A Q&A guide to arbitration law and practice in Vietnam
The country-specific Q&A guide provides a structured overview of the key practical issues concerning arbitration in this jurisdiction, including any mandatory provisions and default rules applicable under local law, confidentiality, local courts’ willingness to assist arbitration, enforcement of awards and the available remedies, both final and interim.
Use of arbitration and recent trends
In recent years arbitration in Vietnam has gained momentum and is becoming an increasingly attractive method of resolving domestic and international disputes. Parties tend to prefer the private nature of the proceedings and the ability to decide on important issues, including the arbitrators, choice of law, venue and language. Relevant statistics for 2013 revealed that 4% of all disputes In Vietnam were resolved by arbitration.
An overwhelming majority of the cases involve the sale of goods (60%), relying on data from the largest and most commonly used local arbitration administrator in Vietnam, the Vietnam International Arbitration Centre (VIAC). However, a growing number of claims relate to other economic sectors such as banking and finance, construction, distribution, investments, outsourcing and services.
Foreign companies have used arbitration for quite some time, but recent statistics show that local companies are increasingly relying on arbitration as the preferred choice for dispute resolution. A leading indicator is the 55% increase year-on-year in cases settled by VIAC in 2013. The VIAC handled 99 cases in 2013 and 124 cases in 2014 (an increase of 25%). The majority of cases are settled in Ho Chi Minh City. Domestic arbitrations count for 58.9% while international arbitrations count for 41.1%. On average, an arbitration lasts for 167 days, with the shortest case taking 81 days and the longest case extending 251 days. Out of 124 cases, the following statistics demonstrate that the VIAC arbitration is now becoming increasingly recognised internationally:
Cases that apply applicable foreign laws: four.
Cases that apply foreign languages: 25.
Cases where arbitrators send dissenting or separate opinions: five.
Cases that have the involvement of lawyers: 66 out of 124.
Cases that request for courts to apply interim measures: 14.
Cases that request for the tribunal to apply interim measures: two.
Arbitration clauses are now becoming a necessity in virtually all contracts.
Another positive trend is the increased involvement of local Vietnamese attorneys acting as arbitrators. The valuable experience local attorneys gain from representing clients in arbitral disputes have translated into a larger pool of qualified local attorneys who can credibly act as arbitrators in both complex cross-border and domestic arbitration proceedings. This will help bolster and continue to elevate arbitration as the preferred dispute resolution mechanism in Vietnam.
There are many advantages to using arbitration over court litigation. In addition to the near universal advantages experienced in other jurisdictions (for example, final resolution on the merits, privacy, quicker resolution, and ability to select the language and venue).
One key advantage arbitration offers is the ability for parties to preselect the lex causae (that is, the law governing the merits of the dispute). This is unless the underlying dispute is wholly a domestic affair. In contrast, litigants in Vietnamese courts must exclusively rely on Vietnamese law. Testimony on foreign law in Vietnamese court proceedings is currently not allowed. The ability to choose the substantive law allows the parties to better manage their risks, selecting and applying laws that cover potential issues specific to their commercial relationship.
Another key advantage is the ability to select qualified and impartial arbitrators. Vietnam’s corruption rankings are among the worst in the world and judicial bribery remains a major concern.
Finally, because Vietnam is a signatory to the New York Convention, arbitral awards are recognised and enforceable in more countries, including Vietnam, compared to court judgments, which are recognised on a reciprocal basis making the enforcement of foreign judgments more difficult.
While arbitration offers many benefits, the enforcement of arbitral awards in Vietnam remains challenging. The grounds for setting aside awards can be interpreted broadly when compared to the arbitration enforcement laws and practices of other countries.
Use of commercial arbitration
The Law on Commercial Arbitration No. 54/2010/QH12 dated 17 June 2010 (LCA) governs arbitrations conducted in Vietnam. Resolution No. 01/2014/NQ-HDTP (Resolution No.01), issued by the Supreme Court of Vietnam, provides further guidance on the implementation of certain provisions of the LCA.
