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In recent years, the method of resolving disputes through commercial arbitration has been increasingly preferred by businesses in Vietnam due to several advantages such as agility, flexibility in procedural matters, high confidentiality, or the parties’ right to negotiate in dispute resolution. However, the challenge posed to this dispute resolution method is the enforceability of arbitral awards in Vietnam.
Arbitral awards are the final decisions of the Arbitration Council resolving all the disputed issues raised in the claim, terminating the arbitration proceedings, and having general binding force on the parties. Nevertheless, under certain legal provisions, arbitral awards are at risk of being annulled by the Court.
This concern has caused much anxiety and raised many questions for businesses and arbitration centers participating in and implementing arbitration dispute resolutions.
In this article, ASL LAW will analyze and clarify the fundamental and important factors for accepting or not accepting the annulment of arbitral awards in Vietnam through two recent decisions of the Hanoi People’s Court.
Summary of the content of two cases resolved by arbitration in Vietnam:
“Decision No. 16/2023/QD-PQTT on not annulling the arbitral award” of the Hanoi People’s Court dated November 27, 2023.
The Hanoi People’s Court was requested to review the Request for Annulment of the Arbitral Award by Company ABC in dispute No. 49/22 dated June 23, 2023, arbitrated by the Vietnam International Arbitration Center in Hanoi, resolving a dispute with Envelop G… as the respondent.
During the contract execution process, disputes arose between the two parties, and the related party filed a lawsuit at VIAC to request the annulment of the contract related to 600,000 undelivered face masks, requesting refund of the payment made, and reimbursement of legal fees.
Conclusion of the Review Council regarding the non-annulment of the arbitral award in dispute No. 49/22:
Conclusion of the Adjudicating Council:
- The Adjudicating Council’s decision does not fully reflect the opinions of the requesting party regarding the subject matter of the case it has adjudicated, is not within the jurisdiction of the Court to review, and there is no basis to annul the Judgment.
- The Adjudicating Council had grounds to apply the CISG in the case, and this issue has been addressed in the Judgment.
- The relevant party has legally authorized power of attorney, including the authorization to sign the lawsuit petition, thus there is no need to separately legalize the lawsuit petition, in accordance with the provisions of Decree No. 111/2011/ND-CP.
- The Adjudicating Council’s separation of the executed and unexecuted parts of the contract falls within the scope of the case’s subject matter, therefore, there is no sufficient basis to annul the Judgment, and it is not contrary to the law.
- The Adjudicating Council has the right to request the requesting party to bear a portion of the legal costs for the relevant party according to the provisions of the Commercial Arbitration Law.
The Adjudicating Council has made a decision not to accept the requesting party’s annulment request because there is no basis to conclude that the Judgment of the Adjudicating Council violates the fundamental principles of Vietnamese law.
“Decision No. 12/2023/QD-PQTT on requesting the annulment of the arbitral award” of the Hanoi People’s Court dated July 4, 2023.
The Hanoi People’s Court was requested to review the annulment of the Arbitral Award in the dispute over a share transfer contract among three parties: Company AO, Mr. Đỗ Tất T, and WP PTE.
The prosecutor’s office participated in the meeting with the following opinions:
- The requesting party had grounds to suspect evidence forgery and requested examination, but this was not approved by the Arbitration Council, which violates the Law on Commercial Arbitration and the VIAC Arbitration Rules.
- Resolutions dated July 12, 2021, and power of attorney documents were not legally legalized by consular authorities, and these documents do not fall under the cases exempt from consular legalization, therefore not recognized and usable in Vietnam.
- The arbitral award violated certain provisions of the Law on Commercial Arbitration, thus the requesting party’s annulment request is justified. Conclusion of the Review Council regarding the annulment of the arbitral award in dispute No. 79/21
Conclusion of the Adjudicating Council regarding the annulment of arbitration award No. 79/21:
Conclusion of the Adjudicating Council:
- On December 16, 2022, VIAC issued arbitration award No. 79/21. By January 11, 2023, the requesting party had filed an application to annul the arbitration award with the People’s Court of Hanoi City within the statutory deadline, thus the proceedings and resolution of the case were within the jurisdiction and the requesting party did not forfeit the right to object.
- The Adjudicating Council only examined the jurisdiction of the arbitration, the arbitration procedural rules, the collection, use, evaluation of evidence, and whether the issuance of the arbitration award by the arbitration tribunal violated the fundamental principles of Vietnamese law without reconsidering the substance of the dispute that the arbitration tribunal had resolved.
- The power of attorney documents and evidence were not legally effective because they had not been legalized by consular authorities as required by the Civil Code and the Civil Procedure Code.
- VIAC accepted the filing request of the relevant party and acknowledged the representative’s participation in the arbitration proceedings based on the authorization of the relevant party even though these documents had not been consularly legalized when the objection was made, which was contrary to regulations. Despite later submitting additional documents and legalized power of attorney during the arbitration proceedings, the arbitration tribunal seriously violated the arbitration procedure (determining the plaintiff’s standing) when handling the filing request of the relevant party.
