Handling cases where a contractually agreed arbitration center terminates its operation

Legal question:

In 2019, my company (referred to to as Company B) signed  a Sale Contract with company A. Accordingly, Company B provides Company A with a quantity of seafood to serve the restaurant run by Company A. Regular delivery time is on the 15th and 30th of every month. In the contract, the parties agreed that if a dispute arises, it will be resolved by the IB international arbitration center. Currently, due to the poor quality of the goods, Company A has refused to receive the goods and requested to unilaterally terminate the sales contract with Company B. Due to a dispute over payment obligations and fines for violations which can not be negotiated by the parties, Company B wants to file a complaint against Company A at IB International Arbitration Center. However, during the application process, we learned that the IB International Arbitration Center had ceased operations. Besides, my Company and Company A couldn’t negotiate anything about the settlement authority. Therefore, please advise us, can we choose another arbitration center to request dispute resolution?

Answer:

Thank you for sending your question to FDVN Law Company (FDVN). Regarding your consultation request, after researching relevant legal regulations, FDVN has some opinions as follows:  

Pursuant to Clause 3 Article 2 Resolution no: 01/2014/NQ-HĐTP guidelines for Law on Commercial Arbitration 2010, in one of the following cases, the dispute shall be handled by the court though it is under an arbitration agreement, unless otherwise agreed by the parties concerned or prescribed by law:

• The court issues a decision to annul the arbitral award or the decision made by the arbitral tribunal to certify the parties’ agreement made;
• There is a decision to suspend the arbitral tribunal or arbitration center from resolving disputes as prescribed in Clause 1 Article 43, Points a, b, d, and dd Clause 1 Article 59 of Law on commercial arbitration;
• The dispute is one of the cases mentioned in Clauses 1, 2, 3, and 5 Article 4 of this Resolution, as:

+ The parties concerned have an agreement to resolve their disputes at a specific arbitration center which has now shut down without any arbitration center that inherit its cases, and the parties concerned fail to reach an agreement on another arbitration center to resolve their disputes.

+ Bother parties have an agreement on appointment of a specific arbitrator to resolve disputes, but when the dispute arises, because of force majeure events or objective difficulties, such arbitrator cannot resolve the case, or the arbitration center or court cannot find a substitute arbitrator as agreed by the parties concerned, and the parties concerned also fail to reach an agreement to select a substitute arbitrator.

+ Bother parties have an agreement on appointment of a specific arbitrator to resolve disputes, but when the dispute arises, such arbitrator refuses the appointment or the arbitration center refuses the arbitrator appointment, and the parties concerned also fail to reach an agreement to select a substitute arbitrator.

+ The goods/service seller and consumers have an overall agreement on provision of goods/services that contain arbitration terms drafted by the seller as prescribed in Article 17 of Law on commercial arbitration, but the consumers refuse to have the dispute that arises resolved by an arbitral tribunal.

According to the information you provided, currently, the IB International Arbitration Center has ceased its operations but the parties have not made any other agreement on selecting another arbitration center to resolve the dispute. Comparing with the cited legal provisions, because there is no other agreement on the selection of an alternative arbitration center, the Arbitration has no authority to resolve the dispute.

Pursuant to Article 6 of Law on Commercial Arbitration 2010, Courts’ refusal to accept cases in which there is an arbitration agreement: “In case the disputing parties have reached an arbitration agreement but one party initiates a lawsuit at a court, the court shall refuse to accept the case, unless the arbitration agreement is invalid or unrealizable.”

Then, contracts for purchase and sale of goods will be accepted and resolved by the competent People’s Court according to the provisions of the Code of civil procedure 2015.

The above is the advisory opinion of FDVN regarding your consultation request based on the research of legal regulations. We hope that FDVN’s advice will be helpful to you.

According to Thanh Tra – FDVN Law Firm