The Prevalence of International Arbitration in Vietnam
According to statistics from the leading Vietnamese arbitration centre, the Vietnam International Arbitration Centre (VIAC), there has been a steady growth in the number of newly administered cases and overall amount in dispute over the last five years, with a slight drop in 2020.
Ho Chi Minh City is still the province with the most enterprises arbitrating with the VIAC, and the majority of disputes concern the sale of goods (47%) with construction disputes coming in second, accounting for 14% of the disputes. The growth of the VIAC earns it the title of the fastest-growing arbitration venue in South East Asia (outside Singapore).
International Arbitration
The Law on Commercial Arbitration does not uphold the concept of “international arbitration” but only of “commercial [local or international] arbitration” and “foreign arbitration”. Commercial arbitration is an arbitration where one of the parties is a merchant (ie, a commercial entity). Foreign arbitration is an arbitration whereby its Tribunal is subject to foreign procedural law, regardless of where the seat of arbitration was. Also, Vietnam does not have two sets of arbitration laws for domestic and foreign arbitration, but only one law on commercial arbitration (LCA).
The concept of “international arbitration” was understood (though without legal basis) in the same way as the UNCITRAL model law. In practice, lawyers might confuse the differences between foreign arbitration and international arbitration, which are not the same.
The top three nations with enterprises arbitrating in Vietnam from 2018 to 2020 were China, Singapore and South Korea. Experience of using arbitration in Vietnam is generally high, evidenced by a growing number of arbitration cases being settled in Vietnam.
Generally, compared to local courts, Vietnam arbitration is perceived to be fairer, and more effective, helping to save time and costs. Arbitrators are also deemed to have more expertise than judges in technical areas of law and international practice. Of course, an arbitration can only be as good as a tribunal could be.
Arbitration in Vietnam 2019–20
In 2019, the new Civil Procedure Code (CPC) was adopted, with clear provisions on the recognition and enforcement of foreign arbitral awards. The enforcement rules follow closely those of Article V of the New York Convention, of which Vietnam has been a member since 1995.
At the same time, the Supreme Court issued a clarification, whereby “non-compliance with principles of Vietnamese law” concerns only restrictive circumstances, including national safety, public safety, public health, fraud or bribery, or universal principles such as pacta sunt servanda. In this respect, the concept of fundamental principles of Vietnam law now comes very close to the concept of public order under the UNCITRAL Model Law. In practice, however, individual experiences vary from court to court.
In 2020, the Government issued Decree 82/2020 on penalties on judiciary matters. As a result, arbitrators who handle a case and knowingly violate the LCA or do not adhere to the principles of impartiality (eg, they sit in a case where they were a counsel) would be subject to a penalty.
Recently, both the National Assembly and the Government called for reform of the LCA 2010, bringing it closer to international practice with a potential express adoption of the UNCITRAL Model Law, and consistent with other laws that have been revised, including the Civil Code 2015 and the Civil Judgment Enforcement Law 2014.
The Impact of COVID-19
COVID-19 has certainly impacted on the way arbitration is conducted in Vietnam. Sadly, the current VIAC Rules only allow hearings online if the parties have so agreed. Another option is to conduct a hybrid hearing, in which the parties and arbitrator(s) who may come to Hanoi or Ho Chi Minh City VIAC offices will conduct arbitration physically, with connection to the other party/arbitrator(s) who cannot come to the VIAC office(s) via an online platform.
Arbitration in Vietnam during COVID-19 in 2020–21
In 2020, the total number of disputes administered by VIAC was 221 cases, of which 46 cases were foreign-related. The number of cases received in 2021 also decreased compared to 2020, due to travel restrictions. Nevertheless, the VIAC is still the busiest arbitration centre in South East Asia outside Singapore.
Hearings online have become more popular and have been shown to be more convenient, but not less reliable. This will certainly increase the efficiency of arbitration, even after the pandemic.
At the same time, the number of cases settled by courts also decreased due to the COVID-19 pandemic and travel restrictions. The courts also have to conduct meetings online if the parties so agree.
According to VIAC statistics, two sectors which have experienced an extensive decrease in international arbitration activities in Vietnam are real estate and general services providers. Real estate disputes experienced a reduction of 23% total cases to 0% total cases between 2019 and 2020. Similarly, services' provision experienced a reduction of 14% between 2019 and 2020. While the reduction of service disputes is attributable to COVID-19 travel restrictions, the reduction of real estate disputes is harder to explain. However, the value of disputes has increased, with a case in early 2021 involving a disputed amount of over USD600 million.
