THE EFFECT OF ARBITRATION AGREEMENTS UNDER VIETNAMESE AND SWEDISH LAW

AASwe: The Swedish Arbitration Act 1999:116 OCAVie: The Ordinance on Commercial Arbitration in Viet Nam 2003:08 CCVie: The Vietnamese Civil Code 2005 SCC Rules: The Arbitration Rules

Joint Swedish-VietnameseMaster’s Programme

MASTER’S THESIS

by Phan Hoai Nam

THE EFFECT OF ARBITRATION AGREEMENTS UNDER VIETNAMESE

AND SWEDISH LAW

Supervisors: Professor Michael Bogdan

Professor Mai Hong Quy

Field of study: Comparative and International Law

Spring 2008

2.3 Relationship between the arbitration clause and contracts 10 2.4 Relationship between arbitration and courts based on the

3.1.2 Capacity and authority of the parties 19

3.2 Requirements as to form of agreement in order to establish consent

AA(Swe): The Swedish Arbitration Act (1999:116)

OCA(Vie): The Ordinance on Commercial Arbitration in Viet

Nam (2003:08)

CC(Vie): The Vietnamese Civil Code 2005

SCC Rules: The Arbitration Rules of the Arbitration Institution of

the Stockholm Chamber of Commerce

VIAC: The Vietnam International Arbitration Center at the

Vietnam Chamber of Commerce and IndustryThe Model Law 1985 Uncitral Model law on International

Commercial Arbitration, with amendments as adopted

in 2006

Executive Summary

Resolving disputes by arbitration is becoming more and more popularbecause of its advantages compared to other measures such as mediation or thecourts1 However, a valid arbitration agreement is needed, if arbitration is to bethe basis for resolving disputes An arbitration agreement has the effect ofexcluding the jurisdiction of the court and it is also needed if a court is later torecognize and enforce arbitral awards, especially if they are decided in foreigncountries

A valid arbitration agreement is an agreement which complies with theprovisions of the relevant law Its effect is based on many factors such as theparties who signed it and its form and content

According to the Vietnamese legal system, only individuals and businessorganizations have the right to enter into an arbitration agreement TheSwedish legal system does not impose any restrictions on this point

Similarly, the form of arbitration agreements and their contents are alsotreated differently by the two legal systems

Vietnamese Law by way of the Ordinance on Commercial Arbitration 2003(hereinafter referred to as the OA(Vie)) specifies the permitted forms ofagreement by way of a list in paragraph 1 of Article 9 of the OA(Vie) Thismethod has limitations as it may not list all written forms of arbitrationagreements For example, the contracting parties could have a bill of lading, aship leasing contract lease or a company charter as the document whichcontains an arbitration agreement In this regard, the Swedish law does notmake specific requirements about the form When disputes arise, the partiesmust simply prove that an agreement on arbitration between the parties didexist2

The scope of an agreement is also linked to the validity of an arbitrationagreement Swedish law allows wide scope to such agreements though it doesexclude some agreements such as consumer contracts or agreements regardingthe carriage of passengers or goods by sea or aviation Meanwhile,Vietnamese law only accepts arbitration in commercial activities where theparties have so agreed Clearly, this limits the contracting parties’ capacity tochoose suitable measures for resolving non - commercial disputes

1 On the advantages and disadvantages of arbitration see: Finn Madsen, Commercial Arbitration

in Sweden, 3rd edition, Oxford University Press, Oxford, 2007, pp.23 - 28

2 The Swedish Arbitration Act of 1999, Five Years On: A Critical Review of Strengths and Weaknesses, p10, Editors: Jernej Sekolec and Nils Eliasson, The UNCITRAL Model Law on

Arbitration and the Swedish arbitration Act: a Comparison

1 Introduction

Along with the development of the market economy, the number ofdisputes in commercial activities is increasing With its flexibility, resolvingdisputes by arbitration is being more and more relied on by enterprises Thepractice in Viet Nam shows that the number of cases resolved by arbitrationhas increased This demonstrates that the position of arbitration compared with

other methods such as courts and ADRs (Alternative Dispute Resolution) has

changed However, in comparison with other countries, the figures are stillmodest3 There are many reasons to explain this, which include imperfections

in the arbitration law of Viet Nam

In general, the authority of arbitrators depends on the arbitration agreement

which the parties consented to “No arbitration if no valid arbitration agreement” Unlike courts, which have jurisdiction over any disputes based on

the procedural law of their country, arbitrators only have authority when thecontracting parties have agreed to choose arbitrators to resolve their disputes.The law on arbitration in Viet Nam appeared later than in other countries4.The Arbitration Ordinance of 1990 is the first document to cover arbitration

