Att. Vu Anh Duong Standing Vice Chairman cum General Secretary Vietnam International Arbitration Centre

Law on Commercial Arbitration 2010 - the arbitration act that opens a new stage of development of commercial arbitration in Vietnam

The LCA was officially passed by the National Assembly on 17 June 2010 and entered into effect from 01 January 2011. The LCA details the policy to encourage the development of arbitration, such as Resolution 48-NQ/TW dated 24 May 2005, which directed “Review the law on economic disputes resolution (arbitration, mediation) in accordance with international commercial practice. Participate in multilateral international treaties on mutual legal assistance, especially those relating to the recognition and enforcement of judgments, court decisions, commercial arbitration decisions”, and Resolution No. 49-NQ/TW dated 02 June 2005 clearly stated “Encourage the resolution of a number of disputes through negotiation, mediation and arbitration; the court supports by the recognizing such resolution”

I. The success of the LCA

The LCA has overcome the shortcomings of the Ordinance on Commercial Arbitration 2003, adopted international arbitration law standards and practices, and promoted arbitration to become an effective dispute resolution method. In details:

1. The adoption of the key principles of UNCITRAL’s Model Law on Commercial Arbitration creates a relatively favorable framework for the development of arbitration. The provisions in the LCA basically satisfy the requirements of resolving commercial disputes by arbitration in Vietnam and are consistent with international commercial arbitration law and practice.
2. Respect the party autonomy

Party autonomy is a fundamental principle of arbitration, which is expressed throughout the entire arbitration process from the commencement to the end of the arbitration, ensuring the parties has the right to freely agree on proceedings. The law only intervenes when the parties have no agreement or the agreement is contrary to the provisions of law.

3. Establish the role of the Court with respect to arbitration

The Court's role includes arbitration assistance and supervision. The Court assists in establishing ad hoc arbitral tribunals, settling the request to replace ad hoc Arbitrators, replace Arbitrators; assisting arbitral tribunals to collect evidences, summons witnesses; assisting in applying interim measures. As for supervision, the Court settles complaints about the jurisdiction of the arbitral tribunals, resolves the request to set aside the arbitral awards, registers ad hoc arbitral awards.

4. Establish the principle of losing the right to object

According to the provisions of the LCA, if a party detects a violation of the proceedings or arbitration law, that party must raise it during the arbitration proceedings, otherwise it will lose the right to object at the Court. This regulation has significantly limited the annulment of arbitral awards.

5. Expand the authority of arbitral tribunals, making the proceedings more effective:

5.1 Competence to summons witnesses

The fact that the LCA gives authority to the arbitral tribunals to summons witnesses is of great importance, which helps the arbitration proceedings be conducted effectively. In the context of increasingly complex disputes, the participation of witnesses in the arbitration process is a practical and growing demand in the practice of arbitration proceedings.

5.2 Competence to apply interim measures

The new point of the LCA is to grant authority to the arbitral tribunals to apply interim measures at the request of one of the parties. The arbitral tribunals can apply one or several interim measures to the disputing parties.

5.3 Competence not to accept the amendments and supplements to the request for arbitration, the counterclaim, the statement of defense in case of abuse in order to hinder the issuance of arbitral awards.

This provision is supposed to prevent a party from lack of goodwill and cooperation in the arbitration proceedings, ensuring the proceedings are not delayed indefinitely and saving time and costs.

II.  On the application of the LCA

1. Issue legal documents guiding implementation

After the LCA was enacted, the Government and the Supreme People's Court issued the following documents:

• Decree No. 63/2011/NĐ-CP dated 28 July 2011 detailing and guiding the implementation of several provisions of the LCA;
• Circular No. 12/2012/TT-BTP dated 07 November 2012 providing several forms used in the organization and operation of arbitration
• Resolution No. 01/2014/NQ-HĐTP dated 20 March 2014 of the Council of Judges of The People’s Supreme Court on guidelines for the LCA

The issuance of the above provisions has met management objectives, contributed  to perfecting the law on commercial arbitration, ensuring that dispute resolution by arbitration activities  are more convenient and increasingly effective. Especially Resolution 01/2014-HDTP.

2. Promote the LCA

The Ministry of Justice has actively coordinated with related agencies, organizations and localities in forming the plan for the implementation of the LCA; organize conferences to promote the LCA to ministries, sectors, provinces, organizations and individuals, especially enterprises nationwide.

In provinces, the implementation of the LCA has also been focused on. The Departments of Justice of the provinces and municipalities have actively advised the local authorities to develop and issue implementation plans; organize promotion in many forms, inform the basic content of the LCA to local agencies, departments, sectors, organizations, business community, including the arbitrators, attorneys, legal reporters.

