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Vol. 8, issue 5
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Enforcement of Foreign Arbitral Awards in
Vietnam and China: From Theory to
Practice
by N. Van Hai
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ENFORCEMENT OF FOREIGN ARBITRAL AWARDS
IN VIETNAM AND CHINA: FROM THEORY TO
PRACTICE*
NGUYEN VAN HAI
* A dissertation submitted in partial fulfillment of the requirements of the University of the West of England
for the degree of Master of Laws in International Trade Law. Bristol, August 2011
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
Table of Contents
ACKNOWLEDGMENTS ........................................................................................... 3
LIST OF ACRONYMS AND TERMINOLOGIES .................................................... 4
INTRODUCTION ....................................................................................................... 5
CHAPTER I: RECOGNITION, ENFORCEMENT OF FOREIGN ARBITRAL
AWARDS AND THE NEW YORK CONVENTION .............................................. 10
I.
Recognition and Enforcement of Arbitral Awards ......................................... 10
II. The New York Convention 1958 .................................................................... 10
1.
A Brief History of New York Convention: ................................................. 11
3.
Grounds for Refusal of Recognition and Enforcement of Foreign Arbitral
Awards ......................................................................................................... 13
2.
Scope of Application of New York Convention ......................................... 12
CHAPTER II: RECOGNITION AND ENFORCEMENT OF FOREIGN
ARBITRAL AWARDS IN VIETNAM ..................................................................... 20
I.
1.
2.
Historical Development of National Laws on Arbitration .............................. 21
National Laws on Arbitration before the Vietnamese Accession to the New
York Convention 1958 ................................................................................ 21
National Laws on Arbitration after the Vietnamese Accession to the New
York Convention 1958 ................................................................................ 23
II. The Enforcement Procedure of Arbitral Award .............................................. 25
1.
2.
Domestic or Foreign Award? ...................................................................... 25
Recognition and Enforcement Procedure .................................................... 29
III.
Grounds for Refusal of Recognition and Enforcement of Foreign Arbitral
Award and Their Practical Issues ........................................................................... 36
1.
Commercial Dispute or Non-Commercial Dispute? ................................... 39
3.
Doctrine of severability ............................................................................... 43
2.
Basic Principles of Laws of Vietnam .......................................................... 41
CHAPTER III: RECOGNITION AND ENFORCEMENT OF FOREIGN AND
FOREIGN-RELATED ARBITRAL AWARDS IN CHINA ..................................... 45
I. Three Stages in the Development of Chinese laws on the Enforcement of
Arbitral Awards. ................................................................................................. 46
1.
2.
Legislation Blank (1949 – 1978) ................................................................. 47
Establishment of Domestic Legislation and Accession to International
Treaties (1979 – 1994) ................................................................................ 47
II. Enforcement Procedures of Arbitral Awards in China ................................... 50
Page 1 of 80
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
1.
2.
Relationship between the Courts and the Arbitration ................................. 50
Classification of Arbitral Awards and Their Respective Enforcement
Procedure in China ...................................................................................... 51
III.
Contemporary Issues on the Recognition and Enforcement of Foreign and
Foreign - Related Arbitral Awards ......................................................................... 59
1.
2.
3.
4.
Local Protectionism and the ‗Double Report System‘ ................................ 59
Public Policy as a Ground for Refusal of Recognition and Enforcement of
Arbitral Awards ........................................................................................... 62
Difficulties in Obtaining the Remedies under the Award ........................... 64
Ad hoc Arbitration ....................................................................................... 65
CHAPTER IV: BRINGING IT ALL TOGETHER ................................................... 67
I.
A Need for Unification of Interpretation of the New York Convention‘s
Provisions ........................................................................................................ 67
II. National Legal Frameworks Need to Be Further Developed Taking into
Account the Widely Accepted International Practice ..................................... 69
III. Organizing the Training Program for Judges and Officials involving in the
Recognition and Enforcement Procedure ........................................................ 71
APPENDIX I ............................................................................................................ 72
BIBLIOGRAPHY ...................................................................................................... 73
BOOKS .................................................................................................................. 73
JOURNALS .......................................................................................................... 74
SOURCES OF LAW ............................................................................................ 77
WEBSITES ........................................................................................................... 79
OTHER SOURCES .............................................................................................. 79
Page 2 of 80
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
Page 3 of 80
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
LIST OF ACRONYMS AND TERMINOLOGIES
ADR
Alternative Dispute Resolution
means
CIETAC
China International Economic and
Trade Arbitration Commission
China or PRC
The People‘s Republic of China
ICC
International Chamber of
Commerce
New York Convention
1958 or the Convention
United Nations Convention on the
Recognition and Enforcement of
Foreign Arbitral Awards 1958.
SIAC
Singapore International Arbitration
Center
SPC
The Supreme People‘s Court of the
People‘s Republic of China
UNCITRAL
United Nations Commission on
International Trade Law
VIAC
Vietnam International Arbitration
Center
Page 4 of 80
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
INTRODUCTION
Among the available alternative dispute resolutions (ADR) such as
mediation, conciliation,…,
arbitration is by far the most preferable method of
dispute settlement and widely used internationally. The statistics on the rise of
arbitration as a forum for resolving commercial disputes indicates a remarkable
increase in the number of cases filed at numerous arbitration institutions in Asian
countries in the last few years. In 2007, the China International Economic and Trade
Arbitration Commission (CIETAC) handled 1,118 cases and 1,230 cases in the
subsequent year1 . Similar trend can be seen in Singapore International Arbitration
Centre (SIAC) where in 2008 it handled 99 cases and 160 cases and 198 cases for the
two subsequent years.2 Relatively small in comparison with the two neighboring big
arbitral institutions, the Vietnam International Arbitration Centre (VIAC) filed 30
and 58 cases in 2007 and 2008 respectively and in 2010, the Centre filed 63 cases3.
The same trend can also be seen in the so called non-traditional arbitration Investor-state arbitration with the number of cases filed at this Centre increased by
25% between the year of 2010 and 20084and the global trend of recourse to
arbitration for dispute settlement continue growing.5
The statistic is abstracted from the website of China International Economic and Trade Arbitration
Commission as of 24th June 2011 when there is no available statistic on the cases filed in 2009 and
2010.
2
SIAC‘s
2010
Annual
Report,
available
at
<
http://www.siac.org.sg/images/stories/documents/SIAC_Annual_Report_2010.pdf> accessed on 24th
June 2011.
3
The statistic is abstracted from the website of Vietnam International Arbitration Centre, available at
http://www.viac.org.vn/vi-VN/Home/thongke/2011/01/357.aspx accessed on 19th July 2011.
4
The cases registered by ICSID in 2008 were 21 cases while this number was 26 cases in 2010, data
available
at
http://icsid.worldbank.org/ICSID/FrontServlet?requestType=ICSIDDocRH&actionVal=ShowDocum
ent&CaseLoadStatistics=True&language=English11.
5
J.William Rowley QC et al, Arbitration World (European Lawyers Ltd., UK 2004) 7.
Page 5 of 80
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
The reasons why the parties to a commercial contract increasingly prefer to
render their potential disputes to the power of arbitration rather than taking court
action lie in the fact that arbitration itself represents number advantages in
comparison with the traditional judicial dispute settlement mechanisms. The
advantages of arbitration as the forum for dispute settlement include: the finality,
confidentiality, flexibility in respect of its procedures, time saving and neutrality.6
Another advantage of arbitration, in principle, is its enforceability. While a court
judgment issued in one State might be unenforceable in the other if the two States
have not entered into a bilateral judicial assistance treaty with each other, an arbitral
award benefits from a number of international conventions to which hundreds of
countries around the globe are the members for its implementation and enforcement.
Nonetheless, the practice of recognition and enforcement of the foreign arbitral
awards (FAA) in the States party to such conventions are not always the true
reflection of what the law in books7 says. The situation is particularly problematic in
developing countries with transitional economies where the legal systems are subject
to ongoing/continuous development/reform.
Focusing on China and Vietnam, two countries with similar legal as well as
social-economic systems8 and which have been widely criticized by the international
See more discussion on the advantages of arbitration in J.William Rowley QC (n 1) 5 and Andrew
Tweedale and Keren Tweedale, Arbitration of Commercial Disputes: International and English Law
and Practice (Oxford University Press, 2007) 39.
7
For the sole purpose of this thesis, ‗law in books‘ means what the law says in the code, statutes, and
regulations. This term is distinctive from the term ‗law in action‘ which means what the law operates
in practice. For more discussion on these two terms, see Bradley et al, How to study law (5th edn.,
Sweet & Maxwell, 2000) p.19-24.
8
China and Vietnam both do not follow binding precedents legal system like the common law system
although under Chinese legal system, the judicial opinions and explanations issued by Chinese
Supreme People‘s court are regarded as a source of law in China, there is no principle of stare decisis
in this country.
Page 6 of 80
6
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
arbitration community in term of the enforcement of foreign arbitral awards 9, this
dissertation aims to critically examine the legal grounds for setting aside a foreign
arbitral award in these jurisdictions. The dissertation is likely to be of interest to
parties involved in commercial disputes with Chinese and Vietnamese trading
partners where the chosen ADR is arbitration. A party to a contract envisaging to
invoke an arbitration clause in these two countries and their lawyers may benefit
from this study in regards to drafting an enforceable arbitration clause or agreement
and weighing the difficulties in order to have an arbitral award recognized and
enforced.
This dissertation mainly focuses on the recognition and enforcement of
arbitral awards, especially the foreign and/or foreign-related arbitral awards as
defined under the laws of China and Vietnam. Other preliminary/related matters such
as composition and jurisdiction of arbitration tribunal will be deliberated only where
it is necessary for further discussion. While China and Vietnam are bound by
commitments under several international treaties as well as bilateral agreements
envisaging an arbitration agreement, this dissertation focuses solely on the United
Nations Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (known as New York Convention 1958) as it is the most important
international treaty governing the recognition and enforcement of arbitral awards.10
In doing so relevant national laws pertaining to arbitration will be critiques as to their
compliance with the provisions of New York Convention and international practice.
Please see more discussion on this issue in China and Vietnam in Chapter II and III respectively
With more than 140 countries presently party to the New York Convention, it has become one of
the most successful multilateral convention in field of international commercial law in general and of
international commercial arbitration in particular. China became a party to the Convention in 1987
while
Vietnam
signed
it
in
1995.
See
http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html .
Page 7 of 80
9
10
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
The discussion and analysis of the dissertation are informed by the utilization
of both black-letter approaches to legal research and comparative approach which
are enriched by historical methodology.11 In parallel with these methodologies, it is
acknowledged that the law on arbitration is closely associated with the development
of the legal system of each jurisdiction and therefore, a pure study at the positive law
will represent its limitations in a sense that it does not take into account the historical
development of the legal background development. Thus, in order to fill this gap, a
certain amount of historical background based on the previous researches and
official materials is provided.
The executive summary of the dissertations is as follows:
Chapter I:
Recognition and Enforcement of Arbitral Awards and the New York
Convention of 1958: This opening chapter discusses the legal
background of recognition and enforcement of arbitral awards and the
relevant provisions of New York Convention. It also focuses on the
provisions on setting aside a foreign arbitral award under this
Convention in order to give the preliminary ideas necessary for the
subject area.
Chapter II:
The development of Vietnamese laws on the recognition and
enforcement of foreign arbitral awards, its current legal framework
and practical issues are discussed.
Chapter III:
This chapter addresses the contemporary issues of both the laws of
and the practice in China regarding the recognition and enforcement
11
Ibid.
Page 8 of 80
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
of arbitral awards. Besides, a short discussion on the historical
development of Chinese laws on arbitration is also provided.
Chapter IV:
Bringing it all together: based on the analysis in previous chapters,
Chapter IV draws conclusions as to common issues that a party may
encounter to have a foreign arbitral award recognized and enforced in
China and Vietnam. In light of the findings, a number of proposals for
reform are also provided.
Page 9 of 80
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
CHAPTER I: RECOGNITION, ENFORCEMENT OF FOREIGN ARBITRAL
AWARDS AND THE NEW YORK CONVENTION
I.
Recognition and Enforcement of Arbitral Awards
The ultimate goal of recourse to arbitration does not rest at the award itself but
to have it enforced so that the winning party can obtain its legitimate compensation
for damages. The winning party normally expects the award to be voluntarily
executed, however it does not always happen this way. Therefore, the winning party
has to apply to the local jurisdiction where the award is sought. It is said that the
enforcement of arbitral award is the weakest link in the entire chain of the
international dispute resolution and it is separate from making the award itself.
12
When a court recognizes an arbitral award, it declares it to be valid and binding upon
the parties. It is a mere declaration since it does not provide any practical application
of what has been ruled. The recognition is for the purpose of preventing any future
claim against the award, hindering the court proceeding of the matter which was
ruled in the arbitral award. When a court is asked to enforce an arbitral award, it is
asked to ensure that the recognized award is performed by using necessary available
measures.13
II.
The New York Convention 1958
This section deals with some features of New York Convention 1958 which
are relevant to the scope of this dissertation including the discussions on the scope of
application of the Convention (Article I) and the grounds for refusal of recognition
and enforcement of arbitral awards (Article V). Firstly, a brief history of the
introduction of New York Convention serves to give the background to the issue.
Marc Blessing, ‗The New York Convention of 1958: The Major Problem Areas‘, in: The New York
Convention of 1958, ASA Special Series No. 9 (1996), p. 20.
13
Alan Redfern, Martin Hunter, Law and practice of international commercial arbitration (4th edn,
Sweet & Maxwell, London 2004) 435.
Page 10 of 80
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
1.
A Brief History of New York Convention:
It is notable that the New York Convention is the result of a string of
attempts made by international law community in order to unifying the rules on
recognition and enforcement of foreign arbitral awards. The history of the
international law on recognition and enforcement of arbitral awards tracks back to
the post World War I period. The first international instrument in this field was the
so called multilateral convention: the Geneva Protocol on Arbitration Clause of 1923
which was negotiated in the framework of the League of Nations. The Geneva
Protocol was to respond to the issue of validity of arbitration agreement on the future
disputes which were not recognized by many States at that time.14 Article 1 of the
Geneva Protocol on Arbitration Clause provides that ―Each of the Contracting States
recognizes the validity of an agreement whether relating to existing or future
differences between parties…‖
However, this was just a step of recognition of the validity of an arbitration
agreement whether it refers to an existing or future dispute. After having the
arbitration agreement valid, it became necessary to have it enforced in the country
other than the country of the seat of arbitration. Again, under the auspice of the
League of Nations, a new convention following the Geneva Protocol has been drawn
up. The Geneva Convention on the Execution of Foreign Awards 1927 governed the
enforcement of arbitral awards failing under the scope of Geneva Protocol. Article I
of the Convention stated that ―an arbitral award made in pursuance of an agreement,
whether relating to existing or future differences … covered by the Protocol on
Arbitration Clauses, opened at Geneva on September 24, 1923, shall be recognized
as binding and shall be enforced in accordance with the rules of the procedure of the
14
Alan Redfern (n 3) 132.
