Judgment No. 84/2017/KDTM-PT dated march 30, 2017 on arbitral award

SUPERIOR PEOPLE’S COURT IN HANOI

JUDGMENT NO. 84/2017/KDTM-PT DATED MARCH 30, 2017 ON ARBITRAL AWARD

On March 30, 2017, at the head office of Superior People’s Court in Hanoi, a court hearing was conducted to hear the appellate commercial case No. 13/2016/TLPT-KDTM dated July 13, 2016 according to the appeal filed by the award creditor concerning the First Instance Commercial Decision No. 01/2016/QĐKDTM-ST dated May 30, 2016 of the People’s Court of Nam Dinh Province.

Based on the Decision to Bring the Case to Trial No. 614/2017/QD-PT dated March 14, 2017 between litigants:

* Award creditor: Company G

Head office: Blaak GA R, P.O.Box, BC R, Netherlands.

Authorized representatives: Mr. Le Xuan L, Mrs. Vu Thi T B and Mr. Nguyen Huy T.

Co-address:  Ward L, District B, Hanoi (according to the Letter of Authorization dated December 14, 2016, taking effect from January 1, 2017).

* Award debtor: Company N.

Address: Street T, Ward K, City N, Nam Dinh Province.

Legal representative: Mr. Nguyen The M, position: the President of the Board of Directors.

Authorized representative: Mr. Nguyen Van D, position: Deputy Director General (according to the Letter of Authorization dated April 10, 2016).

FINDING THAT

* Representation of the award creditor, Company G, in the petition for recognition and enforcement of foreign arbitral award in Vietnam:

Pursuant to the Arbitral Award dated August 12, 2013 issued by the Arbitral Tribunal of International Association B in the arbitral dispute resolution between Company G and N Joint-Stock Company, pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention 1958, to which Vietnam is a signatory from 1995 and the Civil Procedure Code of the Socialist Republic of Vietnam, amended in 2011, the award creditor requests the People’s Court of Nam Dinh Province to consider recognition and enforcement of Arbitral Tribunal of International Association B in Vietnam, to be specific, requesting Company N to, in an immediate manner and in full, pay the following sums of money:

- The invoice sum indicated in the contract No. 658931: USD 505,294.32.

- The interest on USD 505,294.32: USD 42,673.14.

- The invoice sum indicated in the contract No. 659642: USD 905,759.91.

- The interest on USD 905,759.91: USD 76,493.29.

- The invoice sum indicated in the contract No. 669229: USD 22,332.60.

- The interest on USD 22,332.60: USD 1.886.03. In total: USD 1,554,439.29.

- The interest on USD 1,554,439.29 equals 4.25% per year plus (+) benchmark rate in New York: USD 1,554,439.29 x 7.5% x 758/360 = USD 245,471.87.

Where, the interest 7.5% per year means the sum of 4.25%  and 3.25% of benchmark rate in New York, 758 means 758 days from September 2, 2013 to September 30, 2015 (the filing date); 360 means 360 days, which is total days in a year used as the basis for calculating interests in the banking sector. The above-mentioned sum of interest is provisionally calculated on the filing date. This sum of money shall be accumulated from the filing date to the date on which Company N makes the payment in fact.

- Arbitration cost: GBP 5,090.00.

Total: USD 1,799,911.16 and GBP 5,090.00.

* Representation of Company N in the statement of the award debtor:

Company N did not know about the contract No. 669229 dated November 28, 2011 for purchase of 50 tonnes of cotton J 34 tonnes of Indian cotton. In the copy of the document supplied by the court, there is no signature of Company N, so this contract does not exist.

There are two contracts: the contract No. 658931 dated February 16, 2011 for purchase of 300 tonnes of cotton M and the contract No. 659642 dated March 9, 2011 for purchase of 900 tonnes of cotton M. On receiving copies of these two contracts, Company N signed and resent them to Company G. Company N had requested the representative of Company G multiple times to send the original contracts bearing the seal and positions of the representative of the seller to apply for L/C at bank but no reply was received. Thus, Company N cannot proceed the subsequent procedures for the purchase. Alternatively, on July 7, 2011, Company N received a dispatch from the bank indicating the foreign currency shortage leading to the strict procedures for opening an L/C.

Accessing to copies of documents supplied by the court, Company N knows that the Arbitral Tribunal of International Association B had sent notices and documents to Company N from November 6, 2012 to September 12, 2013. However, Company N asserts that it has not received any of these documents from the Arbitral Tribunal of International Association B via its email address. The email address of Company N is N@hn.vnn.vn rather than C@vietunique.com.vn; its fax number is 0084xxxxxxxxxx, and its mailing address is via express courier F. Regarding the addressee of Company N, there is no employee named S in the administrative division or reception desk and Company N only has documentary department in lieu of reception desk. Therefore, the procedures for execution of the contract are sufficient and poorly-grounded; the seller and the Arbitral Tribunal of International Association B has not sent litigation documents as to the contract for purchase of cotton or has sent them to an incorrect address. The award issued by the Arbitral Tribunal of International Association B is unconvincing and coercive0} So, Company N requests the court not to recognize and enforce the award of the Arbitral Tribunal of International Association B against Company N.

