Frederick Burke, Quach Minh Tri and Nguyen Quy Hoai
A. LEGISLATION AND RULES
Arbitration procedures in Vietnam continue to be mainly governed by Civil Procedure Code No. 92/2015/QH13 (CPC), Law on Commercial Arbitration No. 54/2010/QH12 (LCA), and Resolution No. 01/2014/NQ-HDTP issued by the Supreme Court of Vietnam providing further guidance on the implementation of certain provisions of the LCA.
The LCA is generally based on the 2006 UNCITRAL Model Law. There are, however, some provisions which 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, which lost effect as of 01 January 2011, the LCA has many notable developments, including: (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 CPC, specifically its Part Seven, 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.
Vietnam’s commitments under various international trade and investment agreements are also relevant.
Under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), claimants being foreign investors 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 abides by the final award.
Important to note, however, is that Vietnam has entered into a side letter with New Zealand, which would prevent foreign investors from seeking arbitral awards provided for under chapter 9 (Investment) of the CPTPP unless there is specific consent of the host state.
Last year, the EU – Vietnam Investment Protection Agreement (EVIPA) was ratified by the European Parliament and the National Assembly of Vietnam, pending the national ratification in each of the EU member states to enter into force. article 3.57 of this treaty 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 Agreement allows five years from its entry into force for the Vietnamese tribunal system to comply with its rules regarding enforcement. To implement the EVIPA on the domestic scale, the National Assembly of Vietnam adopted Resolution 113/2020/QH14 on the recognition and enforcement of EVIPA awards. This resolution provides that final awards issued under the EVIPA will be deemed as foreign arbitral awards to be recognized and enforced pursuant to the CPC during the five-year transition period as mentioned above.
Another noteworthy recent international trade and investment agreement is the Regional Comprehensive Economic Partnership Agreement (RCEP). The signatories include ASEAN member states, Australia, China, Japan, Korea, and New Zealand. They agreed to exclude all provisions on direct actions against host states by foreign investors. However, foreign investors can still seek arbitration against the host state’s illegal conduct under other existing treaties between Vietnam and RCEP member states.
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 out 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 removed 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 January 2021, there are 32 local arbitration institutions in Vietnam currently registered with the Ministry of Justice, 18 of which have fewer than 10 arbitrators. The Vietnam International Arbitration Centre (VIAC) at the Vietnam Chamber of Commerce and Industry remains the most well-known domestic arbitration institution. This is likely because compared to other domestic arbitration institutions, VIAC has a longer history of development with high-profile arbitrators (including many foreign arbitrators) who have expertise in contract law and can resolve commercial disputes through the English language, making arbitration more accessible for transactions involving a foreign party.
According to a published statistic by VIAC, the number of disputes received by VIAC has continuously increased year by year. In 2019, VIAC received 274 cases. Currently, there are over 60 countries and territories which have resolved their disputes by means of the VIAC for settlement. Entities from China, Singapore, and South Korea are the top clients bringing their disputes to VIAC for settlement.
VIAC is operating based on the LCA and VIAC’s Rules of Arbitration issued on 1 March 2017. The VIAC Rules of Arbitration 2017 have 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.
The year 2020 also witnessed increased transparency of public resources relating to the recognition and enforcement of foreign arbitral awards. The Ministry of Justice (MOJ) compiled and published a public database on recognition and enforcement of foreign arbitral awards and foreign courts’ judgments from 2012 to 2019. According to the MOJ’s database, most of the requests for local recognition and enforcement covered arbitral awards whose seats were in the United Kingdoms, Germany, and Singapore.
Below are the flow charts that were prepared from a plain review of the MOJ’s database.
B.1 Multi-tiered dispute resolution clause
In 2020, the People’s Court of Hanoi rejected (i) a complaint about the tribunal’s jurisdiction and (ii) a request to set aside a VIAC award in relation to a dispute over an EPC contract between Vietnam National Chemical Group (“Vinachem”) and some members of a consortium (“Contractors”).
In its Decision 02/2020/QD-PQTT dated 23 April 2020, the court dismissed Vinachem’s complaint that the arbitral tribunal did not have jurisdiction over the dispute. Vinachem argued that under the parties’ agreement, i.e., an EPC contract based on the FIDIC Silver Book, the dispute must be submitted to amicable mediation and resolution by an adjudication board before any party could pursue arbitration; therefore, the arbitral tribunal cannot assume jurisdiction as the Contractors bypassed the adjudication board. The court found that, because the parties were clearly unable to amicably settle their dispute as shown in their correspondences, the Contractors’ request for arbitration without prior recourse to mediation and an adjudication board was not contrary to the parties’ agreement. Even though there are public comments on the merit of this court decision, the decision at least shows that the content of the parties’ correspondences prior to commencement of the arbitration proceeding can give significant weight to their rights and legal position in the arbitration proceeding.
