THE EFFECT OF ARBITRATION AGREEMENTS UNDER VIETNAMESE AND SWEDISH LAW

Joint Swedish-Vietnamese
Master’s Programme
MASTER’S THESIS

by
Phan Hoai Nam

THE EFFECT OF ARBITRATION
AGREEMENTS UNDER VIETNAMESE
AND SWEDISH LAW

Supervisors: Professor Michael Bogdan
Professor Mai Hong Quy

Field of study: Comparative and International Law
Spring 2008


CONTENTS
ABBREVIATIONS............................................................................
EXECUTIVE SUMMARY..................................................................
1 INTRODUCTION............................................................................
2 OVERVIEW ON ARBITRATION AGREEMENTS...........................
2.1 Definition of an arbitration agreement........................................................
2.2 Construction of arbitration agreement........................................................
2.3 Relationship between the arbitration clause and contracts....................10
2.4 Relationship between arbitration and courts based on the arbitration
agreement................................................................................................ 11

3 REQUIREMENTS FOR VALIDITY OF ARBITRATION
AGREEMENTS........................................................................17

3.1 Requirements concerning to the parties...................................................17
3.2 Requirements as to form of agreement in order to establish consent...20
3.3 Material requirements.................................................................................22

4 CONCLUSION.............................................................................28
TABLE OF STATUTES AND OTHER LEGAL INSTRUMENTS.....30
International Treaties and Conventions.........................................................30
National Legislations.......................................................................................30
Sweden.............................................................................................................. 30
Vietnam............................................................................................................. 30
Others................................................................................................................ 30

TABLE OF CASES........................................................................31
BIBLIOGRAPHY............................................................................ 32
Monographs...................................................................................................... 32
Articles in Journals, Anthologies, and others...............................................33
In English.......................................................................................................... 33
In Vietnamese................................................................................................... 33


Abbreviations
AA(Swe):
OCA(Vie):
CC(Vie):
SCC Rules:
VIAC:
The Model Law

The Swedish Arbitration Act (1999:116)
The Ordinance on Commercial Arbitration in Viet

Nam (2003:08)
The Vietnamese Civil Code 2005
The Arbitration Rules of the Arbitration Institution of
the Stockholm Chamber of Commerce
The Vietnam International Arbitration Center at the
Vietnam Chamber of Commerce and Industry
1985 Uncitral Model law on International
Commercial Arbitration, with amendments as adopted
in 2006

1


Executive Summary
Resolving disputes by arbitration is becoming more and more popular because of
its advantages compared to other measures such as mediation or the courts 1.
However, a valid arbitration agreement is needed, if arbitration is to be the basis for
resolving disputes. An arbitration agreement has the effect of excluding the
jurisdiction of the court and it is also needed if a court is later to recognize and
enforce arbitral awards, especially if they are decided in foreign countries.
A valid arbitration agreement is an agreement which complies with the
provisions of the relevant law. Its effect is based on many factors such as the parties
who signed it and its form and content...
According to the Vietnamese legal system, only individuals and business
organizations have the right to enter into an arbitration agreement. The Swedish
legal system does not impose any restrictions on this point.
Similarly, the form of arbitration agreements and their contents are also treated
differently by the two legal systems.
Vietnamese Law by way of the Ordinance on Commercial Arbitration 2003
(hereinafter referred to as the OA(Vie)) specifies the permitted forms of agreement

by way of a list in paragraph 1 of Article 9 of the OA(Vie). This method has
limitations as it may not list all written forms of arbitration agreements. For
example, the contracting parties could have a bill of lading, a ship leasing contract
lease or a company charter as the document which contains an arbitration
agreement. In this regard, the Swedish law does not make specific requirements
about the form. When disputes arise, the parties must simply prove that an
agreement on arbitration between the parties did exist 2.
The scope of an agreement is also linked to the validity of an arbitration
agreement. Swedish law allows wide scope to such agreements though it does
exclude some agreements such as consumer contracts or agreements regarding the
carriage of passengers or goods by sea or aviation. Meanwhile, Vietnamese law
only accepts arbitration in commercial activities where the parties have so agreed.
Clearly, this limits the contracting parties’ capacity to choose suitable measures for
resolving non - commercial disputes.

1

On the advantages and disadvantages of arbitration see: Finn Madsen, Commercial Arbitration
in Sweden, 3rd edition, Oxford University Press, Oxford, 2007, pp.23 - 28
2
The Swedish Arbitration Act of 1999, Five Years On: A Critical Review of Strengths and
Weaknesses, p10, Editors: Jernej Sekolec and Nils Eliasson, The UNCITRAL Model Law on
Arbitration and the Swedish arbitration Act: a Comparison

2


1

Introduction

Along with the development of the market economy, the number of disputes in
commercial activities is increasing. With its flexibility, resolving disputes by
arbitration is being more and more relied on by enterprises. The practice in Viet
Nam shows that the number of cases resolved by arbitration has increased. This
demonstrates that the position of arbitration compared with other methods such as
courts and ADRs (Alternative Dispute Resolution) has changed. However, in
comparison with other countries, the figures are still modest 3. There are many
reasons to explain this, which include imperfections in the arbitration law of Viet
Nam.
In general, the authority of arbitrators depends on the arbitration agreement
which the parties consented to. “No arbitration if no valid arbitration agreement”.
Unlike courts, which have jurisdiction over any disputes based on the procedural
law of their country, arbitrators only have authority when the contracting parties
have agreed to choose arbitrators to resolve their disputes.
The law on arbitration in Viet Nam appeared later than in other countries 4. The
Arbitration Ordinance of 1990 is the first document to cover arbitration. It was then
replaced by the Ordinance on Commercial Arbitration 2003 (OCA(Vie)). Along
with the documents guiding its implementation in legal practice, the OCA(Vie) now
cover issues relating to arbitration in general and arbitration agreements in
particular. However, regarding arbitration agreements, the ordinances and guiding
documents still have many problems which makes the resolution of disputes in Viet
Nam by arbitration present many difficulties.
Because of the importance of the arbitration agreement, as well as the differences
between Vietnamese arbitration law and the law of other countries, I has chosen the
topic: "The Effect of arbitration agreements under Vietnamese and Swedish law”
for my master’s thesis.
The thesis is divided into four parts as follows:
Part 1: Introduction- generally introduces the thesis and its purpose,
method and delimitation;

