Summary: This article summarizes the key points of Decision No. 52/2019/QD-PQTT dated 16 January 2019, issued by Ho Chi Minh City People’s Court (“The Court“) regarding the annulment of the Arbitral Award. According to the decision, The Court annulled the Arbitral Award due to the lack of Arbitrators’ addresses and multiple communications between an Arbitrator and the Respondent during the arbitration proceedings.
However, it is argued that the current regulations is not clear enough to affirm that The Court annulled the Arbitral Award solely because it lacked the Arbitrators’ addresses, although the absence of the Arbitrators’ addresses in the Arbitral Award violates the Law on Commercial Arbitration 2010. The analysis below will clarify this matter further.
Keywords: #arbitration_award_annulment #arbitration_award #commercial_arbitration #judgment #arbitration #court #award_content #law_on_commercial_arbitration_2010
1. Information of the parties
a) Applicant: WH Vietnam Joint Stock Company (“WH Company”)
b) Parties with related rights and obligations: PKT Forestry Limited Liability Company (“PKT Company”)
2. Summary of the dispute
a) This dispute relates to the Contract for processing goods between PKT Company and WH Company. Accordingly, PKT Company sued WH Company at the Vietnam International Arbitration Center (“VIAC”) and requested WH Company to pay for the goods received under the Principal Contract no. 02/2013/WH dated 26 March 2013, and 11 Commercial Contracts, totaling VND 1,326,523,691.
b) During the dispute resolution, from 27 August 2018 to 19 September 2018, Arbitrator Phan Thong A received several phone calls from WH Company, specifically 14 phone calls (from phone number 0907501xxx of Ms. Nguyen Thi Doan T to phone number 0918758xxx of Mr. Phan Thong A).
On the same day as the hearing, Arbitrator Phan Thong A and WH Company also communicated five times.
c) On 18 October 2018, the VIAC Arbitral Tribunal issued the Arbitral Award in favor of PKT Company, requiring WH Company to reimburse PKT Company for the value of the goods received under the Principal Contract and 11 Commercial Contracts, plus the arbitration fees paid by PKT Company to VIAC.
However, the Arbitration award did not contain the addresses of the Arbitrators.
d) On 7 November 2018, WH Company submitted a request to The Court to annul the Arbitral Award mentioned above.
3. Content and grounds for requesting the annulment of the Arbitral Award by the Applicant
a) The Arbitral Award violated the principle that “Arbitrators must be independent, impartial, and unbiased,” as stipulated in Article 4(2) of the Law on Commercial Arbitration 2010 and the VIAC Code of Ethics for Arbitrators.
b) The Arbitral Tribunal violated the arbitration procedure by summoning the hearings not in accordance with the provisions of the Law on Commercial Arbitration 2010, specifically by repeatedly summoning and postponing the hearings with various reasons.
c) The Arbitral Tribunal used non-objective evidence, showing bias towards the Claimant.
d) The Arbitral Award violated the content and form requirements of an Arbitral Award under Article 61(1)(c) of the Law on Commercial Arbitration 2010, specifically by not including the addresses of the Arbitrators.
e) The Arbitral Award contradicted the fundamental principles of Vietnamese law. However, the Applicant did not specify which fundamental principles of Vietnamese law were violated.
f) The arbitration procedure was not in line with the parties’ agreement, specifically the Arbitrator’s violation of VIAC Arbitration Rules. The Arbitrator communicated with the Respondent several times by phone during the arbitration proceedings, even during the hearing, also communicated 5 times with the Respondent.
4. Decision of Ho Chi Minh City People’s Court
4.1. The grounds presented by the Applicant for annulment the Arbitral Award that were not accepted by The Court:
a) The Arbitral Award violated the principle that “Arbitrators must be independent, impartial, and unbiased,” as stipulated in Article 4(2) of the Law on Commercial Arbitration 2010 and the VIAC Code of Ethics for Arbitrators. However, the Applicant did not provide evidence to support this claim, and thus, could not use this basis to annul the Arbitral Award.
b) The Arbitral Tribunal violated the arbitration procedure by summoning the hearings not in accordance with the provisions of the Law on Commercial Arbitration 2010, specifically by repeatedly summoning and postponing the hearings with various reasons.
