A. LEGISLATION AND RULES
A.1 Legislation
Arbitration procedures in Vietnam continue to be governed mainly 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, which provides further guidance on the implementation of certain provisions of the LCA.
The LCA is generally based on the UNCITRAL Model Law. However, there are some provisions that differ from the model law. These include the 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 with Ordinance No. 08/2003/PL-UBTVQH11 on Commercial Arbitration, which ceased to have effect as of 1 January 2011, the LCA includes many notable developments, such as the following:
- The ability to refer to arbitration even if only one of the parties is engaged in commercial activities
- The option to appoint foreign arbitrators in Vietnam
- The ability to apply for interim measures to protect the legitimate interests of the parties
Moreover, the CPC (Part 7), which came into effect on 1 July 2016, provides certain amendments regarding procedures for the recognition and enforcement of foreign arbitral awards. The amendments have been praised for being more effective and in line with the New York Convention.
In June 2024, the Ministry of Justice published the proposal dossier for the development of a draft law on supplementations and amendments to the LCA prepared by the Vietnam Lawyers Association (VLA) (Proposal Dossier).[1] The Proposal Dossier contains notable findings on the implementation of the LCA and also proposed key supplementations and amendments to the LCA.
Reports on the implementation of the LCA:
- The Proposal Dossier reports that the number of arbitrators/arbitration institutions, as well as the number and value of disputes referred to arbitration have remarkably increased over the years.[2]
- Within the period from 2011 to June 2024, VLA reports that there are 181 requests to set aside domestic awards, out of which local courts upheld 43 requests, rejected 134 requests and terminated four cases. This means that the rate of domestic awards being set aside is around 23.8%. Among the awards that were set aside, nearly half of them (20 cases) were set aside on the ground that they were “contrary to the fundamental principles of Vietnamese laws.” During this period, local courts refused to recognize and enforce 34 foreign awards. In seven of these cases, the courts said that these foreign awards were “contrary to the fundamental principles of Vietnamese laws”.[3]
Key proposed supplementations and amendments to the LCA:
Most of the contents proposed by the VLA in the proposal drafting stage (as previously reported in last year’s edition of this yearbook) are included in the Proposal Dossier. Specifically, the Proposal Dossier sets forth four key policy areas including:[4]
- Expansion of the scope of arbitrable disputes: The Proposal Dossier suggests that disputes in all fields may be referred to arbitration, as long as the laws of such field do not prohibit or restrict dispute resolution by arbitration. Currently, under the LCA, only disputes that arise from commercial activities or among parties at least one of whom conducts commercial activities, and other disputes which are stipulated by law to be settled by arbitration, such as disputes over share purchase agreements and investment agreements are arbitrable.
- Updating regulations on arbitration procedures: The Proposal Dossier suggests various amendments/supplementations to make the LCA more closely aligned to the UNCITRAL Model Law and practice. These include:
- Removing the current article 18.4 of the LCA (which provides that arbitration agreements which forms are incompliant with the LCA are invalid) and adopting contents under article 7.3 (option 1) of the UNCITRAL Model Law that are apparently more flexible on the form of arbitration agreements.
- Amending article 12 of the LCA to be similar to article 3 of the UNCITRAL Model Law, to clarify that the service of notices and communications as applicable to court proceedings do not apply to arbitration.
- Adding a new mechanism for emergency arbitration, previously not available under the current LCA.
- Removing the provision on statute of limitations under the current LCA (i.e., two years) so that the issue of statute of limitations will be addressed according to the relevant applicable substantive laws.
- Expansion of jurisdiction and power of the arbitral tribunals: For example, the VLA proposed to add a new provision to the LCA that is similar to article 19 of the UNCITRAL Model Law that gives the arbitral tribunals the power to conduct the arbitration in manners they consider appropriate unless parties agree otherwise.
- Increasing the enforceability of awards, and reducing the numbers of awards being set aside: The Proposal Dossier suggests that, among other things, the courts’ decisions on setting aside an arbitral award will either be subject to cassation procedure at relevant courts, or be pre-approved by the Supreme Court in case of acceptance of a request for setting aside arbitral awards.
The VLA initially proposed that the draft law on supplementations and amendments to the LCA be adopted by the National Assembly in October 2024. However, that did not happen. As of the date of this publication, the draft law on supplementations and amendments to the LCA has not yet been included in the lawmaking agenda for 2025, so it remains to be seen when the Proposal Dossier will be approved.
