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What Are Business And Commercial Disputes? Notes When Arising Business And Commercial Disputes

What are business and commercial disputes?

Commercial law of Vietnam does not directly provide a definition of a business and commercial dispute. However, based on the provisions of Law on Commerce 2005 regarding commercial activities, we can have the clearest picture of “what are business commerce disputes?”. Accordingly, commercial activities mean activities for the purpose of generating profits, including sales and purchase of goods, provision of services, investment, commercial promotion and other activities for other profit purposes[1]. Thus, it can be understood that business and commercial disputes are conflicts over rights and obligations between parties in the course of involving in business and commercial activities. From the above concept, business and commercial disputes have some characteristics as follows:

  • First, about the subject of business and commercial disputes

Understanding of the subject will answer the question “What are business and commercial disputes?”. In fact, business and commercial disputes mainly take place between merchants. However, in some cases, individuals and organizations that are not merchants can also be the subject of the business and commercial disputes, such as: person who is not yet a member of the company but has transaction on transfer of contributed capital with the company or its member; between the company and its members; between company and the manager in a limited liability company or member of the Board of Management; among the members of the company in relation to the establishment, operation, dissolution, merger, consolidation, division, separation, handover of the company’s assets, change of the organisational form of the company

  • Second, the types of business and commercial disputes can be mentioned as follows:
  • Sales and purchase of goods, providing services; buying and selling bonds and stocks; financial investment, etc.
  • Disputes over intellectual property rights or technology transfers among individuals or organizations, which are all for the purposes of profits.
  • Other business and commercial disputes as provided for by law
  • Third, causes of arising business and commercial disputes
  • the breach of contracts due to non-performance or improper or incomplete the contractual obligation;
  • the violation of the law of the parties participating in the commercial contractual relationship, causing damage to the interests of the other party.

Notes when arising business and commercial disputes

  • First, the parties have the right to choose the methods of dispute settlement

Currently, commercial law of Vietnam stipulates four mechanisms for settling business and commercial  disputes between parties: (i) negotiation; (ii) conciliation; (iii) arbitration; (iv)  Court[2]. Accordingly, depending on the complexity of the dispute and the goodwill of parties, the parties can choose the appropriate settlement method to protect their legitimate rights and interests..

For negotiation and conciliation, the parties can agree and exchange plan of dispute resolution without the intervention of competent judgment enforcement agencies. However, if the parties have applied these two methods to settle the dispute but there are no results, the parties can initiate a lawsuit against a competent authority for settlement such as a court or arbitration

The settlement of the business and commercial disputes by arbitration is conducted by an arbitral tribunal with the final result being a legally enforceable award for the parties. This method is conducted confidentially[3] and the parties can only apply this method when there is a clear agreement on the selection of arbitration for settlement, otherwise the competent court will resolve that dispute[4].

According to Article 30 of the Civil Procedure Code 2015, the court has jurisdiction to settle business and commercial dispute. Judgments of the court are guaranteed by the force of state power. Similar to the arbitration mechanism, the court can only resolve business and commercial disputes when requested by the parties and the dispute must fall within the jurisdiction of the court.

  • Second, the parties should pay attention to the statute of limitations for business and commercial disputes

Under Article 319 of Law on Commerce 2005, the statute of limitations regarding business and commercial disputes is 2 years as of the date a party’s legitimate rights and interests are infringed.

Therefore, in order to ensure the integrity of their right to initiate legal action, the parties in dispute need to pay attention to the statute of limitations for initiating lawsuits to the courts when a dispute occurs.

Third, about the agency and country having jurisdiction to settle business and commercial disputes (for commercial disputes with foreign elements)

Normally, the parties will agree and select the competent agency and country to resolve the dispute before entering into the transaction and stipulate these contents in the contract or after a dispute arises. In case the disputing parties cannot agree on the agency and country having jurisdiction to settle the dispute, the plaintiff may, depending on the case, select the appropriate agency and country to settle the dispute. ensure compliance with international trade laws and practices.

In order to be able to determine the jurisdiction of the Vietnamese Court in business and commercial disputes involving foreign elements, we will consider the provisions of Vietnamese procedural law on common jurisdiction and exclusive jurisdiction of the court.

It should be noted that, for business and commercial disputes under the exclusive jurisdiction of Vietnamese courts, Vietnamese courts will not recognise and enforce the judgments or decisions of foreign courts on these cases[5].

Phuoc & Partners is a professional 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 of Law on Commerce 2005

[2] Article 317 of Law on Commerce 2005

[3] Article 4.1 of Law on Commercial Arbitration 2010

[4] Article 5.1 of Law on Commercial Arbitration 2010

[5] Article 439.4 of the Civil Procedure Code 2015, Article 440.1 of the Civil Procedure Code 2015