an added ease in deceiving the purchaser. This Section may
address any deceit attempted by the on-line seller.
b) Unfair contract terms
- The
Unfair Contracts Act B.E. 2540 (A.D. 1997) provides Thai courts with
great discretion to determine whether contract terms are unfair or
unreasonable. Contracts subject to the Act include consumer contracts,
standard form contracts and hire purchase contracts. Any term therein
that places an excessive burden on one party and gives a sizeable
advantage to another party is likely to violate the Act, in which
case the court may limit or void any such unfair contractual agreement.
c) False and misleading advertising
- The
Consumer Protection Act (No. 2) B.E. 2522 (A.D. 1979), while not specifically
dealing with Internet commerce, does contain provisions relating to
false and misleading advertising. Such misleading advertising, even
if it occurs in Cyberspace, would be covered by the Consumer Protection
Act.
d) Requirement for written
evidence
- Section
456, paragraph 2, of the CCC states that in cases where the agreed
price is more than 500 Baht (approximately US $14) "an agreement to
sell or to buy…is not enforceable by action unless there be some written
evidence signed by the party liable or unless earnest is given, or
there is part performance." This clause would seem to indicate that
in purchases over the Internet where an agreement is reached but no
payment made or performance begun, the agreement is not enforceable
under Thai law simply because there is no signature on the agreement.
However, the proposed Electronic Signature Law should provide a mechanism
to make online agreements binding even without a written signature
(see Section B hereunder).
e) Sales taxes and customs duties
- Thailand's
Revenue Department has announced that the sale of goods via the Internet
is subject to the same taxes and customs duties that apply to conventional
purchases. This means that online sales involving persons under Thai
jurisdiction are potentially subject to Value Added Tax ("VAT"), customs
duties, and excise tax, depending on, among other things, the location
of the purchaser and the nature and origin of the goods.
It is widely acknowledged that tax laws and customs laws will not
be easy to enforce in relation to e-commerce transactions. For instance,
the taxation of online sales of intangible goods (such as watching
a movie or listening to music over the Internet) will be dependent
on the honesty of the purchaser or importer in notifying the authorities
of the existence of the transaction and the value of the goods.
Evasion, however, runs the risk of fines and imprisonment.
f) Governing law
The
determination of the applicable law is certainly one of the most complex
issues in dealing with e-commerce transactions. The laws of every country
reached by a website could potentially apply to any e-commerce transaction.
This paper only deals with Thai law, but any other jurisdiction could
assert competence and declare its laws applicable to an e-commerce transaction
taking place in its territory or involving one of its nationals.
In
cases involving contracts where one party is located out of the Thai
jurisdiction, Section 13 of The Act on Conflict of Laws B.E. 2481 (A.D.
1938) allows the parties to a contract to determine which law they intend
to be bound by. However, if there is no agreement with respect to the
applicable law, the Court will make the determination based on a few
set guidelines. The provisions of Section 13 and a few possible applications
of the guidelines are outlined below.
1.
"If the parties are of the same nationality, the laws of that country
will apply."
-
If a Thai national makes a purchase from a Thai company's website,
the applicable law for any dispute would be that of Thailand. Both
parties are Thai nationals and therefore Thai law will apply (and
it should not matter where the website is hosted or whether the
company's Internet Service Provider ("ISP") is in Thailand or in
another country).
2.
"If the parties are not of the same nationality, the law of the country
where the contract has been made will apply.
-
If a non-Thai national in Thailand makes a purchase from a Thai
company's website (with the ISP located in Thailand), the applicable
law would again be that of Thailand. As both parties are located
in Thailand and dealing with each other through a Thai company's
website, then Thai law applies because the contract is formed in
Thailand.
3.
"In instances where a contract has been made between parties at
a distance [as is often the case with e-commerce], the country where
the contract is deemed to have been made is the country where notice
of the acceptance reaches the seller. If such a place cannot be ascertained,
the law of the country where the contract is to be performed shall
govern."
-
If a non-Thai national abroad makes a purchase
from a Thai company's website (with the ISP located in Thailand),
then the contract is made at a distance, and as per Thai law, the
applicable law is the law of the country where the seller receives
the notice of acceptance from the buyer. In most traditional sale
of goods situations, the notice of acceptance would be received
in the seller's country, the same place where the contract is to
be performed. However, this is not necessarily the case, as for
example, the notice of acceptance could be received by the seller
while in a third country.
- Where
the notice of acceptance "reaches" the seller in e-commerce transactions
is unclear. Possibilities include (i) where the seller's website
is hosted; (ii) where the seller's ISP is located; (iii) the country
of seller's nationality; or (iv) the country where the seller is
when notice of buyer's acceptance is retrieved.
It
is apparent that the nature of e-commerce transactions has injected
a degree of uncertainty into the determination of the governing law.
