Comparing the pros and cons of commercial dispute resolution methods in Vietnam: court, arbitration, and mediation. Help businesses choose the optimal solution.
When commercial disputes arise, businesses have three main options. Each method has its own pros and cons — choosing correctly can save hundreds of millions of VND and many months of time. This article is especially important for foreign businesses operating in Vietnam.
1. Overview of Three Methods
Court: resolved by People's Court under the Code of Civil Procedure — mandatory when no arbitration agreement.
Arbitration: under Commercial Arbitration Law 2010 — only applies with arbitration agreement.
Mediation: neutral third party helps negotiate toward voluntary settlement.
2. Detailed Comparison
2.1. Time
- Court: 6 months - 2 years first instance, additional 4-12 months if appealed
- Arbitration: 3-9 months
- Mediation: 1-3 months
2.2. Cost
- Court: court fee 0.1-0.2% of dispute value
- Arbitration: arbitration fee 1-5% of dispute value
- Mediation: mediator fees
2.3. Confidentiality
- Court: public
- Arbitration: high confidentiality
- Mediation: absolute confidentiality
2.4. International Aspect
Arbitration awards are recognized in 170+ countries party to the New York Convention 1958 — reason why arbitration is the standard choice for international contracts in Vietnam.
3. When to Choose Court?
- Small value disputes (under VND 1 billion)
- Counterparty unable to voluntarily comply
- Cases with criminal aspects
- Disputes involving land use rights
- No arbitration agreement
4. When to Choose Arbitration?
- Large value disputes (over VND 1 billion)
- High confidentiality needed
- International contracts
- Need industry-specific experts
- Want fast resolution
5. When to Choose Mediation?
- Both parties still have goodwill
- Want to maintain long-term business relationship
- Can combine before arbitration/court
6. Arbitration Institutions in Vietnam
- VIAC: Vietnam International Arbitration Centre — largest
- HCMCAC: HCMC Commercial Arbitration Centre
- SIAC, HKIAC, ICC: for international disputes
7. Sample Arbitration Clause
"Any dispute arising out of or in connection with this contract shall be resolved by arbitration at the Vietnam International Arbitration Centre (VIAC) in accordance with its Rules of Arbitration. The number of arbitrators shall be [01/03]. The language of arbitration shall be [Vietnamese/English]. The place of arbitration shall be [Hanoi/Ho Chi Minh City]."
8. Special Considerations for Foreign Businesses
8.1. Foreign Arbitration Award Recognition
Vietnam is a party to the New York Convention since 1995. Foreign arbitration awards can be recognized and enforced in Vietnam through court procedure. However, in practice:
- About 5-10% of recognition requests are rejected
- Common reasons: contrary to public order, violation of due process
- Recognition process typically takes 6-12 months
8.2. Investor-State Arbitration (ISDS)
If dispute is between foreign investor and Vietnamese state, can use ISDS mechanism under BITs and FTAs:
- CPTPP, EVFTA have ISDS provisions
- Vietnam has BITs with 60+ countries
- ICSID arbitration: forum for many investor-state disputes
8.3. Choice of Governing Law
For international contracts, careful consideration of governing law selection:
- Vietnamese law: easier to enforce in Vietnam, but foreign businesses less familiar
- Singapore, English law: international standard, suitable for arbitration
- Home country law: familiar to investor but harder to enforce in Vietnam
This article is for reference only. Please contact a lawyer for accurate advice.
Frequently Asked Questions
Is arbitration always faster than court?
Usually but not always. Arbitration has no appellate level so total time is typically shorter than 2-3 level courts.
Can arbitration awards be annulled?
Yes, under Arbitration Law 2010. Court can annul if serious procedural violations. Award annulment rate under 10%.
Can international arbitration be chosen for domestic contracts?
Yes if parties agree. However foreign awards still need Vietnam court recognition for enforcement.
How are arbitration fees calculated?
By scale based on dispute value. Example VND 1 billion ~ VND 50-80 million, VND 10 billion ~ VND 200-300 million.
With arbitration clause already, can court be used?
No. Court will refuse jurisdiction if other party objects. Unless arbitration clause is invalid or parties agree to waive.