Cracking the Code
Vietnam's Evolving Approach to Enforcement of Arbitral Awards

Arbitration is often preferred over court litigation for cross-border commercial disputes due to its flexibility, neutrality, and enforceability. Unlike court proceedings, arbitration allows parties to tailor the process, including selecting arbitrators with specific expertise, choosing procedural rules, and determining the language of the proceedings. This flexibility is critical in resolving complex international disputes efficiently. Arbitration also offers neutrality by avoiding potential biases that may arise in a national court system, especially in cases involving foreign parties. Most importantly, arbitration awards are widely recognized and enforceable under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), popularly known as the New York Convention, which has 172 contracting states, providing a robust mechanism for cross-border enforcement. Arbitral awards that may be issued in Japan or Singapore are enforceable in other 170 states where the assets (e.g. shareholdings, bank accounts, real properties) of the award debtor are located.

Combined with confidentiality and the generally faster resolution timeline compared to court litigation, arbitration is a favored choice for businesses seeking to mitigate risks and maintain commercial relationships in international contexts.

One significant concern for arbitration users regarding the enforcement of arbitral awards in developing countries is the potential lack of judicial expertise in interpreting and applying the New York Convention. While many developing nations are signatories to the Convention, inconsistent judicial training and unfamiliarity with its provisions can lead to unpredictable outcomes. Judges may apply domestic legal principles inappropriately or prioritize public policy exceptions without fully considering international arbitration standards. This can result in delays, higher costs, or even the refusal to enforce valid arbitral awards. Additionally, procedural irregularities, such as overly rigid adherence to local rules or a lack of transparency in judicial decisions, compound these risks.

This is the first part of our "Enforcement of Arbitral Awards" series, where we explore jurisdiction-specific challenges and strategies in enforcing arbitral awards across key investment destinations by Japanese investors.

In this edition, we focus on Vietnam, a rapidly growing hub for international investment and a crucial market for Japanese investors, who rank among the top five sources of foreign direct investment in the country. With Vietnam’s legal and regulatory framework shaped by its WTO commitments and commitments under the New York Convention and the evolving application of domestic laws, understanding the nuances of arbitration enforcement here is essential.

This article highlights notable case studies, and practical recommendations tailored to ensure effective recognition and enforcement of arbitral awards, empowering Japanese investors to safeguard their interests in Vietnam’s dynamic market.

Vietnam’s approach to the recognition and enforcement of foreign arbitral awards has evolved significantly in recent years, with some court decisions demonstrating a pro-arbitration stance while others reflect lingering obstacles. This article delves into two critical aspects: the reasons for rejection by Vietnamese courts (so arbitration users may want to be aware early on about these obstacles) and instances where courts have granted recognition petitions, highlighting their implications for international arbitration users.

It has been said, “It is difficult to enforce foreign arbitral awards in Vietnam, but not impossible.”

A. Rejection of Foreign Arbitral Awards: Common Judicial Reasoning

1. Violation of Fundamental Principles of Vietnamese Law

A recurring ground for rejection involves alleged violations of "fundamental principles of Vietnamese law," a term often interpreted broadly. For instance:

• Decision No. 09/2023/HS-PT issued by the High People’s Court in Hanoi on 17 January 2023: The Hanoi Court rejected a Singapore International Arbitration Centre (SIAC) award, arguing that the tribunal’s refusal to postpone hearings deprived the respondent of presenting the Supreme Court’s review of a related criminal case. The court claimed this violated the principle of procedural fairness, a fundamental principle of Vietnamese law. Notably, the court did not specify the exact principle infringed, raising concerns about the subjectivity of such grounds.
• Other cases, such as Court Decision No. 04/2020/QD-PQTT issued by the People’s Court of Ha Noi, dated 29 May 2020, highlighted issues like tribunals’ failure to compel evidence production. This was deemed a breach of impartiality and objectivity mandates under the Law on Commercial Arbitration (LCA) and the Civil Code.

2. Improper Notice and Service Deficiencies

Courts have rejected awards due to improper notice or service of arbitration-related documents. For example:

• Case No. 8¹: The court ruled against recognition because the notice was served to an unauthorized individual, and the content of the documents was inadequately proven.
• In another instance, reliance on FedEx for service without clear evidence of delivery content led to a petition’s rejection, reflecting the stringent procedural expectations of Vietnamese courts.

3. Invalid Arbitration Agreements

Cases involving unclear or improperly executed arbitration agreements have also faced rejection:

• Case No. 75²: The court ruled that failure to provide proof of a signatory’s authority rendered the arbitration agreement invalid. This decision underscores the necessity of ensuring strict compliance with Vietnamese representation laws.

