Contributed By VILAF
International arbitration is quite popular as a method of resolving disputes in Vietnam when parties from different jurisdictions are concerned.
In the authors’ experience, when contracts that are relevant to Vietnam involve both Vietnamese and foreign parties, the parties usually nominate arbitration at the Singapore International Arbitration Centre (SIAC) or the Vietnam International Arbitration Centre (VIAC) as the preferred method of dispute resolution. However, in contracts between purely foreign parties, the choice of dispute resolution method is often arbitration in one of the popular arbitration centres in the region, such as SIAC, the ICC International Court of Arbitration or the Hong Kong International Arbitration Centre (HKIAC).
There was no official data on the industries that are experiencing significant international arbitration activity in 2021–22. The 2021 VIAC Annual Report shows there was significant arbitration activity in 2021 in the following industries:
In 2021, 18.1% of the arbitration cases resolved at the VIAC were international arbitration.
Construction appeared to be the industry that experienced more international arbitration activity in 2021–22. By way of an example, construction disputes accounted for 18.9% of the disputes resolved at the VIAC in 2021, whereas the figure for 2020 was only 14%. This might be attributable to the COVID-19 pandemic that seriously affected Vietnam in 2021. The pandemic caused lockdowns across the country and delayed construction activities, which might have led to disputes between parties regarding extension of time (EOT) and payment claims.
There appeared to be no industries that experienced decreased international arbitration activity in 2021–22 as a result of the COVID-19 pandemic.
The VIAC is used most for international arbitration in Vietnam. This may be attributable to its long history of operation in the country, as well as the expertise and experience of its arbitrators.
In 2021–22, there were eight new arbitral institutions that were established in Vietnam, as shown on the portal of the Ministry of Justice.
Arbitration-related matters would be handled by the economic courts (or Tòa Kinh tế in Vietnamese). This is a specialised court function within a provincial-level (or above) court in Vietnam.
The legal framework for international arbitration in Vietnam mainly comprises:
The primary legislation on arbitration in Vietnam is the LCA, which is largely based on the UNCITRAL Model Law on International Commercial Arbitration (1985) (the “UNCITRAL Model Law”). Nonetheless, some LCA provisions diverge from the UNCITRAL Model Law, including:
There have been no significant changes to Vietnam’s arbitration law in 2022.
However, significant changes are expected to occur in the next few years. In 2021, the Standing Committee of the National Assembly assigned the government and the Vietnam Lawyers Association to review the current legal framework on commercial arbitration and propose necessary revisions. The revised law on commercial arbitration may be put on the law-making agenda between 2023 and 2025.
An arbitration agreement is enforceable if it satisfies the following legal requirements, pursuant to Article 16.2, Article 18 and Article 43 of the LCA (as guided under Resolution 01).
Generally speaking, disputes of a non-commercial nature or disputes that fall within the exclusive jurisdiction of the Vietnamese courts may not be referred to arbitration.
First, pursuant to Article 2 of the LCA, the following disputes are arbitrable:
Second, Article 470 of the Civil Procedure Code lists the disputes over which the Vietnamese courts have exclusive jurisdiction (eg, real-estate disputes and marriage disputes). The extent of this exclusive jurisdiction (affecting international or domestic arbitration) is, however, being heavily discussed at the moment. That said, in addition to the Civil Procedure Code, the specialised legislations may also provide that only the Vietnamese courts have jurisdiction over the specialised disputes.
The authors additionally note that the Vietnamese government has also introduced specialised arbitration that, for example, is applicable to labour disputes under the new Labour Code.
As regards the law governing the arbitration agreement, this is not clearly provided for by Vietnamese law. However, the courts would usually consider the law governing the arbitration agreement to be the same as the law governing the entire contract. If the contractual parties fail to agree on the governing law, the conflict of laws principles (provided under the Civil Code) would apply.
When it comes to the enforcement of arbitration agreements, subject to Article 6 of the LCA, the courts will immediately refuse to accept jurisdiction over a case where an arbitration agreement is available (unless the arbitration agreement is invalid or incapable of being performed). This is also implemented in practice.
Vietnamese law applies the rule of separability to arbitration clauses, pursuant to Article 19 of the LCA. Thus, an arbitration clause may still be considered valid even if the rest of the contract in which it is contained is unenforceable.
Vietnamese law does not expressly impose any limit on the parties’ freedom to select arbitrators. However, technically speaking, there are certain limits in the form of relevant qualifications and requirements for becoming an arbitrator. Specifically, pursuant to Article 20 of the LCA, the persons chosen as arbitrators must satisfy the following requirements:
If the parties’ chosen method for selecting arbitrators fails and the rules of the arbitration centre do not have any provisions concerning the selection of arbitrators, there are default procedures for the selection of arbitrators under Article 40 of the LCA (for institutional arbitration) and Article 41 of the LCA (for ad hoc arbitration, with the assistance of the court). These default procedures also apply in cases where there is more than one respondent to the arbitration.
