Vietnam’s Code of Civil Procedure (CCP) provides that before any judgement, decision or foreign arbitral award of a foreign court or arbitration center (foreign court judgements or arbitral awards) to take effect in Vietnam, it is required to be approved by the Vietnamese Court and must be recognized and enforceable under the laws of Vietnam.
However, not all foreign court judgements or arbitral awards of said description will be accepted and considered by the Courts in Vietnam. Whether or not a particular judgement or arbitral award will be taken into consideration award depends on existing international treaties or diplomatic relations between Vietnam and the relevant nations. In principle, the Vietnamese Court will only recognize and enforce foreign court judgements or arbitral awards that are:
- In accordance with the provisions of international treaties signed and participated in by Vietnam;
- Based on a reciprocal agreement; and
- Compliant with the laws of Vietnam.
The Vietnam Ministry of Justice has recently published a database regarding the recognition and enforcement of foreign court judgements or arbitral awards in Vietnam from 2012 to September 30, 2019, (the Database), which indicates that only 49% of foreign court judgements or arbitral awards will be recognized and enforced in Vietnam. This figure sheds light on the alarmingly low rate of recognition and enforcement of foreign court judgements or arbitral awards in Vietnam.
There are two possible reasons behind this low rate of recognition. First, the foreign court or arbitration center may be of inadequate quality or has violated dispute resolution procedural regulations. A second reason to consider is that some provisions that frame the recognition and enforcement of foreign court judgements or arbitral awards by the CCP and the Vietnamese law on Commercial Arbitration may not be properly adhered to or contain vague language without guidelines.
On the international level, Vietnam recognizes and enforces foreign court judgements or arbitral awards based upon the Convention on the Recognition and Enforcement of Arbitral Awards 1958 (New York Convention 1958) and the provisions in Chapters XXXVI and XXXVII of the CCP 2015 (Chapters 26, 27, 28, and 29 of the CCP 2004, amended and supplemented in 2011).
Grounds to deny the recognition and enforcement of a foreign court judgement or arbitral award in Vietnam are stipulated by Articles 3, 4, and 5 of the New York Convention 1958, Articles 439 and 459 of the CCP 2015 (formerly Articles 356 and 370 CCP 2004, amended and supplemented in 2011).
The Database specifies that 05 out of the 26 foreign court judgements and 30 out of the 82 foreign arbitral awards are not recognized in Vietnam. The judgement or arbitral award may be denied for multiple reasons, including:
Grounds for the Court in Vietnam to Refuse to Recognize Foreign Arbitral Awards
When individuals, businesses, or organizations as judgement debtors are not instructed in a timely and appropriate manner on the procedure for appointing an arbitrator and dispute resolution at an international arbitration center, or are otherwise hindered from exercising their litigation rights due to other reasonable grounds
This reason is often invoked to deny foreign arbitral awards when the judgement debtors fail to receive a fair opportunity to present their case. As such, the judgement debtor will have to prove that they were deprived of the right to a fair trial at the international arbitration center. This situation includes the following scenarios:
- The judgement debtor was not provided notice of the appointment of an arbitrator, or
- The judgement debtor was not provided notice of the arbitration procedure; or
- The judgement debtor was not able to present their case.
The type of notice to be provided regarding the arbitrator appointment, arbitration procedure, or arbitration session is governed by the arbitration rules selected by the parties involved in the arbitration agreement. The regulations in the Vietnam CCP on notices and announcements shall not apply to foreign arbitral awards.
The arbitral awards that failed to gain recognition due to this reason comprise the most significant number in the Database, with 70% of the total non-recognitions.
If the signatories of the arbitration agreement do not possess signing capacity within their respective jurisdiction
One basis for non-recognition includes the lack of physical and mental capacity, the lack of authorization, or if the signatory is underage (a minor).
Article 459.1(a), CCP 2015 (Article 370, CCP 2004, amended and supplemented in 2011) provides that the capacity-determining jurisdiction refers to each party’s ‘respective jurisdiction’. The Review Court must base its decision on the laws that apply in the jurisdiction of each signatory to determine whether or not said signatory has the legal capacity to sign the arbitration agreement.
In other words, the Court is not permitted to use Vietnamese legal provisions to determine if the signatory has the legal capacity to sign the foreign arbitration agreement in question. Conversely, the Court is likewise not allowed to use foreign legal provisions to deny the Vietnamese signatory of their legal capacity to sign the same arbitration agreement.
In practice, the legal applicable law that is to be applied to assess the signing capacity of each signatory must be determined via the Court’s conflict avoidance principles.
For foreign signatories, the Court must apply the conflict avoidance principles pursuant to Article 466 (for foreign persons) and Article 467, CCP 2015 (for foreign entities) to ascertain the applicable law. The conditions are as follows:
- The legal capacity of a foreigner shall be determined according to the laws of the country that they are a citizen of (Article 466.1, CCP 2015).
- The legal capacity of a foreign agency or organization shall be determined according to the laws of the country where such agency is established (Article 467, CCP 2015).
- The application of foreign laws to determine the legal signing capacity of the signatories must also comply with the provisions of Article 481, CCP 2015, on selecting and providing foreign laws to apply to civil dispute resolution involving foreign elements.
