i Overview of Vietnam's legal system
Since gaining its independence in 1945, Vietnam has applied a socialist legal system based on the civil law system.2 However, there have been major changes in the country in recent years, including a reorganisation and harmonisation of its laws inspired by other civil law jurisdictions such as France and Germany, as well as the recognition of some court precedents as another source of law.3 In light of these developments, Vietnam is a peculiar jurisdiction, mixing aspects of socialist law and civil law with occasional borrowings from common law.
In Vietnam, legislation is still the most important source of law. Laws are passed by the National Assembly and enacted by the President. Courts are subordinate to the National Assembly and must issue rulings based on the laws in effect.
In 2015, as part of its efforts to reorganise existing legislation, the National Assembly passed the Law on the Promulgation of Legal Documents in which all Vietnamese legal documents are classified by their level of validity (the equivalent of the hierarchy of sources in other civil law jurisdictions).4 Article 4 of this statute categorises Vietnamese legal documents into 15 levels, with the Constitution at the highest level of validity. The second level is Vietnamese laws. At a lower level are implementing regulations for these laws issued by the government in the form of decrees of the government or decisions of the Prime Minister. Ministries and government agencies with ministerial rank (such as the State Bank of Vietnam, the Supreme People's Court and the Supreme People's Procuracy) may then issue circulars or joint circulars to further implement the decrees of the government.
ii Overview of Vietnam's judicial system
In Vietnam, the judicial system comprises people's courts (which include military courts) and people's procuracies.5
There are four levels of courts, and the highest court is the Supreme People's Court.6 The Supreme People's Court consists mainly of a Judicial Council. The Judicial Council consists of all the justices of the Supreme People's Court sitting together as a council under the chairmanship of the Chief Justice (who is appointed by the National Assembly on nomination by the President).7 There are also deputy chief justices (who are appointed by the President on the nomination of the Chief Justice of the Supreme People's Court)8 and other justices of the Supreme People's Court (who are appointed by the National Assembly on the nomination of the Chief Justice of the Supreme People's Court).9 The Supreme People's Court is the court of last resort on all matters arising under Vietnamese law. It also recommends bills to the National Assembly and passes resolutions directing lower courts on the uniform enforcement or implementation of the law across the country.10 The three other levels of courts are the superior people's courts (three courts across the country), the provincial level people's courts (63 across the country) and the district level people's courts (one for each district).11
Military courts are established at various levels in the Vietnam People's Army, with the highest one being the Central Military Court.12
The people's procuracies (also known as the people's offices of inspection and supervision) serve as the prosecutorial authority in Vietnam. Their role is to supervise and inspect judicial compliance by judicial agencies and officials. There is a people's procuracy for every people's court, and the military has its own military procuracies. The highest procuracy is the Supreme People's Procuracy, headed by the Chief Procurator of the Supreme People's Procuracy, who is elected by the National Assembly.13
With respect to arbitration, there is no specialist arbitration court in Vietnam. However, the Supreme People's Court and the Ministry of Justice have recognised in public fora that the enforcement of foreign arbitral awards under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (New York Convention) has been uneven and inconsistent largely because courts located throughout the country do not have the same experience dealing with enforcement issues. Accordingly, there have been active discussions on the need for a specialist court to promote greater uniformity and predictability in enforcing foreign arbitral awards.
iii Vietnam's Arbitration Law
In Vietnam, arbitrations are mainly governed by the Arbitration Law 2010, which came into force on 1 January 2011.14 The Arbitration Law 2010, which is based on the UNCITRAL Model Law and incorporates international arbitration norms, reflects Vietnam's intention of becoming a pro-arbitration jurisdiction.15
Unlike arbitration laws in other jurisdictions, Vietnam's Arbitration Law 2010 does not recognise the concept of international arbitration (as opposed to domestic arbitration). Rather, the Arbitration Law 2010 distinguishes between foreign arbitration and non-foreign arbitration. Foreign arbitration is defined as 'arbitration established under the provisions of foreign arbitration law as agreed by the parties to resolve the disputes, whether inside or outside the territory of Vietnam'.16 Therefore, an arbitration seated inside Vietnam under the rules of a foreign arbitral institution (such as the ICC, SIAC, etc.) may still be considered as a foreign arbitration. On the other hand, an arbitration seated inside Vietnam established under the Arbitration Law 2010 is a non-foreign arbitration. As more fully discussed in the next section, the law regarding the recognition and enforcement of an award is different depending on whether the award is issued in a foreign or non-foreign arbitration.
