In Vietnam, international arbitration is increasingly favoured for resolving commercial disputes involving foreign parties, driven by global integration and cross-border transactions. Its benefits – flexibility, confidentiality, and expert arbitrators – are widely acknowledged.
For purely domestic disputes, Vietnamese parties still prefer litigation or mediation, owing to their familiarity, lower costs, and trust in domestic courts. However, international arbitration is preferred for disputes with foreign parties, leveraging enforceability under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”) and its perceived neutrality.
Key contexts for international arbitration in Vietnam include:
Construction Industry
International arbitration is common in Vietnam’s construction sector, owing to large-scale projects, complex contracts, and multiple parties from different jurisdictions. Common disputes include contract interpretation, delays, and cost overruns. Foreign investment in infrastructure projects and the technical nature of these disputes necessitate the use of expert arbitrators.
Energy Industry
The energy sector, involving projects such as power plants and renewable energy installations that are often funded by international investors, also sees significant arbitration activity. Long-term contracts and regulatory changes frequently lead to disputes. International arbitration is favoured for its neutrality and stability, which are essential for resolving high-value, long-term contracts.
Banking and Finance Sector
Cross-border transactions and investments in the banking and finance sector drive the use of international arbitration. Complex financial instruments require specialised knowledge, which arbitration provides.
Factors Driving Arbitration Preference
The reasons behind certain industries’ preference for international arbitration include:
The VIAC is the foremost arbitration institution in Vietnam for international arbitration, owing to:
Besides the VIAC, institutions such as the Singapore International Arbitration Centre (SIAC) and the ICC are occasionally preferred for disputes involving Vietnamese parties.
No new arbitral institutions have been established in Vietnam in the past year.
Vietnam has established a robust legal framework supporting domestic and international arbitration, designating specific courts for arbitration-related disputes. This ensures efficiency in the arbitration process and effective enforcement of arbitral awards.
Provincial Courts
At the core of this framework are the courts at the provincial level. The provincial courts handle various arbitration-related responsibilities, including:
The provincial courts operate under the guidance of the Civil Procedure Code (CPC) of Vietnam. The CPC incorporates provisions from the New York Convention, ensuring that foreign arbitral awards are recognised and enforceable in Vietnam. This alignment tends to give foreign investors confidence that their arbitral awards will be upheld, making Vietnam an attractive destination for international business.
Supreme Court of Vietnam
The Supreme Court of Vietnam oversees the uniform application of arbitration law across the country. It provides guidance and interpretations of legal provisions related to arbitration, ensuring consistency and clarity in rulings by the lower courts. By handling appeals and reviews of decisions made by the provincial courts and High Courts, the Supreme Court maintains a coherent and predictable arbitration environment in Vietnam.
Vietnam’s primary legislation for international arbitration is the Vietnamese Law on Commercial Arbitration, enacted by the National Assembly on 17 June 2010 and effective from 1 January 2011. This law provides the legal framework for arbitration, influenced by the UNCITRAL Model Law on International Commercial Arbitration (the “UNCITRAL Model Law”), in order to ensure fair and efficient resolution of business disputes.
Alignment With UNCITRAL Model Law
The Vietnamese Law on Commercial Arbitration incorporates the following key UNCITRAL Model Law principles:
Divergences From the UNCITRAL Model Law
Although aligned on the above-mentioned aspects, Vietnam’s legislation differs from the UNCITRAL Model Law in respect of:
Vietnam’s arbitration framework has evolved recently to align more closely with international norms. While the Vietnamese Law on Commercial Arbitration has remained largely unchanged since 2010, regulatory updates and judicial interpretations have shaped the current environment as well as future directions – with pending legislation looking set to change Vietnam’sarbitration landscape.
Regulatory Updates
The Ministry of Justice has streamlined regulations for recognising and enforcing international arbitral awards, thereby expediting procedures and ensuring consistent enforcement nationwide. These updates enhance Vietnam’s reputation as an arbitration-friendly jurisdiction by reassuring foreign parties of effective award enforcement.
Judicial Clarifications
The Supreme People’s Court has provided interpretations of key provisions in the Vietnamese Law on Commercial Arbitration, particularly concerning the grounds for nullifying awards. These clarifications enhance the reliability of arbitration outcomes by minimising the risk of awards being vacated.
Pending Legislation
Upcoming amendments to the Vietnamese Law on Commercial Arbitration are expected to:
Under the Vietnamese Law on Commercial Arbitration, several conditions must be met for arbitration agreements in Vietnam to be enforceable and legally binding. These requirements ensure clarity, consent, and proper documentation, as follows.
To determine whether a dispute is arbitrable in Vietnam, the following factors are considered:
Please refer to 5.1 Matters Excluded From Arbitration for details of subject matters that may not be referred to arbitration under Vietnamese law.
Determining the Law Governing the Arbitration Agreement
Vietnamese courts respect the parties’ choice of law in arbitration agreements under the Vietnamese Law on Commercial Arbitration. If specified, the chosen law governs unless it conflicts with Vietnamese public policy. When no governing law is specified, courts consider factors such as the nature of the contract, place of performance, and parties’ locations. Vietnamese law is typically applied if the agreement is silent and the contract is performed in Vietnam.
Enforcement of Arbitration Agreements
Vietnamese courts generally uphold arbitration agreements per the New York Convention. For enforcement, agreements must be written, clearly express intent to arbitrate, and involve arbitrable disputes under Vietnamese law. Courts dismiss jurisdiction in favour of arbitration when a valid clause exists.
Challenges to Enforcement
Enforcement may face challenges based on agreement invalidity, non-arbitrable matters or conflicts with Vietnamese public policy. Courts rigorously assess these challenges to uphold the integrity and predictability of arbitration proceedings in Vietnam.
In Vietnam, an arbitral clause can remain valid even if the rest of the contract is invalid. This principle, known as the “rule of separability”, treats the arbitration agreement as independent. Thus, if the main contract is invalid due to fraud, illegality, or lack of consent, the arbitration clause can still be enforced if it meets legal requirements.
Vietnamese law applies the rule of separability to arbitration clauses in invalid agreements. The Vietnamese Law on Commercial Arbitration explicitly endorses this principle. According to Article 19, the invalidity of the main contract does not invalidate the arbitration agreement within it. This ensures that the arbitration agreement remains autonomous and can proceed independently of the main contract’s validity.
