VIETNAM Law and Practice Contributed by: Tony Nguyen, Ta Phuong Thao, Nguyen Minh Duc, Nguyen Phuong Anh, Nguyen Duc Tai and Truong Que Chi, EPLegal
In practice, arbitration is most common in disputes involving the sale of goods, construction, real estate and financial transactions. Recent VIAC data indicate that the sale of goods accounts for approximately 25% of cases, followed by construction (22%), real estate (14%) and finance (11%). It is particularly favoured in transactions involving foreign parties, where neutrality, confidentiality and enforceability under the New York Convention are key considerations. While court litigation remains widely used, arbitration has become the preferred forum for complex and internationally connected disputes. 3.2 Restrictions on Use of Arbitration Under Article 2 of the LCA, arbitration applies to: • commercial disputes; • disputes where at least one party engages in com- mercial activities; or • other disputes permitted by law, provided a valid arbitration agreement exists in accordance with Articles 5 and 16. Apart from these disputes, all other types of disputes cannot be referred to arbitration. In addition, courts may retain jurisdiction in certain circumstances, including where an arbitral award or settlement is set aside, arbitral proceedings are termi- nated or the arbitration agreement is invalid or inca- pable of performance. Arbitral tribunals must assess the validity and enforce- ability of the arbitration agreement at the outset. If the agreement is invalid or cannot be performed, the tribunal must terminate the proceedings. 3.3 Advantages of Arbitration Arbitration offers several practical advantages in Viet- nam, particularly for commercial disputes. Flexibility It provides greater procedural flexibility, allowing par- ties to agree on the tribunal’s seat, language and com- position and typically avoids multiple levels of appeal, making it more time-efficient than court litigation. The ability to appoint arbitrators with relevant technical
or industry expertise is a key benefit in complex dis- putes. Confidentiality Confidentiality remains a major advantage, as pro- ceedings are conducted in private, which is particular- ly important for commercially sensitive matters. Arbi- tration is also well-suited to cross-border disputes, offering neutrality and adaptability to foreign law and international practices. Binding Award Arbitral awards are final and binding and those issued by institutions such as the Vietnam International Arbi- tration Centre are enforceable in Vietnam and interna- tionally under the New York Convention, enhancing their practical effectiveness in cross-border transac- tions. 3.4 Disadvantages of Arbitration Arbitration in Vietnam also presents several practical limitations, as outlined below. • Costs are generally higher than court litigation, par- ticularly in complex cases involving tribunal fees, administrative expenses and expert evidence. • There is also a risk of annulment. Courts may set aside arbitral awards on limited grounds under Article 68 of the LCA, including where an award is deemed contrary to the “fundamental principles of Vietnamese law”. This concept remains broadly defined, creating some uncertainty in practice. • Enforcement can be delayed. Applications to set aside awards may suspend or prolong enforce- ment and where an award is annulled, parties often revert to litigation rather than recommencing arbi- tration, reducing the efficiency gains that arbitration is intended to provide (Articles 66 and 71.8 of the LCA). 3.5 Arbitral Institutions The most prominent arbitral institution in Vietnam is the Vietnam International Arbitration Centre, which handles the majority of commercial arbitration cases. VIAC has administered thousands of disputes across a wide range of sectors, involving both domestic and international parties.
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