DISPUTE ISSUES WITH FOREIGN ELEMENTS IN VIETNAM

When entering into a contract, the parties cannot avoid arising disputes during the process of performing such a contract. Dispute issues that arise between subjects in Vietnam and don’t have foreign elements will comply with Vietnamese Law to be resolved. Thus, What Law will be applied for disputes with foreign elements? 

I. The facts of dispute issues with foreign elements

Currently, International integration is one of the most important elements that connect and support countries. Countries can know the life and cultures of each other, participate in operating sectors of business or investment in other countries, or even perform civil relationships such as leases, purchase and sale agreements, marriages, divorces, etc,. These civil transactions are also based on voluntary and agreement-based principles that bring benefits and demand for the parties. However, besides the benefits, there are many civil issues with foreign elements that need to be resolved. Thus, when arising disputes with foreign elements, what Courts have the competence to resolve them? In civil issues, most Courts in related countries also have the competence to resolve these disputes.

II. Understanding disputes with foreign elements

1. What are disputes with foreign elements?

Pursuant to Clause 4, Article 3 of the Law on Commercial Arbitration 2010, disputes with foreign elements are disputes arising in commercial relationships or other legal relationships with foreign elements as defined by the Civil Code.  

2. Some types of disputes with foreign elements

There are five (05) types of common disputes, as follows:

• Disputes arising in activities of business or commerce between individuals or organizations that have business registration with each other and also want to receive profits;
• Disputes arising from Intellectual Property or technology transfers between individuals or organizations;
• Disputes arising between persons who aren’t members of any company and members of such a company or such a company in a transaction of transferring contribution capitals;
• Disputes arising between members of a company; between company and managers for the Limited Liability Company, or between company and Board of Director, Director or General Director for the Joint Stock Company in establishment, operation, liquidation, merger, acquisition, division, handing over the company’s assets, or transfer for the company’s type;
• Other disputes arising in business or commerce, except for such disputes that belong to the resolving competence of other Agencies or Organizations according to the Law.

3. Methods for resolving disputes with foreign elements

In Vietnam, resolution of disputes with foreign elements can be performed according to the following methods: negotiation, mediation, arbitration and the Court. 

III. The regulations for dispute resolution with foreign elements

1. Laws are applied to resolve dispute issues with foreign elements

• The Law on Commercial Arbitration 2010;
• The Civil Code 2015.

2. The competence to resolve disputes with foreign elements

The Provincial People’s Court has the competence to resolve civil issues belonging to the competence of the District People’s Court according to first instance procedures when the Provincial People’s Court considers that such civil issues are necessary to be resolved by them or when the District People’s Court requests consideration and resolution.

The District People’s Court doesn’t have the competence to resolve commercial business activities with foreign elements. The Provincial People’s Court, where the company of suitors has its headquarters, will be entitled to resolve such issues.

Pursuant to Article 2 of the Law on Commercial Arbitration 2010, the Arbitrator⁽¹⁾ has the competence to resolve civil issues, as follows:

• Disputes between the parties arising from commercial activities;
• Disputes arising between the parties that at least one party has commercial activities;
• Other disputes arising between the parties that are resolved by the Arbitrator according to the Law.

The Commercial Arbitrator will be entitled to resolve civil issues that arise without the prior agreement of the parties.

3. Processes for resolving dispute issues with foreign elements

• Step 1: Considering the statute of limitations for resolving dispute issues with foreign elements

Pursuant to Article 33 of the Law on Commercial Arbitration 2010, except for otherwise provided by other specific Laws, the statute of limitations is two (02) years from the time the parties’ legal rights and interests are breached.

• Step 2: Submitting a lawsuit petition to the Arbitration Center for resolving requests

After considering the statute of limitations, the parties have the right to file a lawsuit petition with the Arbitration Center for resolution of their requests.

If the parties agreed to choose the Arbitrator but one party files a suit at the Court, the Court must deny receiving and resolving it; except for agreements of the Arbitrator that are void or unenforceable.

