BACKGROUND
On 09 August 2019, the Claimant, WP PTE (“WHAUP”) and the Respondent 1, Mr. Do Tat T (“Mr.T”) entered into a Share Purchase Agreement under which Mr. T agreed to transfer 33,986,774 shares (equivalent to 34% of total issued shares) of Song Da Surface Water Joint Stock Company (“SD”) to WHAUP for VND 2,073,193,214,000 (taxes included) at the agreed purchase price of VND 61,000 per share. At the time of Share Purchases Agreement, the Respondent 2, AO Water Joint Stock Company (“AO”) holding 41% of SD, acted as guarantor to ensure completion of the transaction.
A dispute arose when WHAUP alleged that the Respondents failed to pay the full put-option price. On 30 September 2021, WHAUP, represented by Mr. Nguyen Viet H, initiated arbitration at the Vietnam International Arbitration Centre (“VIAC”). Subsequently, Respondent 1 submitted the Counter Claim to VIAC.
On 16 December 2022, VIAC issued Award No. 79/21 (“Award”) favor of the Claimant declaring the Respondents had failed to perform their obligation of pay the Claimant with the full put-option price, ordering the Respondents to jointly and severally pay WHAUP over VND 2 trillion, plus arbitration costs and legal expenses and also rejecting the counterclaim of the Respondent 1.
Disagreeing with the Award, on 11 January 2023, the Respondents subsequently applied a Request and supporting documents to the Hanoi Court to set aside the Award (the “Request”), based on the following grounds:
- The supporting documents submitted by the parties by which the Tribunal rendered the Award are fraudulent;
- There is no existing arbitration agreement between the parties;
- The dispute is not under the Tribunal’s jurisdiction; and
- The Award is contrast to the fundamental principles of the Vietnamese laws.
For the purposes of this Article, the analysis focuses exclusively on the grounds arising from the questionable execution of the power of attorney.
ARGUMENTS OF THE PARTIES
Respondents’ arguments
For the above grounds, the Respondents’ arguments to request Ha Noi Court to set aside the Award as follows:
Questionable signing of the Resolution of Board of Director dated 12 July 2021.
In the first arguments raised by the Respondents regarding the authenticity of supporting documents, the Respondents argued that the Claimant’s Board of Directors (“BOD”) had allegedly signed a resolution dated 12 July 2021 (“Resolution”) authorizing Mr. Niphon Bundechanan to represent WHAUP in the arbitration.
In particular, at the time of July 2021, due to the COVID-19 situation, strict lockdowns and travel bans were in force across Southeast Asian Nations, including Singapore and Thailand, where the directors resided. Owing to this strict lockdown, the Respondents contended that it was physically impossible for all five directors to meet and sign the same document on the same day.
Specifically, with respect to Ms. Jareeporn Jarukornsakul, one of the members of the BOD, the Respondents contends that it would have been impossible for her to be physically present at the same location in Singapore together with the other four Board members on 12 July 2021. This is because she was present in Bangkok, Thailand on 09 July 2021 while if she entered to Singapore, she must have been undergoing a 14-day quarantine period under Singapore’s mandatory quarantine policy at that time. In addition, on 19 July 2021, she continued attended an event in Bangkok, Thailand. For these above reasons, the Respondents therefore maintained that the document was fabricated.
Even if the directors had signed separately, the signing date of each BOD member should have been different under each signature, instead of the identical date “12 July 2021”. Significantly, Resolution could not have been sequentially circulated among multiple countries within one day, especially given postal disruptions during the pandemic.
The Respondents further raise another possibility, namely that the set of resolutions was signed by the BOD Members separately on different resolutions and subsequently compiled into a single resolution having the same legal effect as a jointly signed document. However, this scenario does not apply in the present case, as the Resolution submitted to the Tribunal displays all five signatures of the BOD Members on the same document.
Accordingly, the Respondents stated that there were sufficient grounds to conclude that the Resolution to authorize Mr. Niphon Bundechanan to initiate arbitration proceeding was a forged and fabricated document.
Consequently, it is impossible to determine whether Mr. Niphon had authorization to sub-authorize to Mr. Nguyen Viet H to sign the Request for Arbitration.
Violation of notarization/legalization requirements.
At the time of initiating arbitration in VIAC, the Resolution was not legalized pursuant to the Vietnamese relevant laws, including Decree No. 111/2011/ND-CP dated 05 December 2022 (“Decree No.111″). Notably, the Request for Arbitration was signed by Mr. Nguyen Viet H as the authorized representative of Mr. Niphon, while the Power of Attorney granted to Mr. H (“POA”) was neither notarized nor legalized in accordance with the applicable procedural law. Despite these issues, and notwithstanding the Respondents’ strong objections, the dispute was still accepted for administration by VIAC, and the Tribunal proceeded to adjudicate the case and issue the Award on the basis of these documents.
