Enforcement of arbitral awards in Vietnam

01 Oct 2015 Romain STIMPFLING Dossier thématique

The choice of arbitration as a means of dispute resolution has many benefits for individuals, because of its unique procedural characteristics and time savings. However, it also present downsides amongst which the enforcement of an arbitration decision, especially when the decision has not been issued by an arbitration center of Vietnam.In this article we will try to understand how to execute arbitration awards in Vietnam, under various circumstances.

Preliminary considerations;

Please recall that there are 2 main categories of arbitration: the ad-hoc arbitration and the institutional arbitration.

The ad-hoc arbitration organized by the parties themselves without the help of any institution will not be discussed in this presentation. We will focus on institutional arbitration only and enforcement of its awards.

Throughout this article, we are going to distinguish and compare the enforcement in Vietnam of Vietnamese arbitral awards (hereafter referred to as “domestic awards”), which are issued by a Vietnamese arbitration institution, and “foreign arbitral awards”, which are issued by an arbitral institution outside of Vietnam but also in Vietnam by a foreign institution or a foreign arbitrator1.

Vietnam offers a choice of Vietnamese arbitration centers. For example :

- Vietnam International Arbitration Centre(«VIAC») based in Hanoï ;

- Hanoi Commercial Arbitration Centre (« HCAC ») based in Hanoï ;

- ASEAN International Commercial Arbitration Centre (« ACIAC ») based in Hanoï ;

- Pacific International Arbitration Centre (« PIAC ») based in Ho Chi Minh City ;

The VIAC is the best-know arbitration institution in Vietnam. It is a non-government organization regulated by the Law on Commercial Arbitration and has its own rules. Since its creation in 1993, it has received 630 cases, including 64 in 2012, 71% involving foreign parties.

In the VIAC, there are 132 Vietnamese arbitrators and only 17 foreign arbitrators. However, foreign referees in VIAC are new in Vietnam and it’s a proof of its opening in international arbitration that should not be overlooked. Contrary to the old ordinance, the 2010 Law on Commercial Arbitration (LCA)2 allows foreign arbitrators to practice in Vietnam provided that they are a member of an arbitration center.

Now, how are arbitral award enforced in Vietnam? Are there differences between the enforcement of domestic arbitral awards and foreign arbitral awards?

To make it short, enforcement in Vietnam of an arbitral award made by a Vietnamese institution is automatically enforceable without the validation of a court. It is however different for an award made by a foreign institution that should firstly be recognized by a Vietnamese jurisdiction to be enforceable in Vietnam; which process is described hereafter (I). Parallel to the enforcement request, the content of the award itself can, in some cases, be declared invalid by a Vietnamese judiciary and thus be deprived of any implementation (II).

I- Enforcement of arbitral awards in Vietnam

For an arbitration award made by a Vietnamese institution, the application is, in principle, made by the parties themselves without using enforcement of a Vietnamese court. It is quite different for a foreign arbitral award.

Simple enforcement of the arbitral award made by a Vietnamese institution ;

In principle, the parties voluntarily honor the domestic award (Article 65 of the LOI). However, when a party fails to comply with a domestic arbitral award, a party may submit a request to the court's judgment enforcement agency to enforce compliance with the arbitral award.

In addition, registration before a provincial court is not required for awards made by a Vietnamese institution. However registration is required for ad-hoc arbitration.

Complex enforcement process of foreign arbitral awards in Vietnam;

In order to be enforceable in Vietnam, a foreign arbitral award must be formally recognized by the local Provincial People’s Court.

Vietnam only recognizes awards made in another New York Convention state (because it is a signatory) or a country that applies reciprocal treatment to Vietnam (Article 343 of the Vietnam's Civil Procedure Code).

The procedure for enforcement of foreign arbitral awards can take a long time. Firstly, the award creditor must send a request to the Vietnamese Ministry of Justice. This request must be accompanied by all relevant documents such as a certified copy of the award translated into Vietnamese by a certified translator. Seven days after receiving the request, the Ministry of Justice must transfer it to the relevant court (as defined in Articles 364 and 365 of the Civil Procedure Code). Two months after receiving the dossier, the court will decide to refuse the request or continue the process. In the first case the award will have no enforceability at all, and in the second case the file will be transferred to the prosecutor to prepare the hearing.

The prosecutor must give its opinion on the enforceability of the foreign arbitral award and thus has a great influence on the decision of the court, decision which is appealable. This strong involvement of the prosecutor is an important feature of Vietnamese law. Non-attendance by the prosecutor sets a ground for the court to postpone the hearing (Article 355 of the Code of Civil Procedure).

