3 notes when establishing an arbitration agreement

When enterprises choose to resolve disputes by arbitration, they need to pay attention to the time of establishment, form, and legality of the arbitration agreement to avoid the arbitration agreement being invalidated.

Commercial arbitration is becoming increasingly popular due to its advantages, such as quick processing time, simple proceedings, and legally binding judgments. Many enterprises, particularly those involved in international trade, are opting for arbitration as a preferred dispute resolution mechanism. However, it should be noted that if an arbitration agreement is established, the dispute will not by default be accepted and resolved by the Arbitrator. In this article, PLF will provide 3 key considerations when establishing and implementing an arbitration agreement to ensure its effectiveness.

1. Arbitration agreements apply only to specified types of disputes

According to Article 2 of the Law on Commercial Arbitration 2010, the Arbitrator can resolve the following disputes:

• Disputes between the parties arising from commercial activities;
• Disputes arise between parties in which at least one party has commercial activities;
• Other disputes between the parties that are stated by law are resolved by Arbitration.

Thus, only arbitration agreements signed by the parties requesting arbitration to resolve the above disputes are valid. If the parties establish an arbitration agreement to resolve other disputes such as labor disputes or civil disputes over land, the arbitration agreement will have no legal value.

Many enterprises often mistakenly believe that Arbitration only resolves business and commercial disputes, implying that the parties to dispute all have profit motives. However, the above regulations demonstrate that the Arbitrator’s authority to resolve disputes is determined by the type of dispute or the subject of the dispute.

Types of disputes resolved through commercial arbitration:

Accordingly, depending on the type of dispute, it must arise from commercial activities, such as goods purchase and sale activities, service provision, investment, trade promotion, and other profitable activities.

On the subject of the dispute, the Arbitrator will resolve the dispute if at least one party has commercial activities. As a result, the party conducting commercial activities can be a household or individual with business registration, rather than an enterprise. Therefore, some disputes between employees and employers are still accepted and resolved by the Arbitrator because the parties believe that these disputes do not arise from labor relations but from other agreements such as Non-Compete Agreements, Information Confidentiality Agreements between a party engaged in commercial activities (employer or enterprises) and an individual party (employee).

Also, this regulation raises the question of whether a civil dispute involving one party engaging in commercial activities falls under the Arbitrator’s jurisdiction. Although current legal regulations have not yet clarified this content. However, in practice, the parties tend to prefer to resolve them through the Court.

2. Time of establishment and form of Arbitration Agreement

Arbitration agreement may be established in the form of:

• The arbitration agreement can be included in the contract, agreement and signed by the involved parties as a specific term
• The arbitration agreement can be established by the parties after the dispute has arisen,
• The arbitration may be established at any time during the performance of a transaction or contract or agreement between the parties in which at least one party has commercial activities.

Thus, the arbitration agreement does not have to be established before the dispute arises or at a specific time.

Independence of the Arbitration Agreement:

From the moment the arbitration agreement is established, the arbitration agreement is independent of other contracts and agreements from which the parties arise disputes. This means invalidity, cancellation, unilateral termination or other legal issues relating to or arising from these contracts or agreements do not affect the validity of the arbitration agreement unless it is invalid on its own.

Accordingly, if the parties do not establish an arbitration agreement in their contract or agreement, they can do so in the following ways:

• Enter into an independent arbitration agreement. Please note that this arbitration agreement must refer to disputes arising from a specific contract or agreement. Establishing a general arbitration agreement such as “all disputes arising from transactions between Party A and Party B shall be resolved by arbitration at Arbitration Center C” risks rendering the arbitration agreement invalid because of ambiguity. Regarding the form of the arbitration agreement, the parties can establish it in writing or electronically such as an electronic contract according to the provisions of the Law on Electronic Transactions, a data message (one party sends via email and the other party confirms); or
• Sign an annex to the contract to add a provision for dispute resolution by arbitration.

In addition, when one party requests Arbitration to resolve the dispute and the other party is aware but does not object, it is considered an arbitration agreement to be established In this case, one party must submit a written request for arbitration settlement. In addition to the Arbitrator’s notification, the requesting party should notify the other party.

3. Authority to establish an Arbitration Agreement

It should be noted that for a party that is a business, the person establishing the arbitration agreement must be its legal representative or its legally authorized representative. If the party is an individual, the person who establishes the arbitration agreement must be that person or a legally authorized person with full civil capacity.

Above are some notes that enterprises should follow when establishing arbitration agreements. Although the above notes do not cover all of the requirements for an arbitration agreement to be legally valid, however, PLF hopes that enterprises will have a better understanding when choosing Arbitration as the dispute resolution agency and establishing arbitration agreements to resolve disputes that may arise between the parties.

At PLF Law Firm

Is your business looking to protect itself from potential disputes? An arbitration agreement can be a valuable tool for resolving conflicts efficiently and confidentially. Let PLF Law Firm assist you in drafting a comprehensive and enforceable arbitration agreement. Our experienced legal team can provide tailored advice to meet your specific needs, ensuring that your business is well-prepared to handle any dispute.

Contact PLF Law Firm today via email at inquiry@plf.vn or +84913 902 906 or Zalo | Viber | WhatsApp to receive a free 30-Initial Minute Consultation.

Time of writing: 26/06/2024

PLF Law Firm