3. Enforce arbitral awards

The enforcement of an arbitral award has the same high consensus as the execution of the Court's judgment, there is no distinction between the enforcement of commercial arbitration decisions or awards and enforcement of the Court’s judgments or decisions. This has a positive influence on the party to whom the arbitral award is enforced.

4. VIAC’s activities

VIAC has gradually affirmed its position and reputation as a prestigious and experienced arbitration institution in Vietnam. In the period from 2011 to 2019 alone, VIAC resolved 1,259 disputes, an increase of 336% compared to the period from 2003 to 2010. The disputing parties come from more than 60 countries and territories around the world. The quality of dispute resolution is increasingly improved. Arbitrators are regularly trained and exchange experience in dispute resolution. The dispute resolution process is progressively advanced and improved. Time for dispute settlement is shortened. VIAC has also applied information technology to facilitate the resolution of disputes, ensuring the flexibility and convenience for arbitration, such as organizing online sessions, teleconference, video-conference, which helps the parties save time and costs when resolving disputes at arbitration.

In addition to its main function of dispute resolution in accordance with the nature of a non-profit organization, VIAC also promotes the development of arbitration together with alternative dispute resolution methods in Vietnam. VIAC has actively participated in activities like reviewing legal policies, promoting and raising awareness about arbitration through coordinating with domestic and foreign organizations (the state agencies, business associations, bar associations, education institutions, enterprises, etc.), reached tens of thousands of different audiences, issued tens of thousands of publications; sponsored dozens of arbitration moot contests at legal training institutions across the country, and appeared on thousands of news articles promoting dispute resolution in particular as well as law and economy in general.

In terms of international cooperation, VIAC has signed dozens of cooperation agreements with international arbitration organizations to exchange experiences in dispute resolution and information through seminars and training activities.

III. Several drawbacks of the LCA together with proposals and recommendations

1. Drawbacks of the Law on Commercial Arbitration

After 10 years of enactment of the LCA, it can be observed that the LCA has contributed to promoting the development of arbitral activities and arbitration is now better received by the community. The number of disputes resolved by arbitration also experiences a significant increase. However, the practice when applying this law shows that there are a number of shortcomings that need to be further improved, specifically:

1.1. Arbitration’s jurisdiction and provisions on specific jurisdiction of the Vietnamese Court

There are currently different interpretations of arbitration's jurisdiction over disputes with foreign elements regarding rights to real estate in Vietnam provided in Article 470 of the 2015 Civil Procedure Code.

1.2. Article 2(2) of the LCA, which says "Disputes arising between the parties in which at least one party has commercial activities", is not interpreted consistently. In fact, there are many relationships in which one party has commercial activities while the other does not, but it is not clear whether these relationships fall under the jurisdiction of arbitration or not.

1.3. The fact that the LCA only allows the civil judgment enforcement agency of the province or municipal where the arbitral tribunal issues the award to enforce the award is unreasonable and does not facilitate the disputing parties; because in many cases at the place where the arbitral tribunal renders an award, the party who bears the obligation does not have a residential address or property, therefore the civil judgment enforcement agency must entrust enforcement, which is time-consuming and wasteful for both the agency and the party who the award is against.

1.4 The provisions on the loss of the right to object are of significant importance, however, in practice, there are different interpretations of this provision regarding whether or not a party who does not participate in arbitration proceedings loses the right to object or not.

1.5 It is necessary to specify the regulations on the establishment of arbitral tribunal in Article 40 of the LCA, particularly whether the LCA allows the arbitration rules of arbitration centers to appoint arbitral tribunals or not.

1.6. Under Article 44 (4), the Court's decision on the validity of the arbitration agreement or whether the arbitration agreement can be performed is final. Will the Court reconsider this issue when settling the request to set aside the arbitral award?

1.7. Although the LCA grants the arbitral tribunal some authority, especially the competence to apply interim measures, it also stipulates the responsibility to compensate the disputing parties, which is not consistent with international arbitration practice.

1.8 Arbitration award

- It is necessary to agree on the terms "make a decision", "render an arbitral award", "issue an award" and "make an arbitral award".

- Eliminate the regulation that one of the essential contents of the arbitral award is the "address of the arbitrator" (Article 61(1)(c)). It is not necessary that the arbitral award have the address of the arbitrator and it should not be considered the essential content of the arbitral award, because the absence of this content will be considered a violation of the arbitration proceedings.

- Extend the time limit for issuing the arbitral award or allow an extension of the time limit for issuing the arbitral award instead of 30 days (Article 61(3)). In fact, many cases are too complicated to issue an award within 30 days.

