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VIETNAM

Frederick Burke and Quach Minh Tri

A. Legislation and rules

A.1      Legislation

Arbitration procedures in Vietnam continue to be mainly governed by Civil Procedure Code No. 92/2015/QH13, the Law on Commercial Arbitration No. 54/2010/QH12 (LCA), which came into effect on 1 January 2011 and Resolution No. 01/2014/NQ-HDTP dated 20 March 2014 issued by the Supreme Court of Vietnam providing further guidance on the implementation of certain provisions of the LCA (“Resolution No. 01”).

The LCA is generally based on the 2006 UNCITRAL Model Law. There are, however, some provisions that differ from the Model Law. These include: principles in settling disputes; state administration of arbitration; required registration of ad hoc arbitration awards with national courts; minimum qualifications of arbitrators; the right to settle and the right to request mediation by an arbitral tribunal; and setting aside an arbitral award for violating fundamental principles of Vietnamese law.

Compared to Ordinance No. 08/2003/PL-UBTVQH11 on Commercial Arbitration (“Ordinance”), which lost effect as of 01 January 2011, the LCA has many notable developments, included: (i) the ability to refer to arbitration, even if just one of the parties is engaged in commercial activities; (ii) the option to appoint foreign arbitrators in Vietnam; and (iii) the ability to apply for interim measures to protect the legitimate interests of the parties.

Moreover, the Civil Procedure Code No. 92/2015/QH13 (“CPC 2015”) – specifically Part Seven of CPC 2015, which came into effect on 01 July 2016, provides certain amendments regarding procedures for recognition and enforcement of foreign arbitral awards. The amendments have been praised for being more effective and in line with the New York Convention.

On 13 November 2017, the People’s Committee of Ho Chi Minh City issued Decision No. 5994 to establish the Ho Chi Minh City Commercial Arbitration Association (“HCMC CAA”). This is the first commercial arbitration association in the country. The key role of the HCMC CAA is to protect the legitimate rights and interests of arbitrators, maintain stability, encourage developments of commercial arbitration centers in the city, and build up the standards of the arbitrators.

Vietnam’s commitments under various international trade and investment agreements are also relevant in certain circumstances. For example, article 3.57 of the EU – Vietnam Investment Protection Agreement (EVIPA) states that final awards issued pursuant to the EVIPA shall be binding and not be subject to appeal, review, set aside, annulment or any other remedy. However, such stipulation is restricted to entities protected under the EVIPA. Moreover, the EVIPA allows for a period of five years, starting from the date of the entry into force, for which the Vietnamese tribunal system has to comply with its rules regarding enforcement. The EVIPA has been signed by both parties but awaits ratification.

Under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), claimants being a foreign investor have recourse to Investor-State Dispute Settlement (ISDS) mechanisms. Under article 9.29.10, member states of the CPTPP are required to provide for the enforcement of arbitral awards in their respective territories, failing which will result in the creation of a panel where the requesting party may seek (i) a determination that the failure to abide by the final award is inconsistent with the obligations under the agreement, and (ii) a recommendation that the respondent abide by the final award. Important to note, however, is that Vietnam has entered into the following side letters which would prevent investors from seeking arbitral awards provided for under Chapter 28 (Dispute Settlement) of the CPTPP:

  • Side letter between Japan and Vietnam which states that Japan shall not seek recourse to dispute settlement with respect to measures adopted or maintained based on the Cybersecurity Law, Cross-Border Transfer of Information by Electronic Means (article 14.11), and location of computing facilities (article 14.13) for a period of five years from the date of entry into force of the CPTPP in Vietnam;
  • Side letter between Japan and Vietnam which states that Japan shall not seek recourse to dispute settlement with respect to Vietnam’s obligations under article 18.47 (Protection of Undisclosed Test or Other Data for Agricultural Chemical Products), and of Chapter 18 on Intellectual property for a period of five years from the date of entry into force of the CPTPP in Vietnam.

