In business relationships, conflicts of interest are inevitable. The parties to the dispute all want to find a quick, low-cost solution, ensuring their reputation and interests as much as possible. Hence, choosing a dispute resolution method is extremely important. According to the provisions of Article 317 of the Commercial Law 2005, commercial disputes can be resolved in four ways: (i) self-negotiation by the parties; (ii) mediation with the participation of a mediator; (iii) resolution at Arbitration; and (iv) resolution in Court.
Each form will have different characteristics that the parties can consider and choose to apply in their particular case. Here is a basic comparison to get an overview of commercial dispute resolution methods:
| Criteria | Negotiation | Mediation | Arbitration | Court |
| Legal basis | No legal basis | Decree No. 22/2017/ND-CP on 24 February 2017 | Law on Commercial Arbitration 2010 | Code of Civil Procedure 2015 |
| Objects of dispute resolution | The parties to the dispute | Through the mediator[1] | Through the arbitrator[2] | Through the judge[3] |
| Legal binding | Not binding | Not binding | The verdict is final, binding and obligatory to the parties[4] | The decision is obligatory to the parties, otherwise it will be enforced[5] |
| Condition of resolution | Without any conditions, the proceeding is subject to the unanimous will of the parties | There must be an agreement between the parties on commercial mediation[6] | – There is an agreement on commercial arbitration[7]
– Disputes falling under the jurisdiction of commercial arbitration |
– One of the parties files a lawsuit in court[8]
– Disputes falling under the jurisdiction of the court |
| Advantages | – Convenient, fast, simple, flexible, efficient and inexpensive
– Protect the reputation of the parties and business secrets |
– Convenient, fast, simple, flexible, efficient and inexpensive
– Mediation results are recorded and witnessed by a third person, so the level of respect and voluntary compliance with commitments is often higher than negotiation. |
– Arbitration is not limited in terms of territory because the parties have the right to choose any arbitration center to resolve their disputes[9].
– Following a certain procedural order, the arbitral verdict is not publicly disclosed, thus protecting the reputation of the parties and business confidentiality[10].
– The arbitrator’s verdict is final, after the arbitrator makes the verdict, the parties have no right to appeal before any organisation or court[11]. |
Court judgments are highly coercive[12] |
| Disadvantages | – It is difficult to find a common voice because the parties will tend to maximize their interests
– There is no legal mechanism to guarantee the implementation of commitments |
– Mediation also has the same limitations as negotiation, because it is still decided on the basis of the will to agree as well as the voluntary implementation of each party.
– Reputation and business secrets of enterprises are more easily affected than negotiation |
– The longer the dispute, the higher the arbitration fee[13]
– Final judgment but can be considered by the court to cancel. If the ruling is annulled, both sides will have to start from scratch, so it’s time consuming |
– Procedures in proceeding litigation at court are not flexible because they have to comply with the provisions of the law
– Although the principle of open trial of the court is considered progressive and deterrent, it is sometimes an obstacle for entrepreneurs when business secrets are revealed. |
In addition, when the parties choose the commercial dispute resolution method through the Court, the parties will be encouraged to carry out the conciliation procedures prescribed in the Law on Mediation or Dialogue in Court. This shall be carried out before the Court accepts the case if it is not under the non-conduction of mediation circumstances prescribed by Law[14] by the Court’s Mediator. This is a step in the process of proceedings, which is different from the mediation method mentioned in the classification table above.
The article “Methods of resolution when a business dispute occurs” desires to share with the reader about legal terminology has different interpretations. If you have difficulty in finding a Law Firm to advise and support in legal aspect related to the banking practice, please contact us.
Phuoc & Partners is a consulting firm established in Vietnam and currently has nearly 100 members working in three offices in Ho Chi Minh City, Hanoi and Danang. Phuoc & Partners is also rated as one of the leading consulting firms specializing in business law in Vietnam that has leading practice areas in the legal market such as Labour and Employment, Taxation, Merger and acquisition, Litigation. We are confident in providing customers with optimal and effective service.
[1] Article 3.1 Decree No. 22/2017/ND-CP
[2] Article 3.5 of Law on Commercial Arbitration 2010
[3] Article 48 of Code of Civil Procedure 2015
[4] Article 61.5 and Article 66, 67 of Law on Commercial Arbitration 2010
[5] Article 19.1 of Code of Civil Procedure 2015
[6] Article 6 of Decree No. 22/2017/ND-CP
[7] Article 5.1 of Law on Commercial Arbitration 2010
[8] Article 4.1 of Code of Civil Procedure 2015
[9] Article 11.1 of Law on Commercial Arbitration 2010
[10] Article 4.4 of Law on Commercial Arbitration 2010
[11] Article 61.5 of Law on Commercial Arbitration 2010
[12] Article 61.5 of Law on Commercial Arbitration 2010
[13] Article 34 of Law on Commercial Arbitration 2010
[14] Article 19 of Law on Mediation or Dialogue at Court 2020
