Settlement of contractual disputes in Vietnam

Settlement of contractual disputes in Vietnam

During the performance of the contract, the parties may arise conflicts and disputes. So, what methods can the parties use to settle contractual disputes to ensure the interests of themselves or the business?

Let’s find out through this article.

What is a contractual dispute in Vietnam?

Contractual disputes are understood as disagreements and conflicts between parties in a contractual relationship about the rights and obligations of each party under a signed contract.

Contractual disputes include civil contract disputes and commercial contract disputes.

Features of contractual disputes in Vietnam

– Disputes arise directly from the contractual relationship.

– Disputes often involve property or other interests attached to the disputing parties.

– The principle of settlement is equality and agreement.

How to settle contractual disputes in Vietnam?

According to Vietnamese law, there are 04 ways of settling contractual disputes, including:

1. Negotiate.

2. Mediation.

3. Sue at Court.

4. Sue at Commercial Arbitration.

Settlement of contractual disputes in Vietnam by negotiation

Settlement of a contractual dispute by negotiation is a process by which the disputing parties discuss and agree to come to an agreement on a solution to the conflict without the participation of the State or any third party. Most of the current contractual disputes are settled by negotiation.

Features of contractual dispute settlement in Vietnam by negotiation

– The parties reach an agreement on a voluntary basis to agree on a solution to resolve the conflict of rights and obligations in the contract.

– No third party involvement other than the disputing parties.

– After agreeing on a dispute settlement plan, the disputing parties must voluntarily implement the agreed agreement.

Advantages of contractual dispute settlement in Vietnam by negotiation

– Simple, fast, flexible.

– No cost.

– Do not damage the cooperative relationship between the disputing parties, can continue to cooperate in the future.

– Do not provide information and documents to third parties, so do not disclose business secrets of the parties.

Disadvantages of contractual dispute settlement in Vietnam by negotiation

– This method of dispute resolution requires all parties to have good faith and efforts to resolve the dispute, otherwise the probability of success is low.

– The results of the negotiation are not mandatory but are voluntarily implemented by the parties, so if one party does not implement the negotiated content, the negotiation will also be  not valid.

– One party may take advantage of the negotiation procedure to delay the performance of its obligations, in some cases may lose the other party’s right to initiate a lawsuit because the prescriptive period with respect to a claim has expired.

Settlement of contractual disputes in Vietnam by mediation

Settlement of contractual disputes by mediation is the settlement of disputes with the participation of a third party as an intermediary to assist and persuade the disputing parties to seek solutions to resolve the conflict. There are currently the following types of mediation:

– Commercial mediation: Commercial mediators act as mediators and assist parties in settling contractual disputes.

– Conciliation at court: Before the Court accepts the civil case, the parties are entitled to request the Court’s appointed mediator to assist the parties in conciliation and settlement of the case.

– Mediation in civil proceedings: Conciliation is a mandatory procedure in the process of settling civil cases (except in some special cases where conciliation cannot be conducted). During the settlement of the case, the Court creates conditions for the parties to reach agreement on the settlement of the dispute.

– Conciliation at arbitration: At the request of the parties, the Arbitration Council conducts conciliation between the disputing parties.

Advantages of contractual dispute settlement in Vietnam by mediation

– Simple, fast, flexible.

– No cost.

– Do not damage the cooperative relationship between the disputing parties, can continue to cooperate in the future.

– Mediation comes from the voluntariness of the parties, so when agreeing on a mediation plan, the parties usually seriously implement it.

– The parties may request the Court to recognize the successful conciliation result, which is enforceable between the parties.

Disadvantages of contractual dispute settlement in Vietnam by mediation

– This method of dispute resolution requires all parties to have good faith and efforts to resolve the dispute, otherwise the probability of success is low.

– One party may take advantage of the negotiation procedure to delay the performance of its obligations, in some cases may lose the other party’s right to initiate a lawsuit because the prescriptive period with respect to a claim has expired.

Settlement of contractual disputes by Vietnamese Court

Settlement of contractual disputes through court proceedings is the competent court to settle contractual disputes according to the procedures specified in the Civil Procedure Code.

Features of contractual dispute settlement by Vietnamese Court

– Dispute settlement must comply with strict order and procedures as prescribed by the Civil Procedure Code.

– Dispute settlement is carried out through 2 levels of trial.

– Public trial court.

– The effective judgment of the Court is guaranteed to be enforced by State coercion.

Advantages of contractual dispute settlement by Vietnamese Court

– Effective judgments and decisions of the Court are enforceable.

– The settlement of disputes through many levels of trial ensures that the Court’s judgments and decisions are accurate and lawful.

– Low cost.

Disadvantages of contractual dispute settlement by Vietnamese Court

– Court proceedings are often complicated and take a long time.

– The public trial can make business secrets exposed.

– The settlement of disputes at the Court creates a tense confrontation between the two parties, making it difficult to maintain business relations in the future.

– A judgment or decision of a Vietnamese court that wants to be enforced abroad must go through strict recognition procedures of that country.

Settlement of contract disputes by commercial arbitration in Vietnam

Settlement of contractual disputes by commercial arbitration means that an arbitration council or appointed arbitrator settles a contractual dispute between the parties in accordance with the arbitration rules of procedures agreed upon by the two parties.

Settlement of contractual disputes by commercial arbitration only applies to commercial contract disputes, not civil contract disputes.

Fomalities of commercial arbitration in Vietnam

1. Ad – hoc arbitration:

– Established by the parties to settle disputes and self-termination after the dispute is resolved.

– There is no separate arbitration rules of procedures, the arbitration rules of procedures of each case are agreed upon by the disputing parties.

2. Permanent arbitrator:

– Having an organizational structure and operating apparatus, established in accordance with the law.

– There is a list of arbitrators for the disputing parties to choose from.

– Each arbitration center has its own arbitration rules of procedures.

Advantages of contractual dispute settlement by commercial arbitration in Vietnam

– Arbitration has only one level of trial and is final and binding on the parties.

– Time and place to settle disputes flexibly and quickly.

– Arbitrators are chosen by the disputing parties, so the dispute settlement process is not as stressful as the courts, and the parties easily have the opportunity to conciliate and reach agreement on the settlement of the case.

– Arbitration is closed, ensuring confidentiality of information related to business secrets and technology secrets of the parties.

Disadvantages of contractual dispute settlement by commercial arbitration in Vietnam

– High cost.

– The parties may only file a lawsuit to commercial arbitration if there is an agreement to settle the dispute by arbitration.

– Commercial arbitration often faces difficulties in collecting documents and evidences or when it is necessary to summon witnesses due to the lack of State power like the Court.

– The arbitral judgement may be considered by the court to be annulled if there are grounds for annulment as prescribed by law.

Choosing a methods of settlement contract disputes in Vietnam

Each method of dispute settlement has its own advantages and disadvantages. Therefore, depending on each specific case, the disputing parties choose the method of settlement that best suits their conditions and circumstances.