Part 2: Overview on arbitration agreements – comparing and analyzing
Vietnamese and Swedish law on the definition and structure of arbitration
agreements, the relationship between an arbitration agreement and the
contract and between arbitration and courts,
3

According to VIAC resolved 22
cases in 2005, 23 cases in 2006
4
/>
3


Part 3: Requirements for the validity of arbitration agreements –
comparing and analyzing the requirements regarding parties, form and
content of arbitration agreements in Vietnam and Sweden.
Part 4: Conclusion - some conclusions and proposals are made by way of
a summary.
Methods
The methods used in this thesis combine law and economics with the descriptive
method, the comparative legal method and the analytical method. In addition, to
strengthen the argument on the effectiveness, as well as the restrictions in the law
on arbitration agreements in both Viet Nam and Sweden, I have also used case law
analysis.
Delimitation
My thesis focuses on studying and analyzing legal issues relating to the validity
of arbitration agreements in the Vietnamese legal system. In addition, I also
compared this legal framework with the Swedish one for the purpose of suggesting
improvements to the Vietnamese law on the issue.

4


2

Overview on arbitration agreements

2.1

Definition of an arbitration agreement

According to Article 2 (2) of the Ordinance on Commercial Arbitration the
Republic of Socialist Viet Nam in 2003 provided:
“Arbitration agreement means an agreement between the parties to
commit to use arbitration to resolve disputes which may arise or which have
arisen from commercial activities”.
Specifically, the arbitration agreement is the basis for granting authority to
arbitrators regarding a specific dispute relating to commercial activities. These
activities are carried out by business individuals or organizations.
“Commercial activities means the performance of one or many trading
acts by business people or organizations, including goods purchase and
sale, service provision; distribution; trade representation and agency;
consignment; renting and lease; hire purchase; construction; consultancy;
technology; licensing; investment; financing; banking; insurance;
exploration and exploitation; transport of goods and passengers by air, sea,
rail, land, and other commercial acts as prescribed by law5”
Not all business individuals or organizations have the right to decide that their
disputes will be solved by arbitration. However, even when they have the right to
chose arbitration, if the disputes are not regarding commercial activities, such
arbitration agreements will not be recognized. This is an important matter for

enterprises (including enterprises established under the Enterprise Law, the Law on
Foreign Investment, the Law on State enterprises and the Law on Cooperatives…)
as they need to know when to sign arbitration agreements.
The AA(Swe) does not contain any actual definition of an arbitration agreement.
However, a definition is implied in section 1 of the Arbitration Act, which deals
with arbitrability:
“Disputes concerning matters in respect of which the parties may reach
a settlement may, by agreement, be referred to one or several arbitrators for
resolution. Such an agreement may relate to future disputes pertaining to a
legal relationship specified in the agreement”.
Unlike the position in Vietnamese law, the AA(Swe) does not apply to
commercial disputes only. Consumer disputes also come under the Act, but Section
6 states that an arbitration agreement referring to future consumer disputes is not

5

Article 2(3) of OCA(Vie)

5


valid6. And it also does not expressly state that non-contractual disputes can be the
subject of an arbitration agreement. However, it is clear that such disputes can be
arbitrated under the AA(Swe). (See conditions for the effect of arbitration
agreements relating to the content of disputes in the section 3.3).
In both Vietnam and Sweden, an arbitration agreement can be established in
advance (for future disputes) or after a dispute occurs (to settle the dispute has) and
their conditions of validity are similar.
In the process of negotiations leading up to a contract, the contracting parties
may agree to take disputes to arbitration if those disputes arise during the

implementation of the contract or relate to it. In this case, the arbitration agreement
can be included in the contract as an arbitration clause or can be made as an
independent document.
Although the contracting parties did not have an arbitration agreement in the
past, after a dispute between them occurs, they may also reach an agreement to
arbitrate at any time.
Such agreements may be established at any time that the parties choose. In
reality, once disputes have arisen, especially disputes involving foreign elements,
each party would like to choose his own authorities to solve them. So, if the parties
lack the goodwill needed to resolve their disputes, it will be equally difficult for
them to establish an arbitration agreement then. Establishing an arbitration
agreement before disputes occur is the better way and should be done if the parties
intend to use arbitration to resolve disputes.
In brief, although between Viet Nam and Sweden have different ways of defining
the concept of arbitration agreement: a specific concept in Vietnamese Law, but one
only implied in Swedish Law, the connotation of the two is similar. There is only a
difference concerning the types of disputes which can be subject to arbitration.
2.2

Construction of arbitration agreement

The authority of arbitrators to resolve disputes arises through an arbitration
agreement which is negotiated and signed by the contracting parties and is in
essence independent of the underlying contract. To be workable and effective, a
long and detailed arbitration agreement is not needed. The two basic principles that
any arbitration agreement needs are simple. Note that an arbitration agreement
which is unclear or incomplete may well be contrary to the expectations of the
contracting parties, who want to use arbitration to resolve their disputes.
6

Section 6 of the AA(Swe)