In the First Instance Commercial Decision No. 01/2016/QDKDTM-ST dated May 30, 2016, the People’s Court of Nam Dinh Province applied Clause 3 Article 30; Article 369; Article 372; Article 349 of the Civil Procedure Code; Article 4; Article 388 of the Civil Code; Article 11 of the Law on Commerce; Ordinance of Court Fees and Charges, the court judged as follows:  Do not accept the lawsuit petition of Company G for recognition and enforcement of foreign arbitral award in Vietnam, in specific:

Do not recognize and enforce the arbitral award dated August 12, 2013 of the Arbitral Tribunal of International Association B in Vietnam to resolve the dispute over cotton purchase contract between Company G and Company N.

In addition, the Court of First Instance also declared the fee for dealing with the petition and noticed the right to appeal as per the law.

On June 7, 2016, the award creditor, Company G, filed an appeal requesting the Court of Appeal to review the case and refute the entire decision on non-recognition and non-enforcement of foreign arbitral award of the Arbitral Tribunal of International Association B; and recognize and enforce foreign arbitral award of the Arbitral Tribunal of International Association B for the following grounds:

The contract No. 669229 concluded on November 28, 2011 by the two parties is governed by the law of the UK, regardless of whether Company N signed the contract or not.

The notices of the Arbitral Tribunal of International Association B have been duly served on Company N via the email address of B Co., Ltd - the representative broker of the deal between Company N and Company G; via express courier F - an well-known international express courier which certified that the letter and parcel of International Association B were delivered to Company N. Therefore, the first instance council claiming that Company N was not notified in a timely and due manner as to appointment of arbitrator…is not based on the matter of facts.

At the appellate court hearing, the authorized representative of Company G, Mr. Le Xuan L and Mr. Nguyen Huy T, still uphold the appeal for the grounds stated in the appeal petition and claim that the Court of First Instance does not require Company N to justify that Company N has not received any notice from the Arbitral Tribunal of International Association B as per the law. The Court of First Instance was coercive and ungrounded when not recognizing the award of the Arbitral Tribunal of International Association B to understand exactly what is a legal notice of litigation documents of the Arbitral Tribunal of International Association B. Mr. Nguyen Van D - authorized representative of Company N still claims that as Company N did not conclude the contract No. 669229 dated November 28, 2011, it does not know this contract. Contract No. 658931 dated February 16, 2011 and contract No. 659642 dated March 9, 2011 have no term and condition concerning arbitration and the parties do not agree to settle any arising dispute under the rules of the Arbitral Tribunal of International Association B. Son Nam Company still asserts that it has not received any notice of arbitration proceedings as presented, thus, it requests the Trial Panel not to accept the appeal of Company G and upholds the decision of the People’s Court of Nam Dinh Province.

As to the resolution of the case, the representative of Superior People’s Procuracy in Hanoi requests the Trial Panel not to accept the appeal of Company G and uphold the First Instance Decision of the People’s Court of Nam Dinh Province since Company N has not concluded 1 contract and the 2 remaining contracts have no term and conditions regarding arbitration agreement. Alternatively, the verification at FedEx shows that there is only 1 notice with the addressee named S, but Company N asserts that there is no employee named S working in the administrative division of Company N from the time of issuing the notices of the Arbitral Tribunal of International Association B until now.

According to items of evidence and documents assessed and arguments at the court hearing and representation of the litigants and the representative of Superior People’s Procuracy in Hanoi.

CONSIDERING THAT

Clause 2 Article 457 of the Civil Procedure Code 2015 in Viet Nam stipulates: “When considering the application for recognition and enforcement, the Panel shall not conduct re-trial over the dispute when the foreign arbitrator’s award has been issued. The Court shall be only entitled to check and compare the foreign arbitrator’s award and accompanying papers and documents with relevant Vietnam's law provisions and international treaties to which the Socialist Republic of Vietnam is a signatory to form the basis for the issuance of decision to recognize and enforce such award”. Therefore, the appellate council hearing only considers the case based on regulations of Article 459 of the Civil Procedure Code 2015.

Regarding arbitration agreement:

Company N is one party to the contracts for cotton purchase with Company G through the broker, B Co., Ltd.

Considering the contract No. 669229 dated November 28, 2011 that Company G sells 50 tonnes of cotton with origin A to Company N, it clearly has a term of arbitration agreement: “Any dispute arising from or involving this contract shall be resolved by arbitration under the regulations and rules of International Association B, which take effect on the date of signing of this contract. The regulations and rules form an integral to the contract and the contracting parties are supposed to understand them clearly. The place for arbitration dispute resolution is in the UK”.  However, since Company N did not sign this contract, the term of arbitration agreement in this contract is not legally binding on Company N. The People’s Court of Nam Dinh Province declared the term of arbitration agreement in this contract null and void as it does not ensure the right of disposal, agreement on will, and voluntariness in contract conclusion of Company N and not in accordance with basic rules of Vietnam’s law. Therefore, it is ungrounded to force Company N to enforce the decision of the Arbitral Tribunal of International Association B as to this contract. Thus, in the petition part of documents specifying “Comments about appeal grounds” in the first time (September 6, 2016) and in the second time (February 20, 2017) of Company G, represented by Mr. Le Xuan L: “For any possible reason, if the appellate council considers that the damages related to the contract No. 669229 under the arbitral award cannot be recognized or enforced in Vietnam, Company H kindly requests the appellate council to recognize and enforce the remaining damages related to the contracts No. 658931 and No. 659642 amounting to USD 1,771,868.01”.

