IAA Lead Editor for Vietnam Nguyen The Duc Tam examines three recent Vietnam International Arbitration Centre (“VIAC”) decisions involving agricultural products.
In the last few years, Vietnam’s agricultural exports have made significant achievements. Vietnam is now one of world’s top exporters in many agricultural products. As markets expand, there are many commercial disputes between Vietnamese and foreign companies to be resolved. This article introduces some recent cases concerning agricultural products before the VIAC and makes some practical points on the calculation of damages under Vietnamese procedural law.
II. RECENT VIAC DECISIONS CONCERNING AGRICULTURAL PRODUCTS
1. Seller (Vietnam) v. Buyer (Belgium) (Frozen pineapple case)1
Facts: In 2013 and 2014, the Seller and the Buyer concluded four contracts for the sale of frozen pineapple. However, after delivery of the goods, the Seller did not receive payment. In 2015, the Seller brought the case to the VIAC.
The Seller’s position: The Buyer shall make payment to a Vietnamese bank in accordance with the four contracts. The Seller fulfilled its obligations to deliver the goods, to hand over the documents and to transfer the property in the goods. As the Buyer failed to pay timely, the Seller was also entitled to interest on the money owed.
The Buyer’s position: The Buyer made payment to a third party in China as required under the contracts. The Buyer provided another “version” of the four contracts, which did not mention any Vietnamese bank but a third party in China. The Buyer argued that, by delivering the goods and handing over the documents, the Seller accepted this modified “version” of the four contracts. Therefore, the Arbitral Tribunal should reject all the claims and award costs to the Buyer.
The Seller’s supplementary arguments: The Seller challenged the validity of the modified “versions” of the four contracts.
Held: The Arbitral Tribunal ruled that the Seller failed to prove the content of the payment clause (to whom the Buyer should make payment). Thus, it failed to prove that the Buyer did not fulfill its obligation. Accordingly, the Arbitral Tribunal rejected all the claims and costs.
2. Buyer (Philippines) v. Seller (Vietnam) (Rice case)2
Facts: In 2013, the Seller and the Buyer concluded a contract for the sale of rice. The Buyer made advance payment for the amount of 20% of the price. However, the Seller did not deliver the goods. In 2014, the Buyer brought the case before the VIAC.
The Buyer’s position: The Buyer declared the contract voided in June 2014. The Buyer asked for reimbursement of advance payment, interest and arbitration fees.
The Seller’s position: The Buyer fixed an additional period of time for delivery of the goods but then declared the contract voided. The Seller agreed to reimburse the advance payment after having deducted preparatory costs.
Held: The Arbitral Tribunal ruled that the Buyer should be entitled to reimbursement of advance payment and interest. However, as the Buyer fixed an additional period of time for delivery, preparatory costs were to be shared. As the Seller could only prove packaging cost (by providing contract, invoice and payment order), the Buyer was entitled to reimbursement of advance payment and interest, minus packaging cost. The arbitration fees were shared between the parties.
3. Buyer (Belgium) v. Seller (Vietnam) (Shark catfish case)3
Facts: The Seller and the Buyer concluded a framework contract under which the parties subsequently concluded four contracts for the sale of shark catfish. The Buyer intended to resell the goods for profit. However, the goods were rejected. The Buyer brought the case before the VIAC.
The Buyer’s position: The Seller failed to deliver the goods, which were also of low quality, in a timely fashion. Accordingly, the Buyer was entitled to the price difference as damages.
The Seller’s position: The Seller delivered goods in conformance with the contract, as certified by the Buyer’s director of quality control. Moreover, the Seller timely delivered the goods on the dates as requested by the Buyer. The Seller filed a counterclaim against the Buyer for reimbursement of storage cost and transfer cost as well as interest arising out of the four contracts.
Held: The Arbitral Tribunal rejected all the claims and counterclaims. As the framework contract only set out general principles and terms, the Buyer failed to prove, with reasonable certainty, that it suffered loss of profit. The Seller’s counterclaims were rejected because they were based on the arbitration agreements in the four contracts, but not on the arbitration agreement in the framework contract on which the Buyer relied to make the Request for Arbitration against the Seller.
