Decision No: 755/2018/QD-PQTT

Requesting party: Ms. Do Thi Mai T.

Party with related rights and obligations: X LLC

Regarding: Request for annulment of arbitral award in dispute violating confidentiality and non-compete agreement

Facts of the Case

X LLC and Ms. Do Thi Mai T. entered into a fixed-term employment contract for 12 months, from October 10, 2015, to October 31, 2016. The position on offer was Head of the Recruitment Department. On October 21, 2015, X LLC and Ms. T signed a Confidentiality and Non-Compete Agreement (NDA), wherein Section 1, Article 3 of the NDA stated: “During the period of employment with or working for X LLC and for a period of twelve (12) lunar months following the termination of employment with or cessation of work for X LLC, regardless of the reason for termination of employment or cessation of work, the individual agrees not to, directly or indirectly and within the entire territorial scope of the Earth, engage in similar work or essentially similar work to the work performed or substantially similar to the work performed in any business competing with Lazada.vn, .. currently, or in the future competing with the business of Lazada.vn, Recess, and/or affiliates and partners of X LLC.” The parties also agreed that any disputes would be resolved through arbitration.

On November 1, 2016, X LLC and Ms. T continued to sign a fixed-term employment contract for 12 months from November 1, 2016, to October 31, 2017, with the position being Head of the Recruitment Department. Subsequently, on November 18, 2016, Ms. T terminated the 2016 employment contract with X LLC.

On October 2, 2017, X LLC filed a lawsuit along with evidence at VIAC, requesting Ms. T to compensate X LLC in the amount of 205,197,300 VND, equivalent to 03 times the monthly salary before Ms. T unilaterally terminated the 2016 employment contract for violating Section 1, Article 3 of the NDA.

Arbitral Award No. 75/17 HCM dated February 19, 2018, by the Arbitration Council of the Vietnam International Arbitration Center (VIAC) held in Ho Chi Minh City, accepted all of X LLC’s requests, compelling Ms. Do Thi Mai T. to pay the original claim amount of 205,197,300 VND. The respondent is required to bear all arbitration fees in this dispute, amounting to 24,600,000 VND within 30 days from the date of the arbitral award. In case of delayed payment, the respondent shall continue to bear late payment interest as per Article 357 of the Civil Code 2015, at an annual interest rate of 10%, corresponding to the amount and duration of the late payment.

Disagreeing with the arbitral award, on March 22, 2018, Ms. T filed a lawsuit with the Ho Chi Minh City People’s Court requesting the annulment of the entire content of Arbitral Award No. 75/17 HCM dated February 19, 2018, issued by VIAC, citing the following reasons: The arbitration agreement is invalid due to violation of Vietnamese law, the Arbitral Award contradicts basic principles of Vietnamese law, arbitration procedures violate the provisions of the Law on Commercial Arbitration, the dispute does not fall within the jurisdiction of the Arbitration Council, and the Arbitration Council relies on forged evidence.

Representative of the People’s Procuracy of Ho Chi Minh City. The judge correctly exercised jurisdiction over the case resolution. The court held sessions in accordance with the law and submitted documents to the People’s Procuratorate within the specified timeframe, issued, and served procedural documents to litigants and the People’s Procuratorate in accordance with the provisions of the Civil Procedure Code. The trial was conducted in accordance with the legal procedures of civil litigation. The parties exercised their rights and obligations as prescribed by the Civil Procedure Code. There is no basis for accepting Ms. Do Thi Mai T’s request for the annulment of the arbitral award.

