Joint Swedish-VietnameseMaster’s ProgrammeMASTER’S THESIS

by

Phan Hoai Nam

THE EFFECT OF ARBITRATION AGREEMENTS UNDER VIETNAMESE

AND SWEDISH LAW

Supervisors: Professor Michael BogdanProfessor Mai Hong Quy

Field of study: Comparative and International LawSpring 2008

CONTENTS

ABBREVIATIONS 1

EXECUTIVE SUMMARY 2

1 INTRODUCTION 3

2 OVERVIEW ON ARBITRATION AGREEMENTS 52.1 Definition of an arbitration agreement 52.2 Construction of arbitration agreement 62.3 Relationship between the arbitration clause and contracts 102.4 Relationship between arbitration and courts based on the

arbitration agreement 12

3 REQUIREMENTS FOR VALIDITY OF ARBITRATION AGREEMENTS 18

3.1 Requirements concerning to the parties 183.1.1 Kinds of subjects 183.1.2 Capacity and authority of the parties 19

3.2 Requirements as to form of agreement in order to establish consent21

3.3 Material requirements 24

4 CONCLUSION 30

TABLE OF STATUTES AND OTHER LEGAL INSTRUMENTS 32

TABLE OF CASES 33

BIBLIOGRAPHY 34Monographs 34Articles in Journals, Anthologies, and others 35

AbbreviationsAA(Swe): The Swedish Arbitration Act (1999:116)OCA(Vie): The Ordinance on Commercial Arbitration in Viet

Nam (2003:08)CC(Vie): The Vietnamese Civil Code 2005

SCC Rules: The Arbitration Rules of the Arbitration Institution of the Stockholm Chamber of Commerce

VIAC: The Vietnam International Arbitration Center at the Vietnam Chamber of Commerce and Industry

The Model Law 1985 Uncitral Model law on International Commercial Arbitration, with amendments as adopted in 2006

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Executive SummaryResolving disputes by arbitration is becoming more and more popular

because of its advantages compared to other measures such as mediation or the courts1. 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 exist2.

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 - 282 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

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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 modest3. 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

3 According to http://www.viac.org.vn/vi-VN/Home/thongke/2008/10/156.aspx VIAC resolved 22 cases in 2005, 23 cases in 20064 http://www.mediate.com/articles/sturzakerD.cfm

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of arbitration agreements, the relationship between an arbitration agreement and the contract and between arbitration and courts,

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.

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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

5 Article 2(3) of OCA(Vie)

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Section 6 states that an arbitration agreement referring to future consumer disputes is not 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

6 Section 6 of the AA(Swe)

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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.

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 arbitrators7.

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 7 Ulf Franke, Introduction to Arbitration, speech at the Introduction to Arbitration seminar held in Stockholm on 13 - 16 June, 2001.8 http://www.viac.org.vn/vi-VN/Home/baivietlienquan/2008/10/178.aspx

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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 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.

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In the legal practice of Sweden, in the case No. 038/20039 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 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:9 http://www.bakernet.com/NR/rdonlyres/1698E9C9-6ADA-4420-B142-334512CA278B/0/IntlArbitrationSwedenSep06.pdf10 http://www.viac.org.vn/vi-VN/Home/dieukhoanmau.aspx

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“   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:

“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 contractsArticle 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”.

11 http://www.sccinstitute.se/uk/Model_Clauses/Rules_of_the_Arbitration_Institute_of_the_Stockholm_Chamber_of_Commerce_English/

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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 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 independent13.

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 courts14. 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

12 Do Van Dai, Giải quyết tranh chấp bằng phương thức trọng tài ở Việt Nam, Legal Science Journal, No. 06/200713 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.

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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 arbitrators15.2.4 Relationship between arbitration and courts based on the

arbitration agreementCan 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.

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

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.

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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.

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.

16 See point b, section 1.2 of the OCA(Vie)17 See one of case in website of the HCMC Legal Newspaper http://www.phapluattp.vn/news/toa-an/view.aspx?news_id=217744 (Vietnamese version)

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For example, consider the case between Truong Sanh Co.Ltd and Mr. Kuo Chi Seng, relating to the Nha Quan Joint Venture18. 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. 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).