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
territory where the award is relied upon…‖. Various regional conventions followed15
and eventually the most important convention in the field of international
commercial arbitration, the New York Convention was adopted on the last day of the
Conference of United Nation Economic and Social Council (ECOSOC) held in New
York in June 1958.
2.
Scope of Application of New York Convention
Article I.1 of the Convention lays down the Convention‘s scope of
application. Accordingly, the Convention shall apply to:
(i)
arbitral awards made in the territory of a State other than the State where the
recognition and enforcement of such awards are sought; or
(ii)
arbitral awards not considered as domestic awards in the State where their
recognition and enforcement are sought.
It can be noted that this Article firstly addresses the territorial definition of
foreign arbitral awards whereby an award is considered as a foreign if it is made in
the territory of one State and is sought in the territory of the other State. Secondly, an
award may be deemed as foreign and thus failing under the application of
Convention if, according to the national law of the State where it is sought, is
considered as non-domestic award. The Convention‘s secondary definition is more
subjective and variable. The Convention‘s tolerance for individual national
variations on its scope of application, necessary for wide ratification, could have
created problems for its subsequent uniform applications16.
E.g. Bustamante Code of 1928 and European Convention of 1961.
Thomas E. Carbonneau, Cases and materials on international litigation and arbitration (Thomson
West 2005 ) 429.
Page 12 of 80
15
16
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
3.
Grounds for Refusal of Recognition and Enforcement of Foreign Arbitral
Awards
Article V of the Convention lists the grounds base on which, a court may
refuse the recognition and enforcement of foreign arbitral awards failing under New
York Convention. It is notable that the list is inclusive and the court may not base its
refusal on the other grounds. Furthermore, the grounds for refusal laid down in this
Article are to be interpreted restrictively in accordance with the purposes of the
Convention.17
The grounds for refusal the recognition and enforcement of arbitral awards
under New York Convention are divided into two categories:
(i)
those that may be invoked by the parties (Article V (1)); and
(ii)
those may be invoked by the court (Article V (2)).
While the first category aims at protecting the interest of award-debtor, the
second one serves the vital interest of the country where the award is sought. The
following section will give the details of each of grounds for refusal of recognition
and enforcement of arbitral awards under the New York Convention.
3.1
Refusal on the basis of the invalidity of arbitration agreement
The first ground for refusal under Article V (1) provides two diverse
arguments against the recognition and enforcement of arbitral award. In the one
hand, the defense can be the incapacity of a party to arbitration agreement.18 On the
other hand, an invalidity of arbitration agreement can be invoked to refuse the
Albert Jan van den Berg, The New York Arbitration Convention of 1958 - towards a uniform
judicial interpretation (Kluwer Law and Taxation, United States 1981) 297.
18
New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958,
Article V(1)(a).
Page 13 of 80
17
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
recognition and enforcement of the award.19 Since the capacity of a party to
arbitration agreement is not governed by the Convention, it is decided by the
applicable law designated by the choice-of-law rules of the court ruling the
recognition and enforcement of the award. A specific problem arises when one party
to arbitration agreement is a State or State nature that may invoke the sovereign
immunity as a defense in order to avoid arbitral jurisdiction. In 1996, the Italian
Supreme Court ruled that State parties should share the same conditions as applied to
all parties participating in modern international commerce20. This argument is in
keeping with the view that a State enjoys immunity from jurisdiction only in cases
where it acta jure imperii21, while immunity cannot be acknowledged in cases where
the State acta jure gestionis22.
The invalidity of the arbitration agreement may also be invoked as a ground
to prevent the award from being enforced.23 According to the wording of the
provision, the validity of the agreement is determined primarily according to the law
chosen by the parties to govern the arbitration agreement. Subsidiarily, the law of the
country where the award was made shall apply. In Société Van Hopplynus v. Société
Coherent Inc.24, the defendant objected to the validity of the arbitral clause relying
on the Belgian Law on Exclusive Distributorship of 27 July 1961. However, in the
19
Ibid.
Corte di cassazione, 9 March 1996, no 4342, XXII YBCA 737 (1997) 742.
21
Latin term means ‗acts by right of dominion‘. This term is commonly used in conflict of laws. Acta
jure imperii are activities of a governmental or public nature carried out by a foreign State or one of
its subdivisions. Acta jure imperii also qualifies for state immunity under the modern doctrine of
restrictive foreign sovereign immunity.
22
Latin term means ‗acts by right of management‘. It is commonly used in private international law.
Acta jure gestionis refers to activities of a commercial nature carried out by a foreign State or one of
its subdivisions or agencies. However, the acts are not immune from the jurisdiction and process of
local courts under the modern doctrine of restrictive foreign sovereign immunity. See Van Den Berg
(n 7) 280.
23
See n.20.
24
Tribunal de Commerce of Brusseles, 5 October 1994, YCA, Vol. 22 (1997), pp. 637-642
Page 14 of 80
20
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
relevant part of the judgment, the Belgium court held that given the fact that the
common intention of the parties was to submit the contract between them to the law
of the State of California under which the arbitral clause was valid and The New
York Convention recognizes the principle of contractual autonomy, therefore the
court recognize the validity of the arbitral clause.
3.2
Violation of due process
Article V (1)(b) deals with the requirements on the due process. This is a
matter of procedural law and the question arises on under which law, the principles
of due process are to be judged. While the Convention is silent on this issue,
different approaches to the interpretation of this provision have arisen. Whilst
scholars maintain that this ground should be interpreted as a uniform convention
rule, the courts believe it should be construed with reference to domestic notions of
due process violations.25
There are two key expressions worth discussing in this provision: proper
notice and unable to present his case. Proper notice implies that the notice of the
appointment of arbitrator and of arbitral proceedings must be adequate and
appropriate. The wording „unable to present his case‟ implies the arbitrators‘ duty to
inform the other party of whatever arguments and evidence had been submitted by
the opposing party, thus giving the former a chance to reply26. In some cases, the
parties invoke the time limit and the award rendered in default as the grounds to rely
on the Article V (1)(b). Nonetheless, the party which purposely does not participate
in arbitral proceedings and remains inactive may not rely on Article V (1)(b). In
25
26
Van Den Berg (n 7) 298.
Oberlandesgericht of Hamburg, 3 April 1975, YCA, Vol. 2 (1977) 241.
Page 15 of 80
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
Overseas Cosmos, Inc. v. Vessel Corp.27, the court held that respondent‘s alleged
lack of participation in the arbitration proceeding, even if true, could only be
interpreted as intentional. Accordingly, the court finds that respondent was given
‗ample notice of the arbitration and an adequate opportunity to present its defences‘
and objections but it did not.
3.3
Excess of Arbitrator‘s authority
The third ground for refusing the recognition and enforcement of an arbitral
award rendered under the framework of New York Convention is provided for in
Article V (1)(c) where an award may be threatened not to be recognized if the
arbitrator has decided matters covered neither by the arbitration agreement nor by the
terms of reference. This means that the arbitration has dealt with a matter which was
not submitted to it for settlement. This ground for refusal is different from the matter
of non-arbitrability which will be discussed in the following paragraphs. Since in the
whole arbitral proceedings, part of the award might has been properly conducted and
such part deals with the question submitted to arbitration, a non-enforcement of that
part of the award would not be logical as it would be a waste of time and money.
Therefore, a provision has been made for these occasions in order to enable the
possibility of a partial enforcement of an award which deals with the matter properly
submitted to arbitration.
3.4
Violation of arbitration proceedings
An award-debtor may oppose the recognition and enforcement of arbitral
award if he or she can prove that the composition of the arbitral tribunal or the
27
[1997] 97 Civ. 5898 (DC), U.S. Dist.
Page 16 of 80
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
arbitration proceedings did not comply with the parties‘ agreement or, where there is
no agreement, that it did not comply with the law of the country where the arbitration
took place. Article V (1) (d) also provides that an agreement by the parties on the
composition of the arbitral tribunal or the arbitral proceedings supersedes the
national rules of the country where the arbitration took place, except for the
fundamental requirements of due process. In other words, the law of the country
where the arbitration took place comes into play in the absence of an agreement by
the parties.
3.5
Not binding award
The last ground under Article V.1 concerns matters where the award has not
become binding or has been suspended or set aside in the State where it was made. A
distinction is made, on the one hand, of awards not yet binding and, on the other
hand, of awards which are suspended or have been set aside. Questions arise as to
whether binding is an autonomous term or whether it is subject to national law
determination. As the Convention aims to depart from national considerations and
legislation, an autonomous interpretation must be made. This is not stated
specifically in the Convention, but it is in line with the aims of the Convention. A
general opinion is that an award can be binding even if some additional formalities
are required to make it enforceable where it was made, or formal time limits in the
law of the place where it was made have not yet expired28.
3.6
Ex officio Refusal
Julian D. M. Lew et al, Comparative International Commercial Arbitration (Kluwer Law
International, Hague 2003) 717.
Page 17 of 80
28
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
Different from the grounds for refusal of the recognition and enforcement of
arbitral award as listed in Article V.1 where the matter of refusal has to be raised by
the award-debtor, the ex officio grounds provided for in Article V(2) may be invoked
in order to oppose the recognition and enforcement of an award even if the awarddebtor is silent. The recognition and enforcement of an award under this category of
refusal may be challenged by the court itself. According to the provisions of Article
V(2), a court may refuse to recognize an award if it finds that the awards has dealt
with a non-arbitrability matter or the recognition and enforcement of such an award
would be contrary to the public policy of the country where it is sought.
The issue of non-arbitrability is to be decided upon the national law, for
example, in Vietnam, the disputes relating to the land use right and assets attached to
land are non-arbitrable.29 The disputes relating to marriage, adoption, guardianship,
child maintenance, inheritance and administration are not subject to arbitration in
China.30 The non-arbitrability matters may also be broadened by the reservation
stated in Article I(3), according to which a State can choose to only apply the
Convention to matters that are commercial under their national law. Both China and
Vietnam have used this possibility of reservation.31
As to the concept of public policy, it is difficult to define this concept and it is
even harder to determine a violation of public policy. The concept of public policy
varies from State to State. This is to say that an award which is regarded as valid in
one State may be denied in another where it is considered to be contrary to public
policy. To eliminate this issue from happening, several attempts have been made,
Article 136 of the Law on Land number 13/2003/QH11 provides that dispute over land and assets
attached to land shall be resolved by the Vietnamese people‘s court.
30
Arbitration Law of the People's Republic of China 1994, Article 3.
31
Please see http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html
Page 18 of 80
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
inter alia, the International Law Association Committee on International
Commercial Arbitration published in 2002 a report titled „Public Policy as a Bar to
the Enforcement of International Arbitral Awards‟32. This report gives some
guidances for the classification of public policy grounds, and divides them into
procedural and material matters. According to this report, a procedural public policy
ground includes fraud in the composition of the tribunal, lack of reasons in the
award, and lack of impartiality. The concept of the material matters of the public
policy ground includes fundamental principles of law and actions contrary to good
morals33. The distinction between international and domestic public policy is
justified by the differing purposes of domestic and international relations, politics,
governance models and structures, etc. As a result, matters, which fall under
international public policy, are fewer than those in domestic cases.
Electronic copy of this report available at < www.ila-hq.org/download.../BD0F9192-2E98-4B178D56FFE03B80B3EA> accessed on 19th July 2011.
33
Julian D. M. Lew (n 14) 723.
32
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
CHAPTER II: RECOGNITION AND ENFORCEMENT OF FOREIGN
ARBITRAL AWARDS IN VIETNAM
The previous chapter has given us the ideas about the recognition and
enforcement of arbitral awards, particularly which is under the application of the
New York Convention 1958 on Recognition and Enforcement of Foreign Arbitral
Awards as well as the controversial issues arising out of the provisions of the
Convention. The grounds for setting aside the foreign arbitral awards as set forth in
Article V of the Convention have been differently interpreted and applied from
country to country despite of several attempts made by international law community
in order to unify the interpretation and application of the Convention‘s provisions.34
Vietnam has become a party to New York Convention since 1995, however, the
process of transferring and incorporation of the Convention‘s provisions into
domestic law and practice ‗has dented its potential success‘.35 And as professor
Micheal Hwang argued that ―there have been very few successful attempts to enforce
foreign arbitration awards through the Vietnamese courts and the system remains
largely untested‖.36 Keeping these in mind, in this chapter, we will analyse the
Vietnamese national laws on arbitration, the controversial points arising out of the
regulations and the practical issues in this field. Firstly, the history of Vietnamese
law on arbitration will be discussed.
See n.17.
Umut et al, ‗Evolving to Perfection? Enforcement of International Arbitral Awards in Vietnam‘
[2010], the Journal of World Investment & Trade,Vol.11 No.6, 974.
36
Michael Hwang S.C. and Shaun Lee, ‗Survey of South East Asian Nations on the Application
of the New York Convention‘ [2008] Journal of International Arbitration, 873.
Page 20 of 80
34
35
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
I.
Historical Development of National Laws on Arbitration
1.
National Laws on Arbitration before the Vietnamese Accession to the New
York Convention 1958
The recourse to arbitration as a forum for dispute settlement has been long
recognized in Vietnam. The earliest case recorded took place in the late 19th century
when Vietnam was under French colony. The case was on dispute over land whereby
two Vietnamese people agreed to have a foreign expert acting as arbitrator to settle
their dispute. The Saigon Appeal Court then ruled that the outcome of this arbitration
was accepted under the laws of Annam (the name of Vietnam at that time).37
This very first case on arbitration was considered as the heritage of French
civil law while Vietnam was under its colony (Vietnam was under French colony
from 1858 to 1945).38 The first official regulation of Vietnamese State was
introduced only until 1960 together with the introduction of economic contract
regime. 39 On 14 November 1960, the Prime Minister issued the Decree No. 20/TTg
on Establishment of State Economic Arbitration whose main function was to resolve
the disputes relating to economic contract failing under the economic contract
regime. Later, in 1984, Ministerial Council (presently known as Government) issued
the Decree No.62/HDBT on Functions, Duties, Powers and Organization of
Economic Arbitration under which the economic arbitration formed an arbitration
Do Van Dai, ‗Paper on Setting Aside Arbitral Award in Vietnamese Laws‘ in Do Van Dai and Tran
Trong Hai, The Collection of Verdicts and Decisions of Vietnamese Courts on the Commercial
Arbitration‘ (Labour Publishing 2010).
