*Linh Đoàn and Carol (Xinyu) Liu
I INTRODUCTION
The Vietnam National Assembly enacted the Law on Commercial Arbitration[1] (‘LCA’) on 1 January 2011. It is based on the the United Nations Commission on the International Trade Law Model Law to promote general and commercial arbitration. Recently, arbitration in Vietnam has gained momentum, as its domestic and international dispute resolution capability matures.
This paper will examine three aspects of arbitration in Vietnam: (1) arbitral institutions, (2) recent Court’s decisions, and (3) recognition and enforcement of foreign arbitral awards in Vietnam.
II ARBITRATION INSTITUTIONS
Tribunal institutions have been established in various areas in Vietnam under the legal framework of LCA to promote arbitration and other ADR processes. The Vietnam International Arbitration Centre (‘VIAC’) was established in 1993 as an independent and non-profit arbitral institution having jurisdiction over both domestic and international economic disputes.[2]
According to recent statistics released by VIAC, newly registered cases in 2021 increased by 21 percent in 2020, with 270 cases in total. Out of these new cases, 42.7 percent were domestic and 57.3 percent involved international elements.[3] The majority of disputes resolved by the VIAC involve the sale of goods (44.4%), construction (18.9%), followed by services (27.8%).[4] State parties involved in these disputes include China, Singapore, and South Korea.[5] Compared with 2020, the complexity of the cases also increased. Overall, VIAC is in the process of enhancing its arbitration regime and making this dispute resolution process more effective.
In 2021, the Vietnam Chamber of Commerce and Industry launched the Vietnam International Chamber of Commerce endorsed by the International Chamber of Commerce (‘ICC’) as its official representation.[6] Its purpose is to help Vietnamese enterprises access dispute resolution services, including ICC arbitration. On 27 October 2021, there was an agreement between the Permanent Court of Arbitration (‘PCA‘) and the Ministry of Foreign Affairs of Vietnam to establish a staffed office in Hanoi.[7] The purpose of this agreement is to manage PCA hearings and meetings. The Hanoi office will function as PCA’s fourth office outside its Hague headquarters. These initiatives reflect Vietnam’s strong desire to promote its ADR capability internationally.
III CHALLENGES OF ARBITRAL AWARDS
Based on information provided by the Supreme People’s Court of Vietnam on 29 March 2022, there is a decreasing trend in setting aside arbitral wards; a decrease from a 27 percent set aside rate in 2020 to 19 percent in 2021.[8] The cases discussed in this paper focus on the possibility of matters going straight to arbitration, the consumer’s right to choose a court hearing over arbitration, the separability principle of arbitration clauses, the discretion of the arbitral tribunals in fact-finding, and limitation periods.
A. The Possibility to Go Straight to Arbitration
The issue is whether parties can skip agreed mediation and dispute adjudication board (‘DAB’) steps and go straight to arbitration.
Decision No. 02/2020/QD-PQTT[9] has had a significant impact on future judicial decisions concerning a tribunal’s jurisdiction. The People’s Court of Hanoi determined that the parties can go straight to arbitration if the parties’ pre-arbitration discussions to resolve the dispute are unsuccessful, and the parties have the discretion to skip mediation and DAB steps.[10] In this case, the two parties incorporated article 20 in their contract, stipulating that they should seek to resolve the dispute via mediation or DAB first. If the parties are not satisfied with the result, any party can initiate the arbitration. The crux of this case is that after the dispute happened, the two parties did not use official mediation or DAB but only engaged in discussions to resolve the dispute. After the VIAC issued a decision to uphold its jurisdiction, one party argued the prerequisite of mediation or DAB for arbitration has not been satisfied. The Court determined that the parties can skip mediation and DAB and initiate arbitration because over 2-year extensive discussions were unsuccessful in resolving the dispute.[11]
This case flags the possibility of moving straight to arbitration after genuine attempts by both parties to resolve the dispute. It can also reflects the Court’s willingness to focus on the practical feasibility of a prerequisite mediation or DAB rather than stiff compliance with these procedures.
B. Consumer’s Right: Court Litigation v. Arbitration
The pro-arbitration method is increasingly adopted in Vietnam, however, the exception of the consumers’ right to choose litigation should be noted. The issue is whether consumers must choose arbitration first if there is an arbitration clause in the contract.
