The Conclusion of the Hopewell Case that Lasted for more than 30 years

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This week there is no better news than the one regarding the Hopewell case, which has come to an end after more than 30 years. The Supreme Administrative Court confirmed the Central Administrative Court’s order to reject a new trial request. Accordingly, the Ministry of Transport and SRT have to pay damages, expenses, and interest to Hopewell Holding Co., Ltd. for approximately 24 billion Thai baht. This case has lasted for more than 30 years, many of our readers were very young at the height of attention, the THAC will provide you with a summary of the case.

Timeline of the Hopewell case

On 16th October 1989, the Ministry of Transport had announced a tender for the construction of elevated railways and motorways, and invited all the parties interested, proposing a project to obtain the concession for the construction project. Only Hopewell Holding Co. Ltd, (Hong Kong) had participated in the tender.
On 25th July 1990, the Board of Directors of the State Railway of Thailand (SRT) had authorized the Ministry of Transport to sign a contract with Hopewell Holding Co. Ltd. (Hong Kong) for the construction and development of the state railways in Thailand.

Hopewell Holding Co., Ltd. (Hong Kong)

had established Hopewell Co. Ltd. (Thailand) under Thai law to operate a business in Thailand.

On 9th November 1990, both the Ministry of Transport and the State Railway of Thailand had signed a concession agreement with Hopewell Co. Ltd. (Thailand) for the development of the transportation system in Bangkok, consisting in an elevated railway and motorway.

Contract details:

Hopewell Co. Ltd. (Thailand) has the right to utilize buildings and the facilities of the system during the concession period, collect fees from the motorway system and utilize other assets of the system for commercial purposes. Hopewell Co. Ltd. (Thailand) is responsible for all expenses for the design, construction, assembly, and maintenance of the system, except for the elevated railway.

The agreement became effective on 6th December 1991 for 30 years from the day the contract became effective. The construction period is eight years from the day the contract became effective
.

The period before the termination of the concession agreement (1990 – 1997)

The progress of the construction was 5.03% of the total, although it should have been reached approximately 67.67%. Based on the aforementioned facts, the Ministry of Transport expected.

Hopewell Co. Ltd. (Thailand) to be unable to complete the project on time. Therefore, the Ministry had proposed the termination of the concession agreement to the Cabinet.

On 23rd December 1997, the Cabinet had approved the termination of the concession agreement with Hopewell Co. Ltd. (Thailand), as proposed by the Ministry of Transport.

On 27th January 1998, the Ministry of Transport had issued a notice of termination for the concession agreement and prohibited Hopewell Co., Ltd. (Thailand) from entering in the concession area.

On 30th January 1998 and 2nd February 1998, Hopewell Co. Ltd. (Thailand) had replied to the notice of termination affirming that the Ministry of Transport has no right to terminate the concession agreement because it did not meet the requirements provided for the termination of the contract. In its reply, it was stated that the Ministry of Transport had breached the contract and therefore it was liable for damages. Moreover, Hopewell Co. ltd. (Thailand) had the right to legally access the concession area.

On 25th February 1998, the Ministry of Transport had confirmed the termination of the concession agreement and prohibited Hopewell (Thailand) Co., Ltd. and its employees from entering and operating in the concession area. Moreover, Hopewell had been ordered to remove all machines and equipment from the concession area within 15 days from the receipt of the letter of termination.

On 24th November 2004, an arbitration proceeding had been started by Hopewell.

On 30th September 2008, the arbitral tribunal had decided that the Ministry of Transport and the State Railway of Thailand have to pay a joint compensation to Hopewell Co. Ltd. (Thailand) in the amount of approximately 11,800 million Thai baht.

On 13th March 2014, the Central Administrative Court had set aside the award issued by the arbitral tribunal.

The Decision Stated:

“Hopewell Co. Ltd. (Thailand) has been aware or should have been aware of the termination of the agreement since 30th January 1998. Nevertheless, it started the arbitration proceeding on 24th November 2004, more than 5 years after it had notice of the termination. According to Section 51 of the Act on Establishment of the Administrative Courts and Administrative Courts Procedure B.E. 2542, the time for submitting a dispute to arbitration can be considered as an issue of public policy and as such the Administrative Court has the power to decide it. Therefore, the Arbitral Tribunal has no power to decide the dispute submitted by Hopewell Co. Ltd. (Thailand). According to Section 40 paragraph 3(2)(b) and Section 44 of the Arbitration Act B.E. 2545 (2002), the Central Administrative Court can refuse the recognition and enforcement of an award if this is contrary to the public policy. Therefore, the Central Administrative Court denied the recognition and enforcement, set aside the award and issued an order for returning to the parties all the court fees.”