In Vietnam, the parties involved in arbitration have significant autonomy in selecting arbitrators. However, this autonomy is guided by specific legal limits to ensure fairness and integrity. These limits are established under the Vietnamese Law on Commercial Arbitration.
Qualifications
Arbitrators must meet specific qualifications to be eligible. They must have:
In exceptional cases, significant practical experience may suffice in lieu of these qualifications. These requirements ensure that arbitrators have the necessary expertise and experience to handle disputes effectively.
Independence and Impartiality
Arbitrators must also be independent and impartial. They cannot:
Number of Arbitrators
The law allows the parties to agree on the number of arbitrators.
Default Procedure for Selecting Arbitrators
If the parties’ chosen method for selecting arbitrators fails, Vietnamese law provides a default procedure to ensure that the arbitration can proceed. Under the Vietnamese Law on Commercial Arbitration, the following steps are taken.
Default Procedure for Multiparty Arbitrations
Vietnamese law also provides a default procedure for multiparty arbitrations to ensure fair representation in the selection of arbitrators, as follows.
Circumstances of Court Intervention
In Vietnam, under the Vietnamese Law on Commercial Arbitration, courts intervene in arbitrator selection in the following circumstances.
Procedure for Court Intervention
A party can formally apply to the court for an arbitrator appointment. The court reviews the request and then will appoint arbitrators, while reviewing fairness and legal compliance.
Limitations on Court Intervention
Court intervention is restricted to upholding party autonomy and arbitrator integrity, as follows.
In Vietnam, the Vietnamese Law on Commercial Arbitration governs the challenge or removal of arbitrators to ensure impartiality, independence and competence throughout the arbitration process.
Vietnamese law outlines several grounds for challenging or removing an arbitrator, as follows.
Independence and Impartiality
In Vietnam, providing for arbitrator independence and impartiality is crucial for maintaining arbitration integrity under the Vietnamese Law on Commercial Arbitration, as well as the VIAC Rules.
Disclosure of Conflicts of Interest
Transparency is ensured through stringent disclosure obligations, as follows.
Procedures for Handling Conflicts
Vietnamese law outlines the following procedure by which to challenge arbitrators if their independence or impartiality is questioned.
The Vietnamese Law on Commercial Arbitration delineates certain disputes that cannot be arbitrated, as follows.
In Vietnam, the principle of competence-competence is applicable, allowing an arbitral tribunal to rule on its own jurisdiction. This includes addressing any objections regarding the existence or validity of the arbitration agreement. The competence-competence doctrine is recognised and upheld under the Vietnamese Law on Commercial Arbitration, aligning Vietnam’s arbitration practices with international standards.
In Vietnam, courts address issues of arbitral tribunal jurisdiction in specific circumstances defined by the Vietnamese Law on Commercial Arbitration, in an attempt to balance the right to legal arbitration with the protection of parties’ rights. Court intervention may be required in the following circumstances.
Vietnamese courts minimise intervention, upholding arbitral autonomy ‒ although may intervene to ensure the legal process or fairness. Courts intervene if legal principles such as the agreement’s validity or jurisdictional scope are unclear, so as to shield the parties from unjust arbitration.
Courts may review rulings on jurisdiction by arbitral tribunals, thereby ensuring accuracy and protecting the arbitration rights of the parties.
Parties have the right to go to court to challenge the jurisdiction of the arbitral tribunal at certain stages, in the following ways.
In Vietnam, judicial review standards for questions of jurisdiction and admissibility in arbitration are in place to guarantee fairness and adherence to legal principles. Although the concept of de novo review – generally recognised in common-law jurisdictions – is not explicitly articulated in Vietnamese law, the practical approach taken by Vietnamese courts often mirrors this rigourous standard.
As such, Vietnamese courts conduct a thorough and independent review when addressing questions of jurisdiction and admissibility. This means that courts do not simply defer to the arbitral tribunal’s decisions but instead evaluate the issues afresh. This approach aims to provide:
In Vietnam, national courts firmly uphold arbitration agreements, dismissing court proceedings initiated in breach of such agreements. This reflects a strong policy favouring arbitration as the agreed-upon dispute resolution mechanism.
Vietnamese courts are generally unwilling to allow court proceedings to continue if there is a valid arbitration agreement in place. The courts will enforce the arbitration agreement by referring the parties to arbitration and dismissing or staying the court proceedings.
Article 6 of the Vietnamese Law on Commercial Arbitration states that if a party initiates court proceedings in a matter subject to an arbitration agreement, the court must refuse to accept the case unless the arbitration agreement is null and void, inoperative, or incapable of being performed. This legal provision supports the principle that arbitration agreements are to be respected and enforced by the judiciary.
There is a general reluctance by Vietnamese courts to intervene in disputes covered by an arbitration agreement. The courts aim to respect the autonomy of the parties and the arbitration process, adhering to the principle of minimal judicial intervention in arbitration matters.
Vietnamese law allows an arbitral tribunal to assume jurisdiction over individuals or entities that are neither party to an arbitration agreement nor signatories to the contract containing the arbitration agreement in the following circumstances.
Rules apply universally to domestic and foreign third parties, with foreign enforceability governed by international arbitration norms and jurisdictional laws.
Arbitral tribunals are permitted to award preliminary or interim relief in Vietnam. Orders from arbitral tribunals are binding and enforceable through Vietnamese courts if voluntary compliance fails.
The following types of preliminary or interim relief can be awarded:
In Vietnam, the courts play a role in preliminary or interim relief in arbitration proceedings under the following circumstances.
Relief Types for Foreign Arbitrations
Vietnamese courts can grant the following types of preliminary or interim relief in aid of foreign-seated arbitrations:
Use of Emergency Arbitrators
Vietnamese legislation permits the use of emergency arbitrators for immediate relief. Decisions are binding, ensuring swift compliance until full tribunal assembly.
Emergency arbitrators are permitted to use similar types of relief to the courts. This includes asset safeguarding, injunctions, and security.
Vietnamese courts can intervene once an emergency arbitrator has been appointed. However, this tends to be limited to urging compliance with arbitrator orders and generally avoiding direct intervention.
