Decision No: 163/2020/QĐ-PQTT

Requesting Party: A.I.C Management Consulting Co., Ltd.

Related Party: Meito Vietnam Co., Ltd.

Re: Request to annul the arbitration award due to the appointment of the Chairman of the Arbitration Council being unauthorized

Facts of the case

On September 10, 2015, A.I.C Management Consulting Co., Ltd. (Company A) and Meito Vietnam Co., Ltd. (Company M) entered into a consultancy agreement for design services and construction management services for the Mega Cold Storage Project. During the execution of services and payment processes, the parties could not agree on certain aspects, leading to disputes over volume management services and project management services. As per the Agreement and its Appendices, project management services were to be carried out over a total duration of 7 months with a contract value for these services amounting to USD 180,000, equivalent to VND 4,104,000,000.

At a meeting on March 24, 2016, Company M committed to handing over the project site by May 7, 2016. From March 29, 2016, to April 21, 2016, Company A undertook various tasks related to management, supervision, expediting contractors’ work, and issuing project methodologies and templates for the Project Team. On May 6, 2016, Company A requested confirmation of the site handover date and updates on the designation of contractors for key tasks. After several delays, Company M confirmed that site handover would be completed by January 10, 2017. By February 15, 2017, Company M had handed over approximately 80% of the project site. During the period when the site had not yet been handed over, upon request, Company A continued to coordinate and manage subcontractors and perform other construction management services.

On September 28, 2017, Company M unilaterally terminated the contract without referencing the provisions stipulated in the contract, while the parties had not yet conducted the project handover or related tasks.

On November 19, 2018, Company A filed a lawsuit with the Vietnam International Arbitration Center (VIAC), requesting Company M to fulfill obligations of payment for incurred service fees, additional service fees, supplementary printing costs, construction permit application preparation costs, late payment interest, and compensation for damages due to unilateral contract termination. Company M counterclaimed, requesting Company A to provide professional liability insurance certificates, prove the qualifications of staff employed in the project, hand over related documents, and refund Company M for design service fees, management service fees, and volume service fees that Company M had paid to Company A.

Arbitration Award No. 88/18 HCM dated August 2, 2019, of the Vietnam International Arbitration Center (VIAC):

Regarding the lawsuit: Partially accepting the claim concerning late payment interest. Company M is ordered to pay Company A the following amounts: additional service fees of USD 52,274 equivalent to VND 1,216,048,925, late payment interest for the second month of construction management services of VND 12,212,478, supplementary printing costs of USD 5,166.00 and USD 1,938.00 equivalent to VND 120,238,650 and VND 45,106,950, respectively. The request of Company A for payment of incurred costs, late payment interest for design service fees, volume management, and construction management fees from the third to the seventh month was rejected. The request for compensation for damages due to unilateral contract termination by Company M was also rejected.

Regarding the counterclaim: Accepting Company M’s request for professional liability insurance certificates. Company A is obliged to provide Company M with a professional liability insurance certificate with a coverage period of 12 months from June 2018. Company A must hand over to Company M all project-related documents and records not yet handed over. The request to prove the qualifications of Company A’s staff employed in the project was rejected. The request to refund Company M for design service fees, management service fees, and volume service fees that Company M had paid to Company A was also rejected.

Dissatisfied with the arbitration award, Company A filed a lawsuit requesting the annulment of the entire Arbitration Award No. 88/18 HCM for the following reasons:

The arbitration award violated legal regulations when establishing the Arbitration Council. According to Clause 3, Article 40 of the Commercial Arbitration Law 2010 and Clause 3, Article 12 of the VIAC Procedural Rules, in cases where the parties have no other agreement, within 15 days from the date the respondent selects an arbitrator on January 23, 2019, the two arbitrators must elect a third arbitrator as the Chairman of the Arbitration Council. According to the above provision, the last day to elect the third arbitrator as Chairman should be February 7, 2019, but Mr. Lê Tấn Vinh was not elected until February 11, 2019, to form the Arbitration Council. After Mr. Lê Tấn Vinh declined to be the Chairman, Mr. Hoàng Ngọc Giao was elected as Chairman. The Arbitration Council did not verify the facts as requested by Company A to clarify issues related to the dispute. The arbitration award dismissed all additional tasks and incurred costs that Company A had performed according to the signed Contract, and the Arbitration Council did not comply with legal provisions when arbitrarily applying the law to issue the award.

