Understanding the Treaty of Amity

Treaty of AmityA recent posting on this blog on the subject the Foreign Business Act 1999, the primary Thai law regulating foreign ownership of businesses in Thailand stated that there were some exceptions to the Act.

One such exception is those individuals/companies covered by the Treaty of Amity 1966 or to give it its full name The Treaty of Amity and Economic Relations between the Kingdom of Thailand and the United States of America. This current treaty is the present incarnation of the Treaty of Amity and Commerce between Siam and the United States signed in 1833. The 1833 treaty, sometimes called the Roberts Treaty, was the first to be signed by the United States of America with an Asian nation.

In 1857 the J.W. Parker Company became the first American firm to open its doors in Thailand The friendship between the two nations has endured until the present day.

The 1966 treaty, signed in the same year that President Lyndon Johnson became the first American president to visit Thailand, had as an objective the promotion of trade, commerce, cultural understanding and reciprocal legal rights between the United States and Thailand. It granted Americans, making investments and conducting business in Thailand, ‘national treatment’ , albeit with some restrictions *. ‘National treatment’ meaning that American nationals might engage in business on the same basis as Thai nationals. American nationals, registering under the treaty would be exempt from the majority of the later restrictions imposed on foreign investment by the Alien Business Law 1972 and the subsequent Foreign Business Act 1999

The United States is not the only country to have a treaty with Thailand that provides for exceptions to restrictions on ownership and control of businesses in Thailand. Countries such as Japan and Australia also have treaties but the exceptions contained within them are much more limited in scope than those provided by the Treaty of Amity. Simply put for an individual or company to avail themselves of the benefits to be had under the treaty a minimum of 51% of shares in the company to be formed must be held by United States citizens or businesses and a minimum of 50% of the company directors must be Thai or United States citizens.

What might complicate this process is that the American shareholders & directors must prove their American nationality to the satisfaction of the Commercial Registration Department. In the case of individuals this should be easy enough through the use of passports. For companies using the treaty however ultimate ownership must be shown and proof offered that the majority of owners and directors in the company at every level, should the applicant company be a subsidiary, are US citizens.

For this reason, in part, Amity Treaty companies take longer and are more expensive to register than Thai companies. Treaty companies are also restricted to engaging in the activities that they have specifically been authorised to engage in by the Ministry of Commerce. Any change in activity would require specific approval. However there are no minimum capital requirements listed in the treaty and it is also possible to transfer the benefits under the treaty to new owners so long as the company retains majority US shareholding and board of directors under the new owners

Occasionally there are press articles contending that the Amity Treaty is inconsistent with WTO obligations and other areas of Thai domestic law and that the treaty will expire. Certainly there is no guarantee that the Amity Treaty will remain in force forever but until one country gives the other country one year’s notification of its termination it should remain in force.

Should you be thinking of forming a company here in Thailand contact the Sutlet Group now to discuss your options

* Under the Treaty, Thailand restricts American investment only in the following fields of business:

  1. Communications
  2. Transportation
  3. Fiduciary functions
  4. Banking involving depository functions
  5. Owning of or exploitation of land and natural resources
  6. Domestic trade in agricultural products.