Abstract: This article provides a concise overview of the key content of Judgment No. 02/2018/QD-KDTM dated 25 January 2018, issued by the People’s Court of Hanoi (“Court“) regarding the consideration of a request to annul an arbitral award. Accordingly, the Court annulled the arbitral council’s arbitral award by asserting that there was no arbitration agreement between the parties. However, our assessment is that the grounds for the Court’s annulment of the arbitral award are not persuasive. The final section of this Article contains our opinion and assessment, along with the legal bases for such opinion and assessment.
Key words: #annulment_of_arbitral_award #annulment_of_award #commercial_arbitration #judgment #award #court #arbitration_agreement #commercial_arbitration_2010
1. Information about the Parties
1.1. Requesting Parties:
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- F Group Joint Stock Company (“Company F”);
- Mr. Nguyen Thanh B;
- Mr. Nguyen Tuan A;
- Ms. Hoang Thi Thu H;
- Mr. Trinh Van Q;
- Ms. Nguyen Thi P.
(Hereinafter referred to as “Respondents“)
1.2. Parties with related rights and obligations: G I A L L C Company (“Company G“)
2. Summary of the dispute:
a. On 29 July 2014, the Respondents entered into a Debt Receipt with the following terms:
- The Respondents acknowledged their obligation to pay the Company G an amount of 4 billion Vietnamese Dong.
- Any dispute, conflict, or claim arising out of or in connection with this Agreement or any breach, termination, or nullification of the Agreement shall be subject to final arbitration by the Vietnam International Arbitration Center – Vietnam Chamber of Commerce and Industry (“VIAC“) in accordance with the VIAC Arbitration Rules, the rules shall be incorporated by reference into this provision. The number of arbitrators shall be three (3). The place or location of arbitration shall be Hanoi, Vietnam. The language to be used in the arbitration proceedings shall be English.
- The Debt Receipt only bears the confirmation of the Respondents and does not include confirmation from Company G.
b. After the Respondents confirmed the Debt Receipt, there was no further communication between the Company G and the Respondents indicating the Company G’s agreement with the content of the Debt Receipt.
c. On 9 December 2015, the Company G sent a official letter demanding the Respondents to repay the debt. If not, they will file a lawsuit at VIAC.
d. VIAC received the Company G’s statement of claim, and after resolving the dispute, the Arbitral Council ruled that the Company G was entitled to the original amount of 4 billion Vietnamese Dong, and the Respondents were obligated to pay this amount (“Arbitral Award“).
3. Requests of the parties in the dispute:
3.1. Content of the requests by Company F and Mr. Nguyen Thanh B:
- The parties did not have an arbitration agreement, therefore, the Arbitral Council’s resolution of the dispute violated Article 16 of the Law on Commercial Arbitration 2010.
- The dispute does not fall within the jurisdiction of arbitration.
3.2. Content of the requests by Mr. Nguyen Tuan A, Ms. Hoang Thi Thu H, and Ms. Nguyen Thi P:
- Mr. Nguyen Tuan A, Ms. Hoang Thi Thu H, and Ms. Nguyen Thi P did not receive notice from VIAC regarding the Statement of Claim or related documents submitted by Company G. They were not able to ensure their right to establish the Arbitral Council, hence, the Arbitral Award violated point b clause 2 Article 68 of the Law on Commercial Arbitration 2010.
- Mr. Nguyen Tuan A, Ms. Hoang Thi Thu H, and Ms. Nguyen Thi P were not informed of the appointment of the arbitrator by Mr. V – the representative of the Company F. Therefore, they were not able to exercise their rights in the appointment of arbitrators and the establishment of the Arbitral Council, thereby affecting their legal rights and interests.
3.3. Content of the Company G’s request: Company G requested the Court to dismiss the claims brought by the Company F, Mr. Nguyen Thanh B, Ms. Hoang Thi Thu H, Ms. Nguyen Thi P, and Mr. Nguyen Tuan A, for the following reasons:
- The request to annul the Arbitral Award submitted by Company F, Mr. Nguyen Thanh B, Ms. Hoang Thi Thu H, Ms. Nguyen Thi P, and Mr. Nguyen Tuan A on 14 August 2017, which were more than 32 days from the date of issuance of the Arbitral Award, and it does not fall under the category of overdue filings due to force majeure events.
- The parties requesting the annulment of the arbitral award did not show that they had paid the arbitration fee in full as required by law.
