Decision No. 08.2019/2019/QD-PQTT

Plaintiff: Company K – Korea

Related party: A Company Limited

Regarding: Request to annul the arbitral award due to violation of arbitration principles

Case Summary

On 21/09/2007, A Company., and K Company signed a contract agreement on the construction of hotels, serviced apartments, offices, and commercial centers. The total contract value is $72 million. The project implementation term is 36 months from the date of signing the contract. The contract also stipulates that the contractor, Company K, must pay a predetermined compensation in case the project is not completed on the schedule of 0.03% of the contract value per day behind schedule but not exceeding 5% in total. After the contract, the parties also signed 07 amendments bearing numbers from 01 to 07.

On October 25, 2016, Company K filed a lawsuit demanding that A Company pay the amounts including construction costs under the provisional payment requirements totaling $67,578,364 and late fees on the principal amount until due.

Company A did not accept Company K’s claim and re-sued for additional construction costs of $13,383,700 and predetermined damages resulting from delay in project completion in the amount of $16,140,616.

Arbitration Award No. 85/16 HCM dated 20/02/2019 of the Arbitration Council under the Vietnam International Arbitration Center. Company K is responsible for paying Company A the amount of USD 6,060,000, arbitration fees of VND 2,449,664,525, and related attorneys’ fees. In contrast, Company A also paid Company A the sum of $4,996,141 and interest on the payment from the date of judgment until the date of payment.

Disagreeing with the arbitral award, on 19/03/2019 Company K filed a petition to annul the award on the grounds that: The arbitral tribunal did not respect and protect the civil rights of Company K, did not comply with the provisions of law when it did not uniformly apply the legal provisions in applying the statute of limitations for requesting re-lawsuits of A Company. Furthermore, Company K contended the tribunal was not objective and did not follow the provisions of the law when using estimated construction costs to decide the amount of compensation required by A Company. Finally, Company K asserted the tribunal is not objective in its request for Company K to make a late payment of fees.

Response from the Vietnam International Arbitration Center. Company K’s claim arguments in its petition to vacate the arbitral award are unfounded. Company K failed to explain why the statute of limitations issue violated its interests, the interests of the State, and the interests of third parties. On payment, acceptance, compensation and other issues: Company A demanded $12 million for equipment costs, but Company K refused and confirmed at the Meeting that the cost of equipment was $6 million, so the amount of $6 million was undisputed with respect to the disputed value. The arbitral tribunal has jurisdiction only over disputes, not jurisdiction over non-disputed issues. Company K failed to prove that the Arbitral Award was issued contrary to fundamental principles of Vietnamese law and failed to prove that its rights were infringed. Company K also failed to prove that the Arbitral Tribunal was not impartial and objective in the dispute resolution process.

Related party: A Company. When filing a petition for annulment of the arbitral award, Company K did not provide an adequate burden of proof for its claims. Company K’s documents and evidence as presented in their petition are not recognized as lawful by the Vietnamese judicial system. Company K’s new arguments in the document dated June 14, 2019, should not be given consideration so as to ensure due process and fairness to the parties.

A Representative of the People’s Procuracy of Hanoi asserted: The court shall handle the commercial business within its jurisdiction. After accepting, the Court has notified the Procuracy of the same level, the Arbitration Center, the parties as prescribed in Clause 1, Article 71 of the Law on Commercial Arbitration. The application panel has complied with the provisions of Clause 3, Article 71 of the Law on Commercial Arbitration. However, in terms of content, the arbitral tribunal violated Article 5 of the 2005 Civil Code (Article 3 of the 2015 Civil Code) stipulating the principle of equality, and Article 4 of the Law on Commercial Arbitration stipulating the principle of dispute settlement by arbitration. In this case, the arbitral tribunal discriminated unfairly against K.

Judgment Of The Court

The Contract Agreement on the construction made and signed on 30/9/2009 based on the contract entered into by both parties on 21/9/2007 agreed upon by Company K and A Company in Article 19, Section 19.2 “In case no agreement is reached through negotiation, such dispute shall be finally resolved by the Vietnam International Arbitration Center…” Therefore, the arbitral tribunal handling the dispute is within its jurisdiction as defined by Article 5 of the Law on Commercial Arbitration, which outlines the conditions for resolving disputes through arbitration.

When the project was accepted, Company K submitted to A Company all interim payment requests (IPCs) Nos. 33 to No. 38 and were approved by A Company. That is, Company A Limited is obliged to pay Company K the entire amount under the approved IPCs. Moreover, the IPCs are overdue but Company A has only paid part of IPC No. 33. Thus, it must be determined that this is a debt of Company A Limited to Company K under the Construction Contract signed by the parties. The arbitral tribunal rejected Company K’s claim for the debts of Company A Limited from IPC Nos. 34 to No. 38 and only recognized IPC No. 33 as inappropriate. Although this is the content of the dispute that the arbitral tribunal has settled, it has proved whether the arbitral tribunal is objective or not when resolving the dispute.

With regard to A’s claim for additional construction costs and predetermined damages, if Company K fails to complete the work when the completion date is reached, Company K is in breach of section 9.2.1 and at this time Company K must pay damages for predetermined damages due to delay but the arbitral tribunal accepts the request for re-suit of Limited A on additional construction costs is inconsistent with the nature of the case and the agreement of the parties to the contract that Company K’s claim against IPCs approved by A is not recognized by the arbitral tribunal as unreasonable. In this case, the arbitral tribunal discriminated unfairly against Company K. The arbitral tribunal violated Article 5 of the Civil Code 2005 (corresponding to Article 3 of the Civil Code 2015) stipulating the principle of equality and Article 4 of the Law on Commercial Arbitration on the principle of dispute settlement by arbitration, as an instance of serious infringement on the interests of Company K.

Court Decision

Accept the request to cancel the Arbitration Award No. 85/16 established on 20/02/2019 of the Arbitration Council of Vietnam International Arbitration Center on the settlement of disputes arising from the Construction Contract between K Company and A Company.

Legal basis

Point dd, Clause 2, Article 68 of the 2010 Law on Commercial Arbitration. Resolution No. 326/2016/UBTVQH 14.