International Arbitration – Vietnam Updates | August 2024

August 26, 2024

The Vietnamese Supreme Court decides that the procedures and time limit specified in the Vietnamese Law on Commercial Arbitration to issue an award ending an arbitration based on a settlement agreement do not apply to a “foreign arbitral award” arising from a Vietnam seated arbitration.

Introduction

In Supervisory Review Decision No. 03/2023/KDTM-GDT (“Decision 03”) dated 22 September 2023, a five-justice panel of the Judicial Council of the Supreme People’s Court (consisting of all the Justices of the Supreme People’s Court) reversed an appellate decision denying recognition and enforcement of a Vietnam seated ICC award for, most significantly, non-compliance with the procedures provided under Arts. 58 and 61.3 of the Law on Commercial Arbitration (the “LCA”) to timely record and issue an award ending an arbitration based on a settlement agreement.[1] This ruling adds an important clarification to the somewhat unique Vietnamese legal regime governing foreign arbitrations and foreign arbitral awards.

Under Art 3.11 of the LCA, “[a] Foreign arbitration means an arbitration formed under a foreign law on arbitration and selected as agreed by the parties to settle a dispute outside or within the Vietnamese territory.[2] Accordingly, under Art. 3.12. of the LCA, “[a] Foreign arbitral award means an award issued by a foreign arbitration outside or within the Vietnamese territory which is selected as agreed by the parties to settle their disputes.” In other words, in an ICC or SIAC arbitration where the dispute is settled in Vietnam, the resulting award is considered, for purposes of the LCA, to be a foreign arbitral award.

As a foreign arbitral award, its recognition and enforcement in Vietnam must be considered under the codified provisions of the New York Convention (see Civil Procedure Code 2015 (“CPC”) Arts. 451 et seq). CPC Art. 424 expressly provides that foreign arbitral awards considered for recognition and enforcement in Vietnam are those defined in the LCA. This is confirmed in a resolution of the Judicial Council of the Supreme Court dated 20 March 2014, Resolution No. 01/2014/NQ-HDTP (“Resolution 01”), which has the force of law and provides guidance for the implementation of the LCA. Resolution 01 unequivocally states that “[f]oreign arbitral awards shall be recognized and enforced in Vietnam in accordance with the provisions of the Civil Procedure Code on procedures for recognition and enforcement in Vietnam of foreign arbitral awards.” In Decision 03, the Supreme Court for the first time states this conclusion in a judicial opinion:  “[T]he procedures for considering applications for recognition and enforcement in Vietnam of foreign arbitral awards are prescribed from Arts. 451 to 463 of Chapter XXXVII of the Civil Procedure Code 2015.”[3]

The Vietnamese procedural legal regime applicable to foreign arbitral awards is also specified in Resolution 01. According to Art. 5.5(a), Vietnamese courts can support foreign arbitrations in the following matters:

• appointment or change of arbitrator;
• requests to resolve an appeal from the decision of an arbitral tribunal on the validity or enforceability of an arbitration agreement or the jurisdiction of the arbitral tribunal;
• requests for judicial support to collect evidence or to summon witnesses; and
• requests for interim measures.[4]

Against the backdrop of this legal regime, Decision 03 raises the interesting question whether the LCA requirements applicable to the entry of an award ending an arbitration based upon a settlement agreement and the time limit for such entry apply in addition to the ICC rules. The party against whom the award is invoked, the respondent in the original arbitration, argued that the award should be denied recognition and enforcement due to violation of the LCA rules. The Supreme Court held that only compliance with the ICC rules was necessary.

Fact Summary and Procedural History

The claimant in the arbitration (the “Claimant”) and the respondent in the arbitration (the “Respondent”) had entered into a contract for the construction and installation of facilities at the airport in Ho Chi Minh City. The Claimant completed the work which was accepted and taken over by the Respondent who then failed to pay.

The Claimant initiated arbitration. The arbitration clause provided for a three-arbitrator ICC arbitration with Ho Chi Minh City as the “seat of arbitration.” A hearing took place over two days, on 5 and 6 August 2019. On 6 August 2019, the parties signed a Settlement Agreement. Art. 3 of the Settlement Agreement stated: “By signing this Agreement, the Parties agree to jointly request the arbitral tribunal to issue an award in accordance with Art. 33 of the ICC rules and Vietnamese law, as specified in this agreement.”

On 1 October 2019, the arbitral tribunal issued its award, 55 days after the final hearing on 6 August 2019. The ICC award was authenticated in Paris and consularized at the Vietnamese Embassy there.

When the Respondent failed to make a payment required under the Settlement Agreement, the Claimant filed an application for recognition and enforcement of the ICC award at the Ho Chi Minh City People’s Court. This first instance court issued a decision to recognize and enforce the ICC award.

The Respondent appealed. The appeal was based on two grounds: (i) the arbitral tribunal lacked jurisdiction, and (ii) the arbitral tribunal violated the LCA requirements to timely record and issue an award ending an arbitration based on a settlement agreement. The Ho Chi Minh City High-Level People’s Court reversed the decision of the first instance court relying on Art. 3 of the Settlement Agreement. Since both the ICC rules and Vietnamese law apply, the appellate court reasoned that the arbitral tribunal violated the LCA procedures and time limit for issuance of the ICC award.