6


Arbitration agreements are often required to have two basic elements, namely,
the identity of the arbitration organization and the arbitration proceedings rules. In
addition, its scope and the types of disputes covered are also necessary terms. When
establishing an arbitration agreement, the contracting parties should aim to cover all
dispute types which can arise from or relating to the contract between the parties.
They should avoid listing specific disputes as this could limit the authority of the
arbitrators who would not have standing in disputes that were not mentioned.
The agreement should refer to the number of arbitrators. If the parties want the
case to be decided by any number of arbitrators other than three that should be
stated in the clause. The other additions suggested by the SCC Institute refer to the
place of arbitration and to the language(s) to be used in the proceedings. If not
agreed upon by the parties the place of arbitration is decided by the SCC Institute
and the language is decided by the arbitrators 7.
The SCC Institute recommends the following wording:
The Arbitral tribunal shall be composed of ... arbitrators (a sole
arbitrator).
The place of arbitration shall be ...
The language to be used in the arbitral proceedings shall be ...
There are two types of commercial arbitration; institutional or ad hoc arbitration.
Institutional arbitration is conducted under arbitration rules offered by an arbitral
institution. Ad hoc arbitration is based on the applicable arbitration law in the
country where the arbitration is.
To avoid the uncertainty of knowing whether the parties have opted for
institutional or ad hoc arbitration, the clause should be very clear by stating the
national law or the given set of institutional rules, according to which the arbitral

proceedings shall be conducted.
Giving the name of the specific arbitration organization chosen in the arbitration
agreement is also extremely important. In practice, there are many cases where the
arbitration agreement has clearly stated that the contracting parties will refer their
disputes to arbitration8. However, the name of the arbitration organization is not
specifically recorded which could result in arbitration being refused. Because,
according to item 4, article 10 of the OCA(Vie), the arbitration agreement would be
invalid:
“Arbitration agreements shall be invalid in the following cases, where…
the arbitration agreement fails to specify or specifies unclearly the disputed
7

Ulf Franke, Introduction to Arbitration, speech at the Introduction to Arbitration seminar held in
Stockholm on 13 - 16 June, 2001.
8
/>
7


objects, or the arbitration institution competent to settle the dispute, and
later the involved parties have no additional agreement”.
In such cases, Resolution 05 had specifically provided as follows: if the court
bases itself on an arbitration agreement that did not record the name of any
arbitration council or center in Vietnam, the court should have the authority to settle
disputes, unless the parties have agreed on a new specific arbitration council in
Vietnam to resolve their disputes.
For example: an arbitration agreement only contains the following:
“In case disputes can not be solved by negotiation, the contracting
parties shall refer their disputes to arbitration according to Vietnamese
law”.

In the above example, the arbitration agreement is null and void because the
parties did not agree clearly that their disputes should be resolved either by an
arbitration council named by the parties or by ad – hoc arbitration, or by the
arbitration council of a specific arbitration center in Vietnam alone, unless the
parties agree or have agreed to add the specific name of an arbitration council in
Vietnam to resolve their disputes.
However, Resolution 05 and even item 4, article of the OCA(Vie) are
inappropriate in practice. Clearly, through the arbitration agreement, the parties
intended to refer their disputes to arbitration without any court or conciliation or
mediation organizations. The arbitration laws of Sweden (and of other countries) do
not make any such concrete requirements about stating the name of the arbitration
organization.
Stating the full name of the arbitration rules is equally important. There are many
cases leading to problems; VIAC has had to ask parties to determine a specific
proceedings rule to use in resolving their disputes because the arbitration agreement
was too unspecific: "choose rules of international arbitration". In reality, the parties
may only be able to agree on this if they still retain enough goodwill to each other.
If not, the arbitration agreement will be considered as invalid.
In the legal practice of Sweden, in the case No. 038/2003 9 of the SCC, the parties
agreed on an arbitration agreement whose content was obscure. In the contract, the
parties agreed that:
“All arguments and/or disagreements which arise through the Contract
or because of it should be settled by negotiations between both sides. If the
parties cannot come to an agreement the argument shall be settled in the
9

/>
8

Arbitration Court of the Chamber of Commerce, Stockholm, Sweden under
the rules of conciliation and arbitration of the International Chamber of
Commerce by one or more arbitrators appointed in accordance with those
rules in the Contract languages”.
Where their disputes arise, the defendant objected to the jurisdiction of the
Arbitration Institute of the Stockholm Chamber of Commerce. The Arbitration
Institute considered that the parties intended to use arbitration for resolving their
disputes and there was an operative arbitration agreement in existence. Pursuant to
the arbitration agreement, they could determine the will of the parties as
empowering arbitration to settle their disputes under the auspices of the Stockholm
Chamber of Commerce.
In this case, the arbitral tribunal and the parties spent close to ten months on the
issue of jurisdiction, before attention could be turned to the substantive issue of the
dispute. If the parties had used a model clause recommended by either one of the
institutions mentioned in their contract (ICC or SCC), this could easily have been
avoided. Five minutes on the internet in conjunction with the negotiation of the
contract is probably all it would have taken for the parties to find out the exact
wording of a relevant model clause. This would have been time well spent.
We shall look at some arbitration clauses of the VIAC and the SCC Institution:
The VIAC recommends that all parties wishing to make reference to VIAC
arbitration in their contracts use the following model clause10:
“All disputes arising out of or in relation to this contract shall be finally
settled by the Vietnam International Arbitration Centre at the Vietnam
Chamber of Commerce and Industry in accordance with its Rules of
Arbitration”.
Additionally, the parties may add the following provisions to the arbitration
clause:
“ The number of arbitrators shall be......... (One or three);
The place of the arbitration shall be………”
As to disputes involving a foreign element, the parties may also make additions:

“The applicable law shall be .........;
“The language of the arbitration shall be..........”.
The model clause of the Arbitration Institute of the Stockholm Chamber of
Commerce11 is:
10