- The arbitration tribunal was not impartial and violated the Commercial Arbitration Law by not requesting signature authentication when requested by the requesting party.
Therefore, the requesting party’s application to annul the arbitration award is justified. The Adjudicating Council accepts the request and annuls arbitration award No. 79/21 dated December 16, 2022, issued by VIAC.
Some points drawn from the above two cases
From these two decisions, ASL Law has some general comments on the grounds that the Vietnamese Court may consider when resolving annulment requests of arbitral awards according to Vietnamese law, as well as some shortcomings in the applicable legal provisions as follows:
Firstly, regarding the deadline for requesting annulment of arbitral awards in Vietnam:
According to the Vietnam Law on Commercial Arbitration 2010, within 30 days from the date of receiving the arbitral award, if a party has sufficient grounds to prove that the Arbitration Council has rendered an award falling under one of the cases where arbitral awards can be annulled, they can submit a petition to the competent court to request annulment of the arbitral award, except in cases of force majeure. Therefore, the deadline for parties to submit petitions requesting annulment of arbitral awards will be calculated from the date the party receives the arbitral award.
However, despite the legal provisions, in the assessments of the Vietnam Court in the two Decisions, it can be seen that the Court calculated the deadline based on the date of issuance of the arbitral award without considering the date on which the parties received the arbitral award as stipulated above. In general, according to the Arbitration Rules of some arbitration institutions, there will be a certain discrepancy between the “date of issuance of the arbitral award” and the “date of receipt of the arbitral award.” Therefore, calculating the deadline from the date of issuance of the arbitral award will affect the right of parties to submit petitions requesting annulment of arbitral awards. This is a notable difference between the court’s trial practice and the legal provisions that parties need to be aware of to ensure their rights to request.
Secondly, the scope of reviewing requests for the annulment of arbitral awards by the Vietnam Court:
Based on the grounds presented by the requesting party to request the Court to annul the arbitral award, it can be observed that the scope of the requesting party’s submission for the Court’s consideration includes issues related to both the substance and procedure of the arbitration proceedings, specifically alleging that the Arbitration Council was not objective in considering the requesting party’s opinions, leading to an inaccurate decision.
However, the Court’s determination in both Decisions clearly and consistently demonstrates that the scope of the Court’s review when considering requests for the annulment of arbitral awards is based solely on the grounds stipulated in Article 68(2) of the Law on Commercial Arbitration 2010, which rejects reconsideration of the dispute content that the Arbitration Council has resolved.
This perspective of the Court is entirely consistent with the spirit of Article 71(4) of the Law on Commercial Arbitration 2010, which reflects the binding nature of arbitral awards, ensuring consistency and stability in the dispute resolution mechanism, while respecting the decisions of the Arbitration Council and the independence of the arbitration proceedings.
Thirdly, regarding the legality of the lawsuit, power of attorney documents, and other related evidence:
“In both Decisions of the Court, it is clearly stated that the Court’s position on examining the legality of documents in arbitration proceedings will comply with the provisions of the Civil Procedure Code when the Law on Commercial Arbitration does not have specific regulations.”
– ASL LAW Lawyers –
Regarding the request for the annulment of the arbitral award due to contravention of the basic principles of Vietnamese law, specifically regarding the issue of consular legalization of arbitration documents, the Review Council in both cases issued different Decisions as follows: In case No. 79/21, the Hanoi People’s Court issued a decision to annul Arbitral Award No. 79/21 as VIAC accepted the plaintiff’s lawsuit request and acknowledged the authority of the representative despite the resolution on the authorization and the lawsuit not being consularly legalized. On the contrary, in case No. 49/22, the Court ruled that since the power of attorney had been consularly legalized and contained the authorization to file the lawsuit, there was no need to separately legalize the lawsuit, and it complied with the provisions of Article 9 of Decree No. 111/2011/ND-CP.
The Review Council’s assessment is based on Article 478 of the Civil Procedure Code 2015, which stipulates that notarized, authenticated Vietnamese documents and translations shall be recognized and used by Vietnamese courts, except where those documents are exempt from consular legalization under Vietnamese law; and the provisions of Article 9 of Decree No. 111/2011/ND-CP, whereby documents and papers that the receiving agency in Vietnam does not require to be consularly legalized fall under the category of documents exempt from consular certification, consular legalization.
Thus, in both Decisions of the Court, it is clearly stated the Court’s position on examining the legality of documents in arbitration proceedings will comply with the provisions of the Civil Procedure Code, with the reason that in cases where the Law on Commercial Arbitration does not have specific regulations, the arbitration procedure must comply with the provisions and procedures of the Civil Procedure Code. This argument of the Court is a topic that requires multidimensional discussion from lawyers, arbitrators, and researchers.
