FIRST-INSTANCE JUDGMENT SET ASIDE FOR BREACH OF THE PRINCIPLE OF NE BIS IN IDEM / RES JUDICATA IN A MARITIME CARGO DAMAGE CLAIM

Company A v. Company B – Ha Noi Court, Appellate Judgment No. 06/2021/KDTM-PT dated 26 March 2021

INTRODUCTION

This dispute arose from the consequences of a collision at sea on 8  August 2016 between vessel Thanh Dat 01-BLC and vessel Guo Shun 21 in the waters off Binh Thuan province, which caused the entire cargo of 131 coils / 2,708.96 tons of cold-rolled steel coils (“the Cargo”) to sink with the vessel. The case involved a chain of freight agency contracts, under which Company A (“A”) brought proceedings against Company B (“B”) – the party that directly operated vessel Thanh Dat 01-BLC – seeking indemnification in favor of Joint Stock Corporation M (“M”) for a total sum of corresponding to the 42% fault attributed to vessel Thanh Dat 01-BLC in the collision, as agreed between the parties.

The Hai An District Court accepted the case and rendered its first-instance judgment, granting the claimant’s claims in full under Judgment No. 07/2020/KDTM-ST dated 28 September 2020 (the “Hai An First-Instance Judgment”). M appealed, requesting that the first-instance judgment be set aside in its entirety on the grounds that its rights and interests had already been fully and comprehensively resolved by a separate judgment that had taken legal effect. Under Appellate Judgment No. 06/2021/KDTM-PT dated 26 March 2021, the Hai Phong City Court upheld the appeal, set aside the first-instance judgment and remanded the case for re-trial.

The case highlights two important legal issues, which will be addressed in two separate articles: the principle against re-litigation of the same dispute and the conditions for establishing standing to sue in maritime commercial disputes. This first article examines the principle against re-litigation (res judicata / ne bis in idem).

BACKGROUND

The Cargo, the Chain of Carriage Contracts and the Collision

Company D (“D”), the Cargo owner, entered into a contract of carriage with Company C (“C”). C engaged B to carry the Cargo under Freight Voucher No. 01/PVC dated 7 August 2016 (“Freight Voucher”) aboard vessel Thanh Dat 01-BLC from SSIT Phu My Port to Nghi Son Port, Thanh Hoa province.

Since C did not own any vessels and acted as a secondary carrier, it entered into a series of freight agency contracts to arrange for the carriage of the Cargo. Specifically, on 2 August 2016, C executed freight agency contracts with Company D1 (“D1″) and with A. A then executed Contract No. 02/08/2016/HĐVC/HL-HA with B, the party directly operating vessel Thanh Dat 01-BLC. The Cargo was accordingly carried aboard vessel Thanh Dat 01-BLC pursuant to the contract between B and A, together with the Freight Voucher.

The Cargo was insured by M under a Cargo Insurance Certificate, with D named as the insured and the Cargo aboard vessel Thanh Dat 01-BLC as the subject matter of insurance.

At 7:00 a.m. on 8 August 2016, vessel Thanh Dat 01-BLC departed the port. At approximately midnight of the same day, the vessel collided with vessel Guo Shun 21 in the waters off Binh Thuan province. The entire cargo sank with vessel Thanh Dat 01-BLC.

A survey report dated 21 November 2016 issued by Phuong Bac Surveying Joint Stock Company concluded that the primary cause of the accident was human error, in particular the negligence and inexperience of the Second Officer of vessel Guo Shun 21 and the Master of vessel Thanh Dat 01-BLC.

Insurance Indemnity, Subrogation and Apportionment of Fault

On 26 September 2016, the damaged cargo was sold as salvage for VND 3,500,000,000 (equivalent to USD 133,997.70). On 4 October 2016, D submitted a claim to M for compensation of VND 30,193,028,303 (equivalent to USD 1,155,935.23), being the assessed loss after deducting the salvage proceeds. On the basis of the Insurance Policy and the survey findings, M accepted the claim and paid D the full indemnity amount, as evidenced by a Receipt dated 12 December 2016. On the same date, D subrogated to M all rights and interests relating to the steel cargo carried aboard vessel Thanh Dat 01-BLC.

