“No-Nationality” and “Dual-Nationality” Arbitral Awards: When Place of Arbitration Does Not Determine Supervisory Jurisdiction in Vietnam

An award is rendered in an ICC arbitration with its place of arbitration in Hanoi. The losing party applies to set it aside. The Vietnamese court declines jurisdiction because it determines that, under the Law on Commercial Arbitration No. 54/2010/QH12 (the “LCA”), the arbitration is a foreign arbitration. No foreign court would ordinarily have jurisdiction to set aside the award either, because the place of arbitration is in Vietnam. There is therefore no court that appears positioned to set aside the award.

This result follows from the way Vietnamese law classifies arbitrations, and it is not the only unusual consequence of that classification. The same rules can expose an award to set-aside proceedings in two countries at once.

What makes an arbitration “foreign” under Vietnamese law

Article 3.11 of the LCA classifies an arbitration as “foreign” when it is “established in accordance with foreign arbitration law which the parties agree to select to conduct dispute resolution, either inside or outside the territory of Vietnam.” Under Article 3.12, a “foreign arbitral award” is “an award rendered by foreign arbitration either inside or outside the territory of Vietnam in order to resolve a dispute as agreed by the parties.” For purposes of this article, an arbitration that does not fall within the LCA’s definition of a “foreign arbitration” is referred to as a domestic arbitration.

As explained in a previous article, even where Vietnam is the place of arbitration, if the arbitration was administered by a foreign institution such as the ICC, the Vietnamese courts treat the arbitration as a foreign arbitration for the purposes of the LCA.

“No-Nationality” arbitral awards1

Once an arbitration is classified as a foreign arbitration under the LCA, Vietnamese courts have no jurisdiction to set aside an award issued in such arbitration. Article 5.5(b) of Resolution No. 01/2014/NQ-HDTP of the Council of Justices of the Supreme People’s Court (“Resolution 01”) is explicit:

b) Vietnamese Court does not have the power over request to set aside foreign arbitral awards, registration of ad-hoc foreign arbitral awards as stipulated in Point g Article 7(2) of the LCA. Foreign arbitral awards are recognized and enforced in Vietnam in compliance with the CPC’s [the Civil Procedure Code’s] provisions on the procedures for recognition and enforcement of foreign arbitral awards in Vietnam.

The Hanoi People’s Court applied that rule in Decision No. 03/2022/QDST-KDTM dated 22 February 2022, dismissing a set-aside application concerning an ICC arbitration with Vietnam as the place of arbitration. At the Supreme Court level, Supervisory Review Decision No. 03/2023/KDTM-GDT of 22 September 2023 likewise treated an ICC award rendered in an arbitration with its place of arbitration in Ho Chi Minh City as foreign, although that decision arose in the context of recognition proceedings.

“Dual-Nationality” arbitral awards2

Under the LCA, an arbitration administered by a Vietnamese arbitration institution such as VIAC is conducted pursuant to the LCA and that institution’s arbitration rules. Article 28.1 of the LCA expressly requires the arbitration rules of Vietnamese arbitration institutions to conform to the LCA. Accordingly, if the parties elect to have an arbitration administered by a Vietnamese arbitration institution, such an arbitration does not become a “foreign arbitration” within the meaning of Article 3.11 of the LCA even if the parties choose a place of arbitration outside Vietnam. Article 7.2(g) of the LCA gives Vietnamese courts jurisdiction to set aside the award, with territorial jurisdiction following the place where the tribunal rendered it. That conclusion is reinforced by Article 5.4(c) of Resolution 01, which expressly provides for the jurisdiction of Vietnamese courts where the tribunal renders its award outside Vietnam.

Assume, for example, that the parties submit their dispute to VIAC under the VIAC Rules but designate Singapore as the place of arbitration. Singapore courts would ordinarily exercise supervisory jurisdiction by virtue of Singapore being the place of arbitration. At the same time, from the perspective of Vietnamese law, the arbitration does not become a “foreign arbitration” merely by virtue of that designation, and Article 5.4(c) of Resolution 01 permits a Vietnamese court to assume jurisdiction if at least one party is domiciled in Vietnam. The award may therefore face set-aside proceedings in both countries, potentially under different standards and with different results. That said, the author has not identified any published Vietnamese court decision addressing a set-aside application concerning a VIAC arbitration with its place of arbitration outside Vietnam.

