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In the increasingly complex landscape of international trade, resolving disputes fairly and effectively has become a crucial priority for businesses. In this context, commercial arbitration has emerged as a significant mechanism capable of effectively resolving commercial disputes both regionally and internationally, particularly in Vietnam, and has been increasingly adopted in recent times.
Commercial arbitration is not just a form of dispute resolution but also a useful mechanism for protecting business interests in international trade.
This article will delve deeper into the importance of commercial arbitration, highlighting the distinctive features of this dispute resolution method, as well as the rights businesses can exercise if they choose this form of dispute resolution.
The Importance of Arbitration in Resolving Commercial Disputes
Currently, Vietnam has three main methods for dispute resolution: mediation, arbitration, and courts. These methods all aim to ensure objectivity and legality in the dispute resolution process.
Each method has its own advantages and is suited to different situations. The diversity in dispute resolution methods in Vietnam allows disputing parties to choose the best option for resolving disputes effectively and fairly.
Among these methods, resolving disputes through commercial arbitration has gradually become more popular in Vietnam, with Vietnamese businesses increasingly choosing it over court proceedings.
Arbitration plays a crucial role in resolving commercial disputes, especially in the context of international trade rules and regulations. The choice of arbitration is made objectively according to the provisions of Article 40.1 of the 2010 Commercial Arbitration Law (Law No. 54/2010/QH12).
Specifically, within 30 days from receiving the complaint and request to select an arbitrator from the Arbitration Center, the defendant must select their own arbitrator and notify the Arbitration Center or request the Chairman of the Arbitration Center to appoint an arbitrator.
If the defendant does not choose an arbitrator or does not request the Chairman of the Arbitration Center to appoint an arbitrator, within 7 days from the expiration of the above deadline, the Chairman of the Arbitration Center will appoint an arbitrator for the defendant.
The appointed arbitrator will have no conflicts of interest with the parties involved in the dispute, thus being able to apply the law accurately and fairly based on accumulated knowledge and expertise in the relevant dispute areas, which is necessary for obtaining arbitrator certification in Vietnam and internationally.
Arbitrators are usually experts with in-depth knowledge of international trade law, capable of applying this specialized knowledge to analyze and make appropriate decisions. Notably, some international arbitration centers like SIAC have plans to build specialized arbitration teams in specific legal fields, such as Intellectual Property Law.
These specialists will have deeper expertise compared to general multi-disciplinary commercial arbitrators and can review and resolve highly specialized disputes without needing consultation or assistance from experts in the private sector.
Another advantage of arbitration over courts is its flexibility, speed, and efficiency in dispute resolution. Receiving a legal judgment within a short time is crucial for minimizing time and costs related to the dispute resolution process. Additionally, the confidentiality and privacy of the arbitration process also enhance trust among the participating parties.
Arbitral awards have global effectiveness and can be enforced in many countries, providing an effective international dispute resolution mechanism. This enhances the practicality of the arbitration process in the context of international trade.
The aspect of reducing political risk in the arbitration process is also a significant advantage. By focusing on applying the law and trade principles, arbitration helps eliminate unwanted and irrelevant political factors from the dispute resolution process. The non-political nature of arbitration is considered one of the key factors making arbitral awards recognized as objective, fair, and free from third-party influence.
Finally, the feasibility and enforceability of arbitral decisions, established before the process begins, ensure that decisions are implemented fairly and in accordance with the commitments of the involved parties.
The Rights of Businesses in Resolving Commercial Disputes Through Arbitration
In today’s business world, resolving commercial disputes is a crucial aspect of business operations. Businesses not only face challenges from a competitive market but also risks related to contract disputes, intellectual property rights, and other issues.
To address these disputes, commercial arbitration is a popular and increasingly adopted option in Vietnam and worldwide. However, before officially initiating arbitration proceedings, businesses need to be aware of their rights to ensure their interests and achieve the highest effectiveness throughout the dispute resolution process.
According to the 2010 Commercial Arbitration Law, businesses have the following primary rights when choosing to resolve commercial disputes through arbitration:
1. The Right to Negotiate Agreements Between Disputing Parties
The 2010 Commercial Arbitration Law emphasizes the importance of agreements between disputing parties, as do the arbitration rules of various arbitration centers.
