recognition and enforcement of foreign arbitral awards in vietnam

General principles for the recognition and enforcement of foreign arbitral awards in Vietnam - Provisions of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards

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 a court of law An arbitral award can be of a non-monetary nature where the entire claimant'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 any matter to be determined in the arbitration proceedings, injunctive relief, specific performance of a contract and for rectification, setting aside or cancellation of a deed or other 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 Vietnamese territory

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 their disputes

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., arbitral awards made in the territory of another (Contracting) State

This field of application is defined in Article I The general obligation for the Contracting States to recognize such awards as binding and to enforce them in accordance with their rules 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 by submitting proof of one of the grounds for refusal of enforcement which are limitatively listed in Article V(1) The court may on its own motion refuse enforcement for reasons of public 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 the law of which, it is made ("the country of origin"), the foreign court before which enforcement 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 the court's domestic law on enforcement of foreign awards or bilateral or other multilateral treaties 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 to arbitration Article II (3) provides that a court of a Contracting State, when seized of a matter in respect of which the parties have made an arbitration agreement, must, at the request of one of the parties, refer them to arbitration (unless the arbitration agreement is invalid)

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 Arbitral Awards done at New York, on June 10, 1958 (New York Convention 1958) are applied in almost countries for the recognition and enforcement of foreign arbitral awards After

Vietnam’s accession to the Convention, the National Assembly Standing Committee passed the Ordinance on Recognition and Enforcement in Vietnam of Foreign Arbitral Awards at the end of 1995 (the 1995 Ordinance) It took effect on January 1, 1996, and was Vietnam’s first legal document providing procedures regarding the recognition and enforcement in Vietnam of foreign arbitral awards According to that, Vietnam has announced three following reservations:

1 Vietnam will apply the Convention only to recognition and enforcement of awards made in the territory of another contracting State; with regard to awards made in the territory 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 legal relationships, whether contractual or not, that are considered commercial under the national law

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

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 The Civil 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 signatory provide otherwise, the provisions of such international treaties shall apply

Under the provisions in Article 424 of the 2015 Civil Procedure Code, Courts shall consider foreign arbitral awards only the following foreign arbitrators’ award shall be considered 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 about recognition 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 have not yet signed agreements or in which neither of them is contracting states to relevant international conventions.)

- Parties in favor of whom foreign arbitral awards are invoked have the right to file petitions 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 in Vietnam, or agencies or organizations against which the awards are invoked are headquartered in Vietnam, or the assets related to the enforcement exist in Vietnam at the time of filing petitions

- When handling petitions, courts do not examine the subject matter and nature of disputes but only examine them in terms which are primarily relevant to the validity of the arbitral agreement and competence of foreign arbitrators and foreign arbitration proceedings Upon consideration, Vietnamese courts will render their decisions on recognition or non-recognition of awards Involved parties will have the right to lodge appeals of such decisions in higher courts for review according to provisions of the Civil Procedure Code

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

- The Vietnamese State guarantees the transfer from Vietnam to foreign countries of cash and 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 which includes:

- The petition

- Copy of the foreign arbitral award

- Copy of discrete arbitration agreement

- Other papers and documents

Therein, the copies of discrete arbitration agreement are the copies which constitute part

of the signed contract and other papers and documents provided for in international treaties to which Vietnam has signed or acceded Copied documents must be legally valid and documents in foreign languages must be translated into Vietnamese and lawfully notarized 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 arbitral awards 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 to competent courts (courts of provinces or centrally-run cities according to current regulations) where the involved parties reside or work or where related assets exist The competent court is the court of provincial level in which the award debtor resides (if an individual) or has its headquarters (if a company or organization) or the place where the property relating to the enforcement is located

- Secondly, within three working days after receiving files from the Justice Ministry, the competent courts must accept the cases for handling and notify individuals, agencies or organizations 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 and prosecuting agencies

