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William

US-Thai Treaty of Amity and Economic Relations

* Note: the following is intend only to provide the reader with an overview of the issues that need to be considered in relation to the US-Thai Treaty; it is not intended to be a comprehensive guide, nor is it intended to constitute legal advice. In the event that you are contemplating invoking Treaty protection rights, it is strongly recommended that you seek the advice of a reputable lawyer in Thailand.

NOTE: MY RESEARCH INDICATES THAT THIS TREATY IS DUE TO EXPIRE ON OR AROUND DECEMBER 5, 2006. UNTIL SUCH DATE, THE MINISTRY F COMMERCE WILL ACCEPT NEW REGISTRATIONS. THEREAFTER, AS NO NEW FREE TRADE AGREEMENT WITH THE US HAS CURRENTLY BEEN SIGNED, THEY MAY ACCEPT NEW REGISTRATIONS. HOWEVER, AMERICANS WISHING TO TAKE FULL ADVANTAGE OF THIS TREATY, AND LOOKING TO BE ‘GRANDFATHERED’, SHOULD ENSURE THEY REGISTER THEIR COMPANY PRIOR TO DECEMBER 5, 2006.

WHAT IS THE US-THAI TREATY OF AMITY AND ECONOMIC RELATIONS?

The US-Thai Treaty of Amity and Economic Relations (“Treaty”) was signed on May 26, 1966 between the United States of America and the Kingdom of Thailand and requires, subject to certain exclusions* “national treatment” for business interests of US citizens and companies.

The Treaty does not constitute part of “domestic” Thai law. It is an international obligation upon the Kingdom of Thailand, thus must be observed by any Thai government – unless and until such time as the Treaty has been terminated in accordance with its provisions**. However, as the Treaty does not constitute part of domestic Thai law, it cannot, in and of itself, be enforced within the courts of Thailand.

WHAT DOES THE TREATY DO?

In short, by affording “national” treatment, and by virtue, principally, of Article IV*** of the Treaty, US citizens and companies are exempted from the restrictions placed on other “foreign” nationals as such is governed by domestic Thai law – principally the Foreign Business Act 199 – provided that the activities being carried out by the US citizen or company are not contained within one of the exclusions to the Treaty (see footnote *).

HOW DO THEY KNOW I’M AN AMERICAN****?

In consultation with the US Embassy, the Ministry of Commerce (“MoC”) and Ministry of Foreign Affairs have adopted the following procedures, based largely on Article XII, Section 1 of the Treaty, in determining what does not qualifies as requisite US ownership:

1. Treaty protection will be denied to any company where the ownership of that company is directly or indirectly owned (has a controlling interest) by nationals of third countries. Note, the chain of ownership is followed all the way to parent company level. Thus, a US registered company that is owned by a UK national will not qualify.

2. Treaty protection will be denied if the “management” of the company is controlled by a national of a third country. “Controlled” here means that the person is “empowered to act in the name of the company” in dealings with third parties. Thus, if you have a wholly owned US company, with a UK national as CEO, this company would be denied Treaty protection.
Under the MoC Regulation concerning this issue, Treaty protection will be afforded to:

1. A natural person having US citizenship

2. A corporate entity incorporated and existing under the laws of Thailand or the USA of which:

(a) a majority of the number of shareholders or partners or members are US citizens
(b) shareholders or partners or members holding a majority stake in the entity are US citizens
(c) a majority of the directors are US or Thai citizens
(d) in the event that only one person is empowered to sign on behalf of the company as the “authorized director”, such person is not a national of a third country (i.e. non Thai or US nationals)
(e) in the event that more than one person is empowered to sign on behalf of the company as the “authorized director”, a majority of the signatories are not nationals of a third country.

I QUALIFY, HOW DO I APPLY?

The authority charged with registration applications is the MoC. In the event that you wish to be afforded Treaty protections, you need to submit an application to the MoC, who will then issue a “Certificate” letter allowing you to engage in a business which is otherwise a restricted business to foreign nationals.

It should be noted that it is standard procedure of the MoC not to issue a Certificate unless the submitted evidentiary documentation has been certified and notarized by the US Embassy. This is a standardized procedure at the US Embassy and consists of obtaining the pro forma document. This is not an onerous task, but you will likely be charged for this service.

In short, the procedure is not difficult. If we take as an example incorporating a company in Thailand with majority US citizens holding shares, you would follow the normal MoC incorporation of a limited liability company procedure. You would then take the documents, along with evidence that the major shareholders as US citizens, to the US embassy, who will then notarized such. You then take the notarized documents to the MoC to obtain your exemption Certificate.


*exclusions include: fiduciary functions, ownership of land, communications, transportation, banking involving depository functions, exploitation of land and natural resources and domestic trade in indigenous agricultural products
** see NOTE at the top
*** there are other Articles relevant, but it would be too lengthy to mention them all
**** an exception to the following rules applies to publicly traded US corporations if it is difficult to evidence who the “beneficial” owners of the shares are – as opposed to legal owners, provided that the rules relating to directors still need to be complied with.

© Copyright ownership of this article belongs to William Jarvis. You are free to copy this article at liberty and you are also free to quote from this article in full. In either case you are asked, as a matter of courtesy, to make reference to the author as being just that. To this end, while not being particularly fussy, the author views the act of ‘passing off’ as being a particularly repugnant act done by those too stupid to work things out for themselves. Please respect my views on that – it’s not asking a lot!
If you have any questions relating to this article, please feel free to PM me or email me. I cannot promise that I’ll be able to answer your questions, but I’ll do my best.

Kai

Hi William,
Great information as usual. I will send you a PM.

William

Any Yanks out there not enjoying Thanksgiving may be interest to know there is currently a lot of interest in Treaty exempt shelf companies.

I know if I were a Yank, I'd be registering about 10 of these companies, which I would be selling post December 5 for a nice little profit (as you'll likely be Grandfathered)!!

ThaiTours

Now that it's past Dec 5 (I had no idea the treaty was expiring!) if I already have a registered company can I still get a treaty exemption? Does anyone know? Thanks.

KHUNDAN

Who told you the treaty expires??? Do you have a source document?? Very interested in the document that says it expires.

William

^ I refer you to Article XIV, sections 2, 3 and 4 respectively.

The 1966 Treaty of Amity and Economic Relations between The Kingdom of Thailand and the United States of America

The one year notice period was given a year or so ago and, to the best of my knoweldge, the MoC is no longer accepting applications for protection.

My understanding is that it was anticiptated the FTA would be in place by now.

dgblkbelt

Any update to this? Still in place? FTA take it's place? Also if you have a legal business, does it entitle you to own any land or a house as part of the business?

William

Actually, I registered a company today (sorry looking at time of posting - yesterday) - the MoC were fine about it.