Khóa luận tốt nghiệp: Grounds for annulment of arbitral awards according to Vietnamese law on commercial arbitration - Current situations and recommendations

which is 365% more than the mumber of cases admitted in VIAC in 20113 However, accompanied with the rising number of cases is the rising number of annulled awards.* Annulment or setting

MINISTRY OF JUSTICE MINISTRY OF EDUCATION & TRAINING HANOI LAW UNIVERSITY

LL.M NGO TRONG QUAN

Ha Noi - 2024

Confirmation of ŠLpervisor

DECLARATION

I hereby declare that this is my own researchwork the conclusions and data in the graduationthesis are truthfiill and reliable /

Author of the Graduation Thesis

Nguyen Ha Ngoc Anh

LIST OF ABBRE VIATIONS

ADR : Alternative Dispute Resolution

cc : Civil Code

CPC : Civil Proceeding Code

IBA : International Bar Association

LCA : Law onCommercial Arbitration

VIAC : Vietnam International Arbitration C enter

UNCITRAL : United Nations Commission on International Trade Law

1.1.1 Definition and characteristics

1.1.2 Necessity of arbitral award annulment

1.2 Common reasons for annulment of arbitral awards 1.2.1 Arbitrabiity

2.2 Application of grounds of arbitral award annulment

2.2.1 Shortcomings of applying grounds of arbitral awards annulment

2.2.2 Notable cases of annulling arbitral awards

CONCLUSION OF CHAPTER 2

CHAPTER 3: RECOMMENDATIONS FOR IMPROVEMENT OF VIETNAMESELEGAL FRAMEWORK 423.1 Directions and policies on improvement of legal framework AD3.2 Recommendations for improvement of legishtions 433.2.1 Provision on the form of arbitral agreemteHifs oocce.ccce 43)

1 Necessity of the research

After six years of the implementation of the 2003 Ordinance of CommercialArbitration, in response to the needs of using arbitration as a means of alternativedispute resolution (hereby “ADR”) and creating a solid legal framework to support

this method,! the National Assembly of Vietnam passed the Law No 54/2010/QH12

dated 17 June 2010 on Commercial Arbitration (hereby “LCA”) The legislation is

composed of 11 chapters and 75 articles, regulating all matters concerning the

proceedings of arbitration After 13 years of the LCA enforcement, arbitration hasgained its popularity among traders and companies, both from Vietnam and fromother countries that have trading activities in Vietnam According to VietnamInternational Arbitration Center C'VIAC”) — Vietnam’s largest and most prestigious

arbitration center, the Center handled 292 cases in 2022,? which is 365% more than the mumber of cases admitted in VIAC in 20113 However, accompanied with the rising number of cases is the rising number of annulled awards.*

Annulment or setting aside an arbitral avardrefersto the legal process by which

a court sets aside or nullifies an arbitration award that has been issued by an arbitraltribunal The process acts both as a means of scrutinizing and assisting the arbitral

proceedings, detecting “faulty” decisions and halting their enforcement, while

reinforcing the validity of the “correct” and “appropriate” ones Such process isprescribed in all international and domestic legal instruments, namely theUNCITRAL Model Law on International Arbitration (hereby “Model Law”) and the

Convention on the Recognition and Enforcement of F oreign Arbitral Awards (hereby

“New York Convention”)

` Vietnam Lavryers Association (2009), Report No : 10/TTY.HLGVNon the Project of the Law on Commercial

Arbitration, p 2.

? Vietnam Intermutional Arbitration Center (2023), 2022 Amma} Report, retrieved 07 Jumuary 2024 from:

hitps /Áyvntr viac savimages/Resources/Amuual- Reports/2022/VIAC_Aramal-report-2023_230822.pef ,p 11.

? Supra note 2,p.11.

+ Vu Hoang (2021), Hin’ phẩm quyết rong tài thương mea theo pháp luật Việt Nem và một số kien ngĩủ, ViemamaLawyer Jounal, retrieved 07 Jutuary 2024, from https //isvn víilaty-pientctryst-trong-takthatong-nsai-theo- phap-hut-viet-mum-va-mot-so-kien-nghil6 10677477 hmal

Following the framework of Model Law, LCA and its guiding document,

Resolution No 01/2014/NQ-HDTP dated 20 March 2014 by the Council of Judges

of the People’s Supreme Court on Guidelines for the Law on Commercial Arbitration

(hereby “Resolution No 01/2014/NQ-HDTP”), provide the legal basis for the

process of arbitral avard annulment in Article 68 LCA and Article 14 Resolution No

01/2014/NQ-HDTP In recent time, Vietnamese legal community has observed a

surge in the number of arbitral awards that get annulled by the courts Such decisions,

however, often meet with criticisms from practitioners Since the establishment ofthe new law, a common critique comes from the way the court explains the groundsand proves the case fall within the provision, especially requests based in Article6§.2.đ Evenin the Resolution, laymakers have not cleared out on the meaning of the

provision, making interpretation of the law difficult and non-uniform.’ It is argued

that issues regarding arbitration agreements, procedural complications, and groundsfor annulling arbitral awards exist Since arbitration is essentially a "privateadjudicatory body," during the dispute resolution process, it still needs support andintervention from the courts, which serve as dispute resolution authorities with the

characteristics of state pow er.Š Such a dependence makes the interpretation of the law

at the judges’ hands, which might not be the same in each case of annulment This

court practice poses a critical question How should the grounds for annulment

provided in the LCA be construed? However, again, it ends up unanswered Although

the Judges’ Committee gave out instructions for application in the Resolution No

01/2014/NQ-HDTP, specifically Article 14 of the Resolution, it remains silent on the

application of some other grounds, especially in the grounds as listed in Article

Ving Nguyen (2024), Luật nian bắt cấp khiển doanh: nghiệp lo lắng lồn lựa chon trong tài tương mại, Pháp

nit TP Ho Chi Mh Onlzw,retrieved 20 December 2023, from hitps://plo

vvhut-nhitu-bat-cap-khuen-dowhnghiep-lo-lmg-Ichi-hua-chon-trong-tai -thmong-naai-post7 71392 html

* Nguyen Vin Plmc, Nguyen Nhất Duong (2023), Ria ro cho các phan quyét của trong tài thương mai, TheSaigon Times, retrieved 25 December 2023, from https:/thesaigontimes wnuui-ro-cho-cac-phan-quyet-cua-

tong-tai-thnong-nay 4

‘Buu Mian Hai (2015), Thận bản các nguyên nhên cia tình trang huy phẩm quosét wong tài ở Việt Neon hiện

nay, Vietmansese Jounal of Legal Science ,03 (88)/2015 — 2015, retrieved retrieved 20 December 2023 from

Iuttps /Aapchikhp hn hamalaw edu vrimodule /xemachuitie tb abao 2o3xi=e 14802

68.2.b° and 68.2.d!°, and the application of different judges and courts makes the

outcome of such annulment requests become unpredictable That is when a unifiedunderstanding and a solid approach is needed

Yeaming to find the answer to that question, the writer chose the topic

“Grounds for Annulment of Arbitral Awards According to Vietnamese Law on

Commercial Arbitration — Current Situations and Recommendations” for this

thesis

2 Literature review

Review of foreign literature shows that the matter of arbitral avard annulment

has been well discussed among both academics and practitioners Such discussion on

the annulment process could be found in manuscripts such as International

Commercial Arbitration by Gary Barn or International Arbitration by Redfern andHunter Further commentaries on the UNCITRAL Model Law on InternationalArbitration also give a comprehensive view on setting aside arbitral awards in theinternational legal framework, with the Model Law being the leading figure

Foreign research on the matter can be divided into three groups: overview onthe theoretical matters involved in the procedure of award annulment, commentaries

on the provision of the Model Law on annulment of award, and analysis of law from

countries in comparison to the Model Law In the first group, Gary Born!! and Alen Redfern and Martin Hunter! detailed the common grounds for arbitration, in relation

to international conventions and frameworks such as the UNCITRAL Model Law onInternational Commercial Arbitration and the New York Convention The necessity

of the annulment procedures has been examined” and has been used to explore each

of the grounds for challenge!* The commentaries on the annulment provision in the

Article 68.2 LCA: “The arbitration council's composition or procedures of arbitral proceedings is/are ancompliant with the parties’ agreement or the LCA”

‘© Art le 68 24 LCA: “The award contravenes the fundamental prac ples of Vietmese lav”

`! Gary B Bom (2021), Suternational Commercial Arbitration (3" dition), Wolters EEhuver, The Netherlands.