The principle of recognition of a foreign arbitral award by a Vietnamese state court must be qualified. Even when the award was made by an institution of a member country of the New York Convention, its recognition can be cost and time consuming. Therefore in practice few requests are sent to the Ministry of Justice.

Vietnamese award appears clearly favored over the foreign arbitral award. Its enforcement being more complicated and more expensive than arbitral award, the Parties will favour the mention of a local arbitration center in their contracts.

II- Risk of non-enforcement of arbitral awards in Vietnam

Another difficulty that may arise during the process of enforcement request is the invalidity of arbitration awards that may be requested by the losing party to the arbitration.

The nullity of arbitral awards;

Pursuant to Article 68 of the LCA, the competent court can consider setting aside an arbitral award on receipt of a petition from either of the parties to the arbitration based on the following grounds:

  • There is no arbitration agreement or the arbitration agreement is invalid.
  • The composition of the arbitration tribunal was, or the arbitration proceedings were, inconsistent with the agreement of the parties or with provisions of the LCA.
  • The dispute is outside the jurisdiction of the arbitration tribunal; if any part of an arbitral award is outside the jurisdiction of the arbitration tribunal, then that part shall be set aside.
  • Evidence provided by the parties, which the arbitration tribunal based their findings on, are falsified, the arbitrator(s) accepts money, property or other benefits in kind from either of the parties, and such acceptance affects the impartiality and objectiveness of the arbitral award.
  • The arbitral award is contrary to the fundamental principles of the Vietnamese laws.

Due to theLCA, it is now easier to cancel an award. Indeed, the old Arbitration Ordinance stipulated that the parties had only 30 days from the receipt of the award to ask for setting aside an arbitral award, a period which has been repealed.

In practice, Article 68 of the LCA is widely criticized as being too evasive and offering too much scope for actions in declaration of nullity of the award. More especially, the last cause of nullity, "if the award is contrary to fundamental principles of Vietnamese laws" could be interpreted as including all Vietnamese law, making the arbitration useless. Indeed, the choice devolved to the parties by arbitration rules, to choose the applicable law to the dispute, would appear relative.

It would also be possible for the courts to use these principles regarding to State’s interests in the dispute case, questioning the impartiality of the decision.

Finally, Article 71 of the LCA adds that the court decision is final and binding automatically in contradiction with usual proceedings process. So there is a legal vacuum on the possibility or not to appeal as normally required under the Civil Procedure Code.

The non-recognition of foreign arbitral awards;

The Civil Procedure Code provides for a large number of cases where the foreign arbitral award will not be recognized (Articles 369 and 370 of the Civil Procedure Code) amongst which :

  • The dispute cannot be settled through arbitration according to the Vietnamese law.
  • The recognition and enforcement of the award is against the fundamental principles of Vietnamese laws.
  • The parties that enter the arbitration agreement do not have legal capacity according to the laws of the country that is applicable to them.
  • The arbitration agreement is invalid under the laws of the country that the parties chose to govern, or the country where the award was made.
  • The award debtor was not timely and properly notified about the arbitration procedures in the foreign country and therefore could not perform their legitimate rights.
  • Decision made by foreign arbitration was not requested by the parties or exceeds what was being requested.
  • Composition of the arbitration tribunal, and arbitration procedures were inconsistent with the arbitration agreement or the law of the country where the award was made.

Although the Civil Procedure Code provides that the court will only look at the procedural points of the foreign arbitral award, some courts will examine the substantive matters of the award, citing "Vietnamese law principles" to decide whether the arbitral award should be executed or not.

In addition, Vietnamese courts have interpreted strictly some articles of the Civil Procedure Code, including Article 364, with the aim of not recognizing a foreign arbitral award, for a simple mistake in the name of the legal representative of the Arbitral Award .

Complexity of the enforcement process and extensive cases where a foreign arbitration award will not be enforceable in Vietnam create mistrust in the enforcement system of Vietnam. Persistent legal vacuum and evasive laws prevent legal predictability which would be essential to make arbitration efficient and competitive in Vietnam.

The credibility of the Vietnamese arbitration system deserves better predictability of the law in this area of enforcement and a better harmonization of the implementation of Vietnamese and foreign arbitral awards to make arbitration more attractive, in particular as regard foreign arbitration (by easier recognition of foreign arbitral awards), but also as regard domestic arbitration (with an internationalization of arbitrators in Vietnam).

1However, we must stress here that a though foreign institutions are able to settle in Vietnam pursuant to the Law on Commercial Arbitration under a precisely described procedure detailed in the Decree 63, currently there is no foreign arbitration center in Vietnam.

2Law No. 54/2010/QH12 on Commercial Arbitration dated 17th June 2010

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