Cases where Vietnamese Courts refuse to recognize and enforce foreign arbitral awards?

In the context of economic integration, foreign commercial arbitration has increasingly become a preferred dispute resolution mechanism for enterprises due to its efficiency and convenience. However, not all foreign arbitral awards are recognized and enforced in Vietnam.

Accordingly, based on the review of the application for recognition and enforcement and the supporting documents, Vietnamese courts rely on the grounds prescribed in Article 459 of the Civil Procedure Code 2015 (“CPC 2015”) to decide whether to refuse recognition of a foreign arbitral award. The consequence of refusal is that the foreign arbitral award has no legal effect in Vietnam and cannot be enforced by enforcement authorities within the territory of Vietnam.

This article analyzes the cases in which Vietnamese courts refuse to recognize and enforce foreign arbitral awards (“awards”).

1.Cases related to the legal validity of the arbitration agreement

First, Vietnamese courts refuse to recognize and enforce an award where the parties to the arbitration agreement lack the legal capacity to enter into such agreement under the law applicable to each party (Point a, Clause 1, Article 459 of CPC 2015). Specifically, the legal capacity of a party is determined by the law of the country of its nationality. Accordingly, if a party lacks the capacity to conclude an arbitration agreement, such agreement may be deemed invalid. As a result, an award rendered on the basis of that agreement will not be recognized or enforced in Vietnam. For example, where an authorized representative having no authority to enter an arbitration agreement signs it, such agreement is invalid and the award will be refused recognition and enforcement.

Second, an award will not be recognized where the arbitration agreement is determined to be invalid. The legal validity of the arbitration agreement is determined in accordance with the law chosen by the parties; if the parties have not agreed on the applicable law, the law of the country where the award was rendered shall apply (Point b, Clause 1, Article 459 of CPC 2015). For instance, if the law chosen by the parties requires the arbitration agreement to be made in writing but this requirement is not satisfied, the agreement is invalid and the award will not be recognized and enforced in Vietnam.

These conditions are intended to protect the lawful rights and interests of the parties during arbitration proceedings. Accordingly, an award is only recognized when it is rendered on the basis of a lawful and valid arbitration agreement binding upon the parties.

2.Cases related to violations of arbitral procedures

First, an award will not be recognized and enforced if the party against whom enforcement is sought was not properly and timely notified of the appointment of arbitrators or of the arbitration proceedings, or was otherwise unable, for legitimate reasons, to exercise its procedural rights (Point c, Clause 1, Article 459 of CPC 2015). For example, if the respondent did not receive timely notice of an arbitral hearing and therefore could not participate in the hearing, its lawful rights would be directly affected, leading to refusal of recognition and enforcement of the award.

Second, pursuant to Point d, Clause 1, Article 459 of CPC 2015, Vietnamese courts refuse recognition where the award deals with matters beyond the scope of the dispute submitted for resolution or beyond the scope of the arbitration agreement. If the part exceeding the agreed scope can be separated from the compliant part, the latter may still be recognized and enforced in Vietnam.

Third, an award will not be recognized if the composition of the arbitral tribunal or the arbitral procedures are inconsistent with the arbitration agreement or with the law of the country where the award was rendered (Point đ, Clause 1, Article 459 of CPC 2015). For example, if the arbitration agreement stipulates that the arbitral tribunal shall consist of five arbitrators but the tribunal actually consists of only three arbitrators, the tribunal’s composition is inconsistent with the parties’ agreement, and the award will therefore be refused recognition.

These grounds aim to ensure fairness and objectivity in arbitration proceedings and to prevent the enforcement of awards rendered through improper procedures or beyond the agreed jurisdiction.

3.Cases where the award has not taken effect or has no legal validity

First, under Point e, Clause 1, Article 459 of CPC 2015, an award that has not yet taken legal effect will not be recognized. In practice, an award may not yet be effective because it is still subject to correction or interpretation, or because it does not meet the conditions for effectiveness under the applicable law or arbitration rules. Refusal in such cases ensures that only awards with binding legal effect are recognized and enforced in Vietnam.

Second, pursuant to Point g, Clause 1, Article 459 of CPC 2015, an award will not be recognized if it has been set aside or its enforcement has been suspended by a competent authority of the country where the award was rendered or where the law governing the award. For example, if a court at the seat of arbitration annuls an award due to procedural violations, Vietnamese courts will refuse to recognize and enforce that award. This provision reflects Vietnam’s respect for the judicial authority of the country where the award was rendered and ensures that awards no longer legally valid in that country are not enforced in Vietnam.

4.Other cases where awards are not recognized and enforced in Vietnam

First, an award will not be recognized if, under Vietnamese law, the dispute is not eligible to be resolved by arbitration (Point a, Clause 2, Article 459 of CPC 2015). In Vietnam, only disputes arising from commercial activities fall within the jurisdiction of arbitration (Article 2 of the Law on Commercial Arbitration 2010). Accordingly, any non-commercial dispute resolved by foreign arbitration will not be recognized or enforced in Vietnam.

Second, pursuant to Point b, Clause 2, Article 459 of CPC 2015, Vietnamese courts refuse recognition where recognition and enforcement of the award would be contrary to the fundamental principles of Vietnamese law. For example, if an arbitration agreement violates national interests, public interests, or the lawful rights and interests of other parties as prescribed in Clause 4, Article 3 of the Civil Code 2015, the award rendered on the basis of such agreement will be refused recognition and enforcement by Vietnamese courts.

It is no doubt that where the parties voluntarily comply with a foreign arbitral award, there is no need to request Vietnamese courts to recognize and enforce the award. Conversely, where one party fails to voluntarily comply, the other party must file an application requesting Vietnamese courts to recognize and enforce the award in accordance with Article 459 of CPC 2015. If the award falls under any of the refusal grounds mentioned above, it will have no legal effect in Vietnam and cannot serve as a basis for enforcement by enforcement authorities.

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