It was then replaced by the Ordinance on Commercial Arbitration 2003(OCA(Vie)) Along with the documents guiding its implementation in legalpractice, the OCA(Vie) now cover issues relating to arbitration in general andarbitration agreements in particular However, regarding arbitrationagreements, the ordinances and guiding documents still have many problemswhich makes the resolution of disputes in Viet Nam by arbitration presentmany difficulties

Because of the importance of the arbitration agreement, as well as thedifferences between Vietnamese arbitration law and the law of other countries,

I has chosen the topic: "The Effect of arbitration agreements under Vietnamese and Swedish law” for my master’s thesis.

The thesis is divided into four parts as follows:

Part 1: Introduction- generally introduces the thesis and its purpose,

method and delimitation;

Part 2: Overview on arbitration agreements – comparing and

analyzing Vietnamese and Swedish law on the definition and structure

3 According to http://www.viac.org.vn/vi-VN/Home/thongke/2008/10/156.aspx VIAC resolved

22 cases in 2005, 23 cases in 2006

4 http://www.mediate.com/articles/sturzakerD.cfm

of arbitration agreements, the relationship between an arbitrationagreement and the contract and between arbitration and courts,

Part 3: Requirements for the validity of arbitration agreements –

comparing and analyzing the requirements regarding parties, form andcontent of arbitration agreements in Vietnam and Sweden

Part 4: Conclusion - some conclusions and proposals are made by

2 Overview on arbitration agreements

2.1 Definition of an arbitration agreement

According to Article 2 (2) of the Ordinance on Commercial Arbitration theRepublic of Socialist Viet Nam in 2003 provided:

“Arbitration agreement means an agreement between the parties to commit to use arbitration to resolve disputes which may arise or which have arisen from commercial activities”.

Specifically, the arbitration agreement is the basis for granting authority toarbitrators regarding a specific dispute relating to commercial activities Theseactivities are carried out by business individuals or organizations

“Commercial activities means the performance of one or many trading acts by business people or organizations, including goods purchase and sale, service provision; distribution; trade representation and agency; consignment; renting and lease; hire purchase; construction; consultancy; technology; licensing; investment; financing; banking; insurance; exploration and exploitation; transport of goods and passengers by air, sea, rail, land,

Not all business individuals or organizations have the right to decide thattheir disputes will be solved by arbitration However, even when they have theright to chose arbitration, if the disputes are not regarding commercialactivities, such arbitration agreements will not be recognized This is animportant matter for enterprises (including enterprises established under theEnterprise Law, the Law on Foreign Investment, the Law on State enterprisesand the Law on Cooperatives…) as they need to know when to sign arbitrationagreements

The AA(Swe) does not contain any actual definition of an arbitrationagreement However, a definition is implied in section 1 of the ArbitrationAct, which deals with arbitrability:

“Disputes concerning matters in respect of which the parties may reach a settlement may, by agreement, be referred to one or several arbitrators for resolution Such an agreement may relate to future disputes pertaining to a legal relationship specified in the agreement”.

Unlike the position in Vietnamese law, the AA(Swe) does not apply tocommercial disputes only Consumer disputes also come under the Act, but

5 Article 2(3) of OCA(Vie)

Section 6 states that an arbitration agreement referring to future consumerdisputes is not valid6 And it also does not expressly state that non-contractualdisputes can be the subject of an arbitration agreement However, it is clear

that such disputes can be arbitrated under the AA(Swe) (See conditions for

the effect of arbitration agreements relating to the content of disputes in the section 3.3).