Under Vietnamese law, arbitral tribunals have the authority to order security for costs. This power is provided by the Vietnamese Law on Commercial Arbitration, which allows tribunals to take necessary measures to ensure the proper conduct of the arbitration proceedings and protect the interests of the parties involved.
Vietnamese courts also have the authority to order security for costs, in order to guarantee that the parties can cover arbitration expenses and potential awards. This dual authority supports the effective management of arbitration proceedings and safeguards the financial interests of both parties.
Vietnam’s arbitration framework is governed by the Vietnamese Law on Commercial Arbitration and guidance from the Supreme Court and relevant decrees from the Vietnamese government. These laws and rules uphold a structured and fair arbitration process by outlining the responsibilities and rights of parties, the powers and duties of arbitrators, and the judiciary’s supportive role. This robust legal infrastructure maintains effective dispute resolution through arbitration, reinforcing Vietnam’s position as a reliable forum for both domestic and international arbitration.
In Vietnam, arbitral proceedings must follow specific procedural steps as required by law.
Step 1: Initiation and Statement of Defence
Step 2: Formation of the Arbitral Tribunal
In a tribunal with three arbitrators:
In a tribunal with a sole arbitrator:
Step 3: Review of Documents and Preliminary Tasks
Step 4: Dispute Resolution Hearing
Step 5: Issuing the Arbitral Award
Pursuant to Article 21 of the Vietnamese Law on Commercial Arbitration, arbitrators in Vietnam have specific rights and obligations.
Arbitrators have rights to:
Arbitrators have obligations to:
Domestic Matters
In Vietnam, legal representatives in domestic matters must meet specific qualifications and requirements to practice law and represent clients. These are governed by the Law on Lawyers (Law No 65/2006/QH11) and subsequent amendments.
The key qualifications for domestic legal representatives (lawyers) are:
International Arbitration
In the context of international arbitration, the requirements for legal representatives are generally more flexible. Vietnam recognises the need for specialised knowledge in international legal practices, allowing for varied qualifications.
Legal representatives in international arbitration are expected to meet the following requirements.
In Vietnam, the approach to collecting and submitting evidence in arbitration is structured to ensure a fair and efficient resolution of disputes. The procedures accommodate both domestic and international arbitration, with specific principles guiding the process from the pleading stage to the hearing stage.
Pleading Stage
Unlike common-law jurisdictions, Vietnam does not have a formal discovery system. Parties are expected to voluntarily disclose evidence supporting their claims and defences.
Parties submit relevant documents and information with their initial pleadings, including written statements, contracts, emails, and other pertinent materials. Witness statements are also crucial at this stage, providing preliminary insights into the facts and issues.
Hearing Stage
During hearings, parties present their cases orally, reinforcing written submissions with additional testimony and arguments. Witnesses who have provided written statements may testify in person, affirming their statements and offering further oral testimony.
A key aspect of the hearing stage is allowing the opposing party to challenge the credibility and reliability of witness testimony. The goal of such cross-examination is to ensure a thorough and critical evaluation of the evidence.
Legal Privilege and Confidentiality
Communications between a client and their legal counsel are protected by legal privilege unless the client consents to disclosure. This allows free communication without fear of it being used against them.
Both parties and arbitrators are bound to keep the proceedings and the evidence confidential. This protects sensitive information and maintains process integrity.
Procedural Orders and Tribunal Discretion
The arbitral tribunal has broad discretion in managing evidence, including determining admissibility, relevance, materiality and weight.
Procedural orders are issued by the tribunal and provide detailed instructions on evidence collection, submission and presentation. These orders ensure an orderly process and procedural clarity for all parties.
The following rules of evidence apply to arbitration proceedings seated in Vietnam.
Compared with the rules of evidence that apply to domestic matters, the foregoing rules are more flexible. Arbitration proceedings seated in Vietnam offer more adaptability than domestic courts governed by the CPC, which mandates detailed evidence rules.
Vietnamese courts follow strict procedural rules and formal discovery processes, contrasting with arbitration’s focus on substantive issues and flexibility. Balancing adaptability and procedural integrity in arbitration proceedings enhances efficiency and fairness in examining evidence in Vietnam.
In Vietnam, the effectiveness of arbitration is supported by the powers granted to arbitrators and the availability of court assistance. These provisions stipulate that arbitrators can compel the production of documents and the attendance of witnesses, thereby maintaining the integrity and efficiency of the arbitration process.
Powers of Arbitrators
Arbitrators can order parties to submit relevant documents, records, and other pertinent materials. This power is crucial for ensuring that all relevant information is available to the tribunal, thus facilitating a comprehensive evaluation of the case.
Arbitrators can request the attendance of witnesses to provide oral testimony. Witnesses affiliated with the parties are generally expected to comply, allowing the tribunal to obtain first-hand accounts and clarifications on disputed facts.
Court Assistance
If a party fails to comply with an arbitrator’s order, the tribunal can seek court assistance. Article 46 of the Vietnamese Law on Commercial Arbitration permits tribunals to request court intervention in order to enforce their orders. The court can compel parties to comply, so that the arbitration process is not impeded by non-cooperation.
Arbitrators do not have direct authority over non-parties. To secure the co-operation of non-parties, the tribunal can request the court to issue subpoenas or enforcement orders. This judicial support is intended to provide access to all relevant evidence and testimonies, regardless of the involvement of non-parties.
Distinction Between Parties and Non-Parties
Parties to the arbitration agreement are obligated to comply with the arbitrator’s orders. Failure to do so can lead to court enforcement and penalties.
Non-parties are not directly bound by the arbitration agreement and do not have an inherent obligation to comply with the tribunal’s orders. For non-parties, the tribunal must rely on the court’s authority to compel compliance.
Confidentiality is a fundamental principle in arbitration proceedings in Vietnam, which are designed to protect the integrity of the process and the privacy of the parties involved. The Vietnamese Law on Commercial Arbitration provides a comprehensive framework that ensures various elements of arbitration (eg, pleadings, documents, and the final award) are kept confidential.
Extent of Confidentiality
All pleadings and documents submitted during arbitration ‒ including statements of claim and defence, witness statements, expert reports, and other exchanged materials – are confidential. This ensures that detailed information about the dispute is protected.
