Vietnam

Guide to Arbitration Rules and Procedures in Vietnam

Our Country Chapters set out key aspects of the arbitration framework of each jurisdiction highlighted in our website, covering basics like judicial hierarchy and domestic arbitral institutions to substantive issues such as conflicts of laws and the extent of adoption of the UNCITRAL Model Law.

1. Legal System and Framework

Vietnam’s legal system may be described as a mixed system. While there are judicial decisions that have legal effect as “case law” (a concept introduced in 2019), the number of such decisions is limited. Otherwise, Vietnam’s legal system is largely shaped by written legal instruments.

These instruments are made by various state bodies and their effectiveness is subject to a “hierarchy” in Vietnam’s system of legal instruments. The hierarchy is as follows:

  1. the Constitution;
  2. codes and laws enacted by the National Assembly of Vietnam (the supreme organ of the State); and
  3. subsidiary legal instruments made by bodies such as the Government, the ministries and specialised regulatory state bodies.

International treaties and conventions which have been ratified by Vietnam are also regarded as sources of law, and to the extent any provisions of domestic legal instruments are inconsistent with these treaties, the treaties shall prevail.

Vietnam’s judiciary comprises a hierarchy of four main levels (excluding the military courts), with the Supreme People’s Court being the highest court. Below the Supreme People’s Court are, in turn, (a) the High People’s Court; (b) the provincial-level People’s Courts; and (c) the district-level People’s Court.

Most cases will commence at the district-level courts, with some key exceptions including (a) the recognition of foreign arbitral awards; or (b) where the dispute involves foreign parties or property located in foreign states, which are commenced at the provincial-level People’s Courts. These exceptions do not include any monetary threshold regarding the quantum of the dispute.

Despite this hierarchy comprising four layers, typically only one level of appeal is allowed. That is, if the case commences at the district-level People’s Courts, the final appeal is to the provincial-level People’s Courts. That said, in exceptional circumstances, a case may be sent to the Supreme People’s Court for further review. These exceptional circumstances include a serious misapplication of the law by the lower court, there being serious procedural violations during the resolution of the dispute which denied a party from exercising its procedural rights and obligations, or where the decision was inconsistent with the objective details of the case which resulted in damage to the legitimate rights and interests of the parties involved.

The provincial/municipal People’s Courts will have jurisdiction over arbitration activities. Therefore, matters such as pursuing interim measures, handling complaints against a tribunal’s jurisdiction, or seeking recognition of a foreign arbitral award would be handled, in the first instance, by provincial-level People’s Courts.

The Law on Commercial Arbitration No. 54/2010/QH12 (“LCA“) is the main source of law in Vietnam for international arbitration.

Civil procedures before the Vietnamese courts (including for the recognition of foreign arbitral awards) are regulated under the Civil Procedure Code No. 92/2015/QH13. A foreign arbitral award is an award issued under a foreign arbitration, whether outside or inside the territory of Vietnam, to settle the disputes selected by the parties. See definition of foreign arbitration in response to Question 5.1.

Vietnam has not adopted the UNCITRAL Model Law. However, the LCA has been largely modelled according to the provisions of the UNCITRAL Model Law, with some adaptations to align with Vietnamese legal procedures. Some of the differences include the following:

  1. The LCA does not adopt the definition of an “international arbitration”. Instead, the LCA contains its own definition of a foreign arbitration (see response to Question 5.1).
  2. The LCA does not require non-foreign arbitral awards to be “recognised”. Instead, such an award may be directly enforced in accordance with the Law on Civil Judgment Enforcement.
  3. The LCA does not separately recognise the process of granting of a “preliminary order” as specified in the UNCITRAL Model Law.
  4. Under the LCA, where an arbitration agreement fails to indicate the form of arbitration or fails to designate the arbitral institution, in the event of disputes, the parties would need to agree again on the form of arbitration or specific arbitral institution. Absent such agreement, the claimant will have the right to choose such form or arbitral institution.
  5. The UNCITRAL Model Law allows awards to be set aside if its recognition or enforcement would be contrary to “public policy”. The LCA (and Civil Procedure Code) uses the term “fundamental principles of Vietnamese law” instead.
  6. The LCA expressly recognises the right of consumers to select their method of dispute resolution if there is an arbitration agreement included in the general trading terms provided by the goods/service provider. Particularly, consumers may select either litigation or arbitration to settle such disputes despite the stipulation for arbitration (see also response to Question 5.1).

The LCA makes a distinction between foreign arbitration and domestic arbitration.