- The parties requesting the annulment of the arbitral award did not provide an explanation for their failure to participate in the arbitration proceedings, request an adjournment, or request for the appointment of arbitrators. Therefore, they cannot claim their rights in this regard.
- The parties requesting the annulment of the arbitral award submitted documents without: Certified translation of the debt repayment promissory and certified translation of the agreement on put option.
4. The Court’s Judgment:
The Court’s decision to annul the Arbitral Award was based on the determination that the Arbitral Council resolved the dispute in the absence of an arbitration agreement, in accordance with Article 5 of the Law on Commercial Arbitration 2010. Specifically, as follows:
- Pursuant to Article 5 of the Law on Commercial Arbitration 2010: “Dispute shall be settled by arbitration if the parties have agreed to arbitration.”
- Pursuant to Article 16 of the Law on Commercial Arbitration 2010 regarding the form of expression of the arbitration agreement, the Debt Receipt of the Respondents did not conform to the prescribed form of the arbitration agreement as per the law. The Debt Recepit only bore the confirmation of the Respondents and lacked confirmation from the Company G. Therefore, no arbitration agreement was established among the parties.
- Furthermore, pursuant to Article 121 of the Civil Code 2005, corresponding to Article 116 of the Civil Code 2015, which regulates Civil Transactions: “A Civil Transaction is a contract or unilateral legal act that gives rise to, modifies, or terminates civil rights and obligations”. Referring to the Contract as per the provisions of Article 388 of the Civil Code 2005 (Article 385 of the Civil Code 2015): “A civil Contract is an agreement between parties regarding the establishment, modification, or termination of civil rights and obligations”. Hence, “the council of the Court determined that the Debt Receipt, which only bore the confirmation of the Respondents and lacked confirmation from the Company G, cannot be regarded as an agreement among the parties. Consequently, there was no arbitration agreement”.
- Since the parties had not reached an arbitration agreement, the Arbitral Council’s acceptance of jurisdiction and resolution of the aforementioned dispute was violated Article 5 of the Law on Commercial Arbitration 2010.
5. Our assessment of this Judgment:
5.1. Regarding the statute of limitations for lawsuit:
The Court’s assertion states that, “…Regarding the Respondents in this judgment, including Ms. Hoang Thi Thu H, Ms. Nguyen Thi P, Mr. Nguyen Tuan A, based on the postal tracking information of the Post Office, they refused to receive postal deliveries at 17h47 on 17 July 2017. However, according to the confirmation of Mr. Nguyen Dang Nhat M (assistant of Mr. Le Thanh V), it was confirmed that the Respondents received the Arbitral Award mentioned above on 19 July 2017.” Concurrently, the Court determines there is a basis to ascertain that the Respondents received the Arbitral Award on 19 July 2017. Therefore, ” the request to annul the Arbitral Award of the Respondents is deemed to have been filed within the statutory time frame prescribed in Article 69 of the Law on Commercial Arbitration 2010.”
We opine that the Court’s determination to be unpersuasive for the following reasons:
a. Regarding the time the Respondents received the Arbitral Award:
According to Article 177 of the Civil Procedure Code 2015: “If the persons to whom procedural documents are issued, sent or notified are individuals, the procedural documents must be delivered directly to them”. However, arbitration proceedings do not have a similar provision. Specifically, pursuant to clause 2 Article 12 of the Law on Commercial Arbitration 2010: “Notices, documents sent by the Arbitration Center or Arbitral Council to the parties shall be sent to the addresses of the parties or to the representatives of the parties at the correct addresses as notified by the parties”. Clause 4 Article 12 of the Law on Commercial Arbitration 2010 states: “Notices, documents sent by the Arbitration Center or Arbitral Council shall be deemed to have been received on the day the parties or their representatives actually received them or are deemed to have received them if the notices or documents have been sent in accordance with the provisions of clause 2 of this Article“. Based on these provisions, in this dispute, it can be concluded that the Arbitral Award sent to the Respondents should be considered as received on the day the Respondents actually received it or are deemed to have received it if the Arbitral Award was sent to the Respondents at their correct addresses.
