Legal development of the investment dispute settlement system in vietnam issues on the investor state dispute settlement (tóm tắt trích đoạn)

LEGAL DEVELO PM ENT OF THE IN V ESTM EN T
DISPUTE SETTLEM ENT SYSTEM IN VIETNAM :
ISSUES ON THE INV ESTO R -STA TE
DISPUTE SETTLEM ENT
IWASE Maomi*

1. Introduction
At the end o f 2010 the international investm ent agreem ents (IIA s) universe
contained 6,092 agreem ents, including 2,807 bilateral investm ent treaties (B IT s),
2,976 double taxation treaties (DTTs) and 309 IIAs other than BITs and D T T s
(other IIA s)1. D isputes arising out o f IIAs betw een foreign investors and host
States have substantially increased within the last ten to fifteen years, as has th e
num ber o f investor-State dispute settlem ent (ISD S) cases. This explosion runs in
parallel with an increase in the num ber o f IIAs being negotiated w orldw ide2. T he
disputes betw een them raise difficult issues on international law, such as
sovereign immunity, diplom atic protection, and so on. The ISDS based on IIA s
is im portant for foreign investors, because the ISDS m echanism perm its the
direct invocation o f arbitration claims by foreign investors them selves against
the host State3.
In case o f Vietnam, the Bilateral Trade Agreement (BTA) with the U.S. w as
signed in 2000 and became effective in 2001, which included a set o f rules to
facilitate cross-border investment between the two countries. In addition, Vietnam
has concluded 58 BITs, and 42 o f them have entry into force by 1st June 201 24.
These BTA and BITs provide a dispute settlement clause stipulating ISDS, and by

* Associate Professor, University o f Hyogo, Japan.
1. UNCTAD (201 lb), pp. 100-101.
2. UNCTAD (201 la), xvii.
3. Campbell M cLachlan QC (2007), p.5.
4. UNCTAD, Bilateral Investment Treaties signed by Viet Nam.

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LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT.

the end o f 2011 Vietnam has been sued for arbitration in 3 cases based on IIA s1.
The Investment Law o f 2005, legal framework for foreign investment in Vietnam,
also p ro v id e s IS D S . U n d er this Law , foreign investors w ill b e a b le to su e "V ietn am ese
State M an ag em en t A g en cies'' for arbitration or litigation o th e r th a n in V ietn am based
on treat. 'S co n clu d ed by V ietnam as w ell as co n tracts w ith rep resen tativ es o f
A u thorized S tate A g en cies. F urtherm ore, in d rafting the C o m m e rc ia l A rb itra tio n L a w

o f 2010, it was considered that the right o f foreign investors to resolve disputes by
a rb itra tio n w o u ld e x ten d to co n tra ctu al d isp u te s b e tw e e n fo re ig n in v e sto rs an d
V ie tn a m e s e S tate a g e n c ie s rela tin g to in v e stm e n t a c tiv itie s b a s e d o n th e In v e s tm e n t

Law o f 20052.
Here considering economic system in many Asian countries including
Vietnam, "‘state-owned entities’ and/or ‘state-owned enterprises’ (SOEs)" represent
both a m ajor part o f the economy and a not in sig n ific a n t pari o f fiscal revenues. The
SOEs have specific legal forms and are different from the other companies. There
ev en still a r c so m e d ep artm en tal an d /o r m in iste ria l e n titie s w h ic h a rc c o n s id e re d as

SOEs. Foreign investors frequently enter agreements with the SOEs. When a SOE
b r e a c h e s t h e a g r e e m e n t , f o r e ig n i n v e s t o r s o f te n s e e k t o a d d r e s s t h e i r c l a i m d i r e c t ly

against the host State under the application of bilateral or multilateral IIAs. In
Vietnam SOEs have been used as a tool for the government to regulate the national
economy, and such role has aroused controversy at present.
This article analyzes development o f legal systems on ISDS in Vietnam,

focusing on both the IIAs concludcd by Vietnam with the Netherlands, France and
the U.S. respectively, and Vietnam’s municipal laws dealing with foreign investment
dispute settlement, such as laws on investment, BOT and commercial arbitration.
Through this analysis, I examine issues on settlement o f disputes between foreign
investors and the Vietnamese government and/or SOEs.

1. UNCTAD (2012), p i 7. There is no government’s official opinions on the cases in Vietnam,
but according to various unofficial source, websites, papers and so on, they are as follows:
(1) "Dialasie SAS V, Vietnam (UNCITRAL arbitration rules, adm inistered by the PCA)"
which w as initiated in 2011, home country o f Dialasie SAS is France (UNCTAD (2012),
pi 5). (2) "Trinh Vinh Binh and Binh Chau Joint stock Company V. Socialist Republic o f
Viet Nam UNCITRAL, administered at SCC)" which was initiated in 2004, and was settled
on confidential terms following an award rendered in 2007. Home country o f the investors is
the Netherlands (UNCTAD, UNCTAD DATABASE OF TREA TY -BA SED INVESTORSTATE DISPUTE SETTLEMENT CASES.). (3)"South Fork Company V. People’s
Committee o f Bình Thuận Province, home country o f the investor is the United State o f
America (PHƯƠNG NAM (2011).).
2.Vilaf I long Due (2008).

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VIỆT NAM HỌC - KỶ YẾU HỘI THẢO QUỐC TẾ LÀN THỨ TƯ

2.
Investor-State dispute settlement under legal system in Vietnam: Status
and the concept of "a State"

2.1. Bilateral Investment Treaties
Concerning BITs that Vietnam has signed, all negotiated recently and
concuưently BITs tend to follow a reasonably standard pattern, and typically

provide for "recourse to international arbitration." With regard to "recourse to
international arbitration," it is available at the initiative o f either party to the dispute
after a period o f usually three to six months, during which an amicable settlement
must be sought. The outcome o f the arbitration procedure is final and binding.
Vietnam is not currently a member o f the International Centre for Settlement of
Investment Disputes (ICSID), although it has applied for membership. Short of
Vietnam being a m em ber o f the ICSID Convention, most BITs provide for
international arbitration to take place under the United Nations Commission on
International Trade Law (ƯNCITRAL), or under the ICSID once Vietnam becomes
a m em ber1. BITs concluded with the Netherlands2, France3 and a BTA with the
u .s4. also provide the dispute settlement clause, which covers the disputes between
investors and the State.

2.1.1. Definition o f "Disputingparties"
Both BITs with the Netherlands and France stipulate the provisions on disputes
between investor and a host State. The BIT with the Netherlands provides disputes
between "a Contracting Party" and "a national o f the other Contracting Party"
(Art.9(l)). With regard to these disputing parties, A rt.l defines "nationals." The BIT
with the Netherlands, however, does not define "a Contracting Party." It is only noted
"The Government o f the Kingdom o f the Netherlands and the Government o f the
Socialist Republic o f Vietnam (hereinafter referred to as "the Contracting Parties")" in
the Preamble, and there is no definition on "the Contracting Parties."
The BIT with France also provides investment dispute between "a Contracting
Party" and "a national or company o f the other Contracting Party" (A rt.8(l)). With

1. UNCTAD (2008), p.41.
2. Agreement on Encouragem ent and Reciprocal Protection o f Investm ents between the
Kingdom o f the Netherlands and the Socialist Republic o f Vietnam, dated 10 March 1994.
3. Agreement between the Government o f the Socialist Republic o f Vietnam and the
Government o f the French Republic for the Promotion and Protection o f Investment,

concludcd on 26 May 1992 in Paris .
4. Agreement between the United States o f America and the Socialist Republic o f Vietnam on
Trade Relations, concluded on 13 July 2000.

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LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT.

reg ard

to

th e se

d isp u tirm

parties,

A rt.l

d efin e s

"n a tio n a l"

and

"com pany"

respectively. The BIT with France also does not define "a Contracting Party," and

ju s t d e sc rib e s th a t "th e G o v e m m c n t o f th e S o cia list R e p u b lic o f V ie tn a m an d th e
G o v e rn m e n t o f th e R e p u b lic o f F rench, refe rre d to as ‘th e C o n tra c tin g P a rtie s ’" in

the Preamble.
In b o th B IT s w ith th e N eth erlan d s and F ran ce, th e re w a s n o s p e c ific p ro v is io n

on the concept o f "a Contracting Party" as a disputing parties o f ISDS. As to SOEs,
b a se d on th e d e fin itio n c la u se s on "legal p e rso n s (th e N e th e rla n d s )" o r "c o m p a n y
(F ra n c e )," it m ig h t b e c o n s tru e d that a S O E esta b lish e d in a Contracting State (home