The original Board Resolution and POA were not legalized as required by Article 478 of the Civil Procedure Code and Article 4.2 of Decree No. 111/2011/ND-CP. Since these documents originated abroad, they could not be recognized or used in Vietnam without legalization, making the Claimant’s representation before VIAC invalid from the outset.
After objections were raised, WHAUP submitted a new set of “separate resolutions” signed and legalized between October and December 2021 after the arbitration had commenced. The Respondents argued these later documents could not retroactively validate the original authorization, as Vietnamese law does not recognize retrospective ratification of representative authority.
Signatures Forgery
The Respondents noted discrepancies between Ms. Jareeporn’s signature on the disputed resolution and her known signature in other corporate documents. Despite the Respondents’ formal request for forensic verification on 05 August 2022, the Arbitral Tribunal refused to order a signature examination, allegedly breaching Article 46.3 of the Law on Commercial Arbitration and Rule 19.3 of VIAC’s Rules.
For the foregoing reasons, the Respondents submitted that Mr. Nguyen Viet H lacked the legal authority to sign the Request for Arbitration. Nevertheless, the Tribunal relied on this document to determine the Claimant’s procedural standing and to proceed with the resolution of the Case. Such reliance constitutes a serious procedural irregularity.
Claimant’s arguments
Regarding the Respondents’ arguments on the above-mentioned matters, WHAUP opposed the application, maintaining that:
- The POA and Board Resolution were authentic and reflected the directors’ true intent.
- The VIAC Tribunal, as the competent receiving body in Vietnam, lawfully waived the requirement of legalization under Article 9.4 of Decree 111/2011.
- The Tribunal had full jurisdiction under the arbitration clause in the Share Purchase Agreement.
- Subsequent submission of legalized copies was only a procedural clarification, not a substantive defect.
- Allegations of forgery were unfounded, as Ms. Jareeporn had confirmed her signature in a notarized video before a Singapore notary public.
DECISION OF THE COURT
The Court annulled VIAC Arbitral Award No. 79/21 dated 16 December 2022 on the grounds of invalid authorization, violations in legalization of foreign documents and procedural violations connected with the questionable establishment of the Claimant’s POA to authorize the person to sign request of arbitration. In particular, the Court reasoned that:
Regarding the authorization to sign request for arbitration, since the Claimant’s representative was appointed under an unlegalized and potentially fabricated resolution, the initiation of arbitration lacked valid authority. Consequently, the VIAC Tribunal had no jurisdiction to hear the dispute.
Regarding the legalization of foreign documents, the Court stated that although the Law on Commercial Arbitration does not particularly stipulate on the requirement for legalization, on the ground of the Civil Code determined as the fundamental code of law, the Tribunal’s acceptance of an unlegalized POA and Board Resolution despite Respondents’ objections contravened fundamental procedural principles under the Law on Commercial Arbitration.
Further to the above, the Court stated that the Tribunal breached its procedural duty of the Law on Commercial Arbitration and VIAC Rules, in particular, rejected the Respondents’ request for forensic analysis of Ms. Jareeporn’s signature. Therefore, the Tribunal thereby failed to fulfill their fairness and objectivity of the arbitral proceedings.
OUR COMMENTS
Overall, with respect to the arguments advanced by the Parties, the Court’s analysis and conclusions primarily centred on two issues: (i) the authenticity of the signature of Ms. Jareeporn Jarukornsakul, a member of the Claimant’s Board of Directors, and (ii) the legalization of the documents submitted to the Tribunal, including the Power of Attorney.
Authenticity of the Signature on the Resolution
In its reasoning, the Court referred to Article 46.3 of the Law on Commercial Arbitration, considering that the Tribunal’s refusal to grant the Respondent’s request for a forensic examination of the signature reflected a lack of objectivity and constituted a violation of the fundamental principles of Vietnamese law as contemplated under Article 4.2 of the same Law.
At the same time, the Law on Commercial Arbitration, together with Article 19.3 of the VIAC Rules, provides that the arbitral tribunal, either on its own initiative or upon the request of one or more parties, may order expert examination or valuation of assets for the purpose of resolving the dispute.
This wording suggests that the ordering of expert evidence is framed as a power, rather than an obligation, of the arbitral tribunal. From this perspective, the acceptance or rejection of a request for forensic examination may be viewed as falling within the Tribunal’s procedural discretion, rather than as a mandatory procedural step to be taken in every instance.
In the present case, the Tribunal did not reject the Respondent’s request in abstract terms, but assessed the evidence submitted by the Parties as a whole. On that basis, it concluded that the discrepancies relied upon by the Respondent were not sufficient to raise serious doubts as to the authenticity of the signature. As the brief in the Decision of the Court, the Tribunal further noted that Ms. Jareeporn Jarukornsakul herself had provided materials confirming that the signature on the Resolution was hers.
Against this background, the Tribunal may be understood to have considered that a forensic examination was unnecessary for the resolution of the dispute. The Court’s judgment, however, did not elaborate in detail on how the Tribunal’s exercise of procedural discretion in this respect met the threshold of a violation of the fundamental principles of Vietnamese law, nor did it specify the precise criteria applied in reaching that conclusion. This aspect of the decision invites further reflection on the boundary between permissible judicial review and deference to arbitral procedural autonomy.