A.2      Institutions, rules and infrastructure

Under the LCA, arbitration centers may be established in various localities in accordance with the regulations of the Government. The LCA sets the conditions and procedures for the establishment of arbitration centers, their duties and powers, as well as causes for the termination of their operations. The LCA also removes the requirement that an arbitrator must be a Vietnamese citizen. As such, foreign citizens can be appointed as arbitrators in Vietnam if they meet all the requirements under Vietnamese law.

Moreover, Vietnamese law allows foreign arbitration centers to operate in Vietnam through a branch or representative office after satisfying the required conditions and undergoing the correct registration procedures. However, the arbitration awards issued by the local representative office or branch of a foreign arbitration center are considered foreign arbitration awards, and thus, have to go through the process of recognition by the competent court before enforcement can be made in Vietnam. For example, on 17 December 2019, the Korean Commercial Arbitration Board (KCAB) opened its overseas liaison office (“Overseas Office”) in Hanoi, Vietnam. KCAB was the first foreign arbitral institution approved to open an office in Vietnam.

As of December 2019, there are 23 local arbitration institutions in Vietnam currently registered with the Ministry of Justice,[1] 11 of which have fewer than 10 arbitrators. Nonetheless, the Vietnam International Arbitration Centre (VIAC) at the Vietnam Chamber of Commerce and Industry remains the most well-known domestic arbitration institution in Vietnam. This is likely because compared to other domestic arbitration institutions, VIAC has a long history of development with high-profile arbitrators (including a number of foreign arbitrators) who have expertise in contract law and can resolve commercial disputes through the English language, making access to arbitration more accessible for transactions involving a foreign party.

According to a published statistic by VIAC,[2] the number of disputes which VIAC has settled has continuously increased year by year, and in 2018, this figure amounted to 180 cases. Notably, in 2017, there were no arbitral awards issued by VIAC that were set aside by the local courts. This consolidates VIAC’s position as the leading arbitral center in comparison with other domestic arbitration institutions. Currently, there are over 60 countries and territories which have resolved their disputes by means of the VIAC for settlement. Entities from China, Singapore, Korea, and the United States are the top clients bringing their disputes to VIAC for settlement.

VIAC operates based on the LCA and VIAC’s Rules of Arbitration issued on 1 March 2017. The 2017 VIAC’s Rules of Arbitration contain three significant developments, including (i) single arbitration for multiple contracts, (ii) consolidation of claims, and (iii) expedited arbitral procedure, bringing such rules generally in line with international practice.

B. Cases

The number of VIAC’s arbitral awards that were set aside by local courts in Vietnam has reduced significantly. In 2017, VIAC reported that there were no arbitral awards set aside by local courts.