The court may only intervene in the selection of arbitrators in ad hoc arbitration at the request of the parties (or of either party), pursuant to Article 41 of the LCA. Specifically, unless as otherwise agreed between the parties in the ad hoc arbitration, arbitrators will be selected via the following process.
Vietnamese law has particular provisions governing the challenge and removal of arbitrators. Specifically, pursuant to Article 42 of the LCA, an arbitrator must refuse to resolve a dispute and the parties may request replacement of an arbitrator if:
As a matter of practice, before taking on the case, the arbitrators will sign a declaration (ie, an arbitrator’s statement) that they are free of conflict and are able to act as arbitrators.
If challenged, the replacement of arbitrator will be decided by:
Vietnamese law has requirements with regard to arbitrator independence and impartiality, as stipulated under Article 42 of the LCA. An arbitrator must, as from the time of their selection or appointment, provide written notice to the arbitration centre or the arbitral tribunal and to the parties of any circumstances that may affect their objectiveness and impartiality. Please also refer to 4.4 Challenge and Removal of Arbitrators for circumstances in which an arbitrator must refuse to resolve a dispute and the parties may request the replacement of an arbitrator. Nonetheless, there is currently no detailed legislation on determining conflicts of interest that is along the same lines as the International Bar Association (IBA) Guidelines on Conflict of Interest, for example.
In addition to the above-mentioned requirements, Article 16.1 and Article 16.4 of the VIAC Rules (in force as of 1 March 2017) provides for the following requirements concerning independence, impartiality and disclosure of potential conflicts of interest.
As also mentioned in 4.4 Challenge and Removal of Arbitrators, the practice at the VIAC would be that the arbitrators would sign an arbitrator’s statement on these issues, prior to taking on the case.
Please refer to the response in 3.2 Arbitrability. Generally speaking, disputes that are non-commercial in nature or that fall within the exclusive jurisdiction of the Vietnamese courts may not be referred to arbitration.
The LCA does provide for principle of competence-competence. This is stipulated under Article 43 of the LCA, whereby the arbitral tribunal would be able to rule on its own jurisdiction in the event of a challenge.
Pursuant to Article 44 of the LCA, once the decision on jurisdiction is rendered by the arbitral tribunal, a party may opt to challenge the decision and ask a competent court to review the tribunal’s decision within five working days of receiving the decision. Should the party fail to bring the request for review within this prescribed timeline, such party would lose the right to challenge, subject to Article 13 of the LCA.
Although there is no official data to determine the court’s willingness or reluctance to intervene, there have been examples of cases where the court reverts the tribunal’s rulings on jurisdictions. Nonetheless, in the authors’ experience, the courts generally do not intervene arbitral proceedings during the early stages (eg, prior to the issuance of the arbitral awards).
Furthermore, in theory, the courts may also review negative rulings on jurisdiction by arbitral tribunals.
As mentioned in 5.3 Circumstances for Court Intervention, the parties have the right to go to court and challenge the jurisdiction of the arbitral tribunal within five working days of receiving the arbitral tribunal’s decision on jurisdiction, pursuant to Article 44.1 and Article 43.1 of the LCA.
Vietnamese law does not provide for the standard of judicial review of the court (eg, deferential or de novo) for questions of admissibility and jurisdiction of the arbitral tribunal.
However, under Article 10.3 of Resolution 01, the court may consult the arbitral tribunal during the judicial review process as necessary. In practice, the courts also frequently consult and generally respect the arbitral tribunal and/or the arbitration institutions when performing judicial review on admissibility, jurisdiction and/or setting aside an award. As such, the standard of judicial review may arguably be understood as deferential.
Where there is an arbitration agreement and a party tries to initiate a court proceeding, the court will refuse to accept jurisdiction over the case, pursuant to Article 6 of the LCA. As such and also in practice, the court will generally be reluctant to allow a proceeding in breach of arbitration agreements.
The Vietnamese law does not provide any grounds for an arbitral tribunal to have jurisdiction over third parties who are not part of an arbitration agreement nor signatories to the contract containing the arbitration agreement.
An arbitral tribunal is allowed to grant interim reliefs at the request of either of the parties to the dispute. Specifically, under Article 49 of the LCA, the arbitral tribunal may grant the following interim reliefs:
Interim relief ordered by the arbitral tribunal is binding and can be enforced by a civil judgment enforcement agency in the same way as relief issued by the court, pursuant to Article 50.5 of the LCA.
Nevertheless, the authors note that requesting interim relief from the court may have certain advantage – for example, in terms of timing (when the arbitral tribunal has not been established) or, arguably, in terms of the scope of interim relief. Arbitral tribunals may also be reluctant to grant interim reliefs, unless in extremely urgent and/or critical cases. Thus, whether a party should request interim relief from the arbitral tribunal or the court is often an important question of strategy in an arbitration case.
