Vietnam – Judicial Recourse – 2015

1. Vietnam - Judicial Recourse - 2015
Introduction
A popular way of settling investment disputes in many countries around the world is to start
proceedings before a civil or a commercial court. Even though, in principle, this option also
exists in Vietnam, in practice many of our Members prefer to settle their disputes through
arbitration. In this chapter, we will focus on judicial recourse in Vietnam and we will
highlight several obstacles that people face when trying to enforce their rights in practice.
The Vietnamese Courts
Relevant State bodies: Ministry of Justice (MOJ), Supreme People's Court, Supreme People’s
Procuracy, National Assembly (Economic Committee)
Issue description
One of the main reasons why foreign investors avoid the Vietnamese courts relates to the
independence of judges, a matter on which Vietnam still ranks rather low in comparative
international research studies.
Although great progress has been made in the development of the Vietnamese judicial system
in the last 20 years, it is fair to say that more work needs to be done to improve the
transparency and efficiency of proceedings in Vietnamese courts. Foreign investors still tend
to avoid settling business disputes at the Vietnamese courts and will often provide in
contracts for dispute resolution by arbitration.
In addition to the above, in October 2013 the Vietnamese Government adopted Decree No.
123/2013/ ND-CP guiding the Law on Lawyers of 2012. Depending on the implementation of
this Decree in practice, foreign law firms and their lawyers, both foreign and Vietnamese,
will be restricted in the scope of legal services they can carry out in Vietnam. Not only would
this have a negative impact on foreign law firms operating in Vietnam, investors would no
longer be able to use the legal service provider of their choice.
Potential gains/concerns for Vietnam
The lack of a reliable and efficient judicial system that will enable investors, whether
Vietnamese or foreign, to enforce their rights, constitutes a real obstacle to the growth of
investment and trade in Vietnam. According to the former EU Commissioner for Justice,
Fundamental Rights and Citizenship, Viviane Reding, ’the attractiveness of a country as a
place to invest and to do business is undoubtedly boosted by having an independent and
efficient judicial system. Olli Rehn, former European Union (EU) Vice-President for

2. Economic and Monetary Affairs and the Euro, mentioned in this regard that 'high quality,
independent and efficient justice is essential to a growth-friendly business environment.
Recommendations
We believe that much more can be done to improve Vietnam’s judicial system and to
increase the confidence of foreign investors in the Vietnamese courts. Although a lot of work
has already been done in this regard, we recommend that more training should be provided to
the judiciary based on best practices from other countries and with more support from foreign
experts. The performance of judges should be monitored and evaluated, with further training
provided if needed, in order to improve the speed and quality of justice. As justice must not
only be done, but also be seen to be done, increasing transparency, for example through the
publishing of court decisions, would be another step forward.
We recognises the recent efforts of the Vietnamese Government in the implementation of
judicial reforms, based on its Judicial Reform Strategy for 2020. We believe, however, that
there is still much room for further improvement. For example, more guidance from the
Supreme People’s Court to lower courts on how to deal with new and complex cases could
lead to much more consistency in court decisions, while contributing to legal certainty for
investors at the same time.
Arbitration in Vietnam
Relevant State bodies: Ministry of Justice (MOJ), Supreme People’s Court, Supreme
People’s Procuracy, National Assembly (Economic Committee)
Issue description
1. Intervention by the Vietnamese courts without the right of appeal
Foreign investors generally consider that arbitration at the Vietnam International Arbitration
Centre (VIAC) represents a feasible alternative to dispute resolution at the Vietnamese
courts, mainly due to the concerns mentioned in the previous section. Businesses increasingly
recognise that resolving disputes through arbitration at VIAC is generally more flexible and
efficient, and often much faster than instituting proceedings at the Vietnamese courts. This is
especially the case where the value of the claim does not justify providing for dispute
resolution through potentially costly and time consuming proceedings at an international
arbitration institution outside of Vietnam.
However, our Members report that Vietnamese courts have increasingly intervened in VIAC
proceedings leading in many cases to the termination of arbitration proceedings before an
award is issued, or to the setting aside of an award once it has been issued by a VIAC
tribunal.
For example, we understand that there are cases where the respondent in VIAC proceedings
has raised an unfounded objection to the jurisdiction of the VIAC tribunal. When the tribunal

