By Decision on Cassation No. 09/2024/KDTM-GDT dated 11 June 2024, the Council of Judges addressed an application to recognise and enforce in Viet Nam a foreign arbitral award between JIN YE Corporation (China) (“JIN YE”) and Shengli Special Steel (Vietnam) Co., Ltd (“SHENGLI”). The dispute arose from a service contract for the supply of refractory materials; the Guangzhou Arbitration Commission’s award ordered Shengli to pay CNY 5,211,120.16 plus interest (totalling approximately USD 916,551.37 on record). After the first-instance court recognised and ordered enforcement while the appellate court refused recognition, the Council of Judges quashed the appellate decision and reinstated the first-instance decision, thereby ensuring the award is recognised and enforceable in Viet Nam.
BACKGROUND
Contract and arbitral award:
On 7 September 2009, JIN YE and SHENGLI entered into a “Service Contract” under which JIN YE would supply refractory materials for two electric steel furnaces (52 tonnes) and a steel-refining ladle (60 tonnes) of Shenli.
Shenli defaulted on payment obligations, whereupon JIN YE commenced arbitration before the Guangzhou Arbitration Commission (“GZAC”), China. On 15 August 2017, the arbitral tribunal rendered Award No. 5171(2016) S.Z.A.Zi (effective upon issuance), ordering SHENGLI to pay JIN YE CNY 5,211,120.16 (equivalent to USD 660,854.29) together with interest accrued to the application date of CNY 2,016,253.74 (equivalent to USD 255,693.57) totalling approximately USD 916,547.86.
At the first-instance hearing, JIN YE’s representative requested that the total sum payable by SHENLI as of 29 September 2020 be USD 950,728.29 (equivalent to CNY 3,470.17) and sought that interest be payable under Vietnamese law on the amount recognised and ordered to be enforced.
APPLICATION FOR RECOGNITION IN VIET NAM
On 10 January 2020, JIN YE filed an application with the Thai Binh Provincial People’s Court to recognise and enforce in Viet Nam the above foreign arbitral award. The application was lodged within three years from the date the award became effective, in line with Article 451 of the Civil Procedure Code 2015 (“CPC”).
First-instance decision:
The Thai Binh Provincial People’s Court held a hearing in September 2020. By First-Instance Decision No. 01/2020/QĐST-KDTM dated 30 September 2020, the Court recognised and ordered enforcement in Viet Nam of Award No. 5171(2016) S.Z.A.Zi dated 15 August 2017 of GZAC. Specifically, SHENGLI was ordered to perform its payment obligations to JIN YE in accordance with the award (principal, interest and arbitration fees). The Court also ruled on court fees and notified the parties of their appeal rights.
Appellate decision:
SHENGLI appealed. The High People’s Court in Ha Noi, by Appellate Decision No. 188/2021/QD-PT dated 31 March 2021, allowed the appeal and refused recognition on the ground that the GZAC had not admitted and resolved SHENGLI’s counterclaim, which the appellate court viewed as a breach of Article 19 of the Commission’s Arbitration Rules. Accordingly, it set aside the first-instance decision and declined to recognise Award No. 5171(2016) S.Z.A.Zi.
Cassation protest:
On 11 February 2022, JIN YE petitioned for cassation review of the above appellate decision. On 25 March 2024, the Chief Justice of the Supreme People’s Court issued Cassation Protest No. 06/2024/KN-KDTM against Appellate Decision No. 188/2021/QD-PT of the High People’s Court in Ha Noi, requesting the Council of Judges to hear the case on cassation, quash the appellate refusal of recognition and reinstate the first-instance decision recognising the award.
Cassation hearing:
On 11 June 2024, the Council of Judges of the Supreme People’s Court conducted the cassation hearing. The representative of the Supreme People’s Procuracy concurred with the Chief Justice’s Cassation Protest, proposing to quash the appellate decision and to recognise and enforce the arbitral award in Viet Nam.
GROUNDS FOR REFUSAL OF RECOGNITION AND ENFORCEMENT
SHENGLI advanced several reasons requesting the Vietnamese courts not to recognise or enforce the foreign arbitral award, including:
- Invalid arbitration agreement: The person who signed the Service Contract on JIN YE’s side was not JIN YE’s legal representative and lacked proper authorisation. Accordingly, SHENGLI argued that the arbitration clause in the contract was “without legal effect” and that the Chinese arbitral proceedings were “not in conformity with the parties’ arbitration agreement.”
