Decision No. 1185/2022/QD-PQTT

Requesting Party: Limited Liability Company for Construction, Production, and Trade T

Party with related Rights and Obligations: Construction Corporation H Joint Stock Company

Regarding: Request for the Annulment of the Arbitral Award in the Dispute Regarding the Settlement of the Construction Contract.

Facts of the case:

Limited Liability Company for Construction, Production, and Trade T (Company T) acted as the Investor, and Construction Corporation H Joint Stock Company (Company H) acted as the Construction Contractor, having entered into four (04) construction contracts. Specifically, the contracts were as follows: Contract 16/2016/HĐTT signed on November 9, 2016, for the construction of the PMR Evergreen project. Contract PNH-KEN/2009/01 signed on January 21, 2019, for the construction of the G+H Building Block & Parking Basement Zone 2&4. Contract PNH-KEN/2009/07 signed on December 24, 2009, for the plastering of the G+H Building Block walls within The Kenton luxury apartment project. Contract KENTON/TN-HBC/2017 dated February 1, 2017, for the Landscape construction. These contracts were executed by both parties; however, due to a lack of agreement on the settlement value, Company T has yet to make payments to Company H. On November 10, 2021, Company H initiated legal proceedings against Company T at the Vietnam International Arbitration Center (referred to as V) to demand payment of the total outstanding amount from the 04 contracts: 89,581,856,989 VND. Late payment interest calculated until February 17, 2022, amounted to 52,949,725,362 VND. Legal fees and other litigation costs were borne by Company H.

Arbitral Award No. 501/VIAC dated March 18, 2022, rendered by the Vietnam International Arbitration Center (referred to as V): Partially accepted Company H’s request. Company T is required to pay Company H: The principal amount of the debt from the 04 Contracts of 74,829,203,860 VND; The interest amount from the 04 Contracts of 48,702,774,023 VND; an Arbitration fee of 1,266,666,701 VND with Legal fees of 400,000,000 VND. Disagreeing with the arbitral award, Company T filed a petition with the Ho Chi Minh City People’s Court to review and annul the entire content of Arbitral Award No. 501/VIAC-HCM dated March 18, 2022, issued by V for the following reasons: The arbitration agreement was not enforceable due to the termination of the agreed arbitration center without a successor arbitration organization, thus, in the absence of mutual agreement, the Court has jurisdiction to resolve disputes, but V resolved the dispute according to the selection of the arbitration center by the Claimant. The arbitration procedure did not comply with the provisions of the Law on Commercial Arbitration by consolidating the resolution of disputes arising from multiple contracts, yet there were incompatible arbitration agreements. The agreement among the parties regarding debt set-off was real and lawful, but Arbitral Award No. 501/VIAC-HCM disregarded this, thus, this award violated the fundamental principles of Vietnamese law.

Party with related Rights and Obligations: Company H. In this case, Arbitral Award No. 501/VIAC-HCM dated March 18, 2022, issued by the Arbitral Tribunal under V, does not relate to the resolution of the dispute between Company H and Company T. Therefore, Company H requests the Panel to consider the petition requesting a review of Company T’s request to annul Arbitral Award No. 501/VIAC-HCM dated March 18, 2022, issued by the Arbitral Tribunal under V, although it is not the correct subject of the request. However, this is a mistake, an oversight that can be rectified with Company T’s experience.

Representative of the Ho Chi Minh City People’s Procuracy. The panel reviewing the petition to annul the Arbitral Award dated March 18, 2022, issued by V, concluded that it violated the arbitration procedural rules, lacked jurisdiction, and therefore consolidating contracts was a procedural violation. Additionally, the parties had agreed to offset debts, but the arbitral award did not acknowledge this, thus, this award violated the fundamental principles of Vietnamese law.

Court’s Opinion:

Regarding the jurisdiction to resolve disputes: Due to the arbitration agreements in Contracts PNH-KEN/2009/01 and PNH-KEN/2009/07 not specifying a specific arbitration institution, thus not executable, on October 26, 2021, Company H sent Company T Letter No. 83/2021/CV-HBC, proposing V as the Arbitration Institution to resolve disputes related to the contracts and requested Company T to respond within 07 days from the date of receiving the aforementioned letter. By the end of November 9, 2021, beyond the stipulated 07-day period, Company H did not receive a response from Company T regarding the selection of the Arbitration Institution. Thus, it is evident that the parties could not agree on the selection of the Arbitration Institution to resolve the dispute. However, during the hearing, Company T confirmed that when Company H notified the submission of the petition and the selection of V as the dispute resolution center, Company T did not object and did not select any Arbitration Center to resolve the dispute. Throughout the arbitration process, Company T did not object to the jurisdiction of the Arbitral Tribunal. Therefore, Company T’s non-objection to V’s jurisdiction is considered as consenting to the establishment of an arbitration agreement with Company H to resolve the dispute at V. Thus, Company T’s assertion that the dispute does not fall under the jurisdiction of the Arbitral Tribunal lacks merit.

Consolidation of arbitration agreements for resolution within the same dispute: According to the regulations in Article 7(4) of Resolution No. 01/2014/NQ-HĐTP: “Arbitration procedural rules allow multiple legal relationships in dispute to be resolved within the same case.” and V’s Arbitration procedural rules: “Claims arising from or related to more than one contract can be consolidated into one Complaint for resolution in one dispute, even if those claims are based on one or more arbitration agreements.” Both the Law on Commercial Arbitration and V’s rules do not stipulate that arbitration agreements must be compatible with each other in order to be entitled to resolution consolidation within one dispute. Furthermore, as analyzed above, the arbitration agreements are valid and fall under the jurisdiction of the Arbitral Tribunal under V. Therefore, Company T’s claim that V consolidated arbitration agreements that were dissimilar and not under the jurisdiction of the Arbitral Tribunal to resolve within the same dispute is baseless.

Regarding the Arbitral Award’s violation of the fundamental principles of Vietnamese law: Company T argues that the Arbitral Tribunal did not base its decision on the parties’ agreement regarding debt set-off in Letter No. 151-tckt/18 dated January 31, 2018, violating the principle of respecting lawful agreements among the parties, thus, breaching the fundamental principle under Article 3(2) of the Civil Code 2015. In reality, at the time of resolving the dispute at V (i.e., after February 7, 2018), the parties had not yet signed a purchase contract for debt offset as agreed. During the arbitration hearing, Company T also confirmed that up to that point, the parties had not conducted the procedures for transferring ownership of house No. 01 in Block F, City Villa area within the PMR Evergreen project located in Ward M, District Y, Ho Chi Minh City, which is managed by Company T. During the arbitration hearing, the parties also did not agree on the procedures for transfer and debt offset of real estate. The Arbitral Tribunal did not acknowledge the debt offset by the parties as having a basis.

Court Decision:

The request of Limited Liability Company for Construction, Production, and Trade T to annul Arbitral Award No. 501/VIAC-HCM dated March 18, 2022, issued by the Vietnam International Arbitration Center is not accepted.

Legal Basis:

Article 31(2), Point a of Article 38(3), Article 414(3), and Article 415 of the Civil Procedure Code 2015; Article 43(1), Article 68, Article 69(1), Article 71, Article 72 of the Law on Commercial Arbitration; Resolution No. 01/2014/NQ-HĐTP.