(Tiểu luận FTU) RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS IN VIETNAM

Foreign arbitral award means an award pronounced by a foreign arbitration outside or within the Vietnamese territory which is selected as agreed by the parties to settle theirdisputes..

FOREIGN TRADE UNIVERSITY FACULTY OF ENGLISH FOR SPECIFIC PURPOSES

-*** -RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS IN VIETNAM

Class: TAN432(1-1920).2_LT Lecturer: Phan Kim Thoa (MA.)

Hanoi, December 24th, 2019

1.2 Recognition and enforcement of foreign arbitral awards 4 1.3 Referral by a court to arbitration 5

II General principles for the recognition and enforcement of foreign arbitral awards in

III Procedures for recognition and enforcement in Vietnam of foreign arbitral awards 7

3.2 Procedures for considering petitions for recognition and enforcement in Vietnam

IV The Weak Enforcement of Foreign Awards in Vietnam 10

4.1 An Overview of the Enforcement of Foreign Awards 10 4.2 The Weak Enforcement of Foreign Awards in Vietnam 10 4.3 Grounds for refusal of recognition and enforcement under New York Convention

11 4.4 Grounds for refusal of recognition and enforcement in Vietnam 14

The choice of arbitration as a means of dispute resolution has many benefits forindividuals, because of its unique procedural characteristics and time savings However, italso presents downsides amongst which the enforcement of an arbitration decision,especially when the decision has not been issued by an arbitration center of Vietnam Inthis research paper, we will try to understand how to execute arbitration awards inVietnam, under various circumstances

I Introduction

1.1 What is an arbitral award?

Source: US Legal

An arbitral award or arbitration award refers to a decision made by an arbitration

tribunal in an arbitration proceeding An arbitral award is analogous to a judgment in acourt of law An arbitral award can be of a non-monetary nature where the entireclaimant's claims fail and no money needs to be paid by either party

An arbitration award can be made for payment of a sum of money, declaration upon anymatter to be determined in the arbitration proceedings, injunctive relief, specificperformance of a contract and for rectification, setting aside or cancellation of a deed orother document

Foreign arbitration means an arbitration formed under a foreign law on arbitration and

selected as agreed by the parties to settle a dispute outside or within the Vietnameseterritory

Foreign arbitral award means an award pronounced by a foreign arbitration outside or

within the Vietnamese territory which is selected as agreed by the parties to settle theirdisputes

Source: Vietnam Law on Commercial Arbitration

1.2 Recognition and enforcement of foreign arbitral awards

The first action is the recognition and enforcement of foreign arbitral awards, i.e., arbitralawards made in the territory of another (Contracting) State

This field of application is defined in Article I The general obligation for the ContractingStates to recognize such awards as binding and to enforce them in accordance with theirrules of procedure is laid down in Article III A party seeking enforcement of a foreign

award needs to supply to the court (a) the arbitral award and (b) the arbitration agreement(Article IV).

The party against whom enforcement is sought can object to the enforcement bysubmitting proof of one of the grounds for refusal of enforcement which are limitativelylisted in Article V(1) The court may on its own motion refuse enforcement for reasons ofpublic policy as provided in Article V(2)

If the award is subject to an action for setting aside in the country in which, or under thelaw of which, it is made ("the country of origin"), the foreign court before whichenforcement of the award is sought may adjourn its decision on enforcement (Article VI)

Finally, if a party seeking enforcement prefers to base its request for enforcement on thecourt's domestic law on enforcement of foreign awards or bilateral or other multilateraltreaties in force in the country where it seeks enforcement, it is allowed to do so by virtue

of the so-called more-favourable-right provision of Article VII(1)

1.3 Referral by a court to arbitration

The second action contemplated by the New York Convention is the referral by a court toarbitration Article II (3) provides that a court of a Contracting State, when seized of amatter in respect of which the parties have made an arbitration agreement, must, at therequest of one of the parties, refer them to arbitration (unless the arbitration agreement isinvalid)

In both actions the arbitration agreement must satisfy the requirements of Article II(1) and(2) which include in particular that the agreement be in writing

Source: New York Convention

II General principles for the recognition and enforcement of foreign arbitral awards

in Vietnam

- Provisions of the Convention on the Recognition and Enforcement of Foreign ArbitralAwards done at New York, on June 10, 1958 (New York Convention 1958) are applied inalmost countries for the recognition and enforcement of foreign arbitral awards AfterVietnam’s accession to the Convention, the National Assembly Standing Committee

passed the Ordinance on Recognition and Enforcement in Vietnam of Foreign ArbitralAwards at the end of 1995 (the 1995 Ordinance) It took effect on January 1, 1996, andwas Vietnam’s first legal document providing procedures regarding the recognition andenforcement in Vietnam of foreign arbitral awards According to that, Vietnam hasannounced three following reservations:

