CASE LAW DRAFT NO. 14/2024 On the Court’s jurisdiction over disputes related to arbitration activities and the refund of court fees (Please note that this image is not related to the specific case being discussed).

CASE LAW DRAFT NO. 14/2024

On the Court’s jurisdiction over disputes related to arbitration activities and the refund of court fees

Approved by the Judges’ Council of the Supreme People’s Court on [date] [month] 2024 and published under Decision No. [number]/QĐ-CA on [date] [month] 2024 by the Chief Justice of the Supreme People’s Court.

Source of the Case Law:

The Appellate Business and Commercial Judgment No. 06/2024/KDTM-PT dated January 11^th, 2024, by the People’s Court of Hà Nội City regarding the compensation for damages dispute between the plaintiff, L Co., Ltd, and the defendant, V Arbitration Center.

Location of the Case Law’s Content:

Paragraphs 3 and 8 of the “Court’s Opinion” section.

Summary of the Case Law:

– Factual Background 1:

The dispute in this case involves a plaintiff, a company, and a defendant, a commercial arbitration center that provides legal services. The core issue revolves around the arbitration activities conducted by the defendant.

– Legal Resolution 1:

The Court must determine that this dispute falls under the jurisdiction of Vietnamese Commercial Arbitration as governed by the law on commercial arbitration. Consequently, it must be resolved by the provincial-level People’s Court rather than the district-level People’s Court.

– Factual Background 2:

The first-instance court erroneously accepted and handled the case. The plaintiff had paid a first-instance advance court fee, and the defendant had paid an appellate advance court fee. At the appellate stage, the plaintiff withdrew the lawsuit, and the defendant agreed to this withdrawal.

– Legal Resolution 2:

Given these circumstances, the Court is required to suspend the resolution of the case. It must also determine that neither party is responsible for the first-instance or appellate court fees, and therefore, the advance court fees paid by both parties should be refunded.

Relevant Legal Provisions:

– Clause 1 Article 30, Article 31, Point b Clause 1 Article 35, Article 37, Article 38, Article 218 of the 2015 Civil Procedure Code;

– Article 7 and Clause 5 Article 49 of the 2010 Law on Commercial Arbitration.

Keywords:

Compensation for damages, Jurisdiction over dispute resolution, Refund of advance court fees.

CASE DETAILS

According to the petition and statements made during the resolution process, the authorized representative of the plaintiff, L Co., Ltd. (hereinafter referred to as the plaintiff), detailed the following:

The plaintiff had hired a vessel from H Maritime Materials Company for management and exploitation, identified as vessel P. On March 11^th, 2017, vessel P collided with vessel S, which was registered in South Korea, while operating in the waters of Hồ Chí Minh City. Vessel S struck the rear of vessel P.

Subsequently, on March 24^th, 2017, the owner of vessel S submitted a guarantee letter issued by B Insurance Company to the People’s Court of Hồ Chí Minh City. The guarantee amount was USD 1,818,500, and vessel S was released on the same day.

An agreement was reached between the plaintiff and the owner of vessel S: “Within 30 days after vessel P is repaired, the plaintiff will provide the lawyer representing the owner of vessel S with a compensation claim and supporting documents for both parties to continue negotiating the final compensation amount. Additionally, both parties agreed to submit any disputes regarding the plaintiff’s damages to V Arbitration Center for resolution.”

Vessel P was repaired; however, the plaintiff and the owner of vessel S were unable to agree on the final compensation amount. As a result, on October 11^th, 2017, the owner of vessel S filed a lawsuit against the plaintiff at V Arbitration Center.

On July 29^th, 2017, V Arbitration Center issued Arbitration Award No. 82/17/HCM. Subsequently, on August 9^th, 2019, the plaintiff requested the annulment of the Arbitration Award. On October 16^th, 2019, the People’s Court of Hồ Chí Minh City issued Decision No. 1420/2019/QĐ-PQTT, which annulled Arbitration Award No. 82/17/HCM issued by V Arbitration Center.

During the arbitration process at V Arbitration Center, the plaintiff had paid an advance of VND 1,331,272,000 to the defendant. After the annulment of the Arbitration Award by the Court, the plaintiff requested the defendant to refund this advance payment. The defendant proposed a refund of VND 400,000,000, but the plaintiff did not agree to this amount, and as of now, no refund has been issued.

