Nevertheless, it should be noted that the treaty does not provide absolute freedom to American investors. There are certain industries or market segments that prohibit US citizens from performing trade operations and other specific activities. These are the following:
- Land ownership
- Banking activities involving depository functions
- Fiduciary operations
- Involvement in domestic and agricultural trade
- Exploitation of natural resources
American companies wishing to enjoy the treaty’s benefits must observe three simple steps when they register a business in Thailand:
- Register the company at the Ministry of Commerce;
- Acquire the certification document issued by the US Commercial Service; and
- Submit the certification document together with all the required papers to the Ministry of Commerce.
Evidently, US citizens or US juristic individuals are the major beneficiaries of said economic agreement. Companies wishing to qualify as a US juristic person must comply with several provisions:
- Recognized as a juristic person under either US law or Thai law
- More than fifty percent (50%) of the shares are owned by US citizens
- At least fifty percent (50%) of the directors are either US or Thai citizens
- If the US juristic person has one authorized director, the latter should be a Thai or a US citizen
- In cases where there are more than one authorized director, they should be US or Thai citizens. Entities with different nationalities are allowed to participate. However, they cannot obtain signatory powers.
Advantages of the Treaty of Amity
- Equal business rights provide avenues for growth and expansion.
- US citizens have the privilege of becoming major shareholders.
- US businesses are entitled to certain benefits that are not enjoyed by other countries.
Issues concerning the validity of the Thailand US Treaty of Amity
Many are concerned with the treaty’s validity which stems from Thailand’s membership in the World Trade Organization (WTO). One of WTO’s main objectives is to promote non-discriminatory trading practice. Thus, if understood under Thailand’s context, the country fails to comply with the above WTO objective, specifically, the “most favored nation (MFN) status.” Majority of the trading favors are granted to the United States.
In 1995, Thailand requested a 10-year exemption from the MFN. By 2005, a review and revision of its trading regulations was expected since in 2002, the Thailand-US Free Trade Agreement (Thai-US FTA) was formed. Under this arrangement, the privileges enjoyed by US corporate entities under the US- Thai Treaty of Amity were upheld.
Presently, Thailand is considering other options to address this issue. The country’s options are as follows:
- Ask for an extension of the MFN exemption until the Thai-US FTA is properly established.
- Extend the Thailand US Treaty of Amity to all members of the WTO but render extra privileges to US in consideration of the Thai-US FTA.
- Abolish the treaty and lessen the privileges given to US business enterprises.
This article was provided by Siam Legal, an international law firm with offices in Bangkok, Chiang Mai, Hua Hin, Pattaya, Phuket, and Samui. Siam Legal publishes legal guides to company registration in Thailand on its website.
Siam Legal International
Interchange 21 Building, 23rd Floor, 399 Sukhumvit Road
North Klongtoey, Wattana, Bangkok 10110
Tel: 662 259-8100