Shortcomings of Law provisions on the Enforcement of Arbitral Awards

Sep 01, 2020
This statement was given at the Conference on Risk Prevention and Dispute Resolution by Arbitration in Construction. The Conference was organized by the Vietnam International Arbitration Center (VIAC) in collaboration with the Advocacy Committee to establish the Vietnam Construction Law Association this morning (June 16th, 2020) in Hanoi.

At the Conference, Ms. Nguyen Thu Ha of General Department of Civil Judgment Enforcement of Ministry of Justice claimed that the law provisions on the enforcement of arbitral awards still had many drawbacks.

Regarding the person requesting enforcement of an arbitral award, Ms. Ha stated that according to Clause 1, Article 31 of the 2014 Law on Enforcement of Civil Judgments (LECJ), Parties including the judgment creditors and the judgment debtors are entitled to request the enforcement of decisions. Meanwhile, the Law on Commercial Arbitration (LCA) in 2010 only stipulates that the party in favour of whom the award is issued has the right to request for the enforcement of the arbitral award. Therefore, current legislations have not specifically provided the circumstances in which the party to comply with the award wants to request the enforcement of an arbitral award whereas the creditor has yet to request.

As for the procedure for receiving and accepting arbitral awards and decisions, according to Ms. Ha, pursuant with Clause 1, Article 66 of the LCA in 2010, past the lime limit for complying with an arbitral award, if the party to comply with the award fails to voluntarily comply with it and does not request cancellation of the award under Article 69 of the LCA in 2010, the party in favour of whom the arbitral award is issued may request in writing the competent civil judgment enforcement agency to enforce the award.

Nevertheless, the problem is that the effective date of the Arbitral Tribunal's award is not the date on which the Arbitral Tribunal's award is enforced at the competent civil judgment enforcement agency. The effect of the arbitral award is determined as provided in Article 61 and Article 66 of the LCA in 2010. Under Point g, Clause 1, Article 61 of the 2010 LCA, the arbitral award includes " Time limit for enforcement of the award”.

“Therefore, in order to establish the conditions to receive requests for awards enforcement, the civil judgment enforcement agency must base on these regulations to determine two issues: first, whether the time limit for enforcement of the award has expired; second, whether the party to comply with the award requests cancellation of the arbitral award. For ad hoc arbitration's awards, the creditor may request in writing the competent civil judgment enforcement agency to enforce the award after it is registered under Article 62 of the LCA”, Ms. Ha emphasised.

Article 62 of the LCA 2010 stipulates that: within 01 year after an arbitral award is issued, the party requesting registration of an award of ad hoc arbitration shall file an application for such registration to the competent court. After receiving the request for registration of the arbitral award, the court shall make registration or refuse to make registration of the award.

Thus, in order to receive a request for award enforcement, the civil judgment enforcement agency must require the parties to prove that the arbitral award has been registered at the Court. However, confirming the legal status of the arbitral award meets many obstacles, in which the requester must prove that the arbitral award is not cancelled by the Court.

In many cases, the parties who request the competent Court to confirm that the arbitral award is not cancelled do not receive any responses from the Court, leading to the judgement enforcement dossiers at the civil judgment enforcement agency being hindered or not accepted due to the inability to confirm the legal status of the award. Moreover, whether determining the legal status of an arbitral award is the responsibility of the civil judgment enforcement agency or of the parties has not been clearly defined, resulting in difficulties in accepting requests for enforcement of arbitral awards. With regard to this matter, in Petition No.1680/PTM-VP dated 14 July 2017 of the Vietnam International Arbitration Center on the enforcement of arbitral award, one of the shortcomings when submitting requests for enforcement of arbitral awards is that the civil judgment enforcement agency obliges the parties to provide the Court's certification of the acceptance and settlement of the request for cancellation of the arbitral award.

While the Court does not have any process or procedures to issue such Certificate, the issuance of the certificate is entirely up to the practice of each Court. The fact that the enforcement of the arbitral award depends on the Court's issuance of a certificate limits the legitimate rights and interests of the creditor. On the other hand, the procedure for Court confirmation is an independent administrative procedure that must be done before filing a request to civil judgment enforcement agency, doubling the process of requesting enforcement of an arbitral award. At the same time, the Petition also mentioned a drawback regarding the provisions that the requesting party must have evidence that the arbitral award has been valid for enforcement.

In fact, the requesting party will find it very difficult to know whether the court is accepting or settling the request for cancellation of the arbitral award. Meanwhile, the party to comply with arbitral award, who submits the request of cancellation of the arbitral award, and the Court with jurisdiction to consider cancelling the arbitral award can easily provide information. Hence, regulating that the party to comply with the arbitral award or the Court bears the obligation to provide information would be more reasonable. It can be seen that the aforementioned proposals partly reflect the limitations in accepting the current request for enforcement of an arbitral award.

