RETROSPECTIVE LEGAL CONFLICT: ARBITRAL AWARD SET ASIDE DUE TO POST-AWARD DISCOVERY OF LEGAL PROCEEDINGS

S Investment JSC v. Q JSC—Decision No. 2542/2023/QĐ-PQTT

INTRODUCTION

The Court of Ho Chi Minh City issued a decision to set aside an award rendered by an Arbitral Tribunal under the Vietnam International Arbitration Centre (“VIAC”), based on a finding that the Arbitral Tribunal had breached fundamental principles of Vietnamese law by rendering an arbitral award despite the existence of criminal elements connected to the underlying dispute. This case highlights the delicate boundary between party autonomy in arbitration and the legal safeguards that protect public order.

SUMMARY OF FACTS

S Investment JSC (“S“) was the respondent in a dispute resolved by a VIAC tribunal under a contract for the transfer of land use rights in the Bac Phuoc Kien Residential Project, dated 29 March 2017, entered into with Q JSC (“Q“). In connection with the contract, the parties signed a handover memorandum regarding compensation documents on 31 March 2017.

S’s position

Company S, as Respondent in arbitration No. 63/20HCM, argued that the tribunal exceeded its jurisdiction by ruling on the return of land compensation documents, which were not part of the contract but arose from separate tripartite agreements in March 2017. It further claimed violations of fundamental principles of Vietnamese law, as the project was under C03 investigation and key documents were held by S.B Bank, preventing S from producing evidence. The tribunal’s refusal to suspend proceedings and rejection of S’s requests, according to S, showed lack of impartiality. Company S sought annulment of the award under Articles 68 and 69 of the Law on Commercial Arbitration.

Q’s position

Company Q maintained that the March 2017 tripartite minutes were contractual implementation documents and thus within scope. The arbitration clause under Article 15.6 clearly vested jurisdiction in VIAC, and both parties confirmed this in the April 2023 hearing minutes without objection. Q argued that the tribunal treated both sides equally, that the criminal investigation had already been closed without charges, and that S had in fact submitted the disputed documents to the tribunal. It requested rejection of S’s application for setting aside the award.

The Arbitral Tribunal’s approach

The Arbitral Tribunal, as reflected in the award excerpts cited by Company Q, considered the parties’ arguments, recorded their rights to equality and fair treatment, and concluded that the dispute fell within its jurisdiction under the arbitration clause. It found no basis for suspension pending criminal investigation and determined that Company S had been given adequate opportunity to present its case and evidence.

Under VIAC Award No. 63/20HCM dated 10 May 2023, S was ordered to return the land compensation documents to Q. Claiming that the award exceeded the scope of the arbitration agreement and breached fundamental principles of Vietnamese law, S submitted a petition to set aside the award.

THE COURT’S FINDINGS

The Court held that the petition fell within its jurisdiction under the Civil Procedure Code and the Law on Commercial Arbitration.

On the merits, the Court addressed two main arguments raised by S:

• Jurisdiction: The Court rejected the claim that the tribunal lacked authority to order the return of the compensation documents. It concluded that the handover was part of the contract performance. Given the arbitration clause in the contract designating VIAC as the dispute resolution forum, the matter fell squarely within the tribunal’s scope of authority. Moreover, S did not raise any objection to the tribunal’s composition during the proceedings and thus forfeited its right to challenge it later.
• Procedural Fairness and Evidence: The Court also dismissed the argument that S was denied a fair opportunity to gather evidence. According to VIAC’s Rules of Arbitration, the Arbitral Tribunal has no obligation to collect evidence on a party’s behalf. Furthermore, S did not seek judicial assistance for evidence collection.

However, during its review, the Court received a notice from the Ministry of Public Security stating that the underlying contract was linked to an ongoing criminal investigation (the VTP Group and SCB case). The compensation documents, according to the Ministry, had been sealed as evidence in the investigation. In light of this, the Court found that ordering the return of those documents in the arbitral award violated the fundamental principles of Vietnamese law.

Relying on Article 68.2(dd)  of the Law on Commercial Arbitration, the Court set aside VIAC Award No. 63/20HCM dated 10 May 2023.

Conclusion of the Court

The Court accepted S’s application and issued a decision to set aside the arbitral award.

OUR COMMENT

The Court’s approach illustrates adherence to the principle of limited judicial review in arbitration. In line with international arbitration standards, the Court confined its assessment to procedural matters – specifically jurisdiction and potential violations of fundamental legal principles – without delving into the merits of the dispute. This supports the autonomy and finality that underpin arbitral proceedings.

However, a critical legal question arises: At what point in time should a violation of fundamental legal principles be assessed? Legal orthodoxy dictates that the validity of an arbitral award should be determined at the time it was rendered. If the tribunal had no knowledge – or means of knowledge – of the criminal implications when it issued the award, then retroactively applying that context to set aside the award may lack a proper legal foundation. The Court’s position appears to allow such evaluation to extend beyond the issuance of the award, potentially into the enforcement phase. This broad temporal scope introduces legal uncertainty, diluting the finality of arbitration and exposing awards to post hoc challenges.

A notable legal question arises from this case: assuming that the Arbitral Tribunal becomes aware that the dispute may be connected to an ongoing or future criminal case, but there is insufficient evidence from the parties or from investigative authorities to warrant a decision to suspend the proceedings, and no other conclusive proof is available, is the tribunal obliged, when rendering its award, to take into account issues of public policy or fundamental principles of law? Or should it confine itself strictly to exercising its procedural powers and duties based on the case record and available evidence? And if the Arbitral Tribunal does not consider public policy in its deliberations, can the parties adequately request that the tribunal render an award with such considerations in mind?

Furthermore, under the Court’s approach in this case, an award, once rendered, may still be set aside if a criminal element subsequently emerges or if it is later found to contravene fundamental principles, even though such issues did not exist at the time of the hearing and award issuance. This raises the question: how long after its issuance must an award remain in effect before it can be deemed truly “safe” from the risk of being set aside?

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