18 See this case at the website http://www.kinhtenongthon.com.vn/printContent.aspx?ID=10406

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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. 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.

19 Section 4 and Section 49 of the AA(Swe)20 See Article 7 of the Rules of the SCC Institution

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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 agreement21.

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 competence-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

21 http://www.sccinstitute.se/_upload/shared_files/artikelarkiv/report_sekolec.pdf page 11 (48)

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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.

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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 subjects23.

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 199624 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 NJA28 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

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, 200623 See article 17 of the Law DraftDraft Law24 http://www.opsi.gov.uk/acts/acts1996/ukpga_19960023_en_2#pt1-pb1-l1g225 http://www.dis-arb.de/materialien/schiedsverfahrensrecht98-e.html26 Do Van Dai and Mai Hong Quy, p.14027 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.

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there is a more or less far – reaching exception to this. The Supreme Court further stated that in accordance 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

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

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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.

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 court30.

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 11th 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

30 Point a of section 1.2 of the Resolution 05

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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 place31.

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. 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 31 Section 48 of the AA(Swe)32 Article 9(1) of the OCA(Vie)

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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 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

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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”.

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 signed33. 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

33 Section 1 of article 770 of the Vietnamese Civil Code 2005

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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 disputes34. 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 not35. 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.

34 Article 2(3) of OCA(Vie) and article 2 of Resolution 0535 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. 536Phd Do Van Dai, the lecturer of the Civil Faculty of The HCMC Law University.

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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 institutions and more generally in all matters in which public policy is concerned38.

This provision is expressed clearly in Section 1 of the AA(Swe). According to this, arbitration is allowable if there is an arbitration agreement between the contracting parties, regardless of the disputes’ content: commercial or non-commercial disputes; domestic disputes or international disputes; contractual or non-contractual disputes39. However, for disputes between enterprises with customers relating to the purchase and sale of goods or services only for the purpose of personal, an arbitration agreement is only accepted if disputes have occurred.

In addition to this provision in the AA(Swe) concerning consumer cases, there exist other restrictive provisions regarding the right to enter into arbitration agreements. Article 21(4) of the Maritime Act (1994:1004) stipulates that an arbitration agreement, which is to resolve issues concerning responsibility regarding the transport of passengers or goods, cannot be in force before the dispute arises. We can also find similar provisions in Section 3 of Chapter 1 of the part labor disputes in the Swedish Code of Judicial 37 Article 3(1) of the Vietnamese Commercial Law 200538 Two articles were amended by Act no 75-596 of 9 July 197539 http://www.sccinstitute.se/_upload/shared_files/artikelarkiv/report_sekolec.pdf, page 2; Lars Heuman, Arbitration law in Sweden: Practice and Procedure, JP Juris, 2003, p.4

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Procedure (1974:371) and Section 31 (1.3) of the Employee Law (1976:580), the Railway Traffic Act (1985:192), Section 38 of the Air Transport Act (1937:73)40…

The restriction in the section on the right to enter into an arbitration agreement concerning future disputes is based on the interest in protecting the economically weaker party. But when a dispute has arisen, the consumer is free to enter into an arbitration agreement with a business enterprise41.

In brief, although expanding the scope of arbitration is necessary in Vietnam, we should consider several legal relationships where it is difficult to guarantee equal rights for all parties in the proceedings. For example, disputes relating to the rights of employees or the interests of consumers as in Swedish law. The Vietnamese Arbitration Law DraftDraft Law should have provisions similar to those in the Swedish law. It does need to list disputes that are not to use arbitration for resolution.

The draft Law on Arbitration also took a progressive step compared with the OCA(Vie) when the compilers boldly proposed expanding it to cover all types of disputes relating to civil rights and obligations42. This would eliminate situations where an arbitration agreement is considered as null and void agreement or arbitral awards are not recognized in practice because the underlying matter does not relate to commercial activities. However, this provision should be contained in general provisions. As its content relates to the exclusion jurisdiction of arbitration, it should be placed close to terms on scope. One could follow the Chinese Arbitration Law 199443 or the Japanese Arbitration Law in 200344 in this.