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

i) suspend consideration of the petition in cases of receiving written notice

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

ii) cease consideration of the petition in cases where the petitioner has

withdrawn the petition, parties against whom the awards are invoked have voluntarily enforced the awards or have been dissolved or gone bankrupt, foreign arbitral awards have been set aside or suspended by foreign competent authorities, parties against whom the awards are invoked do not reside or work or are not headquartered in Vietnam, or the places where assets related to the enforcement in Vietnam exists are unidentifiable; or

iii) open a hearing to consider the petition within twenty days after issuing

such decision

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

The involved parties may lodge appeals against a court decision within fifteen days after the court issues such decision or after they receive such decision if they have not been

present 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 month respectively

- Fifth, The Supreme People’s Court shall review a provincial-level people’s court’s decision which is appealed or protested within one month after receiving the case files In cases where unclear points exist in dossiers and the courts request the involved parties to make 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 A hearing for review of an appealed or protested decision shall be conducted The review panel may uphold or partially or entirely amend decisions of provincial-level people’s courts and suspend or stop consideration of appeals or protests The Court will issue a decision on:

● Recognizing and permitting enforcement in Vietnam; or

● Non-recognizing the award of foreign arbitrators

Decisions 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 in Vietnam, particularly regarding the enforcement of foreign awards Only final arbitral awards that were not set aside by the foreign country’s Court of the seat of arbitration are subject to enforcement in Vietnam The enforcement of such awards must be recognized and approved by the People’s Court of Vietnam

Vietnam has, accordingly, engaged in a program of reform of its commercial arbitration system 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 a cause of concern to investors and traders alike The practice has shown that Vietnamese

courts are unwilling to enforce arbitration awards Moreover, current Vietnamese regulations on enforcement of international arbitral awards suffer from a number of 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 awards and 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 It appears that between 2005 and 2014, fifty-two requests were submitted for recognition and 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 a report presented by Mr Fred Burke in 2015 The report highlighted the alarmingly weak enforcement of international arbitration awards in Vietnam It also cited the broad provisions of the Civil Procedure Code (CPC) as one of the main reasons for such weak enforcement Indeed, Article 439, previously Article 370 in the 2015 CPC, sets out the grounds 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 of Vietnam.”

Because Vietnam is a signatory to the New York Convention on the Recognition and Enforcement 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 to the Ministry of Justice, which will then transfer the petition to a competent court for recognition and enforcement Unfortunately, for parties seeking to enforce foreign arbitral awards 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 and apply 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

There are nevertheless eight grounds for resisting the recognition and enforcement of an arbitral award under the New York Convention, which is found in Articles V and VI of the Convention These grounds are summarized below

1.There was no valid arbitration agreement

Article V(1)(a) provides that recognition may be refused when:

The parties to the agreement referred to in article II were, under the law applicable

to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law

of the country where the award was made…

Examples: The arbitration agreement was forged, one of the signatories of the arbitration agreement lacked the capacity to sign an award

2.There were serious procedural irregularities in the arbitration

Under Article V(1)(b) recognition and enforcement of arbitration awards may be refused when:

The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case…

Article V(1)(d) also provides that recognition and enforcement of arbitration awards may

be refused when:

The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place…

3.The arbitral tribunal ruled in excess of its jurisdiction

Under Article V(1)(c) recognition and enforcement of arbitration awards may be refused when:

The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced…

Examples: The arbitral tribunal ruled on a question that the parties did not ask it, or it granted relief that was not requested by the Parties

4.The arbitral tribunal was biased

This ground for refusing the recognition and enforcement of arbitration awards is read into Articles V(1)(b), V(1)(d) and V(2)(b) of the New York Convention

Examples: There was no equal treatment of the Parties The arbitral tribunal was clearly partial The arbitral tribunal lacked independence from one of the Parties

5.The arbitration award was not “binding”

Recognition and enforcement of arbitration awards may be refused under Article V(1)(e) when “The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.”

Examples: As arbitration awards can be appealed before the courts of some countries, the arbitration award might not be binding in such a country An interim award also might be not to be binding

6.The subject matter of the dispute was non-arbitrable