Precedent No. 69/2023/AL on the authority of Commercial Arbitrators in resolving disputes over information confidentiality and non-competition agreements in Vietnam

Source of Precedent:

Decision 755/2018/QD-PQTT dated June 12, 2018 of the People's Court of Ho Chi Minh City on the civil matter "Request to cancel the arbitration award"; The requester is Ms. Do Thi Mai T, the person with related rights and obligations is R.

Location of Precedent content:

Paragraph 8, section “Comments of the Court”.

Overview of the content of the Precedent:

- Precedent situation:

The employee and the employer sign an information confidentiality and non-compete agreement regarding, after termination of the labor contract, the employee is not allowed to do similar or competitive work with the employer within a certain period of time. If there is a dispute, it will be resolved by Commercial Arbitration.

- Legal solutions:

In this case, the Court must determine that the dispute over the information confidentiality and non-competition agreement between the two parties is an agreement independent of the labor contract, falling under the jurisdiction of the Commercial Arbitrator.

Legal provisions related to Precedent:

- Clause 2, Article 2, Article 13 and Clause 4, Article 35 of the Law on Commercial Arbitration 2010;

- Clause 2, Article 3 of the Civil Code 2015;

- Article 6 of Resolution 01/2014/NQ-HDTP dated March 20, 2014 of the Council of Judges of the Supreme People's Court guiding the implementation of the Law on Commercial Arbitration 2010.

Keywords of Precedent:

“Confidentiality and non-compete agreement”; “Agreement to resolve disputes by Commercial Arbitration”; “Jurisdiction of Commercial Arbitration”.

CASE CONTENT:

On October 10, 2015, R Company Limited and Ms. Do Thi Mai T signed a labor contract with a term of twelve (12) months (from October 10, 2015 to October 31, 2016), Ms. T works at Company R as Head of Recruitment Department.

On October 21, 2015, Company R and Ms. “During the individual's employment or employment with Company R and for a period of twelve (12) calendar months after termination of employment or employment with Company R, irrespective of the reasons for termination of employment or termination of employment, the individual agrees not to, directly or indirectly and throughout the entire territory, perform work similar to the job or of a similar nature work in any business that competes with L.vn (...), is or will in the future be in competition with the business of L.vn, Company R, and/or affiliates and partners of Company R". The parties also agreed that if a dispute arises, it will be resolved by arbitration.

November 1, 2016, Company R and Ms. T continue to sign a labor contract with a term of 12 months (from November 1, 2016 to October 31, 2017) for the position of Head of Recruitment Department.

On November 18, 2016, Ms. T terminated the 2016 labor contract with Company R. On October 2, 2017, Company R filed a lawsuit with evidence at the Vietnam International Arbitration Center (VIAC), thereby requesting Ms. T to compensate Company R an amount of 205,197,300 VND, equal to 03 (three) times the preceding month's salary before Ms. T unilaterally terminated the 2016 labor contract because Ms. T violated Clause 1, Article 3 of the NDA.

On February 19, 2018, the Arbitration Council of VIAC established in Ho Chi Minh City issued Arbitration Award No. 75/17 HCM with the following content:

1. Accept all of the plaintiff's requests, forcing the defendant to pay the plaintiff compensation of 205,197,300 VND (Two hundred and five million one hundred ninety-seven thousand three hundred VND).

2. The defendant must bear the entire arbitration fee of this dispute, which is 24,600,000 VND. Because the plaintiff has paid all arbitration fees, the defendant must refund the plaintiff the amount of 24,600,000 VND (Twenty-four million six hundred thousand VND).

3. The defendant must pay the plaintiff the entire amount stated in Section 1 and Section 2, Part IV above within 30 days from the date of this arbitration award. In case the defendant delays payment, the defendant must continue to pay interest on late payment as prescribed in Article 357 of the Civil Code 2015, with an interest rate of 10%/year, corresponding to the late payment amount and late payment period.

4. This arbitration award was made on February 19, 2018 in Ho Chi Minh City, Vietnam. This arbitration award is final, binding on the parties, and takes effect from the date of the award.

Disagreeing with the Arbitrator's decision, dated March 22, 2018, Ms. T filed a lawsuit at the People's Court of Ho Chi Minh City with a request to consider canceling the entire content of Arbitration Award No. 75/17 HCM dated February 19, 2018 of VIAC for the following reasons:

- The arbitration agreement is invalid because it violates legal prohibitions, and the Arbitration award is contrary to the basic principles of Vietnamese law.