!2 Alan Redfem, Martin Himter (2015), Redfern coud Hioter on International Arbitration (6 Zdirion), Oxford

University Press.

© WAlliam W Park (2001), Wi Conots Review Arbitval Awards ,in Recht der Intemationalen Wirtschaft mad Streiterk digumg im 21 Jalelumdert: Liber Amicon Karl- Heinz Boeckstiege] 595 (Robert Brmer,L Yves

Fortier, Klaus Peter Berger & Jens Bredow ed.,2001)

4 George A Bemmam (2017), Aousiment of aeards , Intemational Arbitration and Private Intemational Law,

Brill

Model Law showed that the global approach on the matter is quite anonymous and

closely follows the theory and the reasons for judicial review of awards !* In the third

categories, annual reports ÌẾ and dissertations analyze the law from various

jurisdictions and compare with Model Law to recommend on the law of the countries

to enhance the efficiency of the annulment procedure In his most recent thesis,

Mohammad A Odeibat used the comparative approach between national law of

countries across Europe and the Middle East to look into each of the grounds for

annulment according to the UNCITRAL Model Law to propose a new model for

challenging arbitral awards.”

In Vietnam, since the enactment of the 2010 Commercial Arbitration Law,regulations on annulment of arbitral awards has been widely debated in academicwritings Recently, some articles, journals, andrelatedresearch works have addressedthe existing limitations in the lay concerning the annulment of commercial arbitral

awards in Vietnam, including: () the grounds of annulment are unclear,"* (43) lack of uniform understanding on the grounds of annulment,” and (iii) lack of a judicial review procedure with the decisions to annul by the court? Additionally, articles

such as “Perfecting Vietnam's Arbitration Law" by author Tran Viet Dung published

in Issue 01 (14) of the Legal Science Journal or "Current Situation of Annulment of

Arbitral Awards at VIAC" by Vu Anh Duong” can be mentioned However, most of

them focus on the whole process of annulment or just one of the five grounds forannulment as prescribed by law, and the cases mentioned in the articles were onlyupdated until 2018 Phan Thong Anh claimed that the grounds for annulment of

‘Pietro Ortolani (2020), Application for Setting Aside as Exclusive Recourse aginst Arbitral Award,

UNCITRAL Mode] Lav on Intemational Commercial Arbitration: A Commentary ,p 958-908, Cambridge:

Cambridge University Press

!* Global Arbitration Review (2023), The Asia Pacific Artitration Review 2024 retrieved 10 March 2024 from.

hitps //globalarbarationreview comieview the-asia-pac#ic-arbitration-reviews/2024

Mohmmud A Odebat (2023), 4 Legislative Comparative Assessment of Challenging Arvitral Awards Under UNCITRAL Model Law: A.New Hamnontsed Proposed Model for Challenging Arbitral Awards ,Doctar

of Philosophy Thesis, University of Manchester

`* Supra note 7, Nguyên Thi Fimong (2013), Hig pin quoét trong tài theo quay định của pháp luật Việt Nem:

‘Master’s thesis, Hanoi Law University, Hanoi

° Nguyên My Anh (2020), “Cin cirhiy phán quyết trong tải tsường mai quốc tế - Góc nhàn từ pháp hiật Thuy

5ý vi kash nghiim cho Việt Num”, Bachelor’s thesis Ho Chi Minh Cay University of Lavt, Ho Chi Minh Cay,

“Do Fim Chien (2017), Hip phn quyét trong tài Dương mại theo pháp kiật Điệt Nem từ tực tiễn Thành phổ

#6 Chi Minh, Master thesis, Viewum Academy of Social Sciences, Hanoi

*'Vu Anh Duong 2015), Thực trạng juiy phím quyết trong tài tại VIAC, Aruuoed of Arbsra) Award:

Scientific Conference ,Ho Chi Mạnh City University af Layy, 20 Jmuary 2015

arbitral awards in Vietnam were vague and hard to apply, which led to the judges

annulling the awards without much serious consideration ? Tuong Duy Luong

pointed out that the application of the grounds for cancelling the arbitral awards hasbeen heavily influenced by the viewpoint of the Code of Civil Procedure, to which

the author disagreed 3 Dang Xuan Hop compared the provisions on recourse against

arbitral awards between the Model Law and the LCA, pointing out the inconsistent

and unclear terms used in the LCA The most recent article by Phan Huu Thu only

mentioned the gap in regulations on arbitral awards, but only in theory without

mentioning the court’s decisions.

3 Scientific and practical contrib utions of the research

In terms of scientific contributions, the thesis would contribute to the study onthe grounds of annulm ent of arbitral awards:

- A comprehensive review of the theory on the grounds of annulment of anarbitration award and the current provisions on this matter according to Vietnameselav;

- Anin- depth analysis of the current situation of applying such grounds throughthree notable decisions to annul arbitral awards that have been recently issued thelatest of which was in July 2023, and pointing out the drawbacks andinappropriateness in application of such grounds,

2 Phan Thong Anh (2016), Hig’ Phán quyết rong tài (Aroudment of Arbitral Awards), PhD Dissertation, Ho

Chi Minh City University of Law, Ho Chi Minh Cy

" Tuøng Duy Luang (2016), “Sột số căn cứ hữy phán quyết trong tải được quy định tailhoin 2 Điều 68 Luật

Trọng tài thương mai” (Some grounds for munilling the arbitral avrards prescribed m Article 68 2 of the Law

on Commercial Arbitration), Binh luận Bộ luật Tổ ning dan su, Luật Trong tài thacong maa và tcc tiến xét nit

(Commenteay ơn the Code of Civil Procedhre, Lew on Commercial Arbitration and judicial practice), Ta Pháp Publishing Press, Hanoi.

* Dang Mun Hop , Gary Bell (ed) (2018), 12- Viemam: The Viemamese Lane on Commercial Arbitration 2010

Compared to the UNCITRAL Model Leo on International Commercial Arbirration 2006, The UNCITRAL

‘Model Law and Asim Arbitration Layrs - implementation and Comparisons , Cambridge Publishing House ,p

375 - 397

2 Bhan Him Thu (2023), Obstacles cond orientations for refining le gal re gulations on cabitral coveerds ,Fadic ial Academy Legal Profession Review, Vol 06/2023, p 09-14, retrieved 10 Jawary 2024 from Iittps /Aocvientuphap edu wvtapchinghe haat/L ists/Cac SoD a MuatBavAttachments/1$2/Tap% 20chi% 20Nghe

%2Obrath 20s0% 206% 20nam% 202023-n pdf

- Suggestions on improvements of legislation and recommendations for

enhancement of enforcement ability of the judges based on the practice in foreignjurisdictions, in both common law and civil lav systems

4 Objectives of the thesis

By choosing the topic “Grounds for Annulment of Arbitral AwardsAccording te Vietnamese Law on Commercial Arbitration — Current Situationsand Recommendations”, the author aims to achieve these following objectives:

- Firstly, to give a general knowledge of annulment of arbitral award through

definition and theoretical background on grounds for annulment of arbitral award,

- Secondly, to analyze and comment on the grounds of annulling an arbitralaward according to Vietnamese law in comparison with the Model Law ofInternational Commercial Arbitration and the lew of other countries on arbitration,

- Thirdly, to clarify the current situation of applying the grounds of cancellingarbitral awards in Vietnam through the analysis of some notable cases in recent time;and

- Fourthly and finally, to give some recommendations for lavmakers to amendthe law on grounds for annulment of arbitral awards

5 Subject matter and scope of the research

5.1 Subject matter of the research

The subject of this dissertation is the theoretical and practical matters ingrounds for setting aside arbitral awards, current regulations as well as cases ofannulling the arbitral awards in Vietnam to give comments on the application of sucharbitral awards cancelling grounds In particular, the theoretical matters includedefinitions of award and annulment of award, and the reasons underlying the judicial

review of arbitral award The practical matters include the common grounds to set

aside an awards, with examples from both the Model Law and law from foreign

countries.