The industry that is most promising is construction. During 2019–20, construction disputes increased both in number and amount. The highest amount of a construction dispute was USD200 million. Leading foreign arbitrators are also involved.
It is expected that VIAC Rules will need to be revised to adapt to COVID-19, such as allowing the parties to communicate directly to the Tribunal and accepting email as an official mode of submission, or allowing the Tribunal to set the mode of meeting as online without consent from the parties.
The most often used institution for international arbitration is the Vietnam International Arbitration Centre (VIAC). Originally attached to the Vietnam Chamber of Commerce and Industry (VCCI) since the 1990s, the VIAC has now become an independent institute with an international panel of arbitrators, including top-tier arbitration lawyers and scholars. Other arbitration centres to be mentioned are TRACENT (the Saigon Arbitration Centre), the Pacific International Arbitration Centre (PIAC) and the Financial and Commercial Centre for Arbitration (FCCA).
The VIAC is administered by the Secretariat, which consists of counsel (or the VIAC secretary). VIAC counsels play the role of secretaries to the Tribunal. Counsels communicate with the parties and the Tribunal, guide the Tribunal with regard to understanding the VIAC Rules and the LCA, but do not interfere with the cases or the summary of the arguments of the parties. Unlike the International Chamber of Commerce (ICC) or the Singapore International Arbitration Centre (SIAC), the VIAC does not have a Court of Arbitration. Decisions in relation to the composition of the Tribunal or particular arbitrators/candidates are handled by the VIAC Chairman or the VIAC General Secretary.
In 2020–21, four new arbitral institutions were licensed by the Ministry of Justice, including Quang Ninh, Mekong, OPIC and Highland.
In general, the economic sub-division of the relevant provincial People’s Court will hear the disputes relating to arbitrations. The two most popular courts that supervise arbitration are Ho Chi Minh City court and Hanoi court. However, the courts do not assign specific judges to handle arbitration cases.
The LCA and Article 414 of the Civil Procedural Code (CPC) assign courts to:
The intention of the LCA is to adopt the UNCITRAL Model Law as applicable to both domestic and international arbitration. It also limits the spheres where courts may interfere with the independence and impartiality of the arbitrators. Compared to Singapore law, where an arbitral award must be subject to a recognition process, or a challenge to arbitrator might be reviewed by a court, judges in Vietnam do not have such a right. An arbitrator may only ultimately be challenged before the VIAC Chairman.
However, both the LCA and the CPC have the drawback that they do not allow court decisions on arbitration matters subject to appeal or even cassation. To avoid the risk of an arbitrary court decision, the Supreme Court has issued guidelines for assisting and supervising arbitration cases, and the situation has improved lately. However, to solve this problem, the LCA and the CPC need to be amended to include the appeal/cassation of the court decision. The LCA is due for amendment in 2021 or 2022.
Legislations Governing International Arbitration
The Law on Commercial Arbitration 2010 (LCA) is the main legislation governing international arbitration. The LCA has been guided by Resolution No 01/2014/NQ-HDTP of the People’s Supreme Court. Specifically, the court has instructed that an arbitral award will only be set aside after it is proven that it contravenes one or more fundamental principles of Vietnam’s law which have not been adhered to by an arbitral tribunal, and the arbitral award seriously infringes upon the interest of the State, the lawful rights and interests of either the disputing party or a third person. Awards, if not challenged, are directly enforceable as final court judgments.
In relation to the recognition and enforcement of a foreign arbitral award, the main regulation is the Civil Procedures Code 2015.
Difference and Similarities with the UNCITRAL Model Law
The LCA and the provisions on the recognition and enforcement of foreign award under the CPC are both generally based on the UNCITRAL Model Law. The structure of the LCA follows strictly the Model Law, including fundamental provisions, arbitration agreements, appointing arbitrators, submissions, jurisdiction, hearing, awards and challenge of awards. The LCA also limits the role of the courts. In addition, the LCA also adopts the principle of kompetenz-kompetenz in allowing the tribunal to rule on its jurisdiction or a challenge of arbitrators. The LCA also imposes that, unless the law has provided otherwise, a decision of the arbitrators is final.
While the Model Law has only 36 articles, the LCA has over 80 articles. The Model Law adopts a flexible approach that gives arbitrators a wide range of power; the LCA, however, uses strict language to determine the rules and obligations of all parties involved, including the arbitrators. The LCA covers a broader scope than the Model Law. Whereas the Model Law only regulates the arbitration process, the LCA also prescribes requirements on operations of arbitral institutions (both domestic and international institutions operating in Vietnam), including registration requirements, and the rights and responsibilities of arbitral institutions.