38
Pham Duy Nghia, ‗Draft of Law on Commercial Arbitration - Laws on Arbitration in Vietnam:
Historical Development and problems to be resolved‘, available at http://www.vibonline.com.vn/viVN/Drafts/ReviewDetails.aspx?ReviewID=225 accessed on 25th July 2011, ‗emphasis added‘.
39
On 04 January 1960, the Decree No. 04/TTg on the Interim Charter on the Economic Contract was
issued. The Decree governed the contractual relations between State Enterprises and State Authorities.
Page 21 of 80
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
system from the provincial level to the central level in line with the Ex-Soviet system
on economic law.40
As to the operation of the arbitral organizations under economic arbitration
system, it is said that these organizations were misnomer as they were not real
arbitration in terms of their organization and practical operation. Their arbitrators
were public employees who were included in the payrolls and salaries of the State
Budget.41 These arbitral organizations served for settling the disputes arising from
the economic contracts between State enterprises themselves and between State
enterprises and State authorities over which the people‘s courts had no jurisdiction at
that time.42 In addition to dispute settlement function, these arbitral organizations
were also entrusted to manage and supervise the conclusion and the performance of
economic contracts at the ministerial and local level.43 In line with the course of
international economic integration of Vietnam, the operation of these arbitral
institutions eventually terminated in 1994 and the role of economic dispute
settlement was transferred to the Economic Courts established under the Ordinance
on Procedure for Settlement of Economic Disputes issued by the Standing
Committee of National Assembly on 16 March 1994.44
Pham Duy Nghia (n 34).
Decree No.62/HDBT on Functions, Duties, Powers and Organization of Economic Arbitration,
Article 8.
42
The Vietnamese people‘s courts only had their jurisdiction over the dispute relating to the civil
relations at that time. This situation was originated from the socialist economic regime where most of
assets were under public ownership. See more discussion in Pham Duy Nghia (n 34) and Victory,
‗History
of
Establishment
of
Arbitration
Regime‘,
available
at
<
th
http://www.luathoc.vn/phapluat/showthread.php?p=19011> accessed on 25 July 2011.
43
Decree No.62/HDBT on Functions, Duties, Powers and Organization of Economic Arbitration,
Article 4.
44
The Ordinance No. 31-L/CTN dated 29 March 1994 on Procedure for Settlement of Economic
Disputes, Article 12.
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40
41
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
With regard to the forum for dispute settlement relating to foreign trade,
Vietnam established the Foreign Trade Arbitration Committee and Maritime
Arbitration Committee in 1963 and 1964 respectively. 45 These arbitration bodies had
their jurisdiction over the dispute envisaging foreign entities.46 The awards rendered
by these arbitrations would be voluntarily enforced by the parties within a timeframe
as set forth therein.47 The Decree on the Charter of Foreign Trade Arbitration
Committee48 also provided that the parties could request the local court to enforce
the arbitral award if either party had not performed it voluntarily within the
timeframe decided by the Committee under the its award.49 However, the law was
silent on how to file such a request in order to have the award enforced. 50 These two
bodies then were merged into one arbitral institution named Vietnam International
Arbitration Center (VIAC) which then has become the leading arbitral institution in
Vietnam.51
2.
National Laws on Arbitration after the Vietnamese Accession to the New
York Convention 1958
The regulations of enforcement of arbitral award both domestic and foreign
were absent in Vietnamese laws for the period before the accession of Vietnam to the
Foreign Trade Arbitration Committee was established under Decree 59/CP dated 30 April 1963 of
the Government on promulgation of the Charter for Foreign Trade Arbitration Committee and
Maritime Arbitration Committee was established under Decree 153/CP dated 5 October 1964 of the
Government on Charter for Maritime Arbitration Committee.
46
Decree 59/CP dated 30 April 1963 of the Government on promulgation of the Charter for Foreign
Trade Arbitration Committee Article 2.
47
Ibid, Article 11.
48
I.e. the Decree 59/CP dated 30 April 1963 of the Government on promulgation of the Charter for
Foreign Trade Arbitration Committee.
49
Ibid.
50
Umut et al (n 31) 977.
51
Vietnam International Arbitration Center (VIAC) was established under Decision No.204/TTg
dated 28 April 1993. Presently, VIAC is the leading arbitral institution in Vietnam in terms of
caseload (VIAC files about 50 cases per year) and the number of arbitrators with 120 arbitrators.
Please see < http://www.viac.org.vn/vi-VN/Home/danhsachtrongtaivien.aspx> and Pham Duy Nghia
(n 34).
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
New York Convention 1958.52 On 28 July 1995, the Vietnamese President issued the
Decision No. 453/QĐ-CTN on the Accession of Vietnam to the New York
Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.
Two months later, the Ordinance on Recognition and Enforcement of Foreign
Arbitral Awards was issued by the Standing Committee of National Assembly.53 In
principles, the Ordinance reflected the text of New York Convention54 by providing
the principles for recognition and enforcement (Article 2 and 3), enforcement
procedure (Chapter II) as well as grounds for refusal of recognition and enforcement
of foreign arbitral awards (Article 16). However, the provisions of the Ordinance
were ambiguous in determining the definition of ‗foreign arbitration‘, either was its
replacement – the Civil Procedure Code 2004.55
As to the domestic arbitration, in 1997, Vietnam started drafting the
Ordinance on Commercial Arbitration. The drafting work resulted in the issuance of
the Ordinance No.08/2003/PL-UBTVQH dated 25th February 2003 by the Standing
Committee of National Assembly. The issuance of Ordinance on Commercial
Arbitration opened a new chapter in the development of Vietnamese law on
arbitration. The Ordinance addressed most contemporary issues relating to
arbitration such as the validity of arbitration agreement, recognition of ad-hoc
arbitration, interim and emergency reliefs… Especially, together with the Law on
See the discussion in section 1.1 of chapter II, 4 th paragraph and Umut et al (n 31) 978-979.
53
The Ordinance on Recognition and Enforcement of Foreign Arbitral Awards dated 14 September
1995 of the Standing Committee of National Assembly.
54
Umut et al (n 31) 979.
55
The Ordinance on Recognition and Enforcement of Foreign Arbitral Awards was repealed in 2004
and the provisions on recognition and enforcement of foreign arbitral awards were incorporated in the
Civil Procedure Code No.24/2004/QH11 dated 15 th June 2004. However, both these two instruments
failed to clearly define the term ‗foreign arbitration‘ which will be discussed later in section 2.1 of this
chapter II.
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
Enforcement of Civil Judgments56, the Ordinance created, for the first time in history
of Vietnamese law on arbitration, a comprehensive mechanism for enforcement of
arbitral awards by domestic arbitration.57 Besides its achievement, it is said that the
Ordinance still represented various risks of setting aside the arbitral awards by the
court.58 In the attempts to remedy these limitations of the Ordinance, the Vietnamese
National Assembly passed the Law on Commercial Arbitration on 17th June 2010.59
The Law on Commercial Arbitration took effect as of 01st January 2011 and
provides, inter alia, fewer grounds for setting aside arbitral award than the
Ordinance 2003 so as to enhance the predictability of arbitral proceedings.60
II.
1.
The Enforcement Procedure of Arbitral Award
Domestic or Foreign Award?
Before proceeding to the enforcement procedure, a short analysis on the
definition of ‗foreign arbitral award‘ is necessary because there are, in Vietnam, two
different mechanisms of enforcement applied separately to domestic and foreign
arbitral award. The issue that which category of arbitral award fails under the
Law No.26/2008/QH12 dated 28th November 2008 on Enforcement of Civil Judgments.
57
Article 57.3 of the Ordinance provided that the enforcement procedure of arbitral awards shall be
carried out in accordance with the Law on Enforcement of Civil Judgments. See also: Report No.
10/TTr-HLGVN dated 01st September 2009 by Vietnamese Lawyers Association on the drafting
project of the Law on Commercial Arbitration.
58
Report No. 10/TTr-HLGVN dated 01st September 2009 by Vietnamese Lawyers Association on the
drafting project of the Law on Commercial Arbitration and Umut et al (n 31) 978.
59
Law No.54/2010/QH12 on Commercial Arbitration.
60
Article 54 of the Ordinance on Commercial Arbitration provided 6 grounds based on which the
court can consider to set aside an arbitral award whereas under the Law on Commercial Arbitration of
2010, these grounds have been reduced to 5 including (i) no arbitration agreement or invalid
arbitration agreement, (ii) the composition of arbitration tribunal was or the arbitral proceedings were
inconsistent with the agreement of the parties or contrary to the provisions of the Law, (iii) the award
made on a non-arbitrable matter, (iv) evidence provided by the parties on which the arbitral tribunal
relied to issue the award was forged; or arbitrator received money, assets or other material benefit
from one of the parties in dispute which affected objectively and impartially of arbitral award, (v) the
award is contrary to the principles of the laws of Vietnam (Law on Commercial Arbitration, Article
68).
Page 25 of 80
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
‗foreign arbitral award‘ under Vietnamese laws has been arisen since the case of
Mechel Metal Supply Ltd. v. Metal Construction Jsc. in 2005 whereby an award
rendered by the arbitral tribunal of International Chamber of Commerce (ICC) in
Hanoi was treated as a foreign arbitral award.61 As discussed earlier in section 2 of
chapter I, there are two situations where an arbitral award is deemed to be foreign
under the New York Convention: the first one is the case where an award is made
outside the territory of the country where the enforcement of such award is sought,
secondly, an award can be a foreign award under the New York Convention if
according to the domestic laws of the country where it is sought, such award is
deemed to be foreign award.62 This very open definition of the New York
Convention has leaded to different approaches in the provisions of the laws of the
countries in the world. For example, in the Swedish law, an award made abroad
shall be deemed to be a foreign award63; Hungarian law provides that an award
rendered and the seat of arbitral tribunal is outside Hungary is deemed foreign, in
addition, if the majority of arbitrators are or the sole arbitrator is not Hungarian then
the arbitral award shall be deemed to be foreign64; Under the laws of Greece, apart
from the place of arbitration as the basis for determining whether the award is
foreign or domestic, an award is deemed foreign if the arbitrators have applied
foreign procedural law to the arbitration case.65 Although there are different
Vo Van Dai and Tran Trong Hai, The Collection of Verdicts and Decisions of Vietnamese Courts
on the Commercial Arbitration (Labour Publishing 2010) 255.
62
New York Convention, Article I.
63
Swedish Arbitration Act of 1999.
64
Law Decree No. 12/1962 of 31 October 1962 of Hungary.
65
In the past, the place of arbitration has generally been regarded as decisive, however, in recent
Greek case law, an award is deemed foreign if the arbitrators have applied foreign procedural law. By
the same token, an award is considered domestic if the arbitrators have applied Greek procedural law.
See Anghélos C. Foustoucos and Stelios Koussoulis, ‗National Report for Greece‘ in: International
Handbook on Commercial Arbitration, Kluwer Law International, The Hague/London/New York
(2002), p. 40.
61
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approaches to the definition of foreign arbitral award in the laws of the countries,
such laws have provided a clear range of elements for determining what a foreign
award is.
In contrary, the current provisions of Vietnamese laws on the definition of
foreign arbitral award are somewhat ambiguous. Currently, there are two laws
providing the definition of foreign arbitral award in Vietnam: the Law on
Commercial Arbitration 2010 and the Civil Procedure Code 2004. Article 342.2 of
the Civil Procedure Code provides that the foreign arbitral award is award made
outside or inside Vietnam by the foreign arbitration. This definition of foreign
arbitral award provided under the Civil Procedure Code is not clear as well as not in
line with the text of the New York Convention.
Firstly, it is not feasible to
determine whether an arbitral award is foreign or domestic while this Code does not
provide any definition on what is the foreign arbitration. Therefore, the term of
‗foreign arbitration‘ can be interpreted in many ways. The arbitration can be foreign
if the nationality of arbitration organization or of the arbitrator is not Vietnamese. In
addition, if the foreign procedural law on arbitration is applied then the arbitration
can be deemed foreign. The ambiguous provisions of the Civil Procedure Code lead
to various interpretations and in some cases, they are infeasible. How can we identify
the nationality of ad-hoc arbitration or of a mixed nationality arbitral tribunal of
which the arbitrators have different nationalities? Secondly, the territorial criterion is
excluded from the basis for determining a foreign arbitral award as provided for in
the New York Convention under the Code. This exclusion, however, is not in line
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
with the spirit of the New York Convention.66 In the common international practice,
one essential element for identifying a foreign arbitral award is the place of making
the award. This practice originated from the principle which has been widely
acknowledged by the international law and practice on the commercial arbitration –
the principle of lex loci arbitri.67 Differently, under the provisions of Vietnamese
Civil Procedure Code 2004, an award made outside Vietnam but not by foreign
arbitration is not foreign arbitral award. It‘s worth noting that initially, the Ordinance
on Recognition and Enforcement of Foreign Arbitral Awards 1995 which was
repealed by the Civil Procedure Code 2004 provided that an arbitral award made
outside Vietnam shall be deemed to be foreign arbitral award.68
The latest legal instrument in this field – the Law on Commercial Arbitration
2010 does not provide a clearer definition of foreign arbitral award. According to the
Law, foreign arbitral award ‗means an award rendered by foreign arbitration either
inside or outside the territory of Vietnam‘ and foreign arbitration means ‗arbitration
established in accordance with the foreign arbitration law…either inside or outside
the territory of Vietnam‘.69 Again, there are a number of possible interpretations of
the term ‗foreign arbitration law‘. It could be either the procedural law governing the
arbitral proceedings, either the law governing the organization and operation of
arbitral institution. Ironically, although the Law provides a definition of foreign
arbitral awards, nothing in this Law employs or refers to this definition. The
Do Hai Ha, ‗Discussion on the Definition of Foreign Arbitral Award under the Civil Procedure
Code‘, Magazine of Legal Science No.5 Vol.42 [2007].
67
Latin term means law of the place where arbitration is to take place including the regulations on
arbitral proceedings and the law governing the validity of arbitration agreement. See Alan Redfern (n
3) 77 -93.
68
The Ordinance of the Standing Committee of National Assembly on Recognition and Enforcement
of Foreign Arbitral Awards dated 14 September 1995, Article 1.