The table below summarizes the discussion above:

Enforcement

This classification of an arbitration as domestic or foreign under the LCA also has implications for enforcement proceedings, which may exacerbate the issues identified above.

For example, if the place of arbitration is outside Vietnam but the arbitration is nonetheless classified as domestic under the LCA, an award creditor may argue that Articles 66 and 67 of the LCA permit direct enforcement in Vietnam, although that route is likely to encounter practical hurdles. That is because Article 8.1 of the LCA links the competent enforcement agency to the place where the tribunal rendered the award. There will be no competent Vietnamese agency if the award was rendered abroad.

In the scenario of an arbitration for which Vietnam is the place of arbitration but which is administered by a foreign institution, resulting in the award being classified as a foreign award under the LCA, the award will not be directly enforceable in Vietnam and would instead need to be recognized before it can be enforced in Vietnam. Under Vietnam’s revised court regime, discussed here, recognition of a foreign award begins in the competent Regional People’s Court (“Tòa án nhân dân khu vực”, in Vietnamese) where the award debtor resides or the relevant property is located, with appeal to the provincial or municipal court above it and the further possibility of supervisory review by the Supreme People’s Court at the request of the Chief Justice or the Chief Procurator. A party wishing to set aside the award, but unable to do so because the award is not classified as a domestic award under the LCA, will therefore likely have to use the enforcement process to challenge the award instead.

Drafting implications

For arbitration clauses and arbitral proceedings with a nexus to Vietnam, the place of arbitration alone does not determine which country’s court has supervisory jurisdiction over an arbitral award. Parties should therefore consider the choice of arbitral institution and the place of arbitration together when drafting their arbitration clauses.

A clause capable of producing the “no-nationality” result described above is not unusual. A clause in substantially the following form is common in cross-border supply and services contracts with Vietnamese counterparties:

Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration administered by the Singapore International Arbitration Centre (“SIAC”) in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force, which rules are deemed to be incorporated by reference in this clause. The place of arbitration shall be Ho Chi Minh City, Vietnam.

Everything before the last sentence follows the SIAC model clause. The last sentence is commercially understandable: the Vietnamese party keeps the place of arbitration in Vietnam and may assume that Vietnamese courts will exercise supervisory jurisdiction, while the foreign party secures administration by an institution it trusts. Neither side has done anything careless. The clause nonetheless produces an award that no court is positioned to set aside. The Vietnamese courts decline jurisdiction because the arbitration is foreign under the LCA. At the same time, a foreign court would not ordinarily have jurisdiction to set aside an award whose place of arbitration is in Vietnam. The only remaining opportunity to challenge the award arises when recognition is sought under the New York Convention.

Because the arbitration clause is ordinarily negotiated before a dispute arises, the parties generally cannot know which of them will ultimately benefit, or suffer, from these consequences. The better course is therefore to avoid creating the mismatch in the first place.

If the parties wish to use a foreign arbitral institution such as ICC or SIAC, they may consider choosing a place of arbitration outside Vietnam, while providing separately that hearings may be held in Vietnam if convenient. If, instead, the parties wish to have Vietnam as the place of arbitration and Vietnamese courts exercise supervisory jurisdiction, they may consider choosing a Vietnamese arbitral institution such as VIAC. If commercial considerations nevertheless lead the parties to combine administration by a foreign arbitral institution with Vietnam as the place of arbitration, there does not appear to be a reliable drafting mechanism that eliminates the jurisdictional difficulties described above. The practical lesson is therefore a simple one: the choice of arbitral institution and the choice of place of arbitration should not be made in isolation. In the Vietnamese context, parties need to fully understand the particular consequences that may flow from certain combinations of the two, including for court supervision, the availability of set-aside proceedings, and the recognition and enforcement of any resulting award.

• 1The author uses the terms “no-nationality” and “dual-nationality” in this article as shorthand for these anomalous consequences for supervisory jurisdiction, rather than as formal classifications under the LCA or the New York Convention.
• 2Ibid.