Litigation in international arbitration: Soft law in comparison with procedural laws in international arbitration proceedings

07/04/2021
 

Lawyer Nguyen Manh Dzung

Managing Partner of Dzungsrt & Associates

VIAC Arbitrator

 

Law on Commercial Arbitration 2010 (LCA)- the procedural law governing arbitration proceedings whose seat is in Vietnam

When the place of arbitration[1] is Vietnam, the LCA governs the arbitration proceeding[2], therefore, it is a procedural law whose role is similar to the Civil Procedural Code 2015, which regulates the order and procedures for settling civil cases at Court[3]. When comparing the layout, both the LCA and the 2015 CPC have provisions on principles, jurisdiction, rights and obligations of parties in arbitration proceedings, order and procedures for initiating lawsuits, application of provisional emergency measures, Hearing and court’s  judgment, court’s decisions or arbitral award and their enforcement, etc. Despite many similarities, there are important differences between the two Laws, reflecting the characteristics of different dispute resolution methods. The LCA is heavily influenced by international treaties, most notably the 1958 New York Convention on the recognition and enforcement of foreign arbitral awards to which Vietnam has been a member state for 25 years[4]. Another international legal document that also has a major influence on the LCA is the United Nations Commission on International Trade Law (UNCITRAL)’s Model Law on International Commercial Arbitration, which was amended in 2006. Vietnam became an official member of UNCITRAL on December 18, 2018; however,  the LCA Drafting Committee of Vietnam Lawyers Association consulted the Model Law greatly in the drafting process. In addition, the phrase "Unless otherwise agreed by the parties or provided by the arbitration center's rules of proceedings " is frequently used[5], representing a basic principle of international arbitration, that of Party Autonomy. This principle is described in Clause 1, Article 4 of the LCA as arbitrators must respect the agreement of the parties[6]. Another basic principle in arbitration, which is the finality of an arbitral award, is also stipulated in Clause 5, Article 4. Therefore, the LCA does not provide for different levels of adjudication as CPC 2015. Also, there are no detailed provisions on the impartiality and independence of arbitrators[7], the conduct of defense counsel of lawful rights and interests of parties, evidence and sources of evidence, etc. as seen in the CPC. Matters not covered by the LCA 2010 will be governed primarily by (i) arbitration rules (e.g. ICC, SIAC, HKIAC or VIAC), (ii) parties’ arbitration agreement and (iii) international arbitration’s best practice that professional associations (e.g. IBA or ICCA) or arbitration bodies systematize and promulgate (soft law) as opposed to domestic arbitration law.

Additional sources of law in international arbitration: from best practices

The most common soft law is the IBA Rules[8] on the Taking of Evidence in International Arbitration 2010 (Rules on Evidence), IBA Guidelines on Conflicts of Interest in International Arbitration 2014 (Conflicts of Interest Guidelines) and IBA in International Arbitration 2013 (Guidelines on Party Representation), hereinafter referred to as the IBA Rules and Guidelines. In June 2015, The IBA Arbitration Committee conducted a global survey on the use of the IBA Rules and Guidelines in arbitration. The survey results confirm that the IBA Rules and Guidelines are widely used in International Arbitration with the Rule of Evidence being used the most popular, accounting for 57% of all arbitration cases reported in the Survey. Conflicts of Interest Guidelines ranks second with 48% of Respondent cases. In contrast, the Guidelines on Party Representation are not as popular with 16% of cases in the Survey[9]

Another previous survey on the use of soft law in International Arbitration conducted by Kluwer Arbitration Blog from February to March 2014 also found the IBA's Rules of Evidence most prevalent, followed by the Guideline on Conflicts of Interest, Guidelines on Party Representation, UNIDROIT Principles of International Commercial Contract and Lex Mercatoria. In addition, the instructions and procedures of the Chartered Institute of Arbitrators (CIArb) are also mentioned in this survey[10].

Since these soft laws are not legal documents issued by sovereign states like the LCA, they have no binding legal value, but only intended reference. However, soft law will be binding on the disputing parties and the arbitral tribunal if the parties agree to apply the soft law. In case there is no agreement, the arbitral tribunal may apply directly or refer to one or more specific soft laws during settlement, depending on the mandatory provisions[11] of the Law on arbitration proceedings or applicable arbitration rules. Under no circumstances shall the application of these soft laws be contrary to the mandatory provisions of the Law on Arbitration, the Arbitration Rules and parties’ agreement as a supplementary "source of law”.