The scope of excluded disputes: Article 17 of the first law draftDraft Law on arbitration45 and article 18 of the second law draftDraft Law on arbitration46

stipulate that the following disputes shall not fall within the arbitration jurisdiction:

“1. Personal-right-related disputes including those involved in marriages and families under the provisions of the Civil Procedure Code.

40 Finn Madson, p.10941 Finn Madson, p.11042 The law daft on arbitration at http://www.viac.org.vn/vi-VN/Home/sukien/2008/11/220.aspx)43 http://www.lehmanlaw.com/resource-centre/laws-and-regulations/civil-proceedings/arbitration-law-of-the-peoples-republic-of-china-1994.html44 http://www.jseinc.org/en/laws/new_arbitration_act.html#0145 It was proposed on June 29, 200846 It was proposed in November 2008

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2. Administrative disputes that fall within the jurisdiction of relevant administrative agencies”

Item 1 of the above provision is necessary because personal rights are connected closely to the individual, and can not be transferred to others. The personal rights of each person will be protected in ways that are not similar to those protecting rights in property, including intellectual property rights, which can be transferred in civil transactions. It would be difficult to allow the participation of private institutions to act on behalf of state agencies to solve these problems. Their resolution is of too much concern to the State.

Regarding marriage and family matters, Swedish arbitration law does not impose any restriction on using arbitration for resolving disputes. However, personal relationships should not be subject to arbitration when resolving disputes. Because awards relating to these issues may affect the rights and obligations of a third party, , they should only be settled by the authorities. Property relations, such as holding and using joint properties of husband and wife, the disposition of obligations between husband and wife, parents and children. could perhaps go to arbitration if the parties request.

Regarding administrative disputes, as analyzed in Section 3.1, state agencies and independent state are able to take part in arbitration proceedings. However, does this apply to only disputes in private domains or even administrative relationships? As above analysis, the equality position between state agencies, even an independent state and private parties is affirmed. Moreover, in Article 3 of the Ordinance on procedures for resolving administrative cases of 1996, amended and supplemented in 2006, raised a basic principle on resolving administrative disputes:

"In the process of resolving an administrative case, the Court should be facilitating the parties to be able to reach agreement on the resolution of the case".

However, should this be applied to all administrative disputes? Swedish law does not have any specific regulations restricting arbitration in administrative disputes. In practice, according to the guidance of the Swedish Supreme Court, arbitration is only accepted to resolve disputes that concerns measures taken by the state of a commercial or other private law nature. Obviously, Sweden does not accept arbitration for resolving purely administrative disputes. Some countries have similar stipulations. However, there are two ways to provide

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for this: not prohibiting such disputes as is done in Singapore47 and Japan48 or listing the types of allowed disputes as Thailand does in Section 15 of the Arbitration Act (2002:2545)49 regulations:

“In a contract between a government agency and private party, whether an administrative contract or not, the parties thereto may agree to settle their disputes by arbitration. The parties to the contract shall be bound by such arbitration agreement”.

As Vietnam has changed so in recent years, it should permit the parties in administrative disputes to use arbitration. Because of secrecy issues, speed of resolution in administrative disputes is an important element that the parties would appreciate. The special rules of the Law on Investment 2005 will remain, i.e. disputes between investor and the state authorities in issues relating to an investment may fall under arbitral jurisdiction50.