Moreover, the dissertation further looks into the international practice of

applying grounds for annulment of arbitral awards, especially from the UNCITRAL

Model Law on International Arbitration, for comparison and recommendation to

enhance the effectiveness of Vietnamese current regulation

5.2 Scope of the research

- Geographical scope of the research: The thesis studies and analyses theregulation and practice of applying grounds for award annulment in Vietnam, as wellasregulationsin some selected states such as Germany and England, and internationallegal frameworks like the Model Law and the New York Convention

- Temporal scope of the research: The thesis focuses on the time from 2010

until 2023, when needs to amend the law arises

This thesis only covers the challenge to an award at its seat of arbitration, notthe recognition and enforcement of arbitral award It should also be noted that theprocedure of ammulling an arbitral award, which includes the procedure to request theannulment and the procedure of consideration of such request, is not covered in thisthesis

6 Methodology

First, the dissertation uses the doctrinal method The application of thismethod

is presented through interpretation of the regulations’ wordings, which are Law onCommercial Arbitration, Resolution No 01/2014/NQ-HDTP and guiding documents

from the Ministry of Justice Apart from the legal texts, the thesis also analyzes

Vietnamese court decisions throughout the main text, both in the form of briefmention or comprehensive analysis of notable legal issues

Second, the dissertation uses the legal comparative method to compare theVietnamese regulations to the international practice, including the Model Law andlaw from countries that have a well-developed framework for arbitration, such asSingapore, Germany and England The comparison mostly focuses ơn the legal basisand regulations rather than decided cases

7 Structure of the thesis

Apart from the Introduction, Conclusion, List of Abbreviations, List of

Reference, and the Appendixes, the thesis consists of three chapters:

Chapter 1: Overview on grounds for annulment of arbitral awards;

Chapter 2 Current situation of applying grounds of arbitral awardsannulment in Viemam; end

Chapter 3: Recommendations for improvement of Vietnamese legal framework

CHAPTER 1

OVERVIEW ON GROUNDS FOR ANNULMENT

OF ARBITRAL AWARDS

1.1 Overview of annulment of arbitral awards

1.1.1 Definition and characteristics

a Arbitral award

As parties agree to resort the dispute to arbitration, they agree to give the arbitraltribunal the power to decide on their matter, normally in the form of a written decision

Such decisions can be classified according to their characteristics, namely procedural,

jurisdictional, and substantive decision, or according to the time of issuance, which

are interim and final awards.”° Such power is also manifested in all international

frameworks such as the Model Law and the New York Convention, as well as other

international arbitration institutions’ rules?” However, those legal instruments do not

give out a unified definition of an award The New York Convention only points out

in Article 1.2 that:

The term “arbitral awards” shall include not only awards made by arbitratorsappointed for each case but also those made by permanent arbitral bodies to

which the parties have submitted”.

During the process of drafting the Model Law, there were attempts to define anarbitral award, according to which the definition would be:

“Award” means a final award which disposes of all issues submitted to thearbitral tribunal and any other decision of the arbitral tribunal which finallydetermines any question of substance or the question of its competence or anyother question of procedure but, in the latter case, only if the arbitral tribunal

terms its decision an award”

2 Supra note 12,pare 9.02

2 article 34 Model Law, Article 1 New York Convention

** Article 1 2 af the Convention on the Recognition and Enforcement of Foreign Arbitral Awards

** Broches (1984), ‘Recourse against the award; Exforcemnt of the auvard: UNCITRAL ’s Project for a Model

Law on Intemational Conmuercial Arbiration’ 2 ICCA Congress Series 201, at 208

Such lack of a definite understanding of an arbitral award leaves the task of

defining to the arbitrators, academics and practitioners Although they have different

approaches to the matter, they reach quite the same conclusion For academics, an

arbitral award can be understood simply as the final decision of the arbitral tribunal,

which resolves all of the parties’ substantive claims in the dispute and accordingly

ends the tribunal in the arbitration proceeding Redfern and Hunter pointed out that:

All ‘awards’ are ‘final’ in the sense that they dispose ‘finally’ of the issuesdecided in them (subject to any challenge or procedure for correction orinterpretation), and they are ‘binding’ ơn the parties A final award, in thissense, is usually the outcome of arbitral proceedings that have been contested

throughout?

According to practitioners, arbitral awards can only be defined through its

characteristics >} First, the arbitral award can only be rendered by an arbitral tribunal,

not a court or an arbitration institution Although controversial, emergency

arbitrator’s decision does not count as an arbitral avard 32 Second, the award must

address a specific request by the parties to the arbitration, which is normallyconceming jurisdiction or substantive matters of the case Third, it should be finaland binding on the parties to the arbitration Finally, it can be subject to judicial

review by the court through setting-aside and enforcement proceedings 33

To sum up, an arbitral award is a final and binding decision by the arbitral

tribunal, which resolves the parties’ specific requests and subject to court review in

setting-aside or enforcement proceedings

Concerning its characteristics, an arbitral award is of a final and binding nature

First, the arbitration award is the decision of the arbitration tribunal to resolvethe entire dispute and terminate the arbitration proceedings According to the

© Supra note 12,para 9 03

`! Vemms Valentina Wong, Dalibor Valinéié (2023), The Arbitral Award: Form, Content Rffect, Global

Arbiration Review, retrieved 30 December 2023, from https://globalarbitrationreview com/gute Ae challenging-and-enforcing- arbitration-avrards /3rd-e dition /articls Ahe-arbitral- avrard- form content- effect

-guide-* Bemd Ehle, Remar Wolff (d) (2019), Mew York Convention: Article-by-coticle Commentary (nd ed.), Bloomsbwy Publishing, Article I,para 71a.

`' Supra note 31

statutory procedures, an award is the final step, issued at the end of the arbitration

proceedings Formally, the arbitration award creates a legal event by which the

dispute ends In terms of content, the arbitration award provides objective conclusionsabout the dispute, stipulating the rights and obligations that the disputing parties must

perform

Second, the arbitration award has a binding value and forces the disputing

parties to implement it "The arbitrator's decision is binding" is one of thefundamental operating principles, which is of vital significance in arbitrationproceedings Every award is binding, meaning it forces the party to carry out thedecision given in the award regardless of whether it fully, partially approves ordisapproves of the plaintiff's request Once the award is issued, the parties have noright to appeal before any organization or court (except for the right to request acompetent court to cancel the arbitration award if there are sufficient grounds) Morespecifically, in Article 34.2 of the UNCITRAL Arbitration Rules, it is stipulated that

“All awards shall be made in writing and shall be final and binding on the parties

The parties shall carry out all awards without delay.”3Ý

However, the arbitration proceeding is influenced by the procedural law of theseat (lex loct arbitri), since “every state exercises its sovereignty over the activitiestaking place in its territory, and no activity will be allowed in any state if it runs

contrary to its public policy or mandatory rules”TM To ensure the result of a fair and

impartial adjudication process, the arbitration tribunal must comply with the

principles and procedures for resolving disputes according to arbitration law

b Annulment of arbitral award

Most countries laws stipulate that arbitral awards are final and cannot beappealed or protested reflecting the same spirit as the New York Convention and the

article 3.10 LCA

** Article 34.2 UNCITRAL Arbiration Rules (amended 2021)

+ Wafa Yaqoob Janahi, Minvera Khalifa Al Khalifa (2021), The Applicable Law to Arbitration Proceedings:

Party Autonomy and Lex Loci Arbiti (Extent and Limitations), Kilaw Jounal - Vokune 10 - Issue 1 — Serial