Arbitration hearings are conducted in private, with only parties directly involved in the case allowed to attend. This includes the parties, their legal representatives, arbitrators, and invited witnesses or experts. This maintains the confidentiality of discussions and testimonies.
The final decision of the tribunal, including the contents of the arbitral award and any deliberations, is also confidential. Disclosure of the award is limited to what is necessary for enforcement or compliance, unless both parties agree to make the award public.
Disclosure in Subsequent Proceedings
When a party seeks to enforce an arbitral award, they must present the award and relevant parts of the arbitral proceedings to the competent court. This disclosure is necessary for the court to verify the validity and enforceability of the award and to determine whether it complies with legal standards and due process.
An arbitral award in Vietnam is a decision made by the arbitral tribunal that resolves the entire content of the dispute and terminates the arbitration proceedings. The key legal requirements are outlined in the Vietnamese Law on Commercial Arbitration.
Arbitral awards are made based on the following principles.
According to Article 61 of the Vietnamese Law on Commercial Arbitration, the arbitral tribunal must issue the final award within 30 days from the date of the last hearing. This time limit ensures that the arbitration process is conducted efficiently and that disputes are resolved promptly.
Arbitral tribunals in Vietnam must adhere to the scope of the arbitration agreement and Vietnamese public policy when awarding remedies, as outlined in the Vietnamese Law on Commercial Arbitration. Tribunals can only award remedies within the scope of the parties’ agreement. Unauthorised remedies cannot be awarded. Remedies must align with Vietnamese public policy. Awards violating public policy may be set aside or refused enforcement by the courts.
Compensatory Damages
Under Vietnamese law, compensation for damages must be actual, resulting directly from the breach, and the aggrieved party must take reasonable steps to mitigate the damage. Damages correspond to the degree of fault. The defendant may be exempt from compensation if the damage is entirely due to the fault of the aggrieved party or a force majeure event.
Punitive Damages
Vietnamese law prioritises compensatory damages over punitive damages, which are generally not recognised. Arbitral tribunals typically cannot award punitive damages, focusing on reparation rather than punishment.
However, Vietnamese law allows for a “penalty” or “fine” as a punishment for breach in a contractual relationship. For commercial contracts, the penalty amount must be agreed upon by the parties and cannot exceed 8% of the breached portion’s value (or 12% for construction contracts in certain circumstances).
Rectification (Specific Performance)
Tribunals can award specific performance if it is within the arbitration agreement and does not contravene Vietnamese law so that contractual obligations may be fulfilled or breaches corrected. Enforceability depends on the practicality and legal compliance of specific performance orders.
Equitable Remedies
Tribunals may award declaratory relief to clarify legal rights and obligations without monetary compensation, provided they align with the arbitration agreement and comply with legal standards. Enforceability depends on the fairness of the remedy and alignment with public policy principles.
Recovery of Interest
Parties can recover interest on overdue payments based on Article 306 of the Vietnamese Law on Commercial Arbitration (principle of compensatory damages). This interest can be contractually agreed upon or determined by statutory interest rates.
Arbitral tribunals can award both pre-award interest (accruing from the due date to the award date) and post-award interest (accruing from the award date until payment). The interest rate is based on contractual terms or statutory provisions so that the claimant is compensated for the lost time value of money.
Recovery of Legal Costs
Article 34 of the Vietnamese Law on Commercial Arbitration allows arbitral tribunals to decide on the allocation of arbitration costs, including legal fees. Generally, the losing party bears the legal costs of the winning party. This discourages frivolous claims and compensates the successful party.
Arbitral tribunals have broad discretion in allocating costs. They may consider factors such as party conduct, case complexity, and reasonableness of costs. In some cases, a “costs-sharing” approach may be adopted, where each party bears its own costs.
Parties are entitled to appeal an arbitral award in Vietnam on certain grounds. Article 68(2) of the Vietnamese Law on Commercial Arbitration specifies that an arbitral award may be annulled by the court if:
The procedure for annulling an arbitral award in Vietnam is as follows.
Exclusion of Appeal or Challenge
Arbitral awards are final and binding under Vietnamese law, with limited grounds for setting aside as specified in Article 68 of the Vietnamese Law on Commercial Arbitration. These grounds include issues related to the validity of the arbitration agreement, proper notice, the ability to present a case, the tribunal exceeding its authority, improper composition, and contravention of public policy.
Parties may agree to exclude the possibility of an appeal to the extent that they waive their right to challenge the award on substantive grounds. However, statutory grounds for setting aside an award cannot be completely excluded. Protections such as proper notice and adherence to public policy are fundamental and cannot be waived.
Expansion of Scope for Appeal or Challenge
Parties may agree to expand the scope for appeal or challenge beyond what is provided by law, such as allowing appeals for errors of law or fact. However, the enforceability of such agreements under Vietnamese law is limited.
Vietnam’s legal framework promotes the finality and efficiency of arbitration by limiting the grounds for challenging an award. Agreements introducing broader grounds for appeal than those in Article 68 of the Vietnamese Law on Commercial Arbitration may not be recognised by Vietnamese courts. Courts are likely to adhere strictly to the statutory grounds, emphasising that arbitration should remain a swift and conclusive method of dispute resolution.
Vietnamese courts adopt a deferential standard of judicial review for arbitral awards, focusing on ensuring fairness and legality rather than reassessing the merits of the case. This approach upholds the integrity of the arbitral process, recognising the expertise and autonomy of arbitrators.
Grounds for setting aside arbitral awards can be found in 11.1 Grounds for Appeal.
Focus on Procedural Fairness
Judicial review in Vietnam primarily concerns procedural fairness. The court’s role is to ensure that the arbitral tribunal follows the proper procedures, respects the parties’ rights to a fair hearing, and acts within its jurisdiction. This procedural focus preserves the finality of arbitration awards and minimises court intervention, reflecting arbitration’s aim to be a swift and conclusive dispute resolution method.
Deference to Expertise of Arbitral Tribunal
Vietnamese courts generally defer to the expertise and autonomy of arbitral tribunals, understanding that parties choose arbitration for its specialised knowledge, efficiency, and finality. Judicial intervention is minimal and arbitral tribunal decisions are respected and upheld unless significant procedural flaws are present.