In early 2021, the decision relating to arbitration was announced as a precedent for the first time. On 12 March 2021, the Supreme People’s Court declared that Precedent No. 42/2021/AL was based on decision No. 54/2018/DS-ST of the People’s Court of Nha Trang determined the consumer’s right to initiate court proceedings to resolve their dispute even if there is an arbitration clause in the parties’ contract.[12] One related legislative authority is Article 17 of LCA, which states that consumers have the discretion to select arbitration or litigation to resolve their disputes when the goods or service providers drafted the general conditions on goods and service provision and incorporated an arbitration clause.[13]
Even though the Precedent No. 42/2021/AL re-affirmed the existing regulations, it indicates the Vietnamese courts’ position with respect to the protection of consumers’ rights to opt for litigation as well as shows an interest in arbitration-related matters and its expectation to have given more arbitration-related precedents decisions in the future.[14] The lawmakers had acknowledged that form contracts are often non-negotiable, giving rise to the huge, unequal bargaining power against customers.[15] Therefore, if the consumer feels disadvantaged by being compelled to arbitration, Precedent No. 42/2021/AL will be important for customers to legally submit their disputes to the courts.
C The Separability Principle of Arbitration Clause
The issue is whether the arbitration clause is binding to the parties if the contract is ultimately not formed.
In the case of Decision No. 03/2020/QD-GQKN, two parties agreed with the arbitration clause provided in the draft contracts and later agreed to record it in the meeting minutes.[16] The parties were in the process of negotiating the contract terms but unsuccessfully concluded the contract. The dispute about the bid bond arose at that time and the VIAC concluded that they had no jurisdiction to hear this case due to the non-existence of the arbitration agreement.[17] The Hanoi People’s Court held that the dispute must fall within the scope of the arbitration agreement and must be regarded as an issue related to their contract.[18] The ground of that decision lies in the separability principle stipulated in Article 19 of LCA, adopting that an arbitration agreement is separate from the contract.[19]
This case flagged the binding effect of the arbitration clause even though the parties are in the process of negotiating the contract terms and later fail to finalise that contract but agreed on the arbitration agreement in the negotiation.
D Discretion of Arbitral Tribunal in Fact-Finding
In 2019, the Hanoi People’s Court discussed whether fact-finding is an obligation or discretion of arbitral tribunals. The Court produced two different outcomes regarding this issue.
Article 45 of LCA stipulates that fact-finding in arbitral tribunals “may” initiate by the tribunal or be requested by a party.[20] In Case No. 09/2020/QD-PQTT, the Court refused the ability of tribunals to examine the evidence in the case comprehensively. It held that such manner pointed at re-visiting and determining the merits of the case is the discretion of the tribunal.[21]
Comparatively, in Decision No. 04/2020/QD-PQTT, the Court decided the failure of the tribunal to collect evidence violated article 46(2) of the LCA and Article 19(2) of the 2017 VIAC Rules. The Court acknowledged that the provision used “may” rather than “must” but concluded that the failure resulted in the damage of impartiality and objectiveness, thus setting aside the tribunal’s award.[22]
The Court’s decisions indicate that the discretion of the tribunal to conduct fact-finding is not “absolute”. Given that the Court is still finding a balance on how to deal with fact-finding, it appears that whether a tribunal should conduct fact-finding or not, the tribunal itself should consider both the regulations and the fundamental principles of law, and provide sound reasons to support their positions.
E Limitation Period as a Substantive or a Procedural Matter
Another question that arises is whether the limitation period is a procedural matter or a substantive matter.
The general rule is that the Court shall not revisit the substantive matters that have been resolved by the arbitral tribunal.[23] If the Courts regard it as a substantive issue, they will refuse to revisit the tribunal award. However, if they deem it as a procedural matter, they will consider that matter.
The Hanoi People’s Court appears to accept the limitation as a substantive matter while the Ho Chi Minh City (‘HCMC’) People’s Court regards it as a procedural issue. In Decision No. 1063/2021/QD-PQTT, the HCMP Court set aside the arbitral award because of the failure of the tribunal to comply with the procedural law LCA on the limitation period.[24] The HCMC Commercial Arbitration Centre adopted a three-year limitation period in the 2015 Civil Code and concluded that the claim was not time-barred. However, the HCMP People’s Court determined that the limitation period should be 2 years under the procedural law, thus the Court set aside the award.[25]
Decision No. 11/2018/QD-PQTT appears to be regarded as a precedent for arbitration for local courts to comply with. The decision regards the limitation period as a substantive matter, thus rejecting the request for setting aside.[26] Since the limitation period provisions are stipulated in both substantive laws and procedural laws, the issue of limitation period not only occurs in the arbitrations but also in litigation. The answer to this issue is uncertain and it seems this has left room for the Courts in Vietnam discuss such issues in future cases.