- Lack of notice and procedural irregularities: SHENGLI contended it did not receive notice when the GZAC accepted the case; and although SHENGLI had authorised PRC counsel to participate, the arbitral authority did not require a notarised power of attorney, allegedly in breach of Article 264 of the PRC Civil Procedure Law. Furthermore, SHENGLI stated it did not receive the arbitral award after the case was concluded.
- Other defects in the arbitral process: SHENGLI asserted that the duration of the arbitral proceedings exceeded the maximum time-limit under GZAC’s Rules. In addition, since SHENGLI is not a Chinese enterprise, the tribunal’s application of PRC law to resolve the dispute was said to be inappropriate.
On the above grounds, SHENGLI requested the Vietnamese court to refuse recognition and enforcement in Viet Nam of Award No. 5171(2016) S.Z.A.Zi dated 15 August 2017 of the GZAC.
COURT’S FINDINGS AND DECISION
In the cassation review, the Council of Judges of the Supreme People’s Court examined each ground raised by SHENGLI against the yardstick of Vietnamese law and the 1958 New York Convention (“NYC”) on the Recognition and Enforcement of Foreign Arbitral Awards. The principal findings were:
- Valid arbitration agreement and regular procedure: Award No. 5171(2016) S.Z.A.Zi shows that The arbitral tribunal addressed SHENGLI’s counterclaim in accordance with the parties’ arbitration agreement. The procedural rules of the GZAC were observed: SHENGLI’s right to file a counterclaim was ensured under Articles 19 and 72 of the GZAC Arbitration Rules. Accordingly, the arbitration agreement is lawful and effective; the composition of the tribunal and the arbitral procedure conformed to the parties’ agreement and to the GZAC Rules. SHENGLI’s authorisation of counsel to participate in the arbitration was valid, and the award has taken effect in China.
- Compliance with the 1958 NYC: China and Viet Nam are contracting states to the Convention. JIN YE filed its application for recognition in Viet Nam within the statutory time-limit under Article 451 of the CPC[1] Viet Nam is therefore obliged to recognise and enforce an award rendered in China pursuant to the Convention and Vietnam’s civil procedure law.
- Assessment of the lower courts: The first-instance court correctly determined that Award No. 5171(2016) S.Z.A.Zi is final and binding, terminates the arbitral proceedings, and meets the conditions for recognition and enforcement in Viet Nam, consistent with Article 424 of the CPC[2] 2015 and the NYC. By contrast, the appellate court’s view that the tribunal failed to admit SHENGLI’s counterclaim, leading it to refuse recognition, was incorrect; as noted above, SHENGLI’s counterclaim was admitted and determined.
In light of the above, the Council of Judges accepted the Chief Justice’s Cassation Protest. By Decision on Cassation No. 09/2024/KDTM-GDT, the Council quashed Appellate Decision No. 188/2021/QD-PT of the High People’s Court in Ha Noi and reinstated First-Instance Decision No. 01/2020/QĐST-KDTM of the Thai Binh Provincial People’s Court. This means the foreign arbitral award is recognised and enforceable in Viet Nam. The cassation decision took legal effect on 11 June 2024.
OUR COMMENT
Cassation stance & scope of review
Cassation Decision No. 09/2024/KDTM-GDT not only consolidates the principle of respect for arbitral awards under the 1958 NYC but also clarifies the limits of review by Vietnamese courts. The Council of Judges emphasised that Award No. 5171 (2016) addressed SHENGLI’s counterclaim, complied with the GZAC Rules, and ensured SHENGLI’s right to counterclaim. The tribunal applied PRC law selected by the parties and the award had already taken effect in China. In that context, the Council confirmed that the first-instance recognition and enforcement were consistent with Article 424 of the CPC 2015, while the appellate refusal was incorrect because it revisited the merits. This reflects the approach of no re-examination on the merits in proceedings for recognition of foreign arbitral awards, where the court examines the grounds in Article 459[1] of the CPC 2015 corresponding to Article V of the NYC and does not reassess the substantive dispute.