According to The Court, the Arbitral Tribunal had sent summoning papers for each meeting, and the postponement of the hearings was done as requested by the parties, in line with Article 54(2) of the Law on Commercial Arbitration 2010. Therefore, this was not a basis for annulling the Arbitral Award.
c)The Arbitral Tribunal used non-objective evidence, showing bias towards the Claimant. Since this is a matter related to the substance of the dispute, the Court did not consider this basis.
d) The Arbitral Award violated the fundamental principles of Vietnamese law. However, the Applicant did not specify which fundamental principles of Vietnamese law were violated, and therefore, there was no basis for accepting this claim.
4.2. The grounds on which The Court based its decision to annul the Arbitral Award:
a) The Arbitral Award did not include the addresses of the Arbitrators, thus failing to meet the essential requirements of an Arbitral Award under Article 61(1)(c) of the Law on Commercial Arbitration 2010.
b) The Arbitrator violated Article 16(2) of the VIAC Arbitration Rules by communicating with the Respondent multiple times by phone during the arbitration proceedings.
In the contracts, the parties agreed in the regulation on dispute settlement that: “Disputes will be submitted and finally settled by the Vietnam International Arbitration Center (VIAC) in Ho Chi Minh City, Vietnam, based on the VIAC Arbitration Rules in effect at the time of the dispute.”
Article 16(4) of the VIAC Arbitration Rules stipulates: “4. During the arbitration proceedings, an Arbitrator shall not meet or communicate separately with any party; nor shall any party meet or communicate separately with an Arbitrator to discuss matters related to the dispute.”
In practice, during the dispute resolution process from 27 August 2018 to 19 September 2018, Arbitrator Phan Thong A received multiple phone calls from WH Company. Moreover, even during the hearing, this Arbitrator communicated five times with WH Company. This violated Article 16(4) of the VIAC Arbitration Rules, and The Court determined that this behavior made the Arbitral Award not in line with the parties’ agreement on the arbitration procedure as stipulated in Article 61(1)(a) of the Law on Commercial Arbitration 2010.
5. Our assessment on the grounds for annulment of the Arbitral Award by The Court
5.1. The Arbitral Award did not include the addresses of the Arbitrators, thereby violating the essential requirements of an arbitral award under Article 61(1)(c) of the Law on Commercial Arbitration 2010.
Regarding this ground, The Court only noted in Decision No. 52/2019/QĐ-PQTT: “In the arbitral award of dispute case No. 03/17HCM dated 18 October 2018, the addresses of the arbitrators were not mentioned, hence, it violates Article 61(1)(c) of the Law on Commercial Arbitration” without citing any legal basis for the annulment of the Arbitral Award under Article 68(2) of the Law on Commercial Arbitration 2010.
The question here is whether the absence of the addresses of the Arbitrators in the Arbitral Award can be considered a ground for annulment of the Arbitral Award.
a) The current regulation is not clear enough to assert that this fact constitutes a “serious violation” to the extent that would warrant the annulment of the Arbitral Award.
Under Article 68(2) of the Law on Commercial Arbitration 2010, an arbitral award may be annulled under one of the following cases:
“2. An arbitral award shall be cancelled in any of the following cases:
a) There is no arbitration agreement or the arbitration agreement is invalid;
b) The arbitraltribunal’s composition or procedures of arbitral proceedings is incompliant with the parties’ agreement or this Law;
c) The dispute falls beyond the arbitral tribunal’s jurisdiction: when an arbitral award contains the details falling beyond the arbitral tribunal’s jurisdiction, such details shall be cancelled;
d) The evidence provided by the parties on which the arbitral tribunal bases to issue the award is counterfeit: an arbitrator receives money, assets or other material benefits from one disputing party, thus affecting the objectivity and impartiality of the award;
đ) The award contravenes the fundamental principles of Vietnamese law.”
Among these grounds for annulment of the Arbitral Award, none of them specifically address the issue of the Arbitral Award lacking essential content as prescribed by law. However, if we consider the most relevant ground, the omission of the addresses of the Arbitrators in the Arbitral Award could potentially be linked to ground stated in point (b) concerning the arbitration procedure not being in accordance with the provisions of the Law on Commercial Arbitration 2010.
