Decision No. 04/2020/QD-PQTT

Requesting Party: Company B

Related Party: Company NC

Regarding: Request for annulment of Arbitral Award in the dispute over the share purchase agreement

Facts of the case:

On July 15, 2017, Company B and Company NC entered into a framework agreement for the purchase of shares in a private placement of Company NC’s shares. Company B agreed to purchase 49,875,000 shares of Company NC with a face value of 10,000 VND per share at a transaction price of 14,300 VND per share. The total transaction value was 713,212,500,000 VND. Company B fulfilled its obligation to deposit 61,000,000,000 VND. Company NC proceeded with the necessary procedures to obtain the opinions of Company S and Department X regarding the issuance of additional shares to increase Company NC’s charter capital. On November 23, 2017, Department X issued Document No. 2830/BXD-QLDN approving the proposal for Company S to direct its representative to vote for the issuance of additional shares from 951.25 billion VND to 1,450 billion VND of Company NC through a private placement, with an offering price not lower than 14,850 VND per share.

On April 26, 2018, the parties held a meeting and negotiated the terms of the private placement share purchase agreement of Company NC. Accordingly, Company B agreed to adjust the share purchase price to 14,850 VND per share. Company NC continued to proceed with the necessary procedures to obtain the approval of Company S and Department X for the private placement share issuance to Company B at the adjusted price of 14,850 VND per share. On June 18, 2018, Department X issued Document No. 22/BXD-QLDN requesting a review, development, and reporting on the plan to increase Company NC’s charter capital, clarifying the choice of private placement to ensure compliance with the law, transparency, and effectiveness for submission to the Department for consideration and feedback.

After a prolonged negotiation and discussion period, the parties failed to conclude the share purchase agreement due to the absence of a document from Department X approving the proposed plan for the increase in Company NC’s charter capital through a private placement as stipulated in the Framework Agreement. The parties were not in a position to conclude the share purchase agreement as required by the Agreement. On March 21, 2019, Company B sent Letter No. 73/19/TBBPC to Company NC, requesting the refund of the deposit of 61 billion VND and compensation for the penalty by deducting it from the deposit. On April 26, 2019, Company B and Company NC signed a meeting minutes agreeing to terminate the share purchase transaction under the Agreement, refunding the deposit of 61,000,000,000 VND but disagreeing on refunding the penalty deposit due to force majeure. On May 3, 2019, Company NC returned the deposit of 61,000,000,000 VND to Company B. Company B argues that Company NC has violated the Agreement and the transaction does not fall under force majeure, therefore, it has an obligation to reimburse the penalty deposit and late payment interest. On July 22, 2019, Company B filed a lawsuit against Company NC at the Vietnam International Arbitration Center VIAC.

The Arbitral Award in dispute No. 36/19 dated December 18, 2019, rendered by the Arbitral Tribunal of the Vietnam International Arbitration Center VIAC. The Arbitral Tribunal rejects all claims brought by Company B. Company B is liable for arbitration costs in the dispute, totaling 1,231,774,000 VND. Disagreeing with the Arbitral Award, on January 13, 2020, Company B filed a Request to annul the Arbitral Award with the Court, stating that: the Vietnam International Arbitration Center lacks jurisdiction to resolve disputes related to private share placements. Generally, commercial arbitrators do not have jurisdiction to resolve disputes arising from private share placements of non-public joint-stock companies. The arbitral proceedings violate the provisions of the Law on Commercial Arbitration. The Arbitral Tribunal failed to explain the Arbitral Award after Company B submitted a request for clarification. The Arbitral Tribunal’s Award violates the basic principles of Vietnamese law. The Arbitral Tribunal failed to evaluate all documentary evidence and failed to collect documents and evidence as requested by Company B.