Number 37 -p 59 retrieved 20 March 2024 from https :/ownal kilaw edu 68-Dr.-Wafa- Janahi- Mimeera-Al- Khalifa pat

kevAyp-contentAmploads/2022/04/41-UNCITRAL Model Law, whichis called, by an US Cout,?” “a pro-enforcement bias”

—the tendency to favor the enforcement of judgments Article 34 of the UNCITRAL

Model Law emphasizes that a request to set aside an awardis the only way for parties

to exercise their right to object to an arbitral award ** Thus, the parties can still object

to the arbitral award, but the mechanism of this procedure is limited to the maximumextent to show respect for the final decision of the arbitral tribunal For illegalarbitration awards, the parties can object to the arbitration award by requesting acompetent court to annul part or all of the award

“Annul” is “to declare or make legally invalid or void" Annulment, setting

aside or vacatur of an arbitration award 1s an action where a court has the authority toissue a decision to declare part or all of the award invalid If annulling all of the avardmakes all the tribunal’s decisions invalid, setting aside part of the avard onlyinvelidates and severs the decisions that are inappropriate according to the court fromthe award Once a judgment is annulled, it will be considered to have no legal effect.Accordingly, the parties do not have to enforce the judgment The award may also be

refused enforcement in foreign enforcing states according to Article V(1)(e) of New

York Convention, ! although among academics, annulled award in its seat of arbitration can still be recognized and enforced in another country ft

The court's procedure for annulment of an arbitral award is not a procedure forre-trial of the case Unlike the appeal and protest procedures, the court consideringthe request to annul the judgment does not have the authority to change the content

of the judgment, nor does it have the authority to re-try the content of the dispute

from the point of view of the court, but only compare with the grounds for annulment

” Giencore Gram Rotterdam BV v Shivmuth Rai Hanurain Company, US Cowt of Appeals, Ninth Circuit, 26

¥ Anacle V()@) New York Convention: “Recognition and enforcement of the avrard may be refused, at the

request of the party agaist whom it is awoked, only # that patty furnishes to the competent authority where

the recognition and enforcement is sought proof tut: [ ] The avrard hasnot yet become binding on the patties,

or has been set aside or suspended by a competent authority of the country mn which or under the lay of which,

‘that avrard was made.”

+! Gazy B Bom (2021), biternationeal Commercial Arbitration 3rd Edition) , Wokers Khnver, The Netherlands,

§25.11[B),§26.05(C) [8]

of the arbitral award according to the provisions of law On the contrary, the courtwill decide not to cancel the arbitration award if the reason given by the requestingparty does not fall into the grounds stipulated in the applicable law After the award

is set aside, any submission of the dispute to arbitration must be resolved afresh in anew dispute resolution process by a new arbitral tribunal

1.12 Necessity of arbitral award anunhuent

To begin with, the need for a method of judicial review of arbitral award

stemmed from the need of domestic courts to maintain a umform legal system that

delivers fairness to the disputing parties Since the arbitral tribunal — a private body

is performing a public function ordinarily entrusted to national courts, there shouldexist a method to ensure the due process is carried out, the adjudication by suchprivate body is fair and just, and that the decision rendered has legal worth and is

enforceable in an efficient manner? To be more specific, in a community already

governed by established legal systems, introducing a new system that competes andpotentially conflicts with existing ones would be umvarranted However, courtactions aiming at bringing back those who deviated from the path of law and orderhighlight the importance of maintaining the integrity of legal processes

Moreover, the judicial review of awards could enhance the efficiency of

arbitration in general Normally, after an awardis rendered, the winning party would

prefer finality while the losing one would like a close scrutiny for fairness, and

efficiency of such award can only come when the to needs can compromise?

Unlike the common belief that judicial control negatively affect arbitration, the value

of arbitration as a dispute resolution method remains intact In fact, parties hesitant

to engage in arbitration agreements due to concerns about arbitrators interpretations

of the law might now find arbitration more appealing This shift could be attributed

** George A Bema (2017), Spuidwent of covards, Intemational Arbzration and Private Intemational Law, Brill,p 492, para, 582

‘William W Park (2001), Wy Cots Review Arbitral Awards , 2 Recht der Intemationalen Watschaft md

Sueiterledigmng m 21 hlelomdat: Liber Amiconm Karl-Heinz Boeckstie ge] 505 (Robert Brauer, L Yves Fortier, Klaus Peter Berger & Jens Bredotr ed., 2001).

to the anticipation of judicial oversight if an arbitration award deviates from

established legal principles.*

To sum up, to strike a balance between ensuring adherence to legal norms and

preserving arbitration's benefits such as efficiency and expertise, it would be

beneficial for statutes to be enacted in each state allowing for judicial review of

arbitration proceedings This approach would promote the application of established

legal principles while safeguarding the advantages of arbitration, including

expeditiousness and cost savings.

1.2 Common reasons for annulment of arbitral awards

To effectively address the aforementioned needs of legal systems, international

and domestic lawmakers have listed out matters in an arbitration that may possibly

lead to annulment Specifically for the Model Law, whichis the main framework formany countries’ law on arbitration, the drafters faced a significant challenge indetermining the grounds for annulling arbitral awards Initially, the Secretariatproposed aligning the grounds for setting aside with those in the New YorkConvention to enhance acceptability and simplify adoption Despite consideringadditional grounds for setting aside, such as infra petita, conflicting decisions, newevidence emerging after the award, and fraud, bribery, or forgery, the Working Groupultimately decided to stick with the initial proposal to maintain consistency with theNew York Convention This decision aimed to prioritize predictability and efficiency,

with some proposed grounds overlapping with the public policy clause While there

was consideration for further grounds for annulment, the drafters also examined each

of the grounds for refusal in the New York C onvention to assess their applicability in

the context of setting-aside proceedings and the need for adjustments.

Although each jurisdiction may have different grounds for annulment of an

arbitral award,* the approachis more or less the same as Article 34 of Model Law or

+ Fred Herzog (1955), Judicial Review of Arbitration Proceedings - A Present Need, 5 DePaul L Rev 14

(1955), retrieved 12 February 2024 from https :/Avia Library depaul ecivlaw-review AvolS/ss1/2,p 31

+S Supra note 44

+* Pietro Ortolani (2020), Application for Setring Aside as Exclusive Recotgie ageinst Abia Avard

UNCITRAL Model Law on International Commercial Arbitration: A Commentary ,p 58-898 , Cambridge:

Cambridge University Press,p $60

+' Supra note 12,para 10.34

Article 5 of New York Convention The grounds can be divided into three main

common categories: grounds that concerns the arbitrability of the matter in dispute,grounds that concerns the procedures or the process of arbitration, and the grounds

that concerns the correctness of the decision givenin the arbitral awards.®

12.1 Arbitrability

Arbitrability is the noun of the adjective “arbitrable”, which means “subject to

decision by arbitration”.*° In the context of an arbitration, the term refers to whether

the tribunal has the jurisdiction to settle the case The jurisdiction of an arbitraltribunal is the authority of the tribunal to consider and decide on the content as wellasrelated legal issues of a dispute within the scope raised andrequested by the parties.The basis for forming the jurisdiction of the arbitration council is the agreement ofthe parties In the absence of an arbitration agreement, the arbitral tribunal lacksauthority, making it a crucial initial consideration in proceedings Parties typicallyraise objections to jurisdiction early on in the proceedings, prompting the tribunal toaddress them either separately or as part of the final avard Whether jurisdiction isaddressed in a separate decision or within the award, it may be subject to court review

and final determination, as outlined in Article 16(3) of the Model Law $0 If the

decision on jurisdiction is included in the final avard, it can serve as grounds for theannulment of the arbitration award If jurisdiction is decided as a separate decision,parties can only appeal the decision at a competent court rather than to request anannulment The arbitral tribunal is considered to have no authority to resolve thedispute when () the arbitration agreement is invalid, (ii) the arbitral tribunal exceedsits jurisdiction and (iii) the subject matter of the dispute is not resolved by

arbitration *!