State) would be treated as "a investor" when it invests in the other Contracting State
(host State). A SOE corresponds to neither "a Contracting Party" nor "a investor o f
the other Contracting Party" under the BITs.
Similar to the BITs with Netherlands and France, "Chapter IV Development o f
Investment Relations" o f a BTA with the U.S. provides disputes between investors
and a host State (Art.4). In Chapter IV, "an investment dispute" is defined as a
dispute between "a Party" and "a national or company o f the other Party" arising out
o f or relating to "an investment authorization," "an investment agreement" or an
alleged breach o f any right conferred, creatcd or recognized by Chapter IV (...) with
respcct to a covered investment (Art. 1(10)). In addition, "an investment
authorization" is an authorization granted by "the foreign investment authority o f a
Party" to a covered investment or a national or company o f the other Party
(Art. 1(6)), and "an investment agreement" is a written agreement between "the
national authorities o f a Party" and "a covered investment or a national or company
of the other Party" (Art. 1(7)). In the BTA, therefore, disputing parties are "a Party,"
which includes "the foreign investment authority" and "the national authority," and
"a national or company o f the other Party." As these disputing parties, Article 1
defines "company," "company of a Party" and "national" o f a Party. With regard to
"a Parly," the Preamble in the BTA states that "The Government o f the United
States o f America and the Government o f the Socialist Republic o f Vietnam

(hereinafter referred to collectively as "Parties" and individually as "Party")." In
contrast to the BITs with the Netherlands and France, the BTA, furthermore,
stipulates "a state enterprise" with respect to a covcred investment (Art. 1(5)), and a
P a rty ’s o b lig a tio n s sh all ap p ly to a state e n te rp rise in th e e x e rc is e o f a n y re g u la to ry ,

administrative or other governmental authority delegated to it by that Party (Art. 12).
As to these provisions o f Chapter IV, it is reported that "Chapter IV establishes
detailed obligations regarding ISDS and provides the consent o f both Parties to
reso lv e su ch d is p u te s th ro u g h arb itratio n . C h a p te r IV a p p lie s to a sta te e n te rp rise to
the ex te n t th a t th e e n te rp ris e ex ercises any reg u la to ry , a d m in is tra tiv e o r o th e r

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VIỆT NAM HỌC - KỶ YẾU HỘI THẢO QUỐC TẾ LÀN THỨ T ư

Governmental authority delegated to it by the Governm ent"1. Therefore, "state-own
enterprises" which have regulatory functions are treated as "a State" when the
enterprise exercises its power. In this case, investors could file directly for
irbitration against "state-owned enterprises" based on ISDS provision.

2.1.2. The scope o f "a Contracting Party" in Investor-State Dispute Settlement
In BITs with the N etherlands and France and a BTA with the U.S., the disputes
ịgainst "a Contracting Party" and/or "a Party" need at first be settled amicably
iĩĩiong the parties involved. I f the disputes cannot be settled by this mean, the
lisputes will be subm itted to the procedure provided by the respective BITs and
iTA, such as national courts in a host State, arbitration and/or conciliation based on
he agreement, UNCITRAL rules or ICSID.
In the field o f foreign investment, SOEs have been established for the purpose
)f dealing with foreign investors in the host State. This has raised issues o f

ittribution o f acts o f SOEs to the States. In principle, SOEs are separate status and
heir acts will not be attributed to the state. However, several exceptions qualify this
principle: the separation w ill not be respected if the corporate veil has been created
IS a means for fraud and evasion. Conduct w ill be attributed to the state in cases
■vhere the corporation exercises public power. Another exception concerns a
ỉituation o f ownership by the State where control is exercised in order to achieve a
^articular result2. Concerning this issue, investment treaties on the whole generally
jo not contain special rules o f attribution, so they are to be read in the lights o f
general international law in that respect3. As mentioned above, the BITs with the
Netherlands and France have also no definite provision on attribution o f acts by
SOEs, and have no provisions on the scope o f "a Contracting Party." On the other
hand, the France model BIT o f 2006 has a special provision on "attribution" in
Article 2, dealing with federated states o f federal unions, regions, local authorities
or any other entities for whose international relations a Contracting Party is
responsible4. Comparing this provision in the France m odel,B IT with the BITs,
especially with France, it might be difficult to construed that the ISDS provision
will apply to SOEs established in a Contracting State (host State) when the disputes
with investors have occurred in the host State under the BITs themselves. In
contrast to th e m , a B T A w ith th e U .S . s p e c ifie s " a ttrib u tio n " in A rtic le 12 and

1.The U.S. - Vietnam Trade Council Education Forum (2004), p .38.
2.

Rudolf Dozer & Christoph Schreuer (2008), pp. 198-199,

3.Georgios
4.Georgios
526

Petrochilos (2010), p.288.

Petrochilos (2010), p.288, note 7.


LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT...

C la u s e 5 o f A rtic le 1. U n d er th e B TA , acts by "state e n te rp rise s" o f a h o st S ta te

would be attributed to the host State when investment disputes arise between the
s ta te e n te rp ris e s an d in v esto rs. S O E s, esp ecially sp ecific " s ta te -o w n e d e n te rp ris e s "

would be treated as "a Contracting Party" under a BTA with U.S.
In addition, under the ICSID, a constituent subdivision or agency o f a state
m a y b e c o m e a p a rty to arb itratio n p ro c e e d in g s p ro v id e d it h as b e e n d e s ig n a te d to
th e IC S ID an d i f th e co n sen t o f th at en tity h a s b een a p p ro v e d b y th e sta te s
( A r t.2 5 ( l) an d (3 )). A rtic le 25 d o es not set forth an y p rin c ip le o f a ttrib u tio n to th e

State, but merely opens the possibility for the host State to delegate party status to
its teưitorial subdivision or entity for jurisdictional and procedural purposes. Under
the ICSID, the question whether a particular constituent subdivision or entity is
eligible for this purpose is left to the relevant domestic law 1.

2.2. Investment Law
Until 2005, foreign investors were subject to a specific foreign investment law
in 19872 and 19993 respectively. In 2005 Vietnam promulgated the Law on
Investment, which provides a unified operational framework for foreign and
domestic investors as well as for private and public enterprises. The Law on
Investment o f 2005 unifies the legal and regulatory framework for investment and
corporate structure for all types o f investors4.
2.2.1. D efinition o f "Disputing p a rties”

The Law on Foreign Investment in Vietnam o f 1987 provided disputes
between (1) "the two parties" o f a business co-operation contract or a joint venture
contract, (2) "a joint venture or an enterprise with 100% foreign capital" and
"Vietnamese economic organisations" and (3) "foreign invested enterprises"
themselves (Art.25). With regard to these disputing parties, Art.2 defined "a
V ie tn a m e s e p a rly ," "th e tw o p a rtie s," " B u sin e ss c o -o p e ra tio n c o n tra c t," "Jo in t

venture contract" and "Joint venture" respectively. Based on the definition, a
d isp u tin g p a rty is a V ie tn a m e se p arty an d a fo reig n p arty . A s to "a V ie tn a m e se "
p arly , it c o n s titu te s o f o n e or m o re "V ietn am ese eco n o m ic o rg a n is a tio n s ," en jo y in g

the status o f legal person. Therefore, a SOE, especially "state-owned enterprise."
m ig h t b e c o n s tru e d to b e in c lu d ed in "a V ie tn a m e se p arty " b e c a u se "a sta te -o w n e d

1. Rudolf Dozer & Christoph Schreuer (2008), pp. 198-199. See also, Christoph H. Schreutr
(2009), pp. 149-160, paras.230-267, pp.338-341, paras.903-920.
2. Law on Foreign Investment in Vietnam dated 29 December 1987.
3. Law on Foreign Investment in Vietnam dated 12 November 1996.
4. UNCTAD (2008), p .4 1. See also, ISHIDA (2006).
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VIỆT NAM HỌC - KỶ YÉU HỘI THẢO QUỐC TẾ LÀN THỨ T ư

enterprise" w as defined as "a business organization established, invested and

managed by the State as a owner," and "an econ om ic legal person" w hich "operates
under the law and is equal before the law" in D ecree N o . 3 8 8 /H D B T o f 1 9 9 1 With
regard to a party o f "a jo in t venture," the case "a jo in t venture" is established based
on an agreem ent betw een V ietnam ese and foreign governm ents, the governm ents

might be construed as a "in-direct" party o f "the join t venture" contract. On the
other hand, disputes arising betw een contracting parties o f a jo in t venture, it m ight
be im possible that the governm ent is treated as one o f parties o f the join t venture. In
addition, there w as no definite provision on a SOE, so the L aw o f 1987 might be

construed to have no clear ISD S provision2.
The Law on Foreign Investm ent in V ietnam o f 1996 provided alm ost identical
but more detailed dispute settlem ent clause as the L aw o f 1987. The L aw o f 1996

provided disputes betw een (1 ) "parties" o f a business co-operation contract or a
joint venture contract, (2 ) "‘foreign invested enterprises’ and/or ‘the parties o f a
business co-operation contract’" and "Vietnamese enterprises" (A rt.24). With regard
to these disputing parties, Art.2 defined "a Foreign investor," "a Foreign party," "a
V i e t n a m e s e party," "‘the tw o parties’ and ‘a M ulti-party’,'' "a Foreign invested

enterprises," "a join t venture enterprise," "an Enterprises w ith

100% foreign

invested capital," "a B u sin ess cooperation contract" and "a jo in t venture contract"

respectively. Based on the definition, "a party" o f a business co-operation contract
is both "a V ietnam ese party (on e or more V ietnam ese enterprises from all econom ic
sectors)" and "a foreign party (one or m ore foreign investors)." W ith regard to "a
party" o f a joint venture contract, they are "a foreign invested enterprise" and a
different "joint venture" as w ell as "the V ietnam ese party" and "the foreign party."
V ie tn a m e s e d i s p u t in g p a r t i e s s p e c i f ie d in t h e Law o f 1996 m i g h t b e c o n s t r u e d to

include

SOEs,

esp ecially

"state-owned

enterprises,"

because

a

state-owned

1. Regulation

on Establishment and Dissolution o f State Enterprises (Issued together with
Decree No. 388/HDBT dated 20 November 1991 o f the Council o f Ministers). See also,
Viện Khoa họg Pháp lý - Bộ Tư pháp (2006), pp.219-220.

