COURT AND ARBITRATION IN RESOLVING COMMERCIAL DISPUTE.

According to Vietnam law, two resolving dispute concepts are the Court and the Arbitration. However, the parties found that it is hard to determine what method should be prevailed. Therefore, KAV Lawyers would show the advantages and disadvantages of both concepts in this Article aiming to help the readers having more general viewpoints. From that, individuals and corporations could choose the most suitable method to resolve the dispute for them.

1. The Court’s advantage and disadvantage

The advantage

According to Clause 1 Article 2 Law on the organization of people’s court 2014, the people’s Court is a judicial body of the Socialist Republic of Viet Nam. Therefore, the Court is the most coercive judicial body, the Court’s judgment or decision which has a legal effect on the parties and they must comply with this judgment or decision, otherwise, the judgment or decision will be ensured to exercise by the coercive power of the State. Besides, these advantages of the Court could be considered as followed:

  • The Court’s fee or the advance fee: As the Court is a body belonging to the State, so the fee for resolving a dispute is not as high as the Arbitration procedure. Specifically, a case with the same dispute value under 100 million, in the Court, the court’s fee/ the advance court fee will be around 5 million (based on the list of court costs issued together with the Resolution 326/2016/ UTVQH stipulates the rate of collection, exemption, reduction, management and use of court’s fees), whereas, for the arbitration procedure which is more than 10 million. Besides, the court’s fee/ the advance cost will be refunded to the winning party, the parties will go to the judgment enforcement agency to receive his/ her advance payment they have paid before. Unlike the Court, in arbitration procedure, the arbitration fee will not be returned to any party, even one of them win. However, the arbitration council will force the losing party to refund the fee to the winning party in arbitral award. In case, the losing party does not voluntarily exercise the arbitral award, the winning party must request enforcement of the judgment before the arbitration fee could be recovered. This leads to the risk that if the losing party does not have enough assets to enforce, it is very difficult to get back the arbitration fee paid by the winning party.
  • In the trial principal: The court conducts trial publicly and is a deterrent to individuals/ legal entities violating the law. In the case of individuals/ legal entities acting dishonestly, when the case goes publicly, it would be more deterrent to them. As, when unexpected information is released, it would affect the reputation of the individuals/ legal entities. Since then, these individuals/ legal entities will not dare to repeat the offense.

The disadvantage

In addition to the advantage, the court also has a few disadvantages, the following are:

  • The order and procedures for trial by the court are not flexible and still formalistic. The actual progressing time is quite long, a dispute can go through many levels of trial. The trial levels from the first instance to appellate, in some cases, effective judgments and decisions of the Court are also reviewed according to cassation and reopening procedures.
  • The public trial principle is an advantage, but on the other hand, it is still limited in the case when businesses want to keep their reputation in the marketplace or their business secret. In fact, there are disputes that affect the reputation of a business. In a public trial, a party has the right to communicate to the press or other public opinion, this information can be detrimental to one party, and may even influence the decisions of the parties in dispute.
  • The court’s decision/ judgment is not final and if one of the parties feels inadequate about it, the decision/ judgment could be appealed or protested upon the request from the procuracy.

2. The Arbitration’s advantage and disadvantage

The advantage

According to Clause 1, Article 3 of the 2010 Law on Commercial Arbitration, commercial arbitration is the method of settling disputes agreed by the parties and conducted under the provisions of the Law on commercial arbitration. Therefore, when parties agree to settle the dispute by arbitration, it will be resolved by arbitration. This is a concept giving both parties the right to choose which concept they want to apply to resolve the dispute. Unlike the Court, which will default to be a dispute settlement if the parties have no other agreement. It can be seen that the concept of arbitration gives the parties more choices and proactive in resolving disputes. Besides, there are some advantages of this method that can be mentioned as follows:

  • The order and procedures for dispute settlement by arbitration are quick and flexible. The arbitral award is final, the arbitration only adjudicates once, unlike the concept of the Court, which is the Court’s Decision / Judgment can be appealed to a higher level of trial.
  • Information security. Clause 4, Article 4 of the 2010 Law on Commercial Arbitration stipulates that “Settlement of disputes by arbitration is not conducted publicly unless the parties agree otherwise”. This helps businesses if they are caught in disputes and litigation still keep their business secrets and reputation in the marketplace.
  • In the arbitration council, in addition to arbitrators with expertise in law, many arbitrators are experts with expertise in other specialties such as engineering, oil and gas, construction, … This makes for a more comprehensive dispute resolution, because in special cases, there are disputes related to specific industries and someone with specialized knowledge in that field is needed to resolve the dispute. The arbitration centers are non-governmental dispute settlement agencies, not in the state apparatus, operating independently, so that the neutrality of the arbitration is guaranteed.

The disadvantage

Besides the advantages of arbitration, there are still some disadvantages in this concept of dispute settlement. Some of this can be mentioned as follows:

  • The first disadvantage is that the cost of the arbitration procedure is quite high, there is no fixed fee, but depends on the rules of each individual arbitration center and the value of each dispute. According to research, the arbitration price at VIAC for a dispute worth 100 million or less is nearly 17 million while, for the same value of the dispute, the court fee/ advance fee is only 5 million.
  • The investigation, verification of evidence, application of urgent measures for arbitration takes longer than the court. In case of applying urgent measures, the jurisdiction of the arbitrator is narrower than that of the court. The arbitrator is only allowed to apply provisional emergency measures in the following cases (Prohibition of change of status quo disputed property; prohibiting or forcing certain actions to prevent acts that adversely affect the arbitration proceedings; distraint of disputed property; temporary request for payment between parties; prohibition of transfer of property rights over the disputed property). In the investigation, verification, and collection of evidence, if the arbitrator cannot collect it themselves, he/ she must still request the competent court to provide documents. Therefore, the arbitrator faces many difficulties in investigating, verifying, collecting evidence, and summoning witnesses without the willingness and goodwill of the disputing parties and witnesses.
  • An arbitral award may be considered and canceled by the Court upon the request of a party (Clause 1, Article 68 of the 2010 Commercial Arbitration Law). This can be the biggest disadvantage when the parties decide whether to apply the arbitration method to resolve the dispute. In Clause 2, Article 68, there are grounds to cancel the arbitral award, but these grounds are not really convincing and very easy to abuse to cancel the award. However, the current practice also shows that the number of arbitral awards is not much.

*This Article is for reference, comparing the two concepts of resolving commercial dispute in Viet Nam. In order to gain more knowledge or to get more legal information, please contact us:

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