A notable change in substantive law that also relates to arbitration in 2024 is found in the Law on Land No. 31/2024/QH15 that was adopted by the National Assembly on 18 January 2024 and became effective on 1 August 2024. Article 236.5 of the Law on Land 2024 (which did not exist in the previous Law on Land 2013) clearly stipulates that disputes: “arising from commercial activities relating to land” can be resolved by court or arbitration. On this issue, the Proposal Dossier also pointed out the fact that some local courts previously set aside awards based on arguments that land-related disputes fell under the exclusive jurisdiction of the local courts.[5] Article 236.5 of the new Law on Land 2024 has shed light on this issue and is expected to support the enforceability of arbitral awards over commercial land-related disputes.
A.2 Institutions, rules and infrastructure
Under the LCA, arbitration centers may be established in various localities in accordance with government regulations. The LCA sets out the conditions and procedures for the establishment of arbitration centers, their duties and powers, as well as the causes for termination of their operations. The LCA also removed the requirement that an arbitrator 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. Previously, the Korean Commercial Arbitration Board was the first and only foreign arbitral institution to open an office in Vietnam. In November 2022, the Permanent Court of Arbitration opened a representative office in Hanoi, Vietnam.
As of January 2025, there are 49 local arbitration institutions in Vietnam currently registered with the Ministry of Justice, 32 of which have fewer than 10 arbitrators.[6] The Vietnam International Arbitration Center (VIAC) at the Vietnam Chamber of Commerce and Industry remains the most well-known domestic arbitration institution. This is likely because compared with 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 in the English language, making arbitration more accessible for transactions involving a foreign party.
VIAC operates 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, which are the following:
- Single arbitration for multiple contracts
- Consolidation of claims
- Expedited arbitral procedure, bringing such rules generally in line with international practice
According to VIAC’s latest annual report for 2023,[7] there was a sharp increase (46.2%) in the number of new cases it received (424 cases), compared with 292 cases in 2022. Disputes arising from real estate business activities became the most heavily disputed area (26.2% of VIAC caseload in 2023), followed by disputes arising from sales of goods (21.2%) and construction (18.6%). Entities from China, South Korea, and Japan remain the top clients bringing their disputes to VIAC for settlement (accounting for 65.3% of foreign disputing parties at VIAC). Of note, VIAC also reports about 87.9% of its total cases involving lawyers as advocates or authorized representatives, two cases with requests for applying interim measures (one of which was accepted by the tribunal) and 57 requests for replacement of arbitrators. These figures indicate that disputes referred to VIAC have also become increasingly complex.
B. CASES
Based on the public database of the People’s Supreme Court,[8] in 2024, local courts accepted three foreign awards for local recognition and enforcement and upheld only three out of 11 requests for setting aside of domestic awards. Apparently, many local courts referred to the principle that the courts would not re-try the cases in their decisions not to set aside arbitral awards.
B.1 The High Court in Ho Chi Minh City recognized an ICSID Additional Facility award
On 15 July 2024, by Decision No. 40/2024/QD-PT, the People’s High Court in Ho Chi Minh City (as the appellate court) affirmed the decision by the People’s Court of Ho Chi Minh City (as the first-instance court), to recognize and enforce in Vietnam the award for ICSID Case No. ARB(AF)/18/2 dated 29 October 2020.[9]
The arbitral award is the result of an investor-state arbitration, initiated by a Korean investor (claimant) against the Socialist Republic of Vietnam (respondent) based on the Agreement between the Government of the Republic of Korea and the Government of the Socialist Republic of Vietnam for the promotion and protection of investment (Korea – Vietnam BIT 1993), according to the ICSID Additional Facility – Arbitration Rules.[10] While the contents of arbitral award and the details of arbitral proceedings are not published, based on the Decision No. 40/2024/QD-PT, the tribunal seemed to have dismissed all claims of the investor and ordered the investor to bear a large part of respondent’s arbitral costs and legal fees in the total amount of about USD 1.9 million. The People’s Committee of Ho Chi Minh City (as authorized by the Socialist Republic of Vietnam) thus sought for enforcement and recognition of the award against award debtors comprising of the foreign investor and a Vietnamese incorporated company in which the investor holds 49% ownership.
The award debtors raised various arguments against the court’s decision on recognition and enforcement of the award, including:
- The Vietnamese incorporated company in which the investor holds 49% ownership was not the co-claimant in the arbitration and therefore, cannot be named as an award debtor.
- The constitution of the tribunal was inappropriate and non-compliant with the parties’ agreement and arbitration rules, such that two of the arbitrators failed to disclose their past association with the respondent; the respondent did not timely appoint the arbitrator so the respondent’s late appointment must be invalid; the appointment of the presiding arbitrator was not transparent.
- The tribunal seriously violated ICSID Additional Facility – Arbitration Rules by disregarding/misinterpreting evidence.
