Decision No. 11/2022/QD-PQTT Requesting Cancellation of Arbitral Award in Contract Dispute for Sale and Purchase

Decision No. 11/2022/QD-PQTT

Requesting Party: THB Limited Liability Company

Related Party: GMA Company

Regarding: Request for the Annulment of an Arbitral Award in a Contract Dispute for Sale and Purchase

Facts of the case:

The GMA Company and the THB Limited Liability Company respectively entered into the following contracts: Sale and Purchase Contract No. THB/GMA/001 dated July 10, 2020, with a value of 219,000 USD (Contract No. 001), Sale and Purchase Contract No. THB/GMA/002 dated July 17, 2021, with a value of 201,000 USD (Contract No. 002). The total value of these two contracts is 420,000 USD. Subsequently, the THB Company sold medical gloves to the GMA Company with the quantity, types, and prices agreed upon in each contract. Due to THB Company’s inability to deliver the goods as agreed, it has the obligation to refund to GMA Company the amounts already paid, as well as the parties signing liquidation agreements totaling 1,027,500 USD. Specifically, on August 4, 2020, a liquidation agreement was signed for Contract No. 003 in the amount of 607,500 USD. On August 12, 2020, liquidation agreements were signed for Contract No. 001 in the amount of 219,000 USD and Contract No. 002 in the amount of 201,000 USD.

In its self-defense submission to the arbitral tribunal, the THB Company admitted that the GMA Company transferred 1,027,500 USD, of which 420,000 USD represented the value of the two aforementioned contracts. The remaining amount of 607,500 USD is contested by the GMA Company, claiming it was transferred pursuant to Contract No. 003 dated July 17, 2020, which THB Company denies. However, THB Company only refunded a portion of the amount to the GMA Company from the time the contracts were signed in July 2020 until the liquidation in August 2020. Therefore, on August 16, 2021, the GMA Company sued the THB Company at the Vietnam International Arbitration Centre (VIAC) in Hanoi, demanding payment of the outstanding amount owed according to the sale and purchase contracts and signed liquidation agreements, totaling 60,640.04 USD, plus interest on the unpaid amount, arbitration fees, and attorney fees.

In the arbitral award of dispute case No. 70/21 dated May 19, 2022, the Vietnam International Arbitration Centre (VIAC) partially accepted the GMA Company’s request, obliging the THB Company to pay the GMA Company: the remaining amount owed by the THB Company, which amounts to 60,640.04 USD, with attorney fees of 21,426.81 USD, thus totaling 82,066.85 USD. The Center rejected the claim for late payment interest by the GMA Company and required the THB Company to pay arbitration fees of 3,480.85 USD. Disagreeing with the VIAC’s arbitral award, on June 18, 2022, the THB Company filed a request to annul the VIAC’s arbitral award in dispute case No. 70/21 dated May 19, 2021, with the Hanoi People’s Court, arguing that since the signed sale and purchase contracts did not include provisions for arbitration, the arbitral tribunal lacked jurisdiction to resolve this dispute.

Related Party: The GMA Company. Between the THB Company and the GMA Company, only transactions for the sale and purchase of medical gloves under Contracts No. 001 dated July 10, 2020, No. 002 dated July 17, 2020, and No. 003 dated July 17, 2022 (hereinafter collectively referred to as the “Sale and Purchase Contracts”) exist. Due to THB Company’s inability to deliver the goods as agreed, the parties signed liquidation agreements, and the THB Company is obligated to refund GMA Company for the amounts already paid. Apart from the aforementioned sale and purchase contracts, there are no other transactions between the THB Company and the GMA Company. The THB Company’s payment obligation arises solely from these sale and purchase contracts. The THB Company has only partially refunded the payments. On January 11, 2021, the GMA Company sent a reminder letter to the THB Company, requesting the remaining amount of 60,640.07 USD. In response to the GMA Company’s reminder letter, on January 18, 2021, the THB Company sent an explanation regarding the order process, execution of the sale and purchase contracts, and proposed dispute resolution methods.

Representative of the People’s Procuracy. The content of the arbitral award does not contradict the basic legal principles of Vietnamese law. There is no legal basis for the request to annul the arbitral award. The arbitral award does not violate the provisions of the law on commercial arbitration, and it is requested that the Council to Consider the Petition decide not to annul the arbitral award.

Court’s Opinion

During the litigation process, although the THB Company did not acknowledge the signing of Contract No. 03, only admitting to the signing of Contract No. 02, it actually received the full amount from all three sale and purchase contracts, as evidenced by the three aforementioned liquidation agreements, totaling 1,027,500 USD. Due to the THB Company’s failure to deliver the goods, it must refund the amount paid by the GMA Company. The THB Company only managed to transfer a portion to the GMA Company, with the remainder totalling 60,640.7 USD. The GMA Company has issued a reminder letter regarding the outstanding debt to the THB Company. On January 18, 2021, the THB Company sent a letter the GMA Company in response to the letter dated January 11, 2021, concerning the outstanding amount of 60,640.07 USD. In section 3, part B of this letter, the THB Company also proposed arbitration as the dispute resolution mechanism, specifically stating: “Any dispute arising from or related to this agreement, including any issues related to the existence, validity, or termination of the Agreement, shall be finally referred and resolved by arbitration under the Rules of Arbitration of the Vietnam International Arbitration Centre (VIAC) at the time in effect, rules which are deemed incorporated by reference in this provision. The place of arbitration shall be Hanoi.. Vietnamese shall be the governing language for arbitration procedures.” This indicates that the THB Company opted for arbitration, and both parties agreed to choose arbitration as the dispute resolution mechanism for the debt arising from the sale and purchase contracts as grounds for commercial arbitration. The THB Company’s argument that the letter dated January 18, 2021, constitutes a new contract with a third party is unfounded because although it pertains to a third party, the transactions referenced in this letter only relate to the debt arising from the signed sale and purchase contracts between the THB Company and the GMA Company, rather than any other transactions, thus the agreement to select arbitration for dispute resolution in this letter demonstrates a preference for the dispute resolution mechanism for the debt between THB and GMA.

In the letter dated May 17, 2021, the GMA Company sent to the THB Company, it was stated: “In Agreement with THB’s proposal regarding the dispute resolution provision, any disputes arising from or related to commercial transactions between the two parties for the purchase of medical gloves shall be resolved through arbitration at the Vietnam International Arbitration Centre (VIAC).” Thus, the THB Company’s proposal for arbitration to resolve the dispute has been accepted by the GMA Company. Consequently, this constitutes an arbitration agreement between the two parties, and the Council to Consider the Petition determines that the Arbitral Tribunal has jurisdiction to resolve the matter as provided for.

Request for the annulment of the arbitral award in dispute case No. 70/21 dated May 19, 2021, issued by VIAC on the grounds that the Arbitral Tribunal lacked jurisdiction to resolve the matter due to the absence of an arbitration agreement between the parties is unfounded.

Court’s Decision:

The court does not accept the THB Limited Liability Company’s request to annul the arbitral award in dispute case No. 70/21 dated May 19, 2022, issued by the Vietnam International Arbitration Centre (VIAC).

Legal Basis:

Based on Article 2 of Article 31, Article 414, and Article 415 of the Civil Procedure Code; Based on Article 3, Article 68, Article 69, Article 71, and Article 72 of the Law on Commercial Arbitration; Resolution No. 326/2016/UBTVQH14.