Foreign Court Judgments and Arbitral Awards in Vietnam

Highlights

  • On September 25, 2020, the Ministry of Justice published the database on recognition and enforcement of foreign court judgments and decisions, and of foreign arbitral awards in Vietnam.
  • The database comprises decisions of Vietnamese courts on 26 foreign courts’ judgments and decisions and 83 foreign arbitral awards for the period from January 1, 2012 to September 30, 2019.
  • Among 26 petitions for recognition and enforcement of foreign courts’ judgments and decisions, 7 are related to commercial disputes, of which 3 were rejected to be recognized and enforced in Vietnam.
  • Among 83 petitions for recognition and enforcement of foreign arbitral awards, 30 were rejected to be recognized and enforced in Vietnam.
  • With more and more cross-border cases in Vietnam, it appears that Vietnamese courts are becoming increasingly lean toward giving permission to recognize and enforce foreign court judgments and decisions, and foreign arbitral awards.
  • Judgment/award creditors should always bear in mind in case the assets of judgment/award debtors are situated in Vietnam. They therefore should consider how best to ensure recognition and enforcement in Vietnam.
  • Despite the recent positive trend, parties need to consider reasons which could be used by Vietnamese courts to reject recognition and enforcement of foreign court judgments and decisions, and foreign arbitral awards.

Introduction

On September 25, 2020, the Ministry of Justice published the database on recognition and enforcement of foreign court judgments and decisions, and of foreign arbitral awards in Vietnam (the “Database”).

Never before have Vietnamese courts recently been this open about their views and opinions of foreign dispute resolution forums.

It was only 3 years prior that the Supreme People’s Court of Vietnam began publishing judgments and decisions of courts at various levels, and recognizing and publishing case laws, thereby shedding light on an often-shrouded Vietnamese judicial process.

The Database comprises decisions of Vietnamese courts on 26 foreign courts’ judgments and decisions and 83 foreign arbitral awards for the period from January 1, 2012 to September 30, 2019.

Based on the Database, except for cases suspended due to various reasons prescribed in Civil Procedure Code 2015 (including primarily withdrawal of petitions by the applicants), 46% of foreign courts’ judgments and decisions (12 of 26), and 49% of arbitral awards (41 of 83) were recognized and enforced in Vietnam; and only 19% of foreign courts’ judgments and decisions (5 of 26) and 36% arbitral awards (30 of 83) were rejected to be recognized and enforced.

Recognition and Enforcement of Foreign Courts’ Judgments and Decisions

Judgments and decisions of foreign courts (including those in respect of commercial transactions and other civil and family related matters) are mainly considered by Vietnamese courts for recognition and enforcement in Vietnam under two legal bases: (i) an international treaty to which the country of the foreign court and Vietnam are members prescribes recognition and enforcement, and (ii) there are grounds to apply the reciprocity principle with countries with whom Vietnam does not have a treaty.

For mutual assistance on civil matters, Vietnam only has over a dozen treaties with other countries, primarily the former Soviet Union countries.  Therefore, the application of the reciprocity principle is in practice very important because judgments and decisions of courts from a non-treaty country would not otherwise be recognized and enforced in Vietnam.

Among 26 petitions published on the Database, 7 are related to commercial disputes, of which 3 were rejected to be recognized and enforced in Vietnam.

The Database lists out several key reasons why Vietnamese courts rejected to recognize and enforce foreign courts’ judgements.  Those reasons include: (i) such foreign courts had failed to summon, or properly serve the party against whom enforcement is sought with process of the courts; (ii) such foreign judgments and decisions, if recognized, would be contrary to the basic principles of the law of Vietnam; or (iii) where Vietnamese courts find no grounds to apply the reciprocity principle; and (iv) the judgments of the foreign courts had been revoked.

It is worth noting that the party who seeks recognition and enforcement must submit along with the petition, among others, evidence that the foreign court had summoned or properly served the other party.  That means the burden of proof here actually lies with the party who seeks recognition and enforcement.  In reality, it is very difficult for such party to obtain this evidence because this evidence is typically held by the other party.

The concept of “basic principles of Vietnamese law” is the Vietnam equivalent of “public policy” in other jurisdictions.  This is a broad concept and hence is vague.   The relevant cases in the Database on recognition and enforcement of foreign court judgments do not shed light on this issue.

Recognition and Permission for Enforcement of Foreign Arbitral Awards

Foreign arbitral awards are considered by Vietnamese courts for recognition and enforcement in Vietnam under two legal bases: (i) the country of the foreign arbitration forum and Vietnam are members of a relevant international treaty, and (ii) there are grounds to apply the reciprocity principle with countries with whom Vietnam does not have a treaty.  Because Vietnam is a member of the 1958 New York Convention and most countries who are investment or trading partners of Vietnam are members of this Convention, recognition and enforcement on the basis of the reciprocity principle are less important.

Among 83 petitions published on the Database, 30 were rejected to be recognized and enforced in Vietnam.

Recognition and enforcement on the basis of the reciprocity principle is a developing area.  The Database shows that Vietnamese courts have applied the reciprocity basis inconsistently.  Specifically, it is not clear whether Vietnamese courts only permits recognition and enforcement with a country in which a Vietnamese court judgment has been recognized and enforced or would be recognized and enforced.

The most common reasons to reject recognition and enforcement include: (i) such arbitration tribunals had failed to properly serve the party against whom enforcement is sought with process of the tribunals (mentioned 27 times), (ii) such arbitral awards, if recognized, would be contrary to the basic principles of the law of Vietnam (mentioned 10 times), and (iii) there is a lack of authority for the parties to enter into the arbitration agreement or signing formalities had not been complied with (mentioned 6 times).

Despite Vietnam being a member of the New York Convention and Vietnamese law placing the burden of proof on the party against whom enforcement is sought, Vietnamese courts have often requested the party who seeks enforcement to provide evidence.  Furthermore, even where the evidence is provided, Vietnamese courts appeared to rely solely on Vietnamese procedures for service of process, rather than the parties’ agreement and arbitration center’s rules for service of process, to determine whether the service of process was proper.

Lack of authority and non-compliance with signing formalities were also often cited.  Even though Vietnamese law provides that a foreign individual and entity’s civil legal capacity must be determined by using such country’s law, Vietnamese courts, however, have showed a tendency to apply only Vietnamese law for such purpose.

Unlike recognition and enforcement of foreign court judgements, the relevant cases on recognition and enforcement of foreign arbitral awards in the Database indicate that a violation of any specific Vietnamese law could be construed as being against the basic principles of Vietnamese law.  Therefore, there remains significant risk on how Vietnamese courts could broadly interpret basic principles of Vietnamese law when recognizing and enforcing foreign arbitral awards.

Conclusions

There are more and more cross-border cases being recognized and enforced in Vietnam.  Foreign courts and foreign arbitrations are generally permissible for cross border cases unless they fall into the exclusive jurisdiction of Vietnamese courts.  It appears that the Vietnamese courts are becoming increasingly lean toward giving permission to recognize and enforce foreign court judgments and decisions, and foreign arbitral awards.

Judgment/award creditors should always bear in mind in case the assets of judgment/award debtors are situated in Vietnam, and they therefore should consider how best to ensure recognition and enforcement in Vietnam.  Despite the recent positive trend, parties need to consider reasons which could be used by Vietnamese courts to reject recognition and enforcement of foreign court judgments and decisions, and foreign arbitral awards.

Contributors

Truong Nhat Quang, Partner ([email protected])
Nguyen Duy Duong, Associate (duong.n[email protected])
Vu Tuan Duc, Legal Assistant ([email protected])

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