TRADE ARTICLES

Resolving Trade Disputes, Court Or Arbitration?

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“When both Court and Arbitration have jurisdiction over the resolution of disputes arising from the performance of commercial contracts, selecting appropriate modes of resolution will help the parties ensure the benefits and save lots of effort, time and money.”

Principles for dispute resolution

The Courts regularly trial under the principle of openness, which is different from the principle of private dispute resolution of Commercial Arbitration. Many enterprises choose to resolve disputes by Arbitration to protect their trade secrets and reputation in markets because of the private nature of the arbitral awards .

Forms of dispute resolution

The Courts resolve disputes by virtue of Judges. The number of Judges will depend on the level of the trial and the litigants are not entitled to select the Judges to resolve their disputes.
Conversely, when choosing the Arbitration for dispute resolution, the parties may select an Arbitrator or Arbitration Panel consisting of several Arbitrators to resolve the disputes. The Arbitrators are often reputative experts who have extensive experience in a particular field such as contracts, international payments, freight forwarding, financial, etc.
In addition, when choosing the Arbitrators, the parties are entitled to flexibly choose the language, time and venue of the arbitration.  Otherwise if the Courts are selected, all the rules of legal proceedings must adhere strictly in accordance with law.

Effect of the arbitral awards

Since the Courts apply two level of trial courts including the Court of First Instance and the Court of Appeal, the parties can still appeal the judgment of the Court of First Instance in case of disagreement with the said judgment. Meanwhile the award of the Arbitration Panel is final and can be executed immediately.
However, the Commercial Arbitration Act 2010 allows the Court to have the right in cancelling the the Arbitratral Award in some special cases with request from the litigants. Thus, once the Award is declared to be canceled, the parties may agree to bring the dispute to Arbitration for resolution or one party may initiate the Court proceedings.

Time of proceedings 

Characteristics of dispute resolution by Arbitration is that an Arbitrator or an Arbitration Panel may pursue a dispute from when they receive the petition until the dispute is completely resolved and the award is given. Typically, resolving a dispute by Arbitration will only need about 6 to 9 months. 
In contrast, it will take more time to resolve a dispute in Courts. The Courts must daily process a number of cases in variety of fields such as commercial, civil, marriage and family, etc. Due to the lack of Judges team and not being specialized in a particular filed, Judges have to handle too much work leading to the accumulation of unresolved cases. In addition, the two level courts system would make the dispute last for several years and remain unresolved.

Cost of dispute resolution

The fees for Court proceedings are fixed as prescribed by law and are much lower than the fees to be paid to resolve disputes by Arbitration. Arbitration fees may vary and depend on the value of the dispute prescribed by the Centre for Arbitration. Nowadays, for the Arbitration fee schedule of VIAC ranging from 16,5 million VND to over 3,6 billion VND, many small and medium enterprises which can not afford the said fee will follow the path of dispute resolution by Court in order to save costs.

Ability of implementation

Since the nature of the Court is the authority which resolve disputes on behalf of the State, the judgment of the Court is guaranteed by the implementation of the coercive power of the State with a full apparatus and means to enforce the effective judgments. Meanwhile, the enforcement of the Arbitratral Award  is entirely dependent on voluntary spirit of the parties. If the losing party does not voluntarily implement and does not require to cancel the  Arbitratration Award, the winning party will have to submit an enforcement application to the competent Enforcement of Civil Judgments to enforce the Arbitration Award in order to ensure their own benefits.
When providing consultation on drafting contracts with foreign elements to the clients, PLF often prefers to choose the Commercial Arbitration for dispute resolution. Since in case of disputes relating to assets overseas, the Arbitral Award will be enforced more easily thanks to the 1958 New York Convention to which Vietnam is a member. The enforcement of the foreign Courts’ judgments is relatively difficult because we only signed several agreements on mutual legal assistance with a number of countries around the world.

PLF Law Firm 

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