• Step 3: The Arbitration Center establishes the Arbitration Tribunal⁽²⁾ (Arbitral Forum)

Article 30 of the Law on Commercial Arbitration 2010 stipulates that the parties can still negotiate or agree to terminate a dispute resolution by themselves. If the parties can agree on such an issue, they will have the right to require the Arbitration Center’s President to promulgate a suspending decision of dispute resolution. If the parties cannot agree, an Arbitration Tribunal will be established to resolve disputes.

• Step 4: Opening a meeting to resolve disputes

A meeting to resolve disputes is opened to perform mediation or reach an agreement between the parties regarding resolving disputes. When the parties can agree on dispute issues together, the Arbitration Tribunal will make mediation minutes that have the parties’ signatures and the Arbitrator’s confirmation.

The Arbitration Tribunal will promulgate a decision recognizing the parties’ agreement. This decision is final jurisdiction and is equivalent to an arbitration award⁽³⁾.

• Step 5: Award (judgment) of the Arbitration Tribunal

When the parties cannot perform mediation, the Arbitration Tribunal will resolve disputes. Results of dispute resolution will be presented through awards (judgements) of the Arbitration Tribunal. According to Article 60 of the Law on Commercial Arbitration 2010, the Arbitration Tribunal will sentence an arbitration award by majority voting method.

IV. Some questions and answers regarding disputes with foreign elements

1. Can the Court resolve disputes that are agreed upon by choosing Arbitration?

The agreement to choose Commercial Arbitration will limit the competence of the Court because the Court will not receive and resolve dispute issues that have an agreement to choose Arbitration.

2. Can an arbitration award be appealed?

An arbitration award is final jurisdiction and cannot be appealed according to any procedure.

3. What languages are used to resolve dispute issues with foreign elements?

Pursuant to Article 10 of the Law on Commercial Arbitration 2010, as follows:

• For dispute issues without foreign elements, a language used in arbitral proceedings is Vietnamese, except for dispute issues where one party is an enterprise with foreign capital investment at least. If the disputing parties cannot use Vietnamese, they can choose their own interpreter.
• For dispute issues with foreign elements, a language used in arbitral proceedings will be agreed upon by the parties if dispute issues arise between the parties but one of them is an enterprise with foreign capital investment , except for dispute issues where one party is an enterprise with foreign capital investment at least. If the parties don’t agree on used languages, the Arbitration Tribunal will decide and choose appropriate languages.

4. Are the procedures for recognizing and enforcing a decision or award (judgment) of the foreign Court in Vietnam difficult? How long is the duration?

According to principles of respect for sovereignty, civil decisions or awards (judgements) are sentenced by the Jurisdiction of any country, they only have validity in the territory of such countries. Therefore, if a decision or an award (judgment) wants to have validity and enforcement in other countries, such a decision or an award has to be approved by specific procedures that are procedures for recognizing and enforcing civil decisions or awards of the foreign Court in Vietnam.

Pursuant to Clause 1, Article 425 of the Code of Civil Procedure 2015, a person who has the right to request for recognizing and enforcing a decision or an award of the foreign Court is the person to whom the award is enforced or their legal representative.

The request duration is stipulated, as follows: within three (03) years from the date civil decisions or awards of the foreign Court have validity. 

These are all information relating to DISPUTE ISSUES WITH FOREIGN ELEMENTS as prescribed by Vietnamese Law. Please don’t hesitate to contact us, if the clients have any further questions. 

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1. Arbitrator: is someone who has been officially chosen to make a decision that ends a legal disagreement without it having to be solved in court.   (source: Cambridge Dictionary)

2. Arbitration Tribunal (2*): (also known as Arbitral Forum) is a set of arbitrators appointed according to an agreement between the parties in commercial arbitration activities so as to resolve disputes arising.   (source: Legal English of NPLaw)

3. Arbitration award (3*): (also known as an arbitral award) means a decision of the Arbitration Tribunal that resolves the entire dispute's contents and terminates the arbitral proceedings.    (source: Legal English of NPLaw)