Regarding the statute of limitations for enforcement of the arbitral award, Ms. Ha said that according to the law on enforcement of civil judgments (Article 30 of the Law on LECJ, amended and supplemented in 2014 and Article 4 of Decree No. 62/2015/NĐ-CP of the Government on Guidelines for civil judgment enforcement law, amended and supplemented by Decree No. 33/2020 / ND-CP dated 17 March 2020), the statute of limitations for requesting enforcement of judgment is 5 years from the date on which the judgment or decision takes legal effect. Where the time limit for performing an obligation is specified in the judgment or decision, the 5-year time limit shall be counted from the date the obligation is due. For judgments or decisions to be enforced periodically, the 5-year time limit applies to each period from the date the obligations are due.

According to Clause 5, Article 61 of the LCA, the arbitral award is final and takes effect from the date of its issuance. However, Clause 2, Article 66 of the 2010 LCA regulates that: for ad hoc arbitration's awards, the creditor may request in writing the competent civil judgment enforcement agency to enforce the award after it is registered under Article 62 of the LCA, and the time limit for registration is 1 year from the date of issuance of the award. The question is when the statute of limitations for the execution of the judgment exactly begins: from the date of the issuance of the arbitral award or the date it is registered in court? The inconsistency between the above provisions has made the statute of limitations for enforcement of the arbitral award reduce to less than 4 years from the effective date instead of 5 years. Therefore, Ms. Ha insisted that there should be more specific regulations on this matter.

In addition, regarding the jurisdiction to enforce arbitral awards and decisions, according to Article 8 of the 2010 LCA, civil judgment enforcement agencies competent to enforce arbitral awards are civil judgment enforcement agencies of provinces or centrally run cities in which arbitration councils issue the awards. In fact, the arbitration institutions are usually established in Hanoi and Ho Chi Minh City. Accordingly, arbitration awards are mainly issued at arbitration centres located in these two cities.

However, if the parties have no headquarters in these two cities, it is very difficult for them to file a request for enforcement of the award. On the other hand, as provided in Article 55 of the LECJ amended and supplemented in 2014, the Head of the civil judgment enforcement agency must entrust the enforcement to the civil judgment enforcement agency where the judgment debtor has assets, works, resides or has headquarter.

In other words, civil judgment enforcement agencies of provinces or centrally run cities in which arbitration councils issue the awards may have to entrust the enforcement to where the judgment debtor has assets, works, resides or has headquarter; hence the prolonged enforcement period.

About the request for cancellation of the arbitral award, Ms. Ha stated that this matter is specified in Chapter XI of the LCA in 2010 (from Article 68 to Article 72) and Article 14 of Resolution No. 01/2014/NQ-HĐTP dated 20 March 2014 of the Council of Judges of the Supreme People's Court guiding the implementation of LCA in 2010, in which specific provisions on grounds and procedures for requesting and considering canceling an arbitral award. However, there is a lack of provisions imposing liabilities on parties in case one party requests cancellation of the arbitral award but is not recognized by the court and the extension of the enforcement of the award causes damage to the creditor. As a result, the debtor often to finds ways to make a request for an objection so that the award may be rejected, leading to lost time and costs for the creditor.

Consequently, it is necessary to have stricter provisions on requesting cancellation of arbitral awards and more regulations that impose responsibilities on the party requesting cancellation in order to minimize the abuse of the right to request cancellation of arbitral awards in order to extend the enforcement time.

Enforcement of Commercial Arbitration’s awards is important not only in ensuring the rights and interests of the parties to the dispute, but also in creating a fair business environment for entities, improving investment environment and contributing to economic development. Therefore, the completion of legal provisions on enforcement of awards and decisions of commercial arbitration as well as the amendment of the LCA based on practice in reality is extremely necessary.

Therefore, in order to improve the enforcement of arbitral award, Ms. Ha believed coordination between commercial arbitration with the civil judgment enforcement agency in receiving petitions for judgment execution, organizing judgment execution etc. is necessary, thereby synthesizing problems, finding causes and proposing solutions to ensure positive results and improve the quality of arbitral awards.

At the same time, arbitrators analyze and explain legislations and assist parties to negotiate, ensuring their legitimate rights and interests. The parties are encouraged to cooperate and provide sufficient information to the Commercial Arbitrators; and when participating in the settlement pursuant to Article 48 of the LCA, they may request the Commercial Arbitrators to apply the interim measures specified in Article 49 of the LCA to ensure the resolution process and the arbitral award is respected and strictly observed.

Credit: https://enternews.vn/quy-dinh-phap-luat-ve-viec-thi-hanh-phan-quyet-trong-tai-con-nhieu-bat-cap-175357.html

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