The LCA refers significantly to the UNCITRAL Model Law and incorporates many important legal concepts, including a:
Tribunal’s ability to summon witnesses.
Party’s right to request, and a tribunal’s corresponding ability to grant, interim relief.
The Law on Enforcement of Civil Judgments (LECJ) controls the enforcement of arbitral awards and the Civil Procedure Code 2004 (CPC) governs the recognition and enforcement of foreign awards in Vietnam.
Mandatory legislative provisions
Most provisions in the Law on Commercial Arbitration No. 54/2010/QH12 dated 17 June 2010 (LCA) are not mandatory. The LCA allows the parties to freely decide many critical issues that govern the arbitral proceedings. However, there are some mandatory legislative requirements, including:
The arbitral award is final and binding.
The arbitration agreements must be in writing.
The subject matter of the arbitration must involve at least one party engaged in commercial activity (commercial is defined as a profit-making activity, for example, the sale of goods, services, investments and trade promotion) and cannot belong in the exclusive jurisdiction of court litigation.
Vietnamese laws apply when the underlying dispute does not involve any foreign element.
The arbitral tribunal must, as a threshold, decide its jurisdiction by determining the validity and subject matter of an arbitration agreement.
Arbitrators must be independent, objective, impartial and observe the law.
The cumulative effect of the mandatory provisions is a strong legal system generally in favour of arbitration. This reduces the “bottleneck” effect caused by threshold issues that typically plague other jurisdictions, that is, the validity and scope of arbitration provisions.
The statute of limitations to institute arbitration proceedings is typically two years from the date that a claimant has the right to take legal action. This is with the following two exceptions:
The statute of limitations for insurance contracts is three years from when the dispute arises (Article 30, Law on Insurance Business 2000).
The statute of limitations for damages with respect to cargo is one year from the date on which the cargo is delivered or should have been delivered to the consignee (Article 97, Vietnam Maritime Code).
The statute of limitations to enforce a foreign arbitral award is one year from the date the award becomes final.
The Vietnam International Arbitration Centre (VIAC) is the largest arbitration organisation in Vietnam. However, there are a number of arbitration centres, including:
The Asean International Commercial Arbitration Centre (ACIAC).
The Financial and Commercial Centre for Arbitration (FCCA).
The Pacific International Arbitration Centre (PIAC).
See box, Main arbitration organisations.
The Law on Commercial Arbitration No. 54/2010/QH12 dated 17 June 2010 (LCA) only requires that an arbitration agreement be in writing and contain language that establishes the mutual consent of the parties to resolve their dispute by arbitration. The written requirement can be satisfied in different ways and can take various forms, including the following:
An agreement made through communications between the parties via telegram, fax, telex, email or other forms prescribed by law.
An agreement made through the exchange of written information between the parties.
An agreement recorded in writing by a lawyer, notary public, or competent institution at the request of the parties.
A document such as a contract, company charter or other similar document, which contains an arbitration agreement, and referenced by the parties during the course of their transaction.
An agreement made through an exchange of statements of claims and defences that reflect the existence of an agreement proposed by a party and not denied by the other party.
Separate arbitration agreement
An arbitration agreement can be made in the form of an arbitration clause contained in a contract or in the form of a separate agreement.
Unilateral or optional clauses
The Law on Commercial Arbitration No. 54/2010/QH12 dated 17 June 2010 (LCA) does not address unilateral or optional clauses. However, in theory if one party confers another party the right to arbitrate this may be sufficient to establish an agreement to arbitration.
In the context of consumer services and goods, arbitration cannot be unilaterally imposed through the provider’s general terms and conditions. Consumers can elect to litigate in court or arbitrate the dispute.
An arbitration agreement is entirely independent of the contract where it is contained. Any modification, extension, cancellation, invalidation or non-performance of the underlying contract will not invalidate the arbitration agreement.
Breach of an arbitration agreement
Court proceedings in breach of an arbitration agreement
A court will refuse to accept a case involving a dispute that is subject to a valid arbitration agreement. A party’s participation in a court proceeding does not act as a waiver of the party’s right to arbitrate the matter.
