Resolving disputes by commercial mediation

In the context of economic integration and development, commercial mediation is increasingly encouraged as an alternative dispute resolution mechanism. In business environments, disputes are inevitable; however, settling disputes through litigation or arbitration may not always be the most effective or appropriate solution. Instead, commercial mediation offers a more flexible, cost-effective and constructive approach to dispute resolution, enabling the parties to reach a mutually agreed settlement based on voluntariness and good faith.  

To provide a clear legal framework for this method, the Government issued Decree No. 22/2017/ND-CP dated 24 February 2017 on commercial mediation. This is the first specialized legal instrument in Vietnam that comprehensively governs commercial mediation in accordance with international standards. This article outlines the key contents of the Decree. 

What is Commercial Mediation? 

According to Clause 1, Article 3 of Decree No. 22/2017/ND-CP, commercial mediation is defined as a method of dispute resolution arising from commercial activities, in which the disputing parties voluntarily agree to select one or more commercial mediators to assist them in reaching a mutually agreed resolution. 

This method is governed by several fundamental principles: voluntariness, equality, confidentiality, non-coercion, and respect for the parties’ autonomy. 

Advantages of Commercial Mediation 

Commercial mediation offers numerous advantages over traditional dispute resolution mechanisms such as litigation or arbitration, including: 

• Time and cost efficiency: Mediation does not involve complicated procedural steps and often results in more expeditious dispute resolution. 

• Confidentiality: Information regarding the dispute and the outcome of the mediation is kept confidential, protecting the reputation and business interests of the parties involved. 

• Preservation of business relationships: The cooperative nature of mediation facilitates solutions that are constructive and conducive to continued business collaboration. 

• Voluntary compliance: As the outcome is reached by mutual agreement, parties are more likely to comply with its terms than with court judgments or arbitral awards. 

• Court recognition and enforceability: In cases where a mediated settlement is not honored by one party, the other party may request the court to recognize and enforce the agreement. 

Conditions and Circumstances for Conducting Commercial Mediation 

According to Article 4 of Decree No. 22/2017/ND-CP, commercial mediation can be lawfully conducted when the following conditions are met: 

• A valid mediation agreement 

The mediation agreement may be made either before or after a dispute arises (e.g., as a mediation clause in a commercial contract).  

The mediation agreement must be expressed in writing or in another form that has equivalent legal validity (e.g., email, electronically signed documents, etc.). 

• The dispute falls within the scope of commercial mediation 

Commercial mediation applies to: 

• Disputes between traders arising from commercial activities; 

• Disputes between a trader and an organization/individual engaged in commercial activities; 

• Disputes arise during the performance of commercial contracts or commercial transactions. 

Mediation Procedure 

The mediation process shall follow the procedure and principles agreed upon by the parties or as stipulated by the commercial mediation institution (if applicable). Generally, it includes the following stages: 

a) Initiation of mediation 

One party proposes mediation to the other. If it is accepted by the other party, the parties agree to commence the mediation process. 

b) Selection of mediator(s)

The parties may jointly select a mediator or request a mediation organization to appoint one or more mediators. 

c) Mediation sessions

The parties agree on the method, schedule, location, and language of the mediation.  

The mediator facilitates dialogue and assists the parties in reaching a mutually satisfactory solution. 

The parties have the right to terminate the mediation process at any time. 

d) Outcome of mediation

If the mediation is successful, a Minutes of Successful Mediation shall be prepared and signed by the parties and the mediator. 

If the mediation is unsuccessful, the mediation terminates without any binding force on the parties. 

Legal Effect of a Minutes of Successful Mediation 

The Minutes of Successful Mediation is legally binding on the parties. Within six (06) months from the date of successful mediation, either party may request the court to recognize the Minutes of Successful Mediation. Upon recognition, the court’s decision has the same legal effect as a legally effective judgment. If one party fails to perform the obligations under the Minutes of Successful Mediation, the other party may request the judgment enforcement agency to enforce the agreement without having to initiate new legal proceedings before a court or arbitral tribunal. 

Relating posts

1. Resolution of disputes regarding HS codes
2. Trade disputes with foreign elements must be resolved by Vietnamese courts?
3. Decree No. 22/2017/ND-CP on commercial mediation

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