On 16 November 2017, the shipowners and the relevant parties executed a Fault Apportionment Agreement allocating 42% fault to vessel Thanh Dat 01-BLC and 58% fault to vessel Guo Shun 21. M and the owner of vessel Guo Shun 21 reached a settlement in respect of the 58% portion, and M waived all claims against the owner of vessel Guo Shun 21. In respect of the remaining 42%, M had not yet received any indemnification from the carrier, shipowner or manager of vessel Thanh Dat 01-BLC. On 7 August 2018, as subrogee of D, M brought proceedings against C before the Ngo Quyen District Court, Hai Phong City.

The Ngo Quyen District Court Judgment

Under Judgment No. 01/2020/KDTM-ST dated 10 January 2020 (the “Ngo Quyen First-Instance Judgment”), the court granted M’s claims in full and ordered C to pay M a total of VND 14,300,774,822, corresponding to the 42% fault attributed to vessel Thanh Dat 01-BLC. The judgment joined all relevant companies as parties to the proceedings and took legal effect upon the expiry of the appeal period without any appeal or protest being lodged.

The Proceedings Before the Hai An District Court and the First-Instance Judgment

After the Ngo Quyen First-Instance Judgment took legal effect, the representatives of C, A and D agreed that B – as the party that directly executed the contract of carriage and managed the operation of vessel Thanh Dat 01-BLC – was the party directly liable for the damage.

On that basis, A commenced proceedings against B before the Hai An District Court, claiming that B should indemnify M for a total of VND 15,123,133,648, comprising VND 12,681,071,887 representing 42% of the assessed loss and VND 1,765,839,260 in interest for late payment calculated from 7 August 2018 to 24 February 2020.

Under the Hai An First-Instance Judgment dated 28 September 2020, the court granted A’s claims in full and ordered B to pay M a total of VND 15,123,133,648 (comprising VND 12,681,071,887 in principal and VND 2,442,061,761 in interest for late payment calculated to the date of judgment on 28 September 2020). The judgment also declared that C was not required to pay M the sum of VND 13,822,368,356 as ordered under the Ngo Quyen First-Instance Judgment, which had already taken legal effect.

M’s Appeal

On 11 November 2020, M lodged an appeal requesting that the first-instance judgment be set aside in its entirety. M argued that the first-instance judgment had misrepresented its position in the proceedings and had misapplied the law, while all of M’s rights and interests had already been fully resolved and protected under the Ngo Quyen First-Instance Judgment, which had taken legal effect. M maintained that it had no claims of its own in the proceedings before the Hai An District Court and that the contractual dispute between A and B did not concern M.

At the appellate hearing, the claimant applied to withdraw its claim in full. The appellate panel declined to permit the withdrawal, as the defendant was absent from the hearing and the claimant had not produced evidence of the defendant’s consent to the withdrawal, as required under Article 299(1) of the Civil Procedure Code of Vietnam (“the CPC”).

THE APPELLATE COURT’S REASONING AND DECISION

Jurisdiction at First Instance

The Appellate Court confirmed that the dispute concerned a claim for cargo damage under a contract of carriage by sea, falling within the jurisdiction of the district-level court under Article 30(1), Article 35(1)(b) and Article 39(1)(a) of the CPC. As the defendant’s registered office was located in Hai An District, the Hai An District Court had jurisdiction to hear the case.

Breach of the Principle Against Re-litigation

The Appellate Court held that although the Ngo Quyen First-Instance Judgment and the Hai An First-Instance Judgment involved different claimants and defendants, the two cases concerned the same underlying dispute and were identical in substance and in the material facts. M’s rights and interests had already been protected by a judgment that had taken legal effect. The Hai An District Court’s decision to accept and re-adjudicate the same subject matter – in particular, its declaration that C was relieved of its obligations under a judgment already in force – constituted a re-trial of a concluded case, amounting to a serious procedural violation under Article 192(1)(c) of the CPC.

Lack of Standing to Sue

The Appellate Court further held that under Article 186 of the Civil Procedure Code, only an agency, organisation or individual with its own legitimate rights and interests at stake has standing to bring proceedings before a court. In this case, A had no right to commence proceedings for the purpose of protecting M’s interests, as M had not authorised A to bring the claim on its behalf. This constituted a second, independent ground for setting aside the first-instance judgment.

The Appellate Court’s Decision

On the basis of the two violations identified above, the Appellate Court upheld M’s appeal, set aside the Hai An First-Instance Judgment in its entirety and remanded the case to the court of first instance for re-trial under first-instance procedure.

OUR COMMENT

This case is not merely an illustration of procedural rules, but reflects fundamental principles of modern maritime law concerning the determination of jurisdiction, the binding force of judgments that have taken legal effect, and standing to sue in disputes arising from contracts of carriage of goods by sea.