In both Vietnam and Sweden, an arbitration agreement can be established

in advance (for future disputes) or after a dispute occurs (to settle the disputehas) and their conditions of validity are similar

In the process of negotiations leading up to a contract, the contractingparties may agree to take disputes to arbitration if those disputes arise duringthe implementation of the contract or relate to it In this case, the arbitrationagreement can be included in the contract as an arbitration clause or can bemade as an independent document

Although the contracting parties did not have an arbitration agreement inthe past, after a dispute between them occurs, they may also reach anagreement to arbitrate at any time

Such agreements may be established at any time that the parties choose Inreality, once disputes have arisen, especially disputes involving foreignelements, each party would like to choose his own authorities to solve them

So, if the parties lack the goodwill needed to resolve their disputes, it will beequally difficult for them to establish an arbitration agreement then.Establishing an arbitration agreement before disputes occur is the better wayand should be done if the parties intend to use arbitration to resolve disputes

In brief, although between Viet Nam and Sweden have different ways ofdefining the concept of arbitration agreement: a specific concept inVietnamese Law, but one only implied in Swedish Law, the connotation of thetwo is similar There is only a difference concerning the types of disputeswhich can be subject to arbitration

2.2 Construction of arbitration agreement

The authority of arbitrators to resolve disputes arises through an arbitrationagreement which is negotiated and signed by the contracting parties and is inessence independent of the underlying contract To be workable and effective,

a long and detailed arbitration agreement is not needed The two basic

6 Section 6 of the AA(Swe)

principles that any arbitration agreement needs are simple Note that anarbitration agreement which is unclear or incomplete may well be contrary tothe expectations of the contracting parties, who want to use arbitration toresolve their disputes.

Arbitration agreements are often required to have two basic elements,namely, the identity of the arbitration organization and the arbitrationproceedings rules In addition, its scope and the types of disputes covered arealso necessary terms When establishing an arbitration agreement, thecontracting parties should aim to cover all dispute types which can arise from

or relating to the contract between the parties They should avoid listingspecific disputes as this could limit the authority of the arbitrators who wouldnot have standing in disputes that were not mentioned

The agreement should refer to the number of arbitrators If the parties wantthe case to be decided by any number of arbitrators other than three thatshould be stated in the clause The other additions suggested by the SCCInstitute refer to the place of arbitration and to the language(s) to be used inthe proceedings If not agreed upon by the parties the place of arbitration isdecided by the SCC Institute and the language is decided by the arbitrators7

The SCC Institute recommends the following wording:

The Arbitral tribunal shall be composed of arbitrators (a sole arbitrator)

The place of arbitration shall be

The language to be used in the arbitral proceedings shall be

There are two types of commercial arbitration; institutional or ad hocarbitration Institutional arbitration is conducted under arbitration rulesoffered by an arbitral institution Ad hoc arbitration is based on the applicablearbitration law in the country where the arbitration is

To avoid the uncertainty of knowing whether the parties have opted forinstitutional or ad hoc arbitration, the clause should be very clear by stating thenational law or the given set of institutional rules, according to which thearbitral proceedings shall be conducted

Giving the name of the specific arbitration organization chosen in thearbitration agreement is also extremely important In practice, there are manycases where the arbitration agreement has clearly stated that the contractingparties will refer their disputes to arbitration8 However, the name of the

7 Ulf Franke, Introduction to Arbitration, speech at the Introduction to Arbitration seminar held in

Stockholm on 13 - 16 June, 2001.

8 http://www.viac.org.vn/vi-VN/Home/baivietlienquan/2008/10/178.aspx

arbitration organization is not specifically recorded which could result inarbitration being refused Because, according to item 4, article 10 of theOCA(Vie), the arbitration agreement would be invalid:

“Arbitration agreements shall be invalid in the following cases, where…the arbitration agreement fails to specify or specifies unclearly the disputed objects, or the arbitration institution competent to settle the dispute, and later the involved parties have no additional agreement”.

In such cases, Resolution 05 had specifically provided as follows: if thecourt bases itself on an arbitration agreement that did not record the name ofany arbitration council or center in Vietnam, the court should have theauthority to settle disputes, unless the parties have agreed on a new specificarbitration council in Vietnam to resolve their disputes

For example: an arbitration agreement only contains the following:

“In case disputes can not be solved by negotiation, the contracting parties shall refer their disputes to arbitration according to Vietnamese law”.

