The legal status of foreigners in arbitration in Vietnam

Currently, legal regulations allow the use of many different dispute resolution methods such as mediation, negotiation, court, and arbitration. Among them, dispute resolution by arbitration is becoming increasingly popular thanks to its advantages. However, determining the legal status of foreigners in arbitration in Vietnam is always an important issue. In the following article, Viet An Law will summarize regulations that help determine the legal status of foreign partners in arbitration dispute resolution in Vietnam.

Legal basis

• Civil Code 2015;
• Law on Commercial Arbitration 2010;
• Decree 138/2006/ND-CP of the Government detailing the implementation of the provisions of the Civil Code 2005 on civil relations involving foreign elements.

How is the arbitration dispute resolution method regulated in Vietnam?

Pursuant to the provisions of Clause 1, Article 3 of the Commercial Arbitration Law 2010, commercial arbitration is a method of dispute resolution agreed upon by the parties and conducted by the provisions of this law.

In addition, according to the provisions of Clause 3, Article 3 of the 2010 Commercial Arbitration Law, it is possible to determine that foreign partners participating in dispute resolution by arbitration will participate in the proceedings as claimants and defendants.

Principles of dispute resolution by arbitration in Vietnam

According to the provisions of Article 4 of the Commercial Arbitration Law 2010, the principles of arbitration are prescribed as follows:

• The arbitrator must respect the agreement of parties if that agreement does not violate prohibitions or is contrary to social ethics.
• Arbitrators must be independent, objective, impartial, and comply with the provisions of law.
• The disputing parties are equal in rights and obligations. The arbitration council is responsible for creating conditions for them to exercise their rights and obligations.
• Dispute resolution by Arbitration is conducted privately unless the parties agree otherwise.
• The arbitration award is final.

Why should disputes be resolved by arbitration?

The method of resolving disputes by arbitration is widely used in the world due to several advantages. Some of them are as follows:

• Firstly, the arbitration procedure is convenient and quick, demonstrating its simplicity and flexibility in terms of proceedings. The parties can be proactive in the time and place of dispute resolution, without going through many trial levels as in court, thus limiting the cost of time and money for the disputing subjects.
• Secondly, the ability to appoint arbitrators to establish an Arbitral Tribunal to resolve the case helps the parties select good, experienced arbitrators who deeply understand the disputed issue so that they can resolve disputes quickly and accurately.
• Thirdly, the principle of arbitration is not public, partly helping the parties maintain their reputation in the marketplace. This is considered the advantage most favored by the disputing parties.
• Additionally, the disputing parties can influence the arbitration process, and control the provision of their evidence, and this helps the parties maintain business secrets.
• Finally, arbitration resolves disputes in the name of the will of the parties, not in the name of the state legal authority, so it is very suitable for resolving disputes with foreign elements.

Conditions for resolving disputes by arbitration

Under Article 5 of the Commercial Arbitration Law 2010, the conditions that need to be met to be able to resolve disputes by arbitration include:

• Disputes are resolved by arbitration if the parties have an arbitration agreement. Arbitration agreements can be made before or after a dispute arises.
• In case a party to the arbitration agreement who is an individual dies or loses legal capacity, the arbitration agreement remains valid for that heirs or legal representatives, unless the parties have other agreements.
• In case a party to the arbitration agreement is an organization that must terminate its operations, go bankrupt, dissolve, consolidate, merge, divide, separate, or convert its organizational form, the arbitration agreement will still affect the organization that takes over the rights and obligations of that organization unless the parties agree otherwise.

Regulations on the legal status of foreigners in arbitration in Vietnam

What is a legal entity?

Legal entities specified in Article 74 of the Civil Code 2015 can provide some characteristics of legal entities as follows:

• A legal