Settling Disputes Through Arbitration And Things To Keep In Mind (P1)

Settling Disputes Through Arbitration And Things To Keep In Mind (P1)

As an alternative dispute resolution outside of the courtroom, commercial arbitration has long become the preferred dispute settlement mechanism and has been used everywhere around the world, especially within the sphere of international commercial activities.

Although having been introduced into Vietnam relatively early (since the end of the nineteenth century), arbitration has only been duly paid attention to and recognized as an adjudicative institution after the passage of the Ordinance on commercial arbitration in 2003. Despite having many inadequacies content-wise, the Ordinance on commercial arbitration 2003 bears an essential meaning in regulating the law, laying a legal foundation for Vietnamese arbitration to access and integrate with the common trends in international arbitration. When the Law on Commercial arbitration 2010 was passed, former weaknesses relating to the jurisdiction of arbitration centers and void arbitration agreements, etc. were rectified, making the option of settling disputes through arbitration legally clearer, easier to access, and arbitration has been more commonly applied in Vietnam ever since.

Although both are mechanisms for settling disputes, resolving disputes in Courts versus in Arbitration Centres have a few differences, and this article will identify some noteworthy points for the readers to take into consideration when opting for dispute resolution by arbitration:

1. Reviewing the validity of the Arbitration Agreement

  • The dispute falls within a sector over which Arbitration has jurisdiction to adjudicate

Not every dispute can be settled by arbitration. The jurisdiction of arbitration is limited to certain types of disputes enumerated in Article 2 of the Law on Commercial Arbitration, including:

  1. Disputes among parties arising from commercial activities.
  2. Disputes among parties in which at least one party conducts commercial activities.
  3. Other disputes among parties that are permitted by law to be adjudicated by arbitration.
  • There is an agreement to resolve the dispute through arbitration:

Unlike the jurisdiction of Courts which is provided for by law and activated automatically, the jurisdiction of arbitration only arises if the parties agree. Agreements to resolve disputes through arbitration can be entered into before or after disputes have arisen.

  • Not belonging to cases of void arbitration agreements:

Regarding the form of the agreement: According to Article 16 of the Law on Commercial Arbitration 2010, arbitration agreements can be made in the form of arbitration clauses within a contract or in a separate agreement. These agreements shall be made in writing.

The following forms of agreement can also be regarded as written form:

  • Agreements made through communication between the parties by telegram, fax, telex, email or other means as prescribed by law;
  • Agreements made through the exchange of written information between the parties;
  • Agreements recorded in writing by lawyers, notaries public or competent institutions at the request of the parties;
  • In their transaction, the parties refer to a document that contains an arbitration agreement such as a contract, an invoice, a company charter and other similar documents;
  • Agreements made through the exchange of petitions and self-defense statements reflect the existence of an agreement proposed by one party and undenied by the other. 

As regards other matters: In general, from the moment an arbitration clause is drafted until the start of an arbitration procedure, the issue of an arbitration agreement’s validity should be considered the first. The parties should refer to cases where arbitration agreements are voided as set out in Article 18 of the Law on Commercial Arbitration which was further elaborated by Article 3 of Resolution No. 01/2014/NQ-HĐTP to ensure proper compliance with the law.

2. Re-negotiating in case the arbitration agreement is unclear

Although regulations on arbitration have been renovated and reformed a lot after the passage of the Law on Commercial Arbitration 2010, in reality, dispute resolution by arbitration has only started to take off in the past 2-3 years. However, disputes settled by arbitration often result from contracts drafted and entered into many years ago, making it hard to avoid errors in arbitration agreements such as failure to specify the form of arbitration (institutional or ad hoc) or failure to determine the specific arbitration center.

If the form of arbitration is not specified, or the specific arbitration center is not appointed as above, the parties should consider Article 43.5 of the Law on Commercial Arbitration about re-negotiating the form of arbitration or the specific arbitration center settle the dispute. If the parties fail to re-negotiate, the selection of arbitration form and specific arbitration center for dispute settlement will be executed in accordance with the plaintiff’s request.

Although whether the application of the aforementioned regulation on re-negotiation must be satisfied before the plaintiff can appoint an arbitration center or not is still debated in reality, the parties taking a case to arbitration should nevertheless keep in mind the issue of re-negotiation to better protect their right to choose the arbitration center.

See more: Settling Disputes Through Arbitration And Things To Keep In Mind (part 2).

Disclaimer: This article is for general information only and is not a substitute for legal advice. Apolat Legal is a Vietnamese law firm with experience and capacity to advise on matters related to Dispute Resolution. Please click here to learn more about our services and contact our lawyers in Vietnam for advice via email info@apolatlegal.com.