TAX AND LEGAL

Navigating the Boundaries of Legal and Regulatory Compliance

Tanva Mahitivanichcha Tanva Mahitivanichcha

Navigating the Boundaries of Legal and Regulatory Compliance

 

In April, the Bangkok Post reported a curious case of Thailand forcibly removing a US national’s “seastead” residence on the grounds that it compromises Thai sovereignty. “Seasteading” is described as the making of a home in a new, previously uninhabited place at sea, and is associated with the concept of autonomy, self-sufficiency and a frontier lifestyle.[1] This is usually achieved by building residential structures just beyond the fringes of a country’s territorial waters in an attempt to remove the structures from any governmental control.

On paper, the seasteading concept seems to be a libertarian’s dream come true – the ability to live free and clear of any government oversight and control. In the case at hand, the US national had built a residential structure just beyond Thailand’s territorial sea, though it still rested within the country’s contiguous zone. This case will no doubt be raised by Thai law professors for years to come when lecturing on the United Nations Convention on the Law of the Sea.

 

Pushing Against Economic Boundaries

Demarcating national boundaries have always been contentious.  In this technology driven economy, start-ups are not only challenging the traditional economic models, they are creating virgin commercial landscapes that are uncharted and unpopulated by competition.  And in some cases, eroding the traditional concepts of national boundaries. As a result, these novel businesses sometimes grow astronomically by exploiting digital technology to expand their footprint onto the global stage in a matter of a few short years.

Often, the economic and commercial models are so avant-garde or novel that existing laws and regulations do not seem to apply or have jurisdiction over them. The result is a “tug of war” relationship between the start-ups and regulators. In 2018, we saw a legal roadblock against Airbnb, with a Thai court ruling that property owners must possess a hotel licence in order to rent out residential space on a daily basis. As a result of this judicial decision, Airbnb’s challenge to traditional hotel operators had been severely dampened in Thailand.

Similarly, ride sharing or hailing service providers like Uber or Grab have seen legal challenges as to whether drivers of privately-owned vehicles may legally operate passenger transport services. Shared or co-working space operators also saw their business model challenged, as the Thai Revenue Department toughened its scrutiny on companies registering as value added tax (VAT) operators without assigned and physically segregated offices.

In a regulatory vacuum or legislative ambiguity, what’s right or wrong is often a matter of perspective. Issues or problems are usually not flagged until the business flourishes and is effectively disrupting the status quo. Only then does the start-up business truly catch the eyes of regulators and traditional business operators who are adversely affected.

Somewhere between the start-up phase and the exponential growth phase, the start-up management or owners must develop a plan to engage the stakeholders and regulators. Conversations on “how to regulate” and “how to address stakeholders’ concerns” are best started early. This proactive strategy is essential if the up-and-coming challenger intends to have a role in helping shape regulations that would – slowly but surely – be imposed on the business. Otherwise, there is a far greater risk of being locked out of their own markets through legislation, and finding themselves effectively stranded out at sea.

 

[1] See, www.seasteading.org.