Prime Minister Sura-yud Chulanont yesterday told his Singapo-rean counterpart the military-backed government would not intervene in the judicial process over the controversial Temasek Holdings takeover of Shin Corp.

This followed a bilateral meeting between the two leaders on the sidelines of the Asean-China Summit in Nanning, China. It marked Surayud's first international meeting with top regional leaders.

Singaporean Prime Minister Lee Hsein Loong asked Surayud how Temasek's buy-out of Shin Corp could be amicably resolved.

In a rare move, Lee sought a way out for Temasek, which is the Singapore government's investment arm.

He had been quoted as saying on several occasions the takeover of Shin Corp was based on business judgement alone and had nothing to do with the Singaporean government.

"Although there might be some legal problems with the Shin Corp deal, I reiterated that everything will be done according to Thai law and by the justice system", Surayud told reporters after the meeting.

The Thai government was aware the deal had been finalised and would not intervene in the matter, which was entering the judicial process, he added.

Temasek has encountered legal problems over the Bt140-billion takeover because it may have violated laws that prevent foreigners from owning more than 49 per cent stake in local companies.

The Supreme Administrative Court is considering whether officials at the Information and Com-munications Technology Ministry and the Prime Minister's Office failed by not revoking the licences from Shin Satellite and iTV after the two Shin Corp subsidiaries came under the control of Temasek.

Moreover, the Commerce Minis-try's Business Development Depart-ment had concluded that Temasek might have used nominees to circumvent the law in the acquisition. The police are investigating.

In January, ousted prime minister Thaksin Shinawatra's family sold its 49-per-cent stake in Shin Corp to Temasek for Bt73 billion without paying tax. This prompted massive protests and a political snowball that eventually cost him his job.

The Temasek takeover has be-come a full-blown political issue, putting the Lee family in an awkward position. Ho Ching, the CEO of Temasek, is the wife of the prime minister.

On October 6, Lee told a group of editors from Asia and Europe that Temasek's overseas investments were based on commercial judgement and the overall political environment. "I think Temasek must make its judgement about the commercial prospects of the companies it invests in. It must make an assessment of the political environment in the countries it invests in. And they must decide where they want to go," Lee said.

Lee added at the time the coup was a setback for Thai democracy.

However, political repercussions of the Shin-Corp deal have caught Temasek off guard. If it is found to have violated the law, Temasek would be forced to dilute its stake in Shin Corp to below 50 per cent. This would result in a big realised loss.

In spite of the controversial deal, Surayud added that relations with the city-state remained "excellent" and his government would continue to promote cooperation with Singapore.

Surayud will visit Singapore ahead of APEC in Hanoi between November 14 and November 19.