The issue arises as to whether consular legalization is a mandatory requirement for foreign documents such as Resolution, POA, and lawyer appointment letters when they are used in arbitral proceedings in Vietnam.
In Decision No. 12/2023, concerning the issue of authorization, the Hanoi Court held that the Claimant’s Resolution, POA, and Letter of Appointment of Lawyer were invalid because they had not been consularly legalized. The Court reasoned that, since the Law on Commercial Arbitration does not expressly regulate this matter, it was necessary to apply the “corresponding law,” namely Article 478 of the Civil Procedure Code, to require consular legalization of those documents.
However, this line of reasoning is legally unconvincing for the following reasons.
First, under Article 1 of the Civil Procedure Code 2015, the Code governs only civil, commercial, labor and family proceedings before Vietnamese courts. Arbitral proceedings, by contrast, are governed by the Law on Commercial Arbitration and fall outside the scope of the Civil Procedure Code. There is therefore no legal basis to automatically apply the Civil Procedure Code to arbitration merely because the Law on Arbitration is silent on a particular issue.
Second, both paragraphs of Article 478 of the Civil Procedure Code expressly apply to “Vietnamese courts” and make no reference to arbitral tribunals. Nothing in the wording or structure of Article 478 permits it to be extended to arbitration or to be treated as a default rule applicable to arbitral proceedings.
Under the prevailing laws, including the provisions of Decree No. 111/2011 on consular legalization, there is no solid legal basis to assert that an arbitral tribunal has the authority to unilaterally determine whether foreign documents used in Vietnam are required to be consularly legalized.
In short, in the absence of any express statutory provision or clear legal basis extending the consular legalization regime under the Civil Procedure Code to arbitral proceedings, the Court’s imposition of such a requirement in arbitration, and its reliance on that requirement to refuse recognition and enforcement of the arbitral award, lacks legal foundation and is marked by material flaws in legal reasoning.
Should the Draft Precedent No. 15/2024 be approved as the guidance on consular legalization in arbitral proceedings?
Amid ongoing debate as to whether consular legalization is mandatory in arbitral proceedings, Draft Precedent No. 15/2024, which is based on Decision No. 16/2023/QD-PQTT dated 27 November 2023 of the Hanoi People’s Court, has attracted considerable attention. The key question is whether this Draft Precedent should be adopted to conclusively address existing controversies concerning consular legalization in arbitration in Vietnam.
In Decision No. 16/2023/QD-PQTT, the Hanoi Court rejected an application to set aside an arbitral award on the ground that the request for arbitration submitted by a foreign claimant had not been consularly legalized. In reaching its decision, the Court held that consular legalization of the request for arbitration was not required, for the following reasons:
- First, the Court reasoned that the claimant had subsequently submitted a consularly legalized power of attorney expressly confirming and ratifying all procedural acts previously carried out by its authorized representatives, including the signing and filing of the request for arbitration.
- Second, and more importantly, the Court relied on Article 9.4 of Decree No. 111/2011/ND-CP, holding that documents are exempt from consular legalization where the competent authority does not require such legalization in accordance with applicable law.
With respect to the persuasiveness of the Court’s reasoning, the first ground appears reasonable. The fact that the claimant’s power of attorney was consularly legalized, while the request for arbitration itself was not, may be considered acceptable, as the legalized power of attorney sufficiently evidenced the claimant’s genuine intent to commence arbitration, notwithstanding the absence of consular legalization at the time the request was filed.
More significantly, in its interpretation of Article 9.4 of Decree No. 111/2011/ND-CP, although the Draft Precedents expressly clarify the interpretation of Article 9.4, based on the approach of Hanoi Court, it can be interpreted the “corresponding laws” is regulations of commercial arbitration or commercial instead of civil code. In particular, arbitral tribunals are not bound by the consular legalization regime applicable to Vietnamese courts, unless such a requirement is imposed by the Law on Commercial Arbitration or the applicable arbitral rules. As the Law on Commercial Arbitration 2010 does not have any regulations stipulation on the mandatory of consular legalization of foreign documents submitted in arbitral proceedings, the acceptance of an unlegalized request for arbitration could not be regarded as a violation of the fundamental principles of Vietnamese law.
The proposed precedent therefore confirms, at a principled level, that consular legalization is not an inherent or automatic requirement in arbitral proceedings in Vietnam. Rather, it is a procedural matter subject to the autonomy of arbitration and the discretion of the arbitral tribunal, consistent with the flexible and party-driven nature of arbitration.
If adopted, Draft Precedent No. 15/2024 would significantly undermine the reasoning adopted by the Hanoi Court in Decision No. 12/2023 and substantially reduce the ongoing controversy and legal uncertainty faced by parties involved in arbitral proceedings in Vietnam.
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