Arbitration in breach of a valid jurisdiction clause
If the parties did not agree to arbitrate, but instead agreed to resolve all disputes in court under a valid jurisdiction clause, the arbitration cannot proceed. If the scope of the jurisdiction clause is limited to certain matters, the parties can theoretically either waive the jurisdiction clause or agree to arbitrate matters not within the scope of the jurisdiction clause.
There are no regulations that specifically allow a local court to grant an injunction restraining judicial proceedings initiated overseas in breach of a valid arbitration agreement. The Law on Commercial Arbitration No. 54/2010/QH12 dated 17 June 2010 (LCA) simply directs a court to refuse to accept cases that are subject to arbitration and allows a court to decide whether a matter is subject to arbitration.
However, the LCA does allow a tribunal the power to prohibit or force a party from taking any action that may adversely affect the arbitral proceedings.
Joinder of third parties
The Law on Commercial Arbitration No. 54/2010/QH12 dated 17 June 2010 (LCA) does not contain any provision allowing the involuntary joinder of non-signatory third parties to an arbitration proceeding. However, a third party (with the consent of all parties) may theoretically voluntarily join the arbitration as a co-applicant or co-respondent.
A third party may nevertheless be bound by an arbitral award if the party is a party to another contract whose validity or enforceability is dependent on the contract that is subject to arbitration. For example, an award from a loan agreement containing a valid arbitration agreement can affect the guarantor of the loan. Similarly, an agent can theoretically bind the non-signatory principal.
Number and qualifications/characteristics
An arbitral tribunal can be composed of one or more arbitrators as agreed by the parties.
Under the Law on Commercial Arbitration No. 54/2010/QH12 dated 17 June 2010 (LCA) a person who satisfies all the following criteria can act as an arbitrator:
Has the legal capacity to act under the Civil Code.
Possess a university degree and at least five years’ of work experience in the discipline studied.
In special cases, an expert who has highly specialised skills or qualifications can also be selected as arbitrator even if he does not have the requisite education and work experience.
The following cannot act as arbitrators:
Incumbent judges, procurators, investigators, enforcement officers or civil servants of the people’s courts, people’s procuracy, investigative agencies or judgment enforcement agencies.
Persons serving criminal sentences or whose criminal records have not yet been cleared even though they have served their sentences.
An arbitrator must be independent and impartial, with the ability to quickly and promptly settle disputes.
Appointment of arbitrators
Under Article 40 of the Law on Commercial Arbitration No. 54/2010/QH12 dated 17 June 2010 (LCA) the parties are free to agree on the procedure for the appointment of the arbitrator(s). In cases where the parties agree that their dispute will be settled by a sole arbitrator, the claimant must state the name and address of the person whom the claimant selects as arbitrator. Unless otherwise agreed by the parties, within 30 days after receiving the claimant’s statement of claims, the parties must agree on the selection of a sole arbitrator or request the Arbitration Centre to appoint a sole arbitrator, within 30 days after receiving the claimant’s statement of claims (unless otherwise agreed by the parties). A competent court can, at the request of any party, designate a sole arbitrator.
Removal of arbitrators
An arbitrator is disqualified and can be removed in the following circumstances (Article 42.1, LCA):
The arbitrator is a relative or representative of one party.
The arbitrator has an interest related to the dispute.
There are clear grounds to conclude that the arbitrator is not impartial or objective.
The arbitrator was a conciliator, representative, or lawyer of one party before the dispute was brought to arbitration for settlement (unless the parties consented in writing to waive such a potential conflict).
Commencement of arbitral proceedings
There are no laws that provide default rules governing the commencement of arbitral proceedings. When a dispute is settled by an arbitration centre, the time of commencement of arbitral proceedings is the time the arbitration centre receives the claimant’s statement of claims (unless otherwise agreed to by the parties)
In contrast, when a dispute is settled by ad hoc arbitration, the time of commencement of arbitral proceedings is the time the defendant receives the claimant’s statement of claims (unless otherwise agreed to by the parties).