2

On the other hand, Decree N 0. I 8-CP dated 16 April o f the G overnm ent Detailing the
Implementation o f the Law on Foreign Investment in Vietnam stipulated that "Disputes
between foreign-invested Enterprises, foreign parties to business cooperation contracts with
Vietnamese State Agencies shall be resolved through the m eans o f conciliation. When there
is no conciliation with each other, the parties to the dispute shall subm it the dispute to the
Slate competent agency for settlement." in Article 102. W ith the com ing into effect o f this
decree, ISDI was specified in legal document in Vietnam. With regard to the concept o f
’Vietnamese State Agencies," there also had no provision. See, Đỗ Văn Đại, Mai n ồ n g Quỳ

2006) pp.447-448.


LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT.

enterprise is one o f the constituent o f "Vietnam ese enterprises"1. As to "a State" or
"a State entity," the Law of 1996 had also no definite provision.
In contrast to the Laws o f 1987 and 1996, the Law on Investm ent o f 2005
clearly stipulates a provision on disputes between investor and a host State. It
p ro v id e s d is p u te s beween (1) "domestic in v e sto rs" themselves, (2) "a dom estic
investor" an d "V ietn am ese State M an ag em en t A g en cies", (3 ) " ‘a fo reig n in v e s to r’
an d /o r ‘a foreign in vested en terp rise’" and others, (4) "foreign in v e sto rs" themselves

and (5) "a foreign investor" and "Vietnamese State M anagement Agencies" (Art. 12)
With regard to these disputing parties, Article 3 defines "Investor," "Foreign investor"
and "Enterprises with foreign owned capital" respectively. Based on the definition "a
state-ow ned enterprise" o f Vietnam might becom e a disputing party as "a dom estic
in v e sto r" w h e n th e en te rp rise carries o u t in v e stm e n t a c tiv itie s in a c c o rd a n c e w ith

the law o f V ietnam (Art.3(4)(e))2. On the other hand, as to "V ietnam ese State
Management Agencies," there is no definite provision. In addition there is also no

specific provision on "a state-owned enterprise" such as Article 12 o f a BTA w ith
the U.S. in the Law o f 2005. Disputes between foreign investors and "state-owned
enterprises" shall, therefore, fall under ones between (3) "‘a foreign investor’ and/or
‘a foreign in v e ste d enterprise’" and others, not under ones betw een (5) "a foreign

investor" and "Vietnamese State Management Agencies."

1. According to the Law on State-owned Enterprise o f 1995, which was valid at that time, a

state-owned enterprise was defined as "an economic organization which is capitalized,

established, organized and managed by the State, and carries out business or public utility
operations aimed at achieving the socio-economic objectives assigned by the State." (Art.l). The
Law on State-owned Enterprises (NO.14/2003/QH11 dated 26 November 2003), which replaced
the I-aw o f 1995, also defined a state-owned enterprise as "economic organizations where the
State owns the entire charter capital or holds dominant shares or contributed capital, which are
organized in the form o f State companies, joint-stock companies or limited liability companies."
(A rt.l). In addition, the Law on Enterprises (NO.13/1999/QH10 dated 12 June 1999), which
replaced the Law on Companies, the 1XỈW on Private Enterprises dated 12 December 1990, the
Law on Amendments and Supplements to a Number o f Articles o f the Law on Companies and
the Law on Amendments and Supplements to a Number of Articles o f the I^ w on Private
Enterprises dated 22 June 1994, was applied to "state-owned enterprises and enterprises of
political organizations or socio-political organizations which converted in to limited liability
companies or joint-stock companies" (A rt.2(l)), and defined "enterprises" as "an economic
organization having its own name, assets and a fixed transaction office, and having business
registration as prescribed by law in order to conduct business operations." (Art.3( 1)). Sec
also, Phạm Duy Nghĩa (2002), pp.79-124.
2. As noted above, according to the Law on State-owned Enterprise o f 2003, state-owned
enterprises are "economic organizations, organized in the form o f State companies, jointstock companies or limited liability companies (A rt.l).
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VIỆT NAM HỌC - KỶ YẾU HỘI THẢO QUỐC TỂ LÀN THỨ TƯ

2.2.2. The scope o f "a State" in ISID under the Investment Laws
As mentioned above, unlike the Law on Foreign Investment in Vietnam, the
Law on Investment o f 2005 clearly stipulates ISDS. In the process o f drafting laws
both on investment and enterprises o f 2005, the draft laws were circulated for
comments from domestic and foreign entrepreneurs as well as from members o f the

international donor community. After that, the draft laws were submitted to the
National Assembly for review and approval in October 2005. In the meantime, the
G o v e rn m e n t h a d

s t u d i e d p o l i c i e s t o a t t r a c t p r i v a t e i n v e s t m e n t in

in fra s tru c tu re

development in order to respond to the needs for economic development, cutting
business costs and raising competitiveness1.
In the drafting process, the Vietnam Business Forum (V BF)2 had presented
the various comm ents and issues on the laws, and one o f them was about the
updating o f the dispute resolution m echanism 3. W ith regard to disputing
settlement, the VBF expressed concerns on the dispute resolution mechanism in
Article 12. Being undergoing consideration in the N ational Assem bly, the unclear
term "foreign elements" has been removed from Article 124 and disputes between
foreign investors and state authorities could be resolved by international
arbitration provided such rights are agreed "in a relevant contract"5 as well as "in
an international treaty o f which Vietnam is a member" in the final draft6.

1

. D eputy Prim e M inister V u K h o an ’s Speech, at the V ietnam B usiness Forum H o Chi M inh
City, June 2005, in V B F (2005b); V BF (2005a).

2 The V BF is an on-going structured dialogue betw een the V ietnam ese G overnm ent and the
business com m unity. T he V B F aim s to develop o f a favorable business environm ent that
attracts foreign investm ent and stim ulates dom estic econom ic grow th. See also, V B F
w ebsite.
3

M inutes o f the Pre-m eeting on C onversion o f FD I, in V B F (2005a).

4 In the 8th draft o f the Law on Investment, the dispute resolution provisions were moved
from Article 127 (the 7th draft) to Article 12. The VBF considered that the new Article 12
was more com prehensive than the old Article 127. However, use o f term "foreign elements"
could lead to confusion or misinterpretation. Ideally, the article should make clear that
disputes with "foreign elements" included disputes where at least one party to the dispute
was a foreign-invested enterprise or a foreign investor or foreign organization. See,
Comments on the Draft Common Investment Law (cil) and the Draft Unified Enterprise
Law (UEL), in VBF (2005b).
5 Comments on the Common Investment Law, in VBF (2005a).

6 The

first draft presented to the National Assembly stated that disputes with the Government
had to be resolved in Vietnamese courts or arbitration, absent a treaty. See, Private Sector
Participation in Power, in VBF (2005a).

530


LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT..

C o n c e rn in g th e fin al d ra ft, th e S tan d in g C o m m itte e o f th e N a tio n a l A s s e m b ly
re p o rte d th a t th e m a jo rity o f th e N atio n al A sse m b ly a g re e d w ith th e p ro v is io n s o f

the draft, w hile there w ere opinions to propose to transfer A rticle 12 in C hapter II
into

"C hapter IX. State m anagement o f investm ent,"

s e ttle m e n t is th e c o n te n ts o f state m a n a g e m e n t b y

because the dispute

la w s to e n s u r e th a t th e

enterprises and investors exercise their rights under the law o f Vietnam on the
te rrito ry o f V ie tn a m . O n th is o p in io n , th e S ta n d in g C o m m itte e c o n s id e re d th a t

"Chapter

II. Investm ent Guarantees"

prescribed

the contents

to

guarantee

in v e stm e n t, an d " S e ttle m e n t o f in v e stm e n t d isp u te s" w a s o n e m e a n s o f in v e stm e n t

guarantee .
There w ere many discussion on Article 12 on investm ent dispute settlem ent,
and the opinions o f the VBF on disputes between investors and V ietnam ese State
M anagem ent A gencies, that is a State, w ere adopted into the Law . On the other

hand, there seemed to pay no attention to the scope o f "a Vietnamese State
Management Agency" itself. Under the Law on Investment o f 2005, the p r o v i s i o n
on ISDS might not apply to SOEs in principle. The disputes between investors and
SOEs would be treated ones stipulated in Article 12(3).