Another significant distinction is a dispute with a foreign element and a dispute without a foreign element.17 A dispute with a foreign element means that the dispute involves:
- at least one party that is a foreign individual or a foreign legal entity;
- parties that are all Vietnamese, but where the establishment, modification, implementation or termination of their relationship occurred in a foreign country; or
- parties that are all Vietnamese, but where the subject matter of their civil relationship is located in a foreign country.18
A contrario, a dispute without a foreign element does not involve any of the above. The presence of a foreign element in a dispute does not necessarily define whether an arbitration is foreign. Rather, as discussed below, the distinction is significant to determine, for example, the applicable substantive law or language of an arbitration.
If a dispute does not involve a foreign element, the applicable substantive law shall be Vietnamese law.19 If the applicable substantive law is not agreed upon by the parties and the dispute involves a foreign element, the applicable substantive law shall be the law the arbitral tribunal deems most appropriate.20 If the dispute does not have a foreign element, the applicable language shall always be Vietnamese regardless of the parties' agreement, except in a dispute where at least one party is an enterprise with foreign invested capital.21 If the dispute has a foreign element, or has at least one party that is an enterprise with foreign invested capital, the applicable language shall be the language agreed upon by the parties, and in the absence of such an agreement, the applicable language shall be determined by the arbitral tribunal.22
The Arbitration Law 2010 is supplemented by:
- Decree No. 63/2011/ND-CP, which includes implementing regulations on the Arbitration Law 2010;23
- Resolution No. 01/2014/NQ-HDTP, which guides the implementation of certain provisions of the Arbitration Law 2010;24 and
- Decree No. 124/2018/ND-CP, which amends and supplements certain provisions of Decree No. 63/2011/ND-CP.25
Notably, Resolution No. 01/2014 clarifies the provisions on the validity of arbitration agreements; the grounds for setting aside arbitral awards; and the supervisory and supporting role of Vietnamese courts, and their power over foreign arbitrations seated in Vietnam.
iv Recognition and enforcement of arbitral awards in Vietnam
In Vietnam, the procedure relating to the recognition and enforcement of arbitral awards varies depending on whether an award is foreign or non-foreign.
With respect to the recognition of arbitral awards, non-foreign arbitral awards are automatically recognised and are, therefore, effective from their date of issuance.26
On the other hand, foreign arbitral awards must be formally recognised and held enforceable by the competent provincial people's court.27 In 1995, Vietnam became party to the New York Convention. The New York Convention was codified into Vietnamese law through the Civil Procedure Code (the Civil Procedure Code 2004,28 as amended by the Civil Procedure Code 201129 and replaced by the Civil Procedure Code 2015). In addition, the Supreme People's Court also provided guidance to the lower courts in Official Letter No. 246/TANDTC-KT dated 25 July 2014.30 In principle, a foreign arbitral award shall be recognised and enforced in Vietnam if the award is issued in a country party to an international convention on the recognition and enforcement of arbitral awards to which Vietnam is also a party (such as the New York Convention), or on the basis of reciprocity if such country is not party to such a convention.31 Under the Civil Procedure Code 2015, the grounds for refusing the recognition and enforcement are substantially similar to those in Article V of the New York Convention.32 Once a foreign arbitral award is recognised and held enforceable by the competent provincial people's court, the award is legally effective like any decision or judgment of a Vietnamese court.33
With respect to the enforcement of arbitral awards in Vietnam, the enforcement procedure is the same whether an award is non-foreign or foreign. The enforcement procedure is governed by the Civil Procedure Code 2015 and the Law on Enforcement of Civil Judgments.34 The Law on Enforcement of Civil Judgments is guided by Decree No. 62/2015/ND-CP (Decree No. 62/2015).35 Decree No. 62/2015 in turn, is guided by Circular No. 01/2016/TT-BTP36 and Joint Circular No. 11/2016/TTLT-BTP-TANDTC-VKSNDTC,37 which provide specifications on the provisions of Decree No. 62/2015.