Vietnam has signed and ratified the New York Convention. This provides that arbitral awards are recognised and enforced across member states, solidifying Vietnam’s commitment to international arbitration as a reliable dispute resolution method.
Vietnam has also strengthened its arbitration framework through various international agreements and conventions in order to facilitate cross-border dispute resolution, as follows.
Vietnam’s domestic legal framework, particularly the Vietnamese Law on Commercial Arbitration, supports its commitments under international agreements. This law aligns with international standards, facilitating the recognition and enforcement of foreign arbitral awards and providing a solid legal foundation for arbitration within the country.
Arbitral awards in Vietnam are enforced under civil judgment enforcement laws as outlined in Article 67 of the Vietnamese Law on Commercial Arbitration. Article 65 of this law encourages parties to voluntarily enforce arbitral awards. Awards by a domestic arbitral tribunal are enforced by civil enforcement agencies without needing court approval, promoting a streamlined enforcement process.
Standards for Enforcement
Vietnamese courts apply standards consistent with the New York Convention, which Vietnam has ratified with reservations. Key considerations include:
Enforcement of Set-Aside Awards
According to Article V of the New York Convention, enforcement can be refused if the award has been annulled at the seat of arbitration. This principle maintains consistency and respects the judicial authority of the arbitration seat.
Approach to Ongoing Set-Aside Proceedings
When an arbitral award is undergoing set-aside proceedings at the seat of arbitration, Vietnamese courts typically suspend enforcement proceedings pending the outcome of the set-aside proceedings. This cautious approach is to certify that the enforcement decision aligns with the final judicial determination at the arbitration seat.
Sovereign Immunity as a Defence
State entities may raise sovereign immunity to resist enforcement, with success depending on the following factors.
The enforcement of arbitration awards in Vietnam is governed by international treaties and national laws, with the New York Convention being paramount. The New York Convention requires signatory countries to recognise and enforce arbitration awards from other signatory states, with limited exceptions, thus fostering a pro-enforcement bias.
Vietnamese courts generally uphold arbitration, respecting parties’ agreements to arbitrate and the finality of arbitral decisions. This approach is based on principles of party autonomy, finality, and judicial efficiency, ensuring that arbitration remains a viable and efficient dispute resolution method.
Grounds for Annulment of Commercial Arbitration Awards
An arbitration award can be annulled under the following conditions:
Authority to Annul Commercial Arbitration Awards
The court reviews annulment requests upon a party’s application. The party requesting annulment must demonstrate that the arbitral tribunal made the award under circumstances such as an invalid agreement, improper composition, jurisdictional issues, forged evidence, or arbitrator misconduct. For public policy violations, the court actively verifies and collects evidence.
Public Policy Grounds
Vietnamese courts apply both domestic and international public policy standards when refusing to enforce foreign arbitral awards in order to align with Vietnamese legal principles and societal norms while respecting international arbitration norms.
In Vietnam, the legal framework, including the Vietnamese Law on Commercial Arbitration, does not explicitly provide for class action arbitration or group arbitration. Arbitration is typically conducted on an individual basis between the parties who have entered into an arbitration agreement.
Limitations and Requirements
Given the absence of explicit recognition for class action or group arbitration, there are inherent limitations to arbitrating such claims, as follows.
Practical Implications
Owing to the lack of explicit provisions for class action or group arbitration, parties must consider alternative approaches for disputes involving multiple claimants or respondents, as follows.
Ethical Codes for Legal Counsel
Legal counsel in Vietnam, including those involved in arbitration, are governed by the Vietnam Bar Federation through the Code of Ethics and Professional Conduct for Lawyers. The key principles are as follows.
Professional Standards for Arbitrators
Arbitrators in Vietnam are governed by the Vietnamese Law on Commercial Arbitration. Key principles include the following.
Vietnamese law currently lacks specific provisions addressing third-party funding in arbitration. However, existing legal principles and related regulations offer some guidance on its treatment.
Restrictions and Considerations
Despite the absence of explicit prohibitions, the following legal and ethical considerations must be addressed.
The Vietnamese Law on Commercial Arbitration does not explicitly address the consolidation of arbitral proceedings. Therefore, any consolidation must be based on general principles of arbitration law, the rules of arbitration institutions, and relevant practices.
In Vietnam, the Vietnamese Law on Commercial Arbitration governs arbitration, emphasising consensual agreements. Arbitration agreements generally bind parties who expressly agree to them. However, certain legal doctrines extend this binding effect to third parties, as follows.
Binding foreign third parties generally involves the following complex jurisdictional considerations and international principles.
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info@letranlaw.com www.letranlaw.comIntroduction
International arbitration is a recognised and widely used method for resolving cross-border disputes in international commercial transactions and investments. Unlike litigation, arbitration involves a neutral third party or panel making binding decisions. This process is favoured for its flexibility, neutrality, and the enforceability of awards under international treaties such as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”). However, despite Vietnam’s established legal framework for commercial arbitration, there are some features of the system that do not meet the standards of international economic integration. As such, a comprehensive review and enhancement of the arbitration laws so that they align with practical requirements is necessary for the future. This article explores recent trends and developments in international arbitration, focusing on legal, political and socio-economic contexts relevant for clients engaged in international business.
Trends
Online dispute resolution through arbitration
The COVID-19 pandemic accelerated the need for online dispute resolution (ODR), including online commercial arbitration. Today, the shift to ODR is driven by the need for faster and more convenient dispute resolution compared with traditional methods. Further, ODR offers significant cost savings by eliminating expenses associated with physical venues, travel, and accommodation for the parties involved.
Numerous arbitration institutions worldwide have incorporated provisions for online arbitration into their rules or have issued separate rules specifically for online arbitration. Examples include the China International Economic and Trade Arbitration Commission (CIETAC), the Shenzhen Court of International Arbitration (SCIA), and the Istanbul Arbitration Center (ISTAC). Additionally, these institutions have established systems for online filing and case management and are equipped to conduct online hearings and proceedings.
