International software developers working in Thailand often face legal and operational issues when clients don’t pay for delivered software, claim non-performance, or continue using the product after defaulting. These issues become more complicated when clients are outside Thailand, making legal enforcement harder and increasing dispute resolution costs. This article offers a detailed analysis of common challenges, legal risks, and protective strategies under Thai law to help developers and international tech companies navigate this environment.
I. Common Pitfalls in Software Transactions
1. Non-Payment and Functionality Disputes
Non-payment remains one of the most common issues in software projects. Clients may withhold payment, claiming the software does not meet the agreed standards. This situation can turn into a long dispute if the scope of work, delivery criteria, and testing procedures are not clearly established. Thai developers often encounter the additional challenge of limited client responsiveness after delivery, which delays resolution and affects cash flow.
To address this, contracts should specify clearly defined deliverables, measurable acceptance criteria, and structured payment milestones. If a client does not respond or provide feedback within a set timeframe (e.g., 30 days), the work should be considered accepted and payment becomes due.
2. Unauthorized Software Use and IP Infringement
Clients who continue to use software after failing to pay breach not only their contractual obligations but may also commit copyright infringement under Thai law. Software is protected as a copyrighted work under the Thai Copyright Act B.E. 2537 (1994), and developers retain full ownership until payment is completed unless otherwise transferred. Unauthorized distribution or modification can trigger civil and criminal remedies, including cease-and-desist notices and litigation.
3. Cross-Border Enforcement Challenges
When clients operate outside of Thailand, enforcing a judgment or arbitration award becomes significantly more complicated. Thailand lacks bilateral enforcement treaties for court judgments with most countries, which means judgments issued in Thai courts may not be enforceable abroad. However, Thailand is a signatory to the New York Convention, which facilitates the enforcement of arbitration awards internationally, making arbitration a strategic choice in contract drafting.
4. Corporate Dissolution and Assignment of Contracts
Another risk developers face is the strategic dissolution of client entities or unauthorized assignment of contracts. A client might shut down their Thai subsidiary or transfer the contract to an affiliated offshore entity without the developer’s approval. In a notable case, a client tried to transfer contractual obligations to another company despite a clause requiring prior written consent. Under Section 18.4 of typical Thai MSAs, such assignments are invalid without approval, protecting the developer’s rights.
5. Technical Limitations of Law Enforcement
While Thailand has a cybercrime police division and IP courts, general law enforcement agencies may lack the technical expertise needed to effectively address software-specific disputes, especially in criminal cases. This reduces the practical effectiveness of criminal complaints unless the violation is obvious and widespread. Having specialized legal counsel and thorough evidence preparation is crucial when pursuing criminal remedies.
II. Key Legal Protections in Software Contracts
1. Intellectual Property Ownership
Every software contract should clearly include a clause stating that the intellectual property rights (IPR) in the software, code, and related documentation remain with the developer until full payment is received. This serves as a deterrent against misuse and provides legal leverage in disputes. For example, a Thai developer retained ownership of all code delivered from November 2023 onward due to non-payment.
2. Milestone-Based Payments and Suspension Rights
To decrease payment risk, contracts should specify payments in stages linked to specific deliverables. Additionally, the developer should have the contractual right to pause work if an invoice remains unpaid after a certain period (e.g., 15 days). This provides the developer with more leverage during delays.
3. Acceptance Procedures
Including detailed acceptance testing protocols helps avoid vague claims of poor functionality. A standard approach is to give clients a defined period (e.g., 30 days) to test deliverables and either approve or provide written notice of issues. If no response is received, the work is deemed accepted, triggering the obligation to pay.
4. Due Diligence and Client Vetting
Before entering into agreements, especially with overseas clients, developers should verify the client’s financial stability and corporate history. If the client operates through a shell entity in Thailand, consider requiring a parent company guarantee or director-level assurances.
5. No-Assignment and Change-of-Control Clauses
Include provisions that stop clients from assigning the agreement to third parties without prior written approval. This helps prevent liabilities from being transferred to inaccessible or underfunded entities.
6. Source Code Escrow Arrangements
To reassure clients and prevent disputes, especially in high-value projects, consider using a source code escrow. Keep in mind that although it is valuable, Thailand has few professional escrow providers, so options may be limited.
7. Arbitration Clauses
Considering the enforceability of arbitration awards internationally, software contracts should include arbitration clauses that specify a recognized organization such as the Thai Arbitration Institute (TAI). Additionally, include a clause allowing either party to seek injunctive relief through Thai courts in cases of urgent IP or confidentiality breaches.
