Wole Olufunwa considers how to navigate the procedural and practical difficulties of enforcement in Thailand and Vietnam, and convert paper victories into Bhat (฿) or Dong (₫).
The New York Convention
Along with 154 other states, Thailand1 and Vietnam are parties to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention). The New York Convention provides that its members must recognise and enforce arbitration awards issued in other contracting states, subject only to certain limited exceptions.
The provisions of the New York Convention serve as the foundation for recognition and enforcement proceedings in both Thailand and Vietnam. However, the application of these same provisions differ between the two jurisdictions.
Thailand: Establishing Conventions
The New York Convention and the Geneva Convention 1927 will only assist so far in enforcing a foreign arbitral award in Thailand.
The Thai courts adopt a conservative approach to the recognition and enforcement of foreign arbitral awards, placing the onus on the applicant to establish and prove that one of the conventions applies. Enforcement is not merely an administrative rubber stamp or an automatic process, but is in fact a full and separate court proceeding, which may potentially delve into the substantive issues already raised and determined in arbitration. It is often due to the time and costs involved in the process which result in many applications for enforcement of foreign arbitral awards in Thailand failing or being discontinued.
Applying to the Thai courts for recognition and enforcement
The process for enforcement begins with filing a petition to the relevant Thai court for a judgment recognising and enforcing the award, along with copies of the arbitral award and arbitration agreement, and certified translations of each. The court will then review the petition to ensure that all necessary requirements are fulfilled.
Once the petition has been filed, the defendant has the right to file an objection to the petition. Thereafter, a hearing for the petition will be scheduled and conducted. Should the court give judgment in the applicant’s favour, the applicant may enforce the foreign arbitral award as a Thai judgment, with the assistance of the Thai Legal Execution Department.
Resisting an application
However, the defendant in enforcement proceedings is entitled under Thai law to challenge the award on the grounds below, found in ss 42, 43(1)-(6) and 44 of the Arbitration Act 2002 (AA). These provisions are based on the terms of the New York Convention:
- Limitation period: The petition for enforcement must be filed no later than three years from the date the award first became enforceable. (S42 AA)
- Legal incapacity: A party to the arbitration agreement who does not have capacity will render the arbitration agreement voidable. (S43 (1) AA)
- Status of arbitration agreement: Where the arbitration agreement is not binding under the governing law of the country agreed to by parties. (S43(2) AA)
- Notification of proceedings: Where parties were not properly notified of the appointment of the arbitrators and the arbitration proceedings. (S43(3) AA)
- Ultra vires award: Where the tribunal acted beyond the scope of the arbitration agreement. (S43(4) AA). Care should be taken by the parties when drafting these clauses.
- Conduct of arbitration: Where the composition of the arbitral tribunal and/or the arbitral proceedings were not in accordance with the arbitration agreement, or agreed to by parties. (S43(5) AA)
- Status of award: Where the award has been set aside or suspended by the court of the issuing state. (S43(6) AA)
- (i) Lack of arbitrability and (ii) public policy: Where the award relates to a dispute that cannot be resolved by arbitration; and the recognition or enforcement of the award is contrary to public order and good morals. (S44 AA)
As seen above, in coming to its decision, the Thai court will have regard to whether there has been procedural irregularity, a breach of natural justice, or whether the award is against public policy. It is common for defendants to delay the enforcement proceedings by defending on multiple fronts, and utilising as many grounds of refusal as they are able. As a result, enforcement proceedings may be prolonged for 10-18 months.
Appealing the Thai court’s judgment
Thai law permits the defendant to appeal the judgment. Such appeals may be made to either the Supreme (Dika) Court or to the Supreme Administrative Court, depending on the court that rendered the judgment.
In this regard, it should be noted that the grounds for appeal in many ways mirror the grounds for refusing enforcement at first instance. Specifically, an appeal may be lodged on one or more of the following grounds:
- Recognition or enforcement of the award would be contrary to public order or good morals.
- The order or judgment is contrary to public order.
- The judgment is not in accordance with the arbitral award.
- One of the judges hearing the case issued a dissenting opinion in the earlier judgment.
- The court order under review concerns only provisional measures taken to protect a party’s interest before or during arbitration proceedings.
