Enforceability of Arbitration Agreement in a B2C Contract Under Thai Law

Introduction

Arbitration is a form of alternative dispute resolution (ADR) that takes place outside the court system. Due to its confidential, flexible, and international nature, arbitration has gained substantial popularity in commercial disputes.

Traditionally, arbitration was considered suitable only for disputes between business operators (B2B). However, it is increasingly used in disputes between business operators and consumers (B2C), especially those involving online platforms such as social media or e-commerce. For business operators, arbitration offers many advantages, particularly confidentiality, which helps safeguard business reputation.

For arbitration to be binding, it must be clear that both parties have consented to it. This consent is typically expressed through an arbitration agreement, often included as a clause in the main contract.

In B2C contracts, arbitration agreements are commonly embedded in terms of use, often accompanied by detailed provisions tailored to the business. Some even exclude statutory rights, such as class action waivers. While many users accept these terms without scrutiny, they may unknowingly agree to arbitration. This raises a key question: is an arbitration agreement in a B2C contract legally enforceable? This chapter of the guide explores the issue.

Clash of legal values

Arbitration is grounded in party autonomy. When parties agree to arbitrate, the law generally respects and enforces the agreement. In principle, parties are bound to resolve their dispute solely through arbitration. If one party breaches the arbitration agreement by initiating court proceedings, the other may apply to the court to dismiss the claim and refer the matter to arbitration, provided the arbitration agreement is enforceable. This doctrine of party autonomy is particularly applicable in B2B contracts, where parties have comparable economic or bargaining power.

In B2C contracts, however, consumer protection enters the equation. Most jurisdictions adopt public policy measures aimed at protecting consumers, who are generally perceived as having less economic or bargaining power than business operators. These protections often take the form of laws on unfair contract terms, which shield consumers from unreasonably burdensome provisions.

While arbitration may offer advantages in B2B contexts, it can be problematic in B2C settings. For example, arbitration clauses in B2C contracts often require disputes to be resolved at an arbitration institute located in the business operator’s home country. Consider an online platform based in Europe that attracts users globally but mandates arbitration in Europe. An Asian user wishing to bring a claim would need to travel to Europe, potentially incurring substantial legal costs, even for a nominal dispute.

These examples illustrate the tension between party autonomy and consumer protection in B2C arbitration. In recent years, courts in many jurisdictions have increasingly ruled in favour of consumers, declaring arbitration clauses unenforceable on various legal grounds, varying from jurisdiction to jurisdiction. This judicial trend prompted many business operators to reconsider or revise the arbitration clauses in their terms of use.

Thai Law perspective

The main arbitration legislation in Thailand is the Arbitration Act BE 2545 (2002) (AA), which is based on both the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (NYC) and the UNCITRAL Model Law on International Commercial Arbitration 1985 (UNCITRAL). Like other NYC and UNCITRAL jurisdictions, the AA does not specifically address whether an arbitration agreement in a B2C contract is enforceable, or to what extent.

That said, Thailand has enacted several laws aimed at consumer protection. For the purpose of this chapter, two key statutes are highlighted.

• The Unfair Contract Terms Act BE 2540 (1997) (UCTA) provides that a contract term in a B2C contract that imposes an unreasonably onerous burden on one party constitutes an unfair contract. Such a term is enforceable only to the extent that it is fair and reasonable in the circumstances.
• The Consumer Case Procedure Act BE 2551 (2008) (CCPA) governs how B2C cases are to be conducted in court. The CCPA establishes a procedural framework that is particularly favourable to consumers.

This raises the question: can an arbitration agreement in a B2C contract be considered an unfair contract term and thus unenforceable under the UCTA? Recently, the Supreme Court of Thailand (SC) answered yes.

The SC addressed this issue for the first time in Decision No 4183/2565 (2022) and Decision No 4184/2565 (2022). The facts in both cases are similar, and they are discussed together for ease of reference.

Decision No 4183/2565 (2022) and Decision No 4184/2565 (2022)

A consumer (Mr A) filed a claim in court against a business operator (Company B), alleging breach of a condominium sale and purchase contract (the “sale contract”).