Therefore, in the spirit of the above assessment, to minimize the risk of facing annulment of arbitral awards, the Arbitration Council must establish arbitration procedures in compliance with the Civil Procedure Code, unless the Law on Commercial Arbitration provides specific provisions. For example, because the Law on Commercial Arbitration does not provide specific regulations on determining the condition of evidence being a document, but according to the provisions, it must comply with the Civil Procedure Code, specifically at Article 95, the Arbitrator must request the parties to provide certified true copies, legally authenticated copies of all documents and papers submitted to the court as evidence. However, this will have negative implications, eroding the advantages of arbitration proceedings, which typically prioritize agility, cost-effectiveness, and efficiency in procedures.
Moreover, with the requirement that all documents submitted to the court must be consularly legalized, the authentication, consular legalization of documents issued abroad using electronic signatures or digital signatures will pose a challenge for disputing parties as well as the judicial authority when examining the authenticity, both in form and content, according to current laws.
In cases where there are still differing opinions regarding the determination of the legality of documents, evidence in arbitration proceedings, to ensure the risk of annulment of arbitral awards is minimized, for important documents such as Power of Attorney, Lawsuit Requests, Counterclaims, etc., the documents, evidence should ensure compliance with authentication, consular legalization as stipulated by current regulations.
Fourthly, the impartiality and fairness of the Arbitration Council:
According to the Vietnam Court’s assessment, the Vietnam Arbitration Council did not consider the request for handwriting analysis when the requesting party proposed it, which shows a lack of objectivity and a violation of the basic principles of Vietnamese law stipulated in Article 4(2) of the Law on Commercial Arbitration 2010.
Regarding the assertion that the Arbitration Council demonstrated lack of objectivity, unfairness, and violated the basic principles of Vietnamese law under Article 4(2) of the Law on Commercial Arbitration 2010, this assertion lacks basis because:
- Regarding the handwriting analysis issue: even though the Arbitration Council did not conduct the analysis, the plaintiff in the case submitted documents and provided evidence verifying the authenticity of the signatures, indicating that the plaintiff confirmed their intent in the minutes of the meeting despite some discrepancies in the signatures compared to other documents. Additionally, the supplementation of documents further actualized the authority of the signatory, affirming the plaintiff’s intent. Therefore, the Arbitration Council’s actions did not contravene the principle of objectivity.
- Regarding the decision to request handwriting analysis or not: the Arbitration Council has the right to request handwriting analysis but is not obligated to do so, especially when the Plaintiff has affirmed their intent to initiate the lawsuit.
- The assertion that the Arbitration Council is unfair only arises when the Council conducts an analysis at one party’s request and fails to do so at the other party’s request.
- During the proceedings, when the Respondent in the case did not participate in the jurisdictional hearing, the Arbitration Council conducted an online jurisdictional hearing to provide both parties with an opportunity to express their opinions.
Therefore, the Arbitration Council’s decision not to request handwriting analysis and to continue handling the case did not have sufficient grounds to be considered a violation of the principle of objectivity under Article 4(2) of the Law on Commercial Arbitration. Objectivity is a concept that is somewhat subjective and depends heavily on the perspective of the reviewing party. However, to minimize the consideration and issuance of decisions affecting the enforceability of arbitral awards, the Review Council may need to adopt a more stringent perspective.
In practice, when seeking to prove that a document is forged or lacks authenticity, requesting handwriting analysis to verify the authenticity of signatures can be entirely feasible with the party making the request aiming to protect their legal rights and interests.
The lesson learned from this situation is that in some cases, even without a request, a party can proactively conduct handwriting analysis and submit it to the Arbitration Council as evidence for the case, and the costs for analysis will be allocated by the Arbitration Council according to the Law on Commercial Arbitration and the procedural rules of the arbitration center.
Conclusion
In summary, alongside the grounds for considering the annulment of arbitral awards that are clearly defined and more easily identifiable, such as cases where there is no arbitration agreement, the arbitration agreement is null and void, or the dispute falls outside the jurisdiction of the arbitral tribunal, the issue of considering the annulment of arbitral awards due to violations of the fundamental principles of Vietnamese law remains a topic that requires further discussion through the Court’s decisions in practice. The Vietnamese arbitration procedural system, in particular, and the procedural systems in general, require a lengthy process of development and revision through each dispute resolved by arbitration in practice, as well as by referencing the experiences of other countries.
However, despite the many issues that need to be discussed regarding the Court’s decisions to annul arbitral awards, the current Vietnamese law still lacks a mechanism for higher courts to review or oversee the decisions of lower courts in annulling arbitral awards. Therefore, from the perspective of parties involved in litigation at the present time, consulting the Court’s opinions on arbitration procedures and compliance, although it may incur additional time and costs, is a measure to ensure the enforceability of arbitral awards effectively.
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