In the above example, the arbitration agreement is null and void because theparties did not agree clearly that their disputes should be resolved either by anarbitration council named by the parties or by ad – hoc arbitration, or by thearbitration council of a specific arbitration center in Vietnam alone, unless theparties agree or have agreed to add the specific name of an arbitration council

in Vietnam to resolve their disputes

However, Resolution 05 and even item 4, article of the OCA(Vie) areinappropriate in practice Clearly, through the arbitration agreement, theparties intended to refer their disputes to arbitration without any court orconciliation or mediation organizations The arbitration laws of Sweden (and

of other countries) do not make any such concrete requirements about statingthe name of the arbitration organization

Stating the full name of the arbitration rules is equally important There aremany cases leading to problems; VIAC has had to ask parties to determine aspecific proceedings rule to use in resolving their disputes because thearbitration agreement was too unspecific: "choose rules of internationalarbitration" In reality, the parties may only be able to agree on this if they stillretain enough goodwill to each other If not, the arbitration agreement will beconsidered as invalid

In the legal practice of Sweden, in the case No 038/20039 of the SCC, theparties agreed on an arbitration agreement whose content was obscure In thecontract, the parties agreed that:

“All arguments and/or disagreements which arise through the Contract or because of it should be settled by negotiations between both sides If the parties cannot come to an agreement the argument shall be settled in the Arbitration Court of the Chamber of Commerce, Stockholm, Sweden under the rules of conciliation and arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with those rules in the Contract languages”.

Where their disputes arise, the defendant objected to the jurisdiction of theArbitration Institute of the Stockholm Chamber of Commerce The ArbitrationInstitute considered that the parties intended to use arbitration for resolvingtheir disputes and there was an operative arbitration agreement in existence.Pursuant to the arbitration agreement, they could determine the will of theparties as empowering arbitration to settle their disputes under the auspices ofthe Stockholm Chamber of Commerce

In this case, the arbitral tribunal and the parties spent close to ten months onthe issue of jurisdiction, before attention could be turned to the substantiveissue of the dispute If the parties had used a model clause recommended byeither one of the institutions mentioned in their contract (ICC or SCC), thiscould easily have been avoided Five minutes on the internet in conjunctionwith the negotiation of the contract is probably all it would have taken for theparties to find out the exact wording of a relevant model clause This wouldhave been time well spent

We shall look at some arbitration clauses of the VIAC and the SCCInstitution:

The VIAC recommends that all parties wishing to make reference to VIACarbitration in their contracts use the following model clause10:

“All disputes arising out of or in relation to this contract shall be finally settled by the Vietnam International Arbitration Centre at the Vietnam Chamber of Commerce and Industry in accordance with its Rules of Arbitration”.

Additionally, the parties may add the following provisions to the arbitrationclause:

9 http://www.bakernet.com/NR/rdonlyres/1698E9C9-6ADA-4420-B142-334512CA278B/0/ IntlArbitrationSwedenSep06.pdf

10 http://www.viac.org.vn/vi-VN/Home/dieukhoanmau.aspx

“ The number of arbitrators shall be (One or three);

The place of the arbitration shall be………”

As to disputes involving a foreign element, the parties may also makeadditions:

“The applicable law shall be ;

“The language of the arbitration shall be ”.

The model clause of the Arbitration Institute of the Stockholm Chamber ofCommerce11 is:

“Any dispute, controversy or claim arising out of or in connection with this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the Rules of the Arbitration Institute of the Stockholm Chamber of Commerce”.

The parties are advised to make the following additions to the arbitrationclause, as required:

“The arbitral tribunal shall be composed of arbitrators (a

" Any dispute, controversy or claim arising out of or in connection with this contract, as well as any other agreement, or the breach, termination or invalidity thereof……”

2.3 Relationship between the arbitration clause and contracts

Article 11 of the OCA(Vie) provided:

“The arbitration clause exists independently from contracts The modification, extension, cancellation or invalidity of contracts shall not affect the effect of the arbitration clause”.