2.3. BOT Law
During the early 1990s, it was impossible to implement build operate transfer
projects (BO T Project) in Vietnam because the governm ent preferred to avoid
foreign control and private influence o f the infrastructure. H ow ever, the "Doi M oi"
(renew al), the poor state o f infrastructure in Vietnam and the realization that it was
beyond the m eans o f the government to build all the necessary infrastructure based

on state financing, led to amendments to the Foreign Investment Law in late 1992,
which reversed the form er policy2.
In 1993 the government promulgated Decree N o.87/C P 3, the first BOT
re g u la tio n s in V ie tn a m . In 1998 th e g o v e rn m e n t released D e c re e N 0 .6 2 /1 9 9 8 /N D -

CP4, which reworked Decrec No.87/CP, and amended Decree No.62/1998/ND-CP

1. ủ y ban Thường vụ Quốc hội (2005a).
2. Sara Lindgren & H elena Varga (2005), p.31.
3. Decree No.87/CP dated 23 November 1993 o f the Government providing investmeni
regulations on BOT contracts.
4. Decree N0.62/1998/ND-CP dated 15 August 1998 of the (k n e rn m e n t on promulgating
investment regulations under BOX, BTO, BT contracts applied for foreign investment in
Vietnam.
531


VIỆT NAM HỌC - KỶ YẾU HỘI THẢO QUỐC TẾ LẦN THỬ TƯ

by Decree NO.02/1999/ND-CP1 in 1998. Decree NO.78/2007/ND-CP2 was released
by the government in 2007, which replaced obsolete Decree N 0 .87/CP, Decree
N0.62/1988/ND-CP and Decree NO.02/1999/ND-CP. Decree NO.78/2007/ND-CP
perpetuated contents o f the BOT regulations applicable to foreign and domestic
investment in those Decrees,3 there was no substantial difference in terms o f the nature
o f the BOT, BTO or BT contracts in comparison to the old Decrees.4 However, Decree
NO.78/2007/ND-CP set forth a number o f different provisions that apply specifically to
investments under the form o f the these contracts rather than other forms o f
investment,5 and institutionalized new ideas about BOT contracts in the spirit o f the
unified investment law, thereby creating a uniform and equitable legal mechanism
for all investors.6 Decree NO.78/2007/ND-CP reflected the Com munist Party’s and
the State’s major policies on non-discrimination against investors and sources o f
capital as manifested in the promulgation o f both Law on Investment and Law on
Enterprises in 2005.7 A t present, BOT projects are regulated by Decree No.
108/2009/ND-CP,8 amended by Decree No.24/2011/ND-CP9 in 2010.

2.3.1. Definition o f "Disputingparties"
Decree N0.87/CP provided disputes between (1) "a BOT company" and "a
sub-contractor" and (2) "an Authorized State Agency" and "‘an investment owner’
and/or ‘a BOT com pany’" (A rt.l5 (l) and (2)).10 W ith regard to these disputing

Government on A m endm ents o f and
Additions to a Number of Articles of Decree 62/1998-ND-CP of the Government dated 15
August 1998 on on investment in forms of build-operate-transfer contracts, build-transferoperate contracts and build-transfer contracts applicable to foreign investment in Vietnam.

1. D ecree 02/1999-N D -C P dated 27 January 1999 o f th e

2. DECREE NO.78/2007/ND-CP dated on 11 May 2007 of Government on investment in the
form of Build-Operate-Transfer, Build-Transfer-Operate or Build-Transfer contracts.

3. Nguyen Thi Lang (2007), p.l 8.
4. Nguyen Dang Viet (2007).
5. Nguyen Dang Viet (2007).

6. Nguyen Thi

Lang (2007), p. 18.

7. Nguyen Thi Lang (2007), p.l 8.

8. Decree

NO.108/2009/ND-CP dated 27 November 2009 o f the G overnm ent on investment in
the form o f Build-Operate-Transfer, Build-Transfer- Operate or Build-Transfer Contract.

9. Decree No.24/2011/N D-CP on Amendments and Supplem ents to a Number o f Articles o f
amending some articles o f Decree NO.108/2009/ND-CP dated 27 N ovem ber 2009 o f the
G overnm ent, on investment in the form o f Build-Operate-Transfer, Build-Transfer- Operate
or Build-Transfer Contract. This Decree amended Articles 4 and Article 12.
10. See also, Đỗ Văn Đại, Mai n ồ n g Quỳ (2010), pp.447-448.
532


LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT.

p a rtie s , A rtic lc 1 d e fin e d "a B O T co m p an y ," "an A u th o riz e d S ta te A g e n c y " a n d "a

sub-contractor" respectively. Decree No.87/CP had no definition on "an ownerinvestor," which was just refeưed in definition clause of "a BOT contract" as one
p a rty o f th e c o n tr a c t (A rt. 1(4)). A c c o rd in g to th is d e fin itio n , it w a s n o t c le a r

w h e th e r "an in v e stm e n t o w n er" included V ietn am ese e n tities o r n o t. T h e re w as a lso
n o s p e c ific p ro v is io n on "a state-o w n ed en terp rise," so w h e n "a s ta te -o w n e d

enterprise" participated in a BOT project, it might be construed that its legal status
is as same as other Vietnamese entities, that would implement a BOT project as "a
sub-contractor."
A s c o n tra ste d w ith D ecree N 0 .8 7 /C P , D e c re e N 0 .6 2 /1 9 9 8 /N D -C P h a d m o re

detailed provisions. N0.62/1998/ND-CP provided the disputes arising between (1)
"an Authorized State Agency" and "a foreign investor," (2) "the parties" in a BOT
enterprise, (3) "BOX enterprises" and "foreign organizations or individuals" and (4)
"BOT enterprises" and "Vietnamese economic organizations" (Art.25). With regard
to these disputing parties, Article 1 defined "‘BOT enterprise,’ ‘BTO enterprise’ or
‘BT enterprise ("BOT enterprise")’," "State Agency authorized to enter into a BOT,
BTO, or BT contract ("Authorized State Agency")" and "Foreign investor to enter
into a BOT, BTO, or BT contract ("a foreign investor11)" respectively. Based on the
definition, "Authorized State Agencies" would be limited to Ministries, Ministeriallevel agencies, Government-attached agencies and People’s Committees o f provinces
and/or centrally-run Cities. All BOT, BTO and BT contracts would be signed between
"the Authorized State Agency o f Vietnam and a foreign investor" (Art. 1(1), (2) and
(3)), and Vietnamese and/or foreigners might enter into a subcontract with a BOT
enterprise as sub-conừactors(Art.l(7)). A Vietnamese disputing party clearly stipulated
in Article 25 was only "a Vietnamese economic organization," however it was not clear
whether "a party in a BOT enterprise" included "a Vietnamese organization and/or
in d iv id u al" o r not. C o n sid erin g w o rd in g an d literal in terp reta tio n o f A rtic le 2 5 (3 ), "a

Vietnamese economic organization" would be treated as a disputing party in Decree
No. Decree No.62/1998/ND-CP.
Decree NO.02/1999/ND-CP amended Article 25(1) and (3) o f Decree
N o .6 2 /1 9 9 8 /N D -C P and added the d isp u tes arisin g b e tw e e n (1 ) "an A u th o riz e d
S ta te A g e n c y " an d "a B O T co m p an y " d u rin g im p le m e n tin g a c o n tra c t g u a ra n te e d

b y an A u th o riz e d S ta te A g en cy (A rt. 1(1)) an d (2) "a B O T e n te rp ris e " an d "any
V ie tn a m e s e e c o n o m ic o rg an izatio n " w h o se o b lig atio n s to p e rfo rm th e p ro je c t arc
g u a ra n te e d b y an A u th o riz e d S tate A g en cy o f V ietn am (A rt. 1(3)). H o w e v e r D e c re e
N o - 0 2 /1 9 9 9 /N D - C P d id n o t a m e n d e d th e d e fin itio n c la u s e in A r tic le 1 its e lf. S o th e
r e q u ir e m e n ts o f d is p u tin g p a rtie s a rc s a m e a s in D c c re e N o .6 2 /1 9 9 8 /N D - C P .