This matter will ultimately be determined by the Thai courts.
g) Moment of contract formation
The
moment at which an e-commerce contract is formed is also important,
especially where an offer lapses after a certain period of time. Under
Thai law, a contract is formed the moment the buyer's acceptance is
received by the seller. But when is the acceptance actually "received"
by the seller? It could be that the acceptance is considered "received"
by the seller when it is sent by the buyer (by clicking "send"). Or
it could be that the acceptance is considered "received" by the seller
when it reaches the seller's ISP or its website. It is also possible
that all of these events will occur virtually simultaneously. Again,
this issue will ultimately be determined by the Thai courts.
B.
DRAFT E-COMMERCE LAWS
Presently,
several sub-committees which have been appointed by the National Information
Technology Committee ("NITC"), under the Prime Minister and the Ministry
of Science, Technology and Environment, are working on the drafting
of six new laws concerning information technology ("IT"). The National
Electronic and Computer Technology Center ("NECTEC") is also working
along with the sub-committees as a secretariat office. Each IT law is
the responsibility of a separate sub-committee chaired by one legal
expert and comprised of various representatives from concerned agencies.
In
recognition of the need to promote public confidence with respect to
the boom of electronic transactions and the need to establish a viable
framework, the government hopes that the first two e-commerce bills
below can be implemented in the near future.
A
brief description of each proposed IT law follows:
1)
Electronic Transaction Law
-
The Electronic Transaction Bill was approved, in principle, by the
Cabinet on March 14, 2000 and sent to the Office of the Council
of State for revisions. The bill was drafted with the aim of ensuring
an effective legal framework to successfully enforce electronic
contracts and allowing the courts to accept evidence in the form
of electronic documents.
2)
Electronic Signature Law
- The
Electronic Signature Bill was also approved, in principle, by the
Cabinet on March 14, 2000 and sent to the Office of the Council
of State for revisions. The Bill should offer security of electronic
commerce transactions through the mandated use of asymmetric-key
cryptography which can assure that a digital signature is a valid
indication of the authenticity of a source of information;
-
Such technology is intended to provide for certainty of binding
contracts when acceptance is given only by electronic methods without
a "written" signature;
- The
bill as presently drafted calls for certification authorities ("CA")
to be licensed and entrusted with the task of certifying the identity
of vendors and purchasers who conduct business over the Internet;
until a national CA Committee is established to oversee the award
of CA licenses, NECTEC may act as the CA regulator.
3)
Electronics Fund Transfer (“EFT”) Law
-
The EFT Law shall provide consumer protection and establish security
procedures in electronic funds transfers.
4)
Data Protection Law
-
The Data Protection Law should be similar to those of the European
countries, which specifically protect the right of privacy regarding
personal data. The owner of the data should be protected from unauthorized
use of his/her personal data through the electronic processing of
data. The Law should also balance privacy rights with the freedom
to exploit information technology. In other words, the Law shall
provide protection from unfairly interfering with privacy rights
but shall not block the development of information technology.
5)
Computer Crime/Computer-related Crime Law
-
The Computer Crime Law should clarify new
types of criminal offences that may occur in the virtual realm of
the Internet.
6)
Universal Access Law
-
The Universal Access Law should promote the universal access to
the Internet via the National Information Infrastructure pursuant
to the Thai Constitution.
C.
PRECAUTIONARY MEASURES
In
order to enhance the potential validity of e-commerce transactions in
Thailand, on-line businesses should consider taking, among others, the
following precautions:
- Jurisdiction clause - companies should insert proper wording
on their websites to the effect that all transactions relating to
the subject matter shall be governed by Thai law within the exclusive
competence of Thai courts. Whether such election of governing law
and jurisdiction would be recognized and enforced by a foreign jurisdiction
is another issue.
-
Clear and obvious relevant disclaimers - subject to their
enforceability, the insertion of disclaimers will help ensure that
both parties have a clear understanding of their respective obligations
and may serve as a mitigating factor.
-
Written confirmation before performance - until the new law
on electronic signatures is passed, written confirmation should
be obtained; such confirmation is more likely to be recognized as
evidence by the Thai courts.
- Protect
IP rights over the Internet - in conducting transactions over
the Internet and posting business websites, it should be clearly
stated that the material is copyrighted (if applicable) or that
there is a registered trademark in existence in order to raise public
awareness.
- Security
of personal data - companies should be diligent and alert when
transferring personal data via the internet and provide an adequate
security system for business activities.
This
document on Sale of Goods in Cyberspace is intended to provide general
information. The contents do not constitute legal advice and should
not be relied upon as such. If legal advice or other expert assistance
is required, the services of competent professionals should be sought.
For
further information, please contact Ms.
Noppramart Thammateeradaycho, Litigator, Dispute Resolution
Departmenr, (e-mail noppramart.t@tillekeandgibbins.com).
©2000
Tilleke & Gibbins, Bangkok, Thailand