There are, however, certain key differences.
First, under the Model Law, all awards, whether domestic or international, would need to go through the recognition and enforcement procedures, whereas an award made under the LCA is directly enforceable in the same way as a court judgment, unless it is set aside (Articles 66 and 67). This is a clear advantage of Vietnam arbitral awards when compared to foreign arbitral awards, even when compared to Vietnam court judgments in terms of enforceability and pro-arbitration attitude.
The second difference concerns the setting-aside of an award, which was the main reason why the LCA was not recognised by some lawyers as a law aligned to the Model Law. Whereas the UNCITRAL Model Law uses the term “public policy”, the LCA and the CPC both use the term “fundamental principles of Vietnam law”. In the past, local courts have broadly interpreted this term in setting-aside and non-recognition proceedings, in some case, even going as far as to revise the substance of the awards. Recently, the Supreme Court has stated its intention to bring the concept of fundamental principles of Vietnam law closer to the concept of public order. As a result, court decisions have become more pro-arbitration, particularly at Ho Chi Minh City court (economic chamber). “Public policy” or “principles of Vietnam law” are only names; what defines whether a law is aligned with the Model Law is not the name, but the concept used. From that perspective, the LCA is aligned with the Model Law. Otherwise, it cannot explain the success of Vietnam arbitration in winning foreign parties’ trust compared to other countries in the region in which it is recognised that an arbitration law is aligned with the Model Law.
Finally, the LCA takes a more prescriptive approach compared with the Model Law in relation to provisions on procedures for arbitration. In particular, the following.
In late 2020, Decree 82/2020/ND-CP came into force, prescribing administrative penalties for certain activities in the arbitration process.
Under the LCA, an arbitration agreement would be enforceable unless it falls foul of the following circumstances (Article 18 of the Law):
Subject Matters that may Be Referred to Arbitration
Article 2 of the LCA lists three kinds of disputes which can be resolved by arbitration, which are:
Article 470.1 of the CPC provides for two types of disputes that are exclusive to the jurisdiction of the Vietnamese courts: civil cases relating to rights over immovable property located within the Vietnamese territory, and divorce proceedings.
Whether an activity is defined as commercial activity remains a big question in particular circumstances. The People’s Court of Ho Chi Minh City in Decision 755/2018/QĐ-PQTT enforced an arbitral award which was contained in a non-disclosure agreement and rejected an argument that the tribunal lacked jurisdiction for disputes on an employment relationship.
It is certain, however, that construction, insurance, financial services, M&A, leases, trade and intellectual property matters are considered as commercial activities.
Determining whether a Dispute is “Arbitrable”
This is discussed in the foregoing.
Vietnamese national courts must uphold the parties’ arbitration agreement. The only exception is where the arbitration agreement is void or impossible to perform. It is unclear as to whether the parties should bring the case to arbitration first for the Tribunal to decide whether the arbitration agreement is valid or not. It is also not clear when an arbitration agreement is impossible to perform, leaving the Tribunal with a free hand to decide on an interpretation. Hence, if there is no objection by the other party (and that party must start an arbitration proceeding), the court would accept jurisdiction to review the validity of an arbitration agreement.
In relation to the choice of law governing the arbitration agreement, practice in national courts does not differentiate between procedural and substantive law. The key question is whether there is a foreign element to the dispute. If not, Vietnam law applies (Articles 663 and 664 of the Civil Code 2015, Article 14.1 of the LCA). If yes, the parties’ choice of law will apply (Article 14.2 of the LCA). If there is a foreign element but the parties have made no choice, an arbitral tribunal would be entitled to choose the most suitable law (Article 14.3 of the LCA).
The rule of separability to arbitration clauses is expressly recognised under Article 19 of the LCA. Accordingly, an invalid (or void, or however modified) agreement would not affect the validity of an arbitration agreement.
Under Article 20 of the LCA, an arbitrator must have:
It is not necessary that a candidate must be a panel arbitrator to any arbitration institution, but some institutions (the VIAC included) maintain a checklist of conflict of interests to assess whether to accept an arbitrator.
Procedure Following a Failure to Select an Arbitrator
For an institutional arbitration, if either party fails to select the arbitrator, the President of the arbitral institution will make the appointment.
The situation is different for ad hoc arbitration. In this case, it will be the court at the place of arbitration who has the authority to appoint. (Articles 3.6 and 3.7 of the LCA).
