ARE ALL COMMERCIAL DISPUTES CAPABLE OF BEING SETTLED BY ARBITRATION?

Currently, in the context of globalization and profound economic integration, the market economy in Vietnam is increasingly developing, which consequently leads to legal conflicts and disputes arising from commercial activities. When a dispute arises, commercial parties may opt for various dispute resolution methods, among which Commercial Arbitration stands out as a mechanism with preeminent advantages. In Vietnam, commercial arbitration is specifically governed by the 2010 Law on Commercial Arbitration and its guiding documents.

1. What is commercial arbitration?

1.1. Concept

Commercial arbitration is an out-of-court dispute resolution method chosen by the agreement of the parties to resolve disagreements arising from commercial activities. In this process, one or more arbitrators selected by the parties or appointed by an Arbitration Center/Court will comprehensively review the case and issue an arbitral award that is legally binding on the parties.

1.2. Forms

• Institutional arbitration is a form of dispute resolution at an Arbitration Center in accordance with the 2010 Law on Commercial Arbitration and the rules of procedure of that Arbitration Center.

• Ad hoc arbitration is a form of dispute resolution in accordance with the 2010 Law on Commercial Arbitration and the order and procedures agreed upon by the parties.

2. Jurisdiction of arbitration over disputes

Pursuant to Article 2 of the 2010 Law on Commercial Arbitration, arbitration has jurisdiction to resolve the following disputes:

• Disputes arising from commercial activities between the parties.

• Disputes in which at least one party engages in commercial activities.

• Other disputes between the parties which the law provides shall be resolved by arbitration.

3. Conditions for dispute resolution by arbitration

Pursuant to Clause 1, Article 5 of the 2010 Law on Commercial Arbitration, a dispute shall be resolved by arbitration if the parties have an arbitration agreement, established either before or after the dispute arises.

Special cases

A dispute having an arbitration agreement but falling into one of the following cases shall fall under the jurisdiction of the Court, unless otherwise agreed by the parties or otherwise provided by law:

• There is a Court decision setting aside the arbitral award or setting aside the Arbitral Tribunal's decision on recognizing the parties' agreement;

• The arbitration agreement is invalid;

• The arbitration agreement is incapable of being performed as prescribed in Clauses 1, 2, 3, and 5, Article 4 of Resolution 01/2014/NQ-HDTP;

• The dispute does not fall under the jurisdiction of the Arbitral Tribunal;

• There is a decision to suspend the dispute resolution by the Arbitral Tribunal or Arbitration Center because the claimant or respondent, who is an individual, dies without an heir to their rights and obligations;

• There is a decision to suspend the dispute resolution by the Arbitral Tribunal or Arbitration Center because the claimant or respondent, which is an agency or organization, has terminated its operation, gone bankrupt, been dissolved, consolidated, merged, divided, separated, or converted its organizational form without any agency or organization taking over its rights and obligations;

• There is a decision to suspend the dispute resolution by the Arbitral Tribunal or Arbitration Center due to the parties' agreement to terminate the dispute resolution.

4. Arbitration agreement

4.1. Forms of arbitration agreement

An arbitration agreement may be established in the form of an arbitration clause in a contract or in the form of a separate agreement; however, it must be established in writing or in the following forms:

• Exchange between the parties by telegram, fax, telex, email, and other forms as prescribed by law;

• Exchange of information in writing between the parties;

• Agreement recorded in writing by a lawyer, notary, or competent organization at the request of the parties;

• Written documents demonstrating the arbitration agreement such as contracts, vouchers, company charters, and other similar documents referred to by the parties in their transactions;

• Exchange of the statement of claim and statement of defense in which the existence of the agreement is alleged by one party and not denied by the other.

4.2. Validity of the arbitration agreement

• The modification, extension, or cancellation of the contract, or the contract being invalid or incapable of being performed, shall not invalidate the arbitration agreement.

• If a party to an arbitration agreement is an individual who dies or loses civil act capacity, the arbitration agreement shall remain valid for their heir/legal representative, unless otherwise agreed by the parties.

• If a party to an arbitration agreement is an organization that must terminate its operation, go bankrupt, be dissolved, consolidated, merged, divided, separated, or convert its organizational form, the arbitration agreement shall remain valid for the organization that takes over its rights and obligations, unless otherwise agreed by the parties.

4.3. Invalid arbitration agreement

Pursuant to Article 18 of the 2010 Law on Commercial Arbitration (guided by Article 3 of Resolution 01/2014/NQ-HDTP), an arbitration agreement shall be considered invalid if it falls into one of the following cases:

• It is established to resolve disputes that do not fall under the jurisdiction of arbitration.

• It is established by a person lacking authority, unless during the execution of the contract or arbitral proceedings, the authorized person was aware of, accepted, or did not object to this signing.

• It is established by a person lacking civil act capacity.

• The form of the arbitration agreement does not comply with the aforementioned forms.

• One of the parties is deceived, intimidated, or coerced during the establishment of the arbitration agreement and requests to declare such arbitration agreement invalid.

• It violates prohibitions of the law.

5. Are all commercial disputes arbitrable?

Based on the aforementioned contents, it can be affirmed that not all commercial disputes can be resolved by arbitration.

A commercial dispute shall be resolved by arbitration when it fully satisfies the following two main elements:

• The dispute falls under the jurisdiction of arbitration;

• There exists a valid arbitration agreement between the disputing parties.

Commercial arbitration is a modern dispute resolution mechanism, a private judicial institution, existing in parallel with and independent of the People's Court system, yet recognized by the State in terms of validity and legal value. The arbitration method of dispute resolution is considered a harmonization between the flexibility of out-of-court dispute resolution methods and the guarantee of State power in the enforcement of arbitral awards. Choosing arbitration to resolve disputes is not only an affirmation of the parties' freedom of agreement but also a safe and effective legal solution in line with international practices.

Contact Information

DL PINNACLE LAW FIRM LLC

Address: 3rd Floor, 18A/76 Nguyen Thi Minh Khai, Saigon Ward, Ho Chi Minh City

Hotline: 0914.491.911

Email: info@dlpinnacle.vn

Website: https://www.dlpinnacle.vn