Decision No.: 786/2022/QD-PQTT

Requesting Party: F Real Estate Joint Stock Company

Party with Related Rights and Obligations: C Limited Liability Company

Regarding: Request for an annulment of an arbitral award in a dispute over service fee payment.

Facts of the case

On January 11, 2020, C Limited Liability Company (C LLC) and F Real Estate Joint Stock Company (F JSC) signed a Letter of Intent for consulting and valuation services for a land area of 52,095.5 m2 within the CIPUTRA urban area, Tay Ho district, Hanoi. Pursuant to this agreement, C LLC would provide services to determine the consulting and valuation methods and basic assumptions for the Sunshine Empire project to Acuity Funding (a unit designated by F JSC). Immediately after signing the contract, F JSC made a payment of 70% of the contract value to C LLC, equivalent to 1,700,930,000 VND.

On February 28, 2020, C LLC and F JSC further signed a Letter of Intent for valuation and consulting services for the Wonder Villas project within the CIPUTRA urban area, Tay Ho district, Hanoi, Vietnam. C LLC would provide services to determine the consulting and valuation methods and basic assumptions for this project as well. F JSC also made a payment of 70% of the contract value, equivalent to 269,500,000 VND, to C LLC.

C LLC fulfilled its obligations under the contracts, completed the signed works, and sent letters and emails requesting F JSC to pay the remaining 30% of the contract value for the 02 contracts. However, F JSC claimed that C LLC had not completed the work because it had not provided reports and valuation certificates for the aforementioned projects, thus refusing to fulfill the payment obligation. C LLC initiated arbitration proceedings, filing a supplementary claim with the Vietnam International Arbitration Center (VIAC) to request F JSC to fulfill the payment obligations: Remaining service fees under Contract 1: 728,970,000 VND, and under Contract 2: 17,917,572 VND. Late payment interest under Contract 1: 115,037,437 VND, and under Contract 2: 115,500,000 VND. Costs incurred due to overdue payments: 85,145,000 VND.

Arbitral Award No. 16/21 HCM dated January 7, 2022, by the Arbitration Council of VIAC in Ho Chi Minh City. Acceptance of C LLC’s claim, obliging F JSC to pay the following amounts:

• Remaining service fees for the valuation and consulting services for the land project with an area of 52,095.5 m2 within the CIPUTRA urban area, Tay Ho district, Hanoi, Vietnam, totaling 728,970,000 VND, and late payment interest on service fees totaling 115,037,458 VND.
• Remaining service fees for the valuation and consulting services for the Sunshine Wonder Villas project within the CIPUTRA urban area, Tay Ho district, Hanoi, Vietnam, totaling 115,500,000 VND, and late payment interest on service fees totaling 17,913,575 VND.
• Costs incurred due to overdue payments amounting to 85,145,000 VND, and arbitration fees totaling 88,553,000 VND.

Additionally, in the event of late payment beyond 30 days from the date of the award, F JSC must pay additional interest at a rate of 9% per annum.

Disagreeing with the Arbitral Award, on February 9, 2022, the People’s Court of Ho Chi Minh City received a postal lawsuit petition from F JSC, requesting the annulment of Arbitral Award No. 16/21 HCM dated January 7, 2022, issued by VIAC, citing that VIAC and the Arbitration Council violated the provisions of Article 32 of the Commercial Arbitration Law and Article 8 of the VIAC Arbitration Rules dated March 1, 2017. F JSC did not receive any notification from VIAC, causing it to lose its rights as the respondent, including the right to counterclaim and appoint arbitrators with relevant knowledge and experience for this case to participate in the Arbitration Council. The Arbitration Council violated the provisions of Article 40(3) of the Commercial Arbitration Law and Article 12(3) of the Rules, and the President of VIAC violated Article 40(1) of the Commercial Arbitration Law regarding the deadline for appointing arbitrators for the respondent. The arbitral award contradicts the fundamental principles of Vietnamese law. Serious violations of arbitration procedural rules under point b, paragraph 2 of Article 68 of the Commercial Arbitration Law regarding the determination of the final hearing session. Annulment of Arbitral Award No. 16/21 HCM under point d, paragraph 2 of Article 68 of the Commercial Arbitration Law.

Party with Related Rights and Obligations: C Limited Liability Company. Arbitral Award No. 16/21 HCM has undergone the procedures for receiving, accepting, and implementing procedures, and applying the law correctly in accordance with legal regulations by VIAC. The content of Arbitral Award No. 16/21 HCM is entirely in accordance with the regulations. C LLC disagrees with the annulment of the arbitral award. F JSC intentionally did not cooperate, using that as a reason to request the annulment of the award, which is unfounded, and therefore, all of F JSC’s requests should be rejected.

Representative of the People’s Procuracy of Ho Chi Minh City. During the performance of the contract, both F JSC and C LLC complied with the execution without any complaints. The Arbitration Council duly complied with the legal regulations on procedural sequence to resolve disputes between the parties. The respondent participated in the dispute resolution hearing without any objections to the composition of the Arbitration Council. Accordingly, F JSC’s grounds for requesting the annulment of the arbitral award are unfounded.

Court’s Opinion

It is noted that the VIAC documents sent on March 1, 2021, were not delivered to Company F as stipulated in Article 3(2) of the Arbitration Rules. On October 15, 2021, Company F received Notification No. 325/VIAC-HCM and the Petition but failed to exercise the right to counterclaim because the deadline had passed. Therefore, the failure to deliver the documents on March 1, 2021, did not ensure the respondent’s exercise of rights and obligations as provided for in Article 35 of the Law on Commercial Arbitration, constituting a violation of Article 12 of the Law on Commercial Arbitration, falling under the category of serious violations of arbitration procedural rules stipulated in point b of paragraph 2 of Article 68 of the Law on Commercial Arbitration.

Regarding the reasons for the arbitral award conflicting with the fundamental principles of Vietnamese law, during the hearing, a representative of Company C confirmed that at the time of signing the contract, the company did not possess any valid form of investment business license as instructed by the Investment Law of 2014. Therefore, Company C provided valuation services to Company F without meeting the conditions stipulated by Vietnamese law. The Arbitration Council trusted that Company C had fulfilled its function without verifying and clarifying the matter in accordance with Article 45 of the Law on Commercial Arbitration, constituting a violation of procedural rules under point b of paragraph 2 of Article 68 of the Law on Commercial Arbitration. VIAC did not violate point d of paragraph 2 of Article 68 of the Law on Commercial Arbitration as alleged by Company F. The request of the representative of the People’s Procuratorate to participate in the hearing was not in line with the assessment of the council, so the Council did not accept it.

Court Decision

Accept the request of F Real Estate Joint Stock Company. Annul Arbitral Award No. 16/21 HCM in the dispute case of the Arbitration Council under the Vietnam International Arbitration Center (VIAC) issued on January 7, 2022, 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 dated March 20, 2014.