The first instance court then submitted an official letter to the Supreme Court requesting a supervisory judicial review of the appellate decision.[5] Acceding to the request, the Chief Justice issued a protest decision. A panel of the Judicial Council of the Supreme Court considered the case, as required following the issuance of a protest decision by the Chief Justice, and reversed the appellate decision. The decision of the first instance court recognizing and enforcing the ICC award was reinstated.[6]

Decision 03

According to Decision 03, the Respondent had raised four grounds to oppose the recognition and enforcement of the ICC award:

• The arbitral tribunal lacked jurisdiction to resolve the dispute;
• The ICC award was rendered in Vietnam and cannot be considered a foreign arbitral award;
• At the time the parties reached an agreement to resolve the dispute, the arbitral tribunal did not prepare settlement minutes as required by the LCA; and
• The arbitral tribunal violated (i) the procedures for preparing the award as prescribed in Art. 27 of the ICC rules, and (ii) the six-month time limit for issuing an award as prescribed in Art. 31 of the ICC rules.[7]

The Supreme Court disposed of the first ground by pointing out that the parties had appointed co-arbitrators and participated in a hearing before entering into a settlement agreement in which they had asked the arbitral tribunal to issue an award in accordance with Art. 33 of the ICC rules and Vietnamese law.[8] The Respondent could not now argue that the arbitral tribunal did not have jurisdiction. The Supreme Court also quickly disposed of the second ground by relying on the LCA definition of a foreign arbitral award and Resolution 01.

Regarding the third and fourth grounds, the Supreme Court rejected directly the argument the arbitral tribunal had violated the ICC procedural requirements and, indirectly, the argument that the arbitral tribunal failed to draw up settlement minutes and otherwise failed to comply with the requirements of the LCA. The Supreme Court concluded that the ICC award was properly documented and issued in compliance with the ICC rules.[9]

Conclusion

In our view, Decision 03 is significant because it holds that when an arbitral tribunal in a foreign arbitration seated in Vietnam issues an arbitral award by consent, the validity of that arbitral award, with respect to procedures and time limit for issuance, must be determined on the basis of the applicable arbitration rules, rather than the LCA. In other words, the Supreme Court declined to apply the LCA in this case and instead adhered solely to the foreign arbitration rules.

 

[1] Law on Commercial Arbitration No. 54/2010/QH12 (National Assembly, 17 June 2010). This is the basic Vietnamese statute on arbitration.

[2] It is accepted in Vietnam that an ICC or an SIAC arbitration is “an arbitration formed under a foreign law on arbitration” even though the statutory formulation may be a little vague.

[3] Decision 03, paragraph 4, page 7.

[4] Resolution 01 specifically stipulates in Art. 5 as follows:

Article 5. Determination of courts having authority over arbitration as prescribed in Article 7 of the LCA 

[…]

5. Determination of the jurisdiction of the courts in respect of foreign arbitration activities in Vietnam.
   a) When a foreign arbitration is resolving a dispute and requests support from the Vietnamese courts, the Vietnamese courts shall have jurisdiction in respect of foreign arbitration activities as provided in Article 7.2(a)(b)(c)(d)(dd) and (e) of the LCA.
   b) The Vietnamese courts do not have authority to set aside foreign arbitral awards, register ad hoc arbitral awards issued by foreign arbitration as provided in Article 7.2(g) of the LCA. Foreign arbitral awards shall be recognized and enforced in Vietnam in accordance with the provisions of the CPC on procedures for the recognition and enforcement of foreign arbitral awards in Vietnam.

[5] We do not have information about the contents of this official letter. However, Art. 327.2 of the CPC provides as follows:

[…]

2. In the event the courts, the procuracies, or other agencies, organizations, individuals discover legal violations in court judgments, decisions that have become legally effective, then they must provide written notification to a person entitled to issue a protest provided for in Article 331 of this Code.
3. The Chief Judges of the People’s Provincial Courts can petition the Chief Judges of the High-Level People’s Courts or the Chief Justice of the Supreme People’s Courts, the Chief Judges of the High-Level People’s Courts can petition the Chief Justice of the Supreme People’s Court, for the issuance of a protest, in accordance with the supervisory review procedure, of legally effective court judgments, decisions if they discover there is ground to do so, as provided in Article 326.1 of this Code.

Since the first instance court is not authorized to petition directly the Chief Justice, it appears that the Chief Judge of the Ho Chi Minh City People’s Court submitted a petition to the Chief Justice requesting issuance of a protest in respect of the appellate decision.

[6] See Decision 03, page 7, Decision section.

[7] See Decision 03, paragraph 2, page 5. Although the Supreme Court did not explicitly state this, it can be inferred that the four grounds against recognition and enforcement were initially presented by the Respondent in the lower courts.

[8] Article 33.  Award by Consent

If the parties reach a settlement after the file has been transmitted to the arbitral tribunal in accordance with Article 16, the settlement shall be recorded in the form of an award made by consent of the parties, if so requested by the parties and if the arbitral tribunal agrees to do so.

[9] See Decision 03, paragraph 3.3, page 6.

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