*Speech by Dr. Le Net at HKIAC Arbitration Conference – Ho Chi Minh City Feb 19th 2014

Ladies and gentlemen,

It is my great pleasure to be here and to give this address. I don’t know what you had expected me to address but Mr. Dat suggested me to give an address on the title “Arb-Med and the Jurisdictional Minefield”. So I thank you for the chance to deliver my speech on such an interesting topic. With so many leading experts gathering here, I am sure this will be a wonderful exchange of minds on the concerned topic.

I would like to take his opportunity to share with you (1) some of my thoughts on the practice of Arb-Med in Vietnam, and (2) some key notes in finding and clearing the jurisdictional minefield in arbitral proceedings.

1. Some thoughts on the practice of Arb-Med

As we understand, Arb-Med is the situation where parties start the arbitration stage before the mediation stage. This is strange, but it happens.

Arbitration is all about right or wrong while mediation aims to find a win-win solution for both parties. I believe that various scholars have already recognized the many cons and pros of Arb-Med. May I just highlight some points in my address?

In Arb-Med proceedings, one of the most typical cons is that if the arbitrators are allowed to participate in the mediation, they may become bias. That means the arbitrators may lack independence. Consequently, the Arb-Med proceedings may result in an adverse outcome beyond the expectation of the parties, and of which is an unlawful and unreasonable arbitral award.

Concurrently, it is noteworthy that the pros of Arb-Med are for the parties to achieve efficient results. I would like to explain the reason. This is because Arb-Med proceedings aim to provide results which make compromises on the parties’ interests and ensures all issues of the disputes are resolved effectively.

In Vietnam, as a matter of law, arbitral proceedings are governed by the Law on Commercial Arbitration. There is no separate Law on Mediation. However, as a matter of fact, mediation has been available and recognized as an increasingly popular tool in dispute resolution. So we call it the mediation tradition. Let’s have a look at two versions of a mixture between arbitration and mediation: the first version is that mediation is conducted before arbitral proceedings and the second one is that mediation is conducted after the main hearing. Those are the two combinations of mediation and arbitration.

On this note, under Vietnamese law, arbitrators are not allowed to engage in the mediation stage for the same case. This can be explained by the law which ensures the arbitrators’ independence and sense of justice.

We can see that the development of Arb-Med, in addition to other forms of alternative dispute resolution, is heading towards a golden age. With this onset, a natural question to ask is what are the keys are to ensuring the success in utilizing Arb-Med. Among others, I would like to share three tips that merit our attention through my experience as a VIAC arbitrator.

First, for the arbitrator, the foremost advice is to be strong at the hearing.

Second, for the parties, they should show good faith throughout arbitral proceedings.

Third, the parties should watch for signs of the arbitrators, including their type of questions and requests. The reason is that arbitrators are still human. They have feelings, emotions and thoughts and may unintentionally reveal these human facets as signs to the parties. It can be said that arbitrators are predictable people. Hence, it is important to look at the arbitrator’s signs.

For further reference on Arb-Med, I would like to now present a case study to provoke the answer to the question of whether mediation is the best solution in resolving the disputes. The case is on price management in the construction industry. The Contractor is on the claimant’s side and the Employer is on the respondent’s side. More specifically, suppose the case concerns a price adjustment formula, currency and a price index. Suppose also that the case concerns the matter of the index’s adequacy. There are two cases that I would like you to appreciate: the first case is very clear and second one is very vain.

Let me describe in more detail about the first case. The contract is drafted in dual currency – JPY and VND. The paid items are quoted in JPY but purchased in VND. The VN Index is to be used, but the formula is for JPY. In this case, we progressed through a dispute spanning two years, comprising arbitral proceedings and then mediation. In the end, the case was closed with a successful mediation.

However, in the second case, the contract provides that the Engineer is entitled to change the source of index if it is inadequate and causes hardship to the Contractor. In fact, the Engineer implemented this correctly the first time, but refused to do so a second time. As a result, the Contractor suffered losses. In the arbitral proceedings, the Employer argued for a causal link relationship between the status of the source of the index and the losses. It is vain in the present case in how we decided the source of index as being interpreted as inadequate and causing hardship. Therefore, determining the merits of the case based on both feelings and data analysis is essentially a game of minds.

This concludes my first discussion on the Arb-Med practice in Vietnam. Now, I would like to go on to the second part.

2. Jurisdictional minefield

As a VIAC arbitrator, it is one of my roles to identify and reach resolutions for the minefields in arbitral proceedings. Therefore, allow me to talk about the jurisdiction minefield.

As a matter of fact, the jurisdiction of the tribunal does not exist per se. It is given by the parties through the arbitration agreement. So the questions, which are the mines in the minefield, are:

 Is an “arbitration agreement” the same as a “dispute clause”?

Under Vietnamese practice, part of the standard form in the dispute resolution section of a contract includes an arbitration agreement.

 What is the dispute? When does the dispute arise? What is the scope of the dispute?

On this note, the arbitrators should examine the Engineer’s decision as they cannot set aside the Engineer’s decision on the dispute, which is issued before commencement of the arbitral proceedings.

 Who are the contracting parties?

It should be noted that identifying the nature of the contracting parties in disputes is very important. The legal entity of the parties determines their competence to enter into the contracts, the arbitration agreements and the dispute resolution proceedings. For instance, you should be careful when coming into a contractual relationship with a project management unit (“PMU”) in Vietnam. Some PMUs are legal entities and some of them are not. In any case, you are only able to bring a case against PMUs who have legal personality.

 How about a hybrid clause?

Let’s have a look at an example. Suppose in the contract, the dispute clause has three paragraphs: one each for (1) negotiation; (2) mediation at VIAC; and (3) arbitration at VIAC. Among these three agreements, the third one, and only the third one, is the arbitration agreement. Besides, it should be noted that in addition to falling under the scope of arbitration, the issues raised by the parties must have already been analyzed by the Engineer.

 How about a pre-arbitration request?

A pre-arbitration request means a mediation request. Therefore arbitrators should be aware if the parties have asked for mediation and the outcome of that process.

Like the first part, I would like to introduce to you an example in order to provide a more realistic picture on how to find these mines in the minefield.

Let’s imagine the Claimant brings a dispute to arbitration and the Respondent then submits their counter-claim. The counter-claim is about VND 60 billion, but Engineer accepts only VND 50 billion. Accordingly, the Respondent claims for VND 50 billion but the Claimant refuses to pay. Consequently, the Respondent then brings the case to arbitration for a counter-claim of VND 90 billion. With that in mind, the question is how you can bring a case to arbitration without the previous Engineer’s decision. A further question is what if the arbitrators decide that the Engineer’s decision was wrong. Those queries are difficult to identify in practice and even more difficult to answer.

Turning back to the discussion on the jurisdictional minefield, I would like to share some points to be considered when finding the mines in the minefield. The mines can be on the nature of the parties, the definition of the dispute, the definition of the agreement, etc. so think about that.

After finding the mines, as the arbitrators, we try to clear all mines by asking quick questions to the parties, such as “do you have any questions on the language?”. If they say “no”, then we say “thank you” and move on to the next question such as “do you have any questions on the submission of the other party?” or “how is translation provided by the other side?”. All those “yes”, “no” and “thank

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you” are recorded and can be construed as the parties’ acceptance or dismissal. This is a way that the arbitrators clear the mines in arbitral proceedings.

This concludes my presentation. Last but not least, I reiterate my gratitude for giving me this valuable opportunity to address you and I wish this conference every success.

Thank you.