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Presentation of Prof. Mochtar Kusuma-Atmadja : Arbitration in the 1990s: Developments in East Asia : Arbitration in the Southeast Asian Region

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Viet Nam

Very little adjudication of commercial disputes takes place in Viet Nam. Four principal reasons have been identified: first, adversarial adjudication is not a favored method of dispute resolution in Viet Nam. The preference is for consensus settlement. This is a cultural predilection Viet Nam shares with other countries with a Confucian heritage. However, unlike PRC or Japan for example, Viet Nam has not undergone the equivalent of a cultural revolution or Meiji Restoration. In fact, Confucian values have been co-opted by the Communist Party into their social policy. The concept of the individual, central to western rights-consciousness is not well developed in Viet Nam. Vietnamese tend to look to others in a family and work environment to "match" in paired relationships; similarly, business proceeds on the basis of reciprocal obligations. These factors help to explain a business community that prefers a good personal relationship to impersonal formal agreements, setting out rights and obligations, and where adversarial disputes often signal the termination of a fruitful relationship.

Second, until 1987, there was little legislative recognition of private commercial relationships. Economic law existed to formalize State Communist Party control over economic activity. This system co-existed quite successfully with traditional Confucian values of obedience to one's social superiors. International trade disputes were settled by the Foreign Trade Arbitration Council (FTAC). It was established in Hanoi in 1963 with similar rules to its counterpart in the People's Republic of China. This body has reportedly adjudicated trade disputes between Vietnamese entities and those in other Socialist countries. It evidently has little experience and knowledge of Western private international law.

Third, many years after liberalization in PRC, the 6th Communist Party Conference in Hanoi, 1986, introduced a policy of economic change that allowed entities other than the State to engage in commercial transactions. What has not kept pace with the political and economic changes is the training of lawyers in free market economic law and education of the population in the concepts of personal economic rights. One consequence has been to compromise the effectiveness of the Ordinance on Economic Arbitration (1990), which seeks to bring commercial dispute resolution more closely into line with international practice. Another contributing factor has been the failure to reform institutions, such as state economic arbitration bodies and the judicial system, so that they may take a prominent role in the development of rights consciousness.

Finally, although its development has been especially ambitious in recent months, Viet Nam's commercial legal system is still very much in its infancy. This has the potential to give rise to an unfortunate corollary. The incomplete commercial code may of itself engender uncertainty, creating a fertile ground for disputation. And denying an arbitrator comprehensive legal rules, it may also prejudice a proper assessment of the behavior of the disputants.

Viet Nam has only recently set up an institution for international commercial arbitration þ the Viet Nam International Arbitration Centre (VIAC). It was officially opened on 28 April 1993. The VIAC follows closely the model based on the Singapore International Arbitration Centre (SIAC). The Rules accorded to VIAC are based on the UNCITRAL Model Law with some modifications. Previously, domestic Vietnamese law did not directly govern general commercial international transactions. Contracting parties were free to agree among themselves on matters such as proper law, forum and procedures for dispute resolution, and can still do so albeit at an ad hoc level. Experience suggests that Vietnamese economic entities have, in the past, been reluctant to accept arbitration in the country of the foreign party. This hesitation has been compounded by the fact that until the passing of the Companies and Private Enterprise laws (1990), all contractual transactions were with Vietnamese companies either wholly owned or substantially owned by branches of government. Now that it is possible to transact with private Vietnamese entities, concerns relating to sovereignty may no longer be a barrier to the selection of a forum. It is nevertheless important to note that Vietnamese entities, like their foreign counterparts, will be reluctant to submit to an unfamiliar legal procedure or system.

Business Cooperation Contracts (BCC) and joint ventures, but not 100% foreign-owned entity agreements are in reality international contracts, albeit ones governed by Vietnamese law. Curiously the Foreign Investment Law (FIL) and Foreign Investment Ordinance (FIO) contain separate provisions for the regulation of dispute resolution between parties to BCCs and joint ventures. Disputes between parties to a BCC are regulated by Article 25 FIL. Disputants are exhorted to settle their differences through negotiation and conciliation. No matter how laudable this approach may appear, it really serves no purpose other than to defer to the Vietnamese philosophical preference for settling disputes by consensus. Underlying this preference for amicable settlement is the previously mentioned lack of familiarity and distrust of adversary adjudication. This response is of course not unique to Viet Nam. The problem is that there is no formal procedure for the appointment of a mediator such as the regime established by the Foreign Economic Contracts Law of PRC. Failing resolution, the parties to a BCC may refer the dispute to a Vietnamese economic arbitration body or any other arbitration or adjudication institution that is mutually agreeable. Alternatively, disputes may be arbitrated by the tribunal of a third country, or an international arbitration body, so the parties may select an international arbitration tribunal or a municipal tribunal. A further possibility is the establishment, on an ad hoc basis, of a tribunal in any locality.

For joint ventures, much is the same except that legislators have seen fit to regulate disputes between joint venture parties with two slightly different statutory provisions, namely Article 25 FIL and Article 53 of the Foreign Investment Decree (FID). The choice of forum provisions in the Decree are at once more specific and broader than those contained in the Law. Some confusion arises as a result of the use of different terminology in the FIL and FID. The former appears not to provide for ad hoc arbitration while the latter does, and since the law is the paramount legislative instrument, it appears that the Article 53 FID is overruled to the extent that it provides such a possibility. Vietnamese commentators have, however, attributed this to lax drafting rather than legislative intent. Finally, the permissive "may" used in Article 53 FID suggests that parties might elect, or refer disputes to an adjudicator other than an arbitrator. This has yet to occur and is unlikely to be an acceptable alternative.

The two major reforms that have been initiated to complement the dual aims of the national policy of doi moi which loosely translated means 'renovation', namely, the encouragement of entrepreneurial activity and foreign investment, are the setting up of the VIAC and acceding to the New York Convention. Previously, there was no guarantee that a foreign award would be enforceable in Viet Nam, which caused considerable concern to foreign investors. However, on 12 September 1995, Viet Nam became a signatory to the Convention and was considered a top priority for reform by the Vietnamese legislature. The setting up of the VIAC also helped to solve the problems of a lack of rights consciousness among the business community, suspicion of adversary adjudication and the lack of a forum of review over administrative action.

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