Enforcement of Foreign Arbitral Awards in Vietnam27 April 2020

In practice, parties are often requested to submit additional documentation to evidence signatory capacity and/or the proper conduct of arbitration including business registration certificates, legal opinions on foreign laws, and written confirmations of couriers to prove service of certain documents.

In terms of appeal, a first decision granting or denying enforcement of an award can be appealed to the High People’s Court, and the decision handed down by the High People’s Court may in turn be appealed under cassation or retrial procedures.

One important point for consideration when contemplating enforcement of an arbitral award in Vietnam is that all documents and evidence filed in legal proceedings for recognition and enforcement form part of the public record, unless evidence comes under certain exceptions. Such exceptions include evidence relating to state secrets, trade secrets, or personal information relating to individuals’ private lives. Generally, the Vietnamese courts’ judgments on recognition and enforcement are posted on that court’s e-portal, in Vietnamese only. This practice erodes the extent to which arbitral proceedings remain private, which is often considered to be a key benefit of arbitration as opposed to litigation.

As of November 2018, court fees in Vietnam were relatively low-filing fees of VND3m (approximately US$129) must be included with a request for recognition and enforcement of a foreign arbitral award, and any appeal of the decision of the first instance court requires payment of an additional appeal court fee advance of VND300,000 (approximately US$13).

Common reasons for non-enforcement by the Vietnamese courts

1. Invalid service on the award debtor

A key reason cited by Vietnamese courts for refusing to recognise and enforce foreign arbitral awards has been that the award debtor was not promptly and duly informed of the appointment of the arbitrators or of the arbitral procedure. For example, in the case of Wisdom vs. Hao Hung,² the arbitral institution in Hong Kong had sent notice by email to the staff of the award debtor rather than the legal representative of the award debtor. Therefore, when serving notice on the defendant, it is crucial to ensure that contractual notice provisions and notice requirements as prescribed by Vietnamese law are adhered to. Moreover, it is best practice to obtain confirmation of delivery from the courier.

2. Contrary to the principles of Vietnamese law

The Vietnamese Courts’ tendency to refuse to enforce arbitral awards due to infringement of the basic principles of Vietnamese law has generated considerable uncertainty for commercial parties seeking to obtain enforcement of arbitral awards in Vietnam. For example, in the case of Toepfer v Sao Mai (2011), the Supreme Court of Hanoi found that the award creditor’s failure to mitigate its loss was contrary to the principle of good will under Article 6 of the Vietnamese Civil Code.³ In addition, the Court considered the UK arbitral tribunal’s (Grain and Feed Trade Association) granting of liquidated damages to be in conflict Vietnamese law on actual and direct damages and, therefore, Article 11 of the Civil Code requiring compliance with Vietnamese law.

In 2014, the issuance of the Resolution specifically sought to tackle the number of arbitral awards being unreasonably rejected for breaching a principle of Vietnamese law. Pursuant to Article 14.2 of the Resolution, the Vietnamese court reviewing the application must consider the following two questions: (a) whether the principle that is alleged to have been breached is one of the “basic principles on conduct, of which effects are most overriding in respect of the development and implementation of Vietnamese legal system”; and (b) whether the award “violates the interests of the government, and the legitimate rights and interests of third party(ies)”.

However, there remains significant room for interpretation in relation to the Resolution and the principles set out in the Civil Code.

In any event, advice from local counsel should be sought at the drafting stage when contracting with a Vietnamese party or in relation to assets located in Vietnam, in order to minimise the risk of infringing principles of law or specific provisions of Vietnamese legislation.

3. Lack of authority and formalities

Another ground often cited by the Vietnamese courts for non-enforcement is incapacity of a signatory to bind a party to the arbitration agreement. There have also been cases where the arbitration agreement has been deemed invalid, for example through the award debtor failing to sign the document containing the arbitration clause. Such cases bring into light the importance of ensuring that the necessary corporate authorities are reviewed, and that the arbitration agreement, or the agreement containing the arbitration clause, is duly executed by all parties.