Refusal grounds: framework & application
From a legal perspective, Article 459 sets out categories of grounds for refusal of recognition and enforcement of a foreign arbitral award, including: (i) ; and (iii) other conditions such as expiry of the filing time limit. Applied to this case, SHENGLI’s arguments concerning the authority of:
- The contract signatory (falling under Article 459.1.a of the CPC 2015 corresponds to Article V.1.a of the NYC). Under Article V.1.a, the resisting party must furnish proof that the arbitration agreement was invalid under the law applicable to it (or, failing that, the law of the seat). In practice, evidence of actual or ratified authority defeats this ground; if such proof is absent, the arbitration clause remains effective;
- Lack of notice (captured by Article 459.1.c of the CPC 2015, corresponding to Article V.1.b. of the NYC). This is a narrow due-process ground and the burden of proof lies with the award debtor. Where the record shows authorised counsel and substantive participation (e.g., counterclaim), bare assertions of non-receipt are self-contradictory and will not sustain refusal;
- The application of PRC law as a public-policy point (tested under Article 459.2.b of the CPC 2015, corresponding to Article V.2.b of the NYC) do not warrant refusal on this record: the signatory’s authority (and SHENGLI’s participation) sustains the arbitration agreement; notice and the opportunity to be heard were ensured; and, given the foreign element, the choice of PRC law does not offend Vietnamese fundamental principles.
For example, the fact that the signatory of the Service Contract was not the legal representative does not automatically invalidate the arbitration agreement where the signatory had authority to conclude commercial contracts. Furthermore, SHENGLI participated in the arbitration and filed a counterclaim without objecting to jurisdiction, which amounts to a waiver of the right to object.
Burden of proof on notice
As to “lack of notice”, the burden of proof lies with the award debtor under Art. 459.1 of the CPC 2015 / Art. V.1 of the NYC (“furnish proof”). In this case, SHENGLI adduced no evidence of improper notification, while the record shows authorised counsel and multiple filings, including a counterclaim. The allegation of non-receipt is therefore self-contradictory (if no notice was received, counsel could not have been instructed and a counterclaim could not have been filed), and does not sustain a refusal
Due process & counterclaim (facts corrected at cassation)
SHENGLI’s due-process objection (that its counterclaim was not considered) is framed under Art. 459.1.c of the CPC 2015 (Article V.1 of the NYC). However, at cassation, the Council of Judges held that the appellate court had misapprehended the facts: the tribunal did admit and determine Shengli’s counterclaim (at least in part). Once that factual premise is corrected, there is no deprivation of the opportunity to be heard, and thus no basis to refuse recognition on due-process grounds. The award had legal effect in China and had not been set aside, so the Vietnamese courts had no basis to refuse recognition.
Practical takeaways
From a practical perspective, JIN YE v. SHENGLI underlines the importance of selecting and complying with the applicable arbitration law and institutional rules. For Vietnamese businesses using foreign arbitration:
(1) clearly identify the signing authority and the arbitration agreement;
(2) monitor the proceedings and instruct counsel in a timely manner; and
(3) raise objections promptly to preserve rights, because the party resisting enforcement bears the burden of proof and failure to object in time may operate as a waiver.
The decision also shows the Supreme People’s Court’s consistent stance favoring enforcement, with refusal reserved for exceptional cases, thereby supporting a safer legal environment for cross-border transactions and strengthening Vietnam’s credibility in implementing the NYC.
[1] Article 451. Time limit for submission of applications for recognition and enforcement
1. Within 03 years from the day on which the foreign arbitrator’s award takes legal effect, the judgment creditors and persons with relevant legitimate rights and interests or their lawful representatives may submit their application to Vietnam’s Ministry of Justice according to provisions of International treaty to which the Socialist Republic of Vietnam is a signatory or to a competent Vietnam’s Court specified in this Code, in case the International treaty to which the Socialist Republic of Vietnam is a signatory does not provide for or there is no relevant International treaty provisions, to request the Court to not recognize and enforce such award.
2. In cases where the applicant can prove that he/she cannot submit the application within the time limit specified in clause 1 of this Article due to a force majeure event or an objective obstruct, the time period when such force majeure event or objective obstruct occurs shall not be included in the time limit for submission of application.
[2] Article 424. Foreign arbitrators’ award which shall be recognized and enforced in Vietnam
1. The following foreign arbitrators’ award shall be considered being recognized and enforced in Vietnam:
a) Arbitral award of a foreign country which is a signatory to an International treaty about recognition and enforcement of foreign arbitral award together with Vietnam;
b) Foreign arbitral award other than those specified in point a of this clause on the basis of principle of reciprocity.
2. Foreign arbitral award specified in clause 1 of this Article shall be considered being recognized and enforced in Vietnam shall be the final ones of the arbitral tribunal that resolve all the contents of the dispute, finish the arbitral procedures and are effective.
3. Foreign arbitral, foreign arbitral award provided for in clause 1 of this Article shall be determined according to provisions of Vietnamese Law on commercial arbitration.
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