Applicable procedural rules
The parties are free to decide the applicable procedural rules. Arbitrators must respect the agreement of the parties if the procedural rules do not contravene any legal prohibitions or social ethics. If the parties do not specify procedural rules for the arbitrators to follow, arbitrators are likely to resort to the rules of the arbitration centre administering the arbitration.
If the parties cannot agree on the governing procedure, the tribunal will decide the procedures, subject to the rules of the arbitration centre administering the case.
Under Article 49 of the Law on Commercial Arbitration No. 54/2010/QH12 dated 17 June 2010 (LCA) a tribunal has the right to apply interim injunctive relief based on a party’s request. The Civil Judgment Enforcement Authority will assist in carrying out the orders of a tribunal.
In addition, under Article 46 and Article 47 of the LCA, an arbitrator has the right to request that other organisations or individuals provide evidence or witness statements. However, in the case of non-cooperation, the tribunal can only request assistance from a competent court.
Scope of disclosure
Parties have the obligation to provide documents in support of their claims and establish facts relevant to the issues under dispute (Article 46, Law on Commercial Arbitration No. 54/2010/QH12 dated 17 June 2010 (LCA)). However, there are no specific laws obliging the parties to provide any documents. In the event a party does not disclose supporting documents, there is no administrative or criminal sanction, but the party’s arguments can be severely undermined and not accepted by the tribunal.
There is no difference between disclosure in arbitration and litigation. Vietnam does not have any laws permitting party discovery. A tribunal can request the parties to provide evidence, but parties must make any request for evidence through a court or tribunal. There is no guarantee that a court or tribunal will accept a request. If a party refuses to provide evidence, there is nothing a tribunal can do. A party can seek court intervention, but the outcome is not predictable.
There are no provisions under the LCA that allow or disallow the parties to agree to what documents or information will be disclosed by either side.
Arbitration proceedings are confidential under the Article 4 and 21 of the Law on Commercial Arbitration No. 54/2010/QH12 dated 17 June 2010 (LCA).
Courts and arbitration
Any competent court in Vietnam can intervene, at a party’s request, to assist arbitration proceedings. A competent court has the powers to order any of the following:
Appoint an arbitrator in an ad-hoc arbitration.
Replace an arbitrator in an ad-hoc arbitration.
Decide the validity and scope of arbitration agreements.
Assist in the collection of evidence.
Apply interim injunctive relief.
Risk of court intervention
A party can frustrate or delay the arbitration proceedings with frequent court applications. However, any request for court intervention must comply with relevant laws. For example, a party can dispute the validity and scope of an arbitration agreement. If the party fails, the party can later challenge the appointment of an arbitrator, the mode of collecting evidence or later request an arbitral award be cancelled on applicable grounds. If there is a legal basis for the request, a party cannot be prevented from seeking judicial intervention.
The Law on Commercial Arbitration No. 54/2010/QH12 dated 17 June 2010 (LCA) prohibits the parties from delaying the proceedings (that is, providing claims and defences, disclosing supporting documents and witnesses in an untimely manner). In the event a party seeks judicial intervention, the arbitral proceedings will continue until and unless a court issues a decision that requires the arbitration to cease temporarily or permanently.
A party can raise the lack of jurisdiction argument with the tribunal or a competent court under the Law on Commercial Arbitration No. 54/2010/QH12 dated 17 June 2010 (LCA). Vietnam laws recognise the concept of competence-competence, even requiring the tribunal to first decide its jurisdiction. This power is not exclusive and can be reviewed by a competent court, whose decision is final and binding on the parties and the tribunal.
The arbitral proceedings continue until the court decides that there is no valid arbitration agreement or limits the subject matter subject to arbitration.
The tribunal can award security, resorting to the rules of the administering body (if applicable) (Article 34, Law on Commercial Arbitration No. 54/2010/QH12 dated 17 June 2010 (LCA)).
Other interim measures
The tribunal can order the following interim measures or interim injunctive relief (Article 49, LCA):
Prohibit any change in the status of assets under dispute.
Prohibit or force a party to take action that would prevent the proceedings from being adversely affected.
Seize assets under dispute.
