The Supreme People’s Court of
Vietnam just issued Decision 364/QD-CA dated 01 October 2023 regarding
announcement of 07 case laws. Amongst those, the case law No. 69/2023/AL
(“Precedent 69”) put a landmark in reconfirming the wide scope of the arbitration’s jurisdiction to deal with
the non-disclosure and non-competition agreement disputes. Before this case, it
was the common understanding that disputes between employers and employees
(such as non-disclosure and non-competition) were not within the scope of
arbitration.
Summary of dispute
On 10 October 2015, Ms. Do Thi
Mai T (“Ms. T”) signed a 12 months labor contract with Company R (“Company R”)
for the position HR Manager. On 21 October 2015, Ms. T and Company R signed a
non-discloser and non-competence agreement (“NDA”). Article 3 of NDA has
restricted Ms. T to work in a similar position for a business that would
compete with Company R or its affiliate for a period of 12 months after
resignation from Company R. The NDA also regulated that dispute arising from
the contract shall be settled by arbitration.
Ms. T terminated the labor
contract with Company R on 18 November 2016 and on 02 October 2017, Company R
commenced an arbitration against Ms. T for violation of Article 3 under the
NDA, requesting for compensation amount equal to 03 months salary of Ms. T. The
arbitrator panel of VIAC the issued arbitration award No.75/17 HCM (“Award 75”)
accepted Company R’s full request.
On 22 March 2023, Ms. T initated
a lawsuit to the court requesting to set a side Award 75. The court declined
the request.
The Precedent
Ms. T declared that the NDA is an
integral part of the labor contract and therefore this is labor dispute and
should be within the court’s jurisdiction. The court disagreed with this since
the NDA is an agreement independent from the labor contract between Company R
and Ms. T. This point was also confirmed by Ms. T’s lawyer in the Statement of
Defend dated 18 January 2018. The arbitration agreement under the NDA is valid
and must be complied with.
Additionally, Company R is an
entity conducting commerical activities as per Commercial law 2005 and
therefore the dispute between Company R and Ms. T should be under the
arbitration’s jurisdiction as sipulated under Article 2.2 of the Law on
Commercial arbitration.
The court also further elaborated
that during the arbitration proceedings, if one party does not raise its
objection to the arbitration agreement in its Statement of Defend then such
party shall lose its right to raise such objection before the Court (Article
35.4 of the law on Commercial Arbitration and Artcle 9 of Rules of arbitration
of VIAC). Throughout the arbitration proceedings and in Ms. T’s Statement of
Defend, Ms. T has not expressed any objection to the arbitrator’s jurisdiction
and still participated in the hearings, Ms. T has lost the right to give
objection to the arbitrator’s jurisdiction.
Ms. T also based on the reason
that Award 75 contravened the fundamental principle of Vietnamese laws. It
violated the right to work of the employee and the regulations of law on
employment 2013. The court however affirmed that the parties voluntarily
entered into the NDA and should respect the agreement under the NDA, the NDA is
valid and binding between parties.
Comment:
Precedent 69 is a pro-arbitration
rule that clearly extends the arbitration’s jurisdiction to the non-disclosure
& non-competetence agreement (though they are related to the labor contract).
Precedent 69 also reaffirms the doctrine that during the arbitration
proceedings, if one party does not raise its objection to the arbitration
agreement in its Statement of Defend then such party shall lose its right to
raise such objection before the court. The court then cannot set aside the
arbitration award on the ground that the arbitration agreement is not valid or
the dispute is not within the arbitral tribunal’s jurisdicton.