Vietnamese courts play a role in interim relief in arbitral proceedings. Specifically, if – after filing the statement of claim – a party sees that its legal rights and interests have been infringed or there is a direct danger of such infringement, such party can file an application with the competent court (ie, the provincial People’s Court chosen by the parties or of the province where the interim relief needs to be implemented) to order one or more forms of interim relief, pursuant to Article 53.1 of the LCA.
Unless otherwise agreed between the parties, the court can award the following types of interim relief, pursuant to Article 12.2 of Resolution 01:
As regards interim relief in aid of foreign-seated arbitrations, the Vietnamese law does not provide clearly for the court’s authority to grant this type of relief. As such, based on the authors’ understanding, the usual view of the court is that interim relief in aid of foreign-seated arbitrations cannot be granted.
In terms of emergency arbitrators, Vietnam has not yet implemented this mechanism – from neither a regulatory nor practical perspective.
Article 50.3 of the LCA allows the arbitral tribunal to ask the party that requested the interim relief to provide security for costs by lodging a sum of money (or precious metals, precious stones, valuable papers) determined by the arbitral tribunal as corresponding to the amount of damage that may arise should unjustified interim relief be ordered. This is to protect the interests of the party against whom the interim relief is sought to be applied. Such sum of money (or precious metals, precious stones, valuable papers) must be deposited in an escrow account nominated by the arbitral tribunal.
Pursuant to Article 136 of the Civil Procedure Code, the court can also ask the party that requested certain forms of interim relief to:
The foregoing is aimed at protecting the interests of the party who is subject to the interim relief and preventing any abuse of the right to request interim relief. The sum of money (or precious metals, gemstones, valuable papers) must be deposited into an escrow account at a bank within the time limit fixed by the court.
The arbitration procedure in Vietnam is mainly governed by:
In arbitral proceedings conducted in Vietnam, the law only prescribes the following broad procedural steps:
In terms of powers, during proceedings, arbitrators in Vietnam have sufficiently broad powers and authorities to:
In terms of duties, under Article 21 of the LCA, the arbitrators must:
Article 55.2 of the LCA only indicates that, in dispute settlement hearings, parties may invite their representatives to protect their lawful rights and interests. The laws in Vietnam contain no requirements applicable to legal representatives in arbitration. In practice, foreign counsels are able to frequently act in arbitration cases seated in Vietnam.
Arbitrations in Vietnam generally adopt the memorial approach, whereby the parties will prepare the full evidence to attach to their statements in the arbitration. Discovery, disclosure, witness statements and cross-examination are not frequently utilised, except for in complex disputes.
However, the LCA does expressly provide for the arbitral tribunal’s power to request evidence and/or require the attendance of witness.
For both domestic and international arbitrations, the LCA only broadly provides that the parties have the right and obligation to provide evidence to the arbitral tribunal. Nevertheless, there is no comprehensive rules of evidence.
Under Article 46 and Article 47 of the LCA, the courts may assist and would have both the powers to order the production of documents or require attendance of witnesses, subject to a request by the arbitral tribunal.
There is no distinction between parties and non-parties. In fact, the above-mentioned provisions and the arbitration procedure would clearly suggest that even non-parties may be compelled to provide evidence and/or attend as witness, if the arbitral tribunal deems necessary.
From a regulatory perspective, confidentiality is limited to only having private hearings and proceedings, pursuant to Article 4 and Article 55 of the LCA. Arbitrators also have a prescribed obligation to not disclose any information from the arbitral proceedings. In practice, the awards and other matters relevant to arbitral proceedings are generally kept confidential by both the arbitrators and parties.
However, there is no express confidentiality obligation applicable to the parties, either by way of law or institutional rules. As such, information in arbitral proceedings may theoretically be disclosed in subsequent proceedings.
An arbitral award must:
In terms of timeline, the award must be rendered within 30 days of the last hearing. Owing to this short timeline, there is a tendency in complex disputes for the arbitral tribunal to have multiple hearings and for the last hearing to only be held when the arbitrators are ready to render the award. Once the award is rendered, it must be delivered to the parties immediately.
There are no limits on the types of remedies that an arbitral tribunal may award in Vietnam. Generally speaking, the types of remedies granted by both an arbitral tribunal and/or court include:
In Vietnam, parties are allowed to recover interest and legal costs (including arbitration costs and/or lawyers costs), pursuant to Article 34 and Article 61 of the LCA.
Under Article 34 of the LCA, the default position for allocating arbitration costs is that “costs follow the event” or that the losing party will have to pay these costs, unless otherwise agreed by the parties or allocated by the arbitral tribunal. The same approach and principle are usually applied for other legal costs as well, although there is no clear regulation in this respect.