- Arbitration procedures are contrary to the provisions of the Law on Commercial Arbitration.

- The dispute is not under the jurisdiction of the Arbitration Council.

- The arbitration council used fake evidence.

At today's meeting, the requester still maintained his request. People with related rights and obligations still maintain their opinions. The lawyer protecting the legitimate rights and interests of Company R requested that the Court reject Ms. T's request to sue.

Representative of the Ho Chi Minh City People's Procuracy commented:

Through inspection of the case from the time the case was accepted up to this point and it is found that the judge has properly complied with the regulations on authority to resolve the case, the Court has decided to open a meeting and send documents to the Procuracy for study on time and issue and serve procedural documents to participants in the proceedings and the Procuracy in accordance with the provisions of the Civil Procedure Code.

Compliance with the law of the Council opening the meeting: At today's meeting, the meeting is conducted in accordance with the civil procedure law.

The litigants' compliance with the law has properly implemented the rights and obligations prescribed in the Civil Procedure Code.

Regarding content: There is no basis to accept Ms. Do Thi Mai T's request to cancel the arbitration award.

COURT'S OPINION:

[1 ] After reviewing all documents in the case file examined at the meeting; listen to the arguments of the litigants; Hearing the opinion of the Representative of the People's Procuracy of Ho Chi Minh City, the Application Review Council commented:

[2] Regarding legal proceedings:

[3] Regarding the statute of limitations for filing a request: February 19, 2018 is the date of announcement of the Arbitration Award in case No. 75/17 HCM. On February 27, 2018, the defendant received the arbitration award, and on March 22, 2017, Ms. Do Thi Mai T filed a request with the People's Court of Ho Chi Minh City to cancel the arbitration award within the time limit prescribed in Clause 1, Article 69 of the Law on Commercial Arbitration.

[4] The application review council commented on the reasons given by Ms. Do Thi Mai T to cancel the arbitration award as follows:

[5] Reasons "The arbitration agreement is invalid due to a violation of legal prohibitions" and "The arbitration award is contrary to the basic principles of Vietnamese law". Considering that, based on Article 13 of the Law on Commercial Arbitration 2010, it is stipulated:  “In case a party discovers a violation of the provisions of this Law or the arbitration agreement but still continues to conduct arbitration proceedings and does not object to the violations within the time limit prescribed by this Law then they lose their right to object at Arbitration or Court". Article 6 of Resolution No. 01/2014/NQ-HDTP dated March 20, 2014 guiding the Law on Commercial Arbitration 2010prescribed by the Council of Judges of the Supreme People's Court: "In case a party discovers a violation of the regulations or of the arbitration agreement but still continues to conduct arbitration proceedings and does not object to the Arbitration Council or Arbitration Center about such violations within the time limit prescribed by the Law on Commercial Arbitration 2010, you lose the right to object in arbitration or in court against those known violations. In cases where the Law on Commercial Arbitration 2010 does not stipulate a time limit, the time limit is determined according to the agreement of the parties or the rules of arbitration proceedings. “In case the Court determines that the violation has lost the right to object as prescribed in Article 13 of the Law on Commercial Arbitration 2010 and instructions in Clause 1 of this Article, the party that has lost the right to object is not entitled to appeal the decision of the Arbitration Council or request cancellation of the arbitration award for violations that have lost the right to object. The court may not decide to accept the request of one or more parties based on violations that one or more parties have lost the right to object to. Article 9 of VIAC's Arbitration Rules, taking effect on March 1, 2017 stipulates: “In case the defendant believes that the arbitration agreement does not exist, the arbitration agreement is invalid, or the arbitration agreement cannot be performed, the defendant must clearly state this in the Self-Defense Statement. If the defendant does not clearly state that in the self-defense statement, the defendant loses the right to object." In Ms. T's self-defense dated December 4, 2017 as well as throughout the arbitration proceedings, Ms. T did not raise any objections to the arbitration agreement. Thus, Ms. T has lost her right to object to the arbitration agreement according to the above regulations.