If the party against whom an award is invoked fails to comply with a non-foreign arbitral award, and the award is not set aside, the party entitled to enforcement shall have the right to request the competent civil judgment enforcement agency to enforce it.38 Likewise, if the party against whom the award is invoked fails to comply with a foreign arbitral award, and the award is recognised and held enforceable, the party entitled to enforcement shall also be entitled to request the assistance of the competent civil judgment enforcement agency for its enforcement.39
It is worth mentioning the peculiar requirement for non-foreign ad hoc arbitral awards in such a case. Like non-foreign arbitral awards, non-foreign ad hoc arbitral awards are automatically recognised, and therefore effective from their date of issuance. If the party against whom an award is invoked does not comply with the award, the party entitled to enforcement shall also be entitled to request the assistance of the competent civil judgment enforcement agency. However, non-foreign ad hoc arbitral awards are required to be registered within one year of their issuance with the competent provincial people's court in order for the enforcement agency to enforce them.40
v Arbitral institutions in Vietnam
The Ministry of Justice of Vietnam reports that, as of March 2020, there are 31 Vietnamese arbitral institutions in Vietnam.41 The most active is the Vietnam International Arbitration Centre (VIAC) at the Vietnam Chamber of Commerce and Industry, based in Hanoi and Ho Chi Minh City. Other arbitral institutions include the Pacific International Arbitration Centre and TRACENT, the Ho Chi Minh City's Commercial Arbitration Center, both of which are based in Ho Chi Minh City. It is worth mentioning that the first foreign arbitral institution opened in Vietnam on 17 December 2019. A representative office of the Korean Commercial Arbitration Board (the sole Korean arbitral institution statutorily authorised to settle disputes under the Korean Arbitration Act under the auspices of the Korean Ministry of Justice) was indeed set up in Hanoi.
According to VIAC, 274 cases were filed with it in 2019.42 The total value in dispute for all VIAC cases in 2019 was approximately US$285 million. The top three foreign parties in 2019 were from China, Singapore and Korea.43 Finally, the main areas of dispute in 2019 were as follows:
- sales of goods (35 per cent or 96 cases);
- real estate (23 per cent or 63 cases);
- services (14 per cent or 38 cases);
- construction (12 per cent or 33 cases);
- insurance (5 per cent or 14 cases);
- lease of property (4 per cent or 11 cases);
- others (4 per cent or 11 cases); and
- logistics (3 per cent or eight cases).44
In comparison to 2018, a significant growth (52.2 per cent) was observed in the number of cases filed with VIAC (274 cases in 2019 versus 180 cases in 2018).
II THE YEAR IN REVIEW
i Developments affecting international arbitration
In 2019, the Supreme People's Court (the highest court of Vietnam) and the Supreme People's Procuracy (the highest procuracy of Vietnam) have undertaken significant initiatives to promote greater uniformity and predictability in enforcing foreign arbitral awards in Vietnam.
Supreme People's Court's draft resolution regarding adopting a uniform approach in considering petitions for the recognition and enforcement of foreign arbitral awards
In an effort to overcome the uneven and inconsistent enforcement of foreign arbitral awards under the New York Convention in Vietnam, which is largely due to courts around the country not having the same level of experience in dealing with enforcement issues, the Judicial Council of the Supreme People's Court, consisting of all the judges of the Supreme People's Court, is currently working on a comprehensive resolution aimed at providing uniform guidelines for Vietnamese courts to apply in considering the recognition and enforcement of foreign arbitral awards in Vietnam. In late 2019, the Judicial Council circulated a draft resolution and invited comments and recommendations from the arbitration community in Vietnam.