/>
11

/>lm_Chamber_of_Commerce_English/

9


“Any dispute, controversy or claim arising out of or in connection with
this contract, or the breach, termination or invalidity thereof, shall be settled
by arbitration in accordance with the Rules of the Arbitration Institute of the
Stockholm Chamber of Commerce”.
The parties are advised to make the following additions to the arbitration clause,
as required:
“The arbitral tribunal shall be composed of .......... arbitrators (a sole
arbitrator).
The seat
of
arbitration
shall
be
…………………
The language to be used in the arbitral proceedings shall be………”
The two above model arbitration clauses’ content are relatively full. Through

this, we can clearly determine the parties’ intention to use arbitration for resolving
their disputes. Further, we can also identify the specific arbitration organization
which has authority over disputes. However, there are cases where, after the main
contract with an arbitration clause was signed, the parties entered into supplemental
contracts. So, are disputes relating to the supplement contract also given to the
arbitration authority to settle? It may therefore reasonable to add the following
provision:
" Any dispute, controversy or claim arising out of or in connection with
this contract, as well as any other agreement, or the breach, termination or
invalidity thereof……”
2.3
Relationship between the arbitration clause and contracts
Article 11 of the OCA(Vie) provided:
“The arbitration clause exists independently from contracts. The
modification, extension, cancellation or invalidity of contracts shall not
affect the effect of the arbitration clause”.
According to the above provision, the changes of contracts shall not affect the
effect of the arbitration clause in that contract, even in case that the contract is
invalid. Now in Vietnam, there are some opinions that invalidity of contracts shall
affect the effect of the arbitration clause and therefore the case shall be referred to
the competent court. This opinion is not convincible. Because in legal practice, the
Vietnamese Courts have stated that the invalidity of main contracts shall not affect
the effect the arbitration clause12. On the other hand, the arbitration also has
authority to decide invalidity of contracts. Because in Vietnam, although the Civil
Code 2005 provides that the court shall have authority to state that the contract is
12

Do Van Dai, Giải quyết tranh chấp bằng phương thức trọng tài ở Việt Nam, Legal Science
Journal, No. 06/2007

10


not valid but this provision does not stipulate that this power is only given to the
court.
For example, in a case between Dai Hung Corporation and Zest Corporation,
both contracting parties have chosen VIAC to resolve their disputes. Where their
disputes have arisen, Dai Hung Co. said that VIAC does not have authority to
resolve their disputes because the representative of Zest Corporation did not have
authority to sign the contract and so the arbitration clause is also invalid, which is
similar to the contract. But the Supreme People’s Court of Vietnam stated that the
effect of the contract and the effect of the arbitration clause are independent 13.
As to the separability of the arbitration clause from the rest of the contract in
which such clause is contained, the section 3 of AA(Swe) is drafted more broadly
than the Model Law (Article 16(1) of the Model Law provided that: “the arbitral
tribunal may rule on its own jurisdiction, including any objections with respect to the
existence or validity of the arbitration agreement. For that purpose, an arbitration
clause which forms part of a contract shall be treated as an agreement independent of
the other terms of the contract. A decision by the arbitral tribunal that the contract is
null and void shall not entail ipso jure the invalidity of the arbitration clause”) and
does not distinguish between the determination of the jurisdiction of the arbitral
tribunal by the tribunal itself or by the courts 14. Where the jurisdiction of the arbitral
tribunal is subject to determination in court, objections as to the validity of the
contract in which the arbitration clause is contained have been found to be
irrelevant, since the effect of a valid arbitration agreement is that the validity of the
contract in which the arbitration clause is contained is to be determined by the
arbitral tribunal. A court concluded that the arbitrators have jurisdiction to
determine whether the contract is void ab initio, by reason of fraud, even if it is this
contract which purports to confer jurisdiction on the arbitrators 15.
2.4

Relationship between arbitration and courts based on the
arbitration agreement
Can a valid arbitration agreement be replaced by another agreement to choose
the courts and vice versa, or not? In principle, the law on arbitration of most
countries allows for the replacing of an old agreement by a new one. However,
there is difference between Vietnamese and Swedish law on this issue.
13

Decision 112/2006/TTPT dated June 02nd 2006 of the Appeal Court of the Supreme People’s
Court of Vietnam in Hanoi.
14
Section 3 provides that: ”where the validity of an arbitration agreement which constitute part of
another agreement must be determined in conjuntion with a determination of the jurisdiction of
the arbitrators, the arbitration agreement shall be deemed to constitute a separate agreement.
15
The Swedish Arbitration Act of 1999, Five Years On: A Critical Review of Strengths and
Weaknesses, p10, Editors: Jernej Sekolec and Nils Eliasson, The UNCITRAL Model Law on
Arbitration and the Swedish arbitration Act: a Comparison, p.17.

11


The Swedish law clearly covers this issue in Section 5 of the AA(Swe). A party
shall forfeit his right to invoke the arbitration agreement as a bar to court
proceedings where the party has opposed a request for arbitration; or he failed to
appoint an arbitrator in due time; or he fails, within due time, to provide his share of
the requested security for compensation to the arbitrators. In such cases, the courts
will have authority to resolve their dispute.
Sections 4 and 49 of the AA(Swe) also provide that when disputes based on an
agreement containing a valid arbitration agreement are brought into court, the court

must transfer the parties to arbitration if the parties request it. The Court does not
consider arbitration on its own but only on the request of the parties. Accordingly,
the parties must refer to an agreement or in arbitration with version of the first on
the issues of the dispute.
The Vietnamese law also acknowledges this principle in Article 5 of the
OCA(Vie). Accordingly, if a party petitions a court and claims that the parties had a
valid arbitration agreement, the court must refuse jurisdiction. But may the parties
waive the arbitration agreement by choosing to go to court? The OCA(Vie) does not
specifically say.
Article 8 of the Model Law of UNCITRAL provides that:
“A court before which an action is brought in a matter which is the
subject of an arbitration agreement shall, if a party so requests not later
than when submitting his first statement on the substance of the dispute,
refer the parties to arbitration unless it finds that the agreement is null and
void, inoperative or incapable of being performed”.
Resolution 05 of the Judges’ Council of the Supreme People's Court was adopted
in 31 July 2003 to give guidance on a number of provisions of the OCA(Vie), which
contains a way to solve this point. Accordingly, in principle, when the plaintiff sues
in a court, that Court must request him to determine whether there is an arbitration
agreement made before or after their disputes happened. The Court must then check
and consider the documents enclosed in the petition to determine the validity of the
arbitration agreement. If there are grounds for determining that the dispute was
controlled by a valid arbitration agreement then, pursuant to the provisions of the
procedural law, the court will return the applications of the plaintiff. In the case, the
court has determined that there is a specific arbitration agreement after accepting
the case, it will suspend it and return the applications, even the documents enclosed
in the application for litigants. This provision is different from international practice
and from some countries’ law, including that of Sweden.

