A. LEGISLATION AND RULES
A.1 Legislation
Arbitration procedures in Vietnam continue to be mainly governed by Civil Procedure Code No. 92/2015/QH13 (CPC), Law on Commercial Arbitration No. 54/2010/QH12 (LCA), and Resolution No. 01/2014/NQ-HDTP issued by the Supreme Court of Vietnam providing further guidance on the implementation of certain provisions of the LCA.
The LCA is generally based on the 2006 UNCITRAL Model Law. There are, however, some provisions that differ from the Model Law. These include: principles in settling disputes, state administration of arbitration, required registration of ad hoc arbitration awards with national courts, minimum qualifications of arbitrators, the right to settle and the right to request mediation by an arbitral tribunal, and setting aside an arbitral award for violating fundamental principles of Vietnamese law.
Compared to Ordinance No. 08/2003/PL-UBTVQH11 on Commercial Arbitration, which lost effect as of 1 January 2011, the LCA has many notable developments, including:
- The ability to refer to arbitration, even if just one of the parties is engaged in commercial activities
- The option to appoint foreign arbitrators in Vietnam
- The ability to apply for interim measures to protect the legitimate interests of the parties.
Moreover, the CPC, and specifically part seven, which came into effect on 1 July 2016, provides certain amendments regarding procedures for recognition and enforcement of foreign arbitral awards. The amendments have been praised for being more effective and in line with the New York Convention.
Regarding sector-specific developments, the Law on Environment Protection No. 72/2020/QH14 dated 17 January 2020, taking effect from 1 January 2022, for the first time provides that the settlement of claims for compensation for environmental damage is arbitrable. This opens up opportunities for environmental-related arbitration in Vietnam in 2022 and beyond.
Vietnam’s commitments under various international trade and investment agreements remain relevant. Most recently, the Agreement between the Government of the Socialist Republic of Viet Nam and the Government of the State of Qatar for the Reciprocal Promotion and Protection of Investments (“Vietnam-Qatar IPA“), as signed in 2009, finally took effect on 8 December 2021. Similar to other IPAs between Vietnam and other states, the Vietnam-Qatar IPA gives investors the right to seek remedies against the host state via one of the following forums: the local court, ICSID or an ad hoc UNCITRAL arbitration. However, the Vietnam-Qatar IPA also contains a “fork in the road” clause, whereby the investor, having selected one of the above forums, will be precluded from referring its dispute to the remaining forums.
A.2 Institutions, rules and infrastructure
Under the LCA, arbitration centers may be established in various localities in accordance with the regulations of the Government. The LCA sets out the conditions and procedures for the establishment of arbitration centers, their duties, and powers, as well as causes for the termination of their operations. The LCA also removed the requirement that an arbitrator must be a Vietnamese citizen. As such, foreign citizens can be appointed as arbitrators in Vietnam if they meet all the requirements under Vietnamese law.
Moreover, Vietnamese law allows foreign arbitration centers to operate in Vietnam through a branch or representative office after satisfying the required conditions and undergoing the correct registration procedures. However, the arbitration awards issued by the local representative office or branch of a foreign arbitration center are considered foreign arbitration awards, and thus, have to go through the process of recognition by the competent court before enforcement can be made in Vietnam. So far, the Korean Commercial Arbitration Board is still the first and only foreign arbitral institution to open an office in Vietnam.
As of January 2022, there are 35 local arbitration institutions in Vietnam currently registered with the Ministry of Justice, 24 of which have fewer than 10 arbitrators.[1] The Vietnam International Arbitration Centre (VIAC) at the Vietnam Chamber of Commerce and Industry remains the most well-known domestic arbitration institution. This is likely because compared to other domestic arbitration institutions, VIAC has a longer history of development with high-profile arbitrators (including many foreign arbitrators) who have expertise in contract law and can resolve commercial disputes through the English language, making arbitration more accessible for transactions involving a foreign party.
VIAC is operating based on the LCA and VIAC’s Rules of Arbitration issued on 1 March 2017. The VIAC Rules of Arbitration 2017 have three significant developments, including:
- Single arbitration for multiple contracts
- Consolidation of claims
- Expedited arbitral procedure, bringing such rules generally in line with international practice.
According to a published statistic by VIAC, in 2020, there was a remarkable drop in the number of new cases received by VIAC (221 cases), as compared to 274 cases received in 2019. The most heavily disputed areas are disputes, sales of goods, construction and leasing activities. Entities from China, Singapore, and South Korea remain the top clients bringing their disputes to VIAC for settlement.[2] Recently, VIAC and its mediation center, the Vietnam Mediation Centre, introduced two combined services, namely the Mediation-Arbitration Combo and the Arbitration-Mediation-Arbitration Protocol. These interlinked services are designed to encourage parties to mediate while allowing a backup plan for arbitration and might be time-saving and cost-effective options for parties seeking to resolve their dispute at VIAC.