1.9. Annulment of arbitral awards

 - Specific guidelines are recommended to avoid abuse in case of annulment of arbitral award because of forged evidence.

 - The arbitration award will be set aside if it is contrary to the fundamental principles of Vietnamese law; nonetheless, there is currently no specific explanation on what the fundamental principles of Vietnamese law are, hence the varied application from court to court. In practice, the fundamental principles of Vietnamese law have not been consistently explained and are often interpreted in a broad sense. There is a lack of clarity in the adoption of this base.

- According to Article 71(10) of the LCA, the decision of the Court on the annulment of the arbitral award is final and effective. It is necessary to research for a solution to consider a controversial arbitral award.

1.10. It is necessary to regulate that the default model of the arbitral tribunal is a sole arbitrator, instead of providing that the arbitral tribunal shall consist of three arbitrators. The sole arbitrator model will shorten the resolution time and save costs for the disputing parties.

1.11 Supplement provisions on the appointment of emergency arbitrators

According to Article 49 of the LCA, the arbitral tribunal has the right to order interim measures. However, in practice, many cases requiring the application of interim measures occur before the arbitral tribunal is established. If the parties want to request the arbitral tribunal to order interim measures, they must wait until the arbitral tribunal is formed, therefore the measures would lose its meaning.

1.12 In addition, the LCA does not include the development of information technology and electronic proceedings regulations, as well as online sessions via teleconference or video conference.

2. Proposals and recommendations

Countries over the world are introducing policies to prioritize and facilitate the development of arbitration. Some countries, such as Singapore, and Korea, set out the ambition to become the global dispute resolution hub. With the government's support, some arbitration centres in Asia, namely Singapore, Hong Kong, Korea, etc. are becoming more and more influential. Many national courts are in favor of arbitration, whereby, to respect the independence of arbitration proceedings, the courts only intervene when the arbitrators need support; and negative intervention is minimized, especially the annulment of arbitral awards.

2.1. Ministry of Justice

2.1.1 Revision of the LCA is recommended. The LCA plays an important role in the governance and promotion of arbitral activities; nevertheless, the past 10 years have revealed some of the above shortcomings, therefore prompt amendment to continue improving the Arbitration law would be necessary for reform and integration.

2.1.2 The Government should establish a planning and development policy oriented to arbitration. Vietnam currently has 30 arbitration centres, however, few of them are actually active, plus the quality of service among centres is not high. This will affect the overall quality of the arbitration. In addition, the Government should also introduce policies to improve the dispute resolution competence for key arbitration organizations, to conduct training sessions for arbitrators, to timely inspect and examine in order for the arbitration centres to develop sustainably.

2.1.3 The Government should promote arbitration at the national scale and assist arbitration centers to participate in national programs. In order to raise the awareness of commercial arbitration, promotion of commercial arbitration to the business community; legal training institutions and law-practicing organizations nationwide needs to be enhanced.

2.1.4 The Government should encourage arbitration training at universities and institutions.

2.1.5. There should be a tax reduction/exemption mechanism for arbitration centres and arbitrators resolving disputes (especially foreign arbitrators), and a visa exemption mechanism for foreign arbitrators.

2.2. The Court:

2.2.1 The Supreme People's Court should compile a report of statistics of cases related to arbitration, especially on the annulment of arbitral awards, review and evaluate the settlement of cases with respect to arbitration under the LCA, which can be enhanced by coordination with the Ministry of Justice and arbitration centers.

2.2.2. Ensure the time limit specified in the LCA when resolving complaints about the jurisdiction of the arbitration and setting aside the arbitral award.

2.2.3. Timely and fully notify the arbitrators in accordance with the LCA so that the Arbitral Tribunal could acknowledge and provide its opinion to the Court.

2.2.4. The Court supports the Arbitral Tribunal to correct the procedural errors in accordance with the LCA.

2.2.5. The Court should assign several judges to specialize in arbitration in general and annulment of arbitral awards in particular and plan thorough professional training for the judges.

2.2.6. The Supreme People’s Court should have a department to administer and supervise the annulment of arbitral awards.

2.3. Civil judgment enforcement agency.

2.3.1. Continue to support the enforcement of arbitral awards.

2.3.2 Eliminate the requirement that the party requesting enforcement provides the Court's Confirmation of whether the arbitral award has been annulled, or instead require that the party to execute the arbitral award provides the enforcement agency with the Court’s Confirmation or the judgment enforcement agency directly requests the Court to provide this Confirmation.

Arbitration is a method of dispute resolution that has many advantages. The completion of arbitration legislation and the encouragement of the development of arbitration are vital, contributing to judicial reform and international integration, improving the legal environment and business as well as investment environment in Vietnam.