Except in cases prohibited by law or conflicting with the arbitration center’s procedural rules, if the parties have an agreement on certain aspects, such as selecting arbitrators and/or an arbitration center, or negotiating the termination of the dispute resolution process even after arbitration proceedings have begun, the arbitration center will respect and apply these agreements according to Article 38 of the 2010 Commercial Arbitration Law.
Agreements do not necessarily need to be established at the time of signing the contract; they can be made before or after the dispute arises, as stipulated in Article 5.1 of the 2010 Commercial Arbitration Law.
If the parties do not reach an agreement, the aspect will be handled according to the 2010 Commercial Arbitration Law and relevant legal documents.
For example, Article 10.2 of the 2010 Commercial Arbitration Law states that in international commercial disputes involving foreign elements where at least one business has foreign investment, leading to the use of different languages, if there is no specific agreement on the language for arbitration proceedings, the arbitration panel will decide on the language used.
If the parties cannot agree on details related to the dispute resolution body or authority, the choice of the arbitration form or organization will be made according to the plaintiff’s request, as per Article 43.5 of the 2010 Commercial Arbitration Law.
Other aspects of arbitration procedures emphasize the spirit of negotiation, self-determination, and decision-making between the parties, including changes in arbitrators, the composition of the arbitration panel, the authority to establish arbitration agreements, accepted forms of arbitration agreements according to Article 16, the location of the arbitration, applicable national laws in cases with foreign elements, and procedural aspects of dispute resolution meetings.
This principle is detailed in Article 4.1 of the 2010 Commercial Arbitration Law: “Arbitrators must respect the parties’ agreements if such agreements do not violate prohibitions and social ethics.”
Additionally, a significant provision determining the authority to resolve disputes through arbitration and courts, based on the principle of respecting agreements, is stated in Article 6 of the 2010 Commercial Arbitration Law: “If the parties have an arbitration agreement and one party files a lawsuit in court, the court must refuse to accept the case, except in cases where the arbitration agreement is invalid or cannot be enforced.”
Accordingly, if a party has filed a lawsuit in court, even if the court has accepted the case, the court will decide to suspend the case and return the complaint to the plaintiff and attached documents based on Article 6 of the 2010 Commercial Arbitration Law and Article 192.1.d of the 2015 Civil Procedure Code.
2. The Right to Request an Additional Award or the Annulment of an Arbitral Award
According to Article 4.5 and Article 61.5 of the 2010 Commercial Arbitration Law, arbitral awards are final and immediately enforceable without appeal or review. This principle provides a significant advantage of arbitration over court proceedings by resolving disputes quickly and definitively without the need for multiple levels of review, which can extend the resolution process.
This efficiency makes many parties prefer arbitration over traditional court proceedings, which can be time-consuming and impact business opportunities and development.
However, the rapid and unilateral nature of arbitration may result in situations where an incorrect arbitral award remains enforceable without the opportunity for correction, unlike court judgments.
If the parties disagree with the arbitral award, they may request the arbitration panel to issue an additional award for requests made during the proceedings but not included in the initial award, and must promptly notify the other party, as per Article 63.4 of the 2010 Commercial Arbitration Law.
If the arbitration panel deems the request justified, it will issue an additional award within 45 days from receiving the request.
Furthermore, if there are grounds to prove that the arbitral award falls under the annulment cases specified in Article 68.2 of the 2010 Commercial Arbitration Law, the court will review the annulment of the arbitral award upon request. The party requesting the annulment bears the burden of proof, except in cases outlined in Article 68.2.d.
In such cases, the court is responsible for proactively collecting evidence to decide whether to annul the arbitral award.
In addition to the above rights, disputing parties also have rights to file claims, withdraw claims, amend or supplement claims, self-defense, file counterclaims, and amend or supplement counterclaims.
However, it is important to note that the arbitration panel has the authority to reject amendments or supplements to claims if they believe such actions could be abused to obstruct or delay the arbitration process or exceed the scope of the arbitration agreement, as specified in Article 37.2 of the 2010 Commercial Arbitration Law.
You can refer to our published articles of Important Notes for Vietnamese Businesses When Participating in Dispute Resolution at Singapore International Arbitration Centre (SIAC).
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