Some prominent issues that need early adjustment and supplementation in the Law of Commercial Arbitration

The Law on Commercial Arbitration, enacted in 2010 to replace the Ordinance on Commercial Arbitration 2003, has made significant progress and contributed to improving the legal framework for arbitration proceedings in Vietnam. However, after more than a decade in force, the Law on Commercial Arbitration has raised a number of important legal issues that require immediate consideration by the relevant authorities. In this article, we will discuss some outstanding issues that have not been resolved under the current arbitration law and require early supplementation and adjustment in the coming period.

1. Provisions on the exemption/limitation of liability of arbitrators

1.1. Current situation of Vietnamese law

According to the current provisions of the Law on Commercial Arbitration 2010 and Resolution 01/2014/NQ-HDTP, the issue of the exemption of arbitrators' liability has hardly been addressed. Currently, there is only one provision in Article 49(5) of the Law on Commercial Arbitration 2010 regarding the right of the aggrieved party to sue for compensation in court if the arbitral tribunal's interim measures cause damage. However, this is only one of many possible scenarios in which the liability of arbitrators must be considered. In addition, the Rules of Arbitration of most arbitration centers in Vietnam, such as VIAC, TRACENT, STAC, PIAC, do not contain any provisions on arbitrators' liability or limitation.

According to the Outline of Draft Law  on Commercial Arbitration updated as of October 23, 2023[1], one of the two options proposed by the drafting committee is to supplement provisions on the right to exemption from liability and the scope of liability of the Arbitral Tribunal and arbitrators, following a similar direction to the provisions of the UNCITRAL Model Law[2] (UNCITRAL Arbitration Rules 2021) (“Model Law”). Pursuant to Article 16 of the Model Law, parties may only hold arbitrators liable for wilful misconduct. Therefore, no action will be entertained against any arbitrator, the appointing authority or any person appointed by the arbitral tribunal for any act or omission in relation to the arbitrator. The scope of this limitation of liability is quite broad.

1.2. Deficiencies

The absence of provisions on the liability or limitation of liability of arbitrators may have two consequences:

First, it makes it difficult to ensure the independence, impartiality and objectivity of the arbitrators due to the fear of being sued by the disputing parties or being influenced by other factors during the dispute resolution process and the rendering of decisions.

Second, it creates ambiguity in determining the responsibilities of arbitrators, as the current civil law also lacks regulations on this matter. Moreover, it relates to the dual nature of arbitrators, who are inclined either to act as judicial functionaries or to perform contractual duties, a matter that is still under discussion. Therefore, it is necessary to regulate the responsibilities of arbitrators based on the current situation and the direction of development of arbitration dispute resolution methods in Vietnam.

1.3. Proposals

The majority of arbitration laws in various countries address the issue of immunity of arbitrators from liability, particularly with limitations on such immunity. Indeed, Vietnamese law needs to follow this common trend. On the one hand, it helps to ensure the confidence of organizations and individuals in choosing arbitration as a dispute resolution method; on the other hand, it promotes the development of arbitration by ensuring fundamental principles such as the impartiality of decisions and the independence and objectivity of arbitrators.

The core issue in establishing rules on the responsibility of arbitrators is to strike a balance in the scope of liability while ensuring the independence, impartiality and objectivity of arbitrators in both the adjudication process and the quality of decisions. In our view, the following issues need to be carefully considered when drafting rules on arbitrators' liability:

Firstly, there needs to be a clear distinction between the approaches of (i) granting arbitrators the right to be excused, but with limitations in certain cases, or (ii) imposing responsibilities on arbitrators and excusing them only in certain situations. Currently, the direction of the Model Law is towards approach (i), with limitations only in cases of “intentional wrongdoing”.

Secondly, it is critical that the term "intentional wrongdoing" be adequately explained. When translated as "intentional wrongdoing”, it is necessary to clarify what constitutes "intentional wrongdoing" and in what context, whether procedural or substantive. In our research, we have found that most jurisdictions do not hold arbitrators liable for substantive errors, i.e., applying the law or resolving disputes incorrectly. Therefore, legislators need to decide whether to exclude arbitrators' liability in cases of inadequate dispute resolution on the merits or, in other words, to understand "intentional wrongdoing" to include situations where arbitrators intentionally apply incorrect legal rules. The separation of arbitrators' responsibilities with respect to procedural and substantive matters is crucial because, regardless of their ability to resolve disputes, arbitrators should be held liable for making erroneous decisions. After all, they are chosen directly or indirectly by the parties on the basis of their professional competence and are vested with full authority to consider and resolve disputes. Imposing liability on arbitrators in substantive matters may make them cautious, thereby jeopardizing their independence, impartiality and objectivity in adjudication.

Thirdly, another issue to be considered is whether to provide that arbitration centers have the authority to adopt stricter rules regarding the responsibilities of arbitrators within their respective centers. Given the importance of this issue, we propose specific provisions in the law and refrain from expanding other regulatory powers of arbitration centers. This will ensure consistency and equality among arbitration centers, while binding arbitrators from each center within a certain scope of responsibility, and avoid conflicts and distinctions between arbitrators from different centers in each dispute resolution case.

2. Specific provisions for deemed notice

2.1. Current situation in Vietnamese law

The Law on Commercial Arbitration 2010 provides provisions regarding the means of sending notices and the time when parties are deemed to have received notices under Article 12. However, this provision still lacks provisions for cases where parties fail to provide or designate an address for receipt of notices or where the address for receipt of notices changes, leaving uncertainty as to how notices sent in such circumstances will be deemed to have been received.

2.2. Deficiencies

In practice, late or undelivered notices are often cited as grounds for setting aside arbitral awards. Failure to anticipate situations in which a disputing party fails to provide an address for service of process or changes the address for service of process without notifying the other party, the arbitration center or the arbitral tribunal, not only creates disadvantages for these entities during the litigation process, but also makes them liable if a party later seeks to vacate the award on these grounds[3].

2.3. Proposals

The drafting committee may consider referring to the provisions of Article 2 of the Model Law, in particular Paragraphs 3 and 4. Accordingly, in cases where there is no designation or authorization for the receipt of a notice, the notice is deemed to have been received when (i) physically delivered to the recipient; or (ii) delivered to the recipient's place of work, habitual residence or mailing address. In addition, the Model Law also addresses reasonable efforts in Paragraph 4, stating that if reasonable efforts have been made, the notice will be deemed to have been received if it is delivered to the last known business address, habitual residence or mailing address of the recipient, whether registered or otherwise, provided that there is a record of delivery or efforts to deliver the notice. We believe that these provisions of the Model Law are suitable for reference in drafting provisions for the Vietnamese Commercial Arbitration Law.

In addition, we believe that Vietnamese law can retain the provision allowing parties to agree or arbitral institutions to adopt stricter rules on the issue of receipt and delivery of notice, as currently recognized under Article 12 of the existing Law on Commercial Arbitration.