In the lawsuit, the plaintiff claimed to have incurred damages due to the defendant’s Arbitration Award, which it contended was not legally valid. The damages claimed included:

– Advance fee paid to the defendant: VND 1,331,272,000;

– Interest arising from the loan for the advance fee: VND 697,202,104 (from February 5^th, 2018, to May 31^st, 2023);

– Damage related to the guarantee letter from Bảo Minh Insurance, including interest: VND 943,029,260 (from July 29^th, 2019, to October 16^th, 2019);

– Airfare and hotel expenses during the arbitration process: VND 140,244,000;

– Food and entertainment expenses during the arbitration process: VND 140,244,000.

The total claimed damages amounted to VND 3,241,347,365. The plaintiff requested the Court to order the defendant to compensate the full amount of VND 3,241,347,365.

The defendant, represented by its authorized representative, contended the following:

The choice to resolve the dispute through arbitration was entirely voluntary on the part of both parties, including decisions related to the selection of procedures and arbitrators. The defendant’s role was limited to organizing and coordinating activities and providing administrative, office, and other support services.

According to the Law on Commercial Arbitration, the defendant lacks the authority to make decisions on the substance of the dispute or to determine whether a party’s request falls under arbitration jurisdiction. As stated in Article 38 of the General Provisions of the V Arbitration Center, “The Center does not itself resolve disputes. The resolution is conducted by the Arbitration Panel.”

The Arbitration Panel independently issued the Award, which was subsequently annulled by the Court’s decision.

In response to the plaintiff’s lawsuit, the defendant raised three main points:

1. The defendant argued that the plaintiff’s lawsuit is time-barred, as per Resolution No. 02/2022/NQ-HĐTP. According to the three-year statute of limitations starting from the date the plaintiff became aware of the violation, the deadline for filing a lawsuit was August 9^th, 2022. Since the plaintiff submitted the request to annul the Arbitration Award to the People’s Court of Hồ Chí Minh City on August 9^th, 2019, the period for initiating a lawsuit had expired.
2. The defendant claimed that the lawsuit lacks legal grounds. The annulment of the Arbitration Award by the Court does not constitute an “infringement” on any party. Furthermore, the arbitration dispute resolution between the plaintiff and the owner of vessel S does not fall under the scenarios for fee refunds as outlined in Part II, Arbitration Fee Refund, of the defendant’s Arbitration Fee Schedule, which had been specifically communicated to the plaintiff.
3. The defendant noted that the Arbitration Panel members who handled Case No. 82/17/HCM are directly connected to the lawsuit for damages. Since most of the arbitration fees, after fulfilling tax obligations to the State, are paid as remuneration to the arbitrators, the acceptance of the lawsuit would directly impact the rights and obligations of the three arbitrators. Consequently, they should be included as interested parties in the dispute.

The defendant requested that the Court dismiss the lawsuit on the grounds of the statute of limitations, reject all of the plaintiff’s compensation claims as unfounded, and include the arbitrators as interested parties in the dispute. 

At the trial held on September 27^th and 28^th, 2023, the plaintiff’s authorized representative partially withdrew claims related to interest on the advance arbitration fee, damages arising from the guarantee letter issued by Bảo Minh Insurance, airfare, hotel expenses, and food and entertainment costs incurred during the arbitration and court processes. The plaintiff continued to seek compensation solely for the advance fee paid during the arbitration dispute resolution at V Arbitration Center, which amounted to VND 1,331,272,000.

The defendant’s representative upheld their position and requested the Court to apply Point e, Clause 1, Article 217 of the Civil Procedure Code to dismiss the lawsuit on the grounds of the expired statute of limitations. The defendant also sought the rejection of all compensation claims made by the plaintiff and requested that the Arbitration Panel members (Mr. J, Mr. Chu Khắc Hoài D, and Mr. Ngô Khắc L) be included as interested parties.

Additionally, the defendant asked for the case to be transferred to the People’s Court of Hà Nội City for resolution due to foreign elements. The defendant disagreed with all of the plaintiff’s claims.

