An extract from The International Arbitration Review, 11th Edition
Introductioni Overview of Vietnam's legal system
Since gaining its independence in 1945, Vietnam has applied a socialist legal system based on the civil law system. However, there have been major changes in the country in recent years, including a reorganisation and harmonisation of its laws inspired by other civil law jurisdictions such as France and Germany, as well as the recognition of some court precedents as another source of law. In light of these developments, Vietnam is a peculiar jurisdiction, mixing aspects of socialist law and civil law with occasional borrowings from common law.
In Vietnam, legislation is still the most important source of law. Laws are passed by the National Assembly and enacted by the President. Courts are subordinate to the National Assembly and must issue rulings based on the laws in effect.
In 2015, as part of its efforts to reorganise existing legislation, the National Assembly passed the Law on the Promulgation of Legal Documents in which all Vietnamese legal documents are classified by their level of validity (the equivalent of the hierarchy of sources in other civil law jurisdictions). Article 4 of this statute categorises Vietnamese legal documents into 15 levels, with the Constitution at the highest level of validity. The second level is Vietnamese laws. At a lower level are implementing regulations for these laws issued by the government in the form of decrees of the government or decisions of the Prime Minister. Ministries and government agencies with ministerial rank (such as the State Bank of Vietnam, the Supreme People's Court and the Supreme People's Procuracy) may then issue circulars or joint circulars to further implement the decrees of the government.ii Overview of Vietnam's judicial system
In Vietnam, the judicial system comprises people's courts (which include military courts) and people's procuracies.
There are four levels of courts, and the highest court is the Supreme People's Court. The Supreme People's Court consists mainly of a Judicial Council. The Judicial Council consists of all the justices of the Supreme People's Court sitting together as a council under the chairmanship of the Chief Justice (who is appointed by the National Assembly on nomination by the President). There are also deputy chief justices (who are appointed by the President on the nomination of the Chief Justice of the Supreme People's Court) and other justices of the Supreme People's Court (who are appointed by the National Assembly on the nomination of the Chief Justice of the Supreme People's Court). The Supreme People's Court is the court of last resort on all matters arising under Vietnamese law. It also recommends bills to the National Assembly and passes resolutions directing lower courts on the uniform enforcement or implementation of the law across the country. The three other levels of courts are the superior people's courts (three courts across the country), the provincial level people's courts (63 across the country) and the district level people's courts (one for each district).
Military courts are established at various levels in the Vietnam People's Army, with the highest one being the Central Military Court.
The people's procuracies (also known as the people's offices of inspection and supervision) serve as the prosecutorial authority in Vietnam. Their role is to supervise and inspect judicial compliance by judicial agencies and officials. There is a people's procuracy for every people's court, and the military has its own military procuracies. The highest procuracy is the Supreme People's Procuracy, headed by the Chief Procurator of the Supreme People's Procuracy, who is elected by the National Assembly.
With respect to arbitration, there is no specialist arbitration court in Vietnam. However, the Supreme People's Court and the Ministry of Justice have recognised in public fora that the enforcement of foreign arbitral awards under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (New York Convention) has been uneven and inconsistent largely because courts located throughout the country do not have the same experience dealing with enforcement issues. Accordingly, there have been active discussions on the need for a specialist court to promote greater uniformity and predictability in enforcing foreign arbitral awards.iii Vietnam's Arbitration Law
In Vietnam, arbitrations are mainly governed by the Arbitration Law 2010, which came into force on 1 January 2011. The Arbitration Law 2010, which is based on the UNCITRAL Model Law and incorporates international arbitration norms, reflects Vietnam's intention of becoming a pro-arbitration jurisdiction.
Unlike arbitration laws in other jurisdictions, Vietnam's Arbitration Law 2010 does not recognise the concept of international arbitration (as opposed to domestic arbitration). Rather, the Arbitration Law 2010 distinguishes between foreign arbitration and non-foreign arbitration. Foreign arbitration is defined as 'arbitration established under the provisions of foreign arbitration law as agreed by the parties to resolve the disputes, whether inside or outside the territory of Vietnam'. Therefore, an arbitration seated inside Vietnam under the rules of a foreign arbitral institution (such as the ICC, SIAC, etc.) may still be considered as a foreign arbitration. On the other hand, an arbitration seated inside Vietnam established under the Arbitration Law 2010 is a non-foreign arbitration. As more fully discussed in the next section, the law regarding the recognition and enforcement of an award is different depending on whether the award is issued in a foreign or non-foreign arbitration.
Another significant distinction is a dispute with a foreign element and a dispute without a foreign element. A dispute with a foreign element means that the dispute involves:
- at least one party that is a foreign individual or a foreign legal entity;
- parties that are all Vietnamese, but where the establishment, modification, implementation or termination of their relationship occurred in a foreign country; or
- parties that are all Vietnamese, but where the subject matter of their civil relationship is located in a foreign country.
A contrario, a dispute without a foreign element does not involve any of the above. The presence of a foreign element in a dispute does not necessarily define whether an arbitration is foreign. Rather, as discussed below, the distinction is significant to determine, for example, the applicable substantive law or language of an arbitration.
If a dispute does not involve a foreign element, the applicable substantive law shall be Vietnamese law. If the applicable substantive law is not agreed upon by the parties and the dispute involves a foreign element, the applicable substantive law shall be the law the arbitral tribunal deems most appropriate. If the dispute does not have a foreign element, the applicable language shall always be Vietnamese regardless of the parties' agreement, except in a dispute where at least one party is an enterprise with foreign invested capital. If the dispute has a foreign element, or has at least one party that is an enterprise with foreign invested capital, the applicable language shall be the language agreed upon by the parties, and in the absence of such an agreement, the applicable language shall be determined by the arbitral tribunal.
