INSIGHTS

Why are only 49% of foreign courts’ judgements and for arbitral awards recognized and enforced?

November 09, 2020 Court Litigation

Vietnam’s Code of Civil Procedure (CCP) provides that, in order for any foreign courts’ judgements, decisions or foreign arbitral awards (foreign judgements and arbitral awards) to take effect in Vietnam, they must be made in courts that are recognised and enforced under Vietnamese law. However, not all foreign judgements and arbitral awards of said description will be accepted and considered for recognition by the Vietnamese Court. Whether or not the Vietnamese Court will take into consideration a particular judgement or award depends on the existing international treaties or the diplomatic relations between Vietnam and the relevant nations. In principle, the Vietnamese Court will only recognise and enforce foreign judgements and arbitral awards that are:

In accordance with the provisions of the international treaties signed and participated by Vietnam

Based on a reciprocal basis

In pursuant to the law of Vietnam

The Vietnam Ministry of Justice has recently published a database on the recognition and enforcement of foreign judgements and arbitral awards in Vietnam from 2012 to September 30, 2019, (the Database), which shows that only 49% of foreign judgements and arbitral awards have been recognised and enforced in Vietnam. This figure sheds light on the alarmingly low rate of recognition and enforcement of foreign judgements and arbitral awards in Vietnam. Two reasons come to mind. One, the foreign court and arbitration centre is of inadequate quality or had violated dispute resolution procedural regulations. Two, some provisions framing the recognition and enforcement of foreign judgements and arbitral awards by the CCP and the Vietnamese Law on Commercial Arbitration are not properly adhered to or ridden with shortcomings and without guidelines.

The recognition and enforcement of foreign judgements and arbitral awards shall be exercised according to the Convention on the Recognition and Enforcement of Arbitral Awards 1958 (New York Convention 1958) and the provisions in Chapters XXXVI and XXXVII of the CCP 2015 (Chapters 26, 27, 28, and 29 of the CCP 2004, amended and supplemented 2011). Grounds to deny the recognition and enforcement of foreign judgements and arbitral awards in Vietnam are stipulated by Articles 3, 4, and 5 of the New York Convention 1958, Articles 439 and 459 of the CCP 2015 (formerly Articles 356 and 370 CCP 2004, amended and supplemented in 2011).

The Database has made apparent that five out of 26 foreign judgements and 30 out of 82 foreign arbitral awards are not recognised. The same judgement or arbitral award can be denied for multiple reasons, including:

Foreign Arbitral Awards: Reasons for the Vietnamese Court’s Refusal to Recognise

Reason 1: The signatories of the arbitration agreement do not possess the signing capacity under their respective jurisdiction

This basis for non-recognition includes lack of physical and mental capacity, lack of authorisation, or that the signatory is underaged (a minor).

Article 459.1(a), CCP 2015 (Article 370, CCP 2004, amended and supplemented in 2011) provides that the capacity-determining jurisdiction is each of the party’s “respective jurisdiction.” The Review Assembly must base their decision on the jurisdiction of each signatory to determine whether or not the said signatory has the legal capacity to sign the arbitration agreement.

In other words, the Court is not allowed to use Vietnamese legal provisions to determine if the signatory has the legal capacity to sign the foreign arbitration agreement in question. Conversely, the Court is likewise not allowed to use foreign legal provisions to deny the Vietnamese signatory of their legal capacity to sign the same arbitration agreement.

The legal basis to be applied to assess the signing capacity of each signatory must be determined via the Court’s conflict avoidance principles.

For foreigners, the Court must apply the conflict avoidance principles in pursuant to Article 466 (for foreign persons) and Article 467, CCP 2015 (for foreign entities) to determine the applicable law. The conditions are as follows:

The legal capacity of a foreigner shall be determined according to the law under the laws of the country where they are a citizen (Article 466.1, CCP 2015)

The legal capacity of a foreign agency or organisation shall be determined according to the laws of the country where such agency is established (Article 467, CCP 2015).

The application of foreign laws to assess the legal signing capacity of the signatories must also comply with the provisions of Article 481, CCP 2015, on selecting and providing foreign laws to apply to the civil dispute resolution involving foreign elements.

When assessing the legal capacity of Vietnamese individuals, businesses, and organisations, the Court must take into consideration the relevant requirements by the Criminal Code, Law on Enterprises, and other relevant legislative codes.

The arbitral awards that failed to gain recognition due to this reason are the second most abundant in the database with 40% of the total non-recognitions.

Reason 2: The individuals, businesses, and organisations as judgement debtors are not instructed in a timely, appropriate manner on the procedure of appointing an arbitrator and dispute resolution at an international arbitration centre or are hindered from exercising their litigation rights due to other reasonable grounds

This reason is often invoked to deny foreign arbitral awards when the judgement debtors fail to receive a fair chance to present their case. The judgement debtor thence has to prove that they were deprived of the right to a fair trial at the international arbitration centre. This situation includes the following scenarios:

The judgement debtor was not noticed about the appointment of an arbitrator, or

The judgement debtor was not noticed about the arbitration procedure, or

The judgement debtor was not able to present their case.

