Contract dispute solution in Vietnam

 The contract is a written agreement, transaction document between the contracting parties on the performance of a work, in which there are clear provisions on rights and obligations of each party to orient and perform by the law. 

However, in reality, there are still cases where the rights and obligations of the parties are violated, which leads to disputes. It can be said that a contract dispute is a conflict or disagreement between parties to a contractual relationship regarding the performance or non-performance of contractual rights and obligations, or in which one of the parties deliberately does not perform its obligations under the agreement.

Contract disputes resolution methods

         Currently, in reality, contract disputes are usually settled through the following four main methods:

• Settle contract disputes through negotiation: This is the method chosen by the disputing parties first and in reality, most disputes in business and commerce are resolved by this method. The State encourages the parties to apply the method of self-negotiation to settle disputes on the principle of respecting the parties’ right agreement.
• Settle contract disputes through mediation: Mediation is the disputing parties through an intermediary (mediator/mediation center) to together discuss and agree to agree on a solution to settle a disagreement between them and voluntarily implement the agreed solution through mediation.
• Settle contract disputes through arbitration: the parties agree to bring the disputes that have arisen or will arise between them to the arbitration center. After considering the dispute, the arbitrator will make an enforceable judgment against the dispute.
• Settle business disputes through the Court: This is a method of dispute settlement that the parties through the procedure-conducting agency to settle.

Agencies competent to settle contract disputes

         For each method of contract dispute resolution, there will be corresponding agencies competent to settle contract disputes including:

• For settlement through negotiation method: the parties meet each other and discuss to find solutions related to conflicts. In this method, the parties can also ask for the support of the lawyers to analyze legal bases and give advice so that the parties can understand their rights and responsibilities to find a solution as well as to reconcile the rights and obligations of the parties.
• For settlement through mediation method: the mediator who conducts mediate is also known as the mediator;
• For arbitration settlement: arbitration council;
• For settlement through judicial procedures method: People’s Court.

The third-man conducts to mediate (mediator)

         The mediation method is the method that appears earliest and it is used first when there is a contract dispute. Mediation is when the disputing parties discuss and agree to come to an agreement on a solution to their disagreement and voluntarily implement the agreed solution through mediation. When choosing the mediation method, the parties can proceed in one of the following ways:

• Self-mediation: means the disputing parties to discuss by themselves to agree on a solution to the dispute without the influence or help of a mediator (similar to the self-negotiation).
• Mediation through the third-man: means the disputing parties conduct mediation with each other under the support and help of a third-man (mediator). A mediator can be an individual, an organization, or a Court chosen by the disputing parties or prescribed by law.
• Out-of-court mediation: means the mediation conducted by the parties before submitting the petition to the Court or arbitration.
• Mediation in proceedings: means mediation conducted in the Court, in arbitration when these agencies settle a dispute according to the petition of one party (mediation with the assistance of the Court or arbitration). The Court or arbitrator will issue a decision to recognize the agreement of the parties and this decision is enforceable for the parties.

Thus, the mediator conducts the mediation occurs when the parties to dispute proceeding in the manner of mediation. For mediation through third-man, a mediator can be an individual, an organization, or a Court chosen by the agreement of the disputing parties or prescribed by law. Normally, the individual is chosen to be the mediator – a reputable person, trusted by the parties, and has expert knowledge on the matter in dispute. For labor contract disputes, a labor mediator is a person competent to conduct mediation. 

Mediation is not intended to determine who is right and who is wrong based on evidence and legal rights and obligations to make a judgment like arbitration or a Court. Therefore, the mediator does not offer solutions but only helps in negotiating to find common interests, a solution that both parties accept and voluntarily comply with.

Settle contract disputes through arbitration center, arbitrators

         Not all contractual disputes are subject to arbitration. According to the provisions of Article 2 of the Law on Commercial Arbitration 2010, the arbitrator has authority to settle the following disputes:

• Disputes between parties arising from commercial activities;
• Disputes arising between parties in which at least one party has commercial activities;
• Other disputes between the parties as prescribed by law shall be resolved by arbitration.

However, the arbitrator has the authority to settle a particular dispute when there is an arbitration agreement. An arbitration agreement is the agreement of the parties to bring the disputes that have arisen or will arise between them to arbitration. In the arbitration agreement, the parties are entitled to agree to choose a suitable arbitrator, appoint an arbitrator to establish the contract (or committee) to settle the dispute. Once there is an arbitration agreement, the parties can only sue at arbitration according to the agreement. The court shall not participate in the settlement if the parties have agreed to settle through arbitration, except such arbitration agreement is invalid or arbitration agreement is unenforceable.

In Vietnam, arbitration is organized in the form of permanent arbitration centers. The Vietnam International Arbitration Center (VIAC) and the Arbitration centers were established under the provisions of the Law on Commercial Arbitration 2010. Arbitration operates on the principle of one-time adjudication, arbitral award is final: the parties cannot appeal to the Court or other organizations. The disputing parties must perform the arbitral award within the time limit set by the award. However, the parties have the right to request the Court to cancel the arbitral award in some cases. 