11

http://www.sccinstitute.se/uk/Model_Clauses/Rules_of_the_Arbitration_Institute_of_the_Stockho lm_Chamber_of_Commerce_English/

According to the above provision, the changes of contracts shall not affectthe effect of the arbitration clause in that contract, even in case that thecontract is invalid Now in Vietnam, there are some opinions that invalidity ofcontracts shall affect the effect of the arbitration clause and therefore the caseshall be referred to the competent court This opinion is not convincible.Because in legal practice, the Vietnamese Courts have stated that the invalidity

of main contracts shall not affect the effect the arbitration clause12 On theother hand, the arbitration also has authority to decide invalidity of contracts.Because in Vietnam, although the Civil Code 2005 provides that the courtshall have authority to state that the contract is not valid but this provisiondoes not stipulate that this power is only given to the court

For example, in a case between Dai Hung Corporation and ZestCorporation, both contracting parties have chosen VIAC to resolve theirdisputes Where their disputes have arisen, Dai Hung Co said that VIAC doesnot have authority to resolve their disputes because the representative of ZestCorporation did not have authority to sign the contract and so the arbitrationclause is also invalid, which is similar to the contract But the SupremePeople’s Court of Vietnam stated that the effect of the contract and the effect

of the arbitration clause are independent13

As to the separability of the arbitration clause from the rest of the contract

in which such clause is contained, the section 3 of AA(Swe) is drafted morebroadly than the Model Law (Article 16(1) of the Model Law provided that:

“the arbitral tribunal may rule on its own jurisdiction, including any objections

with respect to the existence or validity of the arbitration agreement For that purpose, an arbitration clause which forms part of a contract shall be treated as

an agreement independent of the other terms of the contract A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause”) and does not distinguish between thedetermination of the jurisdiction of the arbitral tribunal by the tribunal itself or

by the courts14 Where the jurisdiction of the arbitral tribunal is subject todetermination in court, objections as to the validity of the contract in which thearbitration clause is contained have been found to be irrelevant, since the

12 Do Van Dai, Giải quyết tranh chấp bằng phương thức trọng tài ở Việt Nam, Legal Science

Journal, No 06/2007

13 Decision 112/2006/TTPT dated June 02 nd 2006 of the Appeal Court of the Supreme People’s Court of Vietnam in Hanoi.

14 Section 3 provides that: ”where the validity of an arbitration agreement which constitute part of

another agreement must be determined in conjuntion with a determination of the jurisdiction of the arbitrators, the arbitration agreement shall be deemed to constitute a separate agreement.

effect of a valid arbitration agreement is that the validity of the contract inwhich the arbitration clause is contained is to be determined by the arbitraltribunal A court concluded that the arbitrators have jurisdiction to determine

whether the contract is void ab initio, by reason of fraud, even if it is this

contract which purports to confer jurisdiction on the arbitrators15

2.4 Relationship between arbitration and courts based on the

arbitration agreement

Can a valid arbitration agreement be replaced by another agreement tochoose the courts and vice versa, or not? In principle, the law on arbitration ofmost countries allows for the replacing of an old agreement by a new one.However, there is difference between Vietnamese and Swedish law on thisissue

The Swedish law clearly covers this issue in Section 5 of the AA(Swe) Aparty shall forfeit his right to invoke the arbitration agreement as a bar to courtproceedings where the party has opposed a request for arbitration; or he failed

to appoint an arbitrator in due time; or he fails, within due time, to provide hisshare of the requested security for compensation to the arbitrators In suchcases, the courts will have authority to resolve their dispute

Sections 4 and 49 of the AA(Swe) also provide that when disputes based on

an agreement containing a valid arbitration agreement are brought into court,the court must transfer the parties to arbitration if the parties request it TheCourt does not consider arbitration on its own but only on the request of theparties Accordingly, the parties must refer to an agreement or in arbitrationwith version of the first on the issues of the dispute

The Vietnamese law also acknowledges this principle in Article 5 of theOCA(Vie) Accordingly, if a party petitions a court and claims that the partieshad a valid arbitration agreement, the court must refuse jurisdiction But maythe parties waive the arbitration agreement by choosing to go to court? TheOCA(Vie) does not specifically say

Article 8 of the Model Law of UNCITRAL provides that:

“A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the

15 The Swedish Arbitration Act of 1999, Five Years On: A Critical Review of Strengths and Weaknesses, p10, Editors: Jernej Sekolec and Nils Eliasson, The UNCITRAL Model Law on

Arbitration and the Swedish arbitration Act: a Comparison, p.17.

agreement is null and void, inoperative or incapable of being performed”.

