Are NDAs legally binding in Thailand? A guide for employers

If you're looking to hire in Thailand, it's vital to understand how Non-Disclosure Agreements (NDAs) work there. Imagine launching a startup in Bangkok, only to discover that your standard non-disclosure agreement (NDA) doesn't hold up under Thai law. It's a scenario you'd want to avoid.

An NDA is a key tool to protect your business secrets, such as intellectual property, confidential information, or trade secrets. And when you're doing business internationally, making sure your NDA is legally sound is crucial.

To give you a better understanding of how to safeguard your business interests when hiring in Thailand, we'll cover how NDAs work under Thai law, including common questions you may have about NDAs in Thailand.

What is an NDA?

An NDA, or Non-Disclosure Agreement, is a legally binding contract between two or more parties. It is designed to protect sensitive information—like trade secrets, customer lists, or proprietary information—from being disclosed or used without the consent of the disclosing party. In essence, it's a promise of confidentiality.

In Thailand, the concept of an NDA aligns with global standards, but with unique nuances. While the Thai Commercial and Civil Code doesn't explicitly recognize NDAs, Thai courts generally respect their terms if they are fair, reasonable, and don’t conflict with public policy or good morals. However, the lack of specific legislation can make their enforceability tricky.

The challenge lies in carefully crafting an NDA that holds up under Thai law. A misplaced clause or a misunderstood local legal principle can make your NDA less effective—or worse, unenforceable. This is why it's crucial to understand the Thai legal landscape when setting up NDAs for your business in Thailand.

Are NDAs enforceable in Thailand?

The short answer is yes, NDAs can be enforceable in Thailand. However, here are some major caveats and rules to consider:

• Lack of explicit legislation: Unlike some jurisdictions, Thai law does not have explicit legislation dealing with NDAs. However, the principles of contract law under the Thai Civil and Commercial Code apply, and Thai courts generally respect and enforce the terms of NDAs if they are fair and reasonable.
• Unfair contract terms: Any contract term deemed "unfair" may not be enforceable. Thai courts have broad discretion to determine what constitutes an "unfair" contract term.
• Public policy and good morals: Thai courts may refuse to enforce an NDA that contravenes public policy or good morals. This is another area where the courts have broad discretion.
• Language of the agreement: NDAs written solely in English may be enforceable, but it is advisable to have the agreement in both Thai and English to avoid any misunderstandings or disputes over interpretation.
• Jurisdiction and dispute resolution: The choice of jurisdiction and dispute resolution mechanisms can have a significant impact on the enforceability of the NDA.

Remember, the enforceability of an NDA in Thailand largely depends on how well it is crafted to comply with Thai law and norms. It's always advisable to seek legal counsel when drafting or enforcing an NDA in a foreign jurisdiction.

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Three things you need to know about NDAs in Thailand

1. There are different kinds of NDAs in Thailand

Generally, NDAs can take two forms: unilateral or bilateral. Unilateral NDAs involve one party agreeing not to disclose the confidential information of another. Bilateral NDAs, on the other hand, involve two parties who agree not to disclose each other's confidential information. Both types can be used in Thailand, depending on the nature of your business relationship.

2. There are specific rules to make them enforceable

As mentioned earlier, an NDA needs to be fair, reasonable, and not go against public policy or good morals. Also, including both Thai and English versions in the agreement, and clearly defining the choice of jurisdiction and dispute resolution mechanisms, can enhance enforceability.

3. They are not rarely enforceable

NDAs can be enforceable in Thailand if they are well-drafted and adhere to Thai legal principles. However, if an NDA is not feasible or enforceable for some reason, you can consider other methods of protection. These can include:

• Restrictive covenants in employment contracts
• Intellectual property rights protections such as patents, trademarks, and copyrights

It's always advisable to seek professional legal advice to identify the best strategies for your specific situation.

When would an employee or contractor sign an NDA?

In Thailand, there are several instances when an employee or contractor might sign an NDA:

• Beginning of a business relationship: This sets early confidentiality expectations.
• Promotion or role change: If a new role involves access to sensitive information, an NDA might be required.
• Start of a new project: NDAs may be necessary when a contractor begins a project that involves proprietary information.
• End of employment or contract: An NDA could protect confidential information after a work relationship ends.
• During mergers and acquisitions: NDAs may be needed when employees or contractors have access to sensitive information during these processes.
• Introduction of new products or services: Those involved in the development or launch might sign an NDA to protect details.

Regardless of the situation, ensuring the NDA aligns with Thai law is crucial for its enforceability.

Frequently asked questions about NDAs in Thailand

Are NDAs enforceable in Thailand?

Yes, NDAs can be enforceable in Thailand. However, it's important to note that unlike some other jurisdictions, there's no specific legislation for NDAs in Thai law. Enforceability largely depends on the terms of the agreement being fair, reasonable, and not against public policy or good morals. Agreements should ideally be written in both Thai and English, and clear dispute resolution mechanisms should be defined. Always consult legal counsel for drafting or enforcing an NDA in Thailand.

Are NDAs enforceable overseas?

The specific laws of the foreign jurisdiction where you seek enforcement will determine if a Thai NDA is enforceable overseas. Generally, foreign courts are likely to recognize an NDA valid under Thai law, thanks to principles of international law. However, it's essential to include the governing law and jurisdiction in the NDA. Also, these provisions should be acceptable in the foreign country. Always engage an experienced international law firm when handling cross-border NDA issues.