The authors also note that, if the parties have agreements on costs allocation (eg, cost-sharing), these agreements would usually be respected and implemented by the arbitral tribunal.
Article 4.5 of the LCA sets forth that arbitral awards are final. As such, they cannot be appealed by the parties.
Nevertheless, within 30 days of the date of receipt of the arbitral award, either party may ask the court to set aside an arbitral award in any of the following cases:
Parties cannot agree to exclude or expand the scope of appeal or set aside awards.
However, the last ground for setting aside (regarding violation of fundamental principles of Vietnamese law) is vague and without any clear guidance at the moment. As such, in practice, parties usually use this vague ground to bring any type of challenge (including on the merits of the dispute).
courts are not allowed to revisit the merits of a case, as provided in Article 71.4. of the LCA
Nonetheless, in practice, parties usually attempt to retrial or to revisit the merits of the case by way of claiming violations of fundamental principles of Vietnamese law. In such case, the court may decide to consult the arbitral tribunal and/or let the tribunal rectify the alleged violations (if any). Thus, the standard of judicial review is arguably deferential. This approach, however, may vary from court to court.
Vietnam acceded to Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”) on 12 September 1995. The New York Convention came into force in Vietnam on 11 December 1995, with declarations as follows.
The procedure for the recognition and enforcement of arbitral awards is generally as follows.
An award that has been set aside by the courts in the seat of arbitration will not be enforced in Vietnam, according to Article 459.1(g) of the Civil Procedure Code, which provides that the court will not recognise a foreign arbitral award if the enforcement of such award has been cancelled or terminated by a competent agency in the country where such award is made or the home country of the law that is applied.
An award that has not taken compulsory legal effect on the parties will not be enforced by the Vietnamese court, pursuant to Article 459.1(e) of the Civil Procedure Code. As such, an award subject to ongoing set-aside proceedings at the seat of arbitration may not be enforced by the Vietnamese court if it has not taken compulsory legal effect on the parties.
Additionally, under Article 451.1 of the Civil Procedure Code, the time limit for submission of applications for the recognition and enforcement of foreign arbitral awards is within three years following the day on which the foreign arbitral award takes legal effect. As such, a foreign award must be final and binding before it can be recognised and enforced in Vietnam.
Sovereign immunity is not a ground to refuse the recognition and enforcement of an arbitral award. Nonetheless, in practice, similar defence may be raised on the grounds of violation of the fundamental principles of Vietnamese law.
Statistically, the Vietnamese courts used to have a relatively bad track record when it came to recognising and enforcing arbitral awards. However, the rate of recognised and enforced awards seems to be on the rise in recent years. That said, when reviewing the courts’ decisions on this matter, there does not appear to be a universal approach to award recognition and enforcement.
As regards the public policy ground, when being transposed into Vietnamese law, it has become the ground of violations against “fundamental principles of Vietnamese law”. This denotes a sense of domestic public policy. There has yet to be any official guidance on this ground and, as such, the applications and reasonings on this ground appear to vary from court to court.
Vietnamese law does not explicitly provide for class action arbitration or group arbitration.
Professional Standards
Please refer to 4.1 Limits on Selection on the professional standards applicable to arbitrators conducting proceedings in Vietnam. For lawyers’ standards, Article 10 of the Law on Lawyers provides that Vietnamese citizens who are loyal to the Fatherland, observe the Constitution and law, have good moral qualities, possess a law bachelor diploma, have been trained in legal profession, have gone through the probation of legal profession and have good health for law practice may become lawyers.
Ethical Codes
The National Bar Council of the Vietnam Bar Federation issued the Decision No 201/QD-HDLSTQ dated 13 December 2019 on code of ethics and conduct of Vietnamese lawyers. This includes rules concerning general ethics, as well as relationships with clients, colleagues, presiding agencies or persons in legal proceedings and with other regulatory agencies, organisations and individuals.
For arbitrators, each arbitration centre has its own ethical codes for its arbitrators.
There is no explicit regulation regarding third-party funding in Vietnam. This practice is neither clearly prohibited nor permitted by law.
Article 7.4 of Resolution 01 specifies that multiple legal relationships can be resolved in the same case if:
The circumstances for consolidation are not clearly stipulated by this provision. In practice, arbitration institutions also kept the consolidation rules quite vague – presumably so that the discretion to allow consolidation is retained by the institution and the arbitral tribunal. By way of an example, Article 15 of the VIAC Rules only provides that “the centre shall decide on whether the arbitrations are consolidated upon its consideration on relevant matters”.
The authors are not aware of any instances where third parties may be bound by an arbitration agreement or award. In contrast, in a court setting, there does not appear to be a clear limitation on the courts’ ability to bind foreign third parties.
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