69
Law No.54/2010/QH12 on Commercial Arbitration, Article 3.
Page 28 of 80
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
recognition and enforcement of foreign arbitral award, for the time being, is
governed by the Civil Procedure Code 2004. The unclear definition provided for in
the Law on Commercial Arbitration 2010 only plays the role of a reference where
possible for the application of the Civil Procedure Code 2004.
2.
Recognition and Enforcement Procedure
The previous section has shown that the current provisions in Vietnamese
laws have not yet provided a clear identification of a foreign arbitral award. And
none can be sure on how the Vietnamese courts would interpret the latest definition
of foreign arbitral award provided for in the Law on Commercial Arbitration 2010
until the first case would be tested. In addition, as already mentioned elsewhere in
this dissertation, Vietnam is a civil law country where the case law is not deemed to
be a source of laws. Therefore, it is advisable for the parties involving in a
contractual transaction to take this issue into account in their consideration of
selecting arbitration as the dispute settlement method. In this section, we will look
into the current regulations of Vietnam on the recognition of the foreign arbitral
award and on the enforcement procedure of both foreign and domestic arbitral award
so as to have a comparative view on the issue. Generally, both domestic and foreign
arbitral award, if they are not voluntarily carried out by the losing party, shall be
processed through the similar stages before achieving their enforcement. The
outstanding difference between these two types of arbitral award is that the award by
the foreign arbitration has to be firstly recognized by and obtained the permission for
enforcement from a competent court before it can be coercively enforced while this
requirement does not apply to the domestic arbitral award.
2.1
Enforcement of Domestic Arbitral Award
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
As already mentioned in the precedent section, the domestic arbitral award
may be enforced in Vietnam without the intervention by the courts. While this
distinction is criticized not to be common around the world70, it is acceptable in the
sense that it only favours the domestic arbitral award while not creating any stricter
requirement to the foreign arbitral award in comparison with other legislations
around the globe.71
Under the Law on Commercial Arbitration 2010, if any party fails to carry
out an arbitral award within the time-limit set forth therein and that the same party
has not applied for setting aside that award at the competent court, then the award
creditor shall be entitled to apply for enforcement as well as for coercive
enforcement of the award at the enforcement agency of provincial level.72 The
enforcement and coercive enforcement procedure of arbitral award shall be
performed in the same way as the enforcement of the court‘s judgment does in
accordance with the Law on Enforcement of Civil Judgments 2008.73
In Vietnam, the award made by the ad-hoc arbitration needs to be registered
at the court where the award has been issued before the award-creditor is entitled to
See Umut et al (n 31) 985.
Numerous countries such as France, United Kingdom, South Korea, Singapore, do not draw the
separate mechanism applied to the enforcement procedure of domestic and foreign arbitral awards.
Under the arbitration law of such countries, both domestic and foreign arbitral awards need to obtain
the leave of the court for its enforcement.
72
Article 67 of The Law on Commercial Arbitration 2010 provides that the enforcement procedure of
arbitral award shall be carried out in accordance with the provisions of the Law on Enforcement of
Civil Judgments 2008 and Article 35 of the Law on Enforcement of Civil Judgments confers the
power to coercively enforce the arbitral award to the provincial enforcement agency. It‘s worth noting
that the time-limit for voluntary enforcement of arbitral award is stated in the award itself, not
provided at law (Article 61 of the Law on Commercial Arbitration on the content, form and the
validity of arbitral awards).
73
The Law on Commercial Arbitration 2010, Article 67.
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70
71
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
apply for enforcement at the enforcement agency.
74
Although the ad-hoc arbitration
has been legally recognized since the Ordinance on Commercial Arbitration 2003,
the provisions on ad-hoc arbitration under the Law of 2010 have not yet been much
further developed and this situation is criticized to discourage the parties from
recourse to ad-hoc arbitration.75
2.2
Enforcement of Foreign Arbitral Awards
Departing from the international common practice, Vietnam still maintains a
separate enforcement mechanism applied to the award made by foreign arbitration
whereby a foreign arbitral award needs to be formally recognized by the competent
court before it can be enforced in Vietnam.76 The current legal instruments
governing the enforcement of the foreign arbitral awards in Vietnam are the Civil
Procedure Code 2004 and the Law on Enforcement of Civil Judgments 2008.
File and Enrollment of the Petition
The party who wish to enforce the foreign arbitral award in Vietnam has to
firstly file a petition to the Ministry of Justice (MOJ) of Vietnam77 accompanied with
necessary supporting documents as prescribed under the relevant provisions of
international treaties to which Vietnam is a signatory or a participant78; in case of
absence of such provisions or such international treaties, the petition must have
Article 62 of the Law on Commercial Arbitration 2010 requires the parties to register the award by
ad-hoc arbitration with competent court within 01 year from the date of the award.
75
Phan Thong Anh, Dispute Settlement by Ad-Hoc Commercial Arbitration in Vietnam: Practice and
Solutions, Journal of Legal Studies, available at < http://www.nclp.org.vn/thuc_tien_phap_luat/giaiquyet-tranh-chap-bang-trong-tai-thuong-mai-ad-hoc-o-viet-nam-thuc-trang-va-giai-phap > accessed
on 02nd August 2011.
76
This point of law in the Vietnamese legislation is criticized not to be common in the world. See
n.67 and Umut et al (n 31) 985.
77
In Umut et al (n 31), the scholars point out that majority of jurisdictions in the world do not require
the intervention of administrative authority as in the case of MOJ in Vietnam before the court accepts
the petition.
78
The Civil Procedure Code 2004, Article364.
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
attached: (i) a valid copy of the foreign arbitration award; (ii) a copy of the
arbitration agreement of the parties in accordance with the law of the relevant
country.79
Within seven days from the date of receipt of the petition attached with
necessary documents, the MOJ will forward these dossiers to a provincial court of
the locality where the award-debtor has his/her headquarters or where his/her place
of residence or work is located, or where the property subject to the enforcement is
situated.80 Within three working days from the date of receipt of the dossiers from
the MOJ, the court shall be responsible for checking the dossiers and notifying the
individual against whom, or body or organization against which, enforcement is
sought and the procuracy of the same jurisdiction.81 In addition, the court may
request the applicant of the petition to clarify the ambiguous points of the dossiers.82
Preparation for Consideration of the Petition
Within two (or four months in case where the court needs further
clarifications from the applicant according to Article 367.2 of the Civil Procedure
Code) after the date of accepting the petition, the court is expected to issue one of the
following decisions as the case may be:
(i) Temporarily suspending its consideration of the petition upon its receipt of
a notice from the MOJ whereby the arbitral award in question is being
considered for abolition or suspension of enforcement by a competent body
in a foreign country;
Ibid, Article 365.
Ibid, Article 366.
81
Ibid, Article 367.1.
82
Ibid, Article 367.2.
79
80
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
(ii) Suspending its consideration of the petition if the award-creditor
withdraws his/her petition or the award-debtor has voluntarily implemented
the award; or the award-debtor is dissolved or declared bankrupt and its
rights and obligations are dealt with in accordance with the laws of Vietnam
or where the individual award-debtor dies and his or her rights and
obligations are not bequeathed;
(iii) Suspending its consideration of the petition upon its receipt of a notice
from
the MOJ whereby the arbitral award in question has been abolished or
suspended from enforcement by a competent body in a foreign country;
(iv) Suspending its consideration of the petition or returning the petition and
accompanied documents to the MOJ if the award-debtor has no head office or
place of residence in Vietnam or it becomes impossible to determine the
place where the related property is situated;
(v) Opening a court meeting to consider the petition.83
If the court chooses to open the meeting on consideration of the petition, then
it shall hold such meeting within 20 days from the date of its decision of opening of
the meeting.84
Meeting on Consideration of the Petition
The court shall hold the meeting on consideration of the petition with or
without the presence of the award-debtor provided that he or she has been notified by
83
84
Ibid, Article 368.1.
Ibid, Article 368.2.
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
the court on the meeting at least twice.85 The petition shall be considered by a
council of three judges and the council shall not, in line with the international
practice, re-judge on the merits of the matters which have been ruled by the foreign
arbitration.86 The council shall issue its decision on the majority basis.87
Appeal against the Court‟s Decision
Within 15 days from the date of issuance of court‘s decision, the awarddebtor may appeal and the provincial procuracy may protest the court‘s decision to
the People‘s Supreme Court.88 The People‘s Supreme Procuracy may also protest
such decision within the time-limit of 30 days from the date of decision.89
The People‘s Supreme Court shall consider the appeal within one or two
month as the case may be90 from the receipt by it of dossier of appeal and the
decision issued by the People‘s Supreme Court shall be final and binding upon the
parties.91
Coercive Enforcement of Foreign Arbitral Awards
In the event the provincial court or People‘s Supreme Court as the case may
be recognizes the award then the decision on the recognition of the award shall be
forwarded to the provincial enforcement agency of the locality where the awarddebtor has his/her headquarters or where his/her place of residence or work is
Ibid, Article 369.1.
Ibid, Article 369.4.
87
Ibid, Article 369.5.
88
Ibid, Article 372.1.
89
Ibid, Article 372.2.
90
Article 373.1 of the Civil Procedure Code provides that the People‘s Supreme Court shall consider
the appeal within one month from its receipt of appellant‘s dossier but if the court needs further
clarifications of the appellant on any issues of the dossier, then the period for consideration shall be
extended one more month.
91
Ibid, Article 373.3.
Page 34 of 80
85
86
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
located, or where the property subject to the enforcement is situated within 30
days.92 It is said that the involvement of the State authority in the coercive
enforcement of the award is not novel in the world since in many countries, the
award-creditor may call for assistance of private entities to realize the award
whenever the award-debtor fails to voluntarily implement it.93
The enforcement agency shall issue its decision on enforcement of the award
within 05 working days from its receipt of the court‘s decision on recognition of the
award.94 The enforcement agency shall notice the relevant parties on its decision on
enforcement of the award within 03 working days95 from the date of issuance of such
decision which gives the award-debtor 15 days for his or her voluntary execution.96
Should the award-debtor fail to carry out the award within the period of 15 days then
the award shall be coercively enforced.97
In short, the procedure for recognition and enforcement of foreign arbitral
awards in Vietnam can be described in the map below:
Foreign Arbitral Award
Application at the MOJ
Law on the Enforcement of Civil Judgments 2008, Article 28.1.
Umut et al (n 31) 988.
94
Law on the Enforcement of Civil Judgments 2008, Article 36.1, emphasis added. It is noted that
the Law does not consistently use the term of ‗days‘ and ‗working days‘.
95
Ibid, Article 39.2.
96
Ibid, Article 45.1.
97
Ibid, Article 46.1.
Page 35 of 80
92
93
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
2 to 4 months
Court‘s decision to
open the hearing or
suspend the case
07 days
Beginning of the
Recognition Procedure at
the provincial court
20 days
Court‘s hearing on
recognition of the
award
15-30 days
Appeal at People‘s
Supreme Court
30 days
Decision on
Enforcement by
enforcement agency
08 working
days
Enforcement by
award-debtor
III.
Grounds for Refusal of Recognition and Enforcement of Foreign Arbitral
Award and Their Practical Issues
The issue of refusal of recognition and enforcement of arbitral award is
always raised in the country where the award is sought according to the national laws
of such country. The national laws on arbitration are different from country to
country despite of certain common international regulations in place. Therefore, it is
of interest to the parties to have preliminary ideas on the reasons why an arbitral
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
award would be set aside in the country of enforcement before selecting arbitration
as the dispute resolution method.98
The grounds for refusal of recognition and enforcement of foreign arbitral
awards are provided for in Article 370 of the Civil Procedure Code 2004 which
transfers the text of the New York Convention and the UNCITRAL on International
Commercial Arbitration into Vietnamese laws.99 Accordingly, Article 370 of the
Civil Procedure Code provides the following circumstances whereby the Vietnamese
court may set aside a foreign arbitral award:
i.
The parties to the arbitration agreement did not have the capacity to sign the
agreement in accordance with the applicable law of each party; or the
arbitration agreement is invalid in accordance with the governing law, or the
laws of the country in which the award was made where the arbitration
agreement does not stipulate the governing law;
ii.
The individual against whom, or body or organization against which,
enforcement is sought had not been notified properly and in a timely manner
of the appointment of the arbitrator or the procedures for resolving the
dispute by foreign arbitration, or had reasonable cause for failing to exercise
its, or his or her, right to legal proceedings;
iii.
The foreign arbitration award was made in respect of a dispute which was not
International Trade Centre under UNCAD/WTO, Arbitration and Alternative Dispute Resolutions –
How to resolve commercial dispute? (Geneva 2001) 149.
99
In principle, Article 370 of the Civil Procedure Code lays down the similar seven grounds for
refusal of recognition and enforcement of foreign arbitral awards as provided for in Article V of New
York Convention and Article 36 of UNCITRAL Model Law on International Commercial Arbitration.
98
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referred to arbitration by the parties involved, or which goes beyond the
request of the parties to the arbitration agreement. Where it is possible to
sever the arbitration award, that part which was referred to arbitration by the
parties shall be recognized and enforced in Vietnam;
iv.
The composition of the foreign arbitration tribunal, or the foreign arbitration
procedure, was inconsistent with the arbitration agreement or the laws of the
country in which the foreign arbitration award was made, in cases where such
matters are not stipulated in the arbitration agreement;
v.
The foreign arbitral award is not yet binding on the parties; or The foreign
arbitral award has been revoked or suspended by a competent body of the
country in which the foreign arbitral award was made or of the country the
law of which is the governing law;
vi.
The relevant dispute cannot be resolved by arbitration in accordance with the
laws of Vietnam;
vii.
The recognition and enforcement of the foreign arbitration award in Vietnam
is contrary to the basic principles of the laws of Vietnam.
While the first five grounds above can be considered by the competent court
only at the request of the parties to arbitration, the last two grounds can be invoked
by the court itself.
100
This provision of the Civil Procedure Code follows the same
pattern of the New York Convention and the UNCITRAL Model Law on
International Commercial Arbitration. Slightly different from the foreign arbitral
award, the domestic arbitral award can be challenged to be set aside only by the
100
Civil Procedure Code 2004, Article 370.
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
invocation of the parties to arbitration.101 Although the laws of Vietnam on the
recognition and enforcement of foreign arbitral awards virtually copy the provisions
of the New York Convention, most existing problems in the recognition and
enforcement of foreign arbitral awards arise not from the provisions themselves but
from the interpretation and implementation of these provisions in practice.102 The
following paragraphs of this section serve to analyze the relevant cases whereby the
Vietnamese courts have applied the relevant provisions of the New York Convention
as well as of the national laws for setting aside the foreign arbitral awards.