The sale contract contained an arbitration clause stating:

“Parties agree that, if any dispute between them arises out of or in connection with this contract and cannot be resolved amicably, such dispute shall be resolved by arbitration under the Thai Arbitration Institute, Office of the Judiciary (‘TAI Rules’).”

Accordingly, Company B sought to compel arbitration by requesting the court to dismiss Mr A’s claim under Section 14 paragraph 1 of the AA.

Under Section 14 paragraph 1 of the AA, the court must be satisfied that the arbitration agreement is enforceable before referring the matter to arbitration. The provision reads:

“In the case where an action in a matter which is the subject of an arbitration agreement is brought to the Court by one party without referring to the arbitral tribunal in accordance with an arbitration agreement, the others may submit, within the date for filing his or her statement or the period for filing his or her statement as prescribed by law, his or her request to dispose of the case and refer to arbitration to the competent Court. The Court shall, after making inquiries, dispose of the case, unless it appears that the arbitration agreement is void, inoperative, or incapable of being performed.”

The lower courts reached different conclusions, prompting an appeal to the SC. The SC ultimately held that the arbitration clause in the sale contract was unenforceable.

The SC began by emphasising the policy behind the CCPA: to ensure that consumer cases are adjudicated efficiently, expeditiously and fairly. The SC noted that under the CCPA, the court plays an active role in proceedings, such as rectifying procedural irregularities, examining witnesses, adjusting damage claims, reserving the right to amend judgments, and awarding punitive damages. The CCPA also waives court fees for consumers and allows oral complaints. The SC held that, by default, the CCPA applies to B2C cases and significantly enhances consumer access to justice.

Turning to arbitration, the SC acknowledged that while arbitration is a form of ADR, its enforceability depends on the consumer’s full and informed consent. This includes a genuine opportunity to negotiate the arbitration clause and to understand how arbitration differs from court proceedings. Under the TAI Rules, for example, a claimant must file a written statement of claim (SOC), nominate an arbitrator, and bear certain costs, requirements that may impose a burden on consumers and deprive them of the procedural benefits available under the CCPA.

In this case, the sale contract was governed by the Condominium Act BE 2522 (1979), which prescribes a standard form. The SC found that the arbitration clause deviated from this form and imposed an additional burden on the consumer, Mr A.

Based on these findings, the SC concluded that the arbitration clause constituted an unfair contract term under the UCTA and was therefore unenforceable under Section 14 paragraph 1 of the AA. Mr A was entitled to proceed in court without being compelled to arbitrate. Accordingly, the SC dismissed Company B’s motion.

As of July 2025, no further decisions on this issue have been reported in publicly available sources. Therefore, Decision No 4183/2565 (2022) and Decision No 4184/2565 (2022) currently represent the most recent judicial stance in Thailand on the enforceability of arbitration clauses in B2C contracts, a stance that is generally unfavourable to arbitration.

Implications

The precedent set by SC Decision No 4183/2565 (2022) and Decision No 4184/2565 (2022) leaves several questions unresolved. One key issue is the SC’s apparent emphasis on whether a consumer had full opportunity to negotiate the arbitration agreement. This raises the question: if a B2C arbitration clause allows the consumer to choose between court litigation and arbitration at the time of accepting the terms of use, would that constitute sufficient opportunity to negotiate? Alternatively, given the SC’s view that arbitration imposes greater burdens than court litigation under the CCPA, would an arbitration clause that mirrors certain CCPA protections be more likely to withstand scrutiny? These questions remain unanswered.

Another open question is whether a business operator can rely on a foreign law that favours arbitration in B2C contracts, and whether Thai courts would apply that law. Based on the SC’s reasoning, there is a strong possibility that Thai courts would apply Thai law, such as the UCTA and CCPA, regardless of the chosen law, on the basis that consumer protection constitutes a matter of public policy and mandatory application in Thailand.

At this stage, business operators should carefully assess the risks of including arbitration clauses in B2C contracts. If arbitration is pursued, the clause must be crafted to strike a balance between business needs and legal risk. This is not a straightforward task and may require ongoing review of legal developments in light of the specific nature of each business.