3. issued a decision to confirm its jurisdiction, the respondent successfully applied to a
Vietnamese court to have the decision overturned. Since the decision of the Vietnamese court
on this issue is final and binding, and since there is no right of appeal against the court’s
decision, the court decision resulted in the termination of the VIAC proceedings.
The ease with which the Vietnamese courts can intervene to terminate VIAC proceedings,
without valid grounds and without any right of appeal, represents a major obstacle for foreign
investors who are seeking the fair and transparent resolution of their claims in Vietnam.
A respondent in VIAC arbitration proceedings can also challenge the validity of the VIAC
award at the Vietnamese court once it is issued, often relying on obviously flawed grounds.
We understand that in one case, all of the participants in VIAC arbitration proceedings
unanimously agreed to conduct the hearing in Vietnamese for reasons of convenience. Once
VIAC had issued an award against the respondent, the latter successfully petitioned the
Vietnamese court to set aside the award on the grounds that the arbitration agreement
provided for the arbitration to be conducted in English and therefore holding the arbitration
hearing in Vietnamese was inconsistent with the agreement of the parties. The court accepted
the petition even though the respondent’s lawyers and representatives had also fully agreed to
conduct the hearing in Vietnamese and despite the fact that the language of the hearing was
completely immaterial to the reasoning of the tribunal and the validity of the award.
2. Procedural issues regarding arbitration in Vietnam
In principle, simple copies of documents relating to the dispute are acceptable in arbitration
proceedings. In practice, however, a tribunal will likely apply the Vietnamese Civil
Proceedings Code to direct that only original or notarised copies of documents shall be
accepted as valid evidence. If the documents in question have been issued by competent
authorities in a foreign country, such documents are required to be notarised and legalised by
the Vietnamese embassy in the country of issuance. Consequently, the preparation of
evidence can represent a significant time and cost burden for the foreign party to arbitration
proceedings in Vietnam.
Under the Vietnamese Law on Commercial Arbitration, an arbitral tribunal has the power to
summon witnesses to attend a hearing at the request of a party or to request the assistance of
the court in the collection of evidence. However, in practice, the courts do not actively or
effectively support arbitration proceedings and the use of a court summons to oblige the
attendance of a witness at an arbitration hearing is rarely, if ever, used.
Similarly, it is rare for an expert to provide evidence during VIAC arbitration proceedings,
since it is difficult to find experts who are qualified to give evidence or who have experience
of providing expert written opinions or of giving live evidence at hearings. Consequently, in
practice it is very rare for any witness or expert witness to appear at a VIAC arbitration
hearing. The hearing is usually limited to the submissions of the counsel of the parties. In
addition, the lack of case precedents, case law reporting, and a developed body of academic
analysis is a further disadvantage for parties to settle a dispute at VIAC.

4. Recent positive signs
We recognise Vietnam’s pro-arbitration efforts through the recent issuance of Resolution
01/2014-/ NQ-HDTP of the Council of Judges of the Supreme People’s Court, effective from
2 July 2014 (Resolution No. 1). Among other things, Resolution No. 1 requires the court to
adhere to the time limits under the Law on Commercial Arbitration for considering
challenges to decisions of the arbitral tribunal, including decisions on jurisdiction, and
requires the court to provide reasons for its decision. In respect of applications to set aside
arbitral awards, Resolution No. 1 provides that the court cannot reconsider the merits of the
dispute but may only determine if there is a valid ground to set aside the award as provided in
the Law on Commercial Arbitration and as further clarified in the resolution. We appreciates
the issuance of Resolution No. 1 as a step in the right direction and we hope that several of
our Members’ concerns will be addressed with the implementation of this Resolution in
practice. At the same time, we believe that there is still enough room for further
improvement.
Recommendations
We believe that more guidance and supervision from the Supreme People’s Court and the
Chief Justice regarding court interventions, as well as the introduction of a right to appeal a
first instance court decision on jurisdiction or on the validity of an arbitral award, could
contribute to making dispute settlement through arbitration in Vietnam more popular and
practical.
Recognition and Enforcement of Foreign Arbitral Awards
Relevant State bodies: Ministry of Justice (MOJ), Supreme People’s Court, Supreme
People’s Procuracy, National Assembly (Economic Committee)
Foreign investors in Vietnam generally choose to provide for dispute resolution by
international arbitration where the value of the contract is substantial. Although international
arbitration is often costly and time consuming, an international arbitral award is generally
enforceable in most jurisdictions around the world under the 1958 New York Convention on
the Recognition and Enforcement of Foreign Arbitral Awards (hereafter the NYC), of which
Vietnam is a member.
The vast majority of member states properly apply the provisions of the NYC in practice and
duly recognise and enforce foreign arbitral awards within their own jurisdictions. However,
our Members have found that it is extremely difficult in practice to achieve the recognition
and enforcement of foreign arbitral awards through the Vietnamese courts. The main
difficulties encountered are the reversal of the burden of proof in respect of objections to
applications for recognition and enforcement of foreign arbitral awards, and the rejection of
applications by the Vietnamese courts for reasons that are not consistent with the NYC, as
discussed further below.
1. REVERSED BURDEN OF PROOF