533


VIỆT NAM HỌC - KỶ YẾU HỘI THÀO QUỐC TẾ LẢN THỨ TƯ

Decree NO.78/2007/ND-CP divided disputes into tw o categories according to
capital o f BOT project, first is disputes arising from projects with domestic investment
capital and second with foreign invested capital (Art.42). The disputes related to the
domestic were between (1) "the Authorized State Agency" and "a investor or a project
enterprise" and (2) "the project enterprise" and "economic organizations" participating
in implementing the project with contractual obligations guaranteed by the Authorized
State Agency (Art.42(l)). The disputes related to the foreign were between (1) "the
Authorized State Agency" and "a foreign investor or a project enterprise," (2) "a project
enterprise" and "‘a foreign organization or individual’ or ‘Vietnamese economic
organization’" and (3) foreign investors themselves (Art.42(2)). With regard to these
parties, Article 2 defined "State Agencies authorized to conclude project conừacts
("Authorized State Agencies")," "Investors" and "‘BOT enterprise,’ ‘BTO enterprise’
or "BT enterprise ("project enterprise")" respectively.
As mentioned above, in Decree N0.62/1998/ND-CP, only Ministries,
Ministerial-level agencies, Government-attached agencies and People’s Committees
o f provinces and/or centrally-run Cities could be authorized to conclude project
contracts. In contrast to that, Decree NO.78/2007/ND-CP added "attached agencies"
as one o f "the Authorized State Agencies." As to this "attached agencies,", it had
been indicated that the definition o f the Authorized State Agencies might be

construed in two ways. First, they would include (1) M inistries, Ministerial-level
agencies, Government-attached agencies, (2) Provincial and/or Centrally-run City’s
People’s Committees, and (3) entities attached to the agencies mentioned in both (1)
and (2) which were authorized by these agencies to conclude BOT contracts.
Second, they would include (1) Ministries, Ministerial-level agencies, Governmentattached agencies, (2) Provincial and/or Centrally-run C ity’s People’s Committees,
and (3) entities attached to the agencies mentioned in both (1) and (2), and all three
types o f agencies m ust be authorized by the Prime M inister to conclude BOX
contracts. Therefore it had been criticized that there should be a uniform
interpretation o f the D ecree’s provision on contractual parties1.
Decree No. 108/2009/ND-CP provided 5 kinds o f disputes between (1)
"Authorized State Agencies" and "investors or project enterprises," (2) "project
enterprises" and "economic entities participating in project implementation," (3)
"Authorized State Agencies" and "‘foreign investors’ or ‘project enterprises’"
arising in the performance o f project contracts and guarantee contracts, (4) "project
enterprises" and "‘foreign organizations or individuals’ or ‘Vietnamese economic

1. Nguyen Thi Lang (2007), p. 18.
534


LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT.

institutions’" and (5) investors themselves (Art.44). With regard to these parties,
A rtic le

2

d e fin e s

"Investors"

e n te rp ris e " )" resp ectiv ely .

and

"B O T ,

BTO

or

BT

e n te rp ris e

(" p ro je c t

In ad d itio n , A rtic le 3 p ro v id e s th a t S ta te a g e n c ie s

a u th o riz e d to sig n an d p erfo rm p ro jec t c o n tra c ts (" M in is trie s , D e p a rtm e n ts a n d
P ro v in c ia l-le v e l P e o p le ’s C o m m ittees") are M in istries, M in is te ria l-le v e l a g e n c ie s,
G o v e rn m e n t-a tta c h e d ag en cies and P eo p le's C o m m itte e s o f P ro v in c e s o r C e n tra lly ru n C ities. D u e to A rticle 3, pro v isio n s on d isp u tin g p a rtie s b e c o m e m o re s im p lifie d

and definite than ones o f Decree NO.78/2007/ND-CP, which arose unclear
interpretation. In Decree No. 108/2009/ND-CP, not only "Agencies attached to a
Provincial-level People’s Committee" are not included in "the Authorized State
Agencies," but also the term "authorized to conclude project contracts" is deleted.
2.3.2. The scope o f "Authorized State Agencies"

All BOT Laws have specified disputes against "Authorized State Agencies" so

far. Under the cuưent Decree NO.108/2009/ND-CP has prescribed specific
administrative authorities at both central and provincial level, which are treated as
"Authorized State Agencies." Furthermore, agencies attached to local government,
which are considered to be equivalent to "state entities" at local revel, are clearly
exempted from "Authorized State Agencies." As to "state-owned enterprises," they
might be "domestic investors" or subjects involved in BOT projects, but would not
be treated as "Authorized State Agencies."

2.4. Arbitration Law
Commercial arbitration appears in Vietnam later than the economic tribunal,
together with the emergence and development o f economic contracts. Vietnam had
in tro d u c e d th e sy ste m o f S tate F x o n o m ic A rb itratio n s in c e 1 9 6 0 , b u t a fte r a d o p tin g

the "Doi Moi" in 1986, this system was disbanded when the Economic Tribunals
were established within the systems o f the People’s Court to settle economic
disputes in 1993. In 1994 the Government promulgated Decree N o.116/CP,1 under
w h ic h E c o n o m ic A rb itratio n C en ters w ere estab lish ed in P ro v in c e s an d C e n tra lly ru n C ities .
W ith reg ard to settlin g disp u tes re la tin g to fo reig n tra d e , V ie tn a m e s ta b lish e d
the F o re ig n T ra d e A rb itratio n C ouncil in

19633 an d th e M a ritim e A rb itra tio n

1. Decree

No. 116/CP dated 5 September 1994 o f the Government on the Organization and
activities o f Economic Arbitration.

2. Pham Diem (2009), pp.27-28. See also, Le Hong Hanh (2009), pp. 1-2.
3. Decree No.59/CP dated 30 April 1963 of the Council o f Government on the establishment o f
Foreign Trade Arbitration Council.

535


VIỆT NAM HỌC - KỶ YẾU HỘI THẢO QUỐC TÉ LẦN THỨ TƯ

Council in 19641 respectively. During early 1960s economic activities in Vietnam
required to set up a non-govemmental arbitration organisation to resolve disputes
from international economic relations including not only the economic relations
between Vietnam, the former Soviet Union and the eastern block but also the
economic relations between Vietnam and developed m arket econom ies2. In 1993
these Councils were merged into the Vietnam International Arbitration Centre
(VIAC), which was established under Decision N o.204/TTg3 by the Prime Minister.
In 1996 the Prime M inister legislated Decision N o.l 14/TTg4 in order to expand the
jurisdiction over disputes from "international economic relations"5 into ones from
"domestic business relations"6.
Since 1993 in Vietnam, together with the economic courts as the only State
dispute settlement body, there have been two non-govem m ental dispute resolution
bodies in parallel existence, namely the VIAC affiliated to the Vietnam Chamber o f
Commerce and Industry (VCCI) and provincial Econom ic Arbitration Centres.
These institutions were regulated by different legislation that made it a special
characteristic during the evolution o f economic laws in Vietnam over the past years.7
In 2003, the Standing Committee o f the National Assembly adopted Ordinance
NO.08/2003/PL-ƯBTVQH on Commercial Arbitration,8 which replaced Decree
N o.l 16/CP, Decision No.204/TTg and Decision N o .ll4 /T T g . The Ordinance was
regarded as big step forward in development o f arbitration in Vietnam as compared
to the previous Decree No. 116/CP. The Ordinance provided dispute resolution
mechanism with many principles that were commonly accepted in solving
international trade disputes in most arbitration centers in the world. Such principles

1. Decree No. 153/CP dated 5 O ctober 1964 o f the Council o f G overnm ent on the establishment

o f M aritime Arbitration Council.
2. Institute o f State and Law, National Centre for Social Scicnces and Humanities Vietnam,
(2002), pp.33-34.
3. Decision No.204/TTg dated 28 April 1993 o f the Prime M inister on the organization of
Vietnam International Arbitration Center.
4. Decision No.l 14/1996/QD-TTg dated 16 February 1996 o f the Prime Minister on Expanding the
Jurisdiction o f the Vietnam International Arbitration Center in Settling Disputes.
5. Article 2 o f the Statute o f the VIAC attached to Decision No.204/TTg.

6. Article

1 o f Decision No. 114/1996/QD-CP.

7. Institute o f State and Law, National Centre for Social Sciences and Humanities Vietnam,
(2002), p.34.

8. Ordinance

No. 08/2003/PL-UBTVQH dated 25 February 2003 o f the Standing Committee
o f the National Assembly on Commercial Arbitration.

536


LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT.

were as the right of the involved parlies to form arbitration tribunal, close trial,
determination of arbitration jurisdiction based on arbitration clause and so on 1.
Under the Ordinance it had enable the disputing parties to select either court or
arbitration for settlement o f their disputes2.

S in c e 2 0 0 4 V ietn am h ad p rep ared its legal sy stem in o rd e r to jo i n in W T O an d

the National Assembly passed 103 laws and codes during from 2004 to 20093.
U n d e r O rd in a n c e o n C o m m e rc ia l A rb itratio n in 2 0 0 3 , th e re h a d c o n tin u e d to e x ist
s h o rtc o m in g s on arb itral p ro c e e d in g s in V ie tn a m 4. T h e N a tio n a l A s s e m b ly d ra fte d a
B ill on C o m m e rc ia l A rb itra tio n , w hich b asica lly c o n fo rm e d w ith th e M o d e l L a w on

International Commercial Arbitration o f the UNCITRAL5, and passed the Law on
C o m m e rc ia l A rb itratio n in Ju n e 2 010, w h ich to o k effect on 1 J a n u a ry 2 0 1 16.