The type of notice on the arbitrator appointment, arbitration procedure, or arbitration session is governed by the arbitration rules selected by the parties involved in the arbitration agreement. The Vietnamese CCP’s regulations on notices and announcements shall not apply to foreign arbitral awards.

The arbitral awards that failed to gain recognition due to this reason are the second most abundant in the database with 40% of the total non-recognitions.

Reason 3: The international arbitration centre comprises members or dispute resolution procedures that are not in compliance with the arbitration agreement or the law of the jurisdiction where the international arbitrator announces their decision, if the arbitration agreement fails to set out provisions for these situations

Article 459.1(đ), CCP 2015 (Article 370.1(đ), CCP 2004, amended and supplemented in 2011) provides that a judgement or arbitral award can be denied due to violations committed by (i) members of the Arbitration Tribunal, or (ii) arbitration procedure.

Regarding the arbitration tribunal members, the provisions of Article 459.1(đ), CCP 2015 apply if one party has been deprived of the rights to appoint an arbitrator or to request arbitration tribunal members suitable with the parties’ arbitration agreement to resolve their resolution. To determine whether or not violations had occurred, the Court has to base upon: (i) the arbitration agreement, or (ii) if said agreement does not provide any stipulations, the law under the laws of the country where the arbitration was executed will be the basis.

Regarding the protocol, the provisions of Article 459.1(đ), CCP 2015 apply if one party has been deprived of an arbitration procedure under the agreement established by the relevant parties. This basis is similar to the basis provided for the annulment of domestic arbitral awards, as stated by Article 68.2(b), the Vietnamese Law on Commercial Arbitration. However, one needs to note that the legal basis for the assessment of arbitration procedure’s legality is grounded in the agreement made and signed by the relevant parties, the rules of arbitration by the foreign arbitration centre, the law regarding arbitration in the country where the parties agreed to formalise their commitment, not the typical litigation procedures under the Vietnamese CCP.

The arbitral awards that failed to gain recognition due to this reason are the third most abundant in the database with 33.4% of the total non-recognitions.

Reason 4: Clash with the fundamentals of Vietnamese Law

The concept and extent of a ‘clash with Vietnamese Law’ are currently topics of debate. According to Decree 01/2014/NQ-HĐTP, the Council of Judges explained that the ‘violations against the fundamentals of Vietnamese Law” denote any decisions that “infringe on the basic principles of conduct effective on all matters regarding the construction and execution of Vietnamese Laws.” However, such a description lacks sufficient details. Moreover, this Decree only instructs to apply the provisions in the Law of Commercial Arbitration 2010 to annul domestic arbitral awards instead of explicating on how to navigate the CCP to recognise and enforce foreign judgements and arbitral awards in Vietnam. This reason for non-recognition is arguably the most unsettling to the judgement creditor.

The arbitral awards that failed to gain recognition due to this reason are the third most abundant in the database with 33.4% of the total non-recognitions.

Foreign Courts’ Judgements: Reasons for the Vietnamese Court’s Non-Recognition

Reason 1: The civil judgements and decisions of the foreign courts do not correspond with one of the conditions for recognition provided in the international treaties of which the Socialist Republic of Vietnam is a member

Vietnam has signed several mutual legal assistance treaties with other countries such as China, Laos, France, Mongolia, etc. All said treaties contain regulations of the recognition and enforcement of foreign judgements in Vietnam, including stipulations on the parameters for recognition and enforcement, conditions and procedure of recognition and enforcement, etc.

The judgements that failed to gain recognition due to this reason are the least abundant in the database with 20% of the total non-recognitions.

Reason 2: The judgement debtor or their legal representative failed to appear at the hearing held by the foreign court because they were not properly summoned, or the summon was not served to them in a timely and lawful manner to enable them to exercise their right of self-defence

This basis for non-recognition is grounded in the judgement debtor’s deprivation of a fair and equal chance to present their case.

The judgements that failed to gain recognition due to this reason are the least abundant in the database with 20% of the total non-recognitions.

Reason 3: The court issuing the judgement or decision lacks the authority to settle the relevant civil matter according to Article 440 of the CCP

This reason for the Vietnamese Court’s refusal to recognise and enforce the foreign judgement and decision was recently introduced as part of the CCP 2015. A number of legal researchers have come forward to disagree with this line of reasoning, arguing that the foreign court’s authority is not dependant on the evaluations of the Vietnamese legislature.

The judgements that failed to gain recognition due to this reason are the least abundant in the database with 20% of the total non-recognitions.

*****

The recognition of enforcement of foreign judgements and arbitral awards help reduce the litigation costs borne by the parties participating in the dispute. However, the recognition and enforcement of said matters must comply with certain rules and principles, which serve to demonstrate a nation’s right to jurisdictional independence. That declaration bars the imposition of another nation or an international organisation’s legal judgement and awards. Hence, it does not only underscore Vietnam’s sovereignty but also aligns the country with the current values espoused by the global economy.


Authors: Stephen Le

The Copyright to this document is exclusively owned by LE & TRAN. No part of this material may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of LE & TRAN. We reserve all rights and will take prompt legal action (criminal, civil and commercial proceedings) under all relevant Vietnamese and International laws against any and all infringement(s) by individuals or organizations.

 

DMCA.com Protection Status

Call Now