Report Analysis of ITV Case & Shin Satellite Case
Part-1: ITV Case
1. A law relevant to ITV incident was passed in 1992 called Private Participation in State Undertaking ACT, B.E. 2535 (PPA Law).
1) PPA Law aims to regulate government agencies granting license or concession to private sector with project size larger than 1 billion baht.
2) PPA Law requires certain key processes, i.e., the setup of project committee and Cabinet’s approval.
2. Prime Minister Office (PMO) granted ITV license since 1995. There are 4 clauses relevant to this incident
1) ITV is required to pay concession fee to PMO amounting to 1 billion baht a year for the later years.
2) Content Ratio: ITV is required to air a 70/30 ratio of news and documentary over entertainment programs of its airtime, and restriction during prime-time. In case of violation, ITV will be fined at 10% of its concession fee per year payable daily and license may be revoked if violation persists.
3) Non-Competing: ITV is entitled to remedy in case government allows or does not prevent TV advertising commercials, a) by any other existing TV channel who was previously not allowed such advertising; or b) by other new private TV channel.
4) Arbitration: The Arbitrator’s ruling of any of the parties’ contractual dispute is deemed to be final.
3. Shin Corporation became major shareholder of ITV in December 2000 and after that there were series of capital increase and stock market listing so finally Shin has more than 50% shareholding.
4. In November 1999, other existing channels were allowed to air TV advertising commercials.
1) ITV at the time notified PMO of contractual breach and requested remedy, but to no avail.
2) In March 2002, after almost 3 years, PMO admitted such breach and opened discussion for remedy but to no avail.
3) September 2002 ITV sought Arbitration judgment to settle the dispute with PMO.
4) In January 2003 the Arbitrator ruled in favor of ITV based on the Non-Competing clause, leading to license contract amendment, with remedies of refund and reduction of concession fee; Content Ratio change to 50/50 and no prime-time restriction.
5) Shortly after, ITV implemented the remedies and PMO sought
5. In May 2006, the
6. In December 2006 the
1) On ground that the Non-Competing clause was not legally valid or binding because it was not submitted for approval by the cabinet since its first license contract signing in 1995 as required by the PPA Law;
2) And that ITV could not excuse of innocent of signing the contract without knowing that PMO did not seek cabinet approval of the clause because PPA Law is a law.
3) So ITV must pay concession fee and follow the Content Ratio as per the original contract, but the Court did not rule on any fine or punishment.
4) Note that earlier there were other amendments to ITV license contract but they were all properly submitted to the cabinet.
6. PMO then ordered ITV to pay by early March 6, 2007 for difference of what ITV implemented Arbitration’s ruling making up to the original contract.
1) All unpaid concession fee and interest charge amounting to 2 billion baht.
2) Fine for violating Content Ratio at “100 million baht per day” (10% of 1 billion baht per year concession fee payable daily), amounting to 100 billion baht.
3) Counting from the day ITV implemented Arbitration’s ruling in January 2003 (100M x 3 years or 1000 days).
4) Note that such huge fine was heavily criticized by the public of exorbitant and unreasonable.
7. ITV responded to PMO that it obeys the court judgment and is willing to pay the concession fee of 2 billion baht, but it has different view on the fine.
1) That it implemented the different Content Ratio only because of the Arbitration’s ruling, not an intention to violate. Thus any violation should be deemed to happen only if it still violates the required Content Ratio after the Court’s ruling (which ITV immediately resumed after the
2) In case of violation and fine, its calculation method results in far less than PMO’s 100 billion baht fine, and requested PMO to recalculate.
3) ITV’s calculation of the fine is 10% of 1 billion baht per year concession fee amounting to 100 million baht per year and “payable” per day, thus amounting to 274,000 payable per day, and for 1000 days then amounting to 274 million baht.
8. But PMO still insisted its order and calculation of fine. With such potential risk exposure of PMO’s claim of 100 billion baht fine, as such it becomes impossible for ITV to find financing supports even for the part of 2 billion baht concession fee (let alone the fine), from financial institutions or from the shareholders to increase capital.
9. With ITV’s inability to pay the 2 billion baht concession fee (and the fine) by the March 6 deadline as demanded by PMO, PMO revoked ITV license and all assets transferred to PMO becoming a new government channel called TITV.
1) But prior to that the government indicated that it will find way not to keep ITV’s employees and the broadcast continue without interruption.
2) Then on March 6 the cabinet ordered the shut down of ITV broadcast until a full transfer to TITV in a month time.
3) But on March 7 the Council of State interpreted the relevant law that PMO is able to appoint the Public Relation Department (PRD) to assume ITV operations
4) On the same day the
10. Even though ITV business was already transferred to PRD as TITV, ITV is still a publicly listed company and the shareholders are going to convene on March 26 to decide whether it will sue PMO to protect its interest as follows:
1) That the calculation of the fine is unfair and excessive, and ITV’s calculation is reasonable and the license be resumed.
2) That PMO’s not submitting the Non-Competing clause for cabinet approval (at the time of first contract signing in 1995) is an act of negligence of governmental duty under the criminal law, and thus PMO must be responsible for the consequence of this litigation.