The Arbitration Law 2010 is supplemented by:
- Decree No. 63/2011/ND-CP, which includes implementing regulations on the Arbitration Law 2010;
- Resolution No. 01/2014/NQ-HDTP, which guides the implementation of certain provisions of the Arbitration Law 2010; and
- Decree No. 124/2018/ND-CP, which amends and supplements certain provisions of Decree No. 63/2011/ND-CP.
Notably, Resolution No. 01/2014 clarifies the provisions on the validity of arbitration agreements; the grounds for setting aside arbitral awards; and the supervisory and supporting role of Vietnamese courts, and their power over foreign arbitrations seated in Vietnam.iv Recognition and enforcement of arbitral awards in Vietnam
In Vietnam, the procedure relating to the recognition and enforcement of arbitral awards varies depending on whether an award is foreign or non-foreign.
With respect to the recognition of arbitral awards, non-foreign arbitral awards are automatically recognised and are, therefore, effective from their date of issuance.
On the other hand, foreign arbitral awards must be formally recognised and held enforceable by the competent provincial people's court. In 1995, Vietnam became party to the New York Convention. The New York Convention was codified into Vietnamese law through the Civil Procedure Code (the Civil Procedure Code 2004, as amended by the Civil Procedure Code 2011 and replaced by the Civil Procedure Code 2015). In addition, the Supreme People's Court also provided guidance to the lower courts in Official Letter No. 246/TANDTC-KT dated 25 July 2014. In principle, a foreign arbitral award shall be recognised and enforced in Vietnam if the award is issued in a country party to an international convention on the recognition and enforcement of arbitral awards to which Vietnam is also a party (such as the New York Convention), or on the basis of reciprocity if such country is not party to such a convention. Under the Civil Procedure Code 2015, the grounds for refusing the recognition and enforcement are substantially similar to those in Article V of the New York Convention. Once a foreign arbitral award is recognised and held enforceable by the competent provincial people's court, the award is legally effective like any decision or judgment of a Vietnamese court.
With respect to the enforcement of arbitral awards in Vietnam, the enforcement procedure is the same whether an award is non-foreign or foreign. The enforcement procedure is governed by the Civil Procedure Code 2015 and the Law on Enforcement of Civil Judgments. The Law on Enforcement of Civil Judgments is guided by Decree No. 62/2015/ND-CP (Decree No. 62/2015). Decree No. 62/2015 in turn, is guided by Circular No. 01/2016/TT-BTP and Joint Circular No. 11/2016/TTLT-BTP-TANDTC-VKSNDTC, which provide specifications on the provisions of Decree No. 62/2015.
If the party against whom an award is invoked fails to comply with a non-foreign arbitral award, and the award is not set aside, the party entitled to enforcement shall have the right to request the competent civil judgment enforcement agency to enforce it. Likewise, if the party against whom the award is invoked fails to comply with a foreign arbitral award, and the award is recognised and held enforceable, the party entitled to enforcement shall also be entitled to request the assistance of the competent civil judgment enforcement agency for its enforcement.
It is worth mentioning the peculiar requirement for non-foreign ad hoc arbitral awards in such a case. Like non-foreign arbitral awards, non-foreign ad hoc arbitral awards are automatically recognised, and therefore effective from their date of issuance. If the party against whom an award is invoked does not comply with the award, the party entitled to enforcement shall also be entitled to request the assistance of the competent civil judgment enforcement agency. However, non-foreign ad hoc arbitral awards are required to be registered within one year of their issuance with the competent provincial people's court in order for the enforcement agency to enforce them.v Arbitral institutions in Vietnam
The Ministry of Justice of Vietnam reports that, as of March 2020, there are 31 Vietnamese arbitral institutions in Vietnam. The most active is the Vietnam International Arbitration Centre (VIAC) at the Vietnam Chamber of Commerce and Industry, based in Hanoi and Ho Chi Minh City. Other arbitral institutions include the Pacific International Arbitration Centre and TRACENT, the Ho Chi Minh City's Commercial Arbitration Center, both of which are based in Ho Chi Minh City. It is worth mentioning that the first foreign arbitral institution opened in Vietnam on 17 December 2019. A representative office of the Korean Commercial Arbitration Board (the sole Korean arbitral institution statutorily authorised to settle disputes under the Korean Arbitration Act under the auspices of the Korean Ministry of Justice) was indeed set up in Hanoi.
According to VIAC, 274 cases were filed with it in 2019. The total value in dispute for all VIAC cases in 2019 was approximately US$285 million. The top three foreign parties in 2019 were from China, Singapore and Korea. Finally, the main areas of dispute in 2019 were as follows:
- sales of goods (35 per cent or 96 cases);
- real estate (23 per cent or 63 cases);
- services (14 per cent or 38 cases);
- construction (12 per cent or 33 cases);
- insurance (5 per cent or 14 cases);
- lease of property (4 per cent or 11 cases);
- others (4 per cent or 11 cases); and
- logistics (3 per cent or eight cases).
In comparison to 2018, a significant growth (52.2 per cent) was observed in the number of cases filed with VIAC (274 cases in 2019 versus 180 cases in 2018).