Default Procedure for Multiparty Arbitration
The parties on one side must jointly appoint an arbitrator. If they fail to do so, either the President or the court, as previously mentioned, will make the appointment.
The Vietnamese court generally plays a minor role and cannot intervene in the parties’ selection of arbitrators.
Under Article 42.1 of the LCA, an arbitrator will be challenged if:
When compared with the UNCITRAL Model Law (and also the IBA Guidelines on Conflicts of Interests in International Arbitration), the grounds for challenge are much more restrictive in the LCA. In particular, whereas the former only require a “justifiable doubt” as to the arbitrator’s impartiality or lack of independence, the latter requires “clear grounds” (a much higher standard).
Under Article 21 of the LCA, an arbitrator is under a general duty to remain independent and impartial. They must also disclose all circumstances which may affect their independence and impartiality, pursuant to Article 42.2 of that law.
The same disclosure requirement is provided under the VIAC Rules of Arbitration, with a checklist generally based on the Red and Orange Lists of the IBA Guidelines to Conflict of Interests in International Arbitration with variations (that the parties must pay attention to). If the arbitrator falls under any of the circumstances on the list, then, depending on which circumstance it is, the arbitrator may be automatically disqualified or that conflict would have to be expressly waived by the parties.
Vietnam’s approach is to contract-in, which means that any matter not mentioned in Article 2 of the LCA is non-arbitrable.
The principle of competence-competence is expressly recognised under the LCA.
Under Article 44 of the LCA, the competent Vietnamese court has the right to review the decision on jurisdiction of an arbitral tribunal if a party requests the court to review the Tribunal’s decision. Normally, when a party submits a review request to the court, the Tribunal will wait for the court to make a decision (although the LCA expressly allows them to proceed). Although the court decision on jurisdiction is final, it has also happened that the award was set aside later on jurisdiction again (but for a different reason from that of the original decision).
Under Article 44 of the LCA, the timing for challenge is within five working days of receiving the Tribunal’s decision on jurisdiction. The court should appoint a judge within seven working days, although in reality the appointment and ruling on jurisdiction may take longer.
Under Article 44 of the LCA, the judge will make a decision in camera, without needing to call for a hearing or to invite the parties to submit opinions. The judge’s decision is final.
Under Article 6 of the LCA, where an arbitration agreement exists and a party commences court proceedings, the court must refuse jurisdiction unless that arbitration agreement is void or impossible to perform.
If a dispute resolution clause specifies that both the court and the arbitration tribunal have competency, then, generally, whichever institution receives the claim first will have competency (Article 2.4 of Resolution No 01/2014 of the People’s Supreme Court).
A breach of an arbitration agreement by the Tribunal is a serious breach and may result in the setting-aside of the award. There is no clarification, however, as to when the arbitration agreement starts. For example, a claim dispute clause (eg, Clause 20 of the Fédération Internationale Des Ingénieurs-Conseils (FIDIC) general conditions of contract) includes an arbitration agreement at Sub-clause 20.6, but it might be considered by the Tribunal that Sub-clauses 20.1 to 20.5 also apply. As such, if a party fails to submit the case to the dispute board (if that board was established under Sub-clause 20.3), the Tribunal may not accept jurisdiction, otherwise it would violate the agreement between the parties, and pacta sunt servanda is certainly a fundamental principle of any law, not just in Vietnam.
Arbitration brought under Vietnam law is based on the existence of a written arbitration agreement between the parties (Article 5.1 of the LCA). Anyone who is not a party to the arbitration agreement cannot bring the dispute to arbitration pursuant to that arbitration agreement.
There are, however, express exceptions to this rule under Articles 5.2 and 5.3 of the LCA, specifically:
The arbitration agreement is void or impossible to perform if the matters are impossible to arbitrate, or if the parties who sign the arbitration agreement have no competence to do so, or the arbitration institution ceases to exist. For other matters, such as a lack of language, procedural rule or place of arbitration, the Tribunal may decide when it is established.
An arbitral tribunal in Vietnam is permitted to award interim reliefs or emergency relief, according to Article 48.1 of the LCA.
Compared with the UNCITRAL Model Law, Article 17, the interim measures available to the Arbitral Tribunal are more restrictive. Whereas Article 17 of the Model Law prescribes a general power to order any interim measure of protection that the Arbitral Tribunal may consider necessary, the LCA only prescribes a restrictive list of measures which the Tribunal may order. There was a case in which a Tribunal ordered a measure that was not specified under the LCA which was later challenged at a court for indemnity. It is a very rare case, but arbitrators should pay attention to what measures it may adopt.