The rules are different for Vietnamese signatories. When assessing the legal capacity of Vietnamese individuals, businesses, and organizations, the Court must take into consideration the relevant requirements of the Criminal Code, the Law on Enterprises, and other relevant legislative codes.
The arbitral awards that failed to gain recognition due to signatory capacity are the second most abundant category in the Database with 40% of the total non-recognitions.
Should the international arbitration center be comprised of members or dispute resolution procedures that are not in compliance with the arbitration agreement or the law of the jurisdiction where the international arbitrator announces their decision (if the arbitration agreement fail to set out provisions for these situations)
Article 459.1(đ), CCP 2015 (Article 370.1(đ), CCP 2004, amended and supplemented in 2011) provides that a judgement or arbitral award may be denied due to violations committed by (i) members of the Arbitration Tribunal, or (ii) failure to comply with arbitration protocol and procedure.
Regarding the arbitration tribunal members, the provisions of Article 459.1(d), CCP 2015 are applicable if one party has been deprived of the right to appoint an arbitrator or to request arbitration tribunal members that suitable to the parties’ arbitration agreement. To determine whether or not a violation has occurred, the Court takes into account: (i) the arbitration agreement, or (ii) if said agreement does not provide any provisions in this regard, the laws of the country where the arbitration was executed will be utilized.
Regarding violations of arbitration protocol and procedure, the provisions of Article 459.1(đ), CCP 2015 apply if one party has been deprived of an arbitration procedure under the agreement established by the relevant parties. This ground is similar to the provisions concerning the annulment of domestic arbitral awards, as stated by Article 68.2(b) of the Vietnamese Law on Commercial Arbitration. However, one needs to note that the legal basis for the assessment of the arbitration procedure’s legality is not found in the typical litigation procedures of the Vietnam CPP. Instead it is based on the agreement made and signed by the relevant parties, the rules of arbitration set by the foreign arbitration center, the law regarding arbitration of the country where the parties agreed to formalize their commitment.
The arbitral awards that failed to gain recognition due to these reasons comprise the third most numerous in the Database, with 33.4% of the total non-recognitions.
Conflict with the fundamentals of the Laws of Vietnam
The concept and extent of a ‘conflict with the Laws of Vietnam’ are currently a topic of debate. According to Resolution 01/2014/NQ-HDTP, the Council of Judges explained that ‘violations against the fundamentals of the Laws of Vietnam’ denote any decisions that ‘infringe upon the basic principles of conduct effective in all matters regarding the construction and execution of the Laws of Vietnam’. However, such a description is certainly vague and lacks sufficient detail. Moreover, this Decree only provides instructions to apply the provisions of the Law of Commercial Arbitration 2010 to annul domestic arbitral awards instead of explaining how to navigate the CCP to recognize and enforce foreign judgements and arbitral awards in Vietnam. This reason for non-recognition is, arguably, the most unsettling to the judgement creditor.
The arbitral awards that failed to gain recognition due to this reason are the fourth most numerous in the Database, comprising 23.3% of the total non-recognitions.
Grounds for the Court in Vietnam not to recognize Foreign Court Judgements
If the civil judgement and decision of the foreign court not correspond with one of the conditions for recognition provided in the international treaties of which the Socialist Republic of Vietnam is a member.
Vietnam has signed several mutual legal assistance treaties with other countries such as China, Laos, France, Mongolia, etc. All said treaties contain regulations concerning the recognition and enforcement of foreign judgements in Vietnam, including stipulations on the parameters for recognition and enforcement, conditions and procedure for recognition and enforcement, etc.
The judgements that failed to gain recognition due to this reason are the least numerous in the Database, comprising 20% of the total non-recognitions.
If the judgement debtor or their legal representative failed to appear at the hearing held by the foreign court because they were not properly summoned, or the summons was not served to them in a timely and lawful manner to enable them to exercise their right of self-defense.
This basis for non-recognition is based on the judgement debtor’s deprivation of a fair and equal opportunity to present their case.
The judgements that failed to gain recognition due to this reason account for a significant number (40%) of the total non-recognitions.
This basis for the Vietnamese Court’s refusal to recognize and enforce the foreign courts’ judgement and decision was recently introduced as part of CCP 2015. A number of legal researchers have come forward to criticize this line of reasoning, arguing that the foreign court’s authority is not dependent on the evaluation of the Vietnamese legislature.
Nevertheless, the judgements that failed to gain recognition due to this reason take up a large proportion (40%) of the total non-recognitions.
The recognition and enforcement of a foreign court’s judgement or arbitral award helps reduce the litigation costs borne by the parties participating in the dispute. However, the recognition and enforcement of said matters must comply with certain rules and principles, which serve to demonstrate a nation’s right to jurisdictional independence. This principle bars the imposition of another nation or an international organization’s legal judgement and awards. Hence, it not only underscores Vietnam’s sovereignty, but also aligns the country with the current values espoused by the global economy.
This article contains legal knowledge and professional terms, readers who are interested in the procedure for recognition and enforcement of foreign courts’ judgements or arbitral awards in accordance with the Laws of Vietnam, please contact our Commercial Litigators and Trial Lawyers at firstname.lastname@example.org.