Practical experience in minimizing the rick of arbitral award annulment

Commercial arbitration has become the preferred dispute resolution method for many Vietnamese businesses, thanks to its efficiency, speed and compatibility with international trade practices. However, one significant risk of this approach is that the court may annul the Arbitral Award upon request from one or more parties. This article examines the legal framework governing arbitral award annulment and offers practical guidance to minimize this risk.

1. Grounds for the Court review the annulment of an Arbitral Award and its legal consequences

• Grounds for court review and decision on Arbitral Award annulment 

According to Article 68.2 of the Law on Commercial Arbitration 2010, Article 14 of Resolution No. 01/2014/NQ-HĐTP of the Supreme People’s Court Council provides guidance: The Court shall only annul an Arbitral Award in the following 05 (five) cases:

a.There is no arbitration agreement or the arbitration agreement is invalid;

b.The composition of the arbitral tribunal or arbitration procedures was inconsistent with the parties’ agreement or contrary to the provisions of this Law;

c.The dispute was not within the jurisdiction of the arbitral tribunal; in cases where an Arbitral Award contains content beyond the arbitral tribunal’s jurisdiction, such content shall be annulled;

d.The evidence provided by the parties on which the arbitral tribunal based its award was forged; An arbitrator received money, assets, or other material benefits from a party to the dispute that affected the objectivity and fairness of the Arbitral Award;

e.The Arbitral Award contradicts the fundamental principles of Vietnamese law.

• Consequences of court annulment of Arbitral Award

If the Examination Council issues a decision not to annul the Arbitral Award after considering a party’s request for annulment, that Arbitral Award shall be enforced and the relevant parties have the responsibility to implement it within the prescribed time limit.

Conversely, if the Examination Council issues a decision to annul the Arbitral Award, the parties may agree to continue resolving the dispute through Arbitration or one party has the right to bring the case to Court as stipulated in Article 71.8 of the Law on Commercial Arbitration 2010.

2. Experience in using arbitration for dispute resolution to limit the risk of Arbitral Award annulment

2.1 Experience in establishing arbitration agreements

When a party submits a request for Commercial Arbitration to resolve a dispute without an arbitration agreement or with an invalid one, the arbitration tribunal’s acceptance and resolution of the request violates arbitration procedure. As a result, any Arbitral Award issued will be annulled.

Therefore, when establishing an arbitration agreement, parties need to note the following issues:

• An arbitration agreement must be in writing and can take the form of either a contract clause or a separate agreement. The parties may establish this agreement either before or after a dispute arises.
• To avoid invalidation of the Arbitral Award, the arbitration agreement must meet several key conditions: the person establishing it must have proper authority and capacity; the agreement must not have been terminated by the parties; the agreement must be free from deception, threats, or coercion; and it must not violate any legal prohibitions or social ethics. Therefore, parties need to carefully check and confirm this information to avoid cases where the arbitration agreement becomes invalid.

An arbitration agreement must stipulate the choice of arbitration for dispute resolution. Additional elements such as the specific arbitration organization, procedural rules, location, applicable law, language, and number of arbitrators are optional. In practice, cases where an arbitration agreement only expresses one content about choosing arbitration as the dispute resolution method may be considered unclear. To mitigate this risk, parties should consult model arbitration clauses from arbitration centers or seek guidance from experienced lawyers to avoid adverse consequences when disputes arise in the future.

2.2 Experience in handling issues related to procedural errors in arbitration proceedings

One of the key risks that can lead to Arbitral Award annulment is procedural error during arbitration proceedings. Such errors may include: improper composition of the arbitral tribunal or arbitration procedures that either violate the parties’ agreement or contradict Law on Commercial Arbitration provisions. For example, such errors occur when the arbitral tribunal fails to follow either the parties’ agreed-upon rules regarding tribunal composition and procedures, or the relevant provisions of the Law on Commercial Arbitration.

In cases where the Examination Council has grounds to believe that the composition of the arbitral tribunal or arbitration procedures contain serious violations and may be subjected to annulment if the arbitral tribunal can not remedy or does not remedy as required by the court under Article 71.7 of the Law on Commercial Arbitration 2010, that Arbitral Award is likely to be annulled by the Review Panel.

Experience has shown that Arbitral Awards are often annulled due to procedural errors rather than issues with the award content itself. For instance, Arbitral Awards have been annulled because arbitral tribunals use imprecise language in meeting notices or make simple mistakes like incorrectly recording currency units.

During the resolution of cases at arbitration, parties need to monitor and supervise the proceedings to timely detect any errors by the arbitration during the period when parties are filing claims, submitting defense statements, counterclaims, amending and supplementing the above requests or requesting temporary emergency measures and the order of conducting dispute resolution meetings. When detecting errors in procedures or arbitral composition, parties can present their opinions by sending a statement on the issue to the arbitral tribunal for resolution. The arbitral tribunal can acknowledge the opinions and provide timely adjustment solutions.

When procedural errors are discovered after the arbitral tribunal has issued its award, parties still have an opportunity to prevent the award from being annulled by the court. The provisions in Article 71.7 of the Law on Commercial Arbitration and Article 15.3 of Resolution 01/2014/NQ-HĐTP establish clear legal grounds for the arbitral tribunal to correct procedural errors and avoid annulment in two cases: (i) when requested by a party to the dispute, or (ii) when the court deems it necessary.

To prevent award annulment, parties must gather documents and evidence demonstrating that any procedural errors are remediable and have no impact on the Arbitral Award. Once this documentation is complete, parties should submit a petition to the court handling the case, requesting that the Arbitral Award be upheld.

2.3 In cases where the Arbitral Award has been annulled, parties may agree to continue resolving the dispute through Arbitration or one party has the right to bring the case to court as stipulated in Article 71.8 of the Law on Commercial Arbitration 2010.

Arbitration is an effective way to resolve disputes and reflects modern commercial practices. To maintain the legal validity of Arbitral Awards, parties must improve their legal knowledge and ability to detect potential errors during arbitration proceedings. Serious application of practical experience as well as engaging qualified legal counsel can minimize the risk of award annulment while protecting all parties’ interests.

This article has explored practical strategies for minimizing the risk of Arbitral Award annulment. We trust these insights will serve as a valuable resource for our readers and interested parties in the field of arbitration.

Best regards,