Courts Granting Emergency Relief
Under Article 53 of the LCA, a party may request the competent court to apply one or more emergency reliefs after submitting its statement of claim, especially for the measures that the Tribunal cannot adopt, or if the Tribunal is not yet established.
Emergency Reliefs
Under Article 12 of Resolution No 01/2014/NQ-HĐTP, the type of emergency reliefs which can be granted by the court in Vietnam includes those available to an Arbitral Tribunal. In addition, under Article 48 of the LCA, the parties may request the court also to grant emergency reliefs in accordance with other relevant laws. This includes the CPC 2015, Article 114, which sets out a number of further emergency reliefs which can be applied by the courts.
Emergency Relief in Aid of Foreign-Seated Arbitrations
Under Vietnam law, there has yet to be any specific legal mechanism allowing the courts to grant emergency reliefs in aid of foreign-seated arbitrations, although in practice some courts are willing to provide assistance.
Emergency Arbitrators
No emergency arbitrators are available.
For measures to freeze a bank account or seize assets, the courts and/or the arbitral tribunal must order security for costs. However, an interim relief constraining the moving of the assets of the other party (Article 49.c of the LCA) does not require (for the moment) security for costs.
Chapter V of the LCA sets out a number of procedure requirements for arbitration in Vietnam. These concern:
In Vietnam, it is commonly understood that the following procedural steps are required by the LCA:
In practice, however, Tribunals are willing to issue the order and allow the making of further submissions with the consent of the parties. One thing that is certain is that the Vietnam LCA follows the memorial style, not the pleading style. Therefore, if a party wishes to submit expert or witness statements, it needs to do so with a submission (unless the other party agrees otherwise).
Under Article 21 of the LCA, the powers and duties that are imposed upon arbitrators are similar to those under the UNCITRAL Model Law.
There are no particular qualifications or requirements for legal representatives appearing in arbitration proceedings in Vietnam. It is sufficient that the legal representative is able to show that they are a representative, either by virtue of them holding the position of legal representative of a legal entity, or by being empowered by a power of attorney.
Under Articles 30, 35 and 46 of the LCA, parties have the right and obligation to submit evidence to prove their case and in support of their statements of claim and statements of defence.
Additionally, as a general rule, pursuant to Article 46 of the Law on Commercial Arbitration, a party can request the arbitral tribunal to order the production of documents and evidence from the other party. In the event that the documents and evidence could not be acquired, even though the tribunal or a party have employed the necessary methods, that party may request the court to order the production of the documents/evidence. As discussed in 11.2 Excluding/Expanding the Scope of Appeal, a local court in Vietnam annulled a tribunal award on the ground that the Arbitral Tribunal failed to grant a request for production of evidence, alleging “impartiality” or “lack of independence”. The same applies to witnesses and witness statements. Under Article 47 of the LCA, a party can request the tribunal to order the attendance of a witness at the hearing. If appropriate methods have been carried out by the Tribunal but the witness still does not attend, the Tribunal will apply to the court to make an order for attendance. In practice, any such process of discovery, disclosure, use of witness statements, or cross-examination is applied with discretion and, generally, is subject to the parties’ agreement and the Tribunal’s direction on a case-by-case basis.
As for privilege, Vietnam law does not contain express provisions on this and, depending on the parties’ agreement, or the rules of the arbitral institutions, the privilege rule may be applied.
There are no rules of evidence applying in particular to arbitration seated in Vietnam (eg, a rule of evidence similar to the IBA Rules on the Taking of Evidence in International Commercial Arbitration). It is also commonly understood that parties may submit evidence at any time prior to the final hearing. In the past, an award was set aside because it referred to the IBA Rules without agreement between the parties that those rules should apply. The IBA Rules are not considered to be in compliance with Vietnam law. To avoid that risk, the Tribunal should issue a procedural order that accepts the IBA Rules in advance.
The Tribunal or the parties may request the competent court to order the production of documents relating to the dispute. Similarly, the Tribunal may request the court to require the attendance of a witness. Within five working days from appointment by the court, the judge shall make the decision to order document production/witness attendance accordingly.
Article 21 of the LCA imposes a general duty on arbitrators to maintain confidentiality regarding the arbitral proceedings on the parties and the arbitrator.
As for the parties, there is no express confidentiality requirement, only a default rule that “dispute settlement by arbitration shall be conducted in private”.
Article 61.1 of the LCA provides a list of requirements with which an arbitral award must comply, such as dates, names and addresses of the parties, grounds for issuing the award (except for a consent award) and the arbitrators’ signatures. An award must be issued within 30 days after the end of the final hearing (Article 61.3).