Order the preservation, storage, sale or disposal of any asset under dispute.
Request temporary monetary payment between the parties.
Prohibit the transfer of assets under dispute.
The tribunal has broad powers to award appropriate remedies, such as damages, injunctions, declarations, costs and interest. However, the remedies must have been specifically requested by a party and not be contrary to the fundamental principles of Vietnamese law. Remedies that are immoral, illegal or manifestly unreasonable, including excessive punitive or exemplary damages, may be deemed to contravene fundamental principles of Vietnamese law.
Rights of appeal/challenge
The parties in an arbitration proceeding have the right to challenge and cancel an unfavourable award by lodging a petition with a local competent court (setting aside the award). An award cannot be appealed, that is, the merits of the underlying dispute cannot be re-adjudicated.
Grounds and procedure
A party must lodge a request to cancel an adverse award with a competent court within 30 days of receipt of the award. The merits of the dispute cannot be re-litigated. The aggrieved party can only request the court to review and cancel the award on the following grounds:
Whether there exists a valid arbitration agreement.
Whether the subject matter decided by arbitration falls within the jurisdiction of the arbitral tribunal.
Whether the arbitral tribunal was properly convened and whether the arbitration proceedings followed applicable procedures.
Whether the evidence was properly submitted.
Whether the arbitral tribunal was objective and impartial.
Whether the award contravenes fundamental principles of Vietnam law.
Recently there is an alarming trend of awards being set aside. Some of the awards are set aside on the grounds that there was no arbitration agreement, or that pre-arbitration negotiations were not exhausted. Some awards are set aside because it is contrary to the fundamental principles of Vietnam law, such as the principle of pacta sunt servanda (or the principle of objectivity).
This trend is a growing concern because court decisions setting aside arbitral awards are not usually subject to revision or appeal. There is a possibility that the Law on Commercial Arbitration No. 54/2010/QH12 dated 17 June 2010 (LCA) may be amended to address this shortcoming and allow court decisions to be appealed and/or revised.
Excluding rights of appeal
There is no right to appeal arbitral awards. However, the grounds to set aside an award can be considered waived if not properly reserved. Under Article 13 of the LCA, one party waives its rights to protest violations of the LCA, if during the arbitration proceedings the perceived violations were not properly raised. However, this Article does not apply if the award contravenes fundamental principles of Vietnamese law.
There are no prohibitions on the type of fee structures that can be charged by lawyers representing parties in arbitration proceedings.
The unsuccessful party must pay the arbitration costs (not lawyer fees) unless otherwise agreed to by the parties or ordered by the tribunal (Article 34, Law on Commercial Arbitration No. 54/2010/QH12 dated 17 June 2010 (LCA)).
The LCA defines arbitration costs as the:
Remuneration paid to the arbitrators.
Travel and other expenses incurred by the arbitrators.
Consultation of expert witnesses or other assistance requested by the arbitrators.
Cost of administering the arbitration and other services provided by the arbitration centre.
The LCA allows the tribunal to allocate the costs between the parties, but in general the losing party bears the costs.
Enforcement of an award
A domestic arbitration award is fully enforceable, unless there are grounds for cancellation. The award creditor can request the provincial civil judgment enforcement authority where the award was issued to execute the award. In the case of an ad hoc arbitration award, the award creditor must first register the award with a competent court before requesting the civil judgment enforcement authority to carry out the award.
Vietnam has been a member of the New York Convention since 1995. Vietnam made four reservations at the time of agreement:
The New York Convention applies to contracting states.
The New York Convention applies to non-contracting states on the basis of reciprocity.
The New York Convention will be applied only to commercial disputes as determined under the laws of Vietnam.
The interpretation of the New York Convention before Vietnamese courts or competent authorities must be in accordance with the Constitution and the law of Vietnam.
To enforce a foreign award in Vietnam (including from the UK and the US) a party must first file a petition with the Ministry of Justice (MOJ) in the country’s capital, Hanoi (along with the award and relevant documents). The MOJ reviews the documents for compliance with procedural requirements and then transfers the documents to a competent court. The competent court then notifies the award debtor and the public prosecutor before considering the petition.