Company N signed the contract No. 658931 dated February 16, 2011 and contract No. 659642 dated March 9, 2011. However, these two contracts have no term of arbitration agreement as the contract No. 669229 dated November 28, 2011. At the court hearing, the representatives of Company G and Company N both asserted that apart from these two contracts, the contracting parties have no other contract having the term of arbitration upon any dispute arising out of these contracts. Therefore, the Arbitral Tribunal of International Association B proceeding with the dispute resolution upon request of the Company G based on these two contracts is not legally binding on Company N.

Regarding arbitral proceedings:

In the petition and during the case resolution, the representative of the petitioner claims that the Arbitral Tribunal of International Association B has duly served litigation documents to Company N via express courier and email address.  However, the petitioner admits that they only sent litigations documents via email address of the broker, B Co., Ltd, rather than the email address of Company N and there is no justifiable ground that Company N received the litigation documents from the said broker. At the appellate hearing, the representatives of Company G claim that the Arbitral Tribunal of International Association B engaged F - one of the leading international express courier to send their notices of arbitral proceedings to Company N and Mr. J - the Chief of Arbitral Tribunal of International Association B confirmed that these notices were duly delivered to Company N. However, the document dated February 14, 2017 sent by F to the Superior People’s Court in Hanoi (reply to Official Dispatch No. 158/CV-TA dated January 18, 2017 of the Superior People’s Court in Hanoi upon the request of the litigants at the hearing on January 17, 2017) specifies that from 2012 to 2013, the Arbitral Tribunal of International Association B sent the notice of arbitral proceedings 8 times to Company B via international express courier F but: “In Vietnam, F provides its services through a general agent, S Co., Ltd. S Co., Ltd notified F that its agent cannot provide proof of delivery (POD) as POD of shipments is only kept for 3 months since the date of delivery and all POD made previously were destroyed”. However, F provided copies of data on parcels to prove the delivery of these parcels. The appellate hearing deems that the above-mentioned data is copies and only the parcel sent on August 13, 2013 has addressee named Son, the other 7 parcels have no addressee. According to the list of insurance payers at Company N collected and presented by the petitioner (copies without certification of any authority) at the appellate hearing, from 2012 to 2013, Company N has employed 2 persons named S, one is a security guard and one is a worker. Therefore, during the case resolution and at first instance and appellate hearings, Company N has valid grounds when consistently asserting that it has not received any litigation documents from the Arbitral Tribunal of International Association B.

According to the above grounds, the appellate council considers that the Court of First Instance is well-grounded and in accordance with Vietnam’s law when not accepting the petition for recognition and enforcement of arbitral award dated August 12, 2013 of the Arbitral Tribunal of International Association B in Vietnam as to the resolution of dispute over the contracts for purchase of cotton between Company N and Company G. Thus, the appeal of Company G is ungrounded to accept. The request of the representative of the Superior People’s Procuracy in Hanoi is in conformity with the judgment of the trial panel.

According to facts and matters and pursuant to Clause 3 Article 462 of the Civil Procedure Code 2015.

HEREBY DECIDES

Do not accept the appeal of Company G and uphold the entire Decision No. 01/2016/QDKDTM-ST dated May 30, 2016 of the People’s Court of Nam Dinh Province. In specific:

Apply Clause 5 Article 31; Article 459; Article 461; Article 430 of the Civil Procedure Code 2015, Ordinance of Court Fees and Charges in Viet Nam.

Do not accept the petition for recognition and enforcement of the arbitral award dated August 12, 2013 of the Arbitral Tribunal of International Association B in Vietnam to resolve the dispute over cotton purchase contract between Company G, address: Blaak GA R, P.O.Box, BC R, Netherlands, and Company N, address: Street T, City N, Nam Dinh Province. Regarding the fee for petition: Company G is obliged to pay VND 4,000,000 which is deducted from the advance of VND 4,000,000 paid by the Branch T in Hanoi to the account number 3511.1.105.4581 of the Ministry of Justice according to the payment order dated January 13, 2016. So, Company G has paid the fee for petition in full.

Appellate court fee: Company G is obliged to pay VND 200,000 which is deducted from the advance of VND 200,000 paid by Mr. Nguyen Duc S on behalf of Mr. Le Xuan L at the Department of Civil Judgment Enforcement of Nam Dinh Province according to the receipt No. 08580 dated June 7, 2016.