Vietnam’s arbitration institutions have also made provisions for online hearings within their procedural rules. Article 25(2) of the Vietnam International Arbitration Center (VIAC) Rules stipulates that the arbitral tribunal may conduct hearings via teleconference, videoconference, or other suitable forms, subject to the agreement of the parties. Similarly, the Hanoi International Arbitration Center (HIAC) has provisions for online dispute resolution for small-value e-commerce and consumer disputes, cross-border commercial disputes, and other commercial disputes in Vietnam.
Challenges and legal considerations
A critical issue in online arbitration is determining the legal venue for arbitration when the parties and arbitrators are located in different locations. If the parties agree to a Vietnamese venue but the arbitrators are from different countries, questions may arise whether online hearings conform with the agreed arbitration venue. It follows that there is concern whether these online hearings are in violation of procedural requirements and possibly risk non-recognition or enforcement of arbitral awards under the New York Convention or the Vietnamese Law on Commercial Arbitration 2010.
It is notable that international practice varies regarding the definition of the arbitration venue. By way of example, UK law defines the arbitration venue as a “legal seat” designated by the parties, the appointing authority, or the arbitral tribunal, rather than a physical location. Thus, even if parties choose Vietnam as the venue, online hearings do not conflict with the legal venue being Vietnam, and awards made in such hearings would be recognised and enforceable in the UK. However, Vietnamese law does not adopt the concept of a “legal seat”. Instead, the Vietnamese Law on Commercial Arbitration defines the arbitration venue as the place where the arbitral tribunal conducts proceedings. Consequently, there is a potential risk that online arbitration awards could be denied recognition and enforcement or be annulled for procedural violations under Vietnamese law.
To fully support online arbitration, Vietnam needs to revise its legal framework to accommodate the concept of a “legal seat” rather than a strictly geographic location. This change would align Vietnamese law with international practice and facilitate the broader adoption of ODR methods, ensuring the legal robustness of online arbitration awards.
Application of generative AI trends in arbitration
The integration of generative AI in various sectors has revolutionised traditional processes, and the field of arbitration is no exception. Generative AI ‒ with its ability to create content, analyse vast amounts of data and predict outcomes ‒ is poised to transform how arbitration is conducted globally. AI’s most significant contribution to arbitration lies in its ability to process and analyse vast amounts of legal documents quickly and accurately. Traditional arbitration involves extensive document review and data analysis, which can be time-consuming and prone to human error. AI tools can expedite this process, ensuring more efficient and accurate handling of cases.
In addition, AI algorithms can predict arbitration outcomes based on historical data, helping parties make informed decisions about pursuing arbitration or negotiating settlements. By automating repetitive tasks and streamlining processes, AI reduces the need for extensive human resources, thereby lowering the overall cost of arbitration. AI also has the ability to draft legal documents (including arbitration agreements, procedural orders, and awards) by analysing the context and requirements of the case ‒ although qualified human oversight remains a requirement. This automation not only saves time but also ensures consistency and adherence to legal standards.
Global adoption of AI in arbitration
In the USA, AI has been increasingly adopted in arbitration. By way of example, the American Arbitration Association (AAA) has started using AI tools to assist in the management and analysis of arbitration cases. These tools help streamline case management ‒ from filing to final award ‒ by automating administrative tasks and enhancing data analysis capabilities. The UK’s legal sector has also embraced AI, particularly in international arbitration. AI-driven platforms such as Kira Systems and ROSS Intelligence are used to review and analyse contracts, identify relevant case law, and predict outcomes. The result is that the efficiency of legal teams is enhanced and valuable insights are provided for arbitrators. Another example can be found in Singapore, a global arbitration hub that has integrated AI into its arbitration processes through initiatives such as the Singapore International Arbitration Center (SIAC). Additionally, the SIAC has collaborated with tech firms to develop AI systems that assist in case management and document review, improving the speed and accuracy of arbitration proceedings.
Challenges and legal considerations
The use of AI in arbitration raises concerns about data privacy and security. Arbitrators and parties must guarantee that sensitive information is protected and that AI systems comply with data protection regulations.
AI’s decision-making capabilities raise ethical questions about transparency and accountability. It is crucial to ensure that AI systems are used to assist human arbitrators rather than replace them entirely.
Another challenge concerns AI’s dependence on quality data. AI systems rely on high-quality data for accurate analysis and predictions. Poor data quality can lead to incorrect outcomes, undermining the arbitration process’ integrity.
Application of AI for arbitration in Vietnam
Vietnam’s arbitration framework, governed by the Vietnamese Law on Commercial Arbitration of 2010, is relatively young compared with international frameworks. While there have been advancements in arbitration practices, the integration of AI is still in its early stages. However, there is a growing interest in leveraging AI to enhance arbitration efficiency and accuracy. Some Vietnamese legal firms have started experimenting with AI tools for document review and legal research. Although these initiatives are still in the early stages, they demonstrate a willingness to embrace AI’s potential in improving legal services, including arbitration.
It should be mentioned that the Vietnamese government and legal institutions have recognised the importance of adopting advanced technologies to enhance the legal framework. Initiatives to modernise legal education and promote technology adoption in the legal sector are currently being implemented, paving the way for broader AI integration in arbitration.
Overall, generative AI is set to revolutionise arbitration worldwide by enhancing efficiency, accuracy and accessibility. While developed arbitration hubs such as the USA, the UK and Singapore have already integrated AI into their structures, Vietnam is gradually recognising the potential benefits of AI in arbitration. As Vietnam continues to modernise its legal framework and embrace technological advancements, the integration of AI in arbitration is likely to follow, offering significant benefits to the business community and enhancing the entire arbitration process.
Third-party funding
Third-party funding in international arbitration refers to the financial support provided by an external entity, unrelated to the dispute, to a party involved in arbitration. This funding is usually provided in exchange for a share of the monetary award or settlement. third-party funding has become increasingly prevalent in international arbitration, offering a means for parties to pursue claims without bearing the full financial burden of litigation or arbitration costs.
Global trends and applications
The UK is one of the leading jurisdictions for third-party funding, particularly in London, which is a global arbitration centre. The Association of Litigation Funders (ALF), a self-regulatory body, provides guidelines and a code of conduct for funding parties. The case of Essar Oilfields Services Ltd v Norscot Rig Management Pvt Ltd in 2016 highlighted the legitimacy of recovering third-party funding costs as part of arbitration awards in the UK, setting a precedent for other jurisdictions.
third-party funding is also widely used in the USA, especially in commercial and investor-state arbitrations. Although there are no federal regulations, disclosure of third-party funding arrangements is increasingly becoming a requirement in arbitral proceedings to avoid conflicts of interest. The case Chevron Corp v Donziger illustrated the significant role of third-party funding in facilitating access to justice in high-stakes international disputes.