Related Party: Company NC. This entity disagrees with the annulment of the Arbitral Award, arguing that Company B’s request for annulment of the Arbitral Award is unfounded. The arbitration agreement between the two companies is consistent with the Law on Commercial Arbitration. Whether to include evidence in the Arbitral Award is within the expertise and jurisdiction of the Arbitral Tribunal. Company B’s assertion that the Arbitral Tribunal was not impartial and objective in evaluating evidence is not a basis for an annulment of the Arbitral Award under the Law on Commercial Arbitration. The Arbitral Tribunal requested Company B to specify the documents to be collected from Department X, but Company B failed to do so. The provision of evidence is the right and obligation of the parties. The responsibility to provide evidence lies with the parties. Whether the Arbitral Tribunal collects evidence is within the discretion of the Arbitral Tribunal. Regarding the financial reports, Company B made an emergency request, and Company NC found that this evidence is not relevant to the case.

Representative of the People’s Procuracy of Hanoi City. The Arbitral Award in dispute No. 36/19 is in compliance with the law, and the dispute falls within the jurisdiction of the Vietnam International Arbitration Center as agreed by the parties. Company B’s claim that the Arbitral Tribunal violated the basic principles of Vietnamese law is not substantiated. The Arbitral Award relied on the agreement of the parties in the contract, thus there is no basis for annulment.

Court’s Opinion:

Considering the framework agreement dated July 15, 2017, between Company B and the Participating Company, signed on the basis of free, voluntary agreement regarding the jurisdiction to resolve disputes at the Vietnam International Arbitration Center. The arbitration agreement was made in writing, with a form and content consistent with the law, therefore, the Arbitral Tribunal’s adjudication of the case is within its proper jurisdiction.

During the dispute resolution process at the Vietnam International Arbitration Center, on October 30, 2019, Company B sent request letter No. 147/2019-PVC-CV dated October 28, 2019, to the Vietnam International Arbitration Center and the Arbitral Tribunal requesting the collection of documents and evidence related to the private share purchase between Company B and Company NC, which Department X was holding as documents of Company NC and Company S sought permission from Department X to proceed with the share purchase as committed in the framework agreement to demonstrate that Company NC and Company S had carried out the necessary procedures to obtain Department X’s permission. However, the Arbitral Tribunal did not collect the documents and evidence as requested by Company B. The Arbitral Tribunal also did not collect the financial reports of Company NC to examine whether Company NC used or did not use the 61 billion VND that Company B had deposited, which could change the nature of the matter and affect the legitimate rights and interests of Company B. The incomplete collection of evidence led to the Arbitral Tribunal’s adjudication not ensuring impartiality and objectivity.

The framework agreement dated July 15, 2017, between Company B and Company NC, states neither party agreed that the Arbitral Award does not need to state the grounds for the decision. However, the Arbitral Award in dispute No. 36/19 dated December 18, 2019, rendered by the Arbitral Tribunal of the Vietnam International Arbitration Center, only explained and reasoned without citing any basis, law, or specific legal normative document, and then decided not to accept all claims brought by Company B and compelled Company B to bear the arbitration costs, which does not respect the agreement between Company B and Company NC, thus violating subparagraph d of Paragraph 1 of Article 61 of the Law on Commercial Arbitration, which regulates the content, form, and validity of the Arbitral Award, contrary to the basic principles of Vietnamese law.

Court’s Decision:

Accepts Company B’s request. Annuls the Arbitral Award in dispute No. 36/19 dated December 18, 2019, rendered by the Arbitral Tribunal of the Vietnam International Arbitration Center. Company B is liable for a court fee of 500,000 VND for the annulment request.

Legal Basis:

Articles 414; 415 of the Civil Procedure Code of 2015. Paragraphs 2, 3 of Article 4; Paragraph 2 of Article 46; Subpoint d of Paragraph 1 of Article 61; Subpoint d of Paragraph 2 of Article 68; Article 69; Article 71; Article 72 of the Law on Commercial Arbitration of 2010. Resolution No. 326/2016/UBTVQH14.