Chapter 3: Applicable substantive law Please identify any cases, laws, official interpretations of laws, books, articles, published notes, commentaries or other authoritative sources from your jurisdiction that you would consider as a necessary inclusion in this Chapter For any identified i) cases, please provide a short paragraph on the issue(s) relevant to this Chapter Legislation The Civil Code of Vietnam (the “Civil Code”) The Civil Procedure Code of Vietnam (the “CPC”) The Law on Commercial Arbitration 2010 (“LCA”) The Ordinance on Commercial Arbitration 2003 (“OCA”) The Resolution 01/2014 of the Supreme People’s Court providing guidance on the Law on Commercial Arbitration (“the Resolution” or “Resolution 01/2014”) ii) Institutional Rules Article 26 VIAC Rules concerning Jurisdiction of the Arbitral Tribunal (quoted in Answer to Question 2) iii) Cases Toepfer v Sao Mai [2011] Appellate Court – Supreme People’s Court in Hanoi The Appellate Court – Supreme People’s Court in Hanoi upheld the first instance decision and turned down the petition for recognition and enforcement of a GAFTA arbitral award set forth by Toepfer as the award was considered as contrary to the fundamental principles of Vietnamese laws The Court reasoned that, the damages awarded to Toepfer were not actual and direct The Court also found that Sao Mai should not be held liable for damages as its failure to open L/C had been due to force majeure The GAFTA Award, therefore, was contrary to the principles concerning damages under Vietnamese commercial law Tyco v Leighton [2003] Appellate Court – Supreme People’s Court in Ho Chi Minh City The award creditor- TYCO services Singapore Pte Ltd Co., apply to Vietnamese Ministry of Justice requesting Leighton Contractors (VN) Ltd Co., to carry out the award issued by Queensland arbitral tribunal, Australia, on April, 9th 2000 The People’ Court of Hochiminh City decided in Decision 82/QDD- XDTT on 23/5/2002 to recognize and enforce in Vietnam both two decision of Queensland arbitral tribunal However, the appeal court- The People’ High court of Ho Chi Minh City in their Decision No 02/ PTDS, rejected Decision No 82/ QDD-XDTT of the People’ court of Ho Chi Minh City pursuant to two reasons: (i) TYCO Company and Leighton Company did not have “commercial relation” because construction activities cannot be considered as commercial activities (ii) The recognition and enforcement of Queensland arbitral tribunal’ decisions violates Vietnamese law because Tyco contracted with Leighton when it did not have permission of the Vietnamese Ministry of Construction Thus, according to Article 16 (2) of the ordinance on recognition and enforcement decision of foreign court/ arbitral tribunal 1995, the appeal court denied to recognize and enforce such two decisions Engro – Novus v Vinatex [1998] Appellate Court – Supreme People’s Court in Hanoi On the 18 November 1997, People’s Court of Ha Noi issued Decision No 01/ST to refuse the recognition of the decision No 241 dated 20 May 1996 issued by International Commercial Arbitration Court, Chamber of Commerce and Industry of Russian Federation The ground to refuse the recognition and enforcement in Vietnam of the arbitral award was that the person signing arbitration agreement was not entitled to sign the agreement At the hearing, the requesting party (The joint- stock company, ENERGO NOVUS) could not prove that Mr Nguyen Ba Noi who represented for Vietnamese party was duly authorized to sign the contract and the arbitration agreement by the Director of CONFECTIMEX Company (VINATEX Company) According to these judgments, the arbitration agreements were invalid because of the unauthorized signatories but not the invalidity of primary contracts Moreover, the court determined that the arbitral tribunal had violated the rules when settling the dispute but then it refused the enforcement on the ground of being contrary with the basic principles of the laws of Vietnam iv) Books Nguyen Trung Tin, Commercial Disputes Resolution with Foreign Elements, Publisher of Social Science, 2009 Do Van Dai and Mai Hong Quy, Private International Law of Vietnam, National Publishing House, 2010 Tran Hoang Hai, Do Van Dai, Collection of judgments, decisions of Vietnamese Courts on commercial arbitration, Lao Động Publisher, 2010 Tran Hoang Hai, Do Van