COURT OF APPEAL UPHOLDS RECOGNITION AND ENFORCEMENT OF ICSID AWARD IN FAVOUR OF THE VIETNAMESE GOVERNMENT

Quyết định: số 40/2024/QĐ-PT ngày 15/07/2024 của TAND cấp cao tại TP Hồ Chí Minh Người; được thi hành án: Ủy ban nhân dân TP HCM (đại diện Nước Cộng hòa Xã hội Chủ nghĩa Việt Nam ; Người phải thi hành án: 2.1. Ông Shin Dong B – Yêu cầu công nhận và cho thi hành tại Việt Nam phán quyết kinh doanh, thương mại của Trọng tài nước ngoài

This case concerns a request for recognition and enforcement in Viet Nam of an arbitral award rendered by the International Centre for Settlement of Investment Disputes (“ICSID”) in favor of the Government of Viet Nam. The award had rejected all claims brought by a Korean investor, Mr. Shin Dong B, and ordered him to pay approximately USD 1.9 million in arbitration and legal costs.

The High Court in Ho Chi Minh City dismissed the investor’s appeal and affirmed the lower court’s decision to recognize and enforce the ICSID award in Viet Nam, finding that the arbitration proceedings and the composition of the tribunal complied with the applicable investment treaty and procedural rules.

BACKGROUND

Mr. Shin Dong B, a Korean national holding 49% of the charter capital in TA Company Limited (“TA”), initiated arbitration proceedings against the Government of Viet Nam under the 2004 Viet Nam–Korea Bilateral Investment Treaty (“BIT”), pursuant to the ICSID Additional Facility Rules. The dispute related to an investment project involving the lease of land for the TA warehouse project in Ho Chi Minh City.

On 29 October 2020, an ICSID tribunal issued its award in Case No. ARB(AF)/18/2, dismissing all of the investor’s substantive claims and ordering him to reimburse 75% of the Government’s arbitration and legal costs—USD 110,308.5 and USD 1,795,230.63 respectively, totaling USD 1,905,538.68.

The Committee of Ho Chi Minh City (“the Committee”), representing the Government of Viet Nam pursuant to the Prime Minister’s authorisation, subsequently filed an application before the Ho Chi Minh City Court for recognition and enforcement of the ICSID award.

THE COURT’S DECISION

On 29 September 2023, the Ho Chi Minh City Court issued Decision No. 2126/2023/KDTM-ST recognizing and enforcing the ICSID award in Viet Nam. The court held that the application met the requirements under Article 16 of the Viet Nam–Korea BIT and Articles 424 and 451 of the Civil Procedure Code 2015, and that the award had become final after the lapse of three months without any setting aside or revision proceedings.

The court further decided to maintain two interim measures previously granted in 2021 to secure enforcement.

THE APPEAL

Mr. Shin Dong B and TA Company Limited appealed the recognition decision, arguing that the ICSID tribunal was improperly constituted, that the arbitrators were not independent or impartial, that the arbitration procedure was inconsistent with the parties’ agreement, and that the Vietnamese translation of the award contained serious errors. They also requested the setting aside of the interim measures.

The appellants contended, among other things, that:

• Two arbitrators failed to disclose prior professional relationships with the Government of Viet Nam or Vietnamese enterprises, allegedly violating Article 13.2 of the ICSID Additional Facility Rules;
• The appointment of one arbitrator by Viet Nam was invalid because it occurred after the 90-day period prescribed by Article 11.3 of the BIT;
• The selection of the tribunal’s president lacked transparency; and
• The tribunal disregarded crucial evidence and misinterpreted the parties’ contracts.
• They also raised objection to the determination of debtors involving TA, since the arbitral award did not contain any content specifying TA owed any payment obligation to the Government of Vietnam.

THE HIGH PEOPLE’S COURT DECISION

Nature of the award

The ICSID award, rendered in Singapore under the Additional Facility Rules pursuant to [Article 9.4.b] of the BIT, was final and enforceable after three months with no annulment or review proceedings. Given that both Viet Nam and Singapore are parties to the 1958 New York Convention, the award met all criteria for recognition under Article 424 of the Civil Procedure Code.