On 22nd April 2019, the Supreme Administrative Court had reversed the decision of the Central Administrative Court.

Details of the decision:

“The Supreme Administrative Court considered the period for submitting the appeal against the award starting from the 9th March 2001 when the Central Administrative Court was established. Therefore, Hopewell Co. Ltd. (Thailand), commencing the appeal to the Central Administrative Court on 24th November 2004, respected the period prescribed by Section 51 of the Act on Establishment of the Administrative Courts and Administrative Courts Procedure B.E. 2542.
The two appellants terminated the concession agreement, prohibited Hopewell Co. Ltd (Thailand) to access the concession area, and retained the sum deposited as security of cost. According to the concession agreement, parties have to enter into negotiation to settle the dispute before starting the arbitration. Hopewell Co. Ltd. (Thailand) tried to enter into a negotiation with the Ministry of Transport and the State Railway of Thailand but without success. Therefore, the precondition for starting the arbitration proceeding was met and the award, on this ground, does not seem to be contrary to the public order.
Regarding the second ground, the arbitral tribunal considered that the concession agreement between the Ministry of Transport, the State Railway of Thailand, and Hopewell Co. Ltd. (Thailand) is a valid commercial contract. Accordingly, since there is no specific law to regulate the prescription for such a contract, the prescription is 10 years under Section 193/30 of the Civil and Commercial Code. When Hopewell Co. Ltd. (Thailand) commenced the arbitration this 10-year period was no expired yet, consequently, the arbitration started rightfully. Although the type of contract and the prescription-period, on which the arbitral tribunal based the award, were different from the ones in the decision of the Supreme Administrative Court, it appears that the dispute was submitted to the arbitral tribunal on time and accordingly the arbitral award did not violate the public policy.
Concerning the third ground, the Ministry of Transport and the State Railway of Thailand issued the letter of termination for the concession agreement without following the procedure prescribed by the contract itself. This procedure requires the parties to attempt a negotiation before terminating the contract, therefore the appellants did not terminate the concession agreement validly. Later, the appellants issued other termination letters while Hopewell Co. Ltd. (Thailand) started removing machines and equipment from the concession area, both the parties’ intentions of terminating the concession agreement. these behaviors showed the when the two petitioners issued many confirmation notices and the objector removed its stuff and did not continue its operation in the area, the circumstance of the two petitioners intended to terminate the agreement. Upon the termination of the concession agreement, each party shall return to the original position, for this reason, the arbitral tribunal ordered the Ministry of Transport and the State Railway of Thailand to pay Hopewell Co. Ltd. (Thailand): 2,850,000,000 Baht corresponding to the Hopewell’s investment, the amount deposited as a guarantee, 33,749,800 Baht for banking cost, 9,000,000,000 Baht for damages plus interest. The Supreme Administrative Court agreed that the decision regarding the termination of the concession agreement included in the arbitral award is not contrary to the public policy. Moreover, the decision regarding the breach of the contract is based on the facts of the case and falls under the discretion of the arbitral tribunal. For these reasons the content of the arbitral award regards only the relationship between the parties of the contract and it does not concern the public policy. On this ground, it is not possible to set aside the arbitral award.
The Supreme Administrative Court reversed the decision of the Central Administrative Court, dismissing the appeal and order to recognize and enforce the arbitral award. Both the appellants have to comply with the arbitral award within 180 days from the date of the present decision and return all the court fees to Hopewell Co. Ltd. (Thailand).”

On 18th July 2019, both the Ministry of Transport and the State Railway of Thailand had authorized the Public Prosecutor to file a request for a new trial according to Section 75 of the Act on Establishment of the Administrative Courts and Administrative Courts Procedure B.E. 2542.

On 23rd August 2019, the Central Administrative Court had rejected the request for a new trial.

The Observation of the Court:

The reasons for the request for a new trial by the Ministry of Transport and the State Railway of Thailand were: the excessive period to exercise the right to start an arbitration, the termination of the concession agreement, and lastly the non-return to the parties’ original positions. The Central Administrative Court rejected the request, considering all these reasons falling under the discretion of the arbitral tribunal and against the decision of the Supreme Administrative Court.
The fact that the Supreme Administrative Court did not return the case to the Central Administrative Court for a new decision falls under the discretion of the Supreme Administrative Court. Moreover, there is no law obliging the Supreme Administrative Court to return the case to the Central Administrative Court, it is in the power of the Supreme Administrative Court to dismiss the case or return it to another court for a new decision.
The argument of entering a contract with a foreign company, raised against Hopewell Co. Ltd. (Thailand), is not a new one since this fact was known since the beginning and no objection was brought about it during the arbitration proceeding and the administrative proceeding. Therefore, the reason raised for requesting a new trial did not meet the criteria under Section 75 paragraph 1(1) and (3) and Section 75 paragraph 2 of the Act on Establishment of the Administrative Courts and Administrative Courts Procedure B.E. 2542.
Therefore, for the above mention reasons the Central Administrative Court rejected the request for a new trial.

