Introduction

In a recent development, Hanoi People's Court, on 4 July 2023, issued a groundbreaking decision addressing a request to annul an arbitration award in a share transfer dispute. The decision, centered around concerns of proper consular legalization for foreign documents, sheds light on critical aspects of dispute resolution within the context of international arbitration.

1. Background of the case

In the year of 2021, the Vietnam International Arbitration Centre (hereinafter referred to as “VIAC”) received a Notice of Arbitration from W. PTE. -  a Singaporean company (hereinafter referred to as the “Claimant”) against A Company -  a Vietnamese company, and Mr. B. – a Vietnamese citizen (hereinafter referred to as the “Respondent”). The crux of the dispute pertained to a share transfer contract. According to the contract signed in 2019, the Claimant and Mr. B. entered into a contract for Mr. B. to transfer 34% of the total issued and voting shares of S Joint Stock Company (referred to as S) to the Claimant. At the time of contract signing, A Company owned 41% of the total issued shares and voting rights of S. A Company is a major shareholder of S and desires to enter into and execute the contract as a guarantor for the fulfillment of obligations and commitments of Mr. B. and S under the contract, and to ensure the successful completion of the share transfer contract.

In early 2022, VIAC rendered a decision through an award, concluding that the Respondent had not met their responsibility to make full payment to the Claimant. In disagreement with the arbitration award, the Respondents lodged a petition seeking the annulment of the arbitration award and associated documents with the Hanoi People's Court.

The main point of the proceedings in the Court is the question of whether the provided evidence, especially a resolution from the Claimant's Board of Directors, is credible, given the lack of proper authentication.

2. Parties’ opinions

The Respondent asserts that the contested resolution, alongside other documents, bears implausible features stemming from logistical constraints and inadequate authentication. They contend that VIAC's acceptance of these documents without proper consular legalization runs counter to legal requisites. The Respondents challenge the tribunal's reliance on the arbitration agreement, assert its nullity, and highlight procedural irregularities, jurisdictional ambiguities, and an alleged disregard for legal tenets. Notably, they express reservations about the potentially adverse precedent set by the arbitral decision.

In contrast, the Claimant staunchly upholds the legitimacy of the arbitration agreement, asserting that the composition and procedure of the Arbitration Council adhered scrupulously to applicable laws and regulations. Emphasizing that the dispute falls squarely within the jurisdiction of the Arbitration Council, the Claimant underscores the non-obligatory nature of consular legalization for specific documents under Vietnamese law. They maintain the propriety of the arbitration proceedings and urge the court to uphold the arbitration award.

3. The decision of the Court

The Court's ruling delves into the Arbitration Council's perspective regarding the application of fundamental laws, including the Civil Code and the Civil Procedure Code. It posits that in the absence of specific provisions in pertinent laws, the provisions of the Civil Code or the Civil Procedure Code should be invoked as corresponding legal frameworks for dispute resolution. In this specific instance, due to the absence of explicit regulations in the Commercial Arbitration Law and its guiding documents, the Court holds that the provisions of the Civil Procedure Code should be applied. Of significance, Article 478 of the Civil Procedure Code mandates the notarization and authentication of documents and papers, alongside Vietnamese translations, for legal validity. The Court acknowledges subsequent endeavors to legalize documents; however, submission post-jurisdiction by the Arbitration Council, especially in the face of Respondent objections, is deemed a procedural violation. The Arbitration Council's interpretation that the Claimant's attempts at legalization aimed at addressing concerns about lack of authorization, rather than deliberate infringement, is rejected by the Court.

Further scrutiny is dedicated to the Arbitration Council's handling of evidentiary legality during the VIAC arbitration proceedings. The Respondents point to signature disparities in Resolutions and solicit signature authentication—a plea denied by the Arbitration Council. The Council's stance, which downplayed these differences as insufficient to cast doubt on the authenticity of the signatures, is deemed lacking objectivity and consequently runs afoul of Article 4.2 of the Commercial Arbitration Law—a tenet governing arbitration principles.

In light of this comprehensive analysis, it becomes evident that the Arbitration Council's approach to dispute resolution contradicts Article 4.2 of the Commercial Arbitration Law. This crucial oversight underpins the legitimacy of the Respondents' request for annulment. Consequently, the court accepts the request, leading to the annulment of the arbitration award in question.

4. The concerns of such decision

This recent judicial decision raises intriguing concerns that warrant careful consideration. The court's rationale, asserting that compliance with Article 4 of the 2015 Civil Code becomes mandatory when the Law on Commercial Arbitration 2010 is silent, introduces a fresh perspective to the legal landscape.

This decision's implications reverberate into the realm of arbitration, particularly through the invocation of Article 478 of the Civil Procedure Code.  Forcing arbitrators to apply civil procedure principles when arbitration law is silent on the matter is unusual and could establish a potentially problematic precedent.

It appears that Article 4 of the Civil Code, which pertains to substantive law, might not be directly applicable to Commercial Arbitration Law or Civil Procedural Law, which primarily deals with procedural matters. The term "other laws" in Article 4.3 of the Civil Code does not encompass procedural law, and in any case, litigation and arbitration are governed by distinct sets of procedural rules that should not be conflated.

Article 4 of the Civil Code plays a pivotal role in this deliberation, outlining the intricate interplay between the code and other pertinent laws that govern civil relations. The article's mandate, stipulating adherence unless contradicting fundamental principles of civil law, sparks a debate on the hierarchy of legal norms. Furthermore, the court's proposition that the Civil Code takes precedence over other laws in case of discrepancies and even international treaties brings forth complex questions on legal prioritization.

While this interpretation introduces a novel perspective, it also fuels discussions on the applicability of Article 4 in contexts beyond substantive law. The interplay between substantive and procedural law becomes apparent, raising questions on whether such a confluence aligns harmoniously with arbitration practices.

Disclaimer: This Legal Update is intended to provide updates on the Laws for information purposes only, and should not be used or interpreted as our advice for business purposes. LNT & Partners shall not be liable for any use or application of the information for any business purpose. For further clarification or advice from the Legal Update, please consult our lawyers: Mr Net Le at net.le@lntpartners.com.