This basis is specifically guided in Article 14(2)(b) of Resolution 01/2014/NQ-HDTP. Accordingly, the Council of Judges instructs that the grounds for annulment of the arbitral award can be applied in cases where “the parties have agreed on the composition of the arbitral tribunal, the rules of the arbitration procedure, but the arbitral tribunal does not correctly follow the agreement of the parties or does not comply with the provisions of this Law, as determined by the Court as serious violations that cannot be rectified by the arbitral tribunal or does not rectified as required by the Court under Article 71(7) of the Law on Commercial Arbitration.“
With this provision, it can be understood that the omission of the addresses of the Arbitrators by the Arbitral Tribunal in the Arbitral Award must be an act of ” does not comply with the provisions of the Law on Commercial Arbitration” concerning the arbitration procedure and must constitute a “serious violation” for The Court to apply the annulment ground under Article 68(2)(b).
The Law on Commercial Arbitration 2010 and Resolution 01/2014/NQ-HĐTP do not clearly explain what constitutes a “serious violation,” and there are no official related documents guiding this matter.
Therefore, there is currently no unambiguous regulations to assert whether the absence of the Arbitrators’ addresses in the Arbitral Award constitutes a “serious violation” to annul the Arbitral Award under Article 68(2)(b) of Law on Commercial Arbitration 2010 or not. The determination of what constitutes a “serious violation” will depend on the perspective of each Court.
b) Another question is whether the Arbitral Tribunal can rectify this error by adding the addresses of the Arbitrators to the Arbitral Award.
According to Article 14(2)(b) of Resolution 01/2014/NQ-HĐTP (as quoted above) and Article 71(7) of the Law on Commercial Arbitration 2010[1], a party to the dispute can request The Court to temporarily suspend the consideration of the annulment request of the Arbitral Award to allow the Arbitral Tribunal to rectify procedural errors by adding the addresses of the Arbitrators to the Arbitral Award. Thus, limiting the annulment of the arbitral award.
However, according to Article 71(7) of the Law on Commercial Arbitration 2010, The Court’s request for the Arbitral Tribunal to rectify procedural errors must be based on a request from one party to the dispute. Without such a request, The Court has no basis to temporarily suspend the consideration of the request so that the Arbitral Tribunal cannot make amendments or additions to the arbitral award to correct the errors.
Furthermore, Article 63 of the Law on Commercial Arbitration 2010 only allows for the correction of the arbitral award in cases of clear errors in spelling, numerical errors, or calculation errors[2]; and it only allows for the addition of the arbitral award in cases where the requirements have been presented during the arbitration proceedings but were not recorded in the arbitral award.[3] Therefore, the omission of the addresses of the arbitrators does not fall under the cases that can be corrected or added to the arbitral award.
5.2. The Arbitrators repeatedly communicated with the Respondent during the dispute resolution process, violating the VIAC’s Arbitration Rules, causing the Arbitral Award to be issued not in accordance with the VIAC’s Arbitration Rules as agreed upon by both parties.
The Court relies on Article 68(2)(b) of the Law on Commercial Arbitration 2010 to annul the Arbitral Award in this case, which is persuasive. In addition to the ground provided by The Court regarding the arbitration procedure not being in accordance with the agreement of the parties, the actions of Arbitrator Phan Thông A may also be considered as a violation of the Law on Commercial Arbitration 2010, specifically the principle that “Arbitrators must be independent, impartial, and unbiased and must comply with the provisions of the law” (Article 4(2)).
[1] Article 71(7) of the Law on Commercial Arbitration 2010 stipulates:
“Article 71. Examination by courts of written requests for annulment of arbitral awards
7. At the request of one of the parties and when appropriate, the examination council may suspend the examination and processing of a request for not more than 60 days in order to facilitate the arbitral tribunal in correcting errors of the arbitral proceedings in its viewpoint in order to remove the grounds for annulment the arbitral award. The arbitral tribunal shall notify the court of such correction. If the arbitral tribunal fails to correct errors in the proceedings, the examination council shall continue examining the written request.”
[2] Article 63(1) of the Law on Commercial Arbitration 2010
[3] Article 63(4) of the Law on Commercial Arbitration 2010