1.
Commercial Dispute or Non-Commercial Dispute?
When adhering to the New York Convention, Vietnam declared several
reservations permitted by the Convention103 including, inter alia, the commercial
reservation clause.104 This choice is not typical to Vietnam given the fact that among
146 Contracting States to the Convention, 43 States have exercised this reservation
right.105 Accordingly, if a foreign arbitral award which is subject to enforce in
Vietnam has dealt with a dispute that is not considered to be commercial nature
under the Vietnamese laws then the award shall not be recognized and enforced in
Vietnam. Thus, it is very important to determine whether or not the dispute arising
out of the commercial activities. This restriction to the scope of arbitration represents
an obstacle to the widespread development of arbitration in Vietnam. In addition, the
Law on Commercial Arbitration 2010, Article 68.1.
Umut et al (n 31) 1002.
103
Article I.3 of the New York Convention offers two reservations to its parties: reciprocal
reservation whereby a State will apply the Convention only to recognition and enforcement of awards
made in the territory of another contracting State; and commercial reservation whereby a State will
apply the Convention only to differences arising out of legal relationships, whether contractual or not,
that are considered commercial under the national law. Both Vietnam and China made these two
reservations.
104
Decision No. 453/QD/CTN dated 28 July 1995 of the State President on the Accession of the
Socialist Republic of Vietnam to the New York Convention provides that the New York Convention
shall apply only to the disputes arising out of the commercial activities.
105
See n. 27.
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101
102
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
interpretation of the term ‗commercial activities‘ has somewhat been a controversial
issue in Vietnamese judicial practice.
In Hyun Dai v Nghi Tam106, the Korean company Hyun Dai and the
Vietnamese company Nghi Tam entered into a contract for construction whereby the
parties agreed to refer their future disputes to the arbitration in Singapore. However,
when the dispute arose, Hyun Dai filed its claim at people‘s court of Hanoi. The First
Instance Court ruled that the dispute between Hyun Dai and Nghia Tam was relating
to civil relations between the parties over which the court has its jurisdiction. The
First Instance Court therefore accepted the case and then, issued its decision in
favour of Hyun Dai. At the Appeal Court, the Court rejected the lower court‘s
decision and consequently rejected the case by ruling that the dispute relating to an
economic contract and therefore it had to be resolved according to the contractual
agreement by and between the parties, in other words, the arbitration in Singapore
would have the jurisdiction to hear the case. It was said that the verdict issued by the
Appeal Court was not reasonable when it did not mention whether the dispute was
commercial dispute or not so as to identify the jurisdiction over the case.107 The
Judicial Review Hearing108 then denied the decision of the Appeal Court and ruled
that the First Instance Court was right in determining the civil nature of the dispute.
For the time being, there are a number of Vietnamese legal instruments
which provide the definition of ‗commercial activities‘ or commercial activities
related. For example, the sectorial law in field of commerce – the Commercial Law
Do Van Dai and Tran Trong Hai (n 39).
Do Van Dai, ‗Comments on the Verdict on the Agreement of choosing Foreign Arbitration‘ in Do
Van Dai and Tran Trong Hai, The Collection of Verdicts and Decisions of Vietnamese Courts on the
Commercial Arbitration‘ (Labour Publishing 2010).
108
This level of court in Vietnamese Judicial System plays a similar role as the House of Lords‘ in the
common law countries, which only judge the matters of law, not the matters of fact.
Page 40 of 80
106
107
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
2005 provides that ―Commercial activity means activity for profit making purposes
comprising purchase and sale of goods, provision of services, investment,
commercial enhancement and other activities for profit making purposes‖109; the
Law on Enterprises 2005 provides the term of ‗business‘ which reads as ―Business
means the continuous conduct of one, several or all of the stages of the investment
process, from production to sale of products or provision of services in the market
for profits‖.110 It can be seen from these two provisions that the distinction between
the ‗commercial activities‘ and the ‗business‘ is somewhat blurred. And it is
arguable that the use of two different terms in these two Laws is unnecessary and
causes the uncertainty in judging what category of activities failing under the
jurisdiction of arbitration and that if this distinction indicates that the business
activities are implidly excluded from the arbitration‘s jurisdiction111.
2.
Basic Principles of Laws of Vietnam
The ground of public policy for refusal of recognition and enforcement of
foreign arbitral awards under the New York Convention was translated into
Vietnamese laws as ‗basic principles of the laws of Vietnam‘.112 As already
discussed in section 3.6 of chapter I of this dissertation, the complexity of the
concept ‗public policy‘ has led to various interpretations of this ground existing
among the countries, causes the uncertainty and risk of refusal of foreign arbitral
awards.113 Despite of several attempts by the international law community in order to
Commercial Law No. 36/2005/QH11, Article 3.1.
Law on Enterprises N0.60/2005/QH11, Article 4.2.
111
Report No. 10/TTr-HLGVN dated 01st September 2009 by Vietnamese Lawyers Association on
the drafting project of the Law on Commercial Arbitration.
112
The Civil Procedure Code 2004, Article 370.2.b.
113
Andrew Tweeddale and Keren Tweeddale, Arbitration of Commercial Dispute – International and
English Law and Practice (Oxford University Press, 2007) 420.
Page 41 of 80
109
110
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
unify the understanding and interpretation of the concept of public policy,114 the
latest Vietnamese legal instrument in this field maintains the wording ‗basic
principles of the laws of Vietnam‘ which seems to broaden the scope of this concept.
While there is no definition for ‗the basic principles‘ in Vietnamese laws, the fact
that each branch of law of Vietnam has its own principles and if all these principles
are translated as ‗basic principles‘ then there would be very few success in the
enforcement of arbitral awards in Vietnam115 and the courts‘ interpretation of ‗basic
principles‘ could be much broader than the normal foreign arbitration community
could imagine.116
In Tyco v Leighton117, the Singaporean Tyco applied for the recognition and
enforcement in Vietnam of the arbitral award rendered by the Australian arbitration.
The Ho Chi Minh People‘s Supreme Court rejected the application by holding that
the fact that Tyco operated in Vietnam without permission from Vietnamese
Government did not respect the sovereignty and the laws of Vietnam. And therefore
the arbitral award applied by Tyco was contrary to the basic principles of the laws of
Vietnam.
Another outstanding case relating to the ground of ‗basic principles of the
laws of Vietnam‘ was Enrgo v Vinatex118. In this case, Enrgo applied to Vietnamese
court for recognition and enforcement of the arbitral award rendered by International
Arbitral Tribunal of Russian Federation, during the verification of the award, the
See: The report titled: „Public Policy as a Bar to the Enforcement of International Arbitral Awards‘
published in 2002 by the International Law Association Committee on International Commercial
Arbitration. Also see the discussion in section 3.6 of chapter I of this dissertation.
115
Umut et al (n 31) 1004.
116
Tony Nguyen, ‗A guiding light when things start to get murky‘ [2011] Vietnam Investment
Review, available at: http://www.vir.com.vn/news/features/a-guiding-light-when-things-start-to-getmurky.html accessed on 30th July 2011.
117
Do Van Dai and Tran Trong Hai (n 39). 204.
118
Ibid.211.
Page 42 of 80
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
court found that the arbitral tribunal rejected the Vinatex‘s submission of notarized
documents as evidence. The court then held that such rejection by Russian Arbitral
Tribunal was contrary to the basic principles of the laws of Vietnam because
Vietnamese laws recognized the notarized contract and documents as effective legal
documents.119
3.
Doctrine of severability
The doctrine of severability in arbitration has been long time recognized in
the international law. This doctrine provides that the validity of an arbitration clause
is severable from the rest of the contract. Therefore, while challenges to the
arbitration clause itself may go to the courts, the arbitral tribunal has sole jurisdiction
regarding contract validity.120 The Vietnamese laws also recognize that the validity
of the arbitration agreement/clause is independent of the whole contract.121
Nonetheless, judicial practice in Vietnam sometimes witnesses the misapplication of
this rule. In Metal Supply v Steel Construction JSC.122, two parties entered into a sale
contract whereby the Steel Construction‘s representative who signed the sale
contract on its behalf was the director of its subsidiary. The sale contract included an
arbitration clause whereby the parties agreed to refer their dispute to the ICC arbitral
tribunal in Hanoi and then ICC rendered its award in favour of Metal Supply. In its
ruling on the application for recognition and enforcement of ICC arbitral award, the
court held that the whole sale contract including its arbitration clause was null and
Article 1 of the Government‘s Decree 31/CP dated 18 th May 1996 on Organization and Operation
of Public Notary provides that ―the contract and documents notarized by State or by competent
people‘s committees have legal effect, except where they are declared to be null and void by the
people‘s courts.
120
Prima Paint v. Flood & Conklin Manufacturing Company, [1967] 388 U.S. 395.
121
Law on Commercial Arbitration 2010, Article 19.
122
Do Van Dai and Tran Trong Hai (n 39) 253.
119
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
void because the representative of Steel Construction had no capacity to enter into
this contract.
Page 44 of 80
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
CHAPTER III: RECOGNITION AND ENFORCEMENT OF FOREIGN AND
FOREIGN-RELATED ARBITRAL AWARDS IN CHINA
The biggest Asian market for both Asian and Europe Union exporters –
China has stand firm on the position of a major international trading partner among
the nations and has placed at one of the world‘s top destinations for foreign direct
investment.123 In the course of continuously growing amount of commercial
transactions, the growing amount of disputes is the obvious consequence of
international trade. Therefore it is vital interest to the parties having business in
China or with Chinese entities to have an efficient commercial dispute settlement
mechanism. Like most other countries, the alternative options for resolving
commercial disputes exist in China. Given the non-binding nature of other ADR
such as conciliation and mediation as well as the negative attitude toward Chinese
judiciary124 where the foreign lawyers are still not allowed to appear before the
Chinese courts125, the arbitration seems to be a far better option for the foreign
parties. Nonetheless, the issue of enforcement of arbitral awards remains
problematic.
According to the International Trade Statistic 2010 of the World Trade Organization, China has
become the leading exporter in 2009 with the value of exports of USD billion 1280, and the second
biggest importer with its value of imports of USD billion 1180, after the United States with the import
value of USD billion 1780.
124
The domestic court system of China is criticized of lack of commercial expertise as well as of its
low and complex procedures. See Dennis Unkovic, ‗Enforcing Arbitration Awards in China‘ [2004],
Dispute Resolution Journal, Vol.59, No.4.68.; Claver-Carone, Mauricio J, ‗Post-handover
Recognition and Enforcement of Arbitral Awards between Mainland China and Hong Kong SAR:
1999 agreement vs . New York Convention [2002], Law and Policy in International Business, Vol.
33, Iss. 2 Winter, 369.
125
Civil Procedure Law 1991 of the People's Republic of China, Article 241.
Page 45 of 80
123
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
The issues on the enforcement of arbitral awards in China were addressed by,
among the other scholars, David J. Howell.126 He made a statistic saying that ―from
1990 to 1996 approximately 25 per cent of the applications made for enforcement of
arbitral awards were denied. Anecdotal evidence from legal practitioners in China
and abroad suggests that the number of cases in which Chinese courts have refused
to enforce arbitral awards is in fact much higher‖.127 Local protectionism in the
enforcement of foreign arbitral awards also was observed by David J.Howell. In his
article, David argued that ―Refusal of enforcement on the grounds that enforcement
would be contrary to ‗social and public interest‘ is a further basis of uncertainty‖.
The following sections will give us the picture of contemporary issues relating to the
enforcement of arbitral awards in China.
I.
Three Stages in the Development of Chinese laws on the Enforcement of
Arbitral Awards.
The history of the Chinese laws on the enforcement of arbitral awards was
suggested by Prof. An Cheng128 to be divided into three stages of development which
are: Related-Legislation Blank period from 1949 to 1978, Establishment of Domestic
Legislation and Accession to International Treaties (1979 – 1994), Improvement of
Domestic Legislation (1995 – present). As this is just a matter of legal history, the
author only provides a brief of these three stages of development of Chinese laws on
arbitration without aiming at reproducing the work done by prof. An Cheng. In
addition, as the third stage from 1995 to present relating to the contemporary issues
David Howell is an International Partner of Baker & McKenzie, and Head of Baker & McKenzie's
Asia Dispute Practice.
127
David J. Howell, ‗An overview of arbitration practice in Asia‘ [2001], International Arbitration
Law Review.
128
An Chen, ‗Is Enforcement of Arbitral Awards an Issue for Consideration and Improvement? —The
Case of China‘ presented at Symposium Co-Organised By ICSID, OECD And UNCTAD: ‗Making
The Most Of International Investment Agreements: A Common Agenda‘ on 12 December 2005.
Page 46 of 80
126
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
on the recognition and enforcement of arbitral awards, the legislation development in
this period will be addressed in the subsequent sections.
1.
Legislation Blank (1949 – 1978)
As the name of this period suggests that during the era of Mao Te-Sung, the
legislation activities were absent in China including the regulations on arbitration.
China during this period had been almost exclusively governed by directives and
orders of the Communist Party, rather than by enactments from legislative bodies,
and courts would almost blindly follow such orders.
2.
Establishment of Domestic Legislation and Accession to International
Treaties (1979 – 1994)
Beginning with the Deng Xiaoping‘s groundbreaking economic reforms
1978, the following years of this period witnessed the strong boost in Chinese
economy which resulted and continue to result in a rise in the number of disputes
between foreign and Chinese business parties.129 Given its awareness that in order to
promote further trade and to attract more foreign investment, the development of a
fair, objective, efficient and predictable dispute resolution system is of crucial
importance, the Chinese government has made remarkable efforts to improve the
reliability and credibility of China's court system and to promote the rule of law.
The first outcome of the establishment of domestic legislation was the Civil
Procedure Law promulgated in 1982 for trial implementation.130 Article 204 of the
Law provided that:
Christoph J. Vaucher, ‗Possibilities of impartial and effective dispute resolution in international
business transactions with China‘ [2002], International Arbitration Law Review.
130
Civil Procedure Law Of The People's Republic Of China, adopted at the 22nd Meeting of the
Standing Committee of the Fifth National People's Congress and promulgated by Order No.8 of the
Standing Committee of the National People's Congress on 8th March 1982, and implemented on a trial
basis as of 1st October 1982.