We believe this resolution will be a major step towards making the recognition and enforcement of foreign arbitral awards in Vietnam more consistent with global standards and practices. First, the key definition of foreign arbitral awards in the current draft resolution appears to follow closely the New York Convention. Second, the resolution is a legal document under the Law on the Promulgation of Legal Documents which means that it will have the force of law. Third, it is a directive from the Supreme People's Court to all lower Vietnamese courts, which will have to apply it. For these reasons, the resolution should significantly improve the quality and consistency of judicial decision-making in the area of recognition and enforcement of foreign arbitral awards.
Supreme People's Procuracy's notice regarding compliance with the rules applicable to arbitration proceedings in reviewing petitions to recognise and enforce foreign arbitral awards in Vietnam
On 20 February 2020, the Supreme People's Procuracy issued Notice No. 97/TB-VKSTC (Notice 97) to all procuracies instructing all procuracies to pay attention to a particular court decision regarding recognition and enforcement of foreign arbitral awards. That court decision is Decision No. 253/2017/KDTM-PT dated 13 September 2017 (Decision 253), which is an appellate court decision upholding the People's Court of Hanoi's refusal to recognise a SIAC arbitral award.
The question at the heart of the case relates to the enforcement of a SIAC arbitral award rendered by a sole arbitrator on the basis of documentary evidence alone, without a hearing, where the respondent, a Vietnamese company, chose not to participate in the proceedings.
On appeal from a lower court decision denying enforcement of the award, the appellate court upheld in Decision 253 the lower court's ruling because the SIAC proceedings had violated certain provisions of the 2013 SIAC arbitration rules (2013 SIAC Arbitration Rules). Specifically, the court found that the Vietnamese respondent had not agreed to have the case decided on the basis of documentary evidence alone, without a hearing, while its agreement was required under the 2013 SIAC Arbitration Rules. In addition, the court also concluded that the appointment of the sole arbitrator was in violation of the 2013 SIAC Arbitration Rules because the SIAC had not sent a list of arbitrators for the Vietnamese respondent to select, notified the Vietnamese respondent of its right to agree with the claimant on the selection of the arbitrator or made any attempt to ascertain whether the Vietnamese respondent had agreed on the appointment of the arbitrator (appointment procedure).
In reaching its conclusions, the appellate court relied on provisions of the Civil Procedure Code 2015 codifying into Vietnamese law the New York Convention. Specifically, the court relied on Article 459 of the Civil Procedure Code 2015, which provides:
The court will not recognixe a foreign arbitral award when it finds that . . . c. The agency, organisation or individual against whom the award is invoked was not notified in a timely and proper manner of the appointment of arbitrators or of the procedures for resolution of the dispute by the foreign arbitration, or, for other legitimate reasons, they were not able to exercise their litigation rights.
It is worth noting that none of the steps of the appointment procedure considered by the appellate court were required under the 2013 SIAC Arbitration Rules. It is not clear whether the appellate court simply misread the 2013 SIAC Arbitration Rules, or read them correctly but found them wanting and, therefore, attributed a 'due process dimension' to Article 459.1 (c) under Vietnamese law. In sum, Decision 253 may have created more, rather than less, uncertainty in the interpretation of Article 459.1 (c) of the Civil Procedure Code 2015.
The issuance of Notice 97, instructing all procuracies to pay attention to Decision 253, elevates Decision 253 to the national policy level. Indeed, Vietnamese prosecutors represent the government and participate in all civil and criminal proceedings where they represent the public interest. It remains to be seen whether the Supreme People's Court will address Decision 253 and Notice 97 in the upcoming resolution guiding lower courts towards a uniform approach in considering petitions for recognition and enforcement of foreign arbitral awards.
