Which disputes can be resolved by commercial arbitration?

Determining the arbitration jurisdiction to resolve disputes is one of the core issues in arbitration proceedings. Article 2 of the Law on Commercial Arbitration 2010 (“LCA”) stipulates that arbitration have the authority to resolve the following 03 (three) dispute types, namely (i) disputes between parties arising from commercial activities, (ii) disputes arising between parties in which at least one party is engaged in commercial activities, and (iii) other disputes between parties that the law stipulates can be resolved by arbitration. In fact, arbitrators and courts have had different views on arbitration’s power to resolve certain disputes. The following article presents Vietnamese legal provisions on types of disputes that can be resolved by commercial arbitration, practical application of such provisions, and some notes for businesses and individuals when choosing arbitration. 

1. Disputes between parties arising from commercial activities

a. What are disputes arising from commercial activities? 

The LCA does not define what “commercial activities” are. In practice, “commercial activities” are often understood as defined in Clause 1, Article 3 of the Commercial Law 2005. Accordingly, commercial activities are activities aimed at generating profits, including buying and selling goods, providing services, investing, promoting trade, and other for-profit activities. Disputes arising from commercial activities are prevalent, including disputes over sales of goods, providing services, disputes between members of a company, disputes between non-members and members of a company, etc. 

b. Are land disputes arising from commercial activities? 

The authority to resolve land disputes is stipulated in Article 236 of the 2024 Land Law (effective August 1, 2024). Accordingly, Vietnamese commercial arbitration has the right to resolve disputes arising from commercial activities related to land. This is a new provision and is considered to be consistent with the adjudication practice. Some examples of disputes arising from commercial land-related activities include disputes over land lease rights, disputes over capital contribution contracts using land use rights, disputes over real estate projects, etc. 

While the Land Law 2013 was effective, whether commercial arbitration had the authority to resolve land disputes was controversial, as this law didn’t recognise the arbitration’s power over land disputes. However, many land-related disputes were still resolved by Vietnamese arbitration centers on the basis that when the parties did not dispute the rights and obligations of land users, the case would still be under the jurisdiction of arbitration. The Court confirmed this interpretation and application of the law through a few decisions on not annulling arbitration awards. 

On April 26, 2022, Company P filed a request to the People’s Court of Ho Chi Minh City to annul the arbitration award of VIAC on the dispute between Company 5 and Company P regarding the implementation of the “Services, trade and housing” project between the two companies. Company 5 initiated a lawsuit against Company P, requesting Company P to return the project’s land of ​​30,104m2. In Decision No. 1015/2022/QD-PQTT dated July 7, 2022, of the People’s Court of Ho Chi Minh City [1] to consider the request to annul the arbitration award, the examination council determined as follows: 

Regarding the dispute No. 96/21 HCM resolved by VIAC, the parties all determined that there was no dispute over the rights and obligations of land users nor dispute over who had the right to use the land. However, the parties did agree that it was only a dispute over the rights and obligations of the parties in the project transfer contract relationship. Therefore, the requestor’s argument that the dispute resolved by the arbitral tribunal was a “land dispute” and thereby asserted that the arbitral tribunal did not have the authority to resolve it is inconsistent with the provisions of Article 3 of the Land Law 2013. 

2. Disputes arising between parties in which at least one is engaged in commercial activities

While Article 2.1 of the LCA focuses on the nature of the dispute, the LCA’s Article 2.2 governs the dispute’s subject. Accordingly, if only one party has commercial activities, the dispute may fall under the jurisdiction of arbitration. Some common disputes in which at least one party has commercial activities include disputes between businesses and consumers (for example, credit contract disputes between banks and customers, disputes arising from standard contracts between businesses and customers, etc.), post-labor disputes (for example, disputes arising from information confidentiality agreements, competition restriction agreements, etc.). 

Are disputes arising from labor relations within the jurisdiction of arbitration?  

