Arbitration is one of the dispute resolution methods in the field of business and commerce which is becoming more and more common in Vietnam because of its outstanding advantages. Quick, simple and flexible arbitral procedures help companies resolve business-related disputes in a timely and effective manner as well as protect confidential business information without affecting their reputation.
Under Clause 1, Article 3 of the Law on Arbitration 2010 of Vietnam, arbitration is defined as a method of dispute settlement agreed upon by the parties in compliance with the provisions of this Law. The disputes herein are those among parties arising out of commercial activities in which at least one involved party has commercial activities or other disputes which are stipulated by law to be settled by arbitration.
1. Conditions for dispute resolution by arbitration in Vietnam
According to Article 5 of the Arbitration law of Vietnam , a dispute shall be resolved by arbitration if the parties have an agreement to settle the dispute by this method. Such agreement can be made either before or after a dispute occurs.
1.1 Formality of arbitration agreement
An arbitration agreement may be made in the form of an arbitral clause in a contract or in the form of a separate agreement. An arbitration agreement must be in writing. The following forms of agreement may also be regarded as written form:
- Agreement made through communication between the parties by telegram, fax, telex, email or other forms provided for by law;
- Agreement made through exchange of written information between the parties;
- Agreement recorded in writing by a lawyer, notary public or competent institution at the request of the parties. In their transactions, the parties make reference to a document such as a contract, document, company charter or other similar documents which contains an arbitration agreement; or the agreement made through exchange of petitions and self-defense statements which reflect the existence of an agreement proposed by a party and not denied by the other party.
1.2 Invalidity of arbitration agreement
Once arbitration is chosen, the involved parties in the process of drafting agreement should take notice of the following cases that can lead to null and void arbitration agreement:
- Disputes arise in areas beyond the arbitration’s jurisdiction defined in Article 2 of the Law on Arbitration 2010;
- The person who prepares the arbitration agreement has no competence defined by law;
- The person who prepares the arbitration agreement has no civil act capacity under the Civil Code;
- The formality of the arbitration agreement is not compliant with the aforementioned specified in Article 16 of Law on Arbitration 2010;
- A party is deceived, intimidated or compelled in the course of making the arbitration agreement and requests a declaration that such arbitration agreement is invalid;
- The arbitration agreement breaches prohibitions specified by law.
2. Procedures for dispute settlement by arbitration in Vietnam
2.1 Considering the statute of limitations for initiation of a lawsuit at an arbitration center
Under Article 33 of the Arbitration Law of Vietnam, the statute of limitations for initiation of a lawsuit according to arbitration procedures is 2 years from the time when the legitimate rights and interests of the involved parties are violated.
2.2 Submitting a statement of claim to the arbitration center
After considering the statute of limitations for initiating a lawsuit, the parties have the right to file a statement of claim to the Arbitration Center to request dispute settlement.
According to the provisions of Article 30 of the Law on Arbitration 2010, in case of dispute settlement at the Arbitration Center, the claimant must make a statement of claim sent to the Arbitration Center. Where a dispute is settled by ad hoc arbitration, such statement of claim must be made and sent to the respondent.
The statement of claim contains:
- Date of preparation of the statement of claim;
- Names and addresses of the parties; names and addresses of witnesses, if any;
- Summary of the dispute;
- Grounds and evidence for initiating the lawsuit, if any;
- Specific requirements of the claimant and the value of the dispute: (i) Name and address of the person whom the claimant selects as arbitrator or requests to be designated as arbitrator; (ii) Enclosed with the statement of claim shall be the arbitration agreement and the originals or copies of relevant documents.
Unless otherwise agreed by the parties or provided by the rules of proceedings of an arbitration center, within 10 days after receiving the claimant’s statement of claim, enclosed documents and arbitration charge receipt, the arbitration center shall send to the respondent copies of the statement and documents specified in Clause 3. Article 30 of aforesaid Law.
The respondent may counter-claim the claimant on matters related to their dispute. The counter-claim shall be sent to the arbitration center. When a dispute is settled by ad hoc arbitration, it shall be sent to the arbitral tribunal and claimant. The counter-claim shall be submitted simultaneously with a self-defense statement.
2.3 Formation of arbitral tribunal at the arbitration center
The Article 38 of the arbitration law of Vietnam allows the involved parties to themselves negotiate and agree to terminate the dispute settlement. When the negotiation is successful, they may request the chairman of the arbitration center to make a decision of suspension of the dispute resolution. In case that agreement can not be reached, an Arbitral Tribunal shall be formed to resolve the dispute.
Depending on the characteristics of the dispute, the parties may agree to form an arbitral tribunal at an arbitration center or establish an ad hoc arbitral tribunal to settle the dispute. The particular sequence to form the arbitral tribunal is specified in Article 40, Article 41 of the Law on Arbitration 2010.
2.4 Authority of the Arbitral Tribunal
- to verify matters;
- to collect evidence;
- to summon witnesses;
- to implement interim urgent measures;
- to change, supplement or terminate interim urgent measures.
The session is held with the purpose of conciliation and mediation in settlement of the dispute.
Under Article 58 of the foregoing Law, the arbitral tribunal shall conduct conciliation sessions for the parties to reach an agreement on resolution of their dispute. If such an agreement can be reached, a record of successful conciliation will be made and signed by the parties and certified by the arbitrators. The arbitral tribunal shall issue a decision recognizing the parties’ agreement, which is final and legally binding as an arbitral award.
2.5 Award of Arbitration in Vietnam
When the conciliation is not successful, the dispute will be resolved by the arbitral tribunal, and the final result achieved will be a tribunal award. According to Article 60 of the Law on Arbitration 2010, the Arbitral Tribunal shall issue an arbitral award by voting on a basis of majority rule.
In case the majority vote cannot be obtained, an arbitral award shall be issued based on the opinion of the arbitral tribunal’s chairman. The arbitral award is final and takes effect on the date of its signing
When the arbitral award takes effect, the Government encourages the involved parties to voluntarily enforce it.
If the time limit for enforcement of the award expires, the party in favor of whom/which the arbitral award is issued may request in writing the competent civil judgment enforcement agency to enforce the award.
3. Advantages of commercial dispute resolution by arbitration
Arbitration has a lot of outstanding advantages, bringing many benefits to the parties when there is a dispute in their business and commercial activities, specifically as follows:
- Firstly, the arbitration procedures are flexible, convenient for the parties when they do not have to participate in many levels of trial. The parties are free to choose the arbitral proceedings which are also simpler than those in Court.
- Secondly, the right to select an arbitrator to resolve disputes allows the parties to choose experts with professional experience and practice in the subject of disputes, reputable to become arbitrators to resolve disputes of the parties and ensure the quality of final judgments.
- Third, arbitration respects the confidentiality of the whole process. The arbitration meeting is not conducted in an open manner, which is different from proceedings of Court’s public trial. Thus, the parties can preserve their reputation in the marketplace.
Should Clients need further information on arbitration in Vietnam, feel free to contact ALB & Partners Law Firm. With a team of experienced arbitration and dispute resolution lawyers, we take pride in ourselves as appreciated by Clients as one of the prestigious law firms in the field of arbitration in Vietnam.
To find out more about our law firm’s services, please contact us via email: [email protected].