Australia was one of the early adopters of third-party funding, initially in insolvency cases and later expanding into arbitration. The Federal Court of Australia has recognised the legitimacy of third-party funding, ensuring transparency and managing potential conflicts through required disclosures.
As major arbitration centres in Asia, Hong Kong and Singapore have recently revised their legal frameworks to permit third-party funding. In 2017, Hong Kong enacted the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance and Singapore followed with the Civil Law (Amendment) Act 2017. Both jurisdictions require disclosure of third-party funding arrangements to ensure transparency and address potential conflicts of interest.
third-party funding is gaining acceptance in the EU, with jurisdictions such as Germany, France, and the Netherlands witnessing a rise in third-party funding arrangements. The European Parliament is also considering proposals for a unified regulatory framework to ensure consistent standards across EU member states.
Application of third-party funding in Vietnam
Vietnam’s arbitration landscape is evolving, with third-party funding gradually being recognised and utilised. The Vietnamese government and arbitration institutions have been observing global trends and are currently considering incorporating third-party funding into their legal framework. As of 2024, Vietnam does not have specific regulations governing third-party funding in arbitration. However, the VIAC and other arbitration bodies have started acknowledging third-party funding’s potential benefits. The Ministry of Justice is also exploring regulatory frameworks that ensure that third-party funding is as transparent and ethical as possible.
Further, there has been a noticeable increase in arbitration cases involving third-party funding in Vietnam. In 2023, approximately 15% of new cases registered with the VIAC were funded by third parties, compared with 10% in 2022. This trend is expected to continue, with projections indicating that cases backed by third-party funding could constitute up to 20% of the VIAC’s caseload by the end of 2024. One of the landmark cases in 2023 involved a Vietnamese tech company receiving third-party funding to pursue a USD50 million claim against a multinational corporation. The funding enabled the claimant to hire top-tier legal representation and expert witnesses, significantly improving their chances of success.
In sum, third-party funding allows parties with meritorious claims but limited financial resources to pursue arbitration, facilitating greater access to justice. By transferring the financial risk to the funding parties, claimants can focus on the merits of their case, leading to an increase in case filings as financial barriers are reduced. However, the lack of specific regulations in Vietnam creates uncertainty regarding the legality and enforceability of third-party funding agreements. Ensuring that third-party funding arrangements are disclosed to avoid conflicts of interest is imperative and safeguards are needed to prevent funding parties from exerting undue influence on the arbitration process.
Arbitration with emergency arbitrators and expedited procedures
Arbitration is often known for its efficiency and time-saving nature compared with traditional litigation. However, many disputes in international arbitration tend to experience delays, particularly at the beginning and end of the arbitration process. In fact, this time lag is the most significant source of dissatisfaction among parties to the arbitration. The 2015 International Arbitration Survey by Queen Mary University of London highlighted that cost and lack of speed are the two major drawbacks of international arbitration. As a result, special mechanisms in arbitration proceedings ‒ such as emergency arbitrators and expedited procedures ‒ have been developed to accelerate dispute resolution.
Global trends and applications
The emergency arbitrator mechanism ensures that interim emergency measures can be implemented promptly before the arbitration tribunal is constituted. This procedure is widely utilised in international arbitration under the rules of various arbitration institutions, including the ICC, the LCIA, the International Center for Dispute Resolution (ICDR), the Stockholm Chamber of Commerce (SCC), the Swiss Arbitration Center (SAC), the SIAC, the Hong Kong International Arbitration Center (HKIAC), and the CIETAC.
To take one example, in Hong Kong the arbitration laws explicitly provide for the application and enforcement of interim measures decided by emergency arbitrators. Although the current Vietnamese Law on Commercial Arbitration allows parties to request interim measures from the courts before the arbitration tribunal is established, this court-supported mechanism lacks the flexibility and responsiveness of the emergency arbitrator system. There are various reasons that strong support for this mechanism is not provided by Vietnamese courts, which include current workload and the lack of priority for arbitration matters.
Applying for emergency arbitrators and expedited procedures in Vietnam
In order to enhance the rights of disputing parties seeking timely and flexible interim measures and to align Vietnamese arbitration law with international practices, it will likely become necessary to amend Vietnam’s Law on Commercial Arbitration to include provisions for emergency arbitrators. Any new provisions will not need to detail the procedures for emergency arbitrators; rather, they are only required to acknowledge the mechanism and delegate the specifics to arbitration centers. The law must also ensure the enforceability of interim measures ordered by emergency arbitrators.
In a similar manner to the emergency arbitrator mechanism, expedited arbitration procedures have been increasingly adopted by global arbitration centres. Expedited procedures are designed to resolve disputes more quickly and at a lower cost than regular arbitration. Several Vietnamese arbitration centers, such as the VIAC, the Mediation Center of Arbitration and Conciliation (MCAC), the Southern Trade Arbitration Center (STAC) and the Ho Chi Minh City Commercial Arbitration Center (TRACENT) have begun to implement expedited procedures, inspired by practices from major international arbitration institutions.
The current Law on Commercial Arbitration in Vietnam does not explicitly address expedited procedures. To provide clearer legal guidance and facilitate the application of expedited arbitration, Vietnamese arbitration law should include provisions for these procedures. This legislative support would create a more defined legal framework, allowing arbitration centres to apply expedited procedures effectively.
Developments
Developing Vietnam’s commercial arbitration law based on the UNCITRAL Model Law
Vietnam’s legislation on commercial arbitration is relatively young compared to international frameworks. In fact, the Vietnamese Law on Commercial Arbitration was enacted on 17 June 2010 and came into effect on 1 January 2011. In contrast, the UNCITRAL Model Law on International Commercial Arbitration (the “UNCITRAL Model Law”) was adopted in 1985 and amended in 2006. Thus, Vietnam’s arbitration law was introduced more than two decades after the UNCITRAL Model Law. To date, Vietnam has not been recognised as a country that follows the UNCITRAL Model Law and this poses a significant barrier to international economic integration, as the country lacks a dispute resolution mechanism aligned with the global legal framework. As such, despite its positive contributions to out-of-court dispute resolution in Vietnam during the past decade, the Vietnamese Law on Commercial Arbitration has revealed several limitations.