Although the IBA Soft Laws were introduced in Vietnam in an IBA's Asia Pacific Arbitration Group (APAG) workshop in Hanoi on November 4, 2017 titled IBA APAG International Arbitration Training Day: Introduction of the IBA Soft Laws, but its practical application is miniscule. Vietnam International Arbitration Center (VIAC) has included the Guidelines on Conflict of Interest in the revised 2018 Arbitration Declaration as a mandatory procedure when appointing arbitrators in VIAC's cases. In a number of VIAC’s cases, parties used the IBA Guidelines on Conflict of Interest to defend the independence and impartiality of arbitrators and the Rules on Evidence to defend evidence. Soft law’s application may induce legal risks to the arbitral tribunal and parties. In Decision No. 11/2019/ QD-PQTT of the People's Court of Ha Noi issued on November 14, 2019, the Court ruled the application of the IBA's Rules of Evidence by the arbitral tribunal when considering and evaluating specific evidence where a party is absent and their witnesses cannot attend the evidence examination meeting violated Article 56, Clause 2 of the LCA (for full analysis, see Article "Enforceability of arbitral awards in Vietnam - alarming practice [12][1]")./.

*This research paper is made to order by the Science Council under Vietnam International Arbitration Centre (VIAC) and only reflects the author’s opinion. VIAC uploads this paper on its official website with the aim of providing valuable information for the reference of the Arbitrators, the parties, other participants in the arbitral proceedings pursuant to VIAC’s Rules of Arbitration, as well as those who are interested in arbitration. Any reference and citation to this research made by a third party shall not be valid or recognized by VIAC. VIAC shall not explain or answer any requests or inquiries related to this research from a third party.

 

[1] Seat/place of arbitration

[2] Article 1 provides the governing scope of the Law on Commercial Arbitration: This Law regulates commercial arbitration competence, arbitration forms, arbitration institutions and arbitrators; order and procedures for arbitration; rights, obligations and responsibilities of parties to arbitration proceedings; competence of Courts over arbitration activities; organization and operation of foreign arbitration in Vietnam and enforcement of arbitral awards.

[3] Article 1. Scope of regulation and task of the CPC: The CPC provides …. order and procedures for settlement of civil lawsuits and civil matters (hereinafter referred to as civil cases) at Court.....

[4] Vietnam ratified the 1958 New York Convention on September 12, 1995 and it took effect on December 11, 1995: https://uncitral.un.org / en / texts / arbitration / conventions / foreign_arbitral_awards / status2

[5] See Articles 7, 9, 10, 11, 12, 14, 31, 32, 34, 35, 38, 39, 40, 41, 54, 55, 58 and 63.

[6] Article 4. Principles for dispute settlement by arbitration

  1. Arbitrators must respect the agreement of the parties if it does not breach prohibitions and is not contrary to social morals.

[7] Article 4, Clause 2 of the LCA

  1. Arbitrators must be independent, objective and impartial and must comply with the provisions of law.

[8] IBA is the English abbreviation of International Bar Association - The International Bar Association is a professional social organization of the global bar association founded in 1947. It consists of 80,000 individual members who are lawyers from global leading law firms and 190 bar associations from 170 different countries: https://www.ibanet.org/About_the_IBA/About_the_IBA.aspx

[9] Report on the reception of the IBA arbitration soft law products dated September 16, 2016 at section 269.

[10] For more information, see: http://arbitrationblog.kluwerarbitration.com/2014/06/06/results-of-the-survey-on-the-use-of -soft-law-instruments-in-international-arbitration /? doing_wp_cron = 1590372304.6038091182708740234375

[11] Mandatory rules of applicable law on arbitration.

[12][first] Nguyen Ngoc Minh, Nguyen Thi Thu Trang, Nguyen Thi Mai Anh, Enforceability of arbitral awards in Vietnam - alarming practice, in The Asia-Pacific Arbitration Review 2021, Law Business Research, 2020.

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