In another Decision No. 09/2020/QD-PQTT dated 16 September 2020,  the court of Hanoi refused to set aside the final arbitral award of the case mentioned above. Under the final award, the VIAC tribunal ruled in favor of the Contractors that payments to the Contractors shall be converted to Vietnam Dong based on foreign exchange rates applicable at the time of conclusion of the contract, rather than payments in foreign currency as provided in the parties’ contract. Although Vinachem argued that the award is contrary to the basic principles of Vietnamese laws (namely, freedom of contract), the court ruled that currency and foreign exchange rates are substantive matters which had been reviewed by the arbitral tribunal. Hence, the court was not in a position to review them again.
B.2 Validity of an arbitration agreement in a draft contract
In its Decision dated 03/2020/QD-GQKN dated 28 May 2020, the People’s Court of Hanoi reversed the decision of an arbitral tribunal on the arbitration agreement.
In this case, during the negotiation after the bidding process, the respondent (the bid solicitor) provided the claimant (the bidder) with a draft agreement that included an arbitration clause. The parties then signed several minutes relating to this draft agreement, one of which stipulated that “The parties agreed to add the location of [the arbitration institution], which is Hanoi, Vietnam.” The parties did not eventually sign the draft agreement, so the respondent sent several complaints to the bank that had granted the claimant a bid guarantee and requested the bank to pay the guaranteed amount. The claimant then relied on the arbitration clause in the draft agreement to initiate an arbitration proceeding. However, the arbitral tribunal decided that they did not have jurisdiction over the dispute because an arbitration agreement did not exist.
The court of Hanoi disagreed with the arbitral tribunal. The court observed that although the parties did not sign the agreement, the fact that the claimant was granted a bank guarantee for the bid was a prerequisite for the claimant to participate in the bid and negotiate with the respondent. The parties did proceed with the negotiation. Therefore, the court ruled that there existed a dispute in relation to the agreement, and this dispute fall under the jurisdiction of the arbitral tribunal as reaffirmed by the parties in their meeting minutes.
B.3 Scope of authorization, obligation to open hearing and appointment of arbitrator(s)
On 20 February 2020, the Supreme People’s Procuracy (SPP) issued Notice No. 97/TB-VKSTC to lower-level procuracies to guide the recognition and enforcement of foreign awards. In this notice, the SPP asked lower-level procuracies to draw lessons from Appellate Decision No. 253/2017/KDTM-PT dated 13 September 2017 of the People’s High Court, in which the High Court upheld First-Instance Decision No.02/2016/QD-VKDTM of the People’s Court of Hanoi dated 09 May 2016 and did not recognize and enforce a SIAC arbitral award in favor of Balance Industry Co., Ltd (South Korea) against P.P., JSC (Vietnam). The SPP pointed out that Balance Industry’s authorized representatives were only authorized to work with the Ministry of Justice to submit the application/request for recognition and enforcement of foreign awards. Therefore, the court of Hanoi erred in its examination of the scope of authorization of Balance Industry’s representatives and decision to allow Balance Industry’s authorized representatives to participate in the first-instance hearing and to appeal against the first-instance court’s decision.
Regarding substantive issues of this case, the SPP supported the ruling by both the first instance court and the High Court that P.P. was not properly notified of the appointment of the arbitrator and arbitral procedures and thus, could not have exercised its procedural rights. Specifically, the SPP pointed out the two following issues:
- First, pursuant to article 5.2.c and article 21.1 of SIAC Rules 2013, the tribunal must hold a hearing unless the parties agree that the dispute shall be decided on the basis of documentary evidence only. The tribunal, in this case, however, issued an award on a document-only basis based on Balance Industry’s request only.
- Second, pursuant to article 6.1 of SIAC Rules 2013, “[a] sole arbitrator shall be appointed unless the parties have agreed otherwise […]”. However, there is no evidence in the case record showing whether, prior to the appointment of the sole arbitrator, Balance Industry had proposed the use of a sole arbitrator to P.P., or SIAC had sent a list of arbitrators to P.P. or notified P.P. of its right to negotiate with Balance Industry on the appointment of an arbitrator. Therefore, the SPP supported the court’s ruling that SIAC violated its own rules when deciding to appoint the sole arbitrator.