Permanent Court of Arbitration Opens New Office in Hanoi

The Permanent Court of Arbitration’s office in Hanoi may be new but Vietnam is not new to investor-state disputes (ISD). Here’s a brief rundown of ISDs involving Vietnam so far.

The Permanent Court of Arbitration (PCA) opened a representative office in Hanoi, earlier this month, a move designed to further strengthen Vietnam’s reputation as a stable investment destination.

This will be the court’s fifth office outside of its headquarters in the Hague, with the benefits expected to be two-fold.

“The establishment of a PCA representative office will demonstrate Vietnam’s strong commitment to the peaceful settlement of international disputes and assist in making the PCA’s services more accessible in Vietnam and the region,” according to a joint statement from 2021, issued by the PCA and the Ministry of Foreign Affairs.

This comes on the back of the tenth anniversary of Vietnam joining the court. It also comes at a time when investor-state dispute mechanisms (ISDM) are becoming part and parcel with almost all next-generation free trade agreements.

In this light, moving forward, an office in Vietnam’s own backyard may offer unique advantages in building, not only its international reputation, but also its legal capacity in accessing the services of the court.

That said, Vietnam has already had a number of experiences utilizing PCA arbitration.

Investor-state disputes involving Vietnam

Vietnam has so far been party to eight cases of investor-state disputes. Of these three were decided in favor of the state, one in favor of the investor, one was settled, one was abandoned, and two remain pending.

Timeline of investor-state disputes involving Vietnam

The three ISDs Vietnam won

Recofi SA v. Viet Nam

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In July 2013, Recofi, claiming that it had not been paid in full, entered arbitration with the Vietnamese state through the PCA. Recofi was asking for US$66 million in compensation under the France-Vietnam Bilateral Trade Agreement (BIT).

Ultimately, this was found in favor of the state with the arbitrators ruling that the contracts in the dispute did not constitute an ‘investment’ in Vietnam. Subsequently, the PCA did not have jurisdiction to settle the conflict.

Dialasie v. Viet Nam

In 2011, French company Dialasie initiated arbitration against Vietnam through the PCA.

Initially, Dialasie had failed to pay rent on a building it was using in HCMC and had been taken to the Vietnam International Arbitration Center (VIAC) by the Ho Chi Minh City Union of Commercial Cooperatives.

VIAC awarded the claimant US$571,000.

Dialysis then chose to escalate the dispute through the PCA. It claimed that its dialysis clinic in HCMC had been unfairly held to the standards of a hospital as opposed to a clinic. In doing so, Dialasie claimed Vietnam was in breach of the Fair and Equitable Treatment clause of the France-Vietnam BIT.

The PCA ruled that this was not the case and costs were split between the two parties.

McKenzie v. Viet Nam

In 2014, Michael McKenzie of the USA entered arbitration with Vietnam through the PCA.

McKenzie had been granted an investment certificate to build a resort in Vietnam’s Binh Thuan province.

The land, however, was never handed over by the government of Binh Thuan but was instead allocated to a mining company.

McKenzie claimed indirect expropriation in breach of the US-VietNam Trade Relations Agreement (2000) and sought damages in the amount of US$3.7 billion.

The court, however, found in favor of Vietnam with questions raised as to if the investor had acted in good faith in the original transaction.

The ISD Vietnam lost

Trinh and Bin Chau v. Viet Nam (I/II)

Trinh and Bin Chau v. Viet Nam (II) was the second of two claims made by Dutch national Trinh Vinh Binh and his company Binh Chau JSC. It was raised under the 1994 Vietnam-Netherlands BIT.

The first claim centered around the confiscation of real estate and other assets without compensation along with the criminal conviction of Trinh.

The two parties in this first case reached a settlement agreement with the amount of compensation kept confidential.

However, in 2014 Trinh raised a second claim against the Vietnamese government alleging they had breached the first settlement agreement. At the court of arbitration this case was found in favor of the claimant. He was awarded US$37.5 million.

The ISD that was discontinued

Cockrell v. Viet Nam

In 2014, Bryan Cockrell from the USA initiated arbitration proceedings against Vietnam over the failure of the HCMC to approve the transfer of a parcel of land for development. This case, however, was abandoned before it could enter arbitration.

The two ISDs that are still pending

Finally, there are currently two cases pending before the PCA involving Vietnam.

ConocoPhillips and Perenco v. Viet Nam

Essentially, Vietnam has asked ConocoPhillips and Perenco to pay US$179 million in capital gains tax relating to the sale of two of ConocoPhilipps’s subsidiaries in Vietnam. The sale was exempted from paying capital gains taxes in the UK, however, Vietnam is claiming it is entitled to tax the sale itself given that the sole assets of the subsidiaries sold related to oilfields in Vietnam.

Shin Dong Baig v. Socialist Republic of Viet Nam

The Shin Dong Baig v. Vietnam relates to a real estate transaction involving South Korean investor, Shin Dong Baig.The claim is being put forward under the 1993 Korea–

Vietnam BIT with the claimant arguing that authorities had cancelled his land use rights unlawfully. No outcome has been made public.

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