2.4.1. The Definition o f "Disputing parties "

In die period from 1960 to 1993, it is unsurprisingly that there were no problems
on how to settle "investor-State dispute" in the system of Economic Arbitration under
the planned economy. Under Economic Arbitration, for example, Decree
N0.62/HDBT' provided "Task to manage economic contracts," in which the economic
contracts concluded between administrative agencies, such as Ministries, local
governments and its affiliated organizations (Art.4(2)). With regard to arbitration
under the Foreign Trade Arbitration Council and M aritim e Arbitration Council, for
their 30-year history, the number o f cases handled by these Councils was
insignificant especially during 1963-1986 and the role of these Councils was vague

1. Pham Diem, (2009), p.31; Le Hong Hanh (2009), p.3.
2. Pham Diem (2009), p.31. On the other hand, it was described that "... the Arbitration
Ordinance is not designed to compel parties to arbitrate, but merely to allow them to do so if
they so wish. It is therefore imperative that the parlies agree to arbitration. W hile it is
possible for two parties to enter into an arbitration agreement after a dispute has arisen
between them, the safest and more traditional approach is to subm it to arbitration all or
certain disputes which may arise between them in the course o f the performance o f the
contract by way o f an arbitration clause in that same contract." (FINN RO AD in association

with HADECON (2007), pp.71-72.).
3. H aT h i Mai Hien (2010), p.5.
4. Le Hong Flanh (2008), pp. 16-18; Huynh Tuong Long & Jesse Lieberman (2010), p p .16-18.
5. V L L F ( 2 0 1 0 ) , p. 19, p.31.

6. Law on Commercial Arbitration (Law NO.54/2010/QH12) dated on 17 June 2010.
7. Decree N 0.62/HDBT dated on 17 April 1984 o f the Council o f M inisters defining

functions,
duties, powers and organizational apparatus o f the Economic Arbitration at ministry,
province and district.
537


VIỆT NAM HỌC - KỶ YÉU HỘI THẢO QUỐC TẾ LẦN THỬ T ư

since trade partners o f Vietnam at that tim e were mainly from the former socialist
countries. Therefore disputes were not so serious and often resolved through mutual
negotiation for SOEs or the majority o f disputes were resolved via the respective
government arrangements as the countries rendering and receiving aids. These
Councils were then not treated as a full legal person, and were put under the
management o f the Ministry o f Foreign Trade and the M inistry o f Transportation1.
The period from 1994 to 2003, with regard to disputing parties, Decree
No. 116/CP provided that Economic arbitration settled disputes between (1) "the
company" and "its members," and (2) com pany’s m em bers themselves (A rt.l).
Circular NO.02/PL-DSKT2, the guiding regulation o f Decree No. 116/CP, provided
in detailed that Economic Arbitration has jurisdiction, regardless o f the nationality
o f the disputing parties, to settle three kinds o f dispute (A rt.I(l) a, b and c).
Therefore, although both Decree No. 116/CP and Circular N 0 .O2 /PL-DSKT had no
definition clause, considering economic system o f Vietnam at that time, it might be

construed that "a state-owned enterprise" is one side o f disputing parties against
foreign parties. As to "a State" or "a state entity," they could not be treated as
disputing parties under Economic Arbitration.
Decision No.204/TTg provided that the VIAC had jurisdiction over disputes
arising from international economic relations, and one or all o f the disputing parties
were foreign "natural and/or legal person" (Art.2 and Art.3(2)). With regard to
disputes where one o f the disputing parties was foreign, the other party would be
Vietnamese. In this case, as there was also no definition clause in Decision
No.204/TTg, it was not clear which kind o f Vietnamese entity was included in
Vietnamese parties. Considering the situation up to that time, "a state-owned
enterprise" might be construed to be identical to the case in Economic Arbitration.
As to "a State" or "a state entity," although there was an uncertainty in Decision
No.204/TTg, they could not be also treated as disputing parties under Economic
Arbitration.
Ordinance NO.08/2003/PL-ƯBTVQH provided the arbitration organization
and procedures for settling disputes arising from comm ercial activity, according to
agreement by "parties" (A rt.l). Ordinance NO.08/2003/PL-UBTVQH also had no
definition clause on "parties." Instead, Article 2 defined "commercial activities" and

1. Institute o f State and Law, National Centre for Social Sciences and Humanities Vietnam
(2002), pp.33-34; Le Hong Hanh (2009), pp. 1-2; Nguyen Van Hai (2011), pp.21-25.
2. Circular N 0.O2/PL-DSKT dated 3 January 1995 o f the M inistry o f Justice guiding the
implementation o f a num ber o f articles o f Decree No. 116/CP dated 5 September 1994 o f the
Government on the Organization and activities o f Economic Arbitration.
538


LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT...

"d isp u te s in v o lv in g fo reig n elem en ts" re sp e c tiv e ly . A c c o rd in g to th e s e d e fin itio n , it

m ig h t be c o n s tru e d th a t "parties" arc bo th V ie tn a m e se a n d fo re ig n , e ith e r n atu ra l o r

legal person as sam e as Decree N o.l 16/CP and C ircular N 0 .O2 /PL-D SK T , so "stateo w n e d e n te rp ris e s " w o u ld b e in clu d ed in V ie tn a m e s e p a rtie s . T h e y , h o w e v e r,

should get involved in "commercial activity" (Clause 3 and C lause 4, A rt.l), so they
would be so-called "merchant." Only disputes which arose in foreign countries did
not need arising from "commercial activity" (Clause 4). As to "a State" or "a state
entity," O rdinance N 0.O8/ 2 OO3/PL-UBTVQH had no provision.
T h e L a w o n C o m m ercia l A rb itratio n re g u la te s c o m m e rc ia l a rb itra tio n ( A r t.l) ,

which covers disputes between (1) parties engaging in com m ercial activities
them selves, (2) parties at least one of whom engaging in com m ercial activities and
(3) parties which the other law stipulates (Art.2). The Law on Com m ercial
A rbitration defines term "disputing party" and "disputes with foreign elem ents" in
A rticle 3 respectively. According to these definition, as contrasted w ith O rdinance

No. 08/2003/PL-UBTVQH, both Vietnamese and foreign, regardless o f types o f
entity, are treated as "parties", and in addition "all parties" do not need to be socallcd "m erchant." The Law on Commercial A rbitration expands its jurisdiction

comparing with Ordinance No. 08/2003/PL-UBTVQH, it could be construed that
Law on Com m ercial Arbitration covers disputes relating to "a state-ow ned
enterprise." Even the disputes only related to V ietnam ese do not need to be arised

from "commercial activity," and the Law on Commercial Arbitration is applied to
the disputes other than "commercial activity" provided that other laws provide
dispute settlem ent by arbitration (A rt.2(3))'. Although the Law on Com m ercial
A rbitration had no clear provision on disputes with "a State" or "a state entity," the
Law on Investment in 2005, as mention above, provides that "investor-State
dispute" could be settled by arbitration (Art. 12(4)). It m ight be construed that Law
on Com m ercial Arbitration would be able to be applied to ISD S, and the concept o f

"a State" could be confirm ed based on related law, including the Law on Investm ent
in 2005. A t early staee o f the drafting, however, it had been considered that the
right o f foreign investors to resolve disputes by arbitration w ould extend to
c o n tra c tu a l d is p u te s b etw een fo reig n in v e sto rs an d V ie tn a m e s e S ta te a g e n c ie s

relating to investm ent activities, in accordancc with the Investm ent Law o f 20052.

The Law on Commercial Arbitration which approved bv the National Assembly has

1.W ith regard to "commercial activity" in Ordinance No.08/2003'PL-UBTVQH, there has
raised issues, especially on enforcement o f arbitration awards. See, Le Hong Hanh (2008),
pp.39-41; Nguyen Van Mai (2010), pp.21-25.
2.

V ilaf Hong Due (2008).

539


VIỆT NAM HỌC - KỶ YÉU HỘI THẢO QUÓC TÉ LÀN THỨ T ư

removed provisions on ISDS. Here, it need considering drafting process o f the Law
on Commercial Arbitration1.

