Arbitration

Chapter 2: Courts and Alternative Dispute

Resolution
Group Members
Group 3
Nguyen Thi Thuy Diep
Ngo Thanh Ha
Than Thi Bich Hang
Tran Minh Hoan


Presentation Targets

1. Having knowledge of Arbitration
Clause in both the world and
Vietnam
2. Analyzing specific dispute related
to arbitration matter

Outline
1. What is Arbitration?
2. PRM Energy Systems, Inc. v. Primenergy
a. Dispute Context
b. Analysis
3. Precedent: Donaldson Co. v. Burroughs
Diesel, Inc.
4. Vietnam International Arbitration: Real
Situation and Typical Judgment
5. Conclusion

What is Arbitration?


Alternative resolution instead
of litigation
Require the third partys
presence: Arbitrator.
The right to make decision
belongs to arbitrator.
Power is strict and flexible.


Arbitration Clause:
The agreement in a contract states that any
disputes arising under the contract would be
resolved through arbitration rather than court
system.

PRM Energy Systems, Inc. v.
Primenergy

a. Dispute Context
Plaintiff: PRM Inc.
Defendants: Primenergy and Kobe Steel.
Court: Appellate Court. (2010)
Dispute:
PRM sued Primenergy for fraud and theft
trade secrets
PRM sued Kobe for using their own techno in
Japan without permission
The Trial Court declared that PRM had to
take all the complaints to arbitration.
Problem:
Is PRM correct when appealed?
Why or Why not?

Is PRM correct?


PRM is absolutely correct that Kobe
Steel should not be permitted to
enforce the arbitration
Reasons
- PRM and Primenergy signed 5 contracts
referred to as the 1999 Agreements which
contains Arbitration Clause
Pursuant to the Arbitration Clause, various
disputes sounding in contract between PRM
and Primenergy were submitted to
arbitration.
- Kobe Steel was a non-signatory in the 1999
Agreements
Reasons
- The PRM/Primenergy agreements do not
mention Kobe Steel and perform no function
whatsoever relating to the supposed Kobe
Steel/Primenergy "exclusive collaboration"
agreement.
Kobe Steel was never a participant in the
PRM/Primenergy deal
lacks sufficient allegations of pre-arranged
collusive behavior, Kobe Steel's arbitration
demand should be rejected.



Reasons



However, all matters between PRM
and Primenergy should be gone to
arbitration

Reasons
In the context of the current case, both PRM
and Primenergy breach the Agreement in
regard to obligations concerning the territory
of Japan.
PRM granted a license to another company
in Japan, while in the agreement,
Primenergy have the right of first refusal for
a license.
Primenergy granted Kobe the license
without PRM permissions



Reasons

The PRMs claim that Kobes behavior
was beyond the license agreement
with Primenergy is not fully
reasonable.
The reason is that in Agreement, it
states that all disputes would be
settled by arbitration. This is a really
board meaning.




Precedent
Donaldson Co. v. Burroughs
Diesel, Inc.

Background
Plaintiff: BURROUGHS DIESEL, INC.
Defendant: Western Star Inc. and
DONALDSON COMPANY, INC.
The players in this dispute are:
Western Star Truck Sales Inc. is a
manufacturer and distributor of trucks.
Burroughs Diesel Inc. is a dealer of Western
Star.
Donaldson Company Inc. supplied portions
of the truck's air intake system.

Background
Western Star manufactured trucks that it sold to
Burroughs, and the parties signed an agreement
containing an arbitration provision.
Donaldson supplied parts for the trucks and was
not a party to the agreement.
When a problem arose with the trucks,
Burroughs brought claims against Donaldson and
Western Star in state court.
Western Star filed suit against Burroughs in
district court to compel arbitration between
Western Star and Burroughs.
Donaldson then moved to compel Burroughs to
arbitrate with it.
Background
The district court granted Donaldson's motion
to compel arbitration.
On July 20 2009 the 8th Circuit reversed the
district court.
On September 16, 2009 the 8th Circuit
vacated the July decision and substituted a
new decision reaching substantially the same
result.

Comparison
PRM v. Primenergy
PRM
Primenergy
Kobe Steel
A non-signatory involved in a
agreement between PRM
and Primenergy
Alternative Estoppel

Donaldson v. Burroughs Diesel
Burroughs Diesel Inc.
Western Star Truck.
Donaldson Inc.
A out-contractual
supplier is sued by
Burroughs Diesel.
Equitable Estoppel
Both two case, Arbitration Clause involved.
The court in the precedent declared that the
third party ( non-signatory) have the right to
compel arbitration.
In the precedent, it is Donaldson.
Meanwhile, in the other, it is Kobe.

Vietnam International
Arbitration

Real Situation

Arbitration dispute resolution
has been developing lately
economy
political regime culture
Factors influence on the
development of
Arbitration
11% of
business
disputes wars
resolved by
arbitration
Legal
procedures are
complicated and
take many
mistakes
Vietnamese
companies have
not used to the
new kind of
resolution
Incompetent
arbitrators also
make this
method not
appricated.
Improving Effect of Arbitration in
Vietnam
1. Complete legal system and procedures of
arbitration to comply with international
system
2. Complete legal system and procedures of
arbitration to comply with international
system.
3. arbitration center have to make plan for
improve quality of arbitrator.


Typical Judgment
Dispute of Transferring
Obligation in Rice Trading
Contract

1. Plaintiff: Vietnamese Seller
2. Defendant: Hong Kong Buyer and Macao Buyer
Background:
- Hong Kong signed a contract $1.7M with Vietnam buying rice
and confided hiring freighters to Vietnam, paying by L/C
(letter of credit)
- A Macao company- secondhand buyer of the defendant,
opened L/C so that Vietnam get profits. After that, Vietnam
hired freighters and delivered
- Good didnt ensure the quality because of dampness. Macao
didnt accept documents to receive good with the reason of
invalid papers.
- Macao only paid $1.2M and would have paid $500k if they
had claimed damages from insurance company
- Vietnam continued to claim payment from both of companies
and asked arbitrator to resolve
- Hong Kong claimed that Vietnam had received $1.2M from
Macao meaning that HK had no obligation in this payment and
it had been moved to third party- Macao

Judgment:
- Hong Kong was not freed in the duty of
payment. The third party paid on behalf of
HK that it was deligation of power.
- Macao paid $1.2M on behalf of HK,
therefore, HK must pay $500k for Vietnam
Conclusion

1. All the parties signed the Agreement related to
Arbitration clause must go to arbitration when
having disputes
2. The third party, if not involving in the
Agreement- a non-signatory, is not allowed to
demand arbitration
3. In the precedent, we can see that the difference
between alternative estoppel and equitable
estoppel
4. Application of International Arbitration in
Vietnam is still unpopular although it has many
advantages