On 14 November 2019, the People’s Court of Hanoi (“Court”) issued Judgement No. 11/2019/QD-PQTT to set aside the arbitral award dated 10 April 2019 on the dispute between Vinh Son – Song Hinh Hydropower Joint Stock Company (“VSH”) and two Chinese contractors, Powerchina Huadong Engineering Corporation Limited and China Railway 18th Bureau Group Co., Ltd (collectively, “Chinese Contractors”).[3] The reasoning of the court’s decision to set aside this arbitral award included (i) the arbitral tribunal failed to honor the parties’ agreement with respect to the location for dispute settlement, and decided to hold arbitral hearings in different locations, (ii) the arbitral tribunal referred to the International Bar Association rules and guidelines (“IBA Rules and Guidelines”) without fully reviewing the materials and evidence submitted by the respondent, (iii) the arbitral tribunal only relied on the expert’s opinion that was submitted to the tribunal by the claimant without an agreement of the respondent to determine the damages. Below is a summary of this case. VSH engaged Chinese Contractors on a construction project in Vietnam before the parties fell into a dispute over this project. Chinese Contractors brought the dispute to VIAC. In its final award, the VIAC’s arbitral tribunal ruled against VSH and decided that VSH would need to pay a compensation of more than USD 90 million[4] to the Chinese Contractors. VSH then requested the court to set aside this award. In its judgment, the court ruled that the tribunal violated Article 11.2 of the LCA when it decided to change the location for dispute settlement without adopting the parties’ agreement. Article 11.2 of the LCA provides that unless otherwise agreed by the parties, the tribunal may conduct a hearing at a location deemed appropriate. Even though the location was not initially agreed by the parties in their contract after VIAC received the Chinese Contractors’ request for arbitration, VSH proposed that the location for dispute settlement be Hanoi, and the Chinese Contractors agreed with this proposal. During the arbitration procedure, the tribunal issued an injunction order (known under Vietnamese law as a “provisional emergency measure”) against VSH. VSH then took legal actions before the court against the tribunal and the arbitrators to claim for damage caused by such injunction. The tribunal took the view that the court action by VSH against the tribunal and the arbitrators might impose danger to the arbitrators. Therefore, the tribunal decided to change the location of the hearing to Singapore. Despite VSH’s objection, the tribunal further requested VSH to withdraw its court petition against the arbitrators, and as VSH refused to comply with this request, the tribunal decided to hold the final hearing in Osaka, Japan. According to the court’s rulings, the tribunal’s decision to hold hearings in Singapore and Japan was an “unreasonable and inappropriate inference” of the parties’ agreement on the location of dispute settlement and inconsistent with the LCA. In addition, the court ruled that the applicable law to the arbitral proceedings should be the LCA as the location for dispute settlement as agreed by the parties was Hanoi, Vietnam. However, the tribunal referred to the IBA Rules and Guidelines to refuse to review the materials and evidence submitted by VSH on the ground that VSH failed to attend the hearings. The Court found that such reference to the IBA Rules and Guidelines by the tribunal was groundless and negatively affected the respondent’s legitimate rights. The Court also held that the tribunal violated Article 46.3 of the LCA regarding the damage assessment. Article 46.3 of the LCA reads, “The arbitral tribunal shall have the right, […], to seek an independent assessment or valuation of the assets in dispute in order to provide grounds for resolving the dispute.” Thus, the tribunal should have sought opinions from an independent assessor on the Chinese Contractors’ damage claim, rather than adopting the expert’s opinions submitted by the Chinese Contractors without an agreement of VSH on the appointment of this expert.

As a practical matter, Vietnam arbitration proceedings require parties to take special care when authorizing their representatives and counsels for the proceedings and such formalities may render an otherwise legitimate award unenforceable. On the other hand, Vietnam arbitral proceedings tend to be rather less costly than proceedings in some of the region’s more established centers.          

[1] http://bttp.moj.gov.vn/qt/Pages/trong-tai-tm.aspx?Keyword=&Field=&&Page=1.

[2] http://www.viac.vn/images/annual%20reports/Bao-cao-hoat-dong–2018.pdf.

[3] https://congbobanan.toaan.gov.vn/2ta428188t1cvn/chi-tiet-ban-an.

[4] Approximately VND 2.1 trillion.

Author

Frederick Burke is the Managing Partner of Baker McKenzie’s Vietnam offices. Frederick has over 30 years of experience in the planning, negotiation and operation of cross-border trade and investment projects in Vietnam and China, as well as in the related issues of finance, regulatory compliance, property development, construction, tax, and dispute resolution. He is also an active arbitrator at the Vietnam International Arbitration Centre. Frederick Burke can be reached at Frederick.Burke@bakermckenzie.com and +84 8 3520 2628.

Author

Quach Minh Tri is a dispute resolution partner in the Firm's Vietnam offices. His practice focuses on commercial litigation and arbitration, construction disputes, intellectual property enforcement, entertainment, data privacy and internet. Tri has practiced law in Vietnam since 1999. He has published articles, presented at seminars and lectured on various legal issues in Vietnam, Japan, Singapore, Malaysia and other countries. Tri is a registered commercial mediator in Vietnam and a listed arbitrator at the Vietnam International Arbitration Center. Tri is ranked as a "Leading Individual" in litigation by Legal 500.