On consumer cases, the 1st Draft provide in Article 16 as follows: “In case of a dispute between an enterprise and a customer over

goods, service or any other product supplied for personal consumption purpose, the arbitration agreement shall not be referred to as a proof against the consumer”

Thus, under this provision, an arbitration agreement in disputes relating to the consumer will not be valid, and may not be referred to as a proof against the consumer. This may make dispute resolution more complicated. The arbitration or court must decide whether it is considered as a proof against the consumer. If the consumer still wants arbitration, it is said that it is not against him. Moreover, the consumer clause in this Draft only mentions cases where the parties are consumers and enterprises (known as enterprises in the Vietnamese Enterprise Law). It has omitted many other persons, such as business households, cooperatives and the like

The 2nd Draft provides for this issue in Article 17 with some changes as follows:

"For disputes between businesses and domestic consumers, not under the jurisdiction of international arbitration as defined in Article 13 of this Law, to protect consumers, although arbitration agreements are included as general terms on providing goods and services

47 http://statutes.agc.gov.sg/non_version/cgi-bin/cgi_retrieve.pl?actno=REVED-10&doctitle=%20ARBITRATION%20ACT%0a&date=latest&method=part48 http://www.jseinc.org/en/laws/new_arbitration_act.html49 http://chanyakomol.com/thailaws/law/t_laws/tlaw0023.htm50 Article 12 of the 2nd Law DraftDraft Law

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provided that the supplier composed, but they only apply to the consumer if the consumer, through a separate written agreement, determine that he/she has read and understood the arbitration agreement and agreed to be bound by the agreement that is being written "

The second draft has made changes the use of arbitration in disputes concerning consumers. The parties to consumer contracts are not only businesses (based on the Vietnamese Business Law), but also others, known collectively as the "supplier of goods or services"51 and consumers. In addition, courts or arbitrators no longer have an obligation to prove whether the arbitration agreements are against consumers or not. They simply determine whether consumers had a separate written agreement to consider that he/she has read and understood and agreed to be bound by that agreement;

The economic position of the parties in the consumer contract, including contracts concerning to the transport of goods or passengers by sea or aviation, is completely different and consumers may be forced into signing a contract, including the arbitration agreement, just because they have read and understand the content of the arbitration agreement. Comparing the content of this provision in the Draft with Section 6 of AA(Vie), we can see that Section 6 is better. Only when a dispute has arisen can the position of the parties to a consumer contract be equal to each other. And at that time, arbitration could indeed be allowed if there is consent between providers and consumers.

51 Article 18(2) of the 2nd Law DraftDraft Law

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4 Conclusion

The number of disputes settled by arbitration is growing not only in developed countries like Sweden, but also in developing countries, like Vietnam. The legal framework of arbitration in Vietnam has been improving so as to be compatible with international practice and the laws of other countries.

However, many provisions of this framework are not so suitable. There are many problems relating to arbitration agreements, such as: Only business individuals and organizations have the right to sign an arbitration agreement and only for resolving disputes which may arise or which have arisen from commercial activities; Thethe form of arbitration agreements must be in writing the details being determined in accordance with a listing method. Compared with the arbitration law of other countries, especially Sweden - one of the countries which seemsseem to have the best arbitration law - the law on arbitration in Vietnam needs some changes.

On the parties to am arbitration agreement, the Vietnamese arbitration law should allow state agencies to use arbitration for settling disputes concerning the administrative domain. Allowing them to do this will contribute to reducing the overload of the courts, while still ensuring them the choice of a method which brings many benefits.

About the form of the an arbitration agreement, the Draft Law should provide specifically all written forms which are accepted in practice. After Vietnam has become a member of the World Trade Organization in 2007, although how regulation towards open as Swedish law on this issue to the quite effective, making the parties in dispute are not bound by how dependent the cases were identified as forms of text by law on Sunday. In fact, when disputes occur, the parties just to prove the existence of an arbitration agreement is the legal arbitrators would have incurred their jurisdiction. However, in terms of the number of disputes arising in Viet Nam, specially disputes concerning to foreign elements, in recent years appears have been more and more. If Vietnam still use article 9 of the OCA(Vie) to cover on the form of arbitration agreement, this will restrict rights to use arbitration for resolving parties’ disputes. But if this provision on this issue shall be stipulated similar to Swedish Law, it is difficult for competent authorities to determine existence of an arbitration agreement in practice. So, the Draft Law should add some other form to article 9 of the OCA(Vie), such as the forms