1 Vietnam will apply the Convention only to recognition and enforcement of awardsmade in the territory of another contracting State; with regard to awards made in theterritory of non-contracting States, Vietnam will apply the Convention only to the extent

to which those States grant reciprocal treatment

2 Vietnam will apply the Convention only to differences arising out of legalrelationships, whether contractual or not, that are considered commercial under thenational law

3 Vietnam declared that interpretation of the Convention before the Vietnamese courts orcompetent authorities should be made in accordance with the Constitution and the law ofVietnam

However, article 21 regulates that: “In cases of international treaties which the Socialist

Republic of Vietnam has signed or acceded to provide otherwise, the provisions of such international treaties shall apply.”

And until now, in Clause 3, Article 2 of the 2015 Civil Procedure Code regulates that TheCivil Procedure Code applies to the settlement of civil cases involving foreign element(s);

where the international treaties to which the Socialist Republic of Vietnam is a signatoryprovide otherwise, the provisions of such international treaties shall apply

Under the provisions in Article 424 of the 2015 Civil Procedure Code, Courts shallconsider foreign arbitral awards only the following foreign arbitrators’ award shall beconsidered being recognized and enforced in Vietnam:

First, on the basis of international treaties

1 Arbitral award of a foreign country which is a signatory to an International treaty aboutrecognition and enforcement of foreign arbitral award together with Vietnam;

Second, based on the principle of reciprocity

2 Foreign arbitral award other than those specified in point an of this clause on the basis

of the principle of reciprocity (in cases where Vietnam and such foreign countries havenot yet signed agreements or in which neither of them is contracting states to relevantinternational conventions.)

- Parties in favor of whom foreign arbitral awards are invoked have the right to filepetitions with Vietnamese courts requesting the recognition and enforcement in Vietnam

of such awards if the individuals against whom the awards are invoked reside or work inVietnam, or agencies or organizations against which the awards are invoked areheadquartered in Vietnam, or the assets related to the enforcement exist in Vietnam at thetime of filing petitions

- When handling petitions, courts do not examine the subject matter and nature ofdisputes but only examine them in terms which are primarily relevant to the validity of thearbitral agreement and competence of foreign arbitrators and foreign arbitrationproceedings Upon consideration, Vietnamese courts will render their decisions onrecognition or non-recognition of awards Involved parties will have the right to lodgeappeals of such decisions in higher courts for review according to provisions of the CivilProcedure Code

- Foreign arbitral awards that have been recognized and permitted by Vietnamese courtsfor enforcement in Vietnam have a full legal effect like legally effective decisions ofVietnamese courts and are enforced according to civil judgment enforcement procedures

- The Vietnamese State guarantees the transfer from Vietnam to foreign countries of cashand other assets for enforcement of foreign arbitral awards which have been recognized

by Vietnamese courts for enforcement in Vietnam Such money and asset transfers shall

be carried out in compliance with Vietnamese law

III Procedures for recognition and enforcement in Vietnam of foreign arbitral awards

3.1 Documents

In order to request the recognition and enforcement in Vietnam of foreign arbitral awards,the parties have to prepare serveral necessary documents known as petition dossier whichincludes:

- The petition

- Copy of the foreign arbitral award

- Copy of discrete arbitration agreement

- Other papers and documentsTherein, the copies of discrete arbitration agreement are the copies which constitute part

of the signed contract and other papers and documents provided for in internationaltreaties to which Vietnam has signed or acceded Copied documents must be legally validand documents in foreign languages must be translated into Vietnamese and lawfullynotarized or authenticated

3.2 Procedures for considering petitions for recognition and enforcement in Vietnam

of foreign arbitral awards

- Firstly, parties requesting the recognition and enforcement in Vietnam of foreign arbitralawards must begin with the submission of petitions to the Vietnamese Ministry of Justice

Within seven days after receiving a petition dossier, the Justice Ministry will forward it tocompetent courts (courts of provinces or centrally-run cities according to currentregulations) where the involved parties reside or work or where related assets exist Thecompetent court is the court of provincial level in which the award debtor resides (if anindividual) or has its headquarters (if a company or organization) or the place where theproperty relating to the enforcement is located

- Secondly, within three working days after receiving files from the Justice Ministry, thecompetent courts must accept the cases for handling and notify individuals, agencies ororganizations against whom the enforcement is sought as well as the People’s Procuracy

at the same level In this step, the competent courts also notify to award debtor andprosecuting agencies