The Tribunal would have to follow the principles of remedies under the substantive law pursuant to their duty to comply with the law (Article 4.2 of the LCA), or Article 292 of the Law on Commerce, such as specific performance, penalties, damages, termination of contract, and avoidance of contract.
Legal Costs
Vietnam law does not make express provisions on the allocation of legal costs, only on arbitration fees. Under Article 34 of the LCA, the fundamental principle is that the losing party will be responsible for arbitration fees.
A recently developed practice at the VIAC is that the respondent must submit a separate counterclaim for legal costs.
Interests
It is common practice for parties to arbitration in Vietnam to request the award of interests. Some Tribunals go as far as to make a decision that if the losing party does not conform with the award after it becomes final and binding, it must pay additional interest based on the prevailing basic interest rate, even if the winning party did not ask for this.
According to Article 4.5 of the LCA, arbitral awards are final and binding, and may not be appealed in Vietnam.
However, under Article 69 of the Law on Commercial Arbitration, a party may request the competent court to set aside an arbitral award within 30 days from the date of receipt of that award. Article 68 of the Law on Commercial Arbitration sets out the grounds for setting aside the arbitral award as follows:
These grounds roughly follow the grounds set out under Article 36 of the UNCITRAL Model Law, with a number of differences, the most important one of which is “fundamental principles of Vietnam law”.
In recent years, there has been an increase in the number of Vietnamese awards being set aside by local courts on very strange reasonings. A very major set-aside decision was made by the Hanoi People’s Court in 2019 (under Decision No 08/2019/QD-PQTT). The court effectively re-opened the substantive decision of the case, reasoning that the arbitral tribunal was impartial when it accepted a counterclaim inconsistently with the contractual arrangement for liquidated damages.
Another major set-aside decision was also issued by the Hanoi People’s Court in 2020 (Decision 04/2020/QD-PQTT), in which an award was annulled because the arbitral tribunal did not grant a request for production of evidence held by the claimant, or adopt the IBA Rules of Evidence without a procedural order. The court thus set aside the award on the ground that the tribunal had failed to ensure its independence and impartiality.
The parties are not allowed to extend the scope of the challenge. As provided under Article 15.2 of Resolution No 01/2014/NQ-HDTP, during a hearing petition to set aside an arbitral award, the court can only consider whether the award falls under one of the grounds in Article 68.2 of the Law on Commercial Arbitration (see 11.1 Grounds for Appeal). If it does not, the court may not set aside the arbitral award.
However, as previously explained, the Vietnam courts have taken liberties in their interpretation of the grounds for setting aside an award, including the reopening of substantive parts of the arbitral awards for consideration.
As previously mentioned, the court is not allowed to review the merits of the case. However, some courts confuse “merits of the case” and “content of awards”. Hence, the court practice can swing from extreme left (freely interpreting what are fundamental principles of law) to extreme right (not touching the award even if there was a breach of fundamental principles of law, because such a breach involves “merits of the case”). It is hoped that a recent Supreme Court interpretation on fundamental principles (or amendment of the LCA later) would prohibit the court from reopening the facts of the case, but allow it to review the content of awards and strike it down only if it violates public policy.
Another standard to strike content of the case is when the court finds that an important piece of evidence that the Tribunal relied on to issue the award was forged. The issue is how to determine whether such evidence is “important”.
The main standard of judicial review is based on procedural rules, particularly the parties’ agreement and the LCA. If an award was granted without regard to the LCA, for example, Article 33 on time-limitation, it might be considered as violating the LCA. Under Article 33, unless specific laws provide otherwise, the time-limitation to bring a case to arbitration is two years from the time the claimant’s rights are violated, ie, the respondent’s debt is due, but not made. At the same time, the CPC provides that the court shall not look at the question of time-limitation if it is not raised by the respondent. This practice is applied mutatis muntandis in arbitration, although it is unclear if the court may later reopen the issue of the time-limitation.
Under Article 13 of the LCA, if a party was aware of any irregularities in the arbitration proceeding but did not object in a timely manner, it will lose the right of objection. This gives a safety net for the arbitral award later in the setting-aside process. However, not many courts rely on Article 13 to deny claims of the losing party for violating the LCA. As such, the Tribunal should follow the LCA strictly.
