WHEN EFFICIENCY MEETS PARTY AUTONOMY: CROSS-BORDER ENFORCEMENT RISKS IN ICC EXPEDITED ARBITRATION

U Company Limited v. D Steel Joint Stock Company – Decision No. 16/2019/QĐKDTM-ST dated 27 November 2019 of the Da Nang City Court

This case concerns a request for recognition and enforcement in Vietnam of a foreign arbitral award in a commercial matter. The Da Nang City Court considered the request filed by U Company Limited (Philippines) (“U”) against D Steel Joint Stock Company (Da Nang, Vietnam) (“D”) for recognition and enforcement of an award rendered by the International Court of Arbitration of the International Chamber of Commerce (“ICC”).

The decision reaffirms the Vietnamese courts’ stance in applying the 1958 New York Convention and domestic law to recognize foreign arbitral awards, particularly where the parties initially agreed on a three-member tribunal but the case was resolved under the ICC expedited procedure by a sole arbitrator.

CASE BACKGROUND

The parties entered into and performed a contract for the sale of high-grade steel billets, Contract No. DNY-UNI-12.06.2017 dated 12 June 2017, with a total contract value of USD 2,430,000.

Article 13 of the contract provided that any dispute arising would be settled by arbitration under the Rules of Arbitration of the ICC by a tribunal of three arbitrators, seated in Singapore.

Following a dispute, on 28 December 2017, U filed a claim before the ICC International Court of Arbitration. The Final Award No. 23329/PTA/ASB/HTG dated 19 October 2018 (and an addendum dated 11 December 2018) resolved all claims in favor of U and ordered D to pay damages for breach of contract.

U subsequently applied to the Da Nang City Court for recognition and enforcement of the award in Vietnam.

DA NANG COURT’S ANALYSIS

Arbitration Agreement and Procedure:

The Court found that the parties had entered into a valid written arbitration agreement, clear and comprehensive in scope. The agreement had not been annulled by any Singaporean court and did not fall within any of the grounds for non-recognition under Article 459 of the Civil Procedure Code or Article 5 of the 1958 New York Convention.

Proper and Timely Notice:

D was duly and timely notified of the statement of claim, the appointment of the arbitrator, and the arbitral proceedings, in accordance with Article 12 of the Law on Commercial Arbitration. The representative of D confirmed awareness of the proceedings and raised no objections.

Composition of the Arbitral Tribunal:

A key issue before the Court was that the award had been rendered by a sole arbitrator, whereas Article 13 of the contract stipulated a three-member tribunal.

The Court accepted this procedural deviation on the basis of the 2017 ICC Arbitration Rules. Under the 2017 Rules, the expedited procedure, whereby a sole arbitrator may be appointed, prevails over any contrary term in the arbitration agreement when the amount in dispute does not exceed USD 2,000,000.

Importantly, the ICC Secretariat had duly notified D of the application of the expedited procedure, and D raised no objection within the 30-day deadline.

The Court concluded that the issuance of Award No. 23329 by a sole arbitrator was consistent with Article 6(3) of the 2017 ICC Rules and did not contravene Article 5 of the New York Convention.

Consistency with Vietnamese “public policy”:

The Court found that the substance of the award was consistent with Vietnamese substantive law. The arbitral tribunal’s determination that D’s failure to deliver goods constituted a breach of contract, and its order to compensate by way of cover purchase, was in conformity with Articles 34.1, 37.1, 41.2, 300, 301, and 302 of the Commercial Law.

As the award did not contravene the fundamental principles of Vietnamese law, the Court granted recognition and enforcement.

COURT’S DECISION

The Da Nang City Court accepted U’s request and recognized and enforced in Vietnam the arbitral award rendered in Case No. 23329/PTA/ASB/HTG dated 19 October 2018 and its addendum dated 11 December 2018 by the ICC International Court of Arbitration.

OUR COMMENT

The Expedited Procedure Problem

The Da Nang Court’s decision to enforce an ICC award with a sole arbitrator, despite the parties’ three-arbitrator agreement, raises fundamental concerns about party autonomy. The “implied consent” theory is legally dubious: parties incorporating institutional rules shouldn’t automatically consent to provisions overriding their express preferences.

Critically, ICC Rules Article 2(1) of Appendix VI uses permissive language (“may appoint”), not mandatory. The ICC’s commitment to ensuring enforceability suggests discretion should favor party autonomy when objections are raised. Yet ICC practice increasingly defaults to sole arbitrators regardless of party objections.

This creates an enforcement lottery: such awards may be enforceable in Vietnam but face rejection elsewhere.

Strategic Imperatives

• Express opt-outs: Specify in arbitration agreements that expedited procedures don’t apply if tribunal composition matters
• Active objection: Object immediately during notice periods, requesting the ICC exercise discretion to honor the three-arbitrator agreement
• Multi-jurisdictional analysis: Assess enforcement risks across all potential asset locations before accepting expedited procedures

Vietnam’s Public Policy Problem

While praising the Court’s willingness to enforce, the decision exemplifies Vietnam’s problematic approach to public policy review. The New York Convention’s exception was designed narrowly, for cases violating fundamental notions of morality and justice, not for substantive review of awards.

Yet Vietnamese courts examine whether awards accord with specific Vietnamese commercial law provisions. This transforms “fundamental principles” into ordinary substantive law review, precisely what the Convention prohibits.

Defensive Strategy Framework

Counsel facing Vietnamese enforcement must adopt measures unnecessary in mature arbitration jurisdictions:

During Arbitration:

• Submit comprehensive Vietnamese law analyses to tribunals, even where Vietnamese law doesn’t govern
• Demonstrate requested relief wouldn’t contradict Vietnamese substantive law
• Retain Vietnamese law experts on enforceability questions
• Clarification: This doesn’t mean Vietnamese law should govern improperly, rather, tribunals need information about Vietnamese constraints while applying the correct governing law

Cost-Benefit Reality: These measures impose burdens that shouldn’t be necessary under a properly functioning Convention regime. But they’re cheaper than discovering enforceability problems post-award.

Conclusion

The Da Nang decision reflects gradual but uneven progress. Institutional override of party agreements creates unpredictable multi-jurisdictional risks. Vietnam’s expansive public policy review facilitates merits-based challenges inconsistent with Convention obligations.

For practitioners: Vietnamese enforcement remains more art than science. Success requires preemptive anticipation of objections, active engagement during arbitration, defensive submissions on Vietnamese law compatibility, and strategic award drafting. The decision provides guideposts, not guarantees. Prudent counsel must begin enforcement strategies at commencement, not after the award.

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