The Respondents, as individuals, refused postal delivery at 17h47 on 17 July 2017, but later agreed to receive it on 19 July 2017. Therefore, it is essential to determine that the Respondents received the Arbitral Award on 17 July 2017 because the Arbitral Award was sent to the Respondents at their correct addresses, and they knew and should have received the Arbitral Award but declined to do so. Whether the Respondents refused to receive the Arbitral Award, received it but did not open it, or whether someone else at the same address as the Respondents received it… is not and should not be the basis for determining that the Respondents did not receive the Arbitral Award. In disputes such as this, one of the parties, when lacking good faith in resolving the dispute, will seek any means to delay or obstruct the dispute resolution process. What would happen if, in this dispute, the Respondents refused to receive the Arbitral Award on 17 July 2017, and only agreed to receive it on 17 September 2017? In that case, would the time the Respondents received the Arbitral Award be determined as 19 July 2017???
b. Regarding the method of transmitting/delivering the Arbitral Award:
Clause 3 Article 12 of the Law on Commercial Arbitration 2010 specifies: “Notices, documents may be sent by the Arbitration Center or Arbitral Council by direct delivery, secure mail, regular mail, fax, telex, telegram, email, or by any other method with acknowledgment of receipt”.
In this dispute, VIAC sent the Arbitral Award through Vietnam Post. According to Vietnam Post’s postal tracking information, the aforementioned Respondents refused postal delivery at 17h47 on 17 July 2017, but accepted it on 19 July 2017 from Mr. Nguyen Dang Nhat M, who assisted Mr. Le Thanh V, representing the Company F??? The Court’s refusal to accept the date when the Respondents received the Arbitral Award on 17 July 2017 according to Vietnam Post’s tracking, and instead counting it from 19 July 2017, based on the “hand-delivery” method through an individual who does not have any connection with VIAC, and is not the method of sending the Arbitration Award chosen by VIAC, is unpersuasive.
5.2. Regarding the annulment of the Arbitral Award due to the absence of an arbitration agreement:
Article 19 of the Law on Commercial Arbitration 2010 stipulates: “The arbitration agreement is entirely separate from the contract. Changes, extensions, cancellations, invalidity or impossibility to perform the contract do not affect the validity of the arbitration agreement”. The Court’s assertion that: “the Debt Receipt was only signed by the Respondents and lacked the confirmation of G, so it cannot be considered as an agreement among the parties, and hence, there is no arbitration agreement” indicates that the Court is treating the arbitration agreement in a context of complete dependence (rather than independence) on the Debt Receipt. This approach is inconsistent with Article 19 of the Law on Commercial Arbitration 2010.
In other words, the determination of whether there is an “arbitration agreement” in this case does not depend on whether the Debt Receipt mentioned above is considered a civil transaction contract/agreement. In this dispute, we contend:
a. The Debt Receipt was issued by the Respondents, including details of the amount owed and clauses concerning dispute resolution at VIAC. Logically, it is unpersuasive to assume that the parties did not have any exchanges related to the debt receipt in this case. The Debt Receipt can be regarded as the result of negotiations between the parties regarding the loan;
b. When the Respondents sent the Debt Receipt to Company G, Company G neither confirmed nor objected to the content of the Debt Receipt in general and the clause regarding dispute resolution at VIAC in particular. Although not explicitly stated, this could be understood as Company G “implicitly” agreeing to the content of the Debt Receipt in general and the clause regarding dispute resolution at VIAC in particular.
c. Subsequently, on 9 December 2015, Company G “sent a letter requesting the Respondents to repay the debt, if not, they will file a lawsuit at VIAC”. After receiving this letter from Company G, the Respondents did not voice any objections to VIAC’s jurisdiction over the dispute. It can be implied that Company G agreed to the Respondents’ proposal for dispute resolution at VIAC since they threatened to file a lawsuit at VIAC if the Respondents did not repay the debt. In other words, at this point, there is a clearer basis to determine that the arbitration agreement had been established.
d. Additionally, point d clause 2 Article 16 of the Law on Commercial Arbitration 2010 stipulates that the arbitration agreement can also be considered as established in written form if “in the transaction, the parties make a reference to a document that expresses the arbitration agreement such as a contract, a certificate, a company charter, or other similar documents.” In this dispute, Company G made a reference to the arbitration agreement in the Debt Receipt, specifically mentioning that they would file a claim against the Respondents at VIAC if the Respondents did not repay the debt. Therefore, from our perspective, it is sufficient to determine that the arbitration agreement had been established in this case.
Thus, in this case, the Court’s determination that the parties had not established an arbitration agreement, which leads to the conclusion that VIAC lacked jurisdiction to resolve the dispute, is inadequate and unpersuasive.
It is also worth considering that, according to the law on commercial arbitration 2003, it appeared that the parties needed to “sign” the arbitration agreement. However, the Law on Commercial Arbitration 2010 has replaced “sign” with the phrase “establish”, which broadens scope and content. Accordingly, “sign“ is just one of the methods to establish an arbitration agreement.