Related Party: Meito Vietnam Co., Ltd.

The deadline for electing the Chairman of the Arbitration Council was February 7, 2019. However, February 7, 2019, was a Lunar New Year holiday, so according to Clause 5, Article 148 of the Civil Code 2015, the final deadline for electing the Chairman of the Arbitration Council was calculated to be the end of the next working day after the holiday, i.e., February 11, 2019. When Mr. Vinh declined to be Chairman of the Arbitration Council, the Council was already established. According to Clause 2, Article 17 of the VIAC Arbitration Rules, in such cases, the remaining members decide on the change of members. Therefore, Mr. Đặng Quang Phương and Mr. Nguyễn Chính’s election of Mr. Hoàng Ngọc Giao as Chairman of the Arbitration Council was lawful. The minutes dated July 3, 2019, prepared between the representatives of the parties and the Arbitration Council, show that Company A accepted the Arbitration Council, thus losing the right to object according to Article 13 of the Commercial Arbitration Law 2010.

Representative of the People’s Procuracy of Ho Chi Minh City:

The election of Mr. Lê Tấn Vinh as Chairman of the Arbitration Council was within the stipulated time, while the election of Mr. Hoàng Ngọc Giao as Chairman was beyond the stipulated time. The request for verification with a third party was outside the jurisdiction of the hearing council. Based on point b, Clause 2, Article 68, it was proposed to accept Company A’s request to annul the Arbitration Award No. 88/18 HCM.

Court’s Opinions

January 23, 2019, is determined as the date when the arbitrators were selected by the parties. According to Clause 3, Article 40 of the Commercial Arbitration Law and Clause 3, Article 12 of the VIAC Arbitration Procedural Rules, February 7, 2019, is the last day for the arbitrators to elect the Chairman of the Arbitration Council. However, February 7, 2019, was a Lunar New Year holiday (from February 2, 2019, to February 10, 2019), so according to Clause 5, Article 148 of the Civil Code, the final deadline for electing the Chairman of the Arbitration Council was calculated to be the end of the next working day after the holiday, in this case, February 11, 2019. Therefore, the election of Mr. Lê Tấn Vinh by Mr. Đặng Quang Phương and Mr. Nguyễn Chính was lawful. Thus, the complaint regarding the election of Mr. Lê Tấn Vinh as Chairman of the Arbitration Council is unfounded. On February 20, 2019, when Mr. Vinh declined to be Chairman of the Arbitration Council, it was beyond the 15-day period since the arbitrators were selected without electing a Chairman. According to Clause 3, Article 40 of the Commercial Arbitration Law 2010, in such cases, the authority to determine the Chairman of the Arbitration Council rests with the President of the Arbitration Center. Therefore, the election of Mr. Hoàng Ngọc Giao by Mr. Đặng Quang Phương and Mr. Nguyễn Chính as Chairman of the Arbitration Council on February 20, 2019, was unauthorized according to regulations.

Company M asserted that during the opening session of the Arbitration Council on July 2, 2019, Company A was aware of the full authority, procedures, and election process of the Chairman of the Arbitration Council but did not object and continued with the session. Due to the lack of evidence showing that Company A was aware of the violation in electing Mr. Hoàng Ngọc Giao as Chairman, Company A did not lose the right to object under Article 13 of the Commercial Arbitration Law 2010.

Court’s Decision

Accepting the request of A.I.C Management Consulting Co., Ltd. Annul the Arbitration Award of case number 88/18 HCM by the Arbitration Council of the Vietnam International Arbitration Center (VIAC) dated August 2, 2019, in Ho Chi Minh City.

Legal Basis

Clause 2, Article 31; point a, Clause 3, Article 38; Clause 3, Article 414; and Article 415 of the Civil Procedure Code 2015; Clause 3, Article 40; point b, Clause 2, Article 68; Clause 1, Article 69; Article 71; Article 72 of the Commercial Arbitration Law 2010; Article 6 of Resolution 01/2014/NQ-HĐTP.