The grounds for refusing recognition and enforcement are those set out in Article V of the New York Convention and Article 370 of Vietnam’s Civil Procedure Code.
Length of enforcement proceedings
The award debtor has 30 days after compliance is required to satisfy the award. If the award is not satisfied, the award creditor can request a competent enforcement agency to enforce the award after it has become final.
In contrast, the procedure for the recognition and enforcement of foreign arbitral awards is more time consuming. It can take one to two years from the date of submission to receive a final order. This is despite the approximate timeline of five months provided in the Civil Procedure Code 2004 (CPC) from the time the petition is first lodged with the Ministry of Justice until a final decision is rendered by the Supreme Court.
Amendments to the Law on Commercial Arbitration No. 54/2010/QH12 dated 17 June 2010 (LCA) are currently under consideration to reduce the risk of awards being set aside. The discussions are very preliminary and no changes are expected in the coming year.
The Supreme Court has issued a Resolution and an Official Letter that clarify the grounds to set aside foreign arbitral awards. Resolution 01 was made effective on 01 July 2014. In addition to clarifying the grounds to cancel foreign arbitration awards, Resolution 01 reaffirms the jurisdiction of Vietnamese courts to issue interim injunctive relief. Official Letter No. 246/TANDTC-KT was sent to all provincial level courts in Vietnam, providing guidance on the application of the New York Convention with respect to foreign arbitral awards. Specifically, the Letter reminds the lower courts to apply the substantive laws and arbitration rules selected by the parties and not the Vietnamese Civil Procedure Code.
Main arbitration organisations
Vietnam International Arbitration Centre (VIAC)
Main activities. The VIAC is responsible for resolving commercial, construction and financial disputes
The Financial and Commercial Centre for Arbitration (FCCA)
Main activities. The FCCA is responsible for resolving financial, construction and investment disputes
The Asean International Commercial Arbitration Centre (ACIAC)
Main activities. The ACIAC resolves commercial disputes
The Pacific International Arbitration Centre (PIAC)
Main activities. The PIAC resolves commercial disputes
Office of National Assembly
Description: The website is provided by the Office of National Assembly. It provides Vietnamese versions of soft copies of the constitution, laws, ordinances, decrees, circulars and other sub-law documents.
Description: The website is unofficial, but the largest provider of English-language translation of Vietnamese laws.
Description. This is a legal blog run by LNT & Partners that has insight reviews and connects between the facts and the laws (including arbitration).
Description. This is a law blog run by Allens Linklaters, which provides a subscription database of Vietnam law in English.
Le Net, Partner, VIAC Arbitrator
LNT & Partners
Professional qualifications. Vietnam, Attorney at Law.
Areas of practice. Infrastructure; financial services; dispute resolutions.
Non-professional qualifications. Lecturer, Ho Chi Minh City University of Law.
- Acting for the employer in a US$150 million ICC construction arbitration on the Saigon River Tunnel and East West Highway.
- Advising the employer on the US$2.7 billion Metro Line No 2 Ho Chi Minh City
- Advising the lenders in a US$345 million oil and gas project finance.
Languages. English, Vietnamese, Polish, French.
Professional associations/memberships. Vietnam International Arbitration Centre, Arbitrator. Drafting Committee, Principles of Asian Contract Law.
- Vietnam Contract Law, International Encyclopaedia of Laws, Kluwer Law International, Boston (1ST Edition, 1999, 2ND Ed 2012, 3RD Ed 2014).
- Vietnam Corporate and Partnership Law, International Encyclopaedia of Laws (co-author), Kluwer Law International, Boston (1ST Ed 2012, 2ND Ed 2014).
Vietnam Intellectual Property Law, International Encyclopaedia of Laws (co-author), Kluwer Law International, Boston (1ST Ed 2012, 2ND Ed 2014).
By Vietnam Law Insight (LNT & Partners)
Disclaimer: This article is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact the author Net Le at (net.le@LNTpartners.com) or visit the website: Http://LNTpartners.com