Non-Compete Agreements: Protecting Your Business Interests in Thailand

In the dynamic world of business, non-compete agreements are crucial tools for safeguarding proprietary information and preventing conflicts of interest. In Thailand, like elsewhere, these agreements require careful consideration to ensure enforceability and fairness.

Several scenarios necessitate non-compete clauses:

• Business Acquisitions: Buyers understandably want to prevent sellers from immediately launching competing business.
• Employment Contracts: Companies investing in employee training and knowledge-sharing need protection against departing employees using that knowledge to benefit competitors. This is especially vital in sectors with high intellectual property value.
• Joint Ventures: Partners sharing technology and know-how must protect their contributions from being used against them by the other party.

However, section 43 of the Thai Constitution, guarantees freedom of occupation and fair competition. In addition, the Unfair Contract Terms Act further emphasizes fairness, limiting the enforceability of overly restrictive clauses.

Therefore, crafting an enforceable non-compete agreement in Thailand requires specificity:

• Clearly Defined Geographic Scope: Specify the exact region where competition is restricted. Unspecified location is unenforceable.
• Identified Individuals: Clearly state which roles/individuals are bound by the agreement (e.g., directors, senior management).
• Reasonable Timeframe: Thai courts generally consider two years as the upper limit for non-compete duration (Supreme Court Judgment No. 3597/2018).

Why is this important? A well-drafted non-compete agreement is an investment in your business’s long-term security. It protects your market share, proprietary knowledge, and competitive advantage. However, poorly constructed agreements can be deemed unenforceable, leaving your business vulnerable.