[6] In addition, Ms. T believes that the NDA violates regulations on workers' right to work and violates prohibited acts under the 2013 Employment Law, yet the Arbitration Council still recognizes the NDA as an Association. The arbitration council violated the principle of compliance with the law by employees as well as the prohibition in the 2013 Employment Law. Considering that Article 4 of the 2005 Civil Code stipulates: "The freedom to commit and agree in establishing civil rights and obligations is guaranteed by law if such commitment or agreement does not violate legal prohibitions or is not contrary to social ethics. In civil relations, the parties are completely voluntary; neither party is allowed to impose, prohibit, coerce, threaten, or prevent the other party. Legal commitments and agreements are binding on the parties and must be respected by individuals, legal entities, and other entities. In this case, between Ms. T and Company R, they voluntarily signed. When signing, Ms. T is a person with full capacity to act according to the provisions of the law and is not forced, deceived, or imposed on her will to accept to sign the NDA. Therefore, the NDA is valid. The Arbitration Council's recognition of the validity of the NDA is completely legal.

[7] The reason for canceling the arbitration award is because "The arbitration procedure is contrary to the provisions of the Law on Commercial Arbitration 2010". Ms. T believes that the arbitration procedure is contrary to the provisions of the Law on Commercial Arbitration 2010 because: "The award was made on the 31st day from the date of the meeting of the Arbitration Council." and “The arbitration award was not sent to you immediately after the date of issuance, which was January 20, 2018”. Pursuant to Clause 5 and Clause 6, Article 148 of the Civil Code 2015 stipulates: “When the last day of the term is a weekend or public holiday, the term ends at the end of the working day following that holiday.” and “The end of the last day of the term at twenty-four hours of that day”. The final meeting to resolve the dispute between Company R and Ms. T was held on January 19, 2018; However, because February 18, 2018, the 30th day from the date of the last meeting, is Sunday, which is a weekend day, the Arbitration Council issued a decision on February 19, 2018, which is still within the time limit according to the above-mentioned regulations. February 20, 2018 and February 21, 2018 are Lunar New Year holidays, so, according to the provisions of Clause 5, Article 148 of the Civil Code 2015, the time limit for sending the judgment cannot end on these days but ends at twenty-four hours of the next working day, i.e., February 22, 2018. Therefore, the award sent to the parties on February 22, 2018 is still within the time limit prescribed in the Law on Commercial Arbitration 2010.

[8] Reason "The dispute is not under the jurisdiction of the Arbitration Council": Ms. T said that "Disputes about NDA are disputes that will be resolved by the Court". Pursuant to Clause 2, Article 2 of the Law on Commercial Arbitration 2010, it is stipulated: "Arbitrator's authority to resolve disputes: disputes arising between parties in which at least one party has commercial activities." Company R is a trader, has business registration, and has commercial activities under the 2005 Commercial Law. Therefore, the arbitration agreement falls under the jurisdiction of VIAC and the arbitrator according to the provisions of Clause 2, Article 2 of the Law on Commercial Arbitration 2010. This content was concluded by the Arbitration Council at its meeting on January 19, 2018 (Part A, page 5 and Part C, page 6 of the award). Clause 4, Article 35 of the Law on Commercial Arbitration 2010 stipulates: “In case the defendant believes that the dispute does not fall under the jurisdiction of the Arbitrator, there is no arbitration agreement, the arbitration agreement is invalid, or the arbitration agreement cannot be performed, that must be clearly stated in the self-defense statement. Meanwhile, in the Self-Defense Committee as well as throughout the arbitration proceedings, Ms. T did not raise any objections to the Arbitrator's authority but continued the arbitration proceedings and still participated in the dispute resolution meeting. Thus, Ms. T has lost the right to object to the jurisdiction of the Arbitration Council according to the provisions of Article 13 of the Law on Commercial Arbitration 2010 and the instructions in Article 6 of Resolution No. 01/2014/NQ-HDTP. Besides, Ms. T believes that the dispute between the parties is a labor dispute under the jurisdiction of the Court because the NDA is an inseparable part of the Labor Contracts between Ms. T and Company R. In paragraph 11 of the Argument dated January 18, 2018 of the Lawyer defending Ms. T's legitimate rights and interests at VIAC and at the Final Meeting, Ms. T's lawyer reaffirmed the view that the NDA is completely independent of the labor contracts between Company R and Ms. T. Therefore, the Application Review Council determined that the NDA agreement is an independent agreement when there is a dispute; it falls under the jurisdiction of the Arbitrator as chosen by the parties since the signing.

