Dispute settlement by non-public arbitration helps enterprises keep confidential information about disputes that may affect their production and business activities. However, to resolve a dispute by commercial arbitration, the two parties must have an arbitration agreement and must meet the requirements on form as well as the content. The arbitration agreement in the contract is only invalid based on one of the grounds specified in Article 18 of the Commercial Arbitration Law: 

1. “Disputes arise in the domains falling beyond the arbitration’s jurisdiction defined in Article 2 of this Law.
2. The arbitration agreement maker has no competence defined by law.
3. The arbitration agreement maker has no civil act capacity under the Civil Code.
4. The form of the arbitration agreement is incompliant with Article 16 of this Law.
5. A party is deceived, intimidated or compelled in the course of making the arbitration agreement and requests a declaration that such arbitration agreement is invalid.
6. The arbitration agreement breaches prohibitions specified by law.”

(i) Disputes arise in the domains falling beyond the arbitration’s jurisdiction specified in Article 2 of the Law on Commercial Arbitration

The ground leading to the invalid arbitration agreement is the case where the dispute is beyond the jurisdiction of the arbitrator. Here, the term “beyond the jurisdiction of arbitration” refers to a dispute that cannot be resolved by arbitration because these disputes fall under the exclusive jurisdiction of the Court. For example: 

• Civil lawsuits involving rights to properties being immovables in the Vietnamese territory; or 
• Divorce case between a Vietnamese citizen and a foreign citizen or a stateless person if both spouses reside, work or live permanently in Vietnam; or 
• Other civil lawsuits where parties are allowed to choose Vietnamese Courts to settle according to Vietnamese law or International treaties to which the Socialist Republic of Vietnam is a signatory and parties agreed to choose Vietnamese Courts 

belong to Exclusive jurisdiction of Vietnamese Courts (Article 470.1 of the Civil Procedure Code).

Each country will decide which disputes whether or not to be settled by arbitration based on its own economic, social and political policies. Usually, these issues are family relations, criminal offenses, labor or employment complaints, bankruptcy, etc. Article 2 of the Commercial Arbitration Law provides for jurisdiction of arbitration to settle disputes, whereby the arbitrator may resolve the dispute in one of the following three situations:

• Disputes between the parties arising from commercial activities. It includes all activities that are legally defined as commercial activities, that is, activities aimed at generating profits, including buying and selling of goods, providing services, investing, promoting trade and other activities for profit purposes (Article 3.1 of the Commercial Law).
• Disputes arise between parties in which at least one party has commercial activities.
• Other disputes between the parties as provided for by law shall be resolved by arbitration

ii) The person who has entered into the arbitration agreement is not competent as prescribed by law

A person who has entered into an arbitration agreement without jurisdiction under the law is a person who enters into an arbitration agreement when (1) is not the legal representative or legally authorized person, or (2) is a legally authorized person but is beyond the scope of authorization.

• The person who made the arbitration agreement is not the legal representative or the legally authorized person

If the person establishing the arbitration agreement is not the legal representative or the legally authorized representative, then according to Article 3.2 of Resolution 01/2014, that arbitration agreement is in principle null and void. However, if, in the course of making or performing an arbitration agreement, or in an arbitration proceeding, a person competent to conclude an arbitration agreement has recognized the arbitration agreement or knows about such agreement without objecting, the agreement shall be such arbitration agreement is not void. This is consistent with the provisions of Article 142 of the 2015 Civil Code.

• The person who made the arbitration agreement is a person who is legally authorized but exceeds the scope of authorization

The same is true if the person who entered into the arbitration agreement is a legally authorized person but exceeds the scope of the authorization, if, in the course of making or performing the arbitration agreement, or in the arbitration proceedings, the person having If the signing authority has recognized the arbitration agreement or knows about it without objecting, the arbitration agreement is not invalid. This is consistent with the provisions of Article 142 of the 2015 Civil Code.

In cases involving foreign countries according to Article 663 and Article 664 of the 2015 Civil Code, Vietnamese law does not automatically apply. The signator’s lack of authority or excess of authority is considered in accordance with the applicable law and is determined in accordance with the conflict of law rules set out in Articles 673, 674, 676, 683 and the specific provisions in the third section of the Civil Code 2015.

(iii) The person making the arbitration agreement does not have the civil act capacity as prescribed by the Civil Code.

Article 459.1 of the Civil Procedure Code provides that the applicable law to consider the signing capacity of a party is “the law applicable to each party.” The panel must rely on the applicable law to each party to determine whether the person signing the arbitration agreement has the capacity to enter into such an agreement, therefore, this law is not automatically the law of Vietnam.

