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Settlement of investment disputes under EVFTA agreement

Currently, Vietnam is one of the important trading partners of the European Union (EU), so there are more and more investment activities. However, this is also difficult to altogether avoid disputes arising between Vietnamese investors and investors of EU member states. Therefore,  the general method for resolving disputes about investment activities is a top priority issue. Hence, the Free Trade Agreement between Vietnam and the European Union (EVFTA) was signed based on an agreement reached between the parties. On March 03, 2020, the European Council adopted a decision on the conclusion of a Free Trade Agreement (EVFTA) between the EU and Vietnam, and this Agreement will also be effective immediately in Vietnam after being adopted by the National Assembly of Vietnam.

To ensure compliance with the Agreement, Vietnam needs to adapt the law to general provisions. However, Vietnam has also requested the consideration for the reasonable period of preparation and implementation of the commitment. For dispute settlement procedures, under the EVFTA Agreement, this procedure is mentioned in Chapter 15 of the Agreement. Accordingly, the dispute resolution mechanism includes consultations, mediation mechanism and arbitration procedure.

1. Consultations, mediation mechanism 

Consultation is considered a mandatory procedure for all disputes before initiation of the arbitration procedure, except the Parties agree not to have a consultation. When a dispute arises, the Party shall seek consultations by means of a written request to the other Party, copied to the Trade Committee. If the other party agrees, the consultation will be held within 30 days, no later than 45 days of the date of receipt of the request. However, in the cases of urgency such as perishable goods, seasonal goods or seasonal services; this period will be within 15 days, no later than 20 days of the date of receipt of the request.

For the mediation mechanism, The Parties may at any time agree to enter into a mediation procedure. Good faith is considered to be the fundamental principle in the mediation mechanism and the consultation. Accordingly, The Parties shall endeavour to resolve any dispute by entering into consultations. During consultations, each Party shall provide sufficient factual information for an examination of the manner in which the measure at issue could affect the operation and application of this Agreement. Moreover, this Agreement encourages the Parties to enter into a mediation mechanism to limit the costs and maintain the harmonious relationship between the Parties.

2. Arbitration procedure

The Party that sought consultations may have recourse initiation of the arbitration procedure in the following cases: (i) the other party does not respond to the request for consultations within 15 days of the date of its receipt; (ii) the consultations are not held within the define timeframes ; (iii) the Parties agree not to have consultations; and (iv) the consultations have been concluded without a mutually agreed solution. The arbitration procedure will be applied to resolve the dispute.

a. Establishment of the Arbitration Panel

The request to establish an arbitration panel is a step in giving rise to the arbitration procedure between the Parties. The request for the establishment of an arbitration panel shall be made in writing to the other Party, a copy of which shall be submitted to the Trade Committee. The complaining Party shall identify the measure at issue in its request, and explain how that measure is inconsistent with the provisions of this Agreement in such a manner as to present the legal basis for the complaint.

An arbitration panel shall be composed of three arbitrators, and established in the following:

(i) The Parties shall consult in order to agree on the composition of the arbitration panel within 10 days of the date of receipt by the Party complained against of the request for the establishment of an arbitration panel;

(ii) If the Parties do not agree on the composition of the arbitration panel, each Party may appoint an arbitrator from the sub-list of that Party established or from a proposal;

(iii) If a Party fails to appoint an arbitrator, be selected by lot by the chair of the Trade Committee, or the chair's delegate from the sub-list of that Party established or form a proposal.

The list of arbitrators mentioned above includes at least 15 arbitrators, prepared by the Trade Commission within 6 months after the date of entry into force of this Agreement. The advantage of this list is to ensure objectivity in the dispute resolution process. Because in addition to a sub-list for the Union and Vietnam, this list also includes a sub-list of individuals who are not nationals of either Party and do not have permanent residence in either Party and who shall act as chairperson of the arbitration panel.

b. Dispute Settlement Proceedings of the Arbitration Panel

Within 10 days after the establishment of the arbitral tribunal, arbitrators and representatives of the Parties may take part in this meeting via telephone or video conference to determine all matters that the Parties or the arbitration panel deem appropriate, including the timetable of the proceedings and the remuneration and expenses of the arbitrators.

Any hearing shall be open to the public and decided by mutual consent of the Parties. If the Parties do not agree on the venue of the hearing, it shall be held in Brussels (Belgium) or Ha Noi (Vietnam). The Parties have the right to protect their rights by attending any of the presentation, statements, arguments or rebuttals related to matters,  comments by a Party, the decision of the Arbitration Panel.

c. Decisions of the Arbitration Panel 

The Arbitration Panel will resolve the dispute through issuing Interim Report và Final Report. Accordingly, the Interim Report will be issued within 90 days and no later than 120 days from the date of the establishment of the Arbitration Panel. However, in the cases of urgency, the arbitral tribunal must issue the Interim Report within 45 days and no later than 60 days from the date of establishment of the Arbitration Panel.

However, the Parties are permitted to give a written request, including comments regarding the contents of the Interim Report to request the Arbitration Panel to consider the issues. After that, based on considering the written request, the Arbitral Panel may modify this report if it is inappropriate to resolve the dispute and the Arbitration Panel shall issue the Final Report. However, issuing this report must also ensure the time limit specified. Accordingly, the Final Report is issued within 120 days, not later than 150 days from the date of establishment of the Arbitration Panel. In the cases of urgency, this time limit is 60 days, no later than 75 days from the date of establishment of the Arbitration Panel. This report is considered final and will be enforceable without raising the objection. 

The dispute settlement mechanism in investment activities under EVFTA Agreement is more comprehensive than other agreements that Vietnam has signed. Through the general mechanism of dispute resolution, the rights of investors are protected as well as guarantee the right of national supervision in the implementation of international agreements.
 
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