III. Some Notes on Calculation of Damages
1. Counsel’s Fees as Damages
The reimbursement of counsel’s fees is a controversial issue in international commercial law. In principle, Vietnamese law does not consider counsel’s fees as damages. Article 144(3) of the Vietnam’s Civil Procedure Code 2004 (modified in 2011) (“CPC”) provides that “[e]xpenses for […] lawyers shall be borne by the persons requesting such […] lawyers, except otherwise agreed upon by the parties.”4 This general rule is subject to a few exceptions. Notably, Article 205(3) of the Vietnam’s Law on Intellectual Property 2005 (modified in 2009) (“LIP”) authorizes the right holder to request reimbursement of reasonable counsel’s fees. According to the legal maxim, lex specialis derogat legi generali, Article 205(3) of the LIP shall prevail in the field of intellectual property. For instance, in 2010, the People’s Court of Tien Giang Province awarded counsel’s fees to the right holder of a registered trademark.
The contracting parties should be aware of this rule. In fact, this provision in the CPC is a default rule. In other words, it can be overridden if parties agree. In absence of such agreement, the Vietnamese courts will not award such counsel’s fees according to Article 144(3) of the CPC (except in the field of intellectual property as noted above). However, the VIAC Arbitral Tribunal appears not to be bound by this provision because Article 34(2) of the VIAC Rules regulates that “The Arbitral Tribunal shall have the power to decide that one party shall bear all or part of the legal costs or other reasonable expenses incurred by the other party.” As a result, the VIAC Arbitral Tribunal seems to be free to award counsel’s fees. In reality, whether the VIAC Arbitral Tribunal is actually free to award counsel’s fees remains a question. As demonstrated in the Frozen Pineapple case, one may wonder why the VIAC Arbitral Tribunal rejected all the claims of the Seller but still refused to award counsel’s fees to the Buyer.
2. Burden of Proof
Generally, the aggrieved party has the burden to prove, with reasonable certainty, that it has suffered loss. In the Shark Catfish case, the Buyer presumed its loss of profit and this argument was rejected. In the Rice case, the Seller requested the reimbursement of preparatory costs including packaging cost, desiccant cost, phytosanitary cost, etc. However, since the Seller could only prove the packaging cost by submitting the contract, invoice and payment order, the Arbitral Tribunal only accepted packaging cost as damages. Under Article 83(1) of the CPC, readable materials shall be regarded as evidence if they are original documents or copied documents being lawfully notarized or authenticated or certified by competent agencies.5 A mere photocopy usually does not satisfy this requirement.
In conclusion, one should be aware of the rules on calculation of damages. Even if it is the winning party, attention shall be paid to the amount of damages being awarded. In order to protect its own legitimate benefits, a priori, a party may seek agreement on allocating certain types of costs and expenses (for example: legal costs) in the contract. A posteriori, as loss cannot be subjectively presumed but shall be proved with reasonable certainty, a party should make its claims with sufficient supporting evidence.
This article may be cited as follows: Nguyen The Duc Tam, “Recent Cases Concerning Agricultural Products Before the Vietnam International Arbitration Centre: Calculation of Damages from Vietnamese Perspective”, International Arbitration Asia (25 February 2016) <http://www.internationalarbitrationasia.com/Calculation-of-Damages-from-Vietnamese-Perspective>.
- VIAC (2016), Some Precious Lessons in Exporting Agricultural Products, http://viac.vn/tin-tuc/may-bai-hoc-dat-gia-trong-xuat-khau-nong-san-a495.html.
- VIAC (2016), Precious Lesson in Exporting Shark Catfish, http://viac.vn/tin-tuc/bai-hoc-dat-gia-trong-xuat-khau-ca-tra-a501.html.
- The Vietnam’s Civil Procedure Code 2015 will replace the current Vietnam’s Civil Procedure Code 2004 (modified in 2011) and take effect from 1 July 2016. Article 168(3) of the Vietnam’s Civil Procedure Code 2015 is as the same as Article 144(3) of the Vietnam’s Civil Procedure Code 2004 (modified in 2011).
- Article 95(1) of the Vietnam’s Civil Procedure Code 2015 is as the same as Article 83(1) of the Vietnam’s Civil Procedure Code 2004 (modified in 2011).