+ Supra note 12,para 1041

4° Merrim- Webster.com Dictionary, Arbitrable, retrieved 20 December 2023 from https:/inme meri

webster conv/dictionarylzbšrable

5“ Article 16G) Model Law: “The arbitral tribumalmay mule on a plea referred to in paragraph (2) of this article edher as a prelimiway question or in an avard on the merits If the srbšra] tiv rules as a prelmmmary question that # has jurisdiction, amy party may request, within thity days after having received notice of that ruling, the cout specified in article 6 to decide the matter, vthich decision shall be subject to no appeal; while such a request is pending, the arbitral tbunal muy continwe the arbirelproceedings nd nuke an avvard” '! Supra note 12,para 1041

- Regarding invalid arbitration agreement First, it is necessary to clarify the

concept of arbitration agreement Arbitration agreement is the short name of thedispute resolution agreement by arbitration established by the participating parties.Accordingly, when establishing this agreement, the parties share the same intention

that when a dispute arises, arbitration will be chosen as the method of resolution

According to Article II(1) of the New York Convention, member states mustrecogmize an arbitration agreement as valid when the arbitration agreement (2) is inwriting, (ii) covers the dispute that is existing or may arise in the future, (iii) thesedisputes arise from a certain legal relationship and (iv) the subject matter of thedispute can be resolved by arbitration In addition, under the Model Law, thearbitration agreem ent must be signed by parties with full legal capacity and must notcontravene the applicable law to which the parties have agreed If it is deemed that

the arbitration agreement does not meet the above requirements, the agreement will

be considered invalid, thereby leading to the award being annulled In case thearbitration award is annulled due to the invalidity of the arbitration agreement, theparties cannot refer the case back to arbitration unless a new arbitration agreement issigned

- Regarding excess of anthority by arbitration tribunal: The arbitrationtribunal's settlem ent and decision onissues other than the requests of the partiesis anact of exceeding its authority According to Article 34(2)(a)(aii) of the Model Law,the avard resolves a dispute that is not related to or does not fall within the scope ofthe contents requested by the parties to be resolved by arbitration or includesdecisions regarding issues beyond the scope of the parties requests will be annulled.However, in the judgment, if the requested issues can be separated from the rest of

the awardTM, only the excess part is annulled, the rest of the judgment remains valid.

During the process of resolving the case, if the parties discover that the arbitraltribunal has considered issues that are beyond the scope, the parties can complain to

Article 34@2Xa), para (Zit) Model Law, For example, in an award, the tribunal decided that: 4) Respondent

is responsible for the breach and must pay damages, (ii) Claimant is responsible for the damages outside the scope of the contract, and (aii) Respondent nmst pay back half of the arbitration fee In this case, if the cout find that decision (0) is not under the tribunal’s Rrisdirtion, only decision (i) would be armmilled, while the other tưo decisions would still be valid and binding on the parties

the arbitral tribunal to adjust and avoid negative consequences that may affect thearbitral award.

- Regarding arbitrability of the subject matter of dispute: An award may be

annulled if the subject matter of the dispute cannot be resolved by arbitration 5Š For

example, according to German law, “an arbitration agreement regarding legal

disputes relating to the existence of a tenancy relationship for residential spaces in

Germany is ineffective” The types of disputes that can be resolved by arbitration

depend on the laws of each country Many countries do not allow certain types ofdisputes to be resolved by arbitration because they are incompatible with theconfidentiality of this method, such as disputes about bankruptcy, marriage and

family, etc.** Thus, if the subject matter of the dispute falls into cases that cannot be

resolved by arbitration, the arbitration avard of that dispute will be annulled

1.2.2 Procedural grounds

A common reason for setting aside an award is that the procedures of thearbitration were not up to due process The standard of due process is established toensure that parties are treated equally and are given a fair hearing This standardincludes that the arbitral tribunal is legally established, that the proceedings are inaccordance with the parties agreement, and that the parties will receive full notice of

the proceedings and dispute resolution sessions and arbitration award Any award

rendered from arbitration that does not follow one of the three factors mentionedmight be annulled

First of all, an award may be annulled when the arbitral tribunal is not legallyestablished “Legally established” standard can be either the parties’ agreement or theregulations as prescribed by the arbitration center’s rule or the arbitration law of theseat of arbitration As the arbitral tribunal’s power comes from both the parties’

© Article 3624), para (): “An arbitral avvard muy be set asiile by the court specified in article 6 only # [ ]

the party making the application fumishes proof that [ ] or the said agreement is not valid under the Jaw to vihich the parties have subjected or, failing my indication thereon, under the law of this State”

* Section 1030(2), Book 10, Geman Civil Procedure Code (Zivilprocessorcbuaig)

'* Supra note 11, Chapter 61

SJaliya Arbiswan, Aleondre Genest, Enmamel Giakowmakis (2023), Due Process and Povediavl

reguarines, Global Arbitration Review, = revieved «13 Febmuuy 2024, from.

https /iglobalarbirationreview com/guide the-guide-chullenging and enforcing arbitration

avwards/3rd-edition /urticle ut -process-and-proce dural-aregularties

authorization and the state’s recognition, disregarding such miles may affect theintegrity of the arbitration and the validity of the award For example, if the partiesagree on certain standards for arbitrators and the appointed arbitrator does not meetthose criteria, he or she will be considered non-compliant with the parties agreement.

Likewise, if the arbitral process deviates from the agreed-upon rules between

the parties or, inthe absence of such agreement, diverges from the relevant arbitration

laws, an award typically becomes eligible for annulment Nonetheless, there existsignificant constraints regarding the annulment of awards on these grounds Initially,courts tend to refrain from intervening in tribunal discretion, with precedentsindicating that courts should yield to the arbitral tribunal's understanding of theparties procedural arrangements Furthermore, a procedural lapse can lead toannulment solely if it could have influenced the arbitration's outcome

In addition, during the proceedings, if the parties are not fully informed aboutthe appointment of arbitrators/arbitration proceedings or do not have the opportunity

to present their opinions, this situation may also become a basis for annulment of thejudgment To make the most objective and impartial arbitration award, the arbitrationtribunal needs to hear the opinions of all parties involvedin the dispute Therefore, toensure fairness, notices and instructions on proceedings need to be fullycommunicated to all participating parties, and the parties need to fulfill theirprocedural and defense obligations The arbitration rules and the lays governing thearbitration process provide details of the proceedings, including notice of the process

to the parties However, if one of the parties hasreceived the notice butisintentionallyabsent or does not participate in the proceedings, it will lose the right to defend itself

before the arbitration council and pose a challenge to fairness and impartiality of

arbitral awards.”

1.2.3 Substantive grounds

Although the procedure of annulment of award normally does not concern withthe content of the decisions themselves, in limited circumstances, substantive reasons

© Stephan Balthasar (2021), Jiternational Commercial Arbitration: International Corwentions, Country

Reports cad Comparative Analysis, Ind ed., Bloomstwy ,2021,p 59

could be the ground for annulment of arbitral awards Normally, such a case could

happen if the court sees that the enforcement of the requested award couldjeopardize

the legal system or threaten the public policy of the country where the arbitration

takes place Thisis also the very limited circumstances where the review onthe merits

of the case is allowed 5S

- Errors in law: This ground does not originate from the Model Law, but rather

case law from countries that belong to the Common Law legal system such as theUnited States, Singapore, etc Although rare to find this situation occurs when

arbitral tribunals show “manifest disregard of the law” 5 In England, the decision of

the tribunal on the question of law would only be reconsidered is “obviously wrong”,the question is one of “general public importance”, or the decision “is at least open

to serious doubt” This inconsistency will have serious consequences in certain

areas, such as for the interpretation of some provisions in commonly used standardform contracts

- Public policy: An arbitral award may be annulled if the court of the countrywhere the arbitral proceedings took place, especially countries applying the ModelLaw, finds that the award conflicts with its own policy Public policy can beunderstood as the principles that legal systems use to impose general rules on society

with the purpose of protecting the interests, morality and security of the community!

