OVERVIEW OF ARBITRATION IN VIETNAM

The ability to resolve disputes in a neutral forum and the enforceability of binding decisions are often cited as the main advantages of arbitration over the resolution of disputes in domestic courts.

For commercial transactions, parties may face many different choices when it comes to including a mechanism for resolving disputes arising under their contract. If they are silent, they will be subject to the courts of wherever the law determines or a disaffected party decides to initiate legal proceedings. This may not sit well with parties that need to know at the time of entering into their contract that their contractual rights will be enforced. The alternative to silence is to specify a method of binding dispute resolution, which can be either litigation before the domestic tribunal or arbitration. If the parties choose to resolve their disputes in the courts, however, they may encounter difficulties, for example, time consuming or bureaucratism of judges.

Prior to the promulgation of the 2003 Arbitration Ordinance, the Vietnamese legal position in respect of arbitration as a dispute resolution mechanism was, at best, ambiguous; accordingly, foreign entities could not elect arbitration to resolve differences between them. The 2003 Arbitration Ordinance represents an attempt to remove this ambiguity towards arbitration. By broadening the definition of “commercial disputes” and that of a “foreign element” as it relates to arbitration – thereby significantly widening the class of disputes that can be resolved by arbitration – the Vietnamese legislature has clearly endorsed arbitration as a reliable alternative method of dispute resolution. The 2003 Arbitration Ordinance significantly improved the attractiveness of arbitration in Vietnam as an avenue of alternative dispute resolution, and consequently the ability of foreign entities to enter into arbitration arrangements that will be respected has been enhanced.

In addition, an international award originating in a country that is a party to the New York Convention of 1958 may be enforced in Vietnam, which is also a signatory, as if they were rendered by domestic courts. Thus, parties to international contracts can decide to site their disputes in Vietnam as a third and neutral country, knowing that the eventual award can be easily enforced in any country that is a signatory to the New York Convention, which has been ratified by a significant majority of commercial nations. An international award therefore has substantially greater legal force than a domestic court decision.