B. CASES
B.1 Consent to arbitration agreement and language of arbitration proceeding
On 1 December 2021, Ho Chi Minh Court issued Decision No.1191/2021/QD-PQTT[3] to set aside a VIAC award concerning a design contract.
In this case, the claimant, as a service provider, entered into a contract with the first respondent. The contract expressly provides that the second respondent is the ultimate client for such a contract. The negotiation of the contract was conducted in English; however, the contract itself, and subsequent correspondence during the implementation of the contract were made in Vietnamese. The parties further agreed that the language of the arbitration shall be “English and/or Vietnamese“. The claimant later sued both the first and second respondents to claim for outstanding payments. The sole arbitrator appointed VIAC, who is a foreigner and unable to speak Vietnamese, decided to conduct the arbitration in English, and ultimately upheld parts of the claimant’s requests.
Before the Ho Chi Minh Court, the second respondent argued that it is not a party to the contract, thus, is not bound by the arbitration clause therein. The court disagreed. Based on the fact that the second respondent was referred to as the client under the contract, and various notices made by the second respondent to the claimant regarding the contents of the contract, the court concluded that the second respondent demonstrated its intention to be a party to the contract, including the arbitration clause therein.
The first respondent, among other reasons, also requested the Ho Chi Minh Court to set aside the arbitral award because an arbitration conducted solely in English is a violation of the parties’ agreement. The court concurred with such view, citing article 23.2 of VIAC Rules of Arbitration 2017 that in case the parties did not agree on the language of the arbitration “the Arbitral Tribunal shall determine the language or languages to be used in the arbitral proceedings, taking account of the relevant circumstances including the language of the contract.” The court further clarified that the parties’ agreement on the language of arbitration in “English and/or Vietnamese” must be understood as both English and Vietnamese. Thus, based on article 68.2.b of the LCA, the court set aside the award on the ground that the arbitration proceeding was inconsistent with the parties’ agreement.
B.2 Statute of limitation for initiating an arbitration
By Decision No. 1063/2021/QĐ-PQTT dated 25 October 2021,[4] Ho Chi Minh Court also set aside an arbitral award from the Ho Chi Minh City Commercial Arbitration Centre.
In this case, the claimant and the respondent entered into a construction contract. The respondent unilaterally issued a notice of termination on 20 September 2017. The claimant filed a lawsuit before the People’s Court of Da Lat City, which decided to terminate the case on 24 December 2019 on the virtue that a valid arbitration agreement existed between the parties. The claimant then appealed to the People’s Court of Lam Dong Province, which upheld the view of the lower court. The claimant then filed the request for arbitration on 22 June 2020.
Because the Law on Construction No. 50/2014/QH13 does not specify the statute of limitation for legal action, and article 138.1 of this law defines a construction contract as “a civil contract“, the tribunal referred to the Civil Code No. 91/2015/QH13 to find that the statute of limitation for initiating an arbitration, in this case, is three years, instead of two years as provided in the LCA. The tribunal further explained that even if the statute of limitation under the LCA were to apply, the statute of limitation had not expired, because the resolution before the courts was an objective obstacle, and the time for such resolution must be excluded from the calculation of the statute of limitation.
The Ho Chi Minh Court disagreed. The court found that the correct statute of limitation is two years pursuant to the LCA. Further, the court reasoned that the claimant was not prevented from arbitration by any objective obstacles, as it made a subjective decision to file a lawsuit to the local court despite the existing arbitration clause, and the claimant always had the right to withdraw its lawsuit before local courts, but it never did. The court went on to conclude that the calculation of the statute of limitation was not interrupted by the time for resolution before other local courts. On that basis, the court ruled that the award must be set aside pursuant to article 68.2.b of the LCA for violation of the LCA.
[1] For a list of arbitration institutions, see: https://bttp.moj.gov.vn/qt/Pages/trong-tai-tm.aspx
[2] https://www.viac.vn/thong-ke/thong-ke-hoat-dong-giai-quyet-tranh-chap-nam-2020-s36.html
[3] http://congbobanan.toaan.gov.vn/2ta833313t1cvn/chi-tiet-ban-an
[4] http://congbobanan.toaan.gov.vn/2ta833008t1cvn/chi-tiet-ban-an