First, it must be acknowledged that the UNCITRAL Model Law plays a crucial role in shaping arbitration laws worldwide. According to UNCITRAL’s website, 87 countries have adopted or been influenced by the UNCITRAL Model Law when developing their national arbitration laws. While Vietnamese law-makers and experts assert that the Vietnamese Law on Commercial Arbitration has actually referenced the UNCITRAL Model Law and included many provisions drafted accordingly, it has not yet been recognised by UNCITRAL as compliant with the UNCITRAL Model Law.
However, in recent years, the proposal to develop Vietnamese Law on Commercial Arbitration so that it is more in line with the UNCITRAL Model Law has gained support from experts and practitioners. Professor Do Van Dai has noted that “aligning arbitration law with the [UNCITRAL] Model Law is a priority [in order] to meet investors’ expectations” and that “revising the law in accordance with the UNCITRAL Model Law to attract arbitration-based dispute resolution is a global trend”.
In 2020, the Ministry of Justice conducted a study and published its Report on Assessment, Comparison of the Vietnamese Law and the UNCITRAL Model Law Regarding the Recognition and Enforcement of Arbitration Awards and Recommendations on Applying the UNCITRAL Model Law in Vietnam. This report emphasised: “The [UNCITRAL] Model Law is particularly suitable for countries without a comprehensive arbitration law or those with arbitration laws not fully compatible with international cases. This signifies the harmonisation of arbitration laws. Furthermore, studying the application of the [UNCITRAL] Model Law will help achieve widely accepted international standards across countries with different legal foundations.”
The Draft Report on Reviewing the Commercial Arbitration Law (Draft 6) by the Vietnam Lawyers Association also emphasised the need to “improve the institutional framework for commercial arbitration and related laws to ensure arbitration is an effective mechanism for resolving investment, business and commercial disputes” and that “this should align with Vietnam’s socio-economic conditions, the UNCITRAL Model Law, and international arbitration practices”.
Limiting the annulment and non-recognition of arbitral awards in Vietnam
The efficacy of commercial arbitration in fostering international economic integration and development hinges on a robust enforcement mechanism. To ensure the effectiveness of arbitral awards, it is imperative to minimise the annulment of domestic awards and any arbitrary non-recognition or non-enforcement of foreign arbitral awards.
Under the current Vietnamese Law on Commercial Arbitration, the grounds for annulling domestic arbitral awards are outlined in Article 68(2). These grounds include:
These grounds lack clarity and have been inconsistently applied by the courts ‒ in particular, the ground that the award contravenes the fundamental principles of Vietnamese law. This inconsistency poses significant risks to arbitral awards and undermines confidence in arbitration among the disputing parties.
It is significant that the recognition and enforcement of foreign arbitral awards in Vietnam are not governed by the Vietnamese Law on Commercial Arbitration but, rather, by the Civil Procedure Code (CPC). Additionally, since 1995, Vietnam has been a party to the New York Convention. Despite this, the enforcement rate of foreign arbitral awards in Vietnam remains low. According to the Ministry of Justice, from 1 January 2012 to 30 September 2019, there were 84 applications for the recognition and enforcement of foreign arbitral awards in Vietnam. Of these applications, 39 were granted recognition and enforcement (47%), 12 were suspended, and 33 were denied recognition and enforcement (39.3%).
The low rate of recognition and enforcement may be attributed to several factors, including unclear and inadequate legal provisions. By way of example, the terminology ‒ whether it refers to “foreign arbitral award”, “decision of a foreign arbitrator” or “foreign arbitration decision” ‒ is not uniformly defined. Further, the grounds for non-recognition and non-enforcement outlined in the CPC are ambiguous, leading to varied interpretations and inconsistent application across different court levels ‒ especially the provision regarding a foreign arbitral award being contrary to the fundamental principles of Vietnamese law.
Given these issues, it is essential to amend the Vietnamese Law on Commercial Arbitration to provide clearer and more specific grounds for the annulment of arbitral awards and to establish a more effective mechanism for protecting and ensuring the enforceability of all arbitral awards. This may include introducing a supervisory mechanism for the annulment of arbitral awards by courts. Furthermore, the Vietnamese Law on Commercial Arbitration should clearly define terms such as “foreign arbitral award” and “decision of a foreign arbitrator” and provide specifically worded grounds for recognising or not recognising and enforcing foreign arbitral awards. The CPC can then focus on the procedures for the handling of applications for recognition, non-recognition and enforcement of foreign arbitral awards in Vietnam.
Conclusion
Vietnam’s journey towards establishing a robust framework for international arbitration reflects a broader trend of integrating with the global economy and adhering to international standards. However, the existing legal infrastructure requires significant enhancements in order to fully meet the expectations and demands of international businesses.
The deficiencies in Vietnam’s arbitration laws, particularly regarding the annulment of arbitral awards and the recognition and enforcement of foreign awards, pose substantial risks to the credibility and reliability of arbitration as a dispute resolution method. To address these issues, it is crucial to amend the Vietnamese Law on Commercial Arbitration to provide clearer and more specific grounds for annulment and to establish a more effective mechanism for protecting and ensuring the enforceability of arbitral awards. Introducing a supervisory mechanism for the annulment process by courts could help further enhance the stability and predictability of arbitration outcomes.
Moreover, clarifying the definitions and criteria related to foreign arbitral awards in the Vietnamese Law on Commercial Arbitration and detailing the procedures for recognition and enforcement in the CPC will help align Vietnam’s arbitration practices with international standards. This will not only boost the confidence of international commercial entities in choosing arbitration in Vietnam but also promote the country as a favourable destination for resolving international disputes.
By refining its legal framework for international arbitration, Vietnam can significantly enhance the efficiency and reliability of its arbitration system. This will facilitate smoother international commercial transactions and investment, reinforcing Vietnam’s position in the global economic landscape and ensuring that it remains competitive and attractive to international business ventures.
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