A question of nationality

Dr Dang Xuan Hop and Duong Bao Trung discuss how Vietnam can adapt its practices to attract more parties to arbitrate in the country

In Vietnam, it is becoming more common to have an arbitration tribunal constituted under the rules of a foreign arbitration institution (such as the International Chamber of Commerce or ICC) but with the seat in Vietnam. Such a tribunal will conduct the proceeding in Vietnam under the Vietnamese Commercial Arbitration Law (CAL). However, when such a tribunal renders an award, Vietnamese courts have on a number of occasions viewed this as a foreign award to be recognised and enforced under the New York Convention and the Vietnamese Civil Procedures Code (CPC).¹ This article suggests that this award should be viewed as a domestic one, to avoid an anomaly and to bring Vietnam closer to the spirit of the New York Convention and international practices, making it more attractive for parties to arbitrate in Vietnam.

Few would expect that an award… would not be able to be set aside by any court

The view that this is a foreign award seems to draw support from Article 424.3 of the CPC and Article 3.12 of the CAL, which define “award of foreign arbitration” as “an award rendered by a foreign arbitration…”. The term “foreign arbitration” is defined in Article 3.11 of the CAL as an “arbitration formed under provisions of foreign law on arbitration…”. Particularly, Chapter XII of the CAL on “Organisation and operation of foreign arbitration in Vietnam” contains detailed provisions regulating the presence and operations of foreign arbitral institutions in Vietnam, such as the ICC. This has led to the view that the term “foreign arbitration” defined in the CAL and the CPC refers to “foreign arbitral institutions” and, therefore, an award rendered by an arbitral tribunal acting under the rules of a foreign arbitral institution such as the ICC is a foreign award, notwithstanding that the seat of the arbitration is in Vietnam. As a result, this award has to be recognised and enforced by Vietnamese courts under the New York Convention regime.

Once Vietnamese courts regard this as a foreign award, it naturally follows that they will decline the jurisdiction to set it aside (where a relevant ground exists). However, as the seat of the arbitration is in Vietnam and the proceeding is conducted under Vietnamese law, it will be difficult for the courts of any country, other than Vietnam, to assume the setting-aside jurisdiction over this award. Consequently, awards of this nature will form an unusual category which cannot be set aside by any court, potentially making it disadvantageous for some parties involved and discouraging them from using this form of arbitration in Vietnam. This is an anomaly. While the rules of arbitral institutions commonly contemplate a proceeding with a seat outside the home country of the institution, few would expect that an award in such a proceeding would not be able to be set aside by any court, like the current situation in Vietnam.

AWARDS DESIGNATION

To avoid such an anomalous situation, in our view, these awards should be regarded as domestic awards. When Vietnamese law defines foreign awards as those “…rendered by foreign arbitration”, it should be understood as referring to awards rendered by foreign arbitral tribunals, not arbitral institutions. Arbitral institutions do not ‘render’ awards. Only tribunals do. Also, when the CAL defines “foreign arbitration” as “arbitration formed under provisions of foreign law on arbitration…”, it should be interpreted as referring to arbitral tribunals because in most jurisdictions, unlike Vietnam, only arbitral tribunals are set up under the law on arbitration, while arbitration institutions often operate under the law on companies or associations. Therefore, “awards of foreign arbitration” should refer to those rendered by arbitral tribunals constituted in a foreign seat and hence subject to a foreign law on arbitration, regardless of the nationality of the institution which administers the case. Accordingly, an ICC award rendered by a tribunal seated in Vietnam and operating under Vietnamese law should be regarded as a domestic award, not a foreign one, even where the arbitration is administered by the ICC. This would be a more logical position under the CAL, more consistent with the New York Convention. Under the latter, whether an award is a foreign one or not depends primarily on where it is “made” (the seat), rather than on which institution administers the proceeding. Chapter XII of the CAL, notwithstanding its title referring to “foreign arbitration”, should be construed as a mere administrative section regulating how foreign arbitral institutions (not tribunals) are set up in Vietnam.

In our view, these awards should be regarded as domestic awards

The above suggestion finds support in a draft Resolution on recognition and enforcement of arbitral awards of foreign arbitrations (Draft Resolution) issued by the Vietnamese Supreme Court on 18 July 2019. Article 2.1(c) of this Draft Resolution provides that for an “award of foreign arbitration” to be subject to the CPC’s recognition and enforcement procedure, the place of arbitration must be in a New York Convention Member State other than Vietnam, and the law governing the proceeding must be that of the place of arbitration. This would mean that an award rendered in an arbitration seated in Vietnam is not a foreign one even if it is administered by a foreign arbitral institution. If this position in the Draft Resolution is adopted, it will be a positive development, bringing Vietnamese arbitration law in line with international practices and encouraging more parties to choose Vietnam as the seat of the arbitration to avoid the time-consuming recognition and enforcement process applicable to foreign arbitral awards.

ABOUT THE AUTHORS

Dr Dang Xuan Hop FCIArb is an independent arbitrator in Hop Dang’s Chambers in Hanoi, Vietnam. He has arbitrated a large number of commercial disputes at various arbitral institutions. He is a Fellow of CIArb and of the Singapore Institute of Arbitrators. He is also a Senior Fellow at the Law Faculty of the University of Melbourne.		Duong Bao Trung worked as a dispute resolution associate of Baker McKenzie before joining one of the largest multi-industry conglomerates of Vietnam as Legal Counsel. He obtained his LLB from Hanoi Law University (summa cum laude) and LLM from Harvard Law School. Mr Duong is a qualified lawyer in Vietnam and passed the New York Bar exam in 2017.