129
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
When a people's court of the People's Republic of China is entrusted by a
foreign court with the execution of a final judgment or order, the people's
court shall examine it in accordance with any international treaty concluded
or acceded to by the People's Republic of China. If the court deems that the
judgment or order does not violate the fundamental principles of the law of
the People's Republic of China or her national and social interests, it shall
order to recognize the validity of the judgment or order and execute it
according to the procedure specified in this Law…
Although the text of the Law expressly provided for the recognition and
enforcement of foreign judgment according to any international treaty to which
China was party, China had not yet acceded to neither the New York Convention
1958 nor the Convention on Settlement of Investment Disputes between States and
Nationals of other States of 1965 (ICSID Convention). In other words, there was no
ground for enforcement of foreign court‘s decision as well as foreign arbitral awards
in China that time.
Four years later, China acceded to the New York Convention on Recognition
and Enforcement of Foreign Arbitral Awards which entered into force in China on
22nd April 1987. It‘s worth noting that before the effective date of the New York
Convention in China, the Chinese Supreme Court issued a formal notice asking the
courts of all levels to ―immediately organize the economic, civil judges, the
executive staffs and other persons related, to study this important convention and
carry it out strictly according to its articles.‖131
Notice of the Chinese Supreme People's Court on the Implementation of "Convention on the
Recognition and Enforcement of Foreign Arbitral Awards" dated 10th April 1987.
Page 48 of 80
131
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
In order to establish the domestic legislation as legal framework for
performance of its obligations under the New York Convention as well as ICSID
Convention132, China formally promulgated the Civil Procedure Law in April 1991.
Article 269 of this Law expressly stipulates that:
… the party concerned shall directly apply to the intermediate people's court
of the place where the party subjected to enforcement has his domicile or
where his property is located. The people's court shall deal with the matter in
accordance with the international treaties concluded or acceded to by the
People's Republic of China or with the principle of reciprocity.
Although the Civil Procedure Law 1991 has provided the legal framework for
the recognition and enforcement of foreign arbitral awards in China, the arbitration
in its capacity of a formal accepted dispute settlement mechanism, was only legally
recognized and codified until 1994 with the promulgation of the Arbitration Law.133
With its effectiveness as from 01st September 1995, the Arbitration Law spells out
basic provisions in respect of the scope of arbitration134, the arbitration organ135, the
arbitration agreement136, arbitration procedure137, the arbitral award and its
enforcement138, foreign- related arbitration139, etc. The formal promulgation of the
Civil Procedure Code 1991 followed by the Arbitration Law 1994 created the
domestic legislation in term of arbitration in general and the recognition and
China also signed the ICSID Convention in 1990 and eventually ratified the ICSID Convention in
1993.
133
The Arbitration Law of the People‘s Republic of China, adopted at the 8 th session of the Standing
Committee and promulgated by the National People‘s Congress on 31st August 1994.
134
The PRC‘s Arbitration Law, Article 2 and 3.
135
Ibid, chapter II.
136
Ibid, Chapter III.
137
Ibid, Chapter IV.
138
Ibid, Section 3.
139
Ibid, Chapter VII.
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132
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
enforcement of arbitral awards both domestic and foreign and/or foreign-related in
particular, opening a new chapter of development for the arbitration in China.
II.
1.
Enforcement Procedures of Arbitral Awards in China
Relationship between the Courts and the Arbitration
For easy understanding the enforcement procedure of arbitral awards in
China, it would be helpful for us to be aware of the role played by the Chinese courts
in the operation of arbitration in China. The relationship between the courts and
arbitration can be roughly summarized in the following three aspects:
Firstly, the Supreme People‘s Court (SPC) of PRC is entrusted the power of
interpretation of the application of law140, SPC has issued a number judicial
interpretations to the Arbitration Law, the Civil Procedure Code and other relevant
laws, which provide detailed guidance for resolving the arbitration-related issues for
example: Notice of Supreme People‘s Court on some Issues concerning the
Enforcement of the Arbitration Law in People‘s Republic of China, Notice of
Supreme People‘s Court on Conscientiously Implementing the Arbitration Law and
Enforcement of Arbitral Awards according to Law, Agreement of Supreme People‘s
Court on Reciprocal Enforcement of Arbitral Awards between Mainland and Hong
Kong Special Administrative Region, and Opinions of Supreme People‘s Court on
the Issue of the Application of Civil Procedure Law of People‘s Republic of China.
Actually the power of interpretation of law belongs to the Standing Committee of National
People‘s Congress (SCNPC) according to the Article 42 of the Legislation Law of People‘s Republic
of China 2000. It is however SCNPC rarely exercise its supreme power of interpretation due to a lack
of a concrete interpretation procedure and expertise and therefore grants the power of interpretation of
the application of law to the Supreme People‘s Court (SPC), and in reality, SPC issues majority of the
judicial interpretations. See Yahong LI, ‗The Law-making Law: A Solution to the Problems in the
Chinese
Legislative
System?‘
Perspectives,
Vol.
2,
No.
2,
available
at
http://www.oycf.org/Perspectives2/8_103100/lawmakinglaw.htm accessed on 05th August 2011.
140
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Secondly, the courts provide certain administration and assistance to
arbitration, the Arbitration Law provides that in the event the parties to arbitration
disagree on the jurisdiction of arbitral tribunal, then the dispute over the jurisdiction
of tribunal shall be decided by either the tribunal itself or by the competent court. If
one party submits the dispute to the court for judgment and other party relies on the
tribunal then the court‘s decision shall prevail.141
And thirdly, the courts shall scrutinize the application for cancellation,
enforcement of the arbitral awards in accordance to the national laws and the
relevant provisions of the international treaties to which PRC is party.
From the aforesaid functions of the Chinese courts, it can be noted that apart
from the last two functions which are similar to the courts‘ functions in other
jurisdictions142, an outstanding difference of Chinese courts‘ functions in comparison
with other civil law countries like Vietnam is the Supreme People‘s Court‘s function
of interpretation of law. This function of the SPC is said to be a solution for coping
with the rapid change of the society which leaves the statutes into their abstractness
and obsoleteness.143
2.
Classification of Arbitral Awards and Their Respective Enforcement
Procedure in China
It is typical in China where the arbitral awards are not only classified into two
categories: domestic and foreign arbitral award but can also be categorized into the
The Arbitration Law 1994 of PRC, Article 20.
As discussed in the previous Chapter, the Vietnamese courts also have administrative function of
appointing arbitrators as well as assistant function on interim reliefs or on the recognition and
enforcement of the arbitral awards.
143
Jingzhou Tao, Arbitration Law and Practice in China (Kluwer Law International , Netherlands
2004) 32. Also see Yahong LI, ‗The Law-making Law: A Solution to the Problems in the Chinese
Legislative
System?‘
Perspectives,
Vol.
2,
No.
2,
available
at
http://www.oycf.org/Perspectives2/8_103100/lawmakinglaw.htm accessed on 05th August 2011.
Page 51 of 80
141
142
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
foreign-related arbitral award. It is, however, the laws of China do not provide the
explicit definition of each type of arbitral awards, the characteristics of each type of
arbitral awards can be found in the relevant provisions of the Arbitration Law 1994
and the Civil Procedure Code 1991 of the PRC.144
1.1
Foreign Arbitral Award and Its Enforcement Procedure
As for the foreign arbitral awards, Article 269 of the Civil Procedure Law
provide that:
If an award made by a foreign arbitral organ requires the recognition and
enforcement by a people's court of the People's Republic of China, the party
concerned shall directly apply to the intermediate people's court of the place
where the party subjected to enforcement has his domicile or where his
property is
located.
The
people's court shall deal with the
matter
in
accordance with the international treaties concluded or acceded to by the
People's Republic of China or with the principle of reciprocity.145
The term ‗foreign arbitral organ‘ employed in this Article is not defined
elsewhere in the Civil Procedure Law as well as in the relevant laws and the Chinese
laws are silent with regard to foreign arbitration institutions conducting the arbitral
Although no specific definition of each category of arbitral awards under Chinese laws, various
scholars have suggested three categories-classification of arbitral awards when studying the Chinese
laws on arbitration, e.g.: Ian Menzies, ‗The Recognition and Enforcement of Arbitral Awards in
People‘s Republic of China‘ [1996] Austl. Int'l L.J. 111., Lu Song, ‗An Overview of China's
Legislation and Practice on Arbitration Ninth Sino-US Symposium on Legal Issues‘, available at <
http://www.osec.doc.gov/ogc/occic/song.html> accessed on 05th August 2011, Li Xuebing, ‗The
Recognition and Enforcement of Foreign Arbitral Awards or Foreign Judgments in China‘, available
at < www.vmaa.org/docs/Li%20Xuebing_Nov1605_Seminar.doc> accessed on 5th August 2011. Ian
Mezies in his article also categorizes the foreign arbitral awards into foreign arbitral awards under
New York Convention (Convention Awards) and the foreign arbitral awards which do not fail under
the application of New York Convention due to the Chinese reciprocity reservation (Non-Convention
Awards).
145
The Civil Procedure Law of PRC, Article 269, emphasis added.
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
proceedings within the territory of PRC.146 The ICC International Arbitration Court
actually operates in China; however, only until the year of 2009, the first ICC
arbitration‘s case with the seat in China was applied to the Intermediate Court of
Ningbo for its recognition and enforcement.147 It is therefore assumed that the
foreign arbitral awards are the awards rendered by the foreign arbitration institutions
outside the PRC‘s territory.148
As to the enforcement procedure of foreign arbitral award, again, Article 269
of the Civil Procedure Law stipulates that in verification of the application for
recognition and enforcement of foreign arbitral award, the competent court shall deal
with the case ‗in accordance with the international treaties concluded or accessed to
by the People‘s Republic of China or with the principle of reciprocity‘.149 Noting that
there is no specific Chinese legislation providing for the implementation of various
operative provisions of the New York Convention 1958150, there are, in the PRC, the
foreign arbitral awards which fail under the scope of application of the New York
Convention and the foreign arbitral awards which enjoy the recognition and
enforcement mechanism provided for in other bilateral treaties or judicial assistance
Li Hu (Deputy Director of Arbitration Research Institute of China Chamber of International
Commerce),
‗Introduction
to
Commercial
Arbitration
in
China‘,
available
at
http://www.softic.or.jp/symposium/open_materials/11th/en/LiHu.pdf> accessed on 5th August 2011.
147
Duferco v Ningbo Arts and Craft Import and Export Co. The rulings of the Intermediate Court of
Ningbo in this case have been a controversial issue attracting keen attention of arbitration community.
Most commentators believe that the Ningbo Court's treatment of the ICC Award as a non-domestic
award on the nationality basis is dubious as a matter of PRC law. This is partly because the question
of the proper classification under PRC law of the ―nationality‖ of an award issued by a foreign arbitral
institution in China is still very uncertain. The prevailing principle in international law is to treat the
place or ―seat‖ of the arbitration as the determinative factor. See Peter Thorpe, ‗Case Comment:
China: Duferco v Ningbo Arts and Craft Import and Export Co - first ICC arbitral award enforced in
China‘, [2009], International Law Review.
148
Li Hu (n 147).
149
The Civil Procedure Law of PRC, Article 269.
150
Ian Menzies, ‗The Recognition and Enforcement of Arbitral Awards in People‘s Republic of
China‘ [1996] Austl. Int'l L.J. 111, 115.
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treaties concluded by the PRC.151 In consistence with its delimitation, this
dissertation only discusses on the recognition and enforcement procedure of foreign
arbitral awards pursuant to the New York Convention. Apart from the Article 269 of
the Civil Procedure Law which refers the recognition and enforcement of arbitral
awards to the provisions of relevant international treaties, neither the Arbitration
Law nor the Civil Procedure Law has its respective separate section for the arbitral
awards. In accordance with Article III of the New York Convention, the rules of
procedure of recognition arbitral awards as binding and enforceable shall be in
accordance with ―the rules of procedure of the territory where the award is relied
upon. There shall not be imposed substantially more onerous conditions or higher
fees or charges on the recognition or enforcement of arbitral awards to which this
Convention applies than that are imposed on the recognition or enforcement of
domestic arbitral awards‖. Therefore, if an applicant applies for the recognition and
enforcement of arbitral awards, the Chinese Civil Procedure Law shall be applied in
the same manner as so applying to the domestic arbitral awards and other relevant
provisions and interpretation of the SPC152. The steps of the recognition and
enforcement procedure of foreign arbitral awards are as follows:
Should the award-debtor fails to voluntary perform the arbitral award within
the time-limit set forth in the award, the applicant shall, within one year if at least
one party to arbitration is citizen or within six months if all parties are legal persons
For example: Arrangement Between The Mainland And The Macao Special Administrative
Region On The Mutual Recognition And Enforcement Of Civil And Commercial Judgments 2006,
the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial
Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region 2006.
152
Li Xuebing (n 146). Article 62 of the Arbitration Law provides that ―The parties shall execute an
arbitration award. If one party fails to execute the award, the other party may apply to a people's court
for enforcement in accordance with the relevant provisions of the Civil Procedure Law, and the court
shall enforce the award‖.
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calculated from the last day of the period of performance specified in the arbitral
awards153, file the application for recognition and enforcement of foreign arbitral
awards at the Intermediate People‘s Court where:
(i) the person subject to enforcement is a natural person, it shall be the place
where his/her residence is registered or where his/her domicile is located;
(ii) the person subject to enforcement is a legal person, it shall be the place
where its principal executive office is located;
(iii) the person subject to enforcement does not have residence, domicile or
principal executive office in China but has property within the territory of
China, it shall be the place where his//her/its property is located.154
The application shall include (i) the duly authenticated original award or a
duly certified copy thereof, (ii)The original arbitration agreement or a duly certified
copy thereof, (iii) a translation of these documents certified by an official or sworn
translator or by a diplomatic or consular agent.155
The competent intermediate people‘s court shall issue its order on whether to
recognize and enforce the award or not within two months from its acceptance of the
application for recognition and enforcement of the arbitral award. If the court
decides to uphold the application, it shall complete the execution of the award within
six months156; otherwise, it shall report the case to its upper provincial high court. If
The Civil Procedure Law, Article 219.
Circular of Supreme People's Court on Implementing Convention on the Recognition and
Enforcement of Foreign Arbitral Awards Entered by China, Article 3.
155
Ibid, Article 4.
156
The Chinese courts are empowered the role of execution of arbitral award like the procuracy in
Vietnam. The provisions of Chapter XXII of the Civil Procedure Law on Execution Measures grant
the Chinese courts several rights, inter alia, the right to freeze or transfer the saving deposit of the
award-debtor (Article 221), to withhold or withdraw part of the income of the award-debtor
(Article 222).