5. Under the provisions of the NYC, if the award debtor raises any objection to the enforcement
of a foreign arbitral award, then the award debtor is required to provide evidence to prove its
objection. However, in practice the Vietnamese courts reverse the burden of proof and
require the award creditor to prove that any objections raised by the award debtor are invalid
or not applicable. This practice encourages award debtors to raise as many objections as
possible, sometimes frivolous, which the award creditor is required to disprove and it
imposes a significant cost and time burden on the award creditor.
2. REJECTION OF ARBITRAL AWARDS FOR REASONS NOT CONSISTENT
WITH THE NYC
The NYC provides for very limited exceptions where an application for recognition and
enforcement can be rejected. These exceptions include, for example, cases where a party to
the arbitration agreement was, under the law applicable to it, under some incapacity and
therefore lacked authority to sign the agreement; or cases where a party was not given proper
notice of the arbitration proceedings, which must be determined pursuant to rules of the
relevant arbitration institution and the governing law of the arbitration agreement.
However, it appears that the Vietnamese courts have often issued decisions to reject
applications for the recognition and enforcement of foreign arbitral awards. For example, in
many cases, the Vietnamese courts have determined that the foreign party to the arbitration
agreement lacked capacity to sign a contract by wrongly referring to the Vietnamese law
instead of applying the relevant law governing the foreign party, even where evidence has
been presented to the court demonstrating that the foreign party had full capacity to sign such
contract as a matter of its applicable law. In other cases, the Vietnamese courts have
determined that notices were not properly served on the respondent by wrongly applying
Vietnamese law and not referring to the rules of arbitration governing the proceedings and the
governing law of the arbitration agreement.
Recent positive signs
The Supreme People’s Court is aware of the situation described above, as it has recently
issued Letter No. 246/TANDTC-KT on the settlement of requests for the recognition and
enforcement in Vietnam of foreign business and commercial arbitral awards (hereafter Letter
246). This guidance, which is directed at the Chief Judges of the provincial People’s Courts
and the Chief Judges of the Appeal Courts of the Supreme People’s Court, requires judges to
properly apply the provisions of the NYC and, for example, it prohibits judges from applying
Vietnamese law to determine questions that are subject to a foreign law and/or the rules of
arbitration of the relevant arbitration institution.
Recommendations
To further improve the recognition and enforcement of foreign business and commercial
arbitral awards, we recommend Vietnam to follow international best practices with regard to
this matter. Letter 246 could be re-issued as an official and binding resolution and the

6. Supreme People’s Court could provide more guidance to, and supervision of the lower level
courts.
Another suggestion to encourage the recognition and enforcement of foreign arbitral awards
in Vietnam would be to introduce the automatic referral to the relevant Appeal Court of all
cases where an application has been rejected by the Courts of First Instance. Furthermore,
seminars and training courses could be organised by the Supreme People’s Court for all
judges of the provincial People’s Courts and the Appeal Courts to ensure that judges are
properly trained in dealing with applications for recognition and enforcement of foreign
arbitral awards in accordance with Vietnamese law and the NYC.
Conclusion
Our members seek an efficient and transparent justice system when conducting business with
Vietnamese partners and when investing in Vietnam. They want to ensure that business
commitments will be performed as agreed and that proper recourse will be available in the
event of any breach or dispute. Arbitration is internationally recognised as an efficient way to
obtain a swift resolution of conflicts, especially when it comes to technical matters. Less
costly than court proceedings, they are a necessity for businesses, especially small and
medium-sized enterprises (SMEs). It is particularly adapted to international disputes due to
the fact that the parties involved are of different nationalities, speak different languages, and
have different legal and cultural backgrounds. The flexibility offered by arbitration
procedures allows to solve language problems and is reassuring to foreign investors as they
can resort to the judicial system they are familiar with. Developing arbitration in Vietnam
would foster foreign investors’ confidence in doing business in Vietnam.
Please contact Oliver Massmann under Uomassmann@duanemorris.comU if you have any
questions.