Resolving trade disputes via court or arbitration?

Wednesday, Aug 31, 2016 10:13

When both court and arbitration have jurisdiction over the resolution of disputes arising from the performance of commercial contracts, selecting the appropriate mode of resolution will help the parties ensure the benefits of the process and save a lot of time, effort and money.

Principles for dispute resolution

The courts regularly go to trial under the principle of openness, which is different from the principle of private dispute resolution as applied in 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 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 litigants are not entitled to select the judges to resolve their disputes.

Conversely, when choosing arbitration for dispute resolution, the parties may select an arbitrator or arbitration panel consisting of several arbitrators to resolve the dispute. The arbitrators are usually reputable experts who have extensive experience in a particular field such as contracts, international payments, freight forwarding or financials.

In addition, when choosing arbitrators, the parties are entitled to flexibly choose the language, time and venue of arbitration. If the courts are selected to settle the dispute, all the legal proceedings must be strictly in accordance with the law, which is not known for its flexibility.

Effect of arbitral awards

The courts have two levels of trial court: the Court of First Instance and the Court of Appeal. The parties can appeal the judgment of the Court of First Instance where they disagree with the said judgment. However, the award of an arbitration panel is final and can be executed immediately.

Having said the above, the Commercial Arbitration Act 2010 allows the court the right to cancel an arbitral award in special cases upon request from the litigants. In this case, once an award is declared canceled, the parties may agree to bring the dispute to arbitration for resolution, or one party may initiate court proceedings.

Time of proceedings

A characteristic of dispute resolution by arbitration is that an arbitrator or an arbitration panel will pursue a dispute from when they receive the petition until the dispute is completely resolved and the award given. Typically, resolving a dispute by arbitration will only take six to nine months.

In contrast, it will take more time to resolve a dispute in the courts. The courts have to process a number of cases daily ranging across a variety of fields such as commercial, civil, marriage and family, etc. Due to a lack of judge teams and judges having to cover a large number of fields, they tend to be overworked leading to an accumulation of unresolved cases. In addition, the two-level court system can allow disputes to stretch unresolved over several years.

Cost of dispute resolution

The fees for court proceedings are fixed and prescribed by law. They are much lower than the fees paid to resolve disputes by arbitration. Arbitration fees vary and largely depend upon the value of the dispute prescribed by the centre for arbitration. Nowadays, the arbitration fee schedule of VIAC ranges from VND16.5 million to over VND3.6 billion. Many small- and medium-sized enterprises cannot afford these fees and head to the courts for dispute resolution to save on costs.

Ability of implementation

Since the court's authority to resolve disputes is based upon the State, the implementation of a court judgment is guaranteed by the coercive power of the State that has the full apparatus and means to enforce an effective judgment. Meanwhile, the enforcement of an arbitral award is entirely dependent on the voluntary spirit of the parties. If the losing party does not voluntarily implement or cancel the arbitration award, the winning party will have to submit an application of enforcement to the competent enforcement of civil judgments authority to enforce the arbitration award in order to receive the benefits of the arbitration.

When providing consultation on drafting contracts with foreign elements to clients, PLF often prefers to choose commercial arbitration for dispute resolution. In cases of disputes related 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 foreign court judgments are relatively difficult due to the limited number of agreements on mutual legal assistance Viet Nam has signed with countries around the world.


Comments (0)