The idea to amend the Foreign Business Act was initially launched by the opposition of Thai Rak Thai at the beginning of 2006, in response to ex-prime minister Thaksin’s divestment of Shin Corp to Singaporean Temasek Holdings. As a consequence of that, it has been unclear for the past two years how the notions of “alien” and “nominee” actually should be defined in legal terms. This is why many existing foreign investors, due to a feeling of insecurity, chose to hold further investments or even move operations to neighbouring countries.
As far as the real estate business is concerned, in spite of any changes having actually been carried out, the rumours around the proposed changes triggered a decline in the market targeting foreign home buyers. What further added to this were the revised regulations issued by the Commercial Department, saying that foreigners were no longer to own land by setting up companies with Thai nominees.
A few months ago, the National Legislative Assembly decided not to amend the Foreign Business Act in accordance with the interim government’s bill. This is to be understood, in theory, there is no legal principle to any Thai law that can be retroactively enforced. This also applies to the Thaksin’s Shin Corp transaction.
So, what would the Foreign Business Act amendments have meant in practice had they been passed? Well, neither the foreign investor nor the Thai nominees would have been punished but they would have had to comply by changing the ownership structure.
With reference to the upcoming December 23 elections, we don’t think any of the major political parties — i.e. the Democrat Party and the People’s Power Party — have any plans to amend the Foreign Business Act. Our comment is that if the government wants foreign investors to comply with the Foreign Business Act, why not somewhat ease the difficulties by asking them to apply for a foreign business license? This way, the nominee issue would be history.
Socrates Law
