Decision No: 06/2018/QĐ- PQTT

Requesting Party: Limited Liability Company VL Electric Building

Related Party: Joint Stock Company Creative and NMT

Regarding: Request for Annulment of Arbitral Award in Dispute arising after Termination of Construction Contract

Facts of the case:

On June 16, 2009, VL Electric Building Limited Liability Company and Creative and NMT Joint Stock Company entered into a construction contract, Contract XL 3.2/2009/VLBC, to construct a hotel and office building for lease in Vientiane, Laos. The contract stipulated that any disputes arising would be resolved through arbitration when they occurred. Contract XL 3.2/2009/VLBC was completed and terminated according to the Settlement Minutes BBTL- VLBC, signed on September 12, 2012, between VL Electric Building Limited Liability Company and Creative and NMT Joint Stock Company.

On October 25, 2017, Creative and NMT Joint Stock Company initiated arbitration against VL Electric Building Limited Liability Company at the Vietnam International Arbitration Center (VIAC), seeking payment related to the execution of Contract XL 3.2/2009/VLBC for the construction of the hotel and office building in Vientiane, Laos, signed on June 16, 2009, with a total debt of 26,147,038,258 dong (including principal and interest at 13.5% per annum). Despite the contract being terminated, VL Electric Building Limited Liability Company still owed Creative and NMT Joint Stock Company payment, and intentionally delayed debt repayment.

Arbitral award No. 35/7 dated April 25, 2018, by the Vietnam International Arbitration Center, ordered VL Electric Building Limited Liability Company to pay Creative and NMT Joint Stock Company the principal amount under Contract XL 3.2/2009/VLBC, which is 11,562,734,660 dong, and to pay late payment interest on the principal amount, totaling 6,737,982,959 dong, calculated at an interest rate of 9% per annum.

Disagreeing with the Arbitral Award, on May 25, 2018, VL Electric Building Limited Liability Company filed a request with the Hanoi People’s Court to annul arbitral award No. 35/17 for the following reasons: The parties did not agree to arbitration. Since Contract XL 3.2/2009/VLBC had been settled according to Clause 3 of the Settlement Minutes BBTL- VLBC signed on September 12, 2012, it meant that the contract had terminated, and therefore, the arbitration agreement ceased to exist. The settlement minutes did not mention maintaining the validity of the arbitration agreement in Contract XL 3.2/2009/VLBC. There was no existing or referenced arbitration agreement between the parties. Therefore, the arbitral award lacked a legal basis for recognition. Since there was no arbitration agreement between the parties, the arbitration tribunal lacked jurisdiction to resolve the dispute. The arbitral award violated fundamental principles of Vietnamese law by applying Vietnamese law to resolve the claim for late payment interest, whereas Article 6.2 of the contract stipulated that the applicable law was the law of the Lao PDR; in cases where Lao PDR law did not contain provisions or was unclear, Vietnamese law would apply. In cases where the laws of Laos and Vietnam did not make stipulations, established international legal conventions would apply. The arbitration tribunal failed to fulfill its obligations, leading to a decision contrary to the parties’ agreement.

Related party: Creative and NMT Joint Stock Company. This entity believed that the arbitration agreement still existed despite Contract XL 3.2/2009/VLBC being settled. Contract settlement involved the parties confirming the completion of their respective obligations and remaining obligations, acknowledging each party’s responsibility to continue fulfilling obligations under the contract. The settlement minutes did not terminate the validity of the arbitration agreement established in Contract XL 3.2/2009/VLBC. Changes, extensions, cancellations, or invalidity of the contract did not affect the validity of the arbitration clause. The settlement minutes were only an agreement to resolve some issues arising during contract performance, not a separate transaction relationship separate from the contract, and did not create new obligations for the parties. To resolve the dispute, it was necessary to consider and evaluate all issues from the time of contract formation to accurately determine the nature of the dispute and the responsibility for deliberately delaying debt repayment by VL Electric Building Limited Liability Company. During the VIAC arbitration process, no party objected to the formation or composition of the arbitral tribunal. Therefore, the arbitral tribunal established to resolve dispute No. 35/17 was lawfully constituted and had jurisdiction to resolve the dispute. The arbitral award did not violate fundamental principles of Vietnamese law. Applying Vietnamese law to resolve disputes between the parties was entirely consistent with the agreement in Contract XL 3.2/2009/VLBC.

Representative of the People’s Procuracy of Hanoi City: The arbitral award has duly complied with the provisions of the law, therefore, there is no basis to accept the request to annul the arbitral award from the Requesting Party. Specifically, the arbitral tribunal was properly constituted, and during the proceedings, the tribunal did not violate the Arbitration Rules. The content of the award does not contradict the fundamental principles of Vietnamese law.

Court’s Opinion:

VL Electric Building Limited Liability Company contends that since Contract XL 3.2/2009/VLBC has been terminated, this also implies termination of the contract, including the arbitration clause. This interpretation by VL Electric Building Limited Liability Company lacks legal basis

because the arbitration clause exists independently of the contract. Therefore, there is no basis for acceptance. VL Electric Building Limited Liability Company argues that the arbitral award contravenes the fundamental principles of Vietnamese law because, according to the agreement between the parties, the arbitral tribunal should prioritize the application of the law of the Lao PDR to consider the responsibility of VL Electric Building Limited Liability Company for delayed payment to Creative and NMT Joint Stock Company. However, the arbitral tribunal applied the corresponding Vietnamese law to resolve the case without a legal basis. The application of Vietnamese law by the arbitral tribunal to resolve disputes between the parties is entirely consistent with the agreement in Contract XL 3.2/2009/VLBC.

Court Decision:

The request to annul the arbitral award of VL Electric Building Limited Liability Company regarding arbitral award No. 35/17 dated April 25, 2018, of the Vietnam International Arbitration Center is not accepted. VL Electric Building Limited Liability Company must bear court fees of 500,000 dong for the request to annul the arbitral award.

Legal Basis:

Article 31(2), Articles 414 and 415 of the Civil Procedure Code; Articles 3, 7, 13, 68, 69, 71, and 72 of the Law on Commercial Arbitration; Resolution No. 326/2016/UBTVQH1.