Customs and Trade Facilitation

INVESTMENT

DISPUTE SETTLEMENT

Vietnam and the EU have agreed on a modern and reformed investment dispute resolution mechanism which guarantees the respect of the substantive investment protection rules applicable to European and Vietnamese investors. The system strikes the right balance between protecting investors and safeguarding the right of a state to regulate.

Investment Tribunal System

The agreement sets up a permanent dispute resolution system under which disputes about the respect of one of the investment protection provisions included in the IPA (such as protection against expropriation without compensation, non-discrimination or fair and equitable treatment) can be submitted to a standing international and fully independent Investment Tribunal System. The Members of the Tribunal System will be appointed in advance by the EU and by Vietnam and will be subject to strict requirements of independence and integrity. Cases will be heard by divisions of the tribunal which will be composed of three Members, one from the EU, one from Vietnam, and a presiding Member from a third country. Decisions of the Tribunal can be appealed to a permanent Appeal Tribunal which will ensure legal correctness and certainty about the interpretation of the agreement.

Members of the Tribunal

Investment disputes will be adjudicated by highly qualified, independent and impartial Tribunal Members.

All Members of the Tribunal and Appeal Tribunal will be appointed through a joint decision taken together by the EU and Vietnam. The EU and Vietnam have committed themselves to only appoint Tribunal Members whose independence is beyond doubt, who are not affiliated with any government and who do not take instructions from any government and must have demonstrated expertise in public international law and must possess the qualifications required in their respective countries for appointment to judicial offices or be jurists of recognised competence. The agreement further provides that it is desirable that Tribunal Members have expertise in international investment law, international trade law and the resolution of disputes arising under international investment or trade agreements.

The EU and Vietnam can also propose the appointment of trusted Members who are nationals of third countries in lieu of their own nationals if they cannot identify sufficiently qualified candidates. The EUVietnam agreement, together with the procedure for appointing Tribunal Members, therefore guarantees that legally sound decisions will be rendered by highly qualified, impartial and independent Tribunal Members. If a particular technical knowledge is required for an individual dispute, the agreement also foresees the possibility to appoint one or more experts to the Tribunal.

All Tribunal Members must comply with a binding code of conduct annexed to the agreement. In the event of doubts about the impartiality of a Tribunal Member, challenges are possible and will be decided by the President of the Tribunal, who is a national of a third country.

Enforcement of awards

The legal grounds for non-enforceability are included into the grounds for appeal, i.e. a final award must be enforced and domestic courts cannot put into question the legal validity of the decisions. This represents an important advantage for European investors abroad.

Vietnam will be granted a five-year transition period for the entry into force of the enhanced enforcement regime as Vietnam is currently revising its internal legislation in this respect.

Transparency of the proceedings

Proceedings before the Tribunal System will be fully transparent and interested third parties will be allowed to make submissions. The text incorporates the recently adopted United Nations Commission on International Trade Law (UNCITRAL) rules on transparency which will apply to all proceedings. Article 4 of the UNCITRAL rules allows interested third persons to make submissions in proceedings before the Tribunal. Hence, third persons will be able to intervene in the proceedings even if they are not recognised as a party to the dispute. The UNCITRAL provisions will apply to all proceedings under the EU-Vietnam agreement, before the Tribunal of First Instance and before the Appeal Tribunal.

Provisions against abusive claims

While the investment dispute resolution mechanism ensures that the rights of European and Vietnamese investors will be respected, it also safeguards the EU and Vietnam against potential abuses of the system, notably through the prohibition of multiple and parallel claims, as well as enhanced disclosure requirements incumbent upon investors.

Loser-pays principle

The application of the ‘loser-pays principle’ applies to the allocation of procedural costs.

PART IV