2.4.2.
Arbitration

The scope o f disputes related "a State" under the Law on Commercial

The Law on Commercial Arbitration was prepared by the Vietnam Lawyers’

Association (VLA), and a series o f the drafts had been published for comments on
Website o f the VCCI2. The draft No.O dated 29 June 2008 and the draft No.2 dated
4 November 2008 had referred to "the disputes between investors and a State
Management Agency o f Vietnam under the Investment Law" in the definition
clauses in Article 2 and Article 3 respectively. The draft No.2 dated 18 November
2008, however, had just referred "an Authorized State Agency" as one o f disputing
parties (Art.3), and on the other hand, provided an exem ption clause, where disputes
related to natural resources development were exempted from application, and be
commented that disputes stipulated in the Investment Law should not be exempted
(Art. 18). This style was adopted in the following drafts both dated 25 November
2008 and dated 12 January 2009. The draft dated 30 April 2009, which were
brought before the 12th National Assembly in its 5th session, provided 3 kinds o f
disputes exempted from application, and one would be decided by related laws
(Art.2(2)). With regard to "disputing parties," this draft defined "any natural person,
legal entity, organization and/or State agency with the right to agree upon
arbitration" (Art.3(3)). Considering that the draft dated 30 April 2009 had no
referred to the Investment Law, although "a State agency" was included within
"disputing parties," the law might not cover "investor-State dispute settlement"
because relationship between the draft and the Investment Law became unclear as
compared with the draft No.2 dated 18 Novem ber 2008 and the draft dated 12
January 2009. After submitting the draft to the 12th National Assembly, the VLA
had examined the draft further3, and submitted the 20th draft for opinions to the 6th
1. As to the process o f drafting from the 1St to the 6th, see IW ASE (2010).
2. With regard to each draft laws, see VIBOnline website.
3. Prior to submitting the draft for opinions in the National Assembly, the VLA had had
submitted the prepared draft to the Standing Committee o f the National Assembly. This draft
had almost identical provisions on both exemption and definition clauses with the draft
dated 30 April 2009. Furthermore, the VLA had also submitted a report "Statement
No.lO/TTr-HLGVN on the Bill on Arbitration dated 4 August 2009" to the Standing
Committee. In this report, the VLA stated that in the process o f drafting the Arbitration Law,

there were two opposite opinions on the scope o f the arbitration jurisdiction. After the
discussion by the National Assembly, the amended draft had been submitted again. In this
draft dated 28 August 2009, with regard to the scope o f the jurisdiction, two opposite
opinions mentioned in "Statement No.lO/TTr-HLGVN" were written down as options.
540


LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT.

sessio n o f th e 12th N atio n al A ssem bly. T h e 20th d ra ft h ad id e n tic a l p ro v is io n s on

both exemption and definition clauses as well as definition clause with the draft
dated 28 August 2009, and stated the opinions o f both sides concerning the issue on
the scope o f the arbitration jurisdiction in Article 2. In Option 1, the 20th draft had
applied to disputes (1) within scopc of "commercial activities" under the Law on
Commerce o f 2005, (2) one of the disputing parties is engaged in "commercial
activities" and (3) without scope of "commercial activities" but stipulated by other
laws. In Option 2, the 20th draft provided 2 kinds o f disputes, one is disputes to
which the draft was applied, and another is disputes to which the draft was not
applied. The former is ones related to parties’ rights and interests, which arose from
obligations o f a contract or non-contract. The latter is 6 types o f disputes listed in
the clauses from (a) to (dd), where (d) is "disputes between the government, except
where international treaties of which Vietnam is a m em ber have different
provisions" and (dd) is "disputes under jurisdiction o f other agencies in accordance
with the law." In the 6th session of the 12th National Assembly, deputies had
presented 3 different opinions on this issue, and most o f them agreed with Option 1.
The Committee on Justice o f the National Assembly also, based on the majority o f
the deputies, agreed with Option 1. The Committee on Justice prescribed laws
which provided the settlement of disputes not arising commercial activities but
settled by arbitration, such as Article 12 o f the Law on Investment o f 2005. Based

on those opinions, in case that the disputes arise from the legal relations but not
from a commercial activity, and that other laws provide to settle the disputes by
arbitration, then the disputes shall be resolved by arbitration if the parties so agree1.
Furthermore, the VLA had also agreed with Option 1, though the VLA had
originally expressed an opinion in support o f Option 2 in the draft dated 25 July
20092. As to "disputing parties," the 20th draft defined "a disputing party" and
"disputes with foreign elements" in Article 3 respectively. In the 6th session o f the
12th National Assembly, there was no controversy on qualification o f "disputing
parties" among the deputies.
In response to those discussion, the draft dated 3 March 2010 accepted the
opinion based on Option 1 and provided jurisdiction o f arbitration over disputes
b etw ee n ( ] ) th e p a rlie s arisin g from co m m ercial a c tiv itie s , ( 2 ) p a rtie s a t le a st o n e o f
w h o m is e n g a g e d in co m m ercial activ ities and (3 ) p a rtie s in c a s e th e la w s tip u la te s

resolution by arbitration (Art.2). The wording o f Article 2 o f the draft dated 3
M arch 2 0 1 0 w as as alm o st sam e as th e 20th d ra ft. T h is p ro v is io n has b een

1. ủ y ban Tư pháp, Quốc hội khóa XII (2010), pp. 1-2. As to further opinions o f the deputies,
see, Doàn thư ký kỳ họp, Kỳ họp thứ 6 Quốc hội khoá XII (2009V
2. For details, see, Hội Luật gia Việt Nam (2009), pp.5-7.
541


VIỆT NAM HỌC - KỶ YẾU HỘI THẢO QUỐC TẾ LÀN THỨ T ư

completely carried to the content o f Article 2 in the approved Law on Commercial
Arbitration. In contrast, the term "disputing parties" was deleted from the definition
clause in Article 3 o f the draft dated 3rd March 2010. The draft dated 3rd March
2010 has kept the definition on "disputes with foreign elements" with completely
same contents o f the the 20st draft. After the draft dated 3rd March 2010, the

standpoint o f this drafting has been kept other than the definition clause on
"disputing party"1 and the draft dated 17 June 2010 was passed and enacted as the
Law on Commercial Arbitration in 7th session o f the 12th National Assembly.
There were many changes before the Law on Commercial Arbitration present
was enacted. Here, I consider again that disputes other than commercial shall be
settled by arbitration where the other law stipulates so (Art. 2(3)), and the meaning
o f definition "disputing party" and "disputes with foreign elements"(Art.3(3) and
(4)). If literally construed, the Law on Commercial Arbitration m ight be applied to
ISDS according to Clause 4 o f Article 12 o f the Law on Investment o f 2005. In
case, foreign investors could sue the Vietnamese governm ent into arbitration other
than Vietnam.
Furthermore, as compared with Ordinance NO.08/2003/PL-UBTVQH, the scope
o f "disputes with foreign elements" under the Law on Commercial Arbitration also
expands (Art.3(4)). The Law on Commercial Arbitration would be applied to
disputes with foreign elements which arise from both "commercial relationship" and
"other legal relationship," where "foreign elements" is limited within the scope o f
the Civil Code. A "investor-State dispute" is a dispute with "foreign elements" and
arises from legal relationship other than "commercial one." Therefore, based on this
provision, it might be also construed that the Law on Commercial Arbifration would
be applied to ISDS. The current Civil Code2 prescribes "civil relations with foreign
elements" in Part 7 (Art.758-Art.777), and the government legislates Decree

1. In this period, 4 drafts were published. In the draft dated 24 May 2010, with regard to the
definition clause o f Article 3, there were reported some opinions o f deputies that it needed
add the definition clause such as "commercial activity," "commercial arbitration,"
"Arbitration center" and so on. See, ủ y ban Thường vụ Quốc hội (2010), p.3. In the draft
dated 9 June 2010, the term "disputing party" was re-provided in definition clauses, and in
comparing with the 20th draft, the words "State" and "legal person" were deleted, and
instead, the wording "Vietnam" and "foreign" were added. This definition was introduced
into the final draft. In addition, the term "disputes with foreign elem ents" was also amended

from "civil relations stipulated in Civil Code" into "commercial relations and/or other legal
relations stipulated in Civil Code." This definition was also alm ost com pletely adopted in
the final draft. To date, I could have confirmed the reason o f these changes.
2. Code No. 33/2005/Q H 11 on Civil date 14 June 2005.

542


LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT..

NO.138/2006/ND-CP1, which details the implementation o f the Civil Code’s
provisions on civil relations with foreign elements. Decree NO.138/2006/ND-CP,
however, has no provision on "civil relations with foreign elements" involving with
"a State" or "a state entity" (Art.3( 1)).
3. Issues on investor-State dispute settlem ent in V ietnam

3.1. Ratification o f the ICSID Convention by Vietnam
As mentioned 2-1, the BITs with the Netherlands and France provide
arbitration in the ICSID. In addition, under the investment chapter o f a BTA with
U.S., both governments permit foreign investors to sue themselves into
"international arbitration" each other. This means that Vietnam gives the U.S.
investors the right to choose a variety of third-party dispute settlem ent mechanisms
in the event o f an investment dispute with the Government o f Vietnam. Vietnam has
not yet acceded to the ICSID Convention, but has asked the U.S. to provide advice
in this area as part o f the U.S. technical assistance program designed to assist
Vietnam to implement the BTA. In addition, the Prime M inister o f Vietnam
directed the Ministry of Planning and Investment (M PI) to preside over, in
coordination with the Ministry o f Justice, submitting to the Prime Minister within
the second quarter o f 2005 the option for signing on the ICSID Convention2. Based
on this direction, the Ministry of Planning and In v e s tm e n t had submitted a proposal

to the Government to join the ICSID, although the proposal has been still under
consideration3. And furthermore, the Law on Investment o f 2005 clearly specifies
the ICSID Arbitration as one of the dispute settlement procedures. In fact, the report
submitted to the 8th session of the 11 th National Assembly, which discussed and
approved the Law on Investment, by the Standing Committee, also states that
disputes between foreign investors and the Vietnamese State M anagement Agencies
should be resolved by arbitration or the courts o f Vietnam in principle. At present
most o f the countries investing in Vietnam have signed a BIT with Vietnam.
In v e s to rs h a v e th e rig h t to reso rt to arb itra tio n b y th e V ie tn a m e s e o r fo reig n
A rb itra tio n In s titu tio n s for reso lv in g th e d isp u tes. In a d d itio n , w h e n Vietnam joins

the 1CSIDI Convention, other countries, which have not concluded such a BIT but a
m e m b e r o f th e IC S ID C o n v en tio n , disputes b e tw e e n th e in v e s to rs o f su c h c o u n trie s