What information can be covered by an NDA in Thailand?

A Thai NDA can cover a wide array of confidential information, including:

• Trade secrets: These are proprietary methods, processes, or systems unique to your business.
• Intellectual property: This includes patents, copyrights, designs, and trademarks.
• Customer lists: Detailed information about clients can be highly sensitive and valuable.
• Financial information: Details about a company's financial status or strategies are often confidential.
• Business strategies: Plans for expansion, marketing strategies, and other business plans can be protected.

Again, specificity strengthens your NDA. Consult with a legal professional to ensure your NDA effectively covers your company's sensitive information.

When should you use an NDA?

When conducting business in Thailand, consider using an NDA in these scenarios:

• Hiring employees or contractors: To protect confidential information and trade secrets during their employment or contractual period.
• Business partnerships: When entering into a partnership or joint venture where sensitive information may be shared.
• Product development: If you're developing a new product or service and need to share details with others, an NDA can protect your innovative ideas.
• Mergers and acquisitions: To ensure that sensitive data exchanged during these processes remain confidential.
• Consultations with external experts: When seeking advice from consultants, legal experts, or other professionals, an NDA can protect any sensitive information discussed.

Keep in mind that an NDA is only effective if it's enforceable under Thai law, so always consult with a legal professional.

Is an NDA the same as a confidentiality agreement?

In Thailand, the terms "Non-Disclosure Agreement" (NDA) and "Confidentiality Agreement" are often used interchangeably. Both are legal contracts designed to protect sensitive information from being disclosed.

However, while all NDAs are confidentiality agreements, not all confidentiality agreements are NDAs. An NDA specifically restricts parties from disclosing information, while a confidentiality agreement may include broader terms, such as obligations to protect the information, or restrictions on its use. It's always a good idea to consult with a legal professional to understand the specific implications of these agreements in your situation.

Is an NDA the same as a non-compete agreement?

While both NDAs and non-compete agreements are used to protect a company's interests, they serve different purposes in the context of Thai law.

An NDA, or Non-Disclosure Agreement, primarily focuses on preventing the disclosure of sensitive information.

On the other hand, a non-compete agreement is designed to restrict an individual from starting a competing business or working for a competitor for a certain period after leaving the company.

The two agreements can be included in the same document or be separate, depending on the specific needs of your business. Always consult with a legal professional to understand which type of agreement is most suitable for your situation.

Is an NDA ethical?

Yes, NDAs—which are commonly used in Thailand and globally—are generally ethical. NDAs protect sensitive information and foster an environment of trust.

But they become unethical when used to conceal wrongdoing, suppress victims of misconduct, or unfairly restrict someone's career prospects. The key to ethical NDA use is fairness and reasonableness, avoiding any contradiction to public policy or good morals. Always consult a legal professional for guidance.

Benefits of NDAs in Thailand

An NDA can help protect employers' confidential information and proprietary assets, which can be crucial to a company's success. Benefits include:

• Protecting sensitive information: NDAs protect trade secrets, intellectual property, financial information, and other confidential data from unauthorized disclosure.
• Build trust in business relationships: NDAs foster trust in business relationships, facilitating open communication and collaboration.
• Legal recourse: NDAs provide a legal framework for recourse if a breach of confidentiality occurs.
• Competitive advantage: By safeguarding proprietary information, NDAs help maintain a company's competitive edge.
• Attracting investors: Investors often appreciate the use of NDAs, as it shows a company's seriousness about protecting its valuable assets.

In short, an NDA is a critical tool for any business looking to protect its confidential information while operating in Thailand.

What happens if an NDA is breached?

In Thailand, breaching an NDA can lead to:

• Legal Action: The aggrieved party can take the matter to court, seeking remedies for the breach.
• Damages: The court may order the party in breach to pay damages for the loss incurred due to the disclosure of confidential information.
• Injunction: In some cases, the court can issue an injunction to prevent further disclosure of confidential information.
• Termination of contract: The breach may lead to termination of the contract or employment, depending on the severity of the breach and the terms of the agreement.
• Reputation damage: The party in breach could suffer significant reputational damage, which can impact future business and employment opportunities.

In essence, breaching an NDA has serious legal and reputational consequences.

What should be included in an NDA in Thailand?

An NDA in Thailand should cover the following elements:

• Definition of confidential information: Clearly define what is considered confidential. This could include trade secrets, business strategies, customer lists, and intellectual property.
• Obligations of the receiving party: Detail the obligations, including not disclosing the confidential information, using it only for the agreed purpose, and protecting it with appropriate security measures.
• Exclusions: Identify information that is not considered confidential, such as information already in the public domain or known to the receiving party before the agreement.
• Term of the agreement: Specify the duration for which the NDA is in effect.
• Consequences of Breach: Outline the remedies for breach, which could include damages, injunction, or contract termination.

Can an NDA be terminated or canceled in Thailand? If so, under what conditions?

Yes, an NDA can be terminated or canceled in Thailand under certain conditions, including:

• Expiration of the agreement: The NDA expires after the duration specified in the agreement.
• Mutual agreement: Both parties agree to terminate the NDA.
• Breach of agreement: If one party breaches the NDA, the other party may have the right to terminate it.
• Completion of purpose: If the purpose for which the NDA was created has been completed or no longer exists, the agreement can be terminated.

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Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.