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153
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
the provincial high court agrees with the lower court not to recognize and enforce the
award, it shall further report the case to the Supreme People‘s Court whose decision
shall be final.157 The grounds for the courts to consider not recognize and enforce the
foreign arbitral award failing under the application of the New York Convention
shall be in accordance with the Article V of the Convention. Nonetheless, the
interpretation of these grounds in the Chinese judicial practice is quite interesting to
look at.158
1.2
Foreign-Related Arbitral Award and its Enforcement Procedure
Another complicated and typical type of arbitral award in term of its
definition and thus, its subsequent interpretation and application is the foreignrelated arbitral award. Chapter VII of the Arbitration Law on the ‗Special Provisions
on the Foreign-Related Arbitration‘ in its Article 65 stating that the provisions of
Chapter VII shall ‗apply to all arbitration of dispute arising out of economic, trade,
transportation or maritime matters involving foreign elements‘.159
The Starting point for determining the nature of foreign-related arbitration is
the term ‗foreign element‘. Under the Civil Procedure Law 1991, the case involving
foreign elements is the case where: (i) at least one of the parties is a foreigner,
stateless person, foreign enterprise, or organization160; (ii) the legal facts creating,
See Notice Concerning the People‘s Court Dealing with Issues of Foreign-related Arbitration and
Foreign Arbitration , by the Chinese Supreme People‘s Court , Doc. FA-FA
Court Issuance No.
18, 1995, August 28,1995.
158
See the discussion in the Section III of this Chapter.
159
The Arbitration Law 1994, Article 65, emphasis added.
160
The Civil Procedure Law, Article 241.
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
changing, or terminating the civil legal relations between parties occur in a foreign
country161; or (iii) the subject matter of the dispute is located in a foreign country.162
All of these elements however remain silent on whether there is foreign
element in the event one of the parties to arbitration is wholly foreign-owned
enterprise or joint venture company which constitutes the Chinese legal person under
Chinese laws.163 In China International Construction Consultant Corporation v
Beijing Lido Hotel Company, the Beijing Intermediate Court held that the answer to
this question was no.164
A party wishes to enforce a foreign-related arbitral award shall file its
application at intermediate people's court of the place where the party against
whom the application for enforcement is made has his domicile or where his
property is located.165 The time limit for submission of the application and the steps
to be taken for recognition and enforcement of foreign-related arbitral award shall be
as the same as so applying to the foreign arbitral award.166 But yet the grounds for
refusal of the recognition and enforcement of the foreign-related award are slightly
different from those applied to the foreign arbitral award. The Article 260 of the
Ibid, Article 243. A typical example is a contract concluded in a foreign country or a tortuous act
committed in a foreign country.
162
See Mo Zhang, ‗International Civil Litigation In China:A Practical Analysis Of The Chinese
Judicial
System‘,
available
at
<
http://www.bc.edu/bc_org/avp/law/lwsch/journals/bciclr/25_1/02_FMS.htm> , accessed on 05th
August 2011.
163
Ian Menzies (n 152) 124, the Law of the People's Republic of China on Wholly Foreign-Owned
Enterprises 2000, Detailed Rules for The Implementation of The Law on Sino-Foreign Cooperative
Joint Ventures (Promulgated by the PRC‘s Ministry of Foreign Trade and Economic Cooperation on
September 4,1995).
164
Michael J. Moser, ‗China‘s New International Arbitration Rules‘ [1994], Journal of International
Arbitration Vol.11.
165
The Civil Procedure Law 1991, Article 259.
166
See n.159 and Fresfields Bruckhaus Deringer, ‗Resolving Dispute in China through Arbitration‘,
the
Firm‘s
Special
Issue
of
June
2007,
available
at
<
www.freshfields.com/publications/pdfs/2006/14706.pdf> accessed on 06th August 2011.
Page 57 of 80
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
Civil Procedure Law provides the circumstances under which the court may consider
to set aside the foreign-related award as follows:
(1) the parties have not had an arbitration clause in the contract or have not
subsequently reached a written arbitration agreement;
(2) the party against whom the application for enforcement is made was not
given notice for the appointment of an arbitrator or for the inception of the
arbitration proceedings or was unable to present his case due to causes for
which he is not responsible;
(3) the composition of the arbitration tribunal or the procedure for
arbitration was not in conformity with the rules of arbitration; or
(4) the matters dealt with by the award fall outside the scope of the
arbitration agreement or which the arbitral organ was not empowered to
arbitrate.
If the people's court determines that the enforcement of the award goes
against the social and public interest of the country, the people's court shall
make a written order not to allow the enforcement of the arbitral award.
It seems that Article 260 narrows the grounds for setting aside an arbitral
award in comparison with the grounds provided for in the Article V of the New York
Convention when it does not refer to the incapacity of the parties or the invalidity of
the arbitration agreement under the applicable law.167
Beaumont B et al, Chinese International Commercial Arbitration (Simmonds and Hill Publishing,
London 1994) 20.
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
III.
Contemporary Issues on the Recognition and Enforcement of Foreign and
Foreign - Related Arbitral Awards
1.
Local Protectionism and the ‗Double Report System‘
Many scholars as well as law practitioners involving in the application for
recognition and enforcement of foreign and/or foreign-related arbitral awards in
China have long time raised their concerns about the local protectionism as an
obstacle confronted by the foreign parties in trying to get their awards recognized
and enforced.168 As mentioned above, the task on recognition and enforcement of
arbitral awards is delegated to the local courts which could be impacted by the
pressure from local officials resulting in delay and/or frustration in recognition and
enforcement procedure of arbitral awards.169
A fairly common practice is that the court does not do anything. Either it
does not accept the application, or it waits for a very long time before it accepts it.
As a result, a case could be pending for many years. A suggestion is that the court
expects that the party eventually will forget the application. It costs a lot of money
and energy to process, and in the end the party stops pursuing the case.170 According
to Mr. Xing Xiusong in one case in which he represented a Japanese company in an
arbitral proceeding against a Chinese company at the Arbitration Institute of the
Stockholm Chamber of Commerce, the Japanese party won and they sought
enforcement of the award in China in late January 2001. However, Mr. Xiusong
revealed in 2006 when being interviewed that his clients were still waiting for a
response as to whether the case will be enforced or not. Mr. Xiusong supplied
See David Howell (n 128), An Chen (n 129) and the discussion in the following paragraphs.
An Chen (n 129).
170
Tovyanskyy Vyacheslav, International Commercial Arbitration : Awards Enforcement procedure
in People Republic of China (Master Thesis 2009) 111.
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169
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
another example of a case filed in 1994, in which there still has not been a final
judging granted.171
One of the major problems for parties seeking enforcement of foreign,
foreign-related, or even domestic arbitral awards has been the lack of a firm deadline
with respect to whether to accept the application for enforcement, whether to enforce
the award and when to actually carry out the enforcement. It was not uncommon for
the court just to sit on an application or else accept the case, but then never decide
whether to enforce the award or to refuse enforcement.
Being aware of this situation, the SPC in 1995, by the Notice on Courts
Handling of Issues in Relation to Matters of Foreign-Related Arbitration and Foreign
Arbitration, established the ‗Double Report System‘ which was further developed by
the Stipulations on the Questions with Respect to the Charging Fees and the Time
Limit for Examination in Recognition and Enforcement of Foreign Arbitral Awards,
issued October 1998 and the Stipulations on Several Issues in respect of
Enforcement Work of the People‘s Court issued June 1998. Under this Double
Report System, the intermediate court shall decide within seven days whether or not
to accept an application for enforcement172 and shall make its ruling within two
months from the date it accepted the application.173 In case the intermediate court
intends to refuse the recognition of the award then it is responsible to report the case
to the high people‘s court. If the high people‘s court agrees with the lower court to
not recognize the award, it had to submit the case to the SPC for final decision.
Anna Mejlerörom, International Arbitral Awards: A Study of Enforcement in China. Stockholm.
(Master dissertation, 2006). 30.
172
The SPC‘s Stipulations on Several Issues in respect of Enforcement Work of the People‘s Court
issued June 1998.
173
The SPC‘s Notice on Courts Handling of Issues in Relation to Matters of Foreign-Related
Arbitration and Foreign Arbitration 1995.
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
The introduction of this report mechanism can be seen as a sign that the
Supreme People‘s Court is aware of the problems connected with the enforcement
procedure of foreign and foreign-related arbitral awards and is eager to prevent
them.174 There is, however, criticism of this system among scholars and lawyers
working in China. One of the defeats of the Double Report System is lack of firm
deadline within which the SPC should give out its final ruling on whether it agrees or
disagrees with the lower court. Quite recently, a lawyer from Baker & McKenzie in
Hong Kong when being interviewed states that the ―Courts take a long time in
enforcing the award or letting parties know what the status is‖.175 Another lawyer
from Clifford Chance reveals that her clients face extreme difficulties in trying to
enforce an award for several hundred million US dollars against a State-owned
enterprise in Guangzhou.176 Also according to Sonia Chan in her article on Asia
Law, one client of Lynn Aglionby waited for three years for the SPC to rule on the
lower court‘s refusal of recognition of the award.177
Another criticism over the Double Report System is that this mechanism does
not give the enforcing party any right to review the report of the intermediate
people‘s courts or the higher courts and make submissions to them. Nor is there a
right to appear before the higher courts or the before the SPC. To overcome this
problem, some people have suggested replacing the reporting mechanism with the
An Chen (n 129).
Sonia Chan, ‗Protectionism is stifling Chinese Arbitral Awards‘, [2008], Asia Law, available at <
http://www.asialaw.com/Article/2023082/Channel/16680/Protectionism-is-stifling-Chinese-arbitralawards.html>.
176
Ibid.
177
Ibid.
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175
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
right to make a normal appeal.178 It would guarantee more fairness and transparency
in the judicial proceedings handled by the courts.179
2.
Public Policy as a Ground for Refusal of Recognition and Enforcement of
Arbitral Awards
Again, the issue of interpretation of the term ‗public policy‘ can be seen to be
problematic in the jurisdictions whose legal system is under development like China.
Although the original term of ‗public policy‘ employed in the New York Convention
shall apply to the foreign arbitral awards180, Article 260 of the Civil Procedure Law
on the grounds for refusal of recognition and enforcement of foreign-related arbitral
awards translates the this term into the term of „social and public interest‟.181 Similar
to Vietnamese jurisdiction, there is no official definition of this term in Chinese
laws.182 Nonetheless, it is said that the understanding of the term ‗social and pubic
interest‘ is different from the common meaning of ‗public policy‘ or ‗ordre public‘
employed in the New York Convention in its English and French version
respectively.183 An interpretation of an action against social and public interest
includes for example harm to State sovereignty, deterioration of the Chinese moral
values, corruption, destruction of China‘s natural resources, etc.184
In the Dongfeng Garments Factory of Kai Feng City and Taichun
International Trade (HK) Co. Ltd., v. Henan Garments Import & Export (Group)
Co. (1992) case. The Zhenzou Intermediate Court accepted the view that the
Ibid, 40.
Ibid, 41.
180
See section II.2.1 of this Chapter.
181
The Civil Procedure Law, Article 260, emphasis added.
182
William Heye, ―Forum Selection for International Dispute Resolution in China - - Chinese Court
vs. CIETAC‖, [2004] Hasting International and Comparative Law Review 27. 544.
183
Li Hu, ‗Enforcement of the International Commercial Arbitration Award Peoples Republic of
China, [1999], Journal of International Arbitration, 4.11.
184
Chenguang Wang and Zhang Xianchu, Introduction to Chinese Law, (Sweet & Maxwell Asia,
1997) 257.
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179
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
respondent had violated the contract. However, it held that enforcing an arbitral
award requiring the local party to pay a certain amount of money for damages would
bring a negative impact on the local economy and ruled that the enforcement of the
CIETAC award against local Chinese parties in favor of a foreign applicant is
contrary to the social public interest of China.185 Some argue that if the People‘s
Republic China hopes to increase investor confidence, it is important that these
public interests are not broadly defined.186
In 1995, one Chinese company, Jinan Yongning Pharmaceutical Co., Ltd.
(Yongning Company), and three non-Chinese companies signed a contract to set up
a joint venture. The joint venture contract provided that any disputes arising under
the contract would be submitted to arbitration under the rules of the ICC in Paris.
Subsequently, a leasing dispute occurred between the Yongning Company and the
joint venture entity. A Chinese court, accepting jurisdiction over the dispute, ruled in
favour of the Yongning Company, and ordered that the assets of the joint venture be
impounded. As a result of this impounding, the operation of the joint venture was
suspended and the joint venture was eventually closed. In July 2005, the three nonChinese parties to the underlying joint venture contract, invoking the arbitration
clause in the contract, initiated an ICC arbitration in Paris against the Yongning
Company. The ICC arbitration tribunal then ruled that the Yongning Company had
breached the joint venture contract by petitioning a Chinese court to impound the
assets of the joint venture. As a result, the ICC tribunal ordered the Yongning
Cheng Dejun et.al, ‗International Arbitration in the People‘s Republic of China‘ in Randall
Peerenboom, ‗The Evolving Regulation Framework for Enforcement of Arbitral Awards in the
People‘s Republic of China‘ , Asia-Pacific Law Policy Journal 1 (2000).3.
186
Bruce R. Schulberg, ‗China‘s Accession to the New York Convention : An Analysis of the
Regime of Recognition and Enforcement of Foreign Arbitral Award‘, Journal of Chinese Law 3
(Summer Issue 1989). 143.
185
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Company to pay US$6,458,708.40 as damages. Because the Yongning Company did
not pay the money mandated by the ICC arbitration award, the three non-Chinese
companies filed their application for recognition and enforcement of the ICC award
at Jinan Intermediate People's Court in 2007. The Court, however, held that the
arbitration clause in the joint venture contract only bound the disputes between the
contracting parties, and therefore did not bind the leasing disputes between the
Yongning Company and the joint venture. As a result, the Chinese court ruled that
the ICC arbitration award, by purporting to resolve a dispute that was subject to the
jurisdiction of the Chinese courts, violated China's judicial sovereignty and, with it,
Chinese public policy. Accordingly, the Jinan Intermediate People's Court held that
the arbitral award should not be enforced, which decision was affirmed by the
SPC.187
From very few public cases on the recognition and enforcement of foreign
and/or foreign-related arbitral awards, it seems that the Chinese courts‘ rulings
somewhat illustrate some problems associated with the local protectionism as the
award-debtors were major local company.