ii Arbitration developments in local courts
Setting aside of the VIAC arbitral award issued in the highest-value case in the VIAC's history for violation of the law applicable to the proceedings, the Arbitration Law 2010
The particular attention that Vietnamese courts pay to compliance with the rules applicable to arbitration is also clearly shown in a decision setting aside a non-foreign arbitral award. In the Vinh Son - Song Hinh Hydropower JSC (VSH) case, a Vietnamese company hired a Chinese consortium (comprising HydroChina Huadong Engineering Corporation and China Railway 18th Bureau Group) (Chinese consortium) for a construction project in Vietnam. Disputes arose in relation to the project, and the Chinese consortium initiated a Hanoi-seated VIAC arbitration against VSH. The total amount in dispute was US$248.7 million. The case was concluded with a US$90 million damages award in favour of the Chinese consortium. VSH then petitioned the People's Court of Hanoi to have the award set aside. The People's Court of Hanoi granted VSH's petition and set aside the award on 14 November 2019 because the arbitral tribunal unilaterally changed the venue of the hearings to Singapore and Japan, notwithstanding VSH's objections, in violation of the parties' arbitration agreement and the Vietnamese Arbitration Law 2010.
iii Investor–state disputes
As reported in last year's edition, there have been at least eight reported investor–state disputes involving Vietnam as a party:45
- three cases were decided in favour of Vietnam: McKenzie v. Vietnam (2010), DialAsie SAS v. Vietnam (2011) and Recofi SA v. Vietnam (2013);
- one was decided against Vietnam: Trinh Vinh Binh v. Vietnam (2019);
- one was discontinued: Cockrell v. Vietnam (2014); and
- two cases are still pending: ConocoPhillips and Perenco v. Vietnam (2017) and Shin Dong Baig v. Vietnam (2018).46
The only case where recent developments occurred this year is the Shin Dong Baig v. Vietnam case, where it was reported that the arbitral tribunal – consisting of Judith Gill (British), who presided over the proceedings; Klaus Reichert (German, Irish), appointed by the claimant; and Albert Jan van den Berg (Dutch), appointed by the respondent47 – issued Procedural Order No. 2 in respect of the government's request to address its jurisdictional objections as a preliminary question in March 2019, and that a hearing on both jurisdiction and the merits was held in Singapore on 3 and 4 February 2020.
III OUTLOOK AND CONCLUSIONS
2019 witnessed significant developments in the foreign and non-foreign arbitration scenes in Vietnam. On the recognition and enforcement of foreign arbitral awards, it is reasonable to expect more rather than less enforcement of foreign arbitral awards. Moreover, the government's efforts to reassure and stimulate foreign investment and trade, notably via the signing of the EU–Vietnam Free Trade Agreement, the EU–Vietnam Investment Protection Agreement and the Comprehensive and Progressive Trans-Pacific Partnership (formerly known as the Trans-Pacific Partnership) (which entered into force on 14 January 2019 in Vietnam), and the accession of Vietnam as a member of the UNCITRAL since December 2018, will only increase the need for arbitration as a preferred dispute resolution forum for the relevant foreign investors.
1 K Minh Dang is a senior partner and K Nguyen Do is a partner at YKVN. The authors are grateful to Cam Tu Vo Nguyen (associate), Nina Nguyen (associate), Khoa Nguyen (associate) and Hoang Tran Thuy Duong (paralegal) for their kind assistance with the drafting of this chapter.
2 A look at Vietnam's legal system, The Report: Vietnam 2017, Oxford Business Group (2017).
3 Law No. 62/2014/QH13 on Organisation of People's Courts passed by the National Assembly on 24 November 2014, effective from 1 June 2015 (Law on Organisation of People's Courts).
4 Law No. 80/2015/QH13 on the Promulgation of Legal Documents passed by the National Assembly on 22 June 2015, effective from 1 July 2016.
5 Articles 102 and 107 of the Constitution of the Socialist Republic of Vietnam passed by the National Assembly on 28 November 2013, effective from 1 January 2014.
7 Article 26.1 of the Law on Organisation of People's Courts.
8 id., at Articles 28.1 and 27.7.
9 id., at Articles 72 and 27.7.
10 id., at Articles 21, 22 and 26.
11 id., at Article 3.
12 id., at Articles 49 and 50.
13 Articles 7.1, 40 and 62.1 of Law No. 63/2014/QH13 on Organisation of People's Procuracies passed by the National Assembly on 24 November 2014, effective from 1 June 2015.
14 Law No. 54/2010/QH12 on Commercial Arbitration passed by the National Assembly on 17 June 2010, effective from 1 January 2011 (Arbitration Law 2010).
