The current Vietnamese law stipulates two dispute settlement mechanisms: Courts and Commercial Arbitration. So how is the agreement on dispute settlement terms in accordance with the law?

Commercial arbitration only handles cases where the parties have previously agreed to choose an arbitrator as a dispute settlement agency. The arbitration agreement may be made before or after a dispute occurs. If a party initiates a lawsuit at the Court after this agreement is reached, the Court will refuse to accept it, unless the arbitration agreement is invalid or unenforceable.

Therefore, to have a dispute resolved by arbitration, the parties must have an agreement and that agreement must be valid and enforceable.

When establishing an arbitration agreement, the following points must be paid attention to:

  • The arbitration agreement can be established in the form of an arbitration clause in the contract, or in the form of a separate agreement.
  • In case the dispute involves foreign elements, the parties may choose the language used to conduct the proceedings and the applicable law in accordance with the provisions of Vietnamese law.
  • The location of dispute settlement should be agreed upon in the most convenient way for the parties.
  • It is necessary to identify the correct name of the arbitration center.

In case the arbitration agreement is invalid or unenforceable, the disputing parties have the right to initiate a lawsuit to a competent court to settle the case. In case the parties have agreed to choose a specific Court, the competent court is the Court chosen by the parties, if in accordance with the provisions of the law.

Jurisdiction to settle a case is a legal institution, the Civil Procedure Code clearly defines the Court’s jurisdiction by case, territory, and court level. Transfer the petition to the competent court or return the petition if it is not within the jurisdiction of the court.

About territorial jurisdiction, the law provides as a general rule that the court having jurisdiction over the dispute is the court where the respondent resides. But if the parties have agreed to settle the dispute at the Court where the plaintiff resides, it is still acceptable or the jurisdiction will belong to the court where the real estate is located (for real estate disputes).

In practice, many contracts have a dispute resolution clause specifying that the dispute will be resolved in the XYZ District Court, but these agreements are not necessarily legally enforceable because the XYZ District Court is not necessarily the court of competent jurisdiction authorization.

For the case where the parties tend to choose the court as the dispute settlement agency, PLF believes that the parties to the contract should carefully consider the factor of the jurisdiction of the court that the parties have chosen, which facilitates the settlement of arising disputes.

The article is based on laws applicable at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable laws and the specific cases that the reader may wish to apply may have changed. Therefore, the article is for referencing only.


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