3) That PMO’s not submitting the amendments (as per the Arbitration’s ruling of January 2003) for cabinet approval (which has the authority to legalize such amendments according to the PPA Law, in order to bring to compliance with the license contract which stipulates that the Arbitrator’s ruling of any of the parties’ contractual dispute is deemed to be final) is both an act of negligence of governmental duty under the criminal law and a breach of the license contract, and thus PMO must be responsible for the consequence of this litigation.
4) In case the civil court rules in favor of ITV and PMO at fault, then the court may order PMO that ITV license be resumed, and asset be returned, and other remedies be awarded. Though this process may go over 3 courts and take a few years.
Part-2: The ramification of ITV case to Shin Satellite case
1. ICT Ministry politician commented in press interview that based on ITV license termination case that was caused by the unauthorized amendments of ITV license contract (which did not obtain proper Cabinet’s approval), Shin Satellite, being suspicious of similar irregularities of license contract amendments, would face similar consequence to that of ITV.
2. The short explanations to this comment are that the allegation is groundless
1) That there were no irregularities in such contract amendment as claimed.
2) All amendments are properly executed and approved.
3) The requirement to seek proper Cabinet’s approvals for such contract amendments, and any of its legal implication are very different between ITV case and Shin Satellite case.
3. The Shin Satellite case relating to ITV case:
1) Shin Corp’s minimum 51% shareholding in Shin Satellite as required by the license contract was reduced to 41% in mid 2005 but was not approved by the cabinet as required by the PPA Law.
2) Shin Satellite’s launching of Thaicom-3, 4 and 5 satellites (on the issues of back-up satellite requirement and specifications) was not in compliance with the original license contract but was not approved by the cabinet as required by the PPA Law.
3) As such Shin Satellite may violate the license contract and the PPA Law, thus may face similar license termination like that of ITV.
4) But the fact is there are many differences between the Shin Satellite case to that of ITV case.
4. There are 3 phases in the PPA Law, namely firstly “Submission of Project” phase (to start the project), secondly “Project Implementation” phase (to tender and sign contract for the project), then thirdly “Supervision and Monitoring” phase (to carry out the project).
1) Each phase requires a setup of a dedicated coordinating committee to carry out each phase.
2) Only Submission of Project and Project Implementation phases that require Cabinet’s approval for major changes.
3) In Supervision and Monitoring phase, there is no requirement for Cabinet’s approval for any amendment, but only report submission to cabinet in case of non-compliance to the contract. See below.
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Section 23. The coordinating committee under Section 22 shall have the following powers and duties: (1) to monitor and supervise the implementation as provided in the agreement; (2) to report the result of implementation, progress, problems and solutions to the Responsible Minister for information. Section 24. In the case where it appears that the project agency neglects or fails to comply with the binding obligations of the agreement which has already been signed, the representative of the Ministry of Finance in the coordinating committee shall submit the report to the Minister of Finance for further submission to the Council of Ministers. |
5. In ITV case, the Court’s ruling to invalidate the Non-Competing clause lacking Cabinet’s approval was that of the original license contract signed in 1995, which was part of the Project Implementation phase (Cabinet’s approval required).
1) All Shin Satellite cases were in the Supervision and Monitoring phase, the coordinating committee had the authority to carry out the contract and Cabinet’s approvals were not required.
2) The launches of Thaicom-3, 4 and 5 satellites were already provided in the license contract and properly approved and contract was amended by the coordinating committee as stipulated by the license contract.
3) On the shareholding reduction, even though Section 24 of the PPA Law does not require Cabinet’s approval for contract amendment, but the ICT Ministry and the coordinating committee did seek Cabinet’s approval as a precaution back in 2004. But the Secretary of the Cabinet at the time returned the submission on view that such approval was unnecessary, which was also reconfirmed again by the government’s Office of the Attorney General. So transaction process of this case is highly proper.
6. PMO terminated ITV license because ITV did not pay the 2 billion baht concession fee, not on the direct breach of license contract or the direct violation of the PPA Law.
1) In which such inability to pay is caused by PMO’s demanding excessive payment of 100 billion baht.
2) In which the clause for fine penalty was provided for in the contract.
3) In which such excessive fine was the result of amendments (without Cabinet’s approval) calculating from January 2003.
4) In which the lack of Cabinet’s approval is PMO’s fault, not that of ITV, which ITV may sue PMO for such fault.
5) While Shin Satellite license contract has no such clause of fine penalty in the contract that may cause Shin Satellite inability to pay. If Cabinet’s approval is required (which is the duty of the ICT Ministry) in any past amendments, then the remedy is for the ICT Ministry to seek proper Cabinet’s approval, not about penalizing Shin Satellite or terminate any license contract.
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Final Note This lengthy analysis aims to explain that there are inherent legal reasons and proper court litigation to the ITV case, and as such to Shin Satellite case, if any. The case ahead will not be a lawless political punishment caused by the political conflict of the new and previous governments; and that Shin Satellite case is very different from that of ITV case but may have been portrayed wrongly and exaggerated by politicians and media as a result of current political sentiment. |