12

But the Resolution also provided that if, after the plaintiff sent the defendant a
written notice regarding filing a requirement to request the Court to resolve their
disputes or after the defendant received the Court’s notice of the plaintiff’s
requirement, if he does not object within seven days from the date of receiving the
text of the plaintiff or the notification of the Court, the Court should have authority
to settle the case, even though there is a valid arbitration agreement between the
parties. In this situation, it is argued that the parties have just agreed a new choice the choice of the Court for resolving disputes – and amended the old agreement, 16 –
that is, the arbitration agreement. Clearly, this would make article 5 of the
OCA(Vie) and its section 1.1, ineffective. These terms have clearly stated that the
jurisdiction of the court can not arise when there is a valid arbitration agreement. In
Vietnamese legal practice, there have been many cases relating to the jurisdictional
overlap of the court and arbitration based on this guidance regarding Resolution
0517.
However, the guidance is not unreasonable. It has been established for the
purpose of making dispute resolution quicker and restrains parties from delaying
the resolution of a dispute by using the arbitration agreement in this way.
For example, consider the case between Truong Sanh Co.Ltd and Mr. Kuo Chi
Seng, relating to the Nha Quan Joint Venture 18. The two parties signed a joint
venture contract on 01/7/2002 in which at the article 10, the two parties agreed that:
“Disputes between the parties involving, or arising from the contract
must first be solved through negotiations and mediation. In the case where
the parties can not agree with each other; those disputes will be referred to
The Vietnam International Arbitration Center at the Chamber of Commerce
and Industry. Its arbitral award should be the final decision that the parties
have to execute ".
When their disputes occurred, the plaintiff, Truong Sanh Co.Ltd, gave notice to
Mr Kuo that the plaintiff would be suing him for his violations by way of a petition
in the Binh Duong People’s Court on August 1 st, 2007. Truong Sanh Company

officially sent a petition to the above Court on August 20, 2007. However, on
September 25, 2007 the defendant sent a document to the Court to request that the
authority of the Court be reviewed. After the failure of further conciliation attempts,
the defendant been changed his approach by requesting the Court to refer the parties
to Arbitration because there was a valid arbitration agreement between the parties.
16

See point b, section 1.2 of the OCA(Vie)
See one of case in website of the HCMC Legal Newspaper (Vietnamese version)
18
See this case at the website />17

13


Court officially answered the defendant regarding his request on November 26,
2007. The Court based its answer the point b, section 1.2 of the Resolution and
refused the defendant’s request. Because he did not use the right to object to the
Court within 7 working days of receiving the written notice of the plaintiff, he had
lost his rights to use their arbitration agreement instead of the Court. Further
problems arose when the defendant in the court proceedings sent his petition to
VIAC, and it was accepted. It determined that the parties’ disputes should be
referred to arbitration based on article 5 of the OAC(Vie) and Section 1.1 of the
Resolution. Meanwhile, the Binh Duong People’s Court said that VIAC must refuse
the acceptance based on point b, Section 1.2 of the Resolution as above.
The establishment of provisions like Article 5 of the OAC(Vie) and section 1.1 of
the Resolution will exclude circumstances, as in the above case, where the parties
had had a valid arbitration agreement, but it was superseded by a new agreement
(may be an agreement to choose arbitration or other agreements to select a
competent court which can be expressed explicitly or implied).

According to Swedish law, where the defendant, at the beginning of court
proceedings, invokes the existence of an arbitration agreement and requests that the
case be referred to arbitration, while the plaintiff affirms that their arbitration
agreement is not valid, inoperative of incapable of being performed, the Court will
consider the validity of the arbitration agreement and conclude whether it is indeed
null and void, inoperative of incapable of being performed. If so, the Court will not
refer the parties to arbitration and it shall settle these disputes itself. In the contrary
case, the case should be referred to arbitration by the Court. The request can be
made at any time from when the claimant sent his petition to the Court, to the time
when the parties deliver their first document to the court to explain the content of
disputes19 (the request may be attached or in the explaining document).
Because of the principle of competence–competence, arbitrators also have the
power to consider whether they have authority to solve the dispute, if they receive a
request to determine whether they lack jurisdiction over the dispute. This decision is
called a prima facie consideration20.
Thus, according to the OAC(Vie), there is a difference between Vietnamese
arbitration law and international practice. Although the parties now have a new
agreement, they may still be bound by the old agreement. This is contrary to the
important principle that private relations are governed by freedom of choice.
However, the provisions of the Resolution on this matter are not wholly reasonable.
19
20

Section 4 and Section 49 of the AA(Swe)
See Article 7 of the Rules of the SCC Institution

14


Within 7 working days of the defendant being informed that the claimant will

submit his petition to the Court, he must show his rejection of the court because of
the arbitration agreement. This is not appropriate. Once a dispute has arisen, the
parties focus on the dispute’s content and on how to negotiate without approaching
the authorities. If their negotiation fails, they may then request that a specific
authority solve their conflicts. Moreover, in practice, much will have been done
through the mail, telex, and other means…In such a case, seven working - days is
clearly not enough. When a dispute is submitted to the court, the contracting parties
must demonstrate either that recommendations have been submitted to the
defendant (for the claimant) or that he has replied the recommendations to the
plaintiff within 7 working – days (for the defendant). This makes cases even more
complex.
After the above analysis, we will not stipulate all the contents of the Arbitration
Law DraftDraft Law. The Courts should indeed be empowered. On the other hand,
we consider this period should only be applied to the defendant when he has
received a notice from the court. However, is the period to answer appropriate? The
Model Law (article 8) as well as the AA(Swe) (section 4 and 49) merely provide
that if a dispute covered by an arbitration clause is brought before a court, the court
shall refer the parties to arbitration if the arbitration agreement is invoked by the
party relying on the arbitration agreement 21.
The court will not consider the arbitration clause on its own motion, but only if
so requested by the party. Both the Model Law and the Arbitration Act place a
reasonable limit time the party’s request that the matter be referred to arbitration.
Although worded differently, both the Model Law and the Arbitration Act provide
that the party must invoke the arbitration agreement in or with the first statement on
the substance of the dispute.
Under both the Model Law and the Arbitration Act, the question may arise as to
what the court should do when the respondent at the beginning of court proceedings
invokes the existence of an arbitration agreement and requests the case be referred
to arbitration, while the claimant alleges that the arbitration agreement is “null and
void, inoperative or incapable of being performed” (article 8 of the Model Law, and

