Dispute Resolution Mechanism in Vietnam

Vietnam is a country with fast economic development and in-depth integration into the world’s economy. Economic development leads to an increase of commercial transactions which also result in an increase of disputes.  In Vietnam a dispute in which one party is a foreign - invested company can be settled through the following mechanisms:

1. Commercial mediation

With the issuance of Decree No. 22/2017/ND- CP on Commercial Mediation, Vietnam has paved the way for dispute settlement by an advanced dispute resolution mechanism. The parties to a dispute may choose a commercial mediation center (there are more than 20 such centers in Vietnam) or ad hoc commercial mediators who are listed by the provincial justice department in their websites (including foreign commercial mediators). The advantages of mediation are that the parties are free to agree on the venue, methods, and procedures of mediation. If the parties cannot agree on these issues, the mediation rules of the commercial mediation center will apply. It is sufficient that the parties agree in the relevant contract/agreement that they will use commercial mediation for settlement of their dispute if any.

The settlement agreement resulting from mediation is binding on the parties. One party may apply to a Vietnamese court for recognition of the settlement agreement according to the procedures specified by the Civil Procedural Code. Once recognized by the court, the settlement agreement is valid as a court judgment and is enforced by the civil judgment enforcement agency if the other party fails to enforce it.

In case mediation fails, either party may request the court or arbitration to settle their dispute, as agreed in the contract

2. Commercial arbitration

Commercial arbitration has a longer history in Vietnam than commercial mediation. There are more than 40 commercial arbitration centers with the Vietnam International Commercial Center as the leading arbitration body in Vietnam. 

Like mediation, the parties may choose institutional arbitration or ad hoc arbitrators to settle their dispute. An arbitral award is final and can be enforced through the civil judgment enforcement system if the losing party fails to voluntarily enforce it. Thanks to its flexibility, confidentiality and time-saving, arbitration becomes more and more popular and widely is used by foreign-invested enterprises in Vietnam. 

In order to have a dispute settled by arbitration, the parties have to agree in the relevant contract that any dispute between the parties will be referred to the arbitration center (selected by the parties). The parties may choose a sole arbitration (for the costs saving purpose) or three arbitrators to settle their dispute. 

3. Court litigation

Settlement of disputes by courts is a traditional and preferred method by most Vietnamese companies. 

The use of court would save costs as the court bond normally is lower than arbitration fees. However, due to overload of cases, court proceedings are very time-consuming.