Vietnam has been a member of the New York Convention since 1995. Vietnam’s ratification of the Convention came with four reservations:
On 25 September 2020, Vietnam opened a database on statistics of cases enforced in Vietnam at the following webpages: https://moj.gov.vn/tttp/Pages/dlcn-va-th-tai-Viet-Nam.aspx?fbclid=IwAR0ZN4v8vtAKbUpyqoNsPuL82Ll-MgcX6OaBCwW6mtHyj3WtQqreuo5KnTw
Out of 82 foreign arbitral awards, more than 50% were recognised or enforced, all based on the New York Convention. From 26 foreign-court judgments, the result is mixed because there is no international convention on court-judgment recognition. For example, a Korean court judgment was enforced in one case (perhaps on a quid pro quo basis) and denied in another case as no international convention applies.
Enforcing Awards in Vietnam
In Vietnam, there is a distinction between domestic and foreign arbitral awards. In particular, domestic awards are fully enforceable (subject to set-aside), and an applicant may request the civil judgment enforcement authority to enforce the award as though it were a court judgment.
Foreign arbitral awards, meanwhile, are required to go through the recognition procedure first. Under Article 451 of the Civil Procedure Code 2015, the party seeking to enforce a foreign arbitral award in Vietnam must first file a petition with the Ministry of Justice, which will subsequently transfer the document to the competent court within five days upon receipt, pursuant to Article 453 of the Civil Procedure Code. Within five working days upon receipt, the court shall consider admitting the case for review and notify it to the relevant parties, the procuracy and the Ministry of Justice. Then, within two months, the court will either issue a decision to:
If the court finds that the award can be recognised, it will be enforced.
It should be noted, however, that the decision of the court on the recognition of a foreign arbitral award can be appealed within 15 days of issuance, and can be subject to a cassation proceeding, which usually takes a long time (one to two years).
Enforcement of Awards that Have Been Set Aside
An award being set aside by the courts in the seat of arbitration is one of the grounds where the Court of Vietnam will refuse enforcement of that award. This is provided under Article 459.7 of the Civil Proceeding Code 2015.
Under Article 457.2 of the Civil Procedure Code 2015, the local court will suspend the recognition and enforcement proceedings if there is evidence to show that the award is being re-considered (subject to ongoing set-aside proceedings) at the seat.
Defence of Sovereign Immunity at the Enforcement Stage
Sovereign immunity is not one of the grounds for refusing enforcement of the award under Article 459 of the Civil Procedures Code 2015. However, it is noted that the Civil Procedure Code 2015 also expressly recognises an overarching principle that those entitled to diplomatic privileges and immunities or under Vietnam laws and international treaties to which the Socialist Republic of Vietnam is a signatory, the civil cases related to such individuals, agencies and/or organisations shall be settled through diplomatic channels.
It is noted that Vietnam has yet to sign the UN Convention on Jurisdictional Immunities of States and their Property. However, if this changes in the future, it is likely that the aforementioned provision of the Civil Procedure Code 2015 will be interpreted to include a defence of sovereign immunity at the enforcement and recognition stage.
Recognition and Enforcement of Arbitration Awards
When it comes to the recognition and enforcement of arbitral awards, Vietnamese courts are not allowed to re-open the arbitral awards that have already been decided by the arbitral tribunal, only to determine whether the award falls under the grounds for refusal of recognition (Article 457.2 of the Civil Procedure Code 2015). The grounds where the courts can refuse to enforce foreign arbitral awards are stipulated under Article 459 of the Civil Procedure Code 2015, and include the following.
In practice, these standards are very open-ended, giving rise to various interpretations from different courts and a relatively low enforcement ratio. According to statistics, from 2015 to 2019, the percentage of foreign awards enforced in Vietnam was only 47.8%, with 21.7% of the cases being refused enforcement (statistics published by the Ministry of Justice’s official database on recognition of foreign arbitral awards). The most usual grounds for non-recognition under Vietnam law are improper notice, lack of competency to enter into the arbitration agreement and being contrary to basic principles of Vietnam law.
Refusal to Award Foreign Arbitral Awards
The two most common grounds cited by the local court to refuse recognition and enforcement of foreign arbitral awards are (i) "contrary to fundamental principles of Vietnam law” and (ii) the procedures for settlement of disputes conducted by foreign arbitrator are not conformable to the arbitration agreement or the law of the country where the foreign arbitrator’s award has been made.
Contrary to fundamental principles of Vietnam law
Instead of “public policy”, Article 459 of the Civil Procedure Codes 2015 uses the test of “fundamental principles of Vietnam law”. In this concept, Article 14.2 of Resolution 01/2014/NQ-HDTP (which applies to proceedings for annulment of a domestic arbitral award) explains that a Vietnamese court reviewing the application must consider two questions:
Yet there remains significant room for interpretation, and Vietnamese courts have occasionally interpreted this principle very broadly.