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which are , staff of judges, arbitrators, there are many fewer restrictions on the quantity and quality, and therefore an ability to prescribe the direction is not really appropriate. How stipulated in the ordinance as is reasonable in time now. However, it is necessary to bring them to prescribe some day form is also seen as a written agreement as cases leading to a reference text can appear arbitration agreement as single campaign by sea, lease ships , The charter ...

established by way of exchange of information in writing; contained in exchanges of statement of claims and defence where the existence of the arbitration agreement is referred to by one party and is not opposed by the other party; evidenced by way of documents if it is recorded by either party or a third party authorized by the parties to such agreement…

Swedish arbitration law does not restrict the scope of an arbitration agreement to disputes concerning commercial activities as does Viet Nam. Arbitration should be expanded to cover all disputes, except disputes relating to consumer contracts, transport contracts by sea and aviation... This would be entirely reasonable because of equal rights and the freedom of private subjects. Therefore, the Draft Law on arbitration in Vietnam should expand the scope of arbitration.

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Table of Statutes and other Legal InstrumentsInternational Treaties and Conventions The New York convention on the Recognition and Enforcement of Foreign

Arbitral Awards on 10 June 1958National LegislationsSweden The Swedish Arbitration Act (1999:116)The Swedish Code of Judicial Procedure (1974:371) The Swedish Employee Law (1976:580)Vietnam Constitution (1992) of the Socialist Republic of VietnamThe Civil Code of Vietnam 2005 by the National Assembly of the Socialist

Republic of Vietnam The Civil Procedure Code of Vietnam 2004 by the National Assembly of the

Socialist Republic of Vietnam The Commercial Code of Vietnam 2005 by the National Assembly of the

Socialist Republic of Vietnam The Ordinance on Commercial Arbitration in Viet Nam (2003:08) The

Vietnamese Decree 25/2004/NĐ-CP of the Government to stipulate some articles in the Ordinance on Commercial Arbitration in Vietnam dated August 29, 2006

The Vietnamese Resolution 05 of the Judges’ Council of the Supreme People's Court has been adopted in 31 July 2003.

The Vietnamese Decree 88/2006/NĐ-CP of the Government to stipulate on business registration dated August 29, 2006.

Others The Chinese Arbitration Law 1994The Japanese Arbitration Law in 2003The Thailand Arbitration Act in 2002The Singapore Arbitration Act in 2002The UNCITRAL Model law on International Commercial Arbitration 1985,

with amendments as adopted in 2006

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Table of CasesSweden The case No. 038/2003 of the SCC on “determining the issue of jurisdiction as

a preliminary matter based on the arbitration agreement”. Vietnam Truong Sanh Co.Ltd v. Mr. Kuo Chi Seng on “arbitration agreement in the

joint venture contract”. The Thu Do II Company Ltd. v. PT VINDOEXIM Corporation on “authority to

sign the arbitration agreement”. The Dialasie Vietnam Int’l Hospital v. B.Brour Hanoi Pharmacy Company on

“challenging the arbitral awrad due to ineffective of the arbitration agreement”.

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Dao Thien, Lựa chọn trọng tài cho giải quyết tranh chấp thương mại: Doanh nghiệp cần hiểu biết hơn, Vietnamese Business Forum www.dddn.com.vn

Nguyen Minh Hang, Giải quyết hợp đồng mua bán quốc tế, at website: http://www.dddn.com.vn/Desktop.aspx/TinTuc/Phapluat-Kd/Giai_quyet_hop_dong_mua_ban_quoc_te/ .

Nguyen Ba Bình, Xác định cơ quan có thẩm quyền giải quyết tranh chấp và tính hợp pháp của việc lựa chọn luật áp dụng đối với hợp đồng dân sự có yếu tố nước ngoài, Legislation and Rechearch Journal, No.3 2006.

Đang Quang, Tranh chấp thương mại: Trọng tài hay Tòa án, at the website http://www.saga.vn/Kynangquanly/Lanhdao/Giaotiep-Damphan/11113.saga (dated in April 05th 2008)

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