essentially the same rule in section 4 and 49 of the Arbitration Act). According to
one opinion, if, in such a situation, the court engages in a full consideration of the
validity of the arbitration agreement and comes to a conclusion that the agreement
is indeed invalid, inoperative or incapable of being performed and as a result does
not refer the parties to arbitration, the operation of the principle of competence21

page 11 (48)

15


competence will be thwarted, since the arbitral tribunal may never have the
opportunity to consider its own contested jurisdiction. It has therefore been
suggested that in such a situation the court should engage only in a prima facie
consideration of the controversy as to the validity of the arbitration agreement and
should refer the parties to arbitration, if the agreement is prima facie valid,
operative and capable of being performed.
The court would in any case have the ultimate opportunity to decide on the
validity of the arbitration agreement either in the context of the proceedings for the
setting aside or the any later enforcement of the award, or, under the Model Law, if
the arbitral tribunal decides the issue of the validity of the arbitration agreement as a
preliminary question, as any party may request (within thirty days of that ruling)
the competent court to decide the matter, which decision is not subject to appeal;
while such a request is pending, the arbitral tribunal may continue the arbitral
proceedings and make an award (article 16(3) of the Model Law).
In terms of the extent of the court’s examination of the issue of validity under
article 8 of the Model Law, some court decisions have indicated that the court is
only to be concerned with determining whether there is prima facie evidence that
the arbitration agreement existed and whether there is a dispute between the parties
in the ordinary sense of the word, without investigating the merits of the claim. If

the scope of the arbitration agreement is at issue, this is a matter to be determined
by the arbitral tribunal, as is the question of whether a party to the legal proceedings
is a party to the arbitration agreement. Only where it is clear that the dispute is
outside the terms of the arbitration agreement or that a party is not a party to the
arbitration agreement, should reach the court any final determination in respect of
such matters on an application for a stay of proceedings; where those matters are
arguable, the stay should be granted and the matters left for determination by the
arbitrator.

16


3

Requirements for validity of arbitration agreements

3.1

Requirements concerning to the parties

3.1.1

Kinds of subjects

A country’s law of arbitration expands the ability of parties to sign arbitration
agreements regarding all subjects if they satisfy certain requirements, even state
agencies or States. However, Vietnamese law only allows business individuals and
business organizations22 to sign such agreements. The Vietnamese Draft law on
Arbitration would expand this to cover all civil subjects 23.
The Thailand Arbitration Act 2002 allows a government agency to sign an

agreement to refer disputes, which may arise or have arisen in a contract between
them and a private party, to arbitration. The contracting parties shall be bound by
such arbitration agreement. The United Kingdoms Arbitration Act 1996 24 and the
German Arbitration Act25 also do not contain any provisions to restrict state
agencies in arbitration proceedings.
This issue is also covered in the laws of the Republic of France. According to
Article 2060 of the Civil Code, States or state agencies are not allowed to sign any
arbitration agreement. However, according to guidance of the French Cour de
Cassation, state agencies have authority to sign arbitration agreements with a
domestic element26. This regulation has been recorded clearly in Article 9 of Act
No. 86-972 dated August 19, 1986:
“If the state and its entities contract with foreign companies for the
purpose of projects that are of national interest to France, they may under
certain conditions enter into an arbitration clause” 27
Meanwhile, the Swedish law on arbitration allows all subjects, including national
and state agencies to participate in arbitration proceedings. However in NJA 28 1999
p.821, the Swedish Supreme Court held that the principle that a sovereign state
enjoys immunity, i.e., can not be called as a party before another state’s courts, is
recognized in Swedish law. But it is assumed that there is a more or less far –
reaching exception to this. The Supreme Court further stated that in accordance
22

The definitions of business individuals and organizations in Vietnam are determined under the
Decree 88/2006/NĐ-CP of the Government to stipulate on business registration dated August 29,
2006
23
See article 17 of the Law DraftDraft Law
24
/>25
/>26

Do Van Dai and Mai Hong Quy, p.140
27
ICCA, International Handbook on Commercial Arbitration, Kluwer, 2000, France – p.13.
28
Cases from the Swedish Supreme Court are published in the journal Nytt Juridiskt Arkiv,
Avdelning I and the abbreviation of the name of the journal is NJA.

17


with what is generally deemed applicable in comparable legal systems, there should
be an assumption that immunity can be invoked only in disputes which involve acts
of state in the true sense of the term, but not when a dispute concerns measures
taken by a state of a commercial or otherwise private law nature. It is further
generally assumed that a foreign state may be deemed to waive immunity by, e.g.,
entering into an arbitration agreement. It appears to be appropriate, upon entering
into an arbitration agreement with an independent state, to expressly govern the
issue of immunity in connection with arbitration, the enforcement of an arbitral
award, as well as the relationship with associated judicial procedures, such as the
appointment of an arbitrator as well as challenges and action for invalidity.
3.1.2

