Nguyen Huy Hoang, Partner, BROSS & Partners

Email: hoang@bross.vn

Ho Nguyen Hoang Ha, Associate, BROSS & Partners

Email: ha.hnh@bross.vn

On October 1, 2023, the Chief Justice of the Supreme People's Court issued Decision No. 364/QD-CA announcing 7 precedents previously approved by the Justice Council of the Supreme People's Court on August 18, 2023[1].

Accordingly, Draft Precedent No. 12/2023 referred in BROSS & Partners's article on August 29, 2023[2] has been officially published as Precedent No. 69/2023/AL on the competence of commercial arbitration in disputes over non-disclosure and non-compete agreements ("Precedent 69").

Precedent 69 is derived from Decision No. 755/2018/QD-PQTT dated June 12, 2018 of the People's Court of Ho Chi Minh City ("Decision 755") on the "petition for annulment of an arbitral award" issued by the Vietnam International Arbitration Centre (VIAC).

According to the Arbitral Award made at VIAC, the arbitral tribunal  determined that commercial arbitrators have jurisdiction to settle the dispute and accepted the claims by a company (the "Company") against a former employee’s (the “Employee”) breach of a non-compete agreement.

Key contents of Precedent 69:

• Facts: The employee and the employer signed a confidentiality and non-competition agreement, stipulating that after termination of the labor contract, the employee is not allowed to do in the same job or compete with the employer for a certain period, and related disputes, if any, shall be resolved through commercial arbitration.

• Solution: The court must determine that the confidentiality and non-competition agreement is independent of the labor contract and disputes arising will fall under the competence of commercial arbitration.

• Statutory basis:

- Articles 2.2, 13, and 35.4 of the Law on Commercial Arbitration 2010;

- Article 3.2 of the Civil Code 2015; and

- Article 6 of Resolution 01/2014/NQ-HDTP of the Justice Council of the Supreme People's Court.

• The original content of Precedent 69 is located in Paragraph [8] of the "Judgment of the Court" section. Accordingly, the Court's arguments include:

1. The Company is a trader with business registration and commercial activities under the Commercial Law 2005, so the arbitration agreement falls within the competece of VIAC and arbitration under Article 2.2 of the Law on Commercial Arbitration.

2. The Employee asserts that the dispute is not within the competence of arbitration but made no objection to the competence of the arbitrators and still participated in the arbitration proceedings and the dispute settlement hearings. Therefore, the Employee has forfeited the right to object to the competence of the arbitral tribunal under Article 13 of the Law on Commercial Arbitration and Article 6 of Resolution No. 01/2014/NQ-HDTP.

3. The Employee contends that the dispute is a labor dispute under the jurisdiction of the Court because the confidentiality and non-compete agreement is an integral part of the labor contract. However, according to the argument and at the final arbitral hearing, the Employee affirmed that the confidentiality and non-competition agreement is completely independent of the labor contracts between the Company and the Employee. Therefore, the Review Tribunal's determines that the non-compete and non-compete agreement is an independent agreement, and disputes arising will fall within the competence of commercial arbitration at the choice of the parties.

• Of note, the validity of non-compete agreements is not directly recognized in the official precedent section, but has been assessed by the People's Court of Ho Chi Minh City in Decision 755 as follows:

- "... Ms. T vs Company R signed voluntarily [the Agreement], upon the  signing, Ms. T was a person having full capacity to act as prescribed by law, not under threats, frauds, or coercions of will so that Ms. T must accept to sign the [Agreement]. Therefore, the [Agreement] is valid. The arbitral tribunal's recognition of the validity of the [Agreement] is completely lawful."

BROSS & Partners is a Vietnamese law firm proposed by Legal 500 Asia Pacific, Chamber Asia Pacific, AsiaLaw, IFLR1000, Benchmark Litigation, with experience and capacity to advise and resolve disputes related to Investment, Enterprise and Commerce, Mergers & Acquisitions, Labor & Employment, Real Estate & Construction, Finance – Banking, Securities, Capital Markets, and Intellectual Property.

If you need assistance, please contact: hoang@bross.vn; mobile: +84 903 556 119; WhatApps: +84 903 556 119; Zalo: +84 903 556 119.