The adoption of the Law on Commercial Arbitration with a hope to remove the shortages in the recent commercial dispute settlement in Vietnam
On June 17, 2010, the 12th Legislature of the National Assembly passed, together with seven other laws, the Law on Commercial Arbitration (“Law 2010”), which will come into force on January 1 next year. This is a legal instrument of important meanings in Vietnam’s economic integration into international community, by which Vietnamese legislators addressed several shortages of current laws essentially based on Ordinance on Commercial Arbitration of 2003 (“Ordinance 2003”) for enabling the arbitration system to gain the public faith of higher degree in dispute settlement.
Some new points of Law 2010 can be briefly cited as below:
Firstly, Law 2010 widened scope of the arbitration competence for dispute settlement
Limited competence scope is one of shortages of current laws rendering commercial arbitration restrained and less attractive in the eyes of the parties to a dispute as it is only able to hear affairs in commercial field as predetermined and listed by law. Thanks to Law 2010, disputes related to rights and interests of the parties arisen out of contractual obligations or non-contractual obligations with respect to non-commercial activities may be settled via arbitration, provided that there is at least a party doing commercial activity or those may be settled by the arbitration under the laws.
As a result, the scope of dispute settlement by the arbitration is no longer limited to disputes in the commercial field as in Ordinance 2003. In addition, the definition of subject is also broadened, according to which “the parties” regardless of being trader or not, can turn to the arbitration for dispute settlement. This provision remedied a gap of Ordinance 2003 where the arbitration is only permitted for settling dispute between “organization and individuals doing business”. It is expected that with the above regulations, the number of contentious affairs referred to the arbitration will increase after Law 2010 comes into force.
Secondly, Law 2010 accepted the foreign nationality of arbitrator and of arbitration
In overcoming another shortage of Ordinance 2003, Law 2010 does not limit the nationality of an arbitrator to Vietnamese nationality only. That means from now on foreigners can be appointed as arbitrator in Vietnam if satisfies all conditions applicable to an arbitrator, being entrusted and selected by the parties to a dispute or appointed by arbitration centre or court. This provision is for the purpose of responding to actual demand in the period of enhanced economic integration by Vietnam to international community where the parties with foreign element may prefer to cause the arbitration intervention as they can freely to select the most convenient person to participate in the arbitration tribunal.
In addition, for the avoidance of previous confusion, Law 2010 defines that foreign arbitration is one incorporated under the foreign laws on arbitration and operating in accordance with foreign rules on arbitration proceedings, which is selected by the parties to carry out the dispute settlement outside or within Vietnam territory. As a result, its award will be considered as foreign arbitration award regardless of issuance location.
Thirdly, Law 2010 confirmed the right of arbitrators/ arbitration centers to apply the injunctive relieves
In comparison to Ordinance 2003 and in response to the need of the settlement reality, Law 2010 considerably improves the arbitration position by reserving the right to decide on application of a number of injunctive relieves for the arbitration tribunal at the request of either of the parties. This will aid the arbitral proceedings to operate more effectively, to protect rights and legitimate interests of the parties to a dispute. This model is pre-eminent in international commercial arbitration and is suitable with Vietnam reality and Civil Proceedings Code.
Fourthly, Law 2010 more closely prescribed conditions and grounds for abrogation of arbitration award
Under Law 2010, either party wishing request for abrogation of an arbitration award must have sufficiently grounds to prove that the arbitration tribunal has given its award in one of events specified in Law 2010, which details ones relating to evidence or the arbitrator’s obligations that adversely affect objectivity and impartiality of arbitration award. This provision aims to minimize the number of arbitration award requested for abrogation and force the parties to carefully consider if they have sufficiently grounds supporting their request for arbitration award abrogation before bring a claim to the court for such request.
Fifthly, Law 2010 tightened protection of consumers
Regarding disputes between enterprises and consumers, although the arbitration clause has been recorded in general terms and conditions for provision of goods or services elaborated in advance, arbitration agreement will be only valid if the supplier obtains the consumer approval for such agreement. This provision is based on the fact that generally, the consumers are put into a position facing risk of being abused by terms and conditions in a pre-printed contract of the goods seller or the service supplier; as a result, regulations protecting consumers in necessary circumstances are needed.
Sixthly, Law 2010 limited the arbitrators’ liability
Under 2010, subject to a court verdict, the arbitration tribunal may bear the liability to make compensation to the damaged parties if applying other injunctive relieves or exceeding the request of applicant and causing damages to the applicant, the applied party or a third party. This provision is essentially suitable with legislative practices and experiences in many countries for the purpose of encouraging the sense of law and the arbitrators’ objectivity and impartiality.
Seventhly, Law 2010 set out the arbitration language
Law 2010 allows the parties in a dispute with foreign element or involving a foreign invested enterprise to agree on the language used in arbitral proceedings. In case of lacking such agreement, the language will be decided by the arbitration tribunal. Unlikely to Ordinance 2003, Law 2010 reuses definition of dispute with foreign element in the Civil Code. These provisions let the foreigners mind at rest when investing in Vietnam and clear difference between civil laws and laws on arbitration.
Eighthly, Law 2010 intensified relationship between the court and the arbitration, or so called assistance and supervision role played by the court regarding the arbitration in the course of dispute settlement
The extension of arbitration competence scope is meaningful and enforceable in proceedings only if it is supported by court, e.g. in collecting evidence, applying injunctive relieves, recognition and enforcement of foreign arbitral award, etc. because arbitration is a non-governmental and private jurisdiction, not a State agency. Law 2010 provides a series of new regulations to determine this important legal relationship, in which the arbitration will enjoy a timely assistance from the court, however the principle on the arbitration independence from the court is still ensured during the dispute settlement. Regarding the competence determination between the arbitration and the court, Law 2010 says that in case where there is already an arbitration agreement for dispute, the court will have to refuse receiving the claim brought to it by either of the parties, unless such agreement is considered by the court as null and void or non-enforceable. Furthermore, Law 2010 lists a number of the court assistances to the arbitration, that include: announcing the arbitration agreement is null and void, determining the arbitration tribunal competence; appointing and replacing arbitrator; assisting in evidence collection and storage; ensuring the witness presence; applying injunctive relieves; resolving request for arbitration award abrogation; registering arbitration award. These regulations substantially comply with international arbitration laws and practices, and ensure that the arbitration proceedings will be smoothly conducted without any delay. This is a condition for the arbitration’s fruitful operation.
Finally, Law 2010 set out the rules for selecting by the parties the settlement bodies
Law 2010 establishes an important principle that, in the course of arbitral proceedings, if a party has been aware of breach of laws or arbitration agreement, e.g. arbitration agreement is invalid, there is no arbitration agreement or arbitration tribunal has not the competence for dispute settlement, but did not protest within a certain duration, this party will be deemed to be deprived from the right to claim at the arbitration or the court. This provision is for the purpose of effectively preventing abuse activities in the arbitral proceedings, to avoid the prolonged dispute settlement or repeated hearing, which we may see during the implementation of Ordinance 2003.
Though there are still some small points which remain unsolved, in comparison with Ordinance 2003 and precedents, Law 2010, with the above said cited new provisions, is generally recognized as an effective pathfinder for development of arbitration system in Vietnam approaching to standards of modern laws and international arbitral practices and taking into account actual conditions of Vietnam, and a solid foundation for boosting Vietnamese arbitration competitiveness to gain domestic and foreign enterprises’ trust for dispute settlement.
Vision & Associates