[9] Reason "The evidence provided by the parties that the Arbitral Council based on to make a decision is fake": It is considered that Company R has provided the Arbitral Council and Ms. T: confirmation letter from Z Bank (Vietnam) Ltd. and the preceding month's salary slip prior to Ms. T's NDA violation. These documents are documents confirmed by Bank Z and Company R, so they cannot be considered fake. Furthermore, based on Clause 4, Article 71 of the Law on Commercial Arbitration 2010, this is a substantive part, not under the jurisdiction of the application review council.

[10] The representative of the People's Procuracy of Ho Chi Minh City participating in the meeting had the following opinion: proposal not to accept Ms. T's request to cancel the arbitration award. The proposal of the representative of procurement is in accordance with the judgment of the application review board and should be accepted.

[11] From the above observations, we do not accept the request of Ms. Do Thi Mai T.

[12] Pursuant to Clause 3, Article 39 of Resolution No. 326/2016/UBTVQH14 on rates of collection, exemption, reduction, collection, payment, management, and use of court fees and charges issued by the National Assembly Standing Committee In the case of Ms. Do Thi Mai T, the Court fee must be paid. However, in the list of Court fees, it is not clearly specified how much the fee is for the type of request to cancel an arbitration award. Therefore, Ms. Do Thi Mai T does not have to pay the fee.

Because of the above reasons,

Pursuant to Clause 2, Article 31, Point a, Clause 3, Article 38, Clause 3, Article 414 and Article 415 of the 2015 Civil Procedure Code;

Pursuant to Clause 1, Article 5, Point g, Clause 2, Article 7, Clause 2, Article 16, Article 60, Clause 2, Article 68, Clause 1, Article 69, Article 71, Article 72 of the Law on Commercial Arbitration 2010;

Pursuant to Resolution No. 01/2014/NQ-HDTP dated March 20, 2014 of the Council of Judges of the Supreme People's Court guiding the implementation of a number of provisions of the Law on Commercial Arbitration 2010.

DECISION:

1. Do not accept Ms. Do Thi Mai T's request to cancel Arbitration Award No. 75/17 HCM of the Arbitration Council of the Vietnam International Arbitration Center (VIAC) made on February 19, 2018 in Ho Chi Minh City.

2. This decision is final and takes effect from the date of signing, which is June 12, 2018. The parties and the Arbitration Council have no right to complain or appeal, and the Procuracy has no right to protest.

CONTENTS OF THE PRECEDENT

“[8] ... Ms. T said that “The dispute over the NDA is a dispute that will be resolved by the Court.” Pursuant to Clause 2, Article 2 of the Law on Commercial Arbitration 2010, it is stipulated: "Arbitrator's authority to resolve disputes: Disputes arising between parties in which at least one party has commercial activities." Company R is a trader, has business registration, and has commercial activities under the 2005 Commercial Law. Therefore, the arbitration agreement falls under the jurisdiction of VIAC and the arbitrator according to the provisions of Clause 2, Article 2 of the Law on Commercial Arbitration 2010. This content was concluded by the Arbitration Council at its meeting on January 19, 2018 (Part A, page 5 and Part C, page 6 of the award). Clause 4, Article 35 of the Law on Commercial Arbitration 2010 stipulates: "In the event that the defendant believes that the dispute does not fall under the jurisdiction of the Arbitrator, there is no arbitration agreement, the arbitration agreement is invalid, or the arbitration agreement cannot be performed, that must be clearly stated in the self-defense statement. Meanwhile, in the Self-Defense Committee as well as throughout the arbitration proceedings, Ms. T did not raise any objections to the Arbitrator's authority but continued the arbitration proceedings and still participated in the dispute resolution meeting. Thus, Ms. T has lost the right to object to the jurisdiction of the Arbitration Council according to the provisions of Article 13 of the Law on Commercial Arbitration 2010 and the instructions in Article 6 of Resolution No. 01/2014/NQ-HDTP. Besides, Ms. T believes that the dispute between the parties is a labor dispute under the jurisdiction of the Court, because the NDA is an inseparable part of the Labor Contracts between Ms. T and Company R. In paragraph 11 of the Argument dated January 18, 2018 of the Lawyer defending Ms. T's legitimate rights and interests at VIAC and at the Final Meeting, Ms. T's lawyer reaffirmed the view that the NDA is completely independent of the labor contracts between Company R and Ms. T. Therefore, the Application Review Council determined that the NDA agreement is an independent agreement, and when there is a dispute, it falls under the jurisdiction of the Arbitrator as chosen by the parties since signing."

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