3.
Difficulties in Obtaining the Remedies under the Award
The most important reason for non-enforcement of an award is the
respondent‘s lack of property. In the survey conducted in 2001 by Randall
Peerenboom188, the respondent‘s lacks of assets were reported to be the cause for
failure to enforce the award in 43 percent of the non-enforcement cases. According
to figures from 1996, approximately 20-30 percent of the enforcement of arbitral
awards fails because of the respondent lacking sufficient assets. In a number of
187
188
Bloomberg Finance L.P in the Vol. 2, No. 6 edition of the Bloomberg Law Reports - Asia Pacific.
Professor of PRC‘s laws at the University of California Los Angeles Law School.
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cases, the respondents transferred its assets to another company, leaving no funds to
comply with the award. The Civil Procedure Law gives enforcement officers
responsibilities to pursue property of the party against whom a judgment is to be
executed189. This enforcement officer may favour local parties who are likely to be
economically harmed by a judgment against them. Law practitioners in China also
accuse that the enforcement officers are too passive and admit that it is easier to have
the award enforced in Beijing , Shanghai or Guangzhou than in other Chinese
cities.190
4.
Ad hoc Arbitration
Although the Arbitration Law does not expressly exclude the ad hoc
arbitration in China, the provisions set forth in the Arbitration Law seem to indicate
that ad hoc arbitration is discouraged. Firstly, the parties to dispute are required to
reach a written arbitration agreement specifying the designated arbitration
commission191; Secondly, where the parties fail to agree upon arbitration commission
or such agreement is not clear and ambiguous, the parties may supplement the
agreement, in default of which, the arbitration agreement will be rendered invalid.192
Thirdly, the arbitrators may only appointed from the list of arbitrators of an
arbitration commission.193
By the virtue of no express legal recognition of ad hoc arbitration (i.e.
arbitration not held under any institutional rules) some commentators argue that ad
hoc arbitration held within the PRC has no legal basis. Similarly, since ad hoc
The Civil Procedure Law, Article 216.
Sonia Chan (n 176).
191
The Arbitration Law 1994, Article 16.3, emphasis added.
192
Ibid, Article 18.
193
Ibid, Article 22.
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190
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
arbitration cannot be the subject of a valid arbitration agreement under PRC law, an
ad hoc arbitration award obtained in the PRC may be challenged on enforcement
within the PRC on this basis.194 Therefore, for the time being, the parties are not
encouraged to resort to an ad hoc arbitration as dispute settlement method in China.
194
David J. Howell (n 128) 7.
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CHAPTER IV: BRINGING IT ALL TOGETHER
It has been proved by this dissertation that the enforcement of arbitral awards
at the international scale has achieved its undeniable success thanks to the
introduction of the New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards to which 146 countries and territories have become party.195
Nonetheless, this study has also pointed out a number of controversial issues of the
interpretation and application of the Convention‘s provisions in the jurisdictions
around the globe. These issues are more problematic in the civil law countries,
especially in those whose legal system is subject to ongoing development like China
and Vietnam. Therefore, some recommendations below can help pushing up the
unification of interpretation of the Convention‘s provisions as well as help enhancing
the legal framework of China and Vietnam so as to ensure the security and
predictability for the enforcement environment of arbitral awards at the international
level.
I.
A Need for Unification of Interpretation of the New York Convention‘s
Provisions
The undeniable success of the New York Convention could not avoid the
criticisms over the text of the Convention itself. It is understandable because the text
of the Convention remains unchanged for more than a half century and the drafters
of the Convention in 1958 could never have been able to produce a text that would
foresee the issues which we confront at the present time.196 Various provisions of the
See http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html.
Marike R.P. Paulsson, ‗The Miami Draft: the Good Twin of the NYC‘ [2010], Kluwer Arbitration
Blog.
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195
196
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
New York Convention have been criticized for textual ambiguities, being too strict
or outdated.197 However for the time being, it seems that international law
community is not yet ready to welcome a revision of the Convention or a new
convention in this field. As remarked by the founding father of the New York
Convention Pieter Sander at the occasion of celebrating the Convention‘s 40th
anniversary: ―an amendment to the Convention is most likely not possible, nor will a
Protocol or second Convention be desirable‖198 In this context, it is suggested that
the harmonization of the enforcement regime of arbitral awards could be achieved
through changes to the national laws and the uniform interpretations by the
international bodies such as UNCITRAL or ICCA (International Council for
Commercial Arbitration).199 It is necessary to mention the Miami Draft which was
first introduced at the 50th birthday of the New York Convention at Dublin in 2008
and was the subject for debate a year later in Miami.200 Literarily, the text of Miami
Daft is clear and simple and bases on the current practice in order to remedy the
ambiguities and judicial disharmony of the New York Convention. For example, The
Stephanie Cohen, ‗The New York Convention at Age 50: A Primer on the International Regime for
Enforcement of Foreign Arbitral Awards‘; Neil Kaplan, ‗Is the Need for Writing as Expressed in the
New York Convention and the Model Law Out of Step with Commercial Practice?‘ [1996], 12 Arb.
Int‘l 28, 43; Vivienne M. Ashman, ‗UNCITRAL Initiatives to Further Harmonize and Modernize
Arbitration Laws, Rules and Practices‘ [2000], in Practising Law Institute, Litigation and
Administrative Practice Course Handbook Series 635, 651.
198
Pieter Sanders, ―The making of the Convention‖, Enforcing Arbitration Awards under the NYC.
Experience
and
prospects,
New
York
1999,
United
Nations,
available
at
<www.uncitral.org/pdf/english/texts/arbitration/NY-conv/NYCDay-e.pdf > accessed on 06th August
2011.
199
William W. Park, ‗Duty and Discretion in International Arbitration‘ [2000], 15 Mealey‘s Int‘l Arb.
R. 28, 39.
200
The Miami Draft was originally called ‗the new NYC: a hypothetical draft‘ by its drafter Albert
Jan van den Berg, subsequently dubbed ‗the Dublin Convention‘ at the occasion of the ICCA
conference in Dublin 2008 and finally renamed ‗the Miami Draft‘ when re-presented by the author in
Miami on 31 October 2009 at the conclusion of a conference entitled ―The New York, European, and
Panama Conventions.‖
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Miami Draft adopts the solution of the European Convention201, article IX (2), thus
preventing the enforcement of awards annulled on the basis of local standards as
opposed to international standard in term of ‗public policy‘; elimination of the
written form requirement which has been criticized to be too strict and outdated. A
comparison table between the New York Convention and the Miami Draft prepared
by Albert Jan van den Berg is attached hereto for further necessary study where and
when possible.202 In the context that a new convention is unrealistic203, The Miami
Draft imagines articles of the New York Convention, the way one would have
drafted them in 1958 with today‘s knowledge and could be serve as ―best
interpretive practices‖ for the New York Convention.204
II.
National Legal Frameworks Need to Be Further Developed Taking into
Account the Widely Accepted International Practice
The discussions pertaining in Chapter II and III respectively have shown that
the current legal frameworks of both China and Vietnam on the arbitration in general
and on the recognition and enforcement of arbitral award in particular contain
various defeats that need to be resolved and the legal frameworks need to be further
improved in order to secure the legitimate recognition and enforcement of arbitral
awards.
As to the case of Vietnam, the presence of the separate enforcement
mechanism of arbitral awards, although it does not exactly import the spirit of the
The European Convention on International Commercial Arbitration of 1961.
See Appendix I of this Dissertation.
203
Marike R.P. Paulsson (n 197), Pieter Sanders (n 199).
204
Albert Jan van den Berg, Hypothetical Draft Convention on the International Enforcement of
Arbitration
Agreements
and
Awards:
Explanatory
Note,
available
at
<
www.newyorkconvention.org/draft-convention > accessed on 06th August 2011.
201
202
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
Article VII of the New York Convention205, it is acceptable in the sense that the its
requirement of application of foreign arbitral awards to the national court is common
in the world.206 But the current regulations are not clear on the distinction of the two
types of arbitral awards: foreign award and domestic award, which causes the
confusion to the courts and their different interpretations from case to case.
Therefore, it is suggested that further detailed guidance should be issued on the clear
and unified definition of ‗foreign arbitral award‘ as well as other key term such as
‗commercial dispute‘ and the interpretation of the grounds for refusal of the
recognition and enforcement of arbitral awards in line with the international
concepts.
With regard particularly to China, the study has shown that the Chinese laws
are too general and thus the judicial interpretations by the SPC play a very important
role in the judicial practice in China. It is, however, this role played by SPC is not
yet officially recognized by the Chinese legislation.207 Therefore, an official
recognition of this SPC‘s role is necessary in order to encourage the interpretation
work of the SPC as well as guarantee the legal effects of these interpretations. The
Double Report System should be supplemented with the firm deadline for the SPC to
have its reply on the lower‘s courts‘ report. Lack of the regulations on ad hoc
arbitration cannot be seen in any respect as a positive sign of encouraging the
Article VII of the New York Convention provides that : ―Each Contracting State shall recognize
arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory
where the award is relied upon, under the conditions laid down in the following articles.
There shall not be imposed substantially more onerous conditions or higher fees or charges on the
recognition or enforcement of arbitral awards to which this Convention applies than are imposed on
the recognition or enforcement of domestic arhitral awards‖.
206
This mechanism favours the enforcement of domestic arbitral awards while not creating an
obstacle to the enforcement of foreign arbitral awards, see the discussion in Chapter II of this
Dissertation.
207
See n. 141.
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205
Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
development of arbitration in China. Thus, the Chinese law makers is in the need for
official recognition of this type of arbitration in the national laws.
Last but not least, both China and Vietnam is facing certain problems in
coercive enforcement of arbitral awards such as undue delay which in some cases
results in award-creditor‘s inability of recovering their compensations. In this regard,
the guidance which outlines the details of coercive enforcement with adequate timelimit for each step of coercive enforcement is desirable in both these jurisdictions.
III.
Organizing the Training Program for Judges and Officials involving in the
Recognition and Enforcement Procedure
It is common that the judges working were educated domestically and thus
were heavily affected by the civil law system while major of international legal
instruments are driven by the patterns of the common law system. Consequently, the
judges frequently confront with the difficulties in understanding certain concepts
and/or notions of the international instruments and they, as the result, fail to identify
the appropriate respective concepts and/or notions in their civil law. The
misunderstanding of the rules of international legal instruments by the judges will
definitely result in misinterpretation and misapplication of the rules. Therefore, the
training programs in the area of international arbitration law should be provided for
the judges, procurators and executors.208
208
Umut et al (n 31).
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
APPENDIX I
Comparison Table Between New York Convention and Miami Draft
(See the attachment)
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
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Enforcement of Foreign Arbitral Awards in Vietnam and China: From theory to practice
SOURCES OF LAW
I.
INTERNATIONAL LEGAL INSTRUMENTS
1. Bustamante Code of 1928
2. The European Convention on International Commercial Arbitration of 1961.
3. The New York Convention on Recognition and Enforcement of Foreign
Arbitral Awards 1958.
4. UNCITRAL Model Law on International Commercial Arbitration
II.
VIETNAMESE LAWS
5. Commercial Law No. 36/2005/QH11.
6. Decision No. 453/QD/CTN dated 28 July 1995 of the State President on the
Accession of the Socialist Republic of Vietnam to the New York Convention.
7. Decision No.204/TTg dated 28 April 1993.
8. Decree 153/CP dated 5 October 1964 of the Government on Charter for
Maritime Arbitration Committee.
9. Decree 59/CP dated 30 April 1963 of the Government on promulgation of the
Charter for Foreign Trade Arbitration Committee and Maritime Arbitration
Committee.
10. Decree No.62/HDBT on Functions, Duties, Powers and Organization of
Economic Arbitration.
11. Government‘s Decree 31/CP dated 18th May 1996 on Organization and
Operation of Public Notary.
12. Law No.26/2008/QH12 dated 28th November 2008 on Enforcement of Civil
Judgments.
13. Law No.54/2010/QH12 on Commercial Arbitration.
14. Law on Enterprises N0.60/2005/QH11.
15. The Civil Procedure Code No.24/2004/QH11 dated 15th June 2004.
16. The Decree No. 04/TTg on the Interim Charter on the Economic Contract.
17. The Law on Land number 13/2003/QH11.
18. The Ordinance No. 31-L/CTN dated 29 March 1994 on Procedure for
Settlement of Economic Disputes.
19. The Ordinance of the Standing Committee of National Assembly on
Recognition and Enforcement of Foreign Arbitral Awards dated 14
September 1995.
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20. The Ordinance on Recognition and Enforcement of Foreign Arbitral Awards
dated 14 September 1995 of the Standing Committee of National Assembly.
III.
CHINESE LAWS
21. Arrangement Between The Mainland And The Macao Special Administrative
Region On The Mutual Recognition And Enforcement Of Civil And
Commercial Judgments 2006.
22. Arrangement on Reciprocal Recognition and Enforcement of Judgments in
Civil and Commercial Matters by the Courts of the Mainland and of the
Hong Kong Special Administrative Region 2006.
23. Circular of Supreme People's Court on Implementing Convention on the
Recognition and Enforcement of Foreign Arbitral Awards Entered by China.
24. Civil Procedure Law 1991 of the People's Republic of China.
25. Detailed Rules for The Implementation of The Law on Sino-Foreign
Cooperative Joint Ventures (Promulgated by the PRC‘s Ministry of Foreign
Trade and Economic Cooperation on September 4,1995).
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Arbitration and Foreign Arbitration , by the Chinese Supreme People‘s Court
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Convention on the Recognition and Enforcement of Foreign Arbitral
Awards" dated 10th April 1987.
28. The Arbitration Law of the People‘s Republic of China adopted at the 8th
session of the Standing Committee and promulgated by the National People‘s
Congress on 31st August 1994.
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Enterprises 2000.
30. The Legislation Law of People‘s Republic of China 2000.
31. The Supreme People‘s Court‘s Notice on Courts Handling of Issues in
Relation to Matters of Foreign-Related Arbitration and Foreign Arbitration
1995.
32. The Supreme People‘s Court‘s Stipulations on Several Issues in respect of
Enforcement Work of the People‘s Court issued June 1998.
IV.
OTHERS NATIONAL LAWS
33. Arbitration Act of South Korea 1999.
34. French Arbitration Law 2011.
35. Law Decree No. 12/1962 of 31 October 1962 of Hungary
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36. Singapore Arbitration Act 2001.
37. Swedish Arbitration Act of 1999.
38. United Kingdom Arbitration Act 1996.
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