In its First-instance Business and Commercial Judgment No. 111/2023/KDTM-ST dated September 27^th and 28^th, 2023, the People’s Court of Đống Đa District ruled as follows:

1. The Court partially accepted the plaintiff’s claims:

   – Ordered the defendant to compensate the plaintiff VND 1,331,272,000.

   – Dismissed the remaining claims of the plaintiff.

2. Regarding court fees:

   – The plaintiff, having had part of their claims accepted, was exempted from first-instance civil court fees and was to be refunded VND 48,000,000 paid as an advance court fee, according to Receipt No. 0072152 dated June 28^th, 2023.

   – The defendant was ordered to pay VND 51,938,000 in first-instance business and commercial court fees.

The judgment also addressed court fees and the parties’ right to appeal.

The defendant, dissatisfied with the first-instance judgment, appealed the entire First-instance Business and Commercial Judgment No. 111/2023/KDTM-ST dated September 28^th and 29^th, 2023.

Additionally, the People’s Procuracy of Hà Nội City protested the case, requesting that the People’s Court of Hà Nội City vacate the first-instance judgment and retain the case for resolution under first-instance procedures.

During the preparation for the appellate trial, on January 3^rd, 2024, the plaintiff sought to withdraw the lawsuit. The plaintiff argued that the suit against V Arbitration Center at the People’s Court of Đống Đa District was outside the Court’s jurisdiction as defined in Clause 3, Article 7 of the Law on Commercial Arbitration. The plaintiff also requested to be absent from the appellate trial.

The defendant’s authorized representative supported the protest made by the People’s Procuracy of Hà Nội City and the plaintiff’s decision to withdraw the lawsuit. The representative contended that the People’s Court of Đống Đa District lacked jurisdiction over the case and requested that the appellate court dismiss the case. Furthermore, the representative asked for V Arbitration Center to be exempted from paying court fees, as it was not at fault for the plaintiff’s filing and subsequent case dismissal.

The representative of the People’s Procuracy of Hà Nội City recommended that the appellate court accept both the protest and the plaintiff’s withdrawal, and dismiss the case.

They argued that the People’s Court of Đống Đa District did not have jurisdiction over the case, as disputes involving commercial arbitration should be resolved by provincial-level courts in accordance with Clause 5, Article 49 of the Law on Commercial Arbitration. Additionally, they proposed that V Arbitration Center should not be liable for the first-instance business and commercial court fees.

COURT’S OPINION:

[1] Upon reviewing the case files and arguments presented at the trial, and after considering the prosecutor’s opinions, the Appellate Panel made the following observations:

[2] Regarding the procedural matters:

[3] The dispute involves the plaintiff, a business entity, and the defendant, a commercial arbitration center, qualifying it as a business and commercial dispute under the jurisdiction of the court as stipulated in Clause 1, Article 30; Article 31; Point b, Clause 1, Article 35; Article 37; Article 38 of the Civil Procedure Code; and Article 7 of the Law on Commercial Arbitration.

This case falls under the jurisdiction of a provincial-level court, specifically the Economic Court of the People’s Court of Hà Nội City. Therefore, the handling of the case by the People’s Court of Đống Đa District was improper.

[4] Furthermore, the Law on Commercial Arbitration specifies that arbitration centers are liable for damages only when the Arbitration Panel improperly applies or exceeds the request for emergency measures, as outlined in Clause 5, Article 49. In this case, the People’s Court of Đống Đa District wrongly classified the dispute between the plaintiff and the commercial arbitration center as a claim for out-of-contract damages, which was inconsistent with the principles of the Civil Code and the Law on Commercial Arbitration.

[5] The defendant’s appeal of the first-instance judgment was timely and compliant with legal requirements, including the payment of appellate court fees.

[6] The protest made by the People’s Procuracy of Hà Nội City against the first-instance judgment was legally justified.

[7] During the appellate trial, the plaintiff withdrew the lawsuit entirely, and the defendant consented to this withdrawal. The representative of the People’s Procuracy of Hà Nội City suggested that the appellate court vacate the first-instance judgment and dismiss the case. The appellate court agreed with this recommendation, finding it consistent with the Civil Code, Civil Procedure Code, and the principles of the Law on Commercial Arbitration.

