DECISION NO. 35/2025/QĐSST-KDTM of the People’s Court of Ho Chi Minh City, dated February 26, 2025 is a typical and significant case in the practice of setting aside Arbitral awards in Vietnam. The Court annulled a VIAC arbitral award, determining that the dispute was civil in nature, not commercial, and therefore fell outside the statutory jurisdiction of Commercial Arbitration.
Key facts:
The dispute arose between Mr. Tran Anh T and Ms. Hoang Hai Y, who formerly married and jointly participated as distributors for Company U1 under a shared distributor ID (No. 41002284). After their divorce in 2016, the parties continued operating under the same ID until 2020. At that time, they signed “Profit-Sharing Agreement on Commission Rates under the Multi-Level Sales Contract”. Accordingly, Ms. Y transferred her ownership rights in the old distributor ID to Mr. T so that he could continue operating, in return for which Mr. T was obliged to pay Ms. Y 40% of the commissions from a new distributor ID (No. 41002584) granted solely to Mr. T by Company U1.
From 2020-2023, Mr. T transferred approximately VND 2.35 billion to Ms. Y under this arrangement.
In December 2023, Mr. T initiated arbitration proceedings at VIAC, seeking to invalidate the profit-sharing agreement and reclaim the transferred amounts. At that time, Mr. T himself classified the matter as a dispute over “commission-sharing in multi-level sales” and “profit-sharing in commercial business.” Although the original profit-sharing agreement contained no arbitration clause, on May 9, 2025, the parties executed a separate Arbitration Agreement.
On June 27, 2024, the VIAC Arbitral Tribunal rendered Award No. 270/23 HCM, which dismissed all of Mr. T’s claims.
2 – Court’s decision:
The Court accepted Mr. T’s request and annulled the arbitral award. Since the dispute was deemed civil, it fell within the jurisdiction of the People’s Courts rather than arbitration.
The crucial aspect of the Court’s Decision lies in the classification of nature of the legal relationship. The Court distinguished between two separate legal relationships:
1. Commercial relationship: The Court recognized that the relationship between Company U1 and Mr. T, Ms. Y was a commercial multi-level sales relationship. Commissions and bonuses paid by the company to its distributors are economic benefits arising from business activities. Any dispute in this respect would fall within the scope of commercial disputes.
2. Civil relationship: The Court held that the relationship between Mr. T and Ms. Y after their divorce was a civil relationship between two independent individuals. Their profit-sharing agreement was a civil agreement.
The value derived from the old distributor ID constituted common marital property, formed during the marriage. Any dispute regarding its division fell under the category of marital property division
In this Decision, the Court effectively separated the source of the funds from the nature of the agreement to divide them.
Both Mr. T and Ms. Y confirmed that all commissions and bonuses accrued before February 7, 2020, had already been settled. The only outstanding issue concerned their rights and obligations under the profit-sharing arrangement regarding the new distributor ID in Mr. T’s name. Thus, their dispute over the validity of the “Profit-Sharing Agreement on Commissions under the Multi-Level Sales Contract No. 0107022020, dated February 7, 2020,” and Mr. T’s claim for repayment of VND 2,353,331,267, remained a civil dispute between two individuals.
Key takeaways from the decision: parties must pay close attention to the nature of legal relationships before selecting a dispute resolution forum. Even if they agree to submit the matter to arbitration, an arbitral tribunal only has jurisdiction if the dispute falls within the statutory scope of arbitration. Vietnamese courts may annul awards when the dispute is outside arbitration’s jurisdiction.
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