The appeals process in Thailand effectively gives a defendant seeking to resist enforcement a second bite of the cherry. Considering that these appeals can typically take up to two years, the time and costs of enforcing a foreign award in Thailand may end up being disproportionate to the amount in dispute. Given this, it is likely that unscrupulous defendants will take advantage of these conditions in an attempt to avoid enforcement or to buy time to “re-arrange” their assets or business operations.
Vietnam: Practicing enforcement
As in Thailand, recognition and enforcement proceedings in Vietnam are inextricably linked to the provisions of the New York Convention. Also as with Thailand, the onus is typically placed on the applicant to prove that their foreign arbitration award should be enforced2 .
Unlike Thailand however, Vietnam’s membership of the Convention is subject to certain reservations.
- The commercial reservation: Vietnam will only enforce arbitration awards related to ‘commercial transactions’.
- The reciprocity reservation: Vietnam will only enforce foreign arbitration awards to the same extent to which the awarding state grants enforcement.
The effect of these reservations is to afford local Vietnamese courts a wide discretion as to how and when the provisions of the New York Convention are applied.
The pre-submission process
The first obstacle for recognition and enforcement in Vietnam is a rigid pre-submission process. Vietnamese law requires every foreign document provided in court to be an original or a notarised and legalised copy consularised by the relevant Vietnamese Embassy. Such documents will include the award, the underlying agreements, and even accounting and corporate regulatory authority search results from the applicants. This can be a costly and time-consuming process.
An application must be made to the Ministry of Justice by a Vietnamese agent acting under a power of attorney. The applicant must also arrange for all the supporting documents, such as relevant treaties, the award, arbitration agreement, to be translated into Vietnamese. Only once the Ministry of Justice has formally approved the application will the matter be referred to a competent court.
There is also the risk of being timebarred from applying for the recognition and enforcement of a foreign arbitral award. Whilst there is no statutory limitation, in a 2014 decision3 the People’s Court of Long An refused to consider an application for recognition and enforcement of an award on the ground that the application had been filed with the Ministry of Justice over one year from the date the award was issued.
As with Thailand, Vietnamese court proceedings are procedural minefields. In one particular comedy of errors, an arbitral institution’s rules had been copied, translated, and certified during the pre-submission process. These rules had been updated by the time of hearing, 16 months later. This created a vicious circle wherein further foreign documents – in this case, several letters from the arbitral institution had to be issued, copied, translated, and certified merely to confirm the contents of the expired documents.
Vietnamese courts have jurisdiction to decide whether to recognise and enforce foreign arbitral awards in accordance with article 370 of Vietnam’s Civil Procedure Code (CPC)4 , which mirrors article V of the New York Convention.
A significant difference between the CPC and the New York Convention, however, is the introduction of a ground for refusing enforcement on the basis that enforcement would breach the ‘fundamental principles’ of Vietnamese law. Uncertainty as to the meaning of ‘fundamental principles’ has proven to be a significant issue in the enforcement of foreign arbitral awards in Vietnam.
In a 2014 decision, this phrase was construed by the Hanoi provincial court so as to extend to virtually all principles under Vietnamese law5 . In its decision, enforcement of an arbitral award was refused on the basis that it had relied on a foreign law which was inconsistent with Vietnamese law.
In the period 2005-2014, 24 out of a total of 52 applications for recognition and enforcement in Vietnam were dismissed, with the majority of these refusals taking place at a provincial or local level.
Recent efforts by the Vietnamese National Assembly6 and People’s Supreme Court of Vietnam7 have sought to increase the number of foreign arbitral awards by creating standardised procedures and criteria for dealing with these applications. Whether these efforts will be successful, however, remains to be seen.
The recognition and enforcement of foreign awards in Thailand can be a costly and time-consuming process, which should be borne in mind from an early stage for example, when serving notice of arbitration against an entity with assets in Thailand. That said, Thailand is a jurisdiction where persistence is rewarded.
The difficulties of enforcement in Vietnam extend further than just the onerous and time consuming court procedure. There are multiple procedural barriers open to defendants who wish to challenge an arbitral award after the fact. To mitigate this risk, those seeking to enforce in Vietnam are well advised to appoint local bailiffs or lawyers early on, and to take meticulous care in satisfying the administrative formalities at each stage of proceedings.