A foreign arbitration is defined as an arbitration formed under the provisions of foreign law on arbitration, and selected and agreed by the parties to settle a dispute outside or within the territory of Vietnam. This typically includes where (a) the arbitration is administered by a foreign arbitral institution (irrespective of the seat); or (b) the seat of arbitration is not Vietnam. It should be noted that the mere involvement of a foreign party (foreign elements) in the arbitration does not necessarily make it a foreign arbitration.

While the law does not define a domestic arbitration, it is generally regarded as an arbitration which is not a foreign arbitration.

The courts in Vietnam can provide support and assistance in the arbitration process. Particularly, under the LCA, the courts can:

  1. designate or change an arbitrator for ad hoc arbitrations;
  2. settle complaints against the arbitral tribunal’s decision regarding the validity or enforceability of an arbitration agreement and the jurisdiction of the arbitral tribunal;
  3. assist in collection of evidence (e.g., order the production of documents from agencies, organisations, and individuals);
  4. order the attendance of witnesses; and
  5. grant urgent interim measures on the request of a party.

For foreign arbitrations, in practice, the extent of such support and assistance will be determined by the Vietnamese courts on a case-by-case basis. For example, while the Vietnamese courts may lend support to Vietnam-seated arbitrations administered by a foreign arbitral institution, they may be reluctant to do so (and may decline jurisdiction) in foreign-seated arbitrations.

Under the LCA, if there exists an arbitration agreement, but one of the parties initiates a lawsuit at the court, the court must refuse to accept the case (unless the arbitration agreement is invalid or cannot be implemented). See also response to Question 5.1.

2. Arbitral Institutions

The Vietnam International Arbitration Centre (“VIAC“) is the pre-eminent arbitral institution in Vietnam. Established in 1993, it has emerged to be the largest arbitral institution in Vietnam. Others include the Pacific International Arbitration Centre (“PIAC“), the Vietnam Finance Banking Commercial Arbitration Center (“VFB“) and the Financial and Commercial Centre for Arbitration (“FCCA“).

VIAC is headquartered in Hanoi, and has branches in Ho Chi Minh City, Danang and Can Tho. The top three nations with enterprises arbitrating at VIAC in 2019 were China, Singapore and South Korea. In 2019, VIAC saw a caseload of 274 new cases, 40% of which involved foreign direct investment or foreign elements generally. 35% of the disputes in 2019 concerned Sale of Goods, and 23% concerned real estate.

3. Confidentiality

While the LCA requires arbitral proceedings in Vietnam to be conducted in private (unless otherwise agreed by the parties), it does not regulate whether the parties are required to keep the proceedings confidential. However, the tribunal has an obligation of confidentiality (set out in Article 21.5 of the LCA), save where it is legally required to disclose information on the arbitration to state agencies.

4. The Law of the Arbitration and Conflicts of Law

The concept of an applicable law to the arbitration (as distinct from the law applicable to the substance of the parties’ dispute) is not recognised under Vietnamese law, and neither is the concept of the “seat” of arbitration except to the extent of determining whether the arbitration is considered a foreign arbitration or a domestic one. As such, the only relevant law for the purpose of Vietnam conflicts principles is the law applicable to the substance of the dispute.

If the dispute involves no foreign element (as elaborated on below in response to Question 4.3), the tribunal will apply Vietnamese law to settle the dispute.

If the dispute involves a foreign element, the tribunal will apply the law selected by the parties to resolve the dispute. In the absence of agreement, the tribunal will decide to apply the law which it considers to be the most appropriate. For this purpose, the tribunal would apply the law of the country that most “closely associates” with the civil relations between the parties, based on the criteria set out in the Civil Code for determining the law governing the contract.

If Vietnamese law or the law chosen by the parties for the dispute does not contain specific provisions dealing with the dispute in question, the tribunal is permitted to apply “international practices” for settling the dispute, provided that the application or consequences of the application will not contravene the fundamental principles of Vietnamese law.

Yes, foreign law may be applied to the parties’ substantive obligations with respect to the subject matter of the dispute provided that there are foreign elements involved. A foreign element will exist in the following cases:

  • at least one of the participating parties is a foreign natural person or company;
  • the participating parties are Vietnamese natural persons or companies, but the basis for the establishment, modification or termination of their relationship arose in a foreign country; or
  • the participating parties are Vietnamese natural persons or companies, but the subject matter of the civil relation is in a foreign country.

For disputes that do not involve a foreign element, Vietnamese law would be applied for the resolution of the dispute.

