Thailand's perception as a haven for foreign investment has been shaken after environmental activists and residents succeeded in a court order halting dozens of industrial projects worth almost $10 billion. The battle for the environment led to warnings any delays may damage the Thai economy. However, lawyers for the environmentalists say steps were necessary, after years of official neglect.

Foreign investors in Thailand say moves by environmentalists to press for suspension of projects in industrial estates, nationwide, may undermine investor confidence.

The warning comes a fortnight after a group of non-governmental groups and residents from the eastern seaboard province, Rayong, successfully applied for a court injunction to halt 76 industrial projects.

The injunction led to a flurry of moves by the Thai Government to appeal the injunction and ease investor concerns.

This week, the Thai cabinet passed environmental protection legislation to support existing laws that call for a greater community role in assessing new industrial projects. The new legislation may go before parliament in February.

The Thai constitution calls for the setting up of special committees to assess the environmental impact from industrial development.

But, despite the clause, which has been in the constitution since 1997, the government has not passed the supporting legislation or laws to enforce the article from the constitution.

The court action was led an alliance of environmental groups and residents from Rayong, who accused state agencies and governments of failing to follow proper procedures in providing operating licenses at the Map Ta Phut industrial estate in Rayong province.

Nandor G. van der Luehe, chairman of the Joint Foreign Chambers of Commerce in Thailand, says the ruling unsettled many foreign investors.

"These companies have followed the normal rules," he noted. "They have received approvals from the state authorities. All of a sudden you have a court ruling that they have to stop. What we need is a predictable situation where you know what the playing field is and not all of a sudden to start to play the game the rules are changed."

Hardest hit by the court decision was Thai oil and gas conglomerate the Petroleum Authority of Thailand, which had more than 20 projects under way, with affiliated companies. Foreign investors include those from Japan, Germany, Australia and India.

Thai industrial groups warn of unemployment, as a result of the stoppages.

But Somchai Homla-or, a member of the Thai Lawyers Society that assisted the groups, says years of delay and rising pollution from the estates had led the communities to take the legal action.

"Many governments never pay attention to the enactment of the organic law," Somchai said. "So the environmentalists and the communities who suffer from the bad environment cannot tolerate it anymore."

Finance Minister Korn Chatikavanij warned the delays - which is likely to be up to a year -- could shave half a percentage point off Thailand's economic growth. The Thai economy, forecast to shrink by three percent this year, is only showing signs of a fragile recovery from the global recession.

But Law Society's Somchai says new legislation, once in place, will provide a better balance between investment and environment and ensure industrial development in Thailand is more sustainable.