The four prevalent methods of business dispute resolution in Vietnam include Negotiation, Mediation, Arbitration, and Court, in which the former three are commonly referred to as Alternative Dispute Resolution (ADR). According to the Ministry of Justice, Negotiation and Court are the most selected practices to resolve business conflict with 57.8% and 46.8% respectively, followed by Mediation (22.8%) and Arbitration (16.9%). In fact, businesses have not familiarized themselves with Mediation, and also have little trust in this method. As a result, they tend to opt for more certain and reassured ways, notably Court and Arbitration.
Negotiation should be the first consideration to settle any commercial dispute between the parties before involving the jurisdiction, due to its resource effectiveness. However, the negotiation method is not often used by Vietnamese businesses because no binding mechanism is enforced after reaching an agreement among the parties. Consequently, the negotiation is hard to achieve. Thus, the dispute is filed up to the court or the arbitrator for resolution.
According to the Ministry of Justice, Vietnam has 10 Commercial Mediation Centers. Commercial mediation is implemented in one of the following ways:
1. The parties submit a request for mediation to a mediation center namely the Vietnam Mediation Center (VMC)
2. The parties submit a petition to the arbitration center, during the arbitration proceedings, the parties have the right to request the arbitration council to conduct conciliation.
Reality proves that the success or failure of the mediation depends greatly on the industry expertise, experience, mediation skills as well as the mediator’s ability to persuade the parties. Therefore, from the first steps in mediation, the parties should carefully choose the right mediator with established expertise and seasoned experience.
According to its dispute settlement principles, Arbitration presents a number of outstanding advantages to the parties when there is a dispute in business and commercial activities. Specifically, the Arbitration method has
(i) simple procedures,
(ii) transparency and fairness as the parties can select their own arbitrator,
(iii) confidentiality (trade secret),
(iv) voluntary-based regardless of state power,
(v) finality judgment as the parties are obliged to perform.
In Vietnam, the litigants often choose economic dispute settlement by the Court as a last resort to effectively protect their rights and interests when they fail to negotiate or reconcile.
The most considerable benefit of this method lies in state power. The court is a judicial body that has the right to act in the will and power of the state when adjudicating disputes. The final judgments and decisions of the People’s Court must be respected and complied with by state agencies, economic and social organizations, armed forces, and all citizens. In case the judgment is not voluntarily enforced, it will be coerced by state power.
However, commercial dispute resolution by the Court has several downsides. One of the principles in court adjudication is a public hearing, which is of the most concern to businesses as their trade secrets will be exposed. In addition, court procedures are complicated and cumbersome, and the division of trial procedures is time-consuming and ineffective, prolonging the time for dispute settlement. This leads to economic losses for businesses in commercial conflicts.
For foreigners who are involved in business disputes in Vietnam, the unfamiliarity with the Vietnam legal system will cause them certain disadvantages. Therefore, to avoid unfavorable situations and significant economic losses, foreign companies should consult domestic experts in the field and seek out the most beneficial solutions. Viettonkin – one of the leading consulting firms with a deep insight into the Vietnam market and legislation – can help you and your business navigate through the legal process in Vietnam. Please do not hesitate to contact our Vietonkin consultant team via email or contact page.