Saigon Investment held a talk with Mr. NGUYỄN THANH HÀ, a well-known lawyer, and Chairman of the SB Law Firm to understand more about the legal prospects of this case.
According to an announcement made by Gilimex, Amazon Robotics LLC (Amazon) has been one of their customers since 2014. During this period, Amazon violated a commitment that the two sides had agreed upon. This violation is affecting the production and business activities of Gilimex.
Therefore, in order to protect the legitimate interests of the company in accordance with the two-party agreement, Gilimex filed a lawsuit on 12 December against Amazon in the New York State Court in the US. According to the 32-page lawsuit, the partnership between the two parties was built on trust. That is to say that the manufacturing company relied on Amazon forecasts to buy raw materials and invest in factory capacity and employees so as to meet the growing business of Amazon.
However, in April and May 2022, Amazon suddenly changed its forecast and reduced its demand for the remainder of 2022 and 2023 to just a fraction of its previous commitment. Sales to Amazon accounted for a large portion, so the sudden change in policy caused Gilimex to plunge to only three quarters of their business. This caused the revenue in the third quarter to drop to just VND 213 bln, down by 83% compared to the second quarter and 66% compared to the same period in 2021. This also led to the company's inventory to increase by 70% compared to the beginning of the year, to nearly VND 1,278 bln. As of 30 September, Gilimex still had receivables from Amazon Robotics Company of nearly VND 15.5 bln.
JOURNALIST: - Sir, to pursue a lawsuit abroad like in the US, how does a business invest effort, time, and monetary cost?
Mr. NGUYỄN THANH HÀ: - Usually when filing a lawsuit in another country, the business itself will be more disadvantaged in terms of time, cost, and travel. For a lawsuit the size of Gilimex vs Amazon, the legal costs of court and attorney fees can be as high as 30% of the lawsuit, which is a significant amount. When abroad, the language and legal barriers are even more severe. At that time, businesses are more passive and completely dependent on lawyers in the host country. When winning the case, the judgment enforcement procedure is also quite complicated.
Vietnam's economy is increasingly integrated, so the contract value of enterprises with foreign partners has also skyrocketed. But the rapidly changing environment is more prone to disputes. In order to limit risks on their part, in a commercial contract with a foreign partner, in addition to the terms of quantity and value of products, enterprises must pay attention to the content if there is a dispute, and how it should be handled, and which unit is the processing agency and where it is. When there is no agreement in the contract, it is international practice for the petitioner to file an application with the court in the partner's place of residence, as in the case of Gilimex filing a lawsuit at the location of Amazon headquarters in the US.
- Sir, in your opinion, is Gilimex likely to win this case and get high compensation?
- This is not the first time Vietnamese enterprises have filed lawsuits against foreign partners, and there have been many cases of winning lawsuits. For instance, Nui Phao Mining and Mineral Processing Company Limited of Masan Resources JSC, won a lawsuit of USD 130 mln equivalent to VND 3,000 bln from Jacobs Group, a partner of theirs in the US, according to the judgment of the arbitral tribunal appointed by the Singapore International Arbitration Center. The amount of money to settle the case at the international arbitration council at that time helped Masan make a strong profit, contributing more than VND 1,200 bln to total profit of Masan after 9 months in 2019. A Masan representative said that the legal dispute with Jacobs was the test for Masan Nui Phao in becoming an international standard company.
However, the partnership between Gilimex and Amazon was built on trust, showing that businesses do not fully understand the rules of the game when signing a contract with foreign enterprises. Because of this, when a dispute occurs with a foreign partner, Vietnamese enterprises often do not have enough reason to win the case.
In the Gilimex case against Amazon, the ability to win or not depends on the case file, and on the approach and ability of the plaintiff attorneys. In this case, it could be US law firms. The US judicial system is a trial system that relies heavily on precedents, and the ability to provide evidence and arguments of the litigants, so it is difficult to predict the possibility of winning the lawsuit of Gilimex in particular as well as of Vietnamese enterprises in general.
- Sir, currently, many enterprises in the main export industry of Vietnam are facing cancellations or postponements of orders by customers. Should they learn from Gilimex and sue customers for compensation?
- The lawsuit is normal in the operation of enterprises, and this is the most civilized and standard way of behavior. It is completely legitimate behavior for Vietnamese enterprises to reclaim their rights. However, to limit unnecessary disputes, businesses need to pay more attention to the terms of the contract. It is necessary to anticipate possible situations to minimize risks, as well as to have grounds to increase the percentage of winning cases.
In addition, Vietnamese enterprises can choose a mechanism to settle commercial disputes through international commercial arbitration, which will bring more useful measures to the parties, especially to the Vietnamese side. This includes the right to self-determine many procedural issues, agree on where to hold meetings, confidentiality about the contents of the lawsuit, and fast dispute resolution time. In addition, arbitrators with extensive experience in the field of disputes have the ability to enforce judgments that will be more advantageous.
- Thank you very much.