1. Decree NO.138/2006/ND-CP dated 15 November 2006 o f the G overnm ent detailing the
implementation o f the provisions of the Civil Code on civil relations with foreign elements.
2. Directive No.] 3/2005/CT-TTg dated April 8, 2005 o f the Prime M inister on measures to
create new development in foreign direct investment attra ctio n in Vietnam, reprinted in VBF
(2005b)
3. The U.S. & Foreign Commercial Serv ice and U.S. Department o f State (2012), p .123.
543


yỊỆr NAM HỌC - KỶ YẾU HỘI THẢO QUỐC TÉ LẰN THỨ T ư

and the Vietnamese State M anagement Agencies shall be resolved under the ICSID
Copvention1 based on the provision o f the Law on Investment o f 2005.
On the other hand, disputes with "a State" seem to continue to seriously issues in
Vietnam. As to the ICSID Convention, Vietnam seems to become cautious in joining
b ru is e o f sovereignty. The ICSID Convention stipulates that "Each Contracting State

shaJi recognize an award rendered pursuant to this Convention as binding and enforce
the pecuniary obligations imposed by that award within its territories as if it were a
judgment o f a court in that State." (A rt.54(l))2. Issues on sovereignty were
id eated in BOT projects3 and investment projects in Vietnam. In case o f investment
p.0ects, the discussion on the draft o f the Law on Investment, one o f the National
Assembly deputies commented that Vietnam should have its own sovereignty in
saving its cases and should not order foreign arbitration to arbitrate Vietnamese State
jyjgiagement Agencies based on foreign regulation. The same deputy, however,
cordrtued to comment that Vietnam would join the W TO in the near future, and then
V j(tn am s h a ll o b e y t h e g e n e r a l r u l e o f m a r k e t e c o n o m y . T h e r e f o r e , t h e d e p u t y s t a t e d ,

j. yould be better to provide that "The disputes between foreign investors and the
yj(tnamese State M anagement Agencies could be settled in the courts o f Vietnam,
ty u-bitration in V ietnam , or by international arbitration" in the L aw 4.

3.2. The Concept o f "a State"
Under the current BOT Law o f Vietnam, with regard to definite disputes with
Authorized State Agencies, the disputing parties are not required "negotiation
m, conciliation" as a first step for resolution. The disputes shall be settled by
•apitration or courts in Vietnam" or "ad hoc arbitration agreed by the disputing
iy ban Thường vụ Quốc hội (2005b), pp.4-5.

2 ato (2 0 0 7 ),p . m .
ị vnJrew B. W yatt (2002), p.129. Concerning BOT project, difficulty has arisen to implement
ie project apd disputes between foreign investor and "a State" has occuưed. In this
itiation, concerning to Decree N0.62/1998/ND-CP, there was indication that Vietnam
^trained unwilling to be a subject disputes between investors and its agencies to a foreign
rbtration court. For Vietnam, the issues was politically sensitive since international
rbtration was viewed as an infringement o f sovereignty. But theoretically, an investor
hculd require a dispute resolution clause in the contract stating that potential disputes

hculd be solved by international arbitration under the U NCITRAL or ICSID Rules,
lowever, in the case o f Vietnamese counter-parties, empirical experience shows that there is
fundamental discrepancy between the theoretical way o f doing business and the way it
really works out there." See also, VNS (2012); Sara Lindgren & H elena Varga (2005),

1.50, note 105.

4 /ă i

phòng Quốc hội (2005), pp.8-9.


LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMEN r

p a rtie s."

(A rt.4 8 (2 )).

W ithout ag reem en t by

the

A u th o riz e d

S ta te

A g e n c ie s

"investors" or "project enterprises" arc required to settle their dispute in Vietnam. Jf
they want to settle their disputes with Authorized State Agencies in other thyj

Vietnam, they have to agree ad hoc arbitration with Authorized State Agencies jn
advance or after arising dispute1, ỉn manv eases of a BOT project, therefore, tqe
disputes seems to be settled mainly under the d o m estic procedures in Vietiia.^
Although this circumstance might arise difficulties for foreign investors, tie
disputes itself could be settled under domestic system in Vietnam.
As oppose to BOT cases, under which violation of domestic law would be muirjy
at issue, B IT s a n d th e Investm ent Law have p rovided international arbitration Jg
procedures o f ISDS. According to the Law on Investment o f 2005, the dispiỊg
involves foreign investors and a State would be referred by default to a Vietnamese
court, unless provided otherwise in a contract between the investors and the Stale ,r
in an international treaty to which Vietnam and the investor’s home State a-e
parties. This dispute-related contract is separate from the investment certifka^
which does not include provisions on dispute resolution. Foreign investors located
in countries that do not have a BIT with Vietnam thus also have the possibility Q
obtain guaranteed access to international arbitration based on the contract in case
dispute with the State2. In many international arbitration, the question at issued s
usually acts in violation of international law, and the acts would be attributed to tle
central governments even if they were committed by a sub-entity o f the host Stat
Under the international law o f state responsibility, the state is responsible for all >s
organs including those of a territorial unit as well as for state entities exercisiig
elements o f governmental authority3. While a classification o f a person or entity ,s
"organ" in domestic law and practice may often lead the same conclusion undr

[.O n 27 January 2011 the Ministry of Planning and Investment promulgated C irtu |r
N o.03/2011/TT-BKHDT, guiding Government Decree NO.I08/2009/ND-CP on Investing
in the forms o f Build - Operate - Transfer, Build - Transfer - O perate And Build - Traristj.
Contracts. This Circular provides that ministries, sectors and provincial-level Pe 0Dlts
Committee arc responsible for formulating or revising lists o f BOT, BTO and BT projects Ị,
their localities in the course o f formulating annual socio-economic developm ent plans Bt
there is no provision on dispute settlement between investors and these ministries. See

Agencies/VNA/VLLF, (2011), p.32.

2. UNCTAD (2008), p.4I.
3. Rudolf Dozer & Christoph Schreuer (2008), p.234, note 90. in investm ent arbitration tas~
o f ISDS, tribunals have decided based on "the Articles on Responsibility o f StatCi L
Intemationally Wrongful Acts" adopted by the International Law Commission (ILC). Ss
also, R udolf Dozer & Christoph Schreuer (2008), pp. 195-206.


VIỆT NAM HỌC - KỶ YẾU HỘI THẢO QUỐC TỂ LẦN THỨ TƯ

international law, this will not always be the case, that is, "organ" is not a classification
that all domestic legal systems have, and where it exists, it may serve domestic law
purpose unrelated to those if international law. Furthermore, existence o f separate
personality and liability in domestic law is never dispositive o f the status o f the
entity as an organ in international law. State-owned enterprises with a commercial
purpose would not in principle be regard as State organs, but that presumption could
be overturned on showing that, in fact or law, the relevant entity1.

4. Conclusion
When we consider ISDS, the concept o f "a State" is one o f the most important
issue. Foreign investors will able to use the ISDS mechanism in case only disputes
against "a State." The host Sate may deal with foreign investors either through a central
state organ or through a separate entity. It may also be a specialized government
agency such as an investment board or a privatization agency. Vietnam has very
complicated political system, which structured to comprise the Communist Party, the
S ate and Social Organizations2. In "Chapter I: The Socialist Republic o f Vietnam The Political Regime" o f the Constitution o f 1992 specifies the Communist Party
(Art.4), the Vietnam Fatherland Front and its m em ber organizations (Art.9) and the
Trade U nion (Art. 10) as w ell as the State. Under these circum stances there seem s to

hive no the definite concept o f a State as a subject o f sovereign immunity in the
field o f international law in Vietnam 3. This has brought the situation that not only a
dispute between the Vietnam Airlines (VNA), a state-owned enterprise, and a
foreigner, but also a dispute between the Vietnam Football Federation (FVF), a
social organization, and a foreigner are described as exam ples o f sovereign
immunity4. As discussed in this article, Vietnam seems has not established the legal
famework on the ISDS in domestic law as well as international law. In addition, it
siems that few research on sovereign immunity as well as ISDS has being actively
pursue in Vietnam. I could not have confirmed litigations and/or opinions for the
cJncept o f "a State" by the National Assembly and the governm ent so far. In
addition, there seem no official and/or unofficial opinions by the Communist Party
jself. Even in the academic society o f Vietnam, there are few research on sovereign

]. Georgios Petrochilos (2010), p.321.
Pham Diem (2011).
In Vietnam, a case o f Can Gio Ship is known as sovereign immunity, in which the
Government o f Vietnam was sued in Tanzania court. See, Đỗ Văn Đại, Mai Hồng Quỳ
(2010), pp. 150-152.
Fùi Thị Thu (2010), pp.96-97.
>4o