15 K Minh Dang and K Nguyen Do, GAR Know-How Commercial Arbitration 2019 – Vietnam (2019).
16 Article 3.11 of the Arbitration Law 2010.
17 id., at Article 3.4.
18 Article 663.2 of Civil Code No. 91/2015/QH13 passed by the National Assembly on 24 November 2015, effective from 1 January 2017 (Civil Code 2015).
19 Article 14.1 of the Arbitration Law 2010.
20 id., at Article 14.2.
21 id., at Article 10.
23 Decree No. 63/2011/ND-CP detailing and guiding a number of articles of the Law on Commercial Arbitration issued by the government on 28 July 2011, effective from 20 September 2011.
24 Resolution No. 01/2014/NQ-HDTP providing guidelines for a number of provisions of the Law on Commercial Arbitration issued by the Council of Judges of the Supreme People's Court on 20 March 2014, effective from 2 July 2014 (Resolution No. 01/2014).
25 Decree No. 124/2018/ND-CP amending and supplementing a number of articles of Decree No. 63/2011/ND-CP issued by the government on 19 September 2018, effective from 19 September 2018.
26 Article 61.5 of the Arbitration Law 2010.
27 Article 427.2 of the Civil Procedure Code No. 92/2015/QH13 passed by the National Assembly on 25 November 2015, effective from 1 July 2016 (Civil Procedure Code 2015).
28 Civil Procedure Code No. 24/2004/QH11 passed by the National Assembly on 15 June 2004 (Civil Procedure Code 2004).
29 Civil Procedure Code No. 65/2011/QH12 passed by the National Assembly on 29 March 2011 (Civil Procedure Code 2011).
30 Official Letter No. 246/TANDTC-KT giving internal guidance on the resolution of applications for the recognition and enforcement of foreign arbitral awards in Vietnam issued by the Supreme People's Court on 25 July 2014 (Official Letter).
31 Article 424.1 of Civil Procedure Code 2015.
32 id., at Article 459.
33 id., at Articles 37.1(b) and 427.2.
34 Law on Enforcement of Civil Judgments No. 26/2008/QH12, as amended by Law No. 64/2014/QH13 dated 25 November 2014, effective from 1 July 2015 (Law on Enforcement of Civil Judgments).
35 Decree No. 62/2015/ND-CP providing guidelines for the Law on Enforcement of Civil Judgments issued by the government on 18 July 2015, effective from 1 September 2015.
36 Circular No. 01/2016/TT-BTP guiding a number of procedures for administrative management and professional templates in the enforcement of civil judgment issued by the Ministry of Justice on 1 February 2016, effective from 16 March 2016.
37 Joint Circular No. 11/2016/TTLT-BTP-TANDTC-VKSNDTC on the provision of a number of issues and the coordination in the enforcement of civil judgment jointly issued by the Ministry of Justice, the Supreme People's Court and the Supreme People's Procuracy on 1 August 2016, effective from 30 September 2016.
38 Article 66 of the Arbitration Law 2010.
40 Article 62.1 of the Arbitration Law 2010.
41 Ministry of Justice report accessible on its website at https://bttp.moj.gov.vn/qt/Pages/trong-tai-tm.aspx?Keyword=&Field=&&Page=1.
42 VIAC Annual Report 2019 accessible at http://www.viac.vn/en/statistics/2019-statistics-s30.html.
43 VIAC's Newsletter No. 04-T02.2020 of the first quarter of 2020 published on 24 February 2020 accessible at http://www.viac.vn/images/Resources/Newsletters/200224_Ban-tin-Quy-I-2020/Newsletter_Quy-I.2020_final.pdf.
45 Investment Policy Hub, Vietnam as the respondent state, available at http://investmentpolicyhub.unctad.org/ISDS/CountryCases/229?partyRole=2.
47 ICSID, Shin Dong Baig v. Socialist Republic of Vietnam (ICSID case No. ARB(AF)/18/2), accessible at https://icsid.worldbank.org/en/Pages/cases/casedetail.aspx?CaseNo=ARB(AF)/18/2.