Judicial Proceedings and Arbitration in Vietnam

In Vietnam, the commercial disputes will be handled by a Vietnamese court or arbitral institution provided that the contractual parties agree that the contract is construed in accordance with Vietnamese law.

Although Vietnamese courts recently have made strides in improving their skills and reputation, selecting a Vietnamese arbitral institution remains the superior option for many disputes. We recommend utilizing an arbitral institution with international expertise, such as the Vietnam International Arbitration Centre (VIAC) or a reputable arbitration located in Ho Chi Minh City or Hanoi. Arbitration through these bodies tends to be swifter and more efficient, with arbitrators possessing relevant specialized knowledge.

If the parties wish to settle the case by the amicable manner before submitting the case to the court or arbitral institution, mediation procedure should be considered. Mediation is another form where a neutral third party facilitates a discussion between disputing parties to help them reach a mutually acceptable settlement. If an agreement is reached, it can be made enforceable by converting it into a court judgment or an arbitral award. If the mutual agreement is not reached by the parties, the settlement by competent court or arbitration will be considered by the parties.

The procedure on enforcement of arbitration awards is also different between domestic arbitral awards and foreign arbitral awards. For domestic arbitral awards issued by a licensed arbitral institution in Vietnam, they are fully enforceable in Vietnam unless there are reasons for cancellation. The party seeking to enforce the award can have it executed by the provincial civil judgment enforcement authority where the award was rendered. The competent authority will check with the appropriate people's court to see if any requests to cancel the award are pending before granting a decision to enforce it.

For foreign arbitral awards, Vietnam is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which facilitates the enforcement of international arbitration awards in Vietnam. Accordingly, the relevant provincial people's court in Vietnam must formally recognize and declare the award enforceable. Consequently, Vietnam will recognize and enforce any foreign arbitral award as long as it was issued in another country that is also a party to the New York Convention. Once the competent provincial people's court recognizes and declares a foreign arbitral award enforceable, that award carries the same legal weight as any decision or judgment from a Vietnamese court.

In summary, there are advantages and disadvantages associated with each dispute resolution mechanism. Mediation can be an efficient and cost-saving method if the parties reach a mutually agreeable solution. However, if mediation fails, arbitration may be a better option due to its flexible procedures and high confidentiality. Ultimately, the appropriate dispute resolution method will depend on the specific circumstances and nature of the dispute. Parties should consider the pros and cons when determining the optimal approach from all aspects.  At GvW Vietnam, we provide ad-hoc and comprehensive advisory services and represent clients in arbitration and mediation proceedings.