Resolution 05 of the Judges’ Council of the Supreme People's Court wasadopted in 31 July 2003 to give guidance on a number of provisions of theOCA(Vie), which contains a way to solve this point Accordingly, in principle,when the plaintiff sues in a court, that Court must request him to determinewhether there is an arbitration agreement made before or after their disputeshappened The Court must then check and consider the documents enclosed inthe petition to determine the validity of the arbitration agreement If there aregrounds for determining that the dispute was controlled by a valid arbitrationagreement then, pursuant to the provisions of the procedural law, the court willreturn the applications of the plaintiff In the case, the court has determinedthat there is a specific arbitration agreement after accepting the case, it willsuspend it and return the applications, even the documents enclosed in theapplication for litigants This provision is different from international practiceand from some countries’ law, including that of Sweden

But the Resolution also provided that if, after the plaintiff sent thedefendant a written notice regarding filing a requirement to request the Court

to resolve their disputes or after the defendant received the Court’s notice ofthe plaintiff’s requirement, if he does not object within seven days from thedate of receiving the text of the plaintiff or the notification of the Court, theCourt should have authority to settle the case, even though there is a validarbitration agreement between the parties In this situation, it is argued that theparties have just agreed a new choice - the choice of the Court for resolvingdisputes – and amended the old agreement,16 – that is, the arbitrationagreement Clearly, this would make article 5 of the OCA(Vie) and its section1.1, ineffective These terms have clearly stated that the jurisdiction of thecourt can not arise when there is a valid arbitration agreement In Vietnameselegal practice, there have been many cases relating to the jurisdictional overlap

of the court and arbitration based on this guidance regarding Resolution 0517.However, the guidance is not unreasonable It has been established for thepurpose of making dispute resolution quicker and restrains parties fromdelaying the resolution of a dispute by using the arbitration agreement in thisway

16 See point b, section 1.2 of the OCA(Vie)

17 See one of case in website of the HCMC Legal Newspaper an/view.aspx?news_id=217744 (Vietnamese version)

http://www.phapluattp.vn/news/toa-For example, consider the case between Truong Sanh Co.Ltd and Mr KuoChi Seng, relating to the Nha Quan Joint Venture18 The two parties signed ajoint venture contract on 01/7/2002 in which at the article 10, the two partiesagreed that:

“Disputes between the parties involving, or arising from the contract must first be solved through negotiations and mediation In the case where the parties can not agree with each other; those disputes will be referred to The Vietnam International Arbitration Center at the Chamber of Commerce and Industry Its arbitral award should be the final decision that the parties have to execute ".

When their disputes occurred, the plaintiff, Truong Sanh Co.Ltd, gavenotice to Mr Kuo that the plaintiff would be suing him for his violations byway of a petition in the Binh Duong People’s Court on August 1st, 2007.Truong Sanh Company officially sent a petition to the above Court on August

20, 2007 However, on September 25, 2007 the defendant sent a document tothe Court to request that the authority of the Court be reviewed After thefailure of further conciliation attempts, the defendant been changed hisapproach by requesting the Court to refer the parties to Arbitration becausethere was a valid arbitration agreement between the parties Court officiallyanswered the defendant regarding his request on November 26, 2007 TheCourt based its answer the point b, section 1.2 of the Resolution and refusedthe defendant’s request Because he did not use the right to object to the Courtwithin 7 working days of receiving the written notice of the plaintiff, he hadlost his rights to use their arbitration agreement instead of the Court Furtherproblems arose when the defendant in the court proceedings sent his petition

to VIAC, and it was accepted It determined that the parties’ disputes should

be referred to arbitration based on article 5 of the OAC(Vie) and Section 1.1

of the Resolution Meanwhile, the Binh Duong People’s Court said that VIACmust refuse the acceptance based on point b, Section 1.2 of the Resolution asabove

The establishment of provisions like Article 5 of the OAC(Vie) and section1.1 of the Resolution will exclude circumstances, as in the above case, wherethe parties had had a valid arbitration agreement, but it was superseded by a

new agreement (may be an agreement to choose arbitration or other

agreements to select a competent court which can be expressed explicitly or implied).