Public policy can be applied internationally, especially in international justice Thereare two levels of public policy, international public policy (ordre public external) and

national public policy (order public internal) Normally, a country’s public policy will

be used to prevent the application of foreign law, although in exceptionalcircumstances only This is, first of all, to prevent the usage of foreign law that does

** Gilles Cunibati (2022), Article 34: Application For Setting Asidle As Exchutve Recourse Against Arbitral Aweod, Tht UNCITRAL Model LayY on International Commercial Arbitration , Eévward Elgar Publishing, para.

34.60,p.482

* Supra note 12,para 10.74

4° Supra note 12 para 10.75 Section 69GX(c) England’s Arbitration Act: “Leave to appeal dullbe given only

‘if the court is satisfied _ that, on the basis of the findings of fact m the avvard: (the decision of the tribunal

on the question is obviously virong, or (dijthe question is one of generalpublic importance and the decision of the tibumal és at least open to serious doubt”

°¡ Akkermans, B (2019) Public policy (ordre public): A comparative analysis of national, private imernational lav, and EU Public Policy Bwopem Property Law Jowmal, 8G), 260-300.

Iuttps //doi org/10.1515/plj2019-0015,p 263

not comply with the fundamental values of the receiving legal system, but also,

secondly, in the application of foreign law in the receiving legal system.

- Limitation of public policy application: Specifically, according to the Model

Law,® an arbitral award may be annulled if the award violates the public policy of

the country in which the arbitral proceedings take place, but a violation of any

mandatory provision of law® may not always be a violation of public policy 5 Amore

concrete example of this view can be seenina case by the Malaysian Supreme C ourt,where an award is considered against public policy if it is “contrary to morality, orwhen the decision obviously harms the common interests of the community , orinjures innocent people, or violates the that country’s most basic notions of morality

and justice” rather than just opposing to a legal provision Generally, there are two

main approaches to the scope of public policy as a ground for annulment: () thenarrower sense, where an award would only be vacated if the arbitration award itselfviolates statutory law, or (ii) the broader sense, where public policy can be

synonym ous with the public’s interest.”

- Types of violations of public policy: In principle, the content of public policyincludes both procedural and substantive issues During arbitration, proceduralviolation occurs if the parties do not receive adequate notice of arbitrator selection ornotice of meetings Such violationis also considered a violation in public policy since

it jeopardizes the equality principle, thereby becoming a basis for annulment of an

arbitral award In addition, violations of public policy regarding substantive matters

occur when the arbitral tribunal engages in acts of corruption, fraud, or bias

Most developed countries in arbitration have quite similar concepts of public

policy In Germany, courts also assess compliance with fundamental principles of

justice, ethical standards, and national values A decision will be considered a

© Supra note 61,p 273

© article 34(2)(0)(ii) Model Law

+ This temm equates to ‘umdatory rales”, which means rales that camnot be derogated from or avoided by am

agreement

© Supra note $7,p.60.

© PT Asuransi Jasa Indonesia (Perstro) v Dexia Bunk SA [2006] SGCA 41, para 59.

*ï Arm C Hodges (2000), Jiudicial Review of Arbitration Awards on Public Policy Grovoxis: Lessons from the Case Len ,16 Ohio Sx J Disp Resol 91 (2000).

© Supra note $7,p.60

violation of the public interest if it conflicts with these standards, includes a violation

of principles that are fundamental values of the country or is contrary to the concept

of justice In the UNIDROIT Rules of International Commercial Arbitration,

fundamental principles of ethics and justice are also stipulated as the fundamental

principles for international arbitration awards.

°° Eckart Brodemmarm (2023), The Midtiple Roles of the UNIDROIT Principles of International Commercia Contracts in Arbitration, Khurtr Arbaration Blog, retrieved 25 March 2024 from

https /arbxrationblog khnverarbitration com/2023/00/13 Ahe-nsikip ke -roles-of-the-umidro#-prax mitermational-conmuercial-comtracts-mvarbitration/

ples-of-CONCLUSION OF CHAPTER 1

To conclude, an arbitral award is a final and binding decision by the arbitraltribunal, which resolves the parties’ specific requests and subject to court review insetting-aside or enforcement proceedings Annulment of arbitral award is an actionwhere a court has the authority to issue a decision to declare part or all of the award

invalid The process of annulment is not the appeal process and does not attempt to

change or re-try the content of the award

The annulment procedure was created for domestic courts to maintain the

fundamental principle of the law and the integrity of legal processes Such an act canpromote the use of arbitration, since annulment might anticipate the likelihood ofcourt interference if the award violates established legal principles

The common grounds to annul an arbitral award can be divided into three

categories: grounds relating to arbitrability, grounds relating to procedural matters,

and grounds relating to substantive matters The first category includes invalidarbitration agreement, excess of authority by arbitration tribunal, and arbitrability ofthe subject matter of dispute The second type of grounds to annul an award involvesiiregularities in the proceedings, both before and after the tribunal has beenconstituted The third category deals with the content of the decision, includingannulment due to error of law or breach of public policy

InChapter 2, based on the theoretical background as analyzed in Chapter 1, theauthor would examine the legal provisions on the ground for annulment of arbitralaward in Vietnam ese law, as well as comment on the status quo and the shortcomings

of the application of the grounds in the decisions rendered by Vietnamese courts

CHAPTER 2

CURRENT SITUATION OF APPLYING GROUNDS

OF ARBITRAL AWARDS ANNULMENT IN VIETNAM

2.1 Regulations on grounds of arbitral award annulment

The grounds for setting aside an arbitral award are prescribed in subparagraph

ato d of Asticle 68.2 of the LCA,” with explanation and guidance in Resolution No 01/2014/NQ-HDTP.”Ì In general, the grounds can be divided into the three categories

as analyzed in Chapter 1 above:

This category concerns the tribunal”s jurisdiction to hear the case and decide on

the matter of the dispute, andincludes the grounds in Article 68.2.a and Article 68.2.c

of LCA

a There is no arbitration agreement or the arbitration agreement is invalid

As set out inChapter 1, the legal basis for arbitration isthe arbitration agreement.Thisis because the arbitral tribunal doesnot have the inherent right to settle a dispute,which normally belongs to the judicial system of the state, or in other words, nationalcourts The only means to give the tribunal such right is an arbitration agreement, inwhich the parties agree to resort the dispute to arbitration The LCA has recognizedarbitration agreement to be the obligatory condition for arbitration, as prescribed inArticle 5: “A dispute shall be settled by arbitration if the parties have an arbitrationagreement” Accordingly, without a valid arbitration agreement, the arbitral tribunal

is not given the right to hear a case, making their adjudication of the case mull and

void, or in other words, without legal binding effect, which is against the maincharacteristic of an arbitral awards

` Official text n Vietumnese taken from website

https /Aban chinkpln wavidef muh aspx page H=27160docid=98345 Alltranslation of the law in this

thesis is the author’s work, therefore bears no legalieights and canmot be used to replace the Viewumese

texts.