On 18th October 2019, the State Railway of Thailand had started a lawsuit at the Central Administrative Court against the Department of Business Development of the Ministry of Commerce, for the illegal establishment of Hopewell Co. Ltd. (Thailand). The establishment was contrary to the Revolutionary Council No. 281 on the business of foreigners and contrary to the regulations of the Company Partnership Registration Office on the registration of partnerships. For these reasons, Hopewell could not enter into the concession agreement (due to the negotiation between the parties in this dispute and Hopewell Co. Ltd. (Thailand), the case at the Central Administrative Court had been suspended).

The Ministry of Transport and the State Railway of Thailand (Appellants) had appealed against the decision of the Central Administrative Court.

On 3rd July 2020, the Supreme Administrative Court had confirmed the Central Administrative Court’s decision to reject the request for a new trial.

Summary of the reasons:

“The grounds raised by the appellants against the decision of the Central Administrative Court did not meet the requirements provided by Section 75 paragraph 1(1) and (3) of the Act on Establishment of the Administrative Courts and Administrative Courts Procedure B.E. 2542. These grounds require the decision to be illegal or unjust, the simple fact that the decision of the Central Administrative Court is against the Ministry of Transport is not enough to qualify that decision as illegal or unjust.
Regarding the fact that the Supreme Administrative Court did not reverse the case to the Central Administrative Court for a new decision, this cannot be considered unjust but falls under the discretion of the Supreme Administrative Court according to Article 112 paragraph 1(1) of the Rules of the General Meeting of the Judges in the Supreme Administrative Court on Administrative Procedure, B.E. 2543. This article does not oblige the Supreme Administrative Court to dismiss the case, to reverse it to the Central Administration or to decide the case by its own decision. It is in the discretion of the Supreme Administrative Court to decide what to do based on the facts of the case. Accordingly, the Supreme Administrative Court decided to dismiss the case without reverse it to the Central Administrative Court for a new decision. In conclusion, the decision of the Central Administrative Court does not contain errors sufficient to justify a new decision on the case.
Regarding the capacity of Hopewell Co. Ltd. (Thailand) to be a part of the concession agreement, despite the facts concerning the capacity of Hopewell Co. Ltd. (Thailand) about the corporate registration certificate issued by the General Director of the Commercial Registration Department), this issue was claimed by both appellants existed also at the time when parties entered into the concession agreement. Therefore, both the appellants should have examined the capacity of the other party before entering into the contract. Moreover, the draft of the agreement shall be examined by the Minister of Public Prosecutors (the Office of the Attorney General) before signing the contract. Both appellants were parties of the concession agreement and since they are government bodies, they have the authority to check by themselves.
The appellants did not examine the existence of such facts and never raised this issue during both the arbitral proceeding and the administrative proceedings (Central Administrative Court and Supreme Administrative Court). The documents claimed by the appellants cannot be considered new evidence, as prescribed in Section 75 paragraph 1(1) and (3) of the Act on Establishment of the Administrative Courts and Administrative Courts Procedure B.E. 2542, since they were known since the parties entered in the concession agreement.
Regarding the ground of power of the Central Administrative Court to accept the request for a new trial, according to Section 3 of the Act on Establishment of the Administrative Courts and Administrative Courts Procedure B.E. 2542, such request was presented as a new one.
However, since the abovementioned provision does not specify to which administrative court the request has to be presented, the general principle has to be followed. This principle provides that the request has to be submitted to the Central Administrative Court unless it is a case falling under the provision of Section 11 of the Act on Establishment of the Administrative Courts and Administrative Court Procedure B.E. 2542, and the present case does not fall under the cases mentioned in this Section.
Therefore, the Central Administrative Court has the power to reject the request for a new trial.

In this regard, the decision of the Supreme Administrative Court is considered final. Despite accepting the decision of the Supreme Administrative Court and fully cooperate for its execution, the Ministry of Transport had appointed a working group to further study the case.

For further information, please contact THAC!

The Conclusion of the Hopewell Case that Lasted for more than 30 years