ABI in the Land of Smiles A Report on Joint ABIThai Educational Projects
The July 1997 devaluation of the Thai Baht plunged Thailand, and ultimately its neighbors, into an economic recession. Recognizing that an overhaul of Thai commercial and bankruptcy laws was needed to instill creditor confidence and to jump-start the Thai economy, in 1998 and 1999 Thailand's lawmakers responded to the challenge by enacting a series of amendments to Thailand's Bankruptcy Act B.E. 2483 (1940).
ABI has played a significant role in providing education1 and guidance to members of the Thai judiciary and draftees of bankruptcy reform legislation, beginning with a visit to Thailand by an ABI delegation in November 1998. In 1999, ABI continued this role by conducting two additional educational programs for members of the Thai judiciary, official receivers and private-sector audiences on matters relating to bankruptcy and business reorganization law reform, practice and procedure. This article reports on the two joint ABI/Thai educational programs that were conducted in Bangkok last July and November.
Summary of Thai Bankruptcy Reform
The 1998 Amendment to the Bankruptcy Act, which took the form of the inclusion of a new "reorganization" section (Section 90) to the old Bankruptcy Act, was undertaken to provide a structure for the reorganization and the restructuring of troubled Thai entities.2 The new reorganization provisions of the Bankruptcy Act, which took inspiration from concepts and principles of U.S. and Singaporean law, was a major step in the direction of bankruptcy law reform. But before the ink was even dry on the new legislation, Thailand's parliament began a long debate on further amendments to the Bankruptcy Act and to Thai commercial law; these debates eventually culminated in Bankruptcy Act Amendment (No. 5) B.E. 2542 (1999).3 The 1999 amendments clarified concepts in the new reorganization section of the Bankruptcy Act and provided, among other things, for the following:
- The establishment of a central bankruptcy court (CBC) with jurisdiction over the entire nation.
- The adoption of a structure of classification of creditors and revised voting procedures in connection with approving a reorganization plan.
- A modification of the preference and fraudulent conveyance "look back" periods to three months for "non-insiders" and a year for "insiders."
- The adoption of the concept of rejection of "onerous contracts."
- The adoption of objective standards for confirmation a plan.
The First Program
On behalf of ABI, the author conducted a series of educational programs in Bangkok to members of the Thai judiciary, court personnel, official receivers and to a private sector audience in July. The seminar at the CBC was to an audience of approximately 25 Thai bankruptcy judges, members of the Thai Supreme Court and court administrators on the role of the judiciary in reorganization cases. Later that evening, the author spoke to an audience of 80 people from the private and public sectors at the Thai Judicial Training Center on the blueprint of a successful chapter 11 case, followed by a discussion of related concepts and principles that could be applied to Thai practice. The author and Doungporn (Kai) Naranong, COO, MB Valuation Services, Dallas, spoke to an audience of approximately 80 people, consisting primarily of Thai official receivers, on the role of private trustees in U.S. liquidation and reorganization cases and on topics relating to valuation and disposition of assets in bankruptcy cases.
Following the formal presentation, Judge Wisit Wisitsora-At, executive director of the new Thai Bankruptcy Reorganization Office (BRO), and the author reviewed audience feedback and began the process of outlining the structure and content of the more in-depth joint ABI/Thai program that was slated for November 1999.
The Second Program
The November Joint ABI/Thai Ministry of Justice Bankruptcy and Business Reorganization Educational Program came at an opportune time. Having had the benefit of four months of experience in handling bankruptcy liquidation cases and reorganization cases, the justices and judges of CBC, the court personnel and the Official Receivers had many questions and issues that they wanted the ABI delegation group to address. The ABI delegation was comprised of the author, Hon. James A. Goodman (D. Maine), Hon. A. Jay Cristol (S.D. Fla.), Daniel M. Glosband of Goodwin, Procter & Hoar LLP, Boston; James H.M. Sprayregen of Kirkland & Ellis, Chicago; Leslie H. Miles Jr. and Naranong of MB Valuation Services; and James Edgerly of The Recovery Group, Boston.
