VILAF | View firm profile
Background
In a high-value cross-border financing transaction, a foreign lender (the “Lender”), a foreign arranger (the “Arranger”), and a Vietnamese real estate developer (the “Borrower”) entered into a facility agreement (the “Facility Agreement”) under which the Lender agreed to extend a loan of up to USD 400 million. As consideration, the Borrower undertook to pay a total of USD 20 million in front-end and arrangement fees (the “Fees”).
Each party signed a counterpart and exchanged scanned copies via email, but the Borrower never provided a wet-ink original. The Facility Agreement is governed by English law and includes a dispute resolution clause referring disputes to the Singapore International Arbitration Centre (SIAC).
Separately, the Lender entered into guarantee agreements (the “Guarantee Agreements”) with the Borrower’s subsidiaries and major shareholder (the “Guarantors”), under which the Guarantors irrevocably and unconditionally guaranteed the Borrower’s obligations. These agreements are governed by Vietnamese law and similarly contain SIAC arbitration clauses.
Following default by the Borrower and Guarantors, the Lender and Arranger initiated arbitration proceedings at SIAC and secured a favorable award (the “Award”), ordering the Borrower and Guarantors to pay the Fees jointly and severally.
The Lender and Arranger applied for recognition and enforcement of the Award before the Hanoi People’s Court (the “Hanoi Court”). The Hanoi Court partially recognized the Award – enforcing it against the Borrower – but declined to recognize it against the Guarantors, citing (i) alleged deficiencies in the service of arbitration documents and (ii) references to real estate within the Guarantee Agreements.
The decision was subsequently appealed by the Lender and the Borrower to the High People’s Court in Hanoi (the “High Court”). The appeal judge panel includes Mr. Dieu Van Hang, Mr. Bui Anh Thang, and Mr. Nguyen Phan Nam, of which Mr. Dieu Van Hang is the presiding judge of the panel.
Legal Issues Raised
The proceedings before the Vietnamese courts gave rise to two core legal questions:
- Is the Facility Agreement, executed in counterparts and exchanged via email – absent an original wet-ink signature – legally valid, binding, and enforceable?
- Whether references to real estate in the Guarantee Agreements trigger notarization or registration requirements under Vietnamese law – and if unmet, whether this affects the enforceability or arbitrability of related disputes?
The High Court’s Reasoning and Decision
On appeal, both the High Court and the High People’s Procuracy invoked Article 3.8 of Decree No. 30/2020/ND-CP, which defines an “original document” (bản gốc) as either a hard copy bearing a wet-ink signature or a digitally signed electronic document. The court and procuracy reasoned that, since the Facility Agreement was executed only through scanned copies exchanged via email and there was no evidence that the Borrower had signed a wet-ink original, the Facility Agreement lacked legal effect under Article 400.4 of the 2015 Civil Code. Consequently, the arbitration clause in Article 18 of the Facility Agreement was also deemed legally ineffective.
With respect to the Guarantee Agreements, the High Court noted that there are provisions which referenced real estate assets. As the agreements were neither notarized nor registered as secured transactions, the Court found them to be in violation of Vietnamese legal requirements. Although the Court did not elaborate in detail on the consequences of this non-compliance, it appeared to imply – by citing Article 5.2 of the 1958 New York Convention and Articles 459.2(a) and 459.2(b) of the 2015 Civil Procedure Code – that disputes involving real estate fall under the exclusive jurisdiction of Vietnamese courts and are therefore non-arbitrable under domestic law. Furthermore, the lack of notarization and registration was deemed to contravene the fundamental principles of Vietnamese law.
For these reasons, the High Court upheld the Borrower’s appeal and dismissed those of the Lender and Arranger, thereby declining to recognize and enforce the Award in its entirety.
Commentary and Concerns
The High Court’s ruling presents a series of jurisprudential and procedural concerns that merit close examination:
- Inappropriate Application of Governing Law: Notwithstanding the Facility Agreement’s express designation of English law as the governing legal framework, the Court proceeded to assess its validity under Vietnamese domestic law without articulating a principled justification for doing so. This departure from the parties’ contractual choice raises substantive concerns regarding the recognition of party autonomy in cross-border commercial transactions – a principle widely upheld in both international private law and Vietnamese conflict-of-law rules.
- Questionable Interpretation of Decree 30/2020/ND-CP: The invocation of the High Court and the High People’s Procuracy of Decree No. 30/2020/ND-CP as grounds to invalidate the Facility Agreement appears both substantively and procedurally flawed. Pursuant to Articles 1 and 2, the decree regulates document management practices applicable to state administrative bodies, political, and social organizations, and state-owned entities. It does not purport to apply to private commercial contracts between independent parties. Furthermore, the Borrower executed the agreement on 4 March 2020, one day prior to the decree’s entry into force on 5 March 2020. The application of the decree in this context appears legally unfounded.
- Departure from International Arbitration Norms: The validity of the arbitration agreement should have been assessed under Singapore law, which governs the arbitration proceedings. The Court’s reliance on Vietnamese law to invalidate the arbitration clause violates the 1994 Singapore International Arbitration Act, the 1958 New York Convention, and the 2010 Vietnamese Law on Commercial Arbitration. The decision disregards established principles such as the separability of arbitration clauses, the limited scope of judicial review on substantive grounds, and the recognition of arbitration agreements formed through digital means.
- Lack of Statutory Basis for Formality Requirements: The ruling failed to identify any statutory provision requiring notarization or registration of the Guarantee Agreements as a condition for their enforceability or arbitrability. This omission raises serious doubts about the legality of the High Court’s refusal to enforce the arbitral award.Ambiguous Analysis of Arbitrability: The Court’s conclusion that the underlying dispute is non-arbitrable due to the references to real estate lacks persuasive legal support. A more rigorous analysis would have been required to establish that the core dispute falls squarely within the narrow category of matters reserved exclusively to judicial resolution under Vietnamese law.
Key Takeaways
Under Vietnamese law, electronically executed contracts – especially those exchanged via email without a corresponding wet-ink original – may face enforceability challenges, depending on judicial interpretations of formal validity requirements.
Additionally, where guarantees reference real estate and are subject to Vietnamese law, questions may arise concerning notarization, registration, and competent jurisdiction. These factors may affect not only the legal validity of the guarantee itself but also the arbitrability of any associated disputes.
Conclusion
The High Court’s reasoning reflects a notably restrictive interpretation of contractual enforceability and international arbitration frameworks. Beyond unsettling legal certainty, this ruling risks undermining Vietnam’s attractiveness as an investment destination, sowing doubt among foreign investors and dispute resolution practitioners alike. It highlights the urgent need for a more consistent, predictable judicial approach to applying international legal instruments.
Although the High Court ceased operations on 1 July 2025, the adverse precedential impact of its decision may persist well beyond its institutional lifespan.