4. Procedural Irregularities

Instances of arbitral procedure deviations, such as a change in hearing venue or exclusion of evidence based on IBA Guidelines, have also been grounds for rejection. Courts often cite Articles in the LCA requiring strict adherence to agreed procedural rules.

B. Pro-Arbitration Stance: Positive Developments

Whilst challenges persist, Vietnamese courts have also demonstrated progressive, pro-arbitration tendencies:

1. The Sojitz Case³

The dispute between Sojitz Pla-Net Corporation (SPNC) and Rang Dong Holding exemplifies the challenges of enforcing foreign arbitral awards in Vietnam. This case, centered on a share sale and purchase agreement governed by Singapore law, underwent arbitration at the Singapore International Arbitration Centre (SIAC). Despite procedural compliance by the arbitral tribunal, Vietnam’s People’s Court of Ho Chi Minh City initially refused to recognize the award, citing contradictions with “fundamental principles of Vietnamese law.”

Key Points:

• Freedom to Contract and the Right to Claim were highlighted as fundamental principles allegedly violated by the SIAC award. In the arbitration, amongst others, Rang Dong raised counterclaims a few days before the hearing on the merits. The tribunal clarified whether Rang Dong intends to raise these formally as counterclaims in the arbitration and if it were to do so, Rang Dong would have to pay its share of the deposits (as required under the SIAC Rules) before such counterclaims could be determined by the tribunal. Rang Dong refused to pay deposits and thus the tribunal did not proceed to determine the counterclaims. By way of caution, the tribunal provided in the award that it is made without prejudice of any claim that Rang Dong may file arising out of the same contract.
• The appellate court eventually overturned the first-instance decision, aligning with Vietnam's international obligations under the New York Convention and reinforcing judicial support for arbitration​​.

2. Minimal Merits Review

Some courts have adhered to international best practices by refraining from reviewing arbitral award merits:

• Decision 02/2020/QD-PQTT of the People’s Court of Hanoi City (Decision 02/2020): The Hanoi People’s Court upheld the tribunal’s jurisdiction despite allegations of bypassing Dispute Adjudication Board (DAB) processes. The court limited its review to procedural aspects, aligning with Vietnam’s obligations under the New York Convention.
• Decision 09/2020/QD-PQTT of the People’s Court of Hanoi City (Dispute 09/2020): The court emphasized the need to prioritize procedural compliance over merit-based objections. This approach has bolstered confidence in Vietnam as an arbitration-friendly jurisdiction.

3. FIDIC standard form contracts in construction projects in Vietnam

The enforcement of dispute resolution mechanisms within FIDIC model contracts has been another area of contention. These contracts, which prescribe a multi-tiered dispute resolution process, including Dispute Adjudication Boards (DAB), often clash with local judicial interpretations.

• Decision 09/2019/QD-PQTT of the People’s Court of Hanoi City (Decision 09/2019): In this case, the Hanoi People’s Court upheld an arbitral award issued under the VIAC, despite objections about non-compliance with FIDIC’s pre-arbitration DAB requirements. The court ruled that the exclusion of specific DAB provisions by the parties rendered those steps unnecessary, allowing direct arbitration​.
• Decision 02/2020/QD-PQTT of the People’s Court of Hanoi City (Decision 02/2020): A case involving an EPC contract for salt mines highlighted disputes over the necessity of pre-arbitral steps. The court ultimately supported the tribunal’s jurisdiction and found that prolonged correspondence without resolution justified bypassing DAB and amicable settlement​​.

C. Implications and Practical Takeaways

• Vietnam’s judiciary is gradually becoming more arbitration-friendly, but inconsistencies remain. By understanding the nuances of Vietnamese court decisions, stakeholders can better navigate the complexities of enforcing foreign arbitral awards.
• For Practitioners: Ensure compliance with Vietnamese procedural requirements, particularly around notice and representation.
• For Arbitrators: Document procedural decisions meticulously to withstand scrutiny under Vietnam’s legal framework.

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¹ As numbered and published in Vietnam’s Ministry of Justice website on 25 September 2020. This database is not comprehensive and it has not been updated regularly since its launch.
² Id. at fn 1.
³ Available online: Rang Dong Plastics to pay Sojitz Planet following ruling; One of the authors, Earl Rivera-Dolera, had acted as counsel for Sojitz in the arbitration and at the enforcement in her previous firm. Please note that the summary here is based on publicly available information. A comprehensive report has also been published to the public previously here: (1) Post | Feed | LinkedIn

(Written by: Earl Rivera-Dolera / Yusuke Takeuchi)

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*This newsletter is provided for educational and informational purposes only, and is not intended and should not be construed as legal or tax advice.
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