Court case commentary: An arbitral award may be set aside by Vietnamese Court

Now we have one court case commentary on decision of Ha Noi People’s Court of Vietnam which set aside an arbitral award of the Vietnam International Arbitration Center (VIAC) on legal ground that the contract was signed by a person without authorization, case Thu Do II Company LTD (Vietnam) V. PT VINDOEXIM (Indonesia) according to Judgment No.02/2005/XQDTT-ST dated 11 May 2005.

Court case commentary: An arbitral award may be set aside by Vietnamese Court

The facts of court case commentary on an arbitral award may be set aside by Vietnamese Court.

 On 17 November 2003, Thu Do II Company Ltd, a private company with its office in Ha Noi (Thu Do Co) AND pt VindoExim, an Indonesian company with its office in Jakarta, Indonesia (VindoExim Co) entered into a agreement for sale and purchase of an quality of urea worth of USD 4 million (Agreement). The Agreement was signed by a Mr. Phan Ba Hung, as representative of VindoEcom Co. The Agreement required Thu Do Co, as the buyer, to open a USD4 million L/C by 27 November 2003. Thu Do Co failed to open the L/C by this date and its request for an extension was rejected by VindOeXim Co.

 As result of Thu Do Co”s failure, VindoExim Co commenced an arbitration proceeding before the VIAC for breach of agreement and sought to recover from Thu Do Co USD 100,000 as being the agreement penalty plus USD 11,000 in legal costs.

 On 21 July 2004 the VIAC held dispute solution session and on 31 August 2004 it published an award ordering Thu Do Co to pay USD 100,000 to VindoExim Co.

The application for setting aside an arbitral award of VIAC was given to Vietnamese Court.

 On 24 September 2004 Thu Do Co lodge a petition with a Ha Noi Court (Vietnamese court) to set aside an arbitral award of VIAC. Thu Do Co”s petition was based on their view that the arbitration agreement (namely the arbitration clause in the Agreement) was invalid under the Ordinance on Commercial Arbitration and therefore the arbitration award should be set aside.

 Thu Do Co argued that the arbitration agreement was invalid because one of the signatures, Mr. Phan Ba Hung, lacked authority to enter into it pursuant to law. Specially, Thu Do Co argued that Mr. Phan Ba Hung was not authorized representative of VindoExim Co because he did not have a letter of authorization authorizing him to sign the Agreement. Thu Do Co also alleged that in fact VindoExim did not exist in Indonesia.

 After Thu Do Co”s petition, VindoExim issued a letter signed by its Chairman, Mr. LiYanto and a member, Mr. Inwanto, certifying that Mr. Phan Ba Hung indeed was a director of VindoExim. The authority of Mr. LiYanto and Mr. Inwanto in issuing this letter was not challenged before the Court.
Decision of Ha Noi People”s Court

 The Court found, as a matter of fact, that Mr. Phan Ba Hung did not have a letter of authorization from VindoExim at the time he signed the Agreement. The Court also found that Mr. Phan Ba Hung was not the legal representative of VindoExim Co because he was not named as a director of VindoExim Co in certificate of incorporation or it’s Charter. On this basis, The Court held that Mr. Phan Ba Hung had no authorization to sign the Agreement on behalf of VindoExim Co. The arbitration agreement contained in the Agreement was therefore invalid and the arbitral award must be set aside.
The key point here is that the Court did not consider relevant the letter of certification from Mr.LiYanto and Mr.Inwanto on the ground that it was issued after the conclusion of the Agreement and even after the arbitral proceeding had been completed. According to the Court, this letter of certification could not be used as a substitute for the letter of authorization which, in the Court’s view, should have been in existence at the time of signing the Agreement.
Court case commentary: An arbitral award may be set aside by Vietnamese Court

There two points we may be learned from this case:

1. An arbitral award may be set aside by Vietnamese Court if the arbitration agreement is void. A party with sufficient evidence approving that the arbitration tribunal issued the arbitral award in any of the cases which falls within any one of the cases to be set aside prescribed by law, shall have a right, within thirty (30) days from date of receipt of such award, to lodge a petition with the competent court to set aside the arbitral award.

2. The importance of actual authority for representatives of companies signing contracts. If the contract is signed by unauthorized representative, it may be declared void by Vietnamese court. 

However, the Court did not consider the letter of certification from Mr.LiYanto and Mr.Inwanto which clearly certifies the authority of Mr. Phan Ba Hung in relation to the Agreement; it also arguably indicates intent by VindoExim Co to ratify Mr. Phan Ba Hung’s action in signing the Agreement. As a matter of Vietnamese law, the Civil Codes provides that civil transactions established and/or performed by persons without the authority of representation shall not give rise to rights and obligations of the represented persons, except in cases where the representatives or the represented persons give consent thereto. In this case, even assuming the original execution of the Agreement is unauthorized; it seems that the Court should at least have considered whether the letter of certification served to ratify the signing of the Agreement. Such ratification would validate the arbitral agreement, removing the basis for the arbitral award to be set aside.  

Lawyervn.net