The first week of the November program commenced with a roundtable discussion at the CBC with Deputy Chief Justice Vorandath Bhumithavorn, Deputy Chief Justice Choak Chongsanguan, Judge Wisit, Judge Pornchai Asawawattanaporn (Secretary for the CBC) and Judge Konjuk Phoprom. During these discussions, the Thai judges provided an update on developments at the CBC and the status on issues of concern raised in past and pending reorganization cases, and reported on important statistical information. The Thai justices and judges engaged in open discussions with the ABI delegation on the key issues of concern to Thai judges and practitioners.4 The ABI delegation was then treated to a tour of the CBC courtrooms, the court's administrative offices and the offices of the BRO. On the second day, Judge Wisit led a roundtable discussion conducted at the Thai Judicial Training Center on the scope and structure of the educational program.
Thereafter, the ABI delegation spent the next few days sorting out the two-day program for official receivers on issues principally relating to liquidating cases.5 The first day of that program was in a lecture format, and the ABI delegation's remarks were translated into Thai by
Judges Pornchai, Wisit and Montri Sillapamahabundit. The second day commenced with a presentation by Les Miles on asset valuation theory and practice, which was followed by a break-out session into working groups so that the audience could have a meaningful opportunity to interact with the ABI delegation.
The ABI delegation commenced its second week with a roundtable discussion at the Thai Judicial Training Center with members of the Thai judiciary, a representative of the World Bank and representatives of the Corporate Debt Restructuring Advisory Committee of Thailand. The ABI delegation was asked to present, in summary form, the content of the main program (a "walk through" of a typical chapter 11 reorganization case from beginning to end) while relating U.S. concepts and principles to Thai law. As the ABI delegation had extensively reviewed the Bankruptcy Act and the 1998 and 1999 amendments in advance of the program, the group was able to discuss salient U.S. concepts and principles in the context of Thai law and procedure.6
Following this day-long program, the ABI delegation engaged in informal discussions with representatives of the World Bank and the International Monetary Fund on the recent amendments to the Thai bankruptcy law and further reform initiatives.
The main event consisted of a two-day program for an audience consisting of members of the Thai judiciary, court administrators, a few official receivers, government officials and representatives from the private sector. The first day of the program focused on the analysis of a typical chapter 11 reorganization case from beginning to end. The second day of the program applied the concepts and principles that had been discussed on the previous day to a hypothetical case designed to cover issues of concern to Thai practitioners and judges. The ABI delegation made a concerted effort throughout the program to relate U.S. concepts and principles to Thai law and practice. Judging from the enthusiastic response from the audience, this program was well received.
At the end of the program, the ABI delegation was whisked off to the Ministry of Justice for an audience with a minister of justice, Sutasn Ngenmune. He expressed the appreciation of his Royal Highness, the King of Thailand, the Thai government and his office for all of ABI's efforts, and indicated that he looked forward to a continued and close relationship with ABI on future educational programs.
While the road to economic recovery for Thailand will undoubtedly depend on a number of factors, it is evident to the author that the recent amendments to the Bankruptcy Act and the willingness of members of the Thai judiciary, lawmakers and professionals to explore further amendments and revisions to Thailand's bankruptcy and commercial laws bode well for the future. At present, ABI is working with Thai colleagues on a series of educational programs for 2000 and will undoubtedly continue in its role of providing educational assistance on bankruptcy law and practice and on future reform efforts.
4 A recurring theme was the issue of compensation of professionals in bankruptcy reorganization cases—particularly in light of the fact that many of the professionals that were working on Thai reorganization cases hail from foreign jurisdictions and were billing at foreign hourly rates substantially in excess of rates charged by Thai professionals. Return to article
5 The Thai words for a liquidation case and a reorganization case provide a clear view to the stigma associated with bankruptcy in Thai society. In Thai, the word for "bankruptcy" (involuntary liquidation proceeding) is "lom'lalai," which literally means "fall down on your face and melt." The Thai word for business reorganization is "funfoo," a word that is said to invoke "rebirth" or "reorganization." The ABI delegation was advised that, to the extent Thailand adopts bankruptcy provisions in the future akin to chapters 7 and 13 of the U.S. Bankruptcy Code, they will likely shun "lom'lalai" and adopt a new word for these proceedings. Return to article
6 Since an official English translation of the Bankruptcy Act does not exist, the delegation relied on a bound unofficial translation prepared by the Chandler and Thong-Ek Law Offices Ltd. of Bangkok, Thailand. The author wishes to thank Albert H. Chandler and his firm for graciously providing the delegation with advance copies of the translation. Return to article