IV RECOGNITION AND ENFORCEMENT
Even though Vietnam agreed with Convention on the Recognition and Enforcement of Foreign Arbitral Awards (‘New York Convention’) in 1995, the rate of successful recognition and enforcement of foreign arbitral awards has not been high over the past years. This can become an issue not only for Vietnam but also the international business associations.[27]
The failure of recognition and enforcement of arbitral awards in Vietnam may impedes on the country’s credibility and on its international trade and commerce. Despite this, Vietnam has taken several steps to advance arbitration both domestically and internationally. As a result of this initiative, the refusal rate of recognising foreign arbitral awards has significantly decreased.
For instance, more pro-arbitration provisions have been amended into the Civil Procedure Code in 2015. Reports from the lower courts about how they they deal with applications of foreign arbitral awards were requested by the Minister of Justice and were to opened to the public on 25 September 2020 to advance transparency.[28] The database indicated there was a decrease in the refusal of recognition after adopting the 2015 Civil Procedure Code from 2004 Civil Procedure Code, from 42.8 per cent to 15.7 per cent.[29] Moreover, in order to keep consistent with the application and interpretation of the New York Convention and the provisions of the Civil Procedure Code regarding the procedural issues for recognition and enforcement of foreign arbitral awards in Vietnam, the Supreme people’s Court is still in progress of drafting a resolution to advance them.[30]
To conclude, Vietnam’s promotion of the use of arbitration and it being updated into related provisions, has reduced the refusal rate of arbitral awards. As Vietnam continues to advance the uses of arbitration, itwill be interesting to see how it will pursue building an effective method and guidance for recognition and enforcement of foreign arbitral awards in the future years to come.
V CONCLUSION
Over the past years, Vietnam made great contributions and efforts to advance arbitration both domestically and internationally, which can be mirrored in the reduced refusal rate of arbitral awards, the increased complexity of arbitration cases, the attempts to connect to the ICC, etc. In the process of advancing arbitration as an alternative dispute resolution, the consumers’ rights to choose litigation have also been protected. However, as discussed above, it appears that the Courts in Vietnam have left room for certain issues such as fact-finding or limitation period to be refined or provide a clearer guidance to its application to be discussed in future cases.
[1] Vietnam Law on Commercial Arbitration 2010, No. 54/2010/QH12 dated 17 June 2010 (‘LCA’)
[2] Damian Sturzaker, ‘Arbitration in Asia’ (2001) 53(9) Keeping Good Companies 533, 536.
[3] Vietnam International Arbitration Centre 2021 Annual Report.
[4] Ibid.
[5] Ibid.
[6] Nguyen Ngoc Minh and Nguyen Thi Mai Anh Dzungsrt. ‘Vietnam’, The Asia-Pacific Arbitration Review 2023, (27 May 2022) (‘Vietnam Arbitration Review’) <https://globalarbitrationreview.com/review/the-asia-pacific-arbitration-review/2023/article/vietnam> and also <https://icc-vietnam.org/>
[7] ‘Permanent Court of Arbitration to open office in Vietnam’ (Joint Press Release 27 October 2021) 1.
[8] Web portal of the Supreme People’s Court, available at <https://congbobanan.toaan.gov.vn/>.
[9] Decision No. 02/2020/QD-PQTT dated 23 April 2020.
[10] Ibid.
[11] Ibid.
[12] Decision No. 54/2018/DS-ST dated 16/11/2018.
[13] Ibid (n1) Article 17.
[14] Ibid (n6).
[15] Ibid.
[16] Decision No. 03/2020/QD-GQKNdated 28 May 2020
[17] Ibid.
[18] Ibid.
[19] Ibid (n1) Article 19.
[20] Ibid (n1) Article 45.
[21] Decision No. 09/2020/QD-PQTT dated 16 September 2020.
[22] Decision No. 04/2020/QD-PQTTdated 29 May 2020
[23] Ibid (n1) Article 71.4.
[24] Decision No. 1063/2021/QD-PQTT dated 25 October 2021.
[25] Ibid (n1) Article 33.
[26] No. 11/2018/QD-PQTT dated 12 October 2018.
[27] Nguyen Manh Dzung and Le Quang Hung ‘Recognition and Enforcement of Foreign Arbitral Awards in Vietnam: Review of Recent Decisions of the Vietnamese Courts’ (2014) 19 No. 1 International Bar Association Arbitration News 39.
[28] Ibid (n6).
[29] Ibid, also available at <<https://moj.gov.vn/tttp/Pages/dlcn-va-th-tai-Viet-Nam.aspx>
[30] Ibid (6).