The Principle Against Re-litigation

In maritime practice, the risk of conflicting judgments is relatively high, given the nature of maritime transport transactions which typically involve multiple parties – cargo owners, contractual carriers, actual carriers, insurers and other intermediaries. Accordingly, both international and domestic legal systems have established mechanisms to ensure the finality of disputes and to prevent a matter from being litigated more than once before different tribunals.

Two related but conceptually distinct doctrines serve this purpose: res judicata and ne bis in idem. While they are often cited together and share the common objective of preventing repetitive litigation and ensuring the stability of judicial decisions, each operates according to its own logic and scope. Both principles share the common objective of protecting defendants from being exposed to multiple proceedings in respect of the same legal obligation.

Res Judicata

Res judicata, also known as claim preclusion, refers to the legal doctrine meant to bar the re-litigation of a claim between the same parties. In the case of res judicata, the matter cannot be raised again, either in the same court or in a different court. Four elements must generally be present for the doctrine of res judicata to apply:

• The court must have had competent jurisdiction over both the subject matter in dispute and the parties involved;
• The judgment must have been rendered on the merits;
• The parties in the subsequent proceeding must be the same or in privity with those in the prior proceeding; and
• The cause of action in the second proceeding must be the same as or substantially identical to that which was litigated in the first

In the present case, the Ngo Quyen District Court had already rendered a binding judgment comprehensively resolving M’s claim for indemnification from C. That judgment took legal effect upon the expiry of the appeal period without challenge. The subsequent proceedings brought by A before the Hai An District Court seeking compensation for the same cargo loss from the same maritime incident, on behalf of the same beneficiary M fell within the scope of the subject matter already adjudicated.

The Hai An District Court’s decision not only to accept the case but also to issue a judgment expressly releasing C from its obligations under the Ngo Quyen First-Instance Judgment constituted a direct encroachment upon the binding authority of a prior judgment, in clear violation of the principle of res judicata. As the Appellate Court correctly held, this amounted to a serious procedural violation under Article 192(1)(c) of the Civil Procedure Code of Vietnam.

Ne Bis in Idem

While res judicata operates against re-litigation of matters that have already been conclusively determined, ne bis in idem prevent the same dispute from being simultaneously or successively prosecuted before multiple tribunals. Non bis in idem is a legal doctrine to the effect that no legal action can be instituted twice for the same cause of action.

The analytical framework for ne bis in idem in civil matters centres on two requirements, commonly referred to as the idem and the bis criteria. Accordingly:

• Idem: whether the subject matter of the second proceedings is the same as that which was the subject of the first proceedings (facts and legal offence); and
• Bis: whether there is a duplication of proceedings, or a second set of proceedings involves the same subject matter as a prior concluded case.

In this case, the proceedings before the Hai An District Court gave rise to a direct ne bis in idem problem. A commenced those proceedings while a Judgment, which had already resolved M’s rights in full had taken legal effect. The essential substance of the claim before the Hai An District Court was not a new or independent legal dispute arising from different facts: it was an attempt to re-adjudicate the liability arising from the same collision, the same cargo loss, the same insurance indemnity, and the same fault apportionment agreement.

The Hai An proceedings, in effect, constituted a second action on a matter already determined, in violation of the ne bis in idem principle as codified in Article 192(1)(c) of the Civil Procedure Code.

CONCLUSION

The Appellate Court’s decision to set aside the first-instance judgment in this case reflects a principled and correct application of the doctrines of res judicata and ne bis in idem. Once the Ngo Quyen First-Instance Judgment had taken legal effect and comprehensively resolved M’s rights arising from the cargo loss, no court was at liberty to re-examine the same underlying dispute, whether by accepting a fresh claim between nominally different parties, or by issuing a judgment that purported to modify the obligations already determined by a binding decision. The Hai An District Court’s failure to observe this bar constituted a serious procedural violation, which the Appellate Court was right to correct.

Taken together, these two principles serve a single overarching objective: to ensure that judicial decisions, once final, carry the force and permanence that the rule of law demands. In the multi-party environment of maritime commerce, strict observance of this objective is not merely a matter of procedural correctness, but a prerequisite for the stability and predictability of dispute resolution.

The separate but equally significant questions of title to sue and the insurance subrogation mechanism, both of which were also in issue in this case, will be examined in the next article in this series.

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