18 See this case at the website http://www.kinhtenongthon.com.vn/printContent.aspx?ID=10406

According to Swedish law, where the defendant, at the beginning of courtproceedings, invokes the existence of an arbitration agreement and requeststhat the case be referred to arbitration, while the plaintiff affirms that theirarbitration agreement is not valid, inoperative of incapable of beingperformed, the Court will consider the validity of the arbitration agreementand conclude whether it is indeed null and void, inoperative of incapable ofbeing performed If so, the Court will not refer the parties to arbitration and itshall settle these disputes itself In the contrary case, the case should bereferred to arbitration by the Court The request can be made at any time fromwhen the claimant sent his petition to the Court, to the time when the partiesdeliver their first document to the court to explain the content of disputes19 (therequest may be attached or in the explaining document)

Because of the principle of competence–competence, arbitrators also have

the power to consider whether they have authority to solve the dispute, if theyreceive a request to determine whether they lack jurisdiction over the dispute

This decision is called a prima facie consideration20

Thus, according to the OAC(Vie), there is a difference between Vietnamesearbitration law and international practice Although the parties now have anew agreement, they may still be bound by the old agreement This is contrary

to the important principle that private relations are governed by freedom ofchoice However, the provisions of the Resolution on this matter are notwholly reasonable Within 7 working days of the defendant being informedthat the claimant will submit his petition to the Court, he must show hisrejection of the court because of the arbitration agreement This is notappropriate Once a dispute has arisen, the parties focus on the dispute’scontent and on how to negotiate without approaching the authorities If theirnegotiation fails, they may then request that a specific authority solve theirconflicts Moreover, in practice, much will have been done through the mail,telex, and other means…In such a case, seven working - days is clearly notenough When a dispute is submitted to the court, the contracting parties mustdemonstrate either that recommendations have been submitted to the

defendant (for the claimant) or that he has replied the recommendations to the plaintiff within 7 working – days (for the defendant) This makes cases even

more complex

19 Section 4 and Section 49 of the AA(Swe)

20 See Article 7 of the Rules of the SCC Institution

After the above analysis, we will not stipulate all the contents of theArbitration Law DraftDraft Law The Courts should indeed be empowered Onthe other hand, we consider this period should only be applied to the defendantwhen he has received a notice from the court However, is the period toanswer appropriate? The Model Law (article 8) as well as the AA(Swe)(section 4 and 49) merely provide that if a dispute covered by an arbitrationclause is brought before a court, the court shall refer the parties to arbitration ifthe arbitration agreement is invoked by the party relying on the arbitrationagreement21

The court will not consider the arbitration clause on its own motion, butonly if so requested by the party Both the Model Law and the Arbitration Actplace a reasonable limit time the party’s request that the matter be referred toarbitration Although worded differently, both the Model Law and theArbitration Act provide that the party must invoke the arbitration agreement in

or with the first statement on the substance of the dispute

Under both the Model Law and the Arbitration Act, the question may arise

as to what the court should do when the respondent at the beginning of courtproceedings invokes the existence of an arbitration agreement and requests thecase be referred to arbitration, while the claimant alleges that the arbitrationagreement is “null and void, inoperative or incapable of being performed”(article 8 of the Model Law, and essentially the same rule in section 4 and 49

of the Arbitration Act) According to one opinion, if, in such a situation, thecourt engages in a full consideration of the validity of the arbitrationagreement and comes to a conclusion that the agreement is indeed invalid,inoperative or incapable of being performed and as a result does not refer theparties to arbitration, the operation of the principle of competence-competencewill be thwarted, since the arbitral tribunal may never have the opportunity toconsider its own contested jurisdiction It has therefore been suggested that insuch a situation the court should engage only in a prima facie consideration ofthe controversy as to the validity of the arbitration agreement and should referthe parties to arbitration, if the agreement is prima facie valid, operative andcapable of being performed

The court would in any case have the ultimate opportunity to decide on thevalidity of the arbitration agreement either in the context of the proceedingsfor the setting aside or the any later enforcement of the award, or, under theModel Law, if the arbitral tribunal decides the issue of the validity of the

21 http://www.sccinstitute.se/_upload/shared_files/artikelarkiv/report_sekolec.pdf page 11 (48)