The class action lawsuit, filed in April last year on behalf of more than 3,000 Cambodian plaintiffs, accused the Thai sugar giant Mitr Phol of violently displacing them in Cambodia's northwestern Oddar Meanchey province between 2008 and 2009 to make way for plantations.
Mitr Phol said it had invested in Cambodia in "a good faith partnership" with the Cambodian government and got temporary concessions in compliance with all local and national laws.
On Thursday, a Bangkok civil court ruled that the case brought by the villagers was not suitable to be treated as a class action due to communication issues, as the plaintiffs live in remote areas in Cambodia and do not speak Thai.
The villagers would appeal the court decision, and if that failed, they would file individual civil lawsuits, said U.S.-based non-profit group Inclusive Development International, which is helping the Cambodians with the case.
"The Bangkok court got this decision totally wrong, but the class action ruling will be appealed and we will not give up until Mitr Phol is held accountable, even if that means bringing 700 individual civil suits," David Pred, the group's executive director, told Reuters.
"The reality is that individual civil suits, which the Cambodian victims will be forced to pursue if the decision is not overturned on appeal, will be much more costly and complicated for all parties."
Mitr Phol did not immediately comment when contacted by Reuters, saying it was working on a statement.
Mitr Phol withdrew from the sugar project in northwest Cambodia 2014.
The class action lawsuit was said to be the first such lawsuit filed in a Thai court by plaintiffs from another country against a Thai company operating outside Thailand.
(Reporting by Patpicha Tanakasempipat in BANGKOK and Prak Chan Thul in PHNOM PENH Editing by Robert Birsel)