For example, in a widely cited case, Toepler v Sao Mai, the court found that the winning party’s failure to mitigate its loss was contrary to the principle of goodwill under the Vietnamese Civil Code. In addition, the granting of liquidated damages is in conflict with the Vietnam law on damages (requiring damages to be actual and direct).
Strategic Think Tank LLC and 260 Architects v Sudico (a 2015 decision by the Hanoi People’s Court) is another example. In this case, the SIAC award was refused enforcement on the arguably substantive ground that certain construction designs were not approved by local authorities and they did not satisfy local requirements. The legal basis was, again, “contrary to fundamental principles of Vietnam law”.
In general, whilst the court generally recognises that it is bound not to retry the case, there have been occasions where this was the de facto result, as the court considered that awards wrongly applying Vietnam law would be “inconsistent with the principles of Vietnam law”. It is hoped that once the Resolution Guiding Certain Provisions of Civil Procedure Code on Recognition and Enforcement of Foreign Arbitral Awards at First-Instance Courts comes into effect, this will narrow the scope of interpretation for what is meant by “principles of Vietnam law”.
Non-conforming procedures
The second most common ground for non-recognition cited by Vietnam courts is a non-conforming arbitration process. In practice, this is mostly related to the serving of documents and evidence thereof.
For example, in a 2019 decision, the Binh Phuoc’s People Court refused enforcement of a foreign arbitral award on the ground that evidence of serving documents were not present. Similarly, in 2017, the Can Tho People’s Court found, in an annulment proceeding, that despite the award stating that notices would be circulated through Fedex, there was no evidence that the arbitrator had sent their notices and documents through Fedex. As a result, the respondent was not aware of the arbitration proceedings. The award was therefore refused enforcement.
Another example concerns that of the award in Encom Argoin Industrial Corp Ltd v 19 May Textile, an arbitration of the International Cotton Association, which was refused recognition because the court found that the signatory of the respondent lacked capacity and the respondent was not properly notified of the arbitration.
Vietnam law is silent with regard to class-action arbitration or group arbitration. However, it is understood that these types of derivative claims would not be arbitrable, as under Articles 49, 72, 161 of the Law on Enterprise 2020, a member or shareholder of the company when bringing a derivative action on behalf of the company must “comply with legal provisions on civil procedures”. It is understood that this refers to the Civil Procedures Code 2015, and, indeed, Article 30.4 of the Civil Procedures Code 2015 provides that disputes between a company and its members/shareholders shall fall under the jurisdiction of the court. Accordingly, it is understood that these types of derivative actions must be brought to court, not arbitration.
Under Article 21 of the LCA, the arbitrator has a duty to adhere to the rules of professional ethics. Whilst there is no overarching code on professional ethics in Vietnam law (except for certain obligations of the tribunal under Articles 21 and 42 of the LCA), various arbitral institutions have their own rules of ethics. For example, the Vietnam International Arbitration Centre has its own Rules of Ethics of Arbitrator published in 2015.
As for counsel, there are no specific codes or professional standards applicable to them in arbitration (eg, the IBA Guidelines on Party Representation). Instead, counsels are bound by the ethical rules of the relevant bar association. For example, Vietnam lawyers are subjected to the Ethical Rules and Professional Conducts of Vietnam lawyers pursuant to Article 5 of the Law on Lawyers.
There has not been any legal framework or restrictions on third-party funders under Vietnam law. Depending on the structure of the funding, however, if it is a loan with a foreign funder, the funded party will need to register any such funding as a foreign loan with the State Bank of Vietnam.
There is no express recognition for consolidation of arbitration under Vietnam law; however, Article 15 of the VIAC Rules expressly recognises that, with the parties’ agreement, the arbitral tribunal may consolidate claims made in separate, but pending, arbitrations into a single arbitration at the earliest commencement date.
Third Parties Bound by Arbitration Agreements/Awards
Vietnam law is silent on whether third parties can be bound by an arbitration agreement or award. However (and this is untested), if the contract is made in favour of a third party, that party may be entitled to rely on the arbitration agreement to bring a dispute against a party, as, under Article 415 of the Civil Code 2015, a third party in this case has the power to demand the obliged party directly to perform his or her obligation.
National Court of Vietnam and Foreign Third Parties
Vietnam law is silent on the question of whether the national court of Vietnam can bind a foreign third party.
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