Furthermore, even where the dispute involves foreign elements (and the parties had agreed or the tribunal had decided to apply foreign law), foreign law will not apply if the consequences of its application will not be consistent with the fundamental principles of Vietnamese law. Arbitral awards may be set aside or refused for recognition if to do so would contravene these fundamental principles of Vietnamese law. There is no clear test for what constitutes “fundamental principles”. That said, awards have been set aside or refused for recognition in the following cases, on the basis that fundamental principles of Vietnamese law were contravened:

  • an award to the claimant (as construction contractor) for compensation, where the claimant had not obtained all the necessary licences to carry on construction works in Vietnam;
  • an award of liquidated damages, since Vietnamese law only recognises “actual and direct” losses;
  • a failure by the tribunal to verify the legal authorisation of a signatory to a document (and hence, ascertain whether the document was valid); and
  • a failure by the tribunal to consider the extent to which the claimant had mitigated its loss (as required under the Civil Code) when awarding compensation.

Vietnamese law does not regulate the determination of the applicable law for tortious (non-contractual) claims where the arbitration is governed by Vietnamese law.

However, as Vietnamese law does not clearly distinguish between (a) the law governing the arbitration, and (b) the law governing the substance of the dispute, to the extent Vietnamese law governs the arbitration, the courts are likely to find Vietnamese law applies to the claims.

If a foreign element is involved, the test set out in question 4.2 above will be used to determine which foreign law will be applied to the dispute.

Vietnamese law does not draw a distinction between the law applicable to the arbitration and the law governing the arbitration agreement.

Vietnamese written law does not specify whether limitation periods are considered procedural or substantive. It should be noted that Vietnamese courts have jurisdiction over procedural matters, but not substantive matters, decided in an arbitration.

There is, however, a Court decision pointing in favour of limitation periods being substantive. In a decision passed by the People’s Court of Hanoi on 12 October 2018 (Decision 11/2018/QD-PQTT), the court found that issues concerning the statute of limitations were substantive, for which it had no authority to review in determining whether or not to cancel an arbitral award.

However, while this decision may have some persuasive value on other courts, it is not binding on them.

5. Arbitration Agreements

The only formal requirement is that the arbitration agreement must be in writing. For this purpose, the LCA recognises the following forms of agreement as being in writing:

  1. agreements made through communications between the parties by telegram, fax, telex, email or other forms provided for by law;
  2. agreements made through exchange of written information between the parties;
  3. agreement recorded in writing by a lawyer, notary public or competent institution at the request of the parties:

 

(a) where, in their transactions, the parties refer to a document such as a contract, document, company charter, or other similar document which contains an arbitration agreement; or

(b) an exchange of petitions (claims) and defence statements which reflect the existence of an agreement proposed by a party and which was not denied by the other party.

There is one exception: Even if there is an arbitration agreement included in the general conditions for the sale of goods or services to the consumers (which were prepared by the provider of the goods or services), the consumer still has an option of selecting arbitration or litigation to settle the dispute.

Yes, electronic arbitration agreements will be recognised as valid arbitration agreements in writing. Under the Law on Electronic Transactions, the formality requirement to recognise data messages as written documents will likely be satisfied if the information is accessible and usable as reference when necessary.

The LCA also expressly recognises arbitration agreements as being valid when recorded through communications by email.

The LCA recognises an arbitration agreement as being incorporated into a separate contract if, in their transactions, the parties to the separate contract refer to a document such as a contract, document, company charter, or other document which contains that arbitration agreement.

As a preliminary note, arbitration agreements are construed based on general contractual principles, that is, based on the Civil Code (Resolution 01/2014/NQ-HDTP, Article 7).

It remains uncertain under Vietnamese law as to whether non-contractual claims can be settled within the scope of the arbitration agreement. The LCA does not expressly exclude these claims from being arbitrable, and generally provides that the following disputes can be settled by commercial arbitration:

  1. disputes among parties which arise from commercial activities;
  2. disputes among parties, at least one of whom conducts commercial activities; and
  3. other disputes among others which the law stipulates as being settleable by arbitration (for example, maritime disputes under the Maritime Code).

Vietnamese law also does not regulate whether claims in fraud are arbitrable. However, if redress for fraud is sought pursuant to the terms of the contract (rather than through criminal prosecution, for instance), such claims would likely be treated similarly to other contractual claims and allowed in the arbitration.

The LCA recognises the principle of separability – i.e., that the validity of the arbitration agreement does not depend on the validity of the remaining parts of the contract which it is part of. As such, any amendment, supplement, cancellation, invalidation, or non-performance of the contract will not invalidate the arbitration agreement.

Please contact the editorial team of Arbitration Asia at arbitrationasia@rajahtannasia.com.