Decision No. 11/2023/QD-PQTT Re: Request to Annul Arbitration Award Related to Partnership Contract Dispute

Decision No.: 11.2023/QD-PQTT

Requesting Party: T Investment Joint Stock Company

Related Party: ABSOLUTE HOTEL SERVICE I

Re: Request to Annul Arbitration Award Related to Partnership Contract Dispute

 

Facts of the case

According to the case file, Absolute Hotel Service I (“A”) is a foreign hotel brand management company established under the laws of Hong Kong and a subsidiary of A Group, a major hotel management group in Thailand. T Investment Joint Stock Company (“Company T”) is the owner of a hotel building. The hotel, developed by Company T, is a mixed-use building serving both residential and business purposes, with approximately 350 rooms, developed under the condotel model. On January 25, 2018, Company T and A entered into a hotel management service business contract. Subsequently, the parties also signed a Comprehensive Service Contract on September 19, 2019, and a Consultancy Service Contract on December 1, 2019. During the cooperation, conflicts arose between the parties. In conducting business and providing services in Vietnam, A is required to comply with international treaties to which Vietnam is a member, the trade agreements between Vietnam and Hong Kong – China, and Vietnamese law. To operate hotel management services in Vietnam, A must have specialized departments for managing condominium operations, including technical, service, security, hygiene, and environmental departments, as well as a team of trained staff with management operation certificates issued by the Ministry of Construction. Company T argued that A did not meet the necessary conditions to operate hotel management services in Vietnam. A filed a lawsuit with the Vietnam International Arbitration Center (VIAC) to resolve the dispute.

 

Arbitration Award No. 64/20 dated August 11, 2021 by VIAC resolved the contract dispute between Company T and A. Disagreeing with the award, on April 6, 2022, Company T filed a lawsuit requesting the annulment of the arbitration award on the following grounds: improper authority in contract signing, disagreement with the Arbitration Panel’s finding that Company T was at fault in executing the disputed contracts. Specifically:

 

The arbitration did not consider the provisions of the Real Estate Business Law and the Housing Law when determining the validity of the contracts. According to the Law on Enterprise 2014, contracts will be effective at the time the contracts were signed. The Law on Enterprise did not require A to register its business. However, in the specialized field of management, the Real Estate Business Law and the Housing Law required A to meet certain conditions to operate hotel management and other consultancy services in Vietnam. The Arbitration Award No. 64/20, when considering the validity of the signed contracts, did not consider the provisions of the Housing Law 2014 to evaluate A’s capacity and authority in signing these contracts, which was a shortcoming, not objective, and contrary to Vietnamese law. To operate hotel management services in Vietnam, A must ensure specialized departments for managing condominium operations, including technical, service, security, hygiene, and environmental departments, and a team of trained staff with certificates of management operation issued by the Ministry of Construction. Moreover, after meeting the capacity conditions, A has the responsibility to notify the Department of Housing and Real Estate Market Management (since A does not have a headquarters in Vietnam) to publicly disclose information about the management unit. Therefore, A may not have the sufficient functions and authority to sign and execute hotel management contracts according to the criteria and conditions for hotel management services.

 

The arbitration award did not reflect the objective facts regarding the application of hotel management standards and business plans under the Hotel Management Contract. Regarding the Comanche software, Company T clearly stated that this software did not meet the requirements for hotel management and operation, causing serious reputational damage to the company. The Arbitration Panel concluded that the management software (including Comanche and MyHR software) were A’s management tools used to execute the signed Hotel Management Contract with Company T. Therefore, during the validity period of the Management Contract, any changes to these management tools for any reason needed to be discussed and approved by A, as the Manager hired by Company T under the Contract. The Arbitration Panel’s failure to consider the evidence provided by Company T to support its argument that Company T violated the Management Contract was not in line with the objective facts and was inappropriate. Regarding the management authorization and annual business plan, the Arbitration Panel concluded that Company T was at fault for delays in responding to the annual business plan and issuing the Management Authorization. This conclusion was not based on the objective facts, as after A sent the annual business plan on May 12, 2020, numerous online meetings were held between A and Company T to discuss this issue.

 

Company T clearly stated that it did not approve the annual business plan submitted by A due to its unsuitability for new business conditions and lack of feasibility and effectiveness. A’s unilateral termination of the Hotel Management Contract with Company T when the parties had not yet agreed upon and finalized the Management Authorization and annual business plan, accusing Company T of violating the standards set by the Manager and intervening, leading A to completely terminate the hotel management and operation, was unfounded.

 

Related Party: Absolute Hotel Service I

A disagrees with Company T’s request to annul the arbitration award in dispute case No. 64/20, citing that the request for annulment has expired according to Article 69 of the Law on Commercial Arbitration. VIAC has also confirmed that the arbitration award in dispute case No. 64/20 was duly delivered according to Article 12 of the Law on Commercial Arbitration and Article 3 of VIAC’s Arbitration Rules.

 

Representative of the Hanoi People’s Procuracy. The Tribunal has complied with procedural laws. Based on the case file, there is sufficient basis to determine that VIAC delivered the Arbitration Award in dispute case No. 64/20 dated August 11, 2021, to Company T on August 17, 2021, according to VIAC’s Arbitration Rules. Therefore, Company T’s submission of the request to annul the Arbitration Award on April 6, 2022, was beyond the time limit specified in Article 69 of the Law on Commercial Arbitration. Thus, the procuracy recommends dismissing the request to annul the Arbitration Award in dispute case No. 64/20 dated August 11, 2021, of Company T.

 

Court’s Opinions

On October 15, 2021, Company T sent a document to VIAC claiming it had not received the Arbitration Award in dispute case No. 64/20, which is reasonable. Based on the case file and VIAC’s response, on March 17, 2022, Company T received a copy of the Arbitration Award in dispute case No. 64/20 dated August 11, 2021, from VIAC. Therefore, Company T’s submission of the request to annul the Arbitration Award in dispute case No. 64/20 dated August 11, 2021, to the Hanoi People’s Court on April 6, 2022, is within the time limit specified in Clause 1, Article 69 of the Law on Commercial Arbitration. Company T argued that VIAC violated fundamental principles of Vietnamese law in resolving the case; however, Company T did not specify which fundamental principles of Vietnamese law were violated by the Arbitration Award. Consequently, Company T’s request to annul the Arbitration Award is not accepted. During the hearing, both parties acknowledged that throughout the resolution process at VIAC, both parties were given opportunities to present and express their views to protect their legitimate rights and interests. All requests of the parties were considered and resolved by the Arbitration Panel. During the hearing, neither party raised objections to the entire resolution process of the Arbitration Panel. It is evident that the Arbitration Panel handled and resolved the case in accordance with Articles 68 and 71 of the Law on Commercial Arbitration; therefore, Company T’s request to annul the Arbitration Award is not accepted.

 

Court Decision

The request of T Investment Joint Stock Company to annul the Arbitration Award in dispute case No. 64/20 dated August 11, 2021, of the Arbitration Panel under the Vietnam International Arbitration Center (VIAC) is not accepted.

 

Legal Basis

Clause 2, Article 31; Clause 3, Article 414; Article 415 of the Civil Procedure Code. Articles 13, 68, 69, 71, and 72 of the Law on Commercial Arbitration. Clauses 2, 3, Article 3 of the VIAC Arbitration Rules. Point d, Clause 2, Article 14; Clause 2, Article 15 of Resolution 01/2014 of the Judges’ Council of the Supreme People’s Court. Clause 3, Article 39 of Resolution No. 326/2016/UBTVQH14.