Capacity and authority of the parties

If one of the parties who signed an arbitration agreement is incapable, that
agreement is null and void. Only one party needs to be incapable However, the way
of understanding this matter in Vietnam is not quite the same. According to point a,
item 1 of Article 370 of the CPC(Vie) 2004, a foreign arbitral award will not be
recognized and enforced in the territory of Viet Nam where:
“The parties to the arbitration agreement did not have the capacity to sign

the agreement in accordance with the applicable law of each party”.
In other countries, only one party lacking capacity to sign the arbitration
agreement is enough to make it invalid.
In addition, we need to distinguish between cases where there is no capacity at
all and no authority to sign a arbitration agreement. In Vietnam, there is an overlap
between the Vietnamese Civil Code 2005, the OCA(Vie) and the Vietnamese Civil
Procedure Code 2004. The Civil Code and the OCA(Vie) clearly distinguish two
cases: not having capacity to sign an agreement and not having authority to sign an
agreement29. But the Civil Procedure Code only covers the case where the parties
are incapable of signing an arbitration agreement. It does not mention the case
where the parties do not have authority. For legal persons, the authority to sign
contracts, including arbitration agreements is very important. The arbitrators or the
court must determine whether the parties signing an agreement had authority
(authorized or legal representation). If not, they will declare that the arbitration
agreement is null and void under Article 10(2) of the OCA(Vie). In fact, there have
been many disputes where there are arbitration agreements between the parties, but
one of the parties did not have authority to sign. The parties must be referred to
competent courts and any arbitral awards may also be challenged there.
29

Do Van Dai and Mai Hong Quy, pp.140-142

18


However, where disputes have arisen and one of the parties has requested the
Court to solve them, the Court must ask the party who had authority to sign the
arbitration agreement. If he or she accepts it (the acceptance must be recorded in
writing), their arbitration agreement is not null and void and their case will be
referred to arbitration. If not, their case will stay with the competent court 30.

However, in practice, this provision is applied in a different way. For an
example, see where a VIAC arbitral award was challenged by the People's Court in
Hanoi by the Decision 02/2005/XQĐTT - ST dated May 11 th 2005 based on the
requirements of Thu Do II Co. Ltd. The Award of the VIAC pronounced on August
31st 2005 was cancelled by the Court because Mr. Phan Ba Hung, who was
considered as the person acting on behalf of the foreign company, did not have
authority at the time when the contract was signed. The Court said that he was
neither a legal nor an authorized representative. The foreign company later agreed
to authorize Mr. Hung. The Court did not accept this because it said that this
authorization was not in place at the time of signing the contract, including the
arbitration agreement. This is all clearly contrary to the guidance of Resolution 05.
In the private international law of most countries, a foreign party’s capacity and
authority are determined under the laws of the countries where he is a citizen or
resident. However, the OCA(Vie) does not say this specifically, it only provides a
general rule: "The signers of the arbitration agreement are not competent to sign
according to the law’s provisions". What country’s law provisions will be applied if
the dispute involves foreign elements? This is a shortcoming. Clearly, the
Ordinance has omitted important provisions concerning disputes involving foreign
elements, such as determining legal capacity, authority to sign the agreement
arbitration, the form and content of the arbitration agreement...
Unlike in Vietnam, the situation is clearly covered in Sections 46 - 51 of
AA(Swe) on international connections. They determine the choice of law to cover
the authority of parties, the form and content of the arbitration agreement,
applicable law... For example, where an arbitration agreement has an international
connection, the agreement shall be governed by the law agreed upon by the parties.
Where the parties have not reached such an agreement, the arbitration agreement
shall be governed by the law of the country in which, by virtue of the agreement,
the proceedings have taken place or shall take place 31.
The issue of whether a party was authorized to enter into an arbitration
agreement or was duly represented falls outside the ambit of the above provisions.

30
31

Point a of section 1.2 of the Resolution 05
Section 48 of the AA(Swe)

19


Instead, these questions must be determined in accordance with the legal system to
which a person has a permanent nexus through citizenship or domicile, as
established in accordance with Swedish conflict of law rules. The rule accords with
Article V.1(a) of the New York convention on the Recognition and Enforcement of
Foreign Arbitral Awards on 10 June 1958.
3.2

Requirements as to form of agreement in order to establish consent

An arbitration agreement is a special agreement which is the basis for giving
authority to arbitrators to resolve disputes. Although the original contract can be
oral, the arbitration agreement normally cannot. Whether the arbitration agreement
was established before or after the dispute occurred, the laws of most countries
provide that it must be made in writing..
The purpose of this formal requirement is to ensure that the consent of the parties
has been fully established. The form of an agreement has an important role and it is
also the best evidence for determining that a contract has been established. If any
agreement does not comply with a formal condition, it will be invalid.
Vietnamese law stipulates that arbitration agreements must be made in writing.
Arbitration agreements reached through mails, telegrams, telex, fax, electronic
mails or other written forms clearly expressing the wills of the involved parties to

settle their disputes through arbitration shall be regarded as written arbitration
agreements32. If the arbitration agreement is not made in writing, it is null and void
by Article 10(5) of the OCA(Vie).
On the other hand, the AA(Swe) does not make any request concerning the form
of arbitration agreement. Although most arbitration agreements in Sweden are in
practice made in writing, the lack of a formal requirement makes this Act more
flexible in covering arbitration agreement. In practice, there are arbitration
agreements which are only implied agreements between the contracting parties or
they are expressed by electronic means; binding commercial practices are also
accepted. This has increased the opportunity for the arbitrators to perform their
duties where the arbitration agreement is informal.
Most foreign laws however require that an arbitration agreement be in writing
for it to be effective. The reason for this is that an arbitration clause, being such an
important term of a contract, has to be clearly expressed. Swedish law does not
have any such formal requirement, but there is precedent for saying that an
arbitration agreement only comes about if it is clear that the parties have agreed on
arbitration and not on any other kind of dispute resolution. This does not mean that
32

Article 9(1) of the OCA(Vie)