Official text in Vietnamese taken from website https //congbao chintwhn

vivhoi-chmg-van-ban-so-01-2014-ng-hdtp- 10341

Pursuant to Article 68.2.a of the LCA, it could be understood that there are two

cases concerning the arbitration agreement that would make an award anmulled: ()

there is no arbitral agreement, and (ii) the arbitration agreement is invalid In

Resolution No 01/2014/NQ-HDTP, the Council of Judges guides that the ground

covers arbitration agreement of “one of the cases in Article 6 and Article 18 of LCA,

or Articles 2, 3, and 4 of this Resolution”.” Pursuant to Article 18 LCA, there are six

situations where an arbitration agreement is invalid: () Disputes arise in the domains

falling beyond the arbitration's jurisdiction defined in Article 2 LCA, (ai) Thearbitration agreement maker has no competence defined by law, (iii) The arbitrationagreement maker has no civil capacity under the Civil Code, (iv) The form of thearbitration agreement is incompliant with Article 16 LCA, (v) A party is deceived,intimidated or compelled in the course of making the arbitration agreement andrequests a declaration that such arbitration agreement is invalid, and (v) Thearbitration agreement breaches prohibitions specified by law

In considering this ground for annulm ent, the issue of whether the Court and thearbitral tribunal will have the right to decide if the arbitration agreement is valid orinvalid arises Regarding this issue, first of all, the principle kompetenc-kompetenc ofthe tribunal must be mentioned This principle means that the arbitral tribunal has the

right to decide whether it has jurisdiction or not.”3 According to Article 43 LCA, the

issue of jurisdiction is the first issue that the arbitral tribunal considers whenparticipating in resolving disputes If from the beginning of the proceedings, thevalidity of the arbitration agreement is rejected or the tribunal finds that there is aproblem with the arbitration agreement, the arbitration tribunal will discuss andissue

a decision on jurisdiction, which determines whether the arbitral tribunal hasjurisdiction to resolve the dispute However, in case the parties do not agree with thedecision on the jurisdiction of the arbitral tribunal, according to Article 41 LCA, theparties have the right to submit a request to the competent C ourt to review the decision

of the Arbitral tribunal In case the C ourt decides that there is no arbitration agreement

” Article 16 2.4 of Resohution No 01/2014/NQ-HD TP

Jaan Valdes (2007), The Principle of Kompetenc-Kompeterc in Iuternational Commercial Arbitration, MEALEY’s International Arbitration Report, Vol 22 #5, Xew 2007, p.44, retrieved 15 March 2024 from

http sicapa hÈcbvb org hi: hrp-contenthmploads/?021/06/g- The-Principle-of

-Konmetenz-Kompetenz-in-Intemational Commercial: Arbitration pdf

or that the arbitration agreement is invalid the dispute will be discontinued On thecontrary, if the court finds that the arbitration agreement is legally valid, the arbitraltribunal can still continue the settlement.

b The dispute falls beyond the arbitral tribunal's jurisdiction

At first hand, there might be confusion whether this ground is the same as theground of non-existence or invalidity of the arbitration agreement, however, they arenot the same and the ground as prescribedin Article 68 2c existsindependently Since

the arbitral tribunal only receives the jurisdiction from the parties’ agreement, they

only have the right to arbitrate what parties agreed to be arbitrable Whatever outside

of that scope is out of the tribunal’s jurisdiction, regardless of whether it is an existingdispute or relating to the case For example, the parties, when signing the contract,agree that when there is a dispute related to the performance of a contract in Vietnam,

it will be resolved at an arbitration center in Vietnam In this case, if there is anarbitration that resolves disputes related to the performance of contracts in foreigncountries, it is inconsistent with the arbitration agreement.’ Thus, if based solely on.the basis of the invalid arbitration agreement at Article 68.2.c, the arbitration awardcannot be annulled Therefore, the ground that the arbitral tribunal is beyond thearbitral tribunal's jurisdiction needs to be construed independently of the ground thatthe arbitration agreement is invalid

2.1.2 Procedural grounds

This category concerns the proceedings of arbitration, ensuring the parties inthe arbitration are treated equally according to the due process Included in thiscategory is the grounds prescribed in Article 68.2.b and Article 68.2.4

a The arbitration tribunal's composition or procedures of arbitral proceedings

is/are non-compliant with the parties agreement or the LCA

The tribunal’s procedural power comes from the authorization of the domestic

law, andits right to hear the case comes from the recognition of the patties.” The law

“Do Van Dai, Tran Hoang Hai (2011), Pháp luật Việt Now về Thong tài Thương mai, National Political

Publishing House ,p 347

`* Sigvard Jarvin (1986), The soraces coxd limits of the erbitrator’s powers, Arbitration Intentional, Vokme

2, Issue 2, Pages 140-163, from https //doi org/10.1093/arbitration/? 2.140

not only recognizes the sight and authority of the tribunal, but also draws a guidelinefor the proceeding of an arbitration so that the award would be valid by law, thus

increasing enforceability The arbitration agreement also specifies parties’ agreement

as per the way they want the arbitration to be carried out In the arbitration agreement

or during the dispute resolution process, the parties can agree on many proceduralaspects such as selecting an Arbitrator, choosing applicable law or choosing the

language of arbitration, etc Article 68 of the LCA stipulates the grounds for

annulment of an arbitral award when there is a violation of () the composition of thearbitral tribunal or (ii) the arbitral proceedings

The first case is when a party is not allowed to exercise the right to appoint anarbitrator or the composition of the arbitral tribunal to resolve the case is not inaccordance with the agreement of the parties or the arbitration rules according to

Asticle 14 of Resolution No 01/2014/ND-HDTP”ế Asticle 20 of the LCA regulates

the standards of arbitrators, thereby stipulating the standards required to become anarbitrator such as factors of capacity, education, and expertise In addition, paragraph

2 of this article also states cases where individuals, despite meeting the legalqualifications, cannot act as arbitrators due to conflicts of interest If the arbitraltribunal has an arbitrator who does not meet these minimum requirements or isineligible to act as an arbitrator, a party may invoke this point to request an annulment

of the award

The second case is when the arbitral proceeding does not comply with the

parties agreement and the regulation of the LCA Moreover, according to Article 14

of Resolution 01/2014/ND-HDTP, the Courts annul arbitral awards when detecting

that the violations are so serious that the tribunal cannot remedy or does not remedy

at the request of the C ourt according to regulations stipulated in Article 71 of the LCA

In resolving civil disputes, especially commercial disputes, the agreement of theparties is always one of the top priority factors Commercial arbitration is a highlyflexible method which emphasizes the agreement of the parties If the arbitrator

ˆ* People Supreme Cowt, World Bank Group (2018), Judicial Meonial on Arbitration and Mediation, Than

Nien Publishing House ,p 90

shows signs of not respecting the agreement between the parties, this point maybecome a basis for annulment of the arbitration award.

b The evidence provided by the parties on which the arbitral tribunal bases to

issue the award is counterfeit

In arbitration, evidence refers to tangible items presented to the arbitrator by theparties involved in the dispute, as well as by other individuals, agencies, ororgamzations It may also include evidence collected by the arbitrators themselves

according to the procedures outlined in the arbitration law The arbitrator utilizes this

evidence to assess the validity and legality of the claims or objections raised by theparties, aswell as other pertinent factors essential for resolving the dispute effectively.Thus, evidence is important in finding the objective truth of the case, especially with

a litigation model that relies mainly on “case files" like Vietnam today.””

Asticle 68.2 d LCA stipulates that an arbitration award can be annulled if “Theevidence provided by the parties on which the Arbitral Tribunal based its decisionisfalsified” In addition, Article 14.d of Resolution No 01/2014/NQ-HDTP stipulatesthat "The Court will only consider determining evidence of falsification if there isevidence to support that request and that evidence must be related to the decision,affecting the objectivity and fairness of the decision The court must rely on the LCA

regulations, arbitration procedural rules, the parties’ agreement and the rules for

reviewing and evaluating evidence that the arbitral tribunal applies when resolving

the case to determine false evidence" However, both the LCA and the Resolution do

not regulate the standard of evidence used in arbitration The arbitral tribunal, on its

own or at the request of one or more parties, has the right to request appraisal and

valuation of evidence in the dispute as a basis for resolving the dispute At the same

time, it has the right to consult experts, both to examine the existing evidence (as in

the case for appraisal) and to give information on the case Thus, in arbitrationproceedings, in addition to the parties obligation to provide evidence related to

Phan Thang Anh (2015), Căn cứ lấn! phân quyết mong td Hên que đến chang cứ và sục khách quan cũa

Dong tài viễn trong tổ nang trong tài — Sắt cấp và hướng hoàn tiện, Vietransse Jounal of Legal Sciences,

061)2015-2015, retrieved 13 Tatruary 2034 from

https /Aapchikhp km honnalaw ecu vnánochle /eemachitivth adbao

203i=52794326-763f-$cet-bổa8-d20c552b0c4a

disputed issues, the arbitral tribunal also has the sight to collect evidence and verifythe parties’ evidence through assessment and consultation with experts if necessary.