Court’s Opinion

Article 13 of the 2010 Law on Commercial Arbitration stipulates: “In cases where one party discovers a violation of the provisions of this Law or the arbitration agreement but continues to conduct arbitration proceedings without objecting to the violations within the time limit prescribed by this Law, that party loses the right to object in arbitration or before the court.” Article 6 of Resolution No. 01/2014/NQ-HDTP dated March 20, 2014, guiding the Law on Commercial Arbitration by the Judicial Council of the Supreme People’s Court provides: “In cases where one party discovers a violation of the arbitration agreement but continues to conduct arbitration proceedings without objection to the Arbitration Council or the arbitration center within the time limit prescribed by the Law on Commercial Arbitration, that party loses the right to object in arbitration or before the court to those violations already known. If the Law on Commercial Arbitration does not specify a time limit, the time limit shall be determined by agreement of the parties or the arbitration procedural rules.” Article 9 of VIAC’s Arbitration Rules, effective from March 1, 2017, provides: “In case the respondent alleges that the arbitration agreement does not exist, is void, or cannot be performed, the respondent must clearly state this in the Respondent’s Submission. If the respondent fails to do so in the Respondent’s Submission, the respondent forfeits the right to object.” In Ms. T’s Response dated December 4, 2017, as well as throughout the arbitration proceedings, Ms. T did not raise any objections to the arbitration agreement. Therefore, Ms. T has forfeited the right to object to the arbitration agreement as stipulated.

Ms. T argues that the NDA violates the rights of employees and violates prohibited acts under the 2013 Labor Code, while the Arbitration Council still recognizes the NDA. The Arbitration Council’s recognition of the validity of the NDA is entirely in accordance with the law. Ms. T argues that the arbitration procedure violates the Law on Commercial Arbitration and that the dispute does not fall within the jurisdiction of the Arbitration Council. Based on Article 2, Article 2, Article 35, and Article 4 of the 2005 Civil Code, which states: “The right to freedom of contract and agreement in establishing civil rights and obligations is guaranteed by law, provided that such commitments or agreements do not violate the prohibitions of the law or contradict social ethics.” Between Ms. T and X LLC voluntarily entered into an agreement, when signed, Ms. T was fully competent to act in accordance with the law, without coercion, fraud, or imposition. Therefore, the Arbitration Council’s recognition of the validity of the NDA is entirely legal. Ms. T argues that the arbitration procedure violates the Law on Commercial Arbitration and that the dispute does not fall within the jurisdiction of the Arbitration Council. Based on Article 2, Article 2, Article 35, and Article 4 of the 2005 Civil Code, which states: “The right to freedom of contract and agreement in establishing civil rights and obligations is guaranteed by law, provided that such commitments or agreements do not violate the prohibitions of the law or contradict social ethics.” X LLC is a trader, registered for business, and engaged in commercial activities according to the 2005 Commercial Law. Therefore, the arbitration agreement falls within the jurisdiction of VIAC and arbitrators as stipulated in Article 2, Article 2 of the Law on Commercial Arbitration. Article 4 of Article 35 of the Law on Commercial Arbitration stipulates that the NDA is an independent agreement, and in case of dispute, it falls within the jurisdiction of arbitrators as the parties’ choice at the time of signing. The allegation by the parties that the evidence provided by the parties upon which the Arbitration Council relied for the arbitral award was forged is unfounded, as the documents were confirmed by ANZ Bank and X LLC.

Representative of the People’s Procuracy of Ho Chi Minh City. It is recommended not to accept Ms. Do Thi Mai T’s request for the annulment of Arbitral Award No. 75/17 HCM of the Arbitration Council of the Vietnam International Arbitration Center (VIAC) issued on February 19, 2018, in Ho Chi Minh City.

Court Decision

The court does not accept Ms. Do Thi Mai T’s request for the annulment of Arbitral Award No. 75/17 HCM of the Arbitration Council of the Vietnam International Arbitration Center (VIAC) issued on February 19, 2018, in Ho Chi Minh City.

Legal Basis

Article 31(2), Point a of Article 3(3), Article 38(3), Article 414, and Article 415 of the Civil Procedure Code 2015; Article 5(1), Point g of Article 7(2), Article 16(2), Article 60, Point 2 of Article 68, Article 1 of Article 69, Article 71, and Article 72 of the Law on Commercial Arbitration; Resolution No. 01/2014/NQ-HDTP.