Inclusion of TA Company Limited

The Court upheld the lower court’s finding that TA Company Limited was properly listed as a party subject to enforcement. TA was determined as debtor in the request for enforcement of the creditor, had directly participated in the underlying investment contracts and possessed assets in Viet Nam relevant for enforcement. This designation complied with Article 452.1 of the Civil Procedure Code.

Alleged translation errors

The appellants’ claim of mistranslation was rejected. The Vietnamese version of the award had been duly notarised and certified under [Articles 92.2, 95, and 96.3] of the Civil Procedure Code and [Article 4] of the New York Convention. Minor wording differences did not alter the meaning of the award, and no alternative certified translation was submitted.

Tribunal composition and impartiality

The Court found that the ICSID tribunal was properly constituted. The Government’s appointment of its arbitrator on 08 June 2018 fell within the 90-day limit under Article 11.1 of the BIT, and there was no evidence of nondisclosure or bias under Article 13.2 of the ICSID Additional Facility Rules. The supporting documents filed by the appellants were uncertified and held no evidentiary value. Accordingly, the Court held that the tribunal was independent and lawfully formed.

Interim measures and final outcome

The Court affirmed the continuation of two interim measures ordered in 2021 to secure enforcement, as the recognition of the award was valid. Finding no new evidence or legal basis for appeal, the High People’s Court dismissed the appeal, upheld Decision No. 2126/2023/KDTM-ST, and ordered the appellants to bear appellate fees. The decision took immediate effect upon issuance.

OUR COMMENT

The importance of the matter of admissibility of evidence

One of the main reasons the Court rejected the argument from the Claimant regarding the Tribunal’s impartiality is the inadmissibility of evidence. According to the Civil Procedure Code, there is only one provision mentioned the formality of evidence submitted along with the request for enforcement of foreign arbitral award, which states that if the documents are in foreign language, the submission must be completed along with a certified translation of such documents.

However, the Court seems to apply further the requirements set forth in Articles 95 and 96 of the Civil Procedure Code, which regulate the admissibility of evidence in general proceedings to resolve the dispute, for the debtor raising objection to the request for enforcement. According to these provisions, with respect to the written evidence, besides the certified translation of document in foreign language, the litigant must submit the original or certified copy (by the notary’s office or competent authority) of such evidence. The judgment specifically sets out the principle that if the rule on the formality of the evidence is not followed, the Court shall not be bound to consider such evidence.

On the determination of the award’s debtor or party subject to enforcement

The central issue in this award is that the Court identified TA as the debtor of the ICSID award, based on the Committee’s determination of the award creditor. This conclusion is particularly contentious because TA did not participate in the arbitration proceedings, serving only as a witness. The Court arrived at its decision by drawing an analogy to another provision of the Civil Procedure Code concerning the identification of defendants in dispute resolution cases. The main concern is whether this determination could negatively impact the enforcement stage of the award. Specifically, it raises the question of whether the enforcement agency could impose relevant injunctions on TA’s assets. If this is the case, the Court’s conclusion may appear unconvincing and could be seen as violating the principle of separating the liabilities of an equity member from those of the company itself. It is worth noting that Mr Shin Dong B. only held partial equity of the company, equivalent to 49% of its charter capital.

This article aims to furnish our clients and contacts with general information on the relevant topic for reference purposes only, without creating any duty of care on the part of ANHISA. The information presented herein is not intended to serve, nor should it be considered, as a substitute for legal or other professional advice.

ANHISA LLC AND OUR EXPERTISE

ANHISA LLC is a boutique law firm specializing in Dispute Resolution, Shipping and Aviation. Being the leading lawyers in various fields of law, our qualified, experienced, and supportive team of lawyers know how to best proceed with a case against or in relation to Vietnamese parties and are well equipped to provide clients with cost-effective and innovative solutions to their problems.

Regarding dispute resolution, we have represented Vietnamese and foreign clients in the resolution of disputes involving maritime, construction, commercial and civil matters. Our lawyers are well-equipped to offer services on a wide range of disputes and conflicts, whether cross-border or purely domestic, to appear before any Judges or Arbitral Tribunals. The firm is prepared to assist clients in designing the appropriate dispute resolution procedure to help resolve conflicts as efficiently and cost effectively as possible, which may involve combining elements of mediation and other methods such as arbitration.