Settle contract disputes through the People’s Court

         When a contract dispute arises, if the parties can not negotiate and mediate with each other, they can be settled at the People’s Court. The People’s Court has authority over most disputes. The Court’s authority to settle contractual disputes is determined in 4 steps:

Step 1: Authority according to the cases

         Determining authority by the case is to determine whether the dispute falls under the dispute settlement authority of the Court. The Civil code 2015 specifies the Court’s authority to settle disputes according to the case from Article 26 to Article 34. Specifically:

• Civil contract disputes are the cases under the authority of the Court according to Clause 3 Article 26;
• Commercial business contract disputes are under Article 30;
• Labor contract disputes are under Article 32.

Step 2: Authority according to the trial level

         The Law on Organization of People’s Court divides the Court’s dispute settlement competence into these following levels:

• Supreme People’s Court;
• High People’s Court;
• People’s Court of Provinces and Centrally run cities (referred to the Provincial People’s Courts);
• People’s Court of Districts, Towns and Provincial Cities (referred to the District-level People’s Courts);
• Military Court.

District-level People’s Courts have authority over disputes specified in Articles 35 and 36 of the Civil Procedure Law; Provincial-level People’s Courts have authority over disputes specified in Articles 37 and 38 of the Civil Procedure Law.

Step 3: Territorial authority

         Authority to settle contract disputes of territorial courts is determined as follows:

• Court where the defendant resides or works if the defendant is an individual or where the defendant has to headquarter if the defendant is an agency or organization has the competence to settle contract disputes according to first-instance procedures on civil, commercial, and labor contracts specified in Article 26, 28, 30 and 32 of the Civil Procedure Law;
• The involved parties have the right to agree with each other in writing to request the Court where the plaintiff resides or works if the plaintiff is an individual, or where the plaintiff’s office is located, if the plaintiff is an agency, organize settle civil, business, commercial and labor disputes specified in Article 26, 28, 30 and 32 of this Law;
• If the object of the dispute is real estate, only the Court where the real estate is located has authority to settle it.

Notices: In case a civil case has been accepted by a Court and is being settled by code’s provisions on the authority of territorial courts, it must be continued to be settled by that Court even though during the settling there is a change of residence place, head office or transaction address of the involved parties.

Step 4: Authority of the Court depends on the choice of the plaintiff

         Plaintiffs have the right to choose a court to settle civil, business, commercial, or labor contract disputes in the cases specified in Clause 1 Article 40 of the Civil Procedure Law.

         If the plaintiff’s residence place, work, or head office is not known, the plaintiff may request the court where the defendant resides, works, has certain last head office where the defendant has the property to settle:

• If a dispute arises from the activities of the organization’s branch, the plaintiff can request the Court where the organization is headquartered or where the organization has its branch to settle;
• If the defendant does not have a residence place, work, or head office in Vietnam or case about a support dispute, the plaintiff may request the Court where he/she works, resides, or is headquartered to settle;
• If there is a dispute over compensation for damage outside the contract, the plaintiff may request the Court of the place where he/she works, is headquartered or where the damage-causing incident occurs to settle it;
• If there is a dispute about compensation for damage, benefits upon termination of the labor contract, social insurance, health insurance, unemployment insurance, rights and benefits related to employment, salary, income, and other working conditions for employees, a plaintiff who is the employee may request the Court of the place where he/she resides or works to settle;
• If a dispute arises from the employment of a contractor or an intermediary, the plaintiff can request the Court where the main employer resides, works, and is headquartered or where the contractor, the intermediary resides and works to settle;
• If a dispute arises from a contract relationship, plaintiff can request the Court where the contract is performed to settle it;
• If the defendant resides, works or has headquartered in many different places, plaintiff can request the Court where one of the defendant resides, works or is headquartered to settle;
• If there is a dispute over real estate in which real estate is located in different localities, plaintiff can request the Court where one of the real estates is located to settle;
• If there is a dispute over real estate in which real estate is located in different localities, plaintiff can request the Court where one of the real estates is located to settle;

After determining the Court’s authority, the Court has the authority to receive the lawsuit petition and consider the lawsuit petition. If the petition is valid, the Court shall notify the plaintiff of the payment of fees and fee advances. After receiving the fee receipt and the fee advance, the Court accepts the case.

The People’s Courts shall settle disputes according to the authority orders and procedures prescribed by the Civil Procedure Law.

Viet An Law Service on contract dispute resolution consulting:

• Consult on the rights and obligations of the parties in the contractual relationship;
• Consult to determine the basis of dispute settlement and legal basis for dispute settlement;
• Consult, prepare to contact, and negotiate with related parties in the settlement of contract disputes;
• Organize to negotiate and mediate between the parties about contract disputes, represent to negotiate and mediate for customers;
• Discuss and guide customers to collect documents and evidence, provide information;
• An authorized representative lawyer to meet and discuss with arbitration agencies, courts, and authority enforcement agencies to best protect the legal rights and obligations of customers.

Customers who have difficulties and problems related to contract dispute settlement, please contact Viet An Law for advice on the fastest, most accurate, and effective solution!