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ARBITRATION – A GOOD ALTERNATIVE DISPUTE RESOLUTION

PRACTICAL IMPLEMENTATION OF ARBITRATION IN DOMESTIC
COMMERCIAL TRANSACTIONS IN VIETNAM.
Arbitration has long been used worldwide, especially in international business. In Vietnam,
the Commercial Arbitration State Law was first introduced in 2005, then adjusted and raised
to Commercial Arbitration Act (ratified by the National Assembly on 17 June, 2010) and went
into effect by 1/1/2011. These documents are the legal fundamental for this pre-eminent
dispute settlement method to be practiced widely in our country.

I. The reason for the fact that arbitration is applied commonly in international
commercial nowadays is also right for inland commercial activities. The cost-and time-saving
and private characteristic and decision from commercial-activities-savvy arbitral tribunal are
main prominent advantages over traditional courts that arbitration has.
The first thing to take into account is the convenience of exercising arbitration to
resolve disputes arise in highly technical situation related to business such as commerce (and
another example is foreign investment). On one hand, conducting arbitration allows parties to
invite experts with appropriate competences and experiences to be their arbitrators and to
make reasonable decision in a business-savvy way. This proceeding is very different from
traditional litigation as both claimant and defendant cannot “choose the judge”. On the other
hand, as they say “all roads lead to Rome”, the fact that business gurus are still likely to be
consulted by the court panel who might have limited experience in particular business
circumstances helps us to picture the fitting of using arbitration clause in trade contracts
instead of bringing disputes before the Court.
The second reason for entrepreneurs' preference of arbitration is the cost. Although it is
still not clear whether arbitration expenses is lower than nominal filing jury fee in litigation
while the judge, panel and other court officials' salaries not the arbitrators' are paid by
taxpayers, parties do benefit from opportunity cost saving which is generally derived from
time saving. For instance, the procedure scheduled and accelerated by mutual arrangement
and contribute to faster settlement. Also, once the arbitral award is issued, appellate stage
hardly occurs so that the dispute is closed soon. Obviously, these do help in emergency cases
or in conditions that the subject of the contract such as fruit, fresh food, etc. is need to be
determined quickly when further damages would happen without speedy handling. Also,
time-saving is valuable especially in goods trading because the longer the consignment is not
circulated, the bigger the financial and stock cost will be. Therefore, the above points are
usually referred to the natural cost advantage of arbitration.
Finally, the most remarkable characteristic of arbitration in many businessmen and
women is the privacy. Unlike one of basic principle of litigation, arbitral proceedings are non-
public. This is really necessary to the business activities of the involved parties in future
because their customers, suppliers and partners perceive that the reliability is so important
that they tend to diminish the trading with a flaw-reputation company. Therefore, not only the
goodwill is reserved but also in some extent the relationship between those companies still
remains.

II. As we can see, arbitration seems good, so is there any promising future for the use of
arbitration in domestic commercial transactions in Vietnam?
Without contradiction, arbitration can be applied in trade and business within a specific
country besides providing resolution for international contracts. Many scholars and law-
makers believe that this alternative dispute resolution deserves an consideration in changing
the way that people deal with disagreement. Indeed, the actual state of arbitral practice in
many developed nations is a firm proof. Despite its apparent merits, arbitration still has a
modest foothold in domestic dispute settlement in Vietnam.
The foremost important reason may arise from the actual fact that arbitration is quite
new for our potential users. For instance, the introduce of a document that regulates
arbitration in Vietnam has just emerged for five years. Resonating with this fact, the
Vietnamese enterprises have been considered lack of legal knowledge and making use of it.
Therefore, considerable effort will be needed to populate and stimulate the demand and the
application of arbitration into the inland transactions. The government should perform more
actively in organizing more seminars, courses on arbitration and related matters and in
providing detailed practical and useful information to the target entrepreneurs and to the
public as a whole.
To some degree, contributing to the unpretentious demand for arbitration is the low
availability of skilled arbitrators in our country at the present. Take the following argument
for closer view on the matter, although becoming a commercial arbitrator is not so demanding
to be eligible in conformity with the Commercial Arbitration Act 2010, the amount of
experienced arbitrators who are truly reliable is rather small. Consequently, the development
of inland arbitration implementation is not stimulated by the labor force in this area. Perhaps,
a promising solution should be the interaction in foreign trade and investment activities as
well as the increasing preference to arbitration that lead to the requirement of training
qualified arbitrators.
The third obstacle must be the psychological concern about the enforcement of the
arbitral award. This is understandable because arbitral tribunal either appointed by involved
parties (in ad hoc arbitration) or established by an institution providing arbitration services
(Vietnam International Arbitration Center – VIAC for example) (in administered arbitration)
has no authority in prosecuting the award in many people's perception. Actually, all the
declaration and orders of the arbitral tribunal are analogous to judgment of a court and its
enforcement is also guaranteed by the Prosecuting Body. For example, if one party failed to
comply with the arbitration order such as pay for the damage to the other party, they could be
forced to fulfill their obligation by the authorities. Going back to the first issue, our
enterprises will probably use this resolution more frequently with sufficient information.

III. In summary, based on the advantages of arbitration together with the integration trend,
arbitration clause which has been used on foreign trade contracts between Vietnamese
economic organizations and oversea partners will certainly be consolidated and give support
to the advance of arbitration to settle dispute in domestic business context.

References:
1. “Luật Trọng tài thương mại Việt Nam” No 54/2010/QH12.
2. Mitchell L. Marinello, “Protecting the Natural Cost Advantages of Arbitration”.
http://apps.americanbar.org/litigation/litigationnews/practice_areas/corporate_naturalc
ost.html . Retrieved 20/3/2011.