Case casts spotlight on Thai investment law

Case casts spotlight on Thai investment law
Financial Times (8 October 2007)

The Thai authorities’ decision to pursue a businessman accused of acting as a nominee in the purchase of Thaksin Shinawatra’s Shin Corp in 2006 has revived questions about pending changes in foreign ownership rules.A Bangkok court last week approved an arrest warrant for Surin Upatkoon, whom police accuse of using funds from Singapore’s Temasek Holdings to purchase a 68 per cent stake in a holding company, Kularb Kaew, which is the majority shareholder in another company that owns 52 per cent of Shin Corp.

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Mr Surin, a Thai national based in Malaysia, has denied any wrongdoing. His lawyers say he is a victim of politics and authorities’ efforts to prosecute Mr Thaksin, the former Thai prime minister who was deposed in a coup in September 2006 after months of protests over the Shin Corp deal. Mr Thaksin faces corruption charges in Thailand, although criminal proceedings have been put on hold as he is in exile.“The case has no grounds for the police to issue an arrest warrant,” said Phisit Dejchaiyasak, a lawyer for Mr Surin. “We can show [Mr] Surin is a big investor in many companies. He has invested in China, Australia and Thailand. Why would a person like this be a nominee? ”Temasek is not the subject of any charges and a spokesman said Singapore’s sovereign investment fund did not want to comment until it saw the result of the case against Mr Surin. But the case is being watched closely by foreign investors, because if Mr Surin is found guilty it could have repercussions for Temasek, Shin Corp and any foreign companies using Thai nominees. If Kularb Kaew is declared a nominee, that could be in violation of Thailand’s Foreign Business Act. Were Shin Corp defined as a foreign company it could see its licence to operate Thailand’s top mobile phone operator revoked. Or, at the very least, Temasek could be forced to sell down its stake to below 50 per cent. The Kularb Kaew case inspired the military-appointed government to propose changes to the Foreign Business Act that would define a company’s nationality by voting rights and not by shareholding, in an effort to stop the use of nominees. The bill, which has faced widespread opposition from both Thai and foreign investors, is now stalled in parliament. Analysts warn the case could have broader implications for hundreds of foreign investors who have used nominees to invest in Thailand. But the government is seeking to prosecute the Kularb Kaew case in a way that would limit the fall-out, analysts say.