[8] Concerning court fees, given the lack of jurisdiction by the People’s Court of Đống Đa District and the plaintiff’s withdrawal of the lawsuit, the appellate court decided to vacate the first-instance judgment and dismiss the case. As a result, neither the plaintiff nor the defendant is liable for any first-instance or appellate commercial court fees.

In light of the foregoing,

IT IS DECIDED:

Pursuant to:

– Articles 293, 294, 308, and 311 of the Civil Procedure Code;

– Article 7 of the Law on Commercial Arbitration;

– Resolution No. 326/2016/UBTVQH14 dated December 30^th, 2016, on court fees and charges.

The court rules:

1. The First-instance Business and Commercial Judgment No. 111/2023/KDTM-ST dated September 27^thand 28^th, 2023, by the People’s Court of Đống Đa District is annulled, and the case is dismissed.
2. VND 48,000,000 (forty-eight million) paid as an advance court fee according to Receipt No. 0072152 dated June 28^th, 2023, is to be refunded to L Co., Ltd. from the Đống Đa District Civil Judgment Enforcement Department.

VND 300,000 (three hundred thousand) paid as an appellate court fee according to Receipt No. 2884 dated October 26^th, 2023, is to be refunded to V Arbitration Center from the Đống Đa District Civil Judgment Enforcement Department.

This appellate judgment is public and takes effect from the date of pronouncement.

CONTENT OF THE CASE LAW:

“[3] The dispute involves the plaintiff, a business entity, and the defendant, a commercial arbitration center, qualifying it as a business and commercial dispute under the jurisdiction of the court as stipulated in Clause 1, Article 30; Article 31; Point b, Clause 1, Article 35; Article 37; Article 38 of the Civil Procedure Code; and Article 7 of the Law on Commercial Arbitration.

This case falls under the jurisdiction of a provincial-level court, specifically the Economic Court of the People’s Court of Hà Nội City. Therefore, the handling of the case by the People’s Court of Đống Đa District was improper.

…

[8] Concerning court fees, given the lack of jurisdiction by the People’s Court of Đống Đa District and the plaintiff’s withdrawal of the lawsuit, the appellate court decided to vacate the first-instance judgment and dismiss the case. As a result, neither the plaintiff nor the defendant is liable for any first-instance or appellate commercial court fees.”

THE RATIONALE FOR THE CASE LAW DRAFT’S PROPOSAL

1. First case law scenario:

Article 7 of the Law on Commercial Arbitration addresses the “Determination of the Court’s jurisdiction over arbitration activities,” with Clause 3 specifying that “The competent courts that have jurisdiction over arbitration activities as detailed in Clauses 1 and 2 of this Article is the People’s Court of the province or centrally run city.” However, it remains unclear whether “arbitration activities” encompass disputes between a business and a commercial arbitration center (a legal service provider).

The Civil Procedure Code outlines the court’s jurisdiction over business and commercial disputes, including “Requests related to the resolution of disputes by the Vietnamese Commercial Arbitration” (Articles 31 and onwards). Yet, it is ambiguous whether this “related request” includes disputes between a business and a commercial arbitration center.

Due to this ambiguity, there are currently differing opinions: one that considers such disputes to be within the jurisdiction of district-level courts like other disputes, and another that asserts they fall under the jurisdiction of provincial-level courts with respect to arbitration activities.

The case law draft adopts the latter opinion, recognizing that district-level courts lack jurisdiction over commercial arbitration requests. Such matters should be addressed by provincial-level courts (Economic Courts). This approach ensures uniform jurisdiction over all arbitration-related matters, stipulating that any issues related to arbitration should be managed by provincial-level courts (Economic Courts).

2. Second case law scenario:

The Civil Procedure Code stipulates the refund of court fees upon case dismissal (Article 218) but does not specifically address the refund of advance court fees when a plaintiff withdraws the lawsuit and the defendant agrees, particularly when the court has handled the case outside its jurisdiction.

To safeguard the interests of the parties in such cases, the case law draft proposes that advance court fees should be refunded to the parties. This is justified by the procedural agency’s error, not the fault of the parties, thus necessitating a refund of the fees to the litigants.

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