- The People’s Committee of Ho Chi Minh City sought to enforce the award when the time limit for setting aside/annulment of the award had not lapsed; this was contrary to article 16.7 of the Korea – Vietnam BIT.
- The enforcement of the award (in Vietnam) violated the fundamental principle of Vietnamese laws as set out in article 4.2 of the LCA (arbitrator must be independent, objective, impartial and comply with the laws).
The People’s High Court in Ho Chi Minh City (as the appellate court) dismissed all of the arguments by the award debtors. The High Court ruled that the first-instance court correctly referred to the application for recognition and enforcement of award by the People’s Court of Ho Chi Minh City to determine the foreign-invested company as one of the award debtors. For other arguments by the award debtors on errors in the constitution of the tribunal and conducts of the arbitration, the High Court found that documents submitted by the award debtors were not properly legalized/notarized and the award debtors could not provide other evidence to substantiate their arguments.
Separately, the award debtors also challenged the decision on application of injunction rendered by the People’s Court of Ho Chi Minh City (the contents of such injunction are not provided in the Decision No. 40/2024/QD-PT). However, the High Court dismissed the challenge and upheld the decision on application of injunction.
B.2 HCMC Court set aside arbitral awards for being contrary to fundamental principles of Vietnamese laws
Based on public information, in 2024, the People’s Court of Ho Chi Minh City set aside three arbitral awards; all of these cases were based on the ground that the awards were contrary to fundamental principles of Vietnamese laws.
In the first case, by Decision No. 41/2024/QD-PQTT dated 19 March 2024,[11] the court set aside an award over a construction dispute, in which the tribunal upheld claims for outstanding payment by the contractor (claimant) against the project owner (respondent). Among other grounds, the court found that the tribunal failed to let the sole authorized representative of the respondent present their arguments, breaching the fundamental principles of objectivity and equality of parties.
In the second case, under Decision No. 69/2024/QD-PQTT dated 3 May 2024,[12] the court rejected various allegations by the award debtor on procedural irregularities of the arbitration. However, the court pointed out that the tribunal granted the award creditor the claim for late-payment interest based on the report of only one bank (instead of collecting information on average overdue interest rates of at least three commercial banks as required by article 306 of the Commercial Law and the guiding resolution No. 01/2019/NQ-HDTP of the Council of Judges of the Supreme Court). The tribunal also erred in applying the interest rate as announced by the bank for USD-denominated loans to the claimed amount in euros. Therefore, the court found that the award was contrary to the Commercial Law and violated the fundamental principle of equality of parties.
The third case is concluded under Decision No. 97/2024/QD-PQTT dated 30 May 2024, relating to an award over a dispute on sale contracts.[13] In that case, the tribunal rejected the seller’s (claimant) claims for outstanding payment, on the grounds that the statute of limitation had expired. The claimant thus requested for the award to be set aside. The court found that the social distancing measures for the Covid-19 pandemic were an objective impediment preventing the claimant from initiating the arbitration, so the period during which such measures were applicable must be excluded from the calculation of the statute of limitation. The court therefore ruled that the award was contrary to the fundamental principles of Vietnamese laws, pp., the principles concerning the determination of the statute of limitation and the periods that are excluded from calculation of the statute of limitation.
[1] The Proposal Dossier is published (in Vietnamese only) at https://moj.gov.vn/dtvb/Pages/chi-tiet.aspx?itemid=656
[2] The Report on Review of the LCA under the Proposal Dossier, section I.2, pages 2-5.
[3] The Policy Impact Assessment Report under the Proposal Dossier, pages 2, 16.
[4] The Policy Impact Assessment Report under the Proposal Dossier.
[5] The Report on Implementation of the LCA under the Proposal Dossier, pages 7-9.
[6] For a list of arbitration institutions, see: https://bttp.moj.gov.vn/qt/Pages/trong-tai-tm.aspx, last accessed on 19 January 2025.
[7] https://www.viac.vn/images/Resources/Annual-Reports/2023/Bao-cao-thuong-nien-2023—EN_240829.pdf
[8] https://congbobanan.toaan.gov.vn/
[9] https://congbobanan.toaan.gov.vn/2ta1635740t1cvn/chi-tiet-ban-an
[10] Limited public information on the arbitration can be found at https://icsid.worldbank.org/cases/case-database/case-detail?CaseNo=ARB%28AF%29/18/2
[11] https://congbobanan.toaan.gov.vn/2ta1644884t1cvn/chi-tiet-ban-an
[12] https://congbobanan.toaan.gov.vn/2ta1652910t1cvn/chi-tiet-ban-an
[13] https://congbobanan.toaan.gov.vn/2ta1636810t1cvn/chi-tiet-ban-an