If, during the process, there is any evidence that is determined to be false or

counterfeit, and the arbitral tribunal relies on it to decide on the case, the arbitrationaward will be annulled

c An arbitrator receives money, assets or other material benefits from one

disputing party, thus affecting the objectivity and impartiality of the award

In Article 68.2.d LCA, the arbitration award is annulled if “the arbitrator

receives money, property or other material benefits from a disputing party that affectsthe objectivity and fairness of the arbitration award’ Here, to be considered a basisfor anulm ent of an arbitration award, two conditions must be met First, the arbitratorreceives money, property or other material benefits from a disputing party Second,receiving the above benefits must affect the objectivity and fairness of the arbitrationaward Thus, if the party requesting to annul the arbitration award can provideevidence and prove that the arbitrator received money, property or other materialbenefits from a party participating in the dispute, and this money affects the justice,impartiality and objectivity of the award, the arbitration avard may be annulled by

the court.

2.1.3 Substantive grounds

In Vietnamese legal system, there is no ground for annulment based on errors

of law The only substantive ground to vacate an arbitral award is the groundprescribed in Article 68.2 which reads: “The award contravenes the fundamentalprinciples of Vietnamese law.”

In the LCA, there is no definition of “fundamental of principles of Vietnamese

law’, as it isnot a common concept in Vietnamese 1aw.Ê To understand it in a broader sense, it is synonymous with the concept of “public order” Resolution No.

01/2014/NQ-HDTP explains that this ground as “meaning the arbitral avard violates

`* Supra note 24,p 393

People Supreme Cout, World Bank Group (2018), Judicial Meonial on Arbitration and Mediation, Thax

Nien Publishing House ,p.76

the effective basic rules for formulation and implementation of Vietnam's Law” The

Resolution further guides the application as follows:

‘When considering a request for cancellation of an arbitral award, the court mustdetermine whether the arbitral award violates any basic rule of law, how suchtule affects the dispute settlement by arbitration

The court shall only cancel an arbitral award after proving that it contravenesone or some basic mules of Vietnam’s law, which are not adhered to by arbitraltribunal when issuing the arbitral award, and the arbitral award seriouslyinfringe upon the interest of the State, the lawful rights and interests of eitherparty or some third person

From the wordings, the court must assess whether the act of the tribunal

infringes “the interest of the State, the lavful rights and interests of either party orsome third person”, however, no further tests were given to clarify In the examplesprovided, the “fundamental principles” seem to be principles of the substantive law,such as those from the Commercial Law and the Civil C ode, as well as the principles

of arbitration proceedings as prescribed in Article 4 LCA © Another matter to

consider in this ground of annulment is that the infringement in this case involves

both procedural matters and substantive ones, but so as not to conflict with Article 71

LCA which requires the Court to “not review the dispute already settled by the

arbitration tribunal” *! The fundamental principles in this ground are not only those

that are binding on the conduct of the arbitral tribunal, but also ones that are binding

on the parties involved, to ensure the integrity of the law and interests of the State

and other third parties ?

2.2 Application of grounds of arbitral award annulment

2.2.1 Shortcomings of applying grounds of arbitral awards annnlment

Although there is no official statistic of annulled arbitral awards from both

VIAC and the Ministry of Justice since the issuance of the LCA in 2010, it is a

© Article 14.2 đ Resolution No.01/2014/

*' Artxck 714 LCA

*? Muang Duy Luang (2018), Một số vất để về xem xét lựa! phen quyét trong tài, People Cowt Joumals Online,

retrieved 13 February 2024 fram https:/Aapchitoaan wmvimot-so-van-de-ve-xem-xet Iary-phan-quyet-trang-tai

concern that the rate of annulment is increasing rapidly In a recent survey,S3 Nguyen

Trung Nam showed that the most commonly used grounds being (4) invalid arbitrationagreements due to lack of capacity, (ii) infringement of fundamental principles ofVietnamese law, and (iii) procedural breach in the proceedings In many cases, two

or more grounds would be applied simultaneously“ In cases that are based on those

grounds, common patterns in the application can be noticed.

First, in annulled cases due to invalid arbitration agreement relating to lack ofcapacity, most cases focus on the situation where there is allegedly no signature orthat the signatory does not have authority to sign the agreement In the first instance,Article 16.2 LCA is often cited, however, in some situations, arbitration agreementmade indirectly through other contract documents would not be considered a validarbitration agreement In the second case, it normally concerns the validity of the

authorization documents.*

Second, in cases vacated due to infringement of fundamental principle ofVietnamese law, the application is not uniform in the cases Although Resolution No.01/2014 and the guidance book by the People Supreme Court Judicial Manual onArbitration and Mediation have further explained the ground, it still remains elusive

in which principle is considered “fundamental” Accordingly, the judges haveexplained this matter differently While there are cases where violation of a provision

of law could be considered breaching fundamental principles of lew,® in other cases, the court would refuse to consider as it concerns the merit of the case.Š” Another

pattem noticed in the cases annulled according to Article 68.2 dis that the judges do not stateclearly which fundamental principle the award has breached

Third, in cases vacated due to procedural faults in the arbitration proceedings, the cowt

still uses the thought process in a civil proceeding at court to consider the case, and the most

vivid example is the use of civil procedures in an arbitration proceeding Tuong Duy Luong

© Nguyen Trưng Nam (2023), slured at 2023 VIAC’s Arbitration Series ~ Topic 7: Annulment, Recognition

and Enforcement of Arbitral Award on 17 November 2023 Record of talkshow ,retrieved 14 February 2024

from https //youtu be /6VpE Oy 7eNDk 'si= NL Uy 746Q Ggo6:k:Z , sharing at 1:06:39

“ Supra note 83, at 1:09:56

Decision No 1089/2019/QĐ-PQTT dated 5 September 2019 by the Ho Chi Minh City People’s Cout.

* Decision No 11/2019 dated 14 November 2019 by Hanoi People’s Court

* Decision No 1490/2019/QD-PQTT dated 16 October 2019 by the Ho Chi Minh City People’s Cot.

addressed the same problem, pointing out that the judges may have neglected the content of

the documents submitted and misunderstood the nature of the procedures in arbitration *

Moreover, there is no mechamsm to monitor the Court's decision to annul an

arbitration award,đ° leading to a situation where the annulm ent of an arbitration award

is somewhat arbitrary In reality, the court's current decisions to annul arbitral awards

do not have an appeal or cassation process Thus, the court's decision to annul thearbitration award is not subject to supervision Although this is a principle consistentwith international practice, in Vietnam, the lack of a mechanism to monitor the court's

decision to annul an arbitration award can lead to negative consequences.

2.2.2 Notable cases of annulling arbitral awards

As mentioned in the previous paragraph, the main three reasons for annullingarbitral awards in Vietnamese courts are: (i) invalid arbitration agreements due to lack

of capacity, (1) irregularities in the proceedings, and (iii) infringement of fundamentalprinciples of Vietnamese law However, in each of the grounds, the decisions fromthe court still show notable misunderstanding on the provisions of the law as well as

a blurred line in application of other civil procedures

a _ Disregard of the provision of Article 16.2 LCA when considering invalid or

non-existent arbitration agreement due to signatories lack of capacity

The practical application of non-existent or invalid arbitration agreementscontinues to present challenges, with many arbitration awards being unreasonablyannulled due to the alleged absence or invalidity of agreements, often citing reasonssuch as missing signatures or lack of authority from signatories According to theLCA, a signature is not a mandatory formal requirement for the validity of arbitration

agreements đè However, in practice, the consistent interpretation of Article 16.2

remains elusive Parties may exploit this issue to request the annulment of arbitrationawards based on the grounds of non-existence or invalidity of arbitration agreements,thereby prolonging the enforcement process There are still instances where courts

** Supra note 23,p 279

** Article 71.10 LCA: “The cơwt”s decision is f ra] and effective for enforcement.”

?° Supra note 54

ằ article 162 LCA