Dai, Vietnamese law on commercial arbitration, National Political Publishing House, 2011 v) Articles Tran Minh Ngoc, “Law applicable to dispute content arising from international commercial contract”, Journal on State and Law, 2005 Tran Minh Ngoc, “Law applicable to an arbitration agreement in international commercial arbitration” Journal of Legislation Studies, National Assembly Office, 2009; Nguyen Vu Hoang, “Principles of Arbitration in Commercial Arbitration Law 2010”, Democracy and Law Journal, 2010 Nguyen Vu Hoang, “Applicable Law on International Commercial Arbitration », Electronic Journal on Jurisprudence, 2012 Nguyen Vu Hoang: “Arbitration agreement from comparative perspective – the world practice and Vietnam”, Legal Professions Journal 2014 Dao Tri Uc, “Jurisdiction of Arbitral Tribunal and Role of Court in Arbitral Proceedings”, Journal of Hanoi National University, (2010) pp 270-276 Do Van Dai, “Setting Aside Arbitral Award in Vietnam”, Conference Paper, VIAC Conference on Setting Aside and Refusal of Recognition and Enforcement of Arbitral Award in October 2013 Do Van Dai, “Power of Vietnamese Court over Foreign Arbitration seated in Vietnam”, Democracy and Law Journal No 11/2012; Nguyen Vu Hoang, “Principles of Arbitration in Commercial Arbitration Law 2010”, Democracy and Law Journal, 2010 Please indentify and quote any rules of arbitral institutions (referred to above in question for Chapter 1) that relate to the subject matter of this Chapter Article 22: Applicable Law For disputes without a foreign element, the Arbitral Tribunal shall apply the law of Vietnam For disputes with a foreign element, the Arbitral Tribunal shall apply the law agreed by the parties; if the parties not have any agreement on the applicable law, the Arbitral Tribunal shall determine the law it considers the most appropriate If the law of Vietnam, the law agreed by the parties or the law determined by the Arbitral Tribunal does not contain specific provisions relevant to the merits of the dispute, the Arbitral Tribunal may apply appropriate trade usages to resolve the dispute Are there any restrictions in your jurisdiction on the parties' freedom to choose the applicable substantive law for (i) a domestic arbitration or (ii) an international arbitration seated in your jurisdiction? Please state the source of any such restrictions i In respect of disputes without any foreign element, the parties cannot choose the applicable law and the arbitral tribunal must apply Vietnamese laws in domestic arbitration cases1 Deciding the case amiable compositeur or ex aequo et bono may not be allowed as well in a domestic arbitration ii In contrast, parties to a dispute involving foreign elements are free to choose the applicable law and the tribunal is bound to apply such a law In case there is no agreement, the tribunal shall apply the law which it deems most appropriate provided that the dispute resolution and the award are not contrary to the fundamental principle of Vietnamese Laws Art.14 LCA Is there any case law or practice in your jurisdiction concerning an arbitral tribunal's obligation or power to apply mandatory laws from a legal system other than that of the chosen substantive law? According to Prof Do Van Dai and Prof Mai Hong Quy in their treatise on private international law of Vietnam, certain mandatory provisions of Vietnamese law must be complied even when parties chose other substantive laws.2 Otherwise, the arbitral awards may be considered as contradict to the fundamental principles of Vietnamese law, which severely affects the enforceability of such awards.3 For example, in the case of Energo-Novus-Moscow v Thien Son4, the Appellate Court at People’s Supreme Court in Hanoi has held that an arbitral award issued by the International Commercial Arbitration Court at the RF Chamber of Commerce and Industry was in violation of fundamental principles of Vietnamese law as the tribunal had refused to consider valid Vietnamese documents Another instance would be Tyco v Leighton case, where the recognition and enforcement of Queensland arbitral tribunal’ decisions was held to be in contrary to Vietnamese law because Tyco contracted with Leighton when it did not have permission of the Vietnamese Ministry of Construction In 2011, the Appellate Court – Supreme People’s Court of Vietnam has arguably