Disputes arising from the labor relationship between a legal entity employer and an employee are clearly disputes in which at least one party is engaged in commercial activities. However, current labor law provisions are understood that commercial arbitration does not have the authority to resolve individual labor disputes arising from labor contracts because: 

• Firstly, “labor dispute” is defined as a dispute over rights, obligations and interests arising between parties in the process of establishing, implementing or terminating labor relations; disputes between organiations representing employees; disputes arising from relationships directly related to labor relations (Article 179 of the Labor Code 2019 ). 

• Secondly, according to Article 187 of the Labor Code, the authority to resolve labor disputes belongs to the labor conciliator, the labor arbitration council, and the People’s Court. The labor arbitration council stipulated in Article 185 of the Labor Code is a council established by the Chairman of the Provincial People’s Committee, with a term of 05 years. Thus, this arbitration council is not a commercial arbitral tribunal as prescribed by the LCA. 

However, it should be noted that commercial arbitration will have the authority to resolve some disputes arising after the labor relationship, typically disputes over confidentiality and non-competition agreements (commonly known as NDA agreements). Precedent No. 69/2023/AL approved by the Council of Judges of the Supreme People’s Court on August 18, 2023 [2], recognises that disputes over NDA agreements between two parties after the termination of the labor relationship are an agreement independent of the labor contract and when there is a dispute, it is under the jurisdiction of commercial arbitration as chosen by the parties. 

On October 2, 2017, Company R (employer) filed a lawsuit against Ms. T (former employee) at VIAC, alleging that Ms. T had violated the agreement not to work for the company’s competitor after the termination of her employment contract. The arbitral tribunal accepted all of the plaintiff’s requests. Disagreeing with this decision, Ms. T requested the Ho Chi Minh City People’s Court to consider annulling the entire arbitral award, with one of the annulling grounds being the dispute was not within the jurisdiction of commercial arbitration. This reason was not accepted by the Court. The important points of the case law are as follows: 

• Under Article 2.2 of the LCA, the arbitrator has the authority to resolve disputes arising between parties in which at least one party has commercial activities. Company R is a trader, has a business registration, and has commercial activities under the Law on Commercial 2005. Therefore, the arbitration, VIAC, has the authority to resolve this dispute. 

• In Ms. T’s own argument and at the meeting, Ms. T’s lawyer affirmed that the NDA agreement is completely independent of the labor contracts between Company R and Ms. T. Therefore, Ms. T’s claim that the dispute between the parties is a labor dispute under the court’s jurisdiction as the NDA is an inseparable part of the labor contract is unfounded. 

• In her Statement of Defense and throughout the arbitration proceedings, Ms. T did not raise any objections to the jurisdiction of the arbitration but continued the arbitration proceedings. Thus, Ms. T lost her right to object to the jurisdiction of the Arbitral Tribunal. 

3. Other disputes between parties that the law provides for shall be resolved by arbitration

The right to file a lawsuit in arbitration is specifically recorded in a number of specialized laws, such as: 

• Investment Law 2020: Disputes related to investment and business activities in Vietnam shall be resolved through negotiation and conciliation. In case negotiation and conciliation fail, the dispute shall be resolved at Arbitration or Court (Article 14). 

• Law on Enterprises 2020: Members, groups of members, shareholders, and groups of shareholders have the right to request the Court or arbitration to review and cancel resolutions and decisions of the board of members/general meeting of shareholders (Article 62, Article 151). 

• Construction Law 2014: In case the parties to a construction contract cannot negotiate, the dispute shall be resolved through conciliation, commercial arbitration or court in accordance with the provisions of law (Clause 8, Article 146). 

• Maritime Code 2015: The parties involved may resolve maritime disputes by negotiation, agreement or filing a lawsuit at an Arbitration or Court of competent jurisdiction (Clause 1, Article 338). 

See more:

1. Which Is Better, Court Or Arbitration?

2. 05 reasons why should choose arbitration?

[1]: https://congbobanan.toaan.gov.vn/2ta1010674t1cvn/chi-tiet-ban-an  

[2]: https://anle.toaan.gov.vn/webcenter/portal/anle/chitietanle?dDocName=TAND315866 

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