As for individuals, according to Article 3.3 of Resolution 01/2014, the minors or the persons incapable of civil acts. In this case, the court must collect evidence that the person that negotiates the arbitration agreement is not capable of civil acts, including papers bearing his/her date of birth, a conclusion by a competent authority or declaration by a court that such per person is not capable of civil acts.

As for legal entities, the Judge will consider the civil act capacity of the legal representative or the authorized representative to enter into an arbitration agreement.

(iv) The form of the arbitration agreement is not consistent with the provisions

The arbitration agreement may be established in the form of an arbitration clause in a contract or in the form of a separate agreement.

The arbitration agreement must be in writing. The following forms of agreement are also considered to be established in writing:

• Agreements are established through exchanges between the parties by telegram, fax, telex, email and other forms as prescribed by law;
• The agreement is established through the exchange of written information between the parties;
• The agreement is recorded in writing by a lawyer, notary public or competent organization at the request of the parties;
• In the transaction, the parties refer to a document that can represent the arbitration agreement such as a contract, document, charter of the company and other similar documents;
• Through an exchange of petitions and defenses in which the existence of an agreement is stated by one party and not denied by the other.

In case there are more than one arbitration agreement established with respect to the same content of dispute, the last legally established arbitration agreement by time shall prevail.

In case there is both a clause on selection of a court and an arbitration clause is established, but the parties do not have a new agreement or a new agreement on a competent authority to settle the dispute, the court must based on Article 2.4 of Resolution 01/2014 to decide as follows:

• In case the plaintiff requests the arbitrator to settle the dispute before requesting the court to settle the dispute or requests the arbitrator to resolve the dispute when the court has not yet accepted the case, the court shall base itself on the provisions of article 6. Law on Commercial Center to refuse to accept the case within 05 working days from the date of receiving the petition;
• When disputes are submitted to arbitration, the Court must consider accepting and settling disputes according to general procedures.
• In case the Court has accepted the case but discovers that the dispute has requested arbitration before the time the Court accepts the case, the Court shall, based on the provisions of Point i, Clause 1, Article 192 of the CPC, issue a decision to terminate the dispute. only settle the case because it is not within the jurisdiction of the Court, return the petition and the documents attached to the petition.

(v) One of the parties is deceived, threatened or coerced in the process of establishing the arbitration agreement and requests to declare the arbitration agreement null and void.

The validity of the arbitration agreement must be considered separately from the contract. Any claim that the arbitration agreement is void because one party believes that it was deceived, threatened or coerced in the course of entering into the arbitration agreement must be considered in accordance with Article 3. and Article 127 of the Civil Code.

Article 3. Basic principles of civil law

1. Every person shall be equal in civil relations, may not use any reason for unequal treatment to others, and enjoy the same protection policies of law regarding moral rights and economic rights.
2. Each person establishes, exercises/fulfills and terminates his/her civil rights and obligations on the basis of freely and voluntarily entering into commitments and/or agreements. Each commitment or agreement that does not violate regulations of law and is not contrary to social ethics shall be bound by contracting parties and must be respected by other entities.
3. Each person must establish, exercise/ fulfill, or terminate his/her civil rights and/or obligations in the principle of goodwill and honesty.
4. The establishment, exercise and termination of civil rights and/or obligations may not infringe national interests, pubic interests, lawful rights and interests of other persons.
5. Each person shall be liable for his/her failure to fulfill or the incorrect fulfillment of any such civil obligations.

Article 127. Invalidity of civil transactions due to deception, threat or compulsion

Any party entering into a civil transaction as a result of deception, threat or compulsion has the right to request a court to declare such transaction invalid.

Deception in a civil transaction means an intentional act of a party or a third person for the purpose of misleading the other party as to the subject, the nature of the entity or contents of the civil transaction which has caused the other party to enter into such transaction.

Threat or compulsion in a civil transaction means an intentional act of a party or a third person which compels the other party to conduct the civil transaction in order to avoid danger to the life, health, honor, reputation, dignity and/or property or that of its relatives.

(vi) The arbitration agreement violates the prohibition of law

Arbitration agreement is an agreement between the parties on the settlement by arbitration of disputes that may arise or have arisen. Thus, the arbitration agreement must fully comply with the provisions of the law on form and content, and must not violate the prohibition of the law.

The prohibition of the law is the provisions of the law that do not allow the subject to perform certain acts. Social ethics are common standards of behavior in social life, which are recognized and respected by the community.

Above are some of our company’s analyses on this issue. If you need more detailed advice and answers as well as how to access this service, please contact directly the Deputy Director of Sales: Lawyer Nhat Nam via hotline: 0912.35.65.75, 0912.35.53.53 or call the toll free legal consultation hotline 1900.6575 or send a service request via email: lienheluathongbang@gmail.com

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