- Thirdly, within two months after accepting the petition (can be extended by another twomonths) and examining the case file, the court may decide to:

of the Justice Ministry saying that foreign competent authorities arereviewing the foreign arbitral award; or

withdrawn the petition, parties against whom the awards are invoked havevoluntarily enforced the awards or have been dissolved or gone bankrupt,foreign arbitral awards have been set aside or suspended by foreigncompetent authorities, parties against whom the awards are invoked donot reside or work or are not headquartered in Vietnam, or the placeswhere assets related to the enforcement in Vietnam exists areunidentifiable; or

such decision

- Fourth, within twenty days from the date of the decision, if the competent court opens ahearing for consideration of a petition, it shall be conducted by a petition considerationpanel composed of three judges in the presence of procurators of the same level, thepetitioner, and the party against whom the award is invoked or their lawfulrepresentatives The panel can issue a decision on recognition and enforcement inVietnam or non-recognition of the foreign arbitral award by majority

The involved parties may lodge appeals against a court decision within fifteen days afterthe court issues such decision or after they receive such decision if they have not beenpresent at the hearing considering their petition The procuracies of the same level and the

Supreme People’s Procuracy may protest court decisions within fifteen days or one monthrespectively.

- Fifth, The Supreme People’s Court shall review a provincial-level people’s court’sdecision which is appealed or protested within one month after receiving the case files Incases where unclear points exist in dossiers and the courts request the involved parties tomake explanations, the said time limit shall be extended but must not exceed two months

A panel for review of an appealed or protested decision is composed of three judges Ahearing for review of an appealed or protested decision shall be conducted The reviewpanel may uphold or partially or entirely amend decisions of provincial-level people’scourts and suspend or stop consideration of appeals or protests The Court will issue adecision on:

● Recognizing and permitting enforcement in Vietnam; or

● Non-recognizing the award of foreign arbitratorsDecisions of the Supreme People’s Court are final and take immediate effect

IV The Weak Enforcement of Foreign Awards in Vietnam

4.1 An Overview of the Enforcement of Foreign Awards

The last few years have witnessed great development of the arbitration legal framework inVietnam, particularly regarding the enforcement of foreign awards Only final arbitralawards that were not set aside by the foreign country’s Court of the seat of arbitration aresubject to enforcement in Vietnam The enforcement of such awards must be recognizedand approved by the People’s Court of Vietnam

Vietnam has, accordingly, engaged in a program of reform of its commercial arbitrationsystem in order to encourage and attract foreign investors and to address traders' interests

However, the reputation and history of enforcement of arbitral awards in Vietnam is still acause of concern to investors and traders alike The practice has shown that Vietnamesecourts are unwilling to enforce arbitration awards Moreover, current Vietnamese

shortcomings, such as inconsistent statutory interpretation, unclear definitions,overlapping legislation, shortage of trained personnel, etc.

4.2 The Weak Enforcement of Foreign Awards in Vietnam

A significant difference between the Vietnamese courts’ enforcement of domestic awardsand foreign awards Indeed, Nguyen The Duc Tam and Nguyen Thi Thuy Linh reported

in their article disturbing statistics communicated by the Supreme People’s Court Itappears that between 2005 and 2014, fifty-two requests were submitted for recognitionand enforcement of foreign arbitral awards However, the Court accepted only twenty-eight requests or just over half of those that were submitted

This issue has also been raised by the Investment and Trade Working Group in areport presented by Mr Fred Burke in 2015 The report highlighted the alarmingly weakenforcement of international arbitration awards in Vietnam It also cited the broadprovisions of the Civil Procedure Code (CPC) as one of the main reasons for such weakenforcement Indeed, Article 439, previously Article 370 in the 2015 CPC, sets out thegrounds on which a court shall not recognize or enforce a foreign arbitral award,including inconsistency with the “basic principles of the law of the Socialist Republic ofVietnam.”

Because Vietnam is a signatory to the New York Convention on the Recognition andEnforcement of Foreign Arbitral Awards, domestic enforcement of foreign arbitral awards

is possible To enforce a foreign arbitral award in Vietnam, a petition must first be sent tothe Ministry of Justice, which will then transfer the petition to a competent court forrecognition and enforcement Unfortunately, for parties seeking to enforce foreign arbitralawards in Vietnam, a historical lack of guidance as to what constitutes a “basic principle

of Vietnamese law” has left Vietnamese courts with broad discretion to interpret andapply this term in the context of recognizing a foreign arbitral award in Vietnam

4.3 Grounds for refusal of recognition and enforcement under New York Convention