III. Enforcement Options Under Thai Law
1. Civil Litigation in Thai Courts
If a client breaches the contract and has assets in Thailand, developers may pursue a civil lawsuit for breach of contract, damages, and interest (default 7.25% per year for commercial claims under CCC Section 224, or a higher rate if contractually agreed). However, for foreign clients without local assets, enforcement becomes difficult.
2. Arbitration at the Thai Arbitration Institute (TAI)
Arbitration is a favored route due to its international enforceability under the New York Convention. Developers can seek payment of outstanding fees, damages, and interest. TAI also allows for interim relief and typically results in faster, more confidential proceedings.
3. Cease-and-Desist Letters
Before litigation, formal cease-and-desist letters can be an effective pressure tool. These should outline the breaches (e.g., non-payment, IP misuse) and warn of forthcoming legal action. In some cases, notifying the client’s partners or customers increases pressure and urgency.
4. IP Infringement Actions in IP&IT Court
The Central Intellectual Property and International Trade Court has jurisdiction over software IP disputes. Developers may seek injunctions, damages, and asset seizures. This court is staffed with technically trained judges and often resolves matters more efficiently than general courts and is now one of the faster specialised courts in Southeast Asia for preliminary injunctions.
5. Criminal Complaints
Under Thai copyright law, unauthorized use or distribution of software is a criminal offense. For commercial infringement, penalties under the amended Copyright Act (Section 69/1, 2022) include fines ranging from 100,000 to 2,000,000 THB and/or imprisonment from 6 months to 4 years. Directors and officers of infringing companies may be held personally liable if the offense is due to their consent, connivance, or neglect (Copyright Act Section 75). Developers can file complaints with the Economic Crime Division or Cyber Crime Bureau. Criminal cases may be resolved through compoundable offenses, often resulting in payment agreements.
IV. Drafting With Cross-Border Enforcement in Mind
- Forum Selection: Arbitration provides globally enforceable outcomes. Ensure the forum (e.g., TAI) is specified.
- Governing Law: Thai law should govern the agreement for consistency with enforcement mechanisms.
- Language and Translation: Use English or bilingual contracts to reduce misunderstandings and disputes.
- Interim Relief Clauses: Preserve the right to seek urgent injunctive relief through Thai courts even when arbitration is chosen for final dispute resolution.
- Legal Fees Clause: Include provisions for reimbursement of legal costs by the defaulting party.
V. Conclusion
Software developers operating in Thailand must approach each transaction with foresight and legal discipline. By implementing strategic contract clauses and being prepared to enforce their rights through arbitration or court, developers can reduce the likelihood of unpaid work and IP misuse. Thai law provides robust tools—but their effectiveness hinges on proactive, well-informed planning from the outset.
For legal advice tailored to your specific situation, consult with a Thai law firm experienced in software and cross-border disputes.
About the Authors
M.L. Numlapyos Sritawat is a founding partner of Formichella & Sritawat and leads the firm’s Litigation and Dispute Resolution practice. With over thirty years of courtroom experience, he has appeared before nearly every level of Thailand’s judiciary, including the Supreme Court. A titled member of the Royal Institution and descendant of a prominent Thai legal family, M.L. Sritawat is well known for his assertive and innovative advocacy, as well as his ability to handle highly complex disputes across civil, commercial, bankruptcy, and criminal law. He frequently represents clients in precedent-setting cases, and his extensive knowledge of Thailand’s courts and procedural law makes him one of the country’s top litigators.
Patchamon Purikasem is an associate at Formichella & Sritawat and a key leader in the firm’s Litigation Department. With extensive litigation experience, she specializes in corporate, commercial, criminal defense, and criminal prosecution cases, managing them from pre-trial strategies to direct trial advocacy. Patchamon’s diverse practice includes complex business disputes, shareholder conflicts, regulatory compliance issues, and high-profile criminal cases, representing both domestic and international clients. Known for her meticulous preparation, sharp courtroom advocacy, and innovative dispute resolution techniques, she plays a vital role in handling evidence-heavy trials and developing strategies to navigate Thailand’s legal system.
Phalavat Kosalanon is an associate at Formichella & Sritawat and a key member of the firm’s Litigation Department. He specializes in pre-litigation strategy, dispute resolution, and trial preparation, regularly assisting with both corporate and regulatory disputes. His practice includes intellectual property litigation, cross-border defamation cases, and complex commercial conflicts. Known for his methodical preparation and litigation tactics, Phalavat supports the firm’s senior partners in managing document-heavy trials and developing innovative strategies to tackle new issues before Thai courts.
The comments herein are for discussion and information purposes only and are not guaranteed to be up to date. Nothing herein should be or can be relied on as legal advice.