gone too far in staying adamant that GAFTA Tribunal in resolving a dispute must still respect the principle of damages under Commercial Law of Vietnam, that is damages must be actual and direct In the authors’ respectful opinions, such finding of the Appellate Court in Toepfer v Sao Mai was unconvincing at best, not only because the substantive law of the case was not Vietnamese Commercial Law but most important, the requirement that damages must be direct cannot be considered as a “fundamental principle of Vietnamese Law” P.488 Id., See also Vivienne Bath/ Luke Nottage, Foreign Investment and Dispute Resolution Law and Practice in Asia, Routledge, 2012, Section 12.6 Is there a preferred or usual method in your jurisdiction for arbitrators to determine the applicable substantive law where the parties have not chosen the law? The usual method to determine the applicable substantive law without the agreement of the parties should be the method prescribed in Article 769 of the Vietnam Civil Code 2005 and endorsed by Article 15 of Decree 138/CP dated 15 Nov 2006 for civil relations with foreign elements5 That is, the applicable substantive law shall be the law of the country where the contract is performed Have there been any or many arbitrations seated in your jurisdiction in which the parties, a tribunal or a court has chosen or discussed lex mercatoria as the governing law? What about amiable composition/ex aequo et bono? Are there any court decisions on either the use of lex mercatoria or amiable composition / ex aequo et bono? “Applicable law” means the law of a state (but including international conventions and treaties, etc.) so does not include systems such as lex mercatoria, UNIDROIT or religious systems such as Shari’a or Judaic law Deciding the case amiable compositeur or ex aequo et bono may also not be allowed.6 How often are trade usages referred to in arbitrations seated in your jurisdiction, and are there any court decisions relating to their use? We cannot answer exactly how often trade usages are referred to in arbitration due to the confidentiality of arbitral proceedings The authors, however, would note that the use of trade usages, especially Incoterms in arbitration is not a rare sight Article 769.- Civil contracts The rights and obligations of the parties to a civil contract shall be determined in accordance with the law of the country where the contract is performed, unless otherwise agreed upon A civil contract entered into and performed entirely in Vietnam must comply with the law of the Socialist Republic of Vietnam In cases where a civil contract does not specify the place of performance, the determination of the place of performance of the contract must comply with the law of the Socialist Republic of Vietnam Civil contracts relating to immovables in Vietnam must comply with the law of the Socialist Republic of Vietnam Hew R Dundas and Dzungsrt & Associates, “National Report Vietnam”, ICCA International Handbook on Commercial Arbitration, International Council of Commercial Arbitration, p Vietnam-29 The Supreme People’s Court considers “trade usages” as one source of evidence in Resolution 04/2012/NQ-HDTP dated 03 December 2014 providing guidance on some regulations on Proof and Evidence of the civil procedure code The Supreme People’s Court also clarifies: − A custom7 is a habit in social life, production and daily life, is recognized and followed by the local community as a local convention; − A commercial custom is a commercial habit that is widely recognized in an area, a region, or a commercial sector, and has a clear content recognized by parties to define their rights and obligations in commercial activities; − International commercial custom is a practice of international commerce that is repeated in international trading and recognized by related international organizations; − Only customs that are not against the law or social ethics are acceptable When an involved party cites a custom to support his/her opinion on an issue, which has been regulated by legal documents, the court shall apply such legal documents, but not the custom Authors Note: Both “custom” and “trade usages” are used as translation for the same Vietnamese term i.e “Tập quán” – see The VIAC Rules, Article 22 and The LCA, Article 14 for translating “Tập quán” as trade usages