20


an arbitration agreement will come about only if the parties have expressly agreed
on arbitration. It should be observed, however, that there are numerous examples of
parties having been bound by an arbitration agreement on the basic of the same
principles as apply to other contracts, and that, apart form one specific situation,
there is no express support in case law or doctrine for stricter requirements applying
in order to bind parties to an arbitration agreement. The focus of the account which

now follows is on Swedish law. If foreign law is to apply to the arbitration
agreement, a stipulation that the agreement be in writing may result in its not
becoming binding.
The interpretation that formal requirements for the arbitration agreement are
governed by the law of the place of arbitration (if there is no other agreement)
becomes significant in the case where the award has been made in a country where
there is no specific formal requirement for the arbitration agreement, such as
Sweden (or a country that would enact the revised article 7 of the Model Law,
which will recognize an arbitration agreement entered into orally as long as the
agreement refers to a document in writing) and the enforcement of the award is
sought in a country that requires an arbitration agreement to be in a document
signed by the parties or in an exchange of messages (see e.g. article II of the New
York Convention or current article 7 of the Model Law).
If the principle that the formal requirement for the arbitration agreement is
governed by the law of the place of arbitration were generally recognized, this
would mean that, when an award made in Sweden is sought to be enforced in a
country that has stricter formal requirements than Sweden, the law of the place of
origin of the award would apply and would thereby prevent the refusal of the
enforcement of the award on the ground that the arbitration agreement does not
meet the formal requirements of the law of the place of enforcement. A wide
acceptance and confirmation of the principle expressed in section 48 of the
Arbitration Act (that the form of the arbitration agreement is governed by the law of
the place of arbitration) would facilitate international commercial arbitration
considerably.
“Where an arbitration agreement has an international connection, the
agreement shall be governed by the law agreed upon by the parties. Where the
parties have not reached such an agreement, the arbitration agreement shall be
governed by the law of the country in which, by virtue of the agreement, the
proceedings have taken place or shall take place.
The first paragraph shall not apply to the issue of whether a party was

authorized to enter into an arbitration agreement or was duly represented”.

21


Vietnamese arbitration law only contains a few provisions concerning arbitration
involving foreign elements, including articles 2(4) and 7(2). However, because an
arbitration agreement is considered as a contract, its form will be governed by the
law of the place where the contract was signed 33. Where an agreement is signed in a
place where it is formally valid, but it is not in conformity with Vietnamese law, the
local form of the agreement can still be recognized in Viet Nam.
The Arbitration Act does not contain any formal requirements for the validity of an
arbitration agreement.
Although most arbitration agreements would in practice be documented in writing,
the flexibility of the Swedish approach is still of great importance and useful when
parties enter into agreements to arbitrate, for example, by tacit acceptance of a
written contract proposal; with the assistance of a broker when the parties
themselves do not issue any written message; by means regarded as binding by
trade usages; in relation to oral or implied modifications of the arbitration
agreement; and in relation to bilateral investment treaties.
The purpose of this requirement is to draw a party’s attention clearly and distinctly
to the fact that an arbitration clause applies to dealing between the parties. The
absence of a formal requirement in Swedish law does not in any way imply that this
requirement of distinctness is inessential. A contracting party wishing to invoke an
arbitration agreement in his own favour must be able to prove the agreement. This
can be extremely difficult if the agreement was concluded orally on matters other
than the arbitration clause. Having regard to the difficulties of proof, the parties
should ensure that an arbitration agreement is drawn up in writing.
3.3

Material requirements

Beside the requirements analyzed above, such as form and the parties to the
arbitration agreement, the scope of an arbitration agreement is also an important
element regarding its effect. May all disputes be settled by arbitration?
According to Vietnamese law, only parties in disputes concerning commercial
activities may use arbitration for resolving their disputes 34. In fact, this has caused
some trouble for the parties who are obliged to demonstrate that their disputes are
commercial. This provision makes the process of resolving disputes more complex
and time-consuming.
In addition, there are many disputes relating to buying or selling stocks or bonds
in enterprises where it is not clear whether they are commercial disputes or not 35.
33
34

Section 1 of article 770 of the Vietnamese Civil Code 2005
Article 2(3) of OCA(Vie) and article 2 of Resolution 05

22


There is a view that if they are not listed in item 3 of Article 2 of the OCA(Vie),
they must be resolved by courts based on Article 29 of the CPC(Vie). ".
However it is said that such agreements also aim at commercial benefits so they
should be considered as “other commercial acts as prescribed by law”. It is not easy
for judges to determine whether a dispute is a commercial or non-commercial one.
The OCA(Vie) still follows the separation of economic/commercial from mere
civil/consumer’s disputes. Because of the open ended and loosely terms of article
2.3, VIAC and other arbitration centers are not willing to accept a wide range of
disputes, such as disputes on stocks, securities market, disputes among

shareholders, partners and members of companies. If the courts did not accept such
disputes as commercial, they might well cancel any arbitral awards. This
uncertainty has also had an impact on the recognition of foreign arbitral awards in
Vietnam. In one case relating to the services of a golf-provider, the court refused to
accept maintenance of grass as a commercial activity, and rejected arbitration on the
case (cancellation of an arbitration award under article 54.4 of the OCA(Vie)).
However, it is clearly arguable that they belong to “other commercial acts as
prescribed by law” 36.
Moreover, determining the scope of the arbitration agreement by the listing
method is inconsistent with more recent Vietnamese legal documents which have
not been using the listing method. For example, the Vietnamese Commercial Law in
2005 provided that:
“Commercial activities mean activities for the purpose of generating
profits, including: sale and purchase of goods, provision of services,
investment, commercial promotion and other activities for the profit
purpose”37
In addition, it is not consistent with common practices of other countries. Few
countries determine the scope of a relationship by the listing method. They only
provide some exceptions allowing arbitration to be excluded for the purpose of
protecting a subject or a legal relationship.
For example, Articles 2059, 2060 of the French Civil Code provide that
all persons may make arbitration agreements relating to rights of which they
have the free disposal. One may not enter into arbitration agreements in
matters of status and capacity of the persons, in those relating to divorce
and judicial separation or on controversies concerning public bodies and
35

Th.s Vũ Ánh Dương, Thực tiễn áp dụng Pháp lệnh Trọng tài Thương mại tại Trung tâm Trọng
tài Quốc tế Việt Nam, Legal Science Journal, No. 03/2008, p. 5
36

Phd Do Van Dai, the lecturer of the Civil Faculty of The HCMC Law University.
37
Article 3(1) of the Vietnamese Commercial Law 2005

23