In foreign arbitration, the party winning the case may not be the eventual winner. This paradox comes from the requirement that any award of foreign arbitrators must go through the procedure of recognition and enforcement at a competent Vietnamese Court before it can be executed in Vietnam. Only when the Vietnamese Court recognizes such foreign arbitral award can it be enforced in Vietnam as a Vietnamese Court's judgment or decision. This leads to a regrettable situation in which parties who do not have a strong case in the dispute usually lack the goodwill to resolve the dispute in arbitration. They instead prefer to wait until the dispute is settled and then oppose the recognition of the foreign arbitral award before the Vietnamese Court.

Uncertain regulations result in arbitrary and inconsistent applications of the law

Vietnam has been a contracting state of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958) (New York Convention 1958) since 12 September 1995. Afterward, the procedure of recognition and enforcement of foreign arbitral awards in Vietnam has been prescribed, amended, and supplemented in the 2005 Civil Procedure Code, and currently in the 2015 Civil Procedure Code. Nevertheless, during the implementation, the legal provisions related to this issue remain unclear, particularly the provisions on circumstances where a foreign arbitral award shall not be recognized. This situation results in the interpretation of the law varying between courts, which sometimes is arbitrary and violates other principles of the Vietnamese law.

One of the most abused grounds for not recognizing foreign arbitral awards is “the recognition and enforcement of the award of foreign arbitrators in Vietnam is contrary to the fundamental principles of the law of Socialist Republic of Vietnam”[1]. The reason is because there is no specific regulation or guidance demonstrating what “the fundamental principles of the Vietnamese law” are and how “recognition and permission for enforcement… are contrary to these principles”.

In judicial practice, the Vietnamese Court applies in analogous way regulations on the procedure of annulment of domestic arbitral awards stipulated in the 2010 Law on Commercial Arbitration and the Resolution No. 01/2014/NQ-HDTP on guidelines for the Law on Commercial Arbitration of the Justice Council of the Supreme People’s Court dated 20 March 2014 (Resolution 01). Specifically, a domestic arbitral award would be set aside if “the arbitral award is contrary to the fundamental principles of the Vietnamese law”, and the fundamental principles of the Vietnamese law are defined as “the fundamental principles on conduct having universal effect over the establishment and implementation of the Vietnamese law”[2].

Example: On 10 January 2023, the People’s Court of Ho Chi Minh City issued the Decision No. 42/2023/KDTM-ST (Decision No. 42) to settle a case of recognition of foreign arbitral award. In this Decision, the court based its rationale on the provisions of Resolution 01 to determine the fundamental principles of the Vietnamese law. Accordingly, which provision appears repeatedly in various legal documents would be deemed as a fundamental principle of the Vietnamese law. Specifically, the court asserted the following fundamental principles of the Vietnamese law[NL1] [NM2] :

• The principle of “Freedom and voluntary agreement in civil relations” is stipulated in Article 3 and Article 14 of The 2013 Constitution, Article 3.2 of the 2015 Civil Code, Article 11.1 of the 2005 Law on Commerce, Article 5.2 of the 2015 Civil Procedure Code, and Article 4.1 of the 2010 Law on Commercial Arbitration.
• The principle of “Guaranteeing the right to request the Court or Arbitration protect legitimate rights and interests” is stipulated in Article 102.1 of The 2013 Constitution, Article 14 of the 2015 Civil Code, Article 317.3 of the 2005 Law on Commerce, Article 4.1 of the 2015 Civil Procedure Code, and Article 5.1 of the 2010 Law on Commercial Arbitration.

In conclusion, the court refused to recognize the award of the Arbitral tribunal of the Singapore International Arbitration Center (SIAC) since they asserted that the Arbitral tribunal had violated the fundamental principles of Vietnamese law.

Nevertheless, the analogous law application as well as the interpretation of the law of the People’s Court of Ho Chi Minh City in the Decision No. 42 above is not convincing. The court has mistaken the subject "contrary to the fundamental principles of the Vietnamese law" between the procedure of annulment of domestic arbitral awards and the procedure of recognition and enforcement of foreign arbitral awards. Instead of considering whether “the recognition and enforcement” of the award of the Arbitral tribunal of SIAC is “contrary to the fundamental principles of the Vietnamese law” under the Civil Procedure Code, the court only focused on the Arbitral tribunal’s arguments recorded in the award and concluded that the "Arbitral tribunal" had breached the fundamental principles of Vietnamese law as stipulated in the Law on Commercial Arbitration and the Resolution 01. Due to overemphasis on the content of the award, the court may accidentally consider and re-adjudicate the dispute that has been resolved by arbitration, which is prohibited by the Civil Procedure Code. This is the reason why the losing party in arbitration frequently object to the recognition of the arbitral award on the ground that it is "contrary to the fundamental principles of the Vietnamese law" to lead the court to re-consider the dispute.

Furthermore, determining whether a legal regulation is the fundamental principle of the Vietnamese law based on its frequency of occurrence is not genuinely reasonable. Indeed, Resolution 01 provides two examples of the fundamental principles of the Vietnamese law, whereby the principle of "freedom and voluntary commitment" is stipulated in two legal documents, including the Civil Code and the Law on Commerce; while the principle "the arbitrator shall be independent, objective, and impartial" is only stipulated in the Law on Commercial Arbitration. As a result, the "universal effect " of a fundamental principle of Vietnamese law cannot be merely measured by its frequency of occurrence in the Vietnamese legal document system. Such open regulation presently not only leads to the arbitrary interpretation of the law by the parties objecting to the recognition of foreign arbitral awards but also results in inconsistent opinions of the courts at all levels.

It is essential to solidify relevant provisions

Therefore, to avoid the abuse of legal loopholes to evade the obligation of executing foreign arbitral awards, it is required to reinforce the provisions of the law to enhance the capability of foreign arbitral awards being recognized and enforced in Vietnam. In 2019, the Justice Council of the Supreme People’s Court released and consulted the Draft Resolution regarding guidance for the implementation of several provisions of the Civil Procedure Code on the procedure of recognition and enforcement of foreign arbitral awards in Vietnam in first-instance courts. If adopted, such resolution will not only unify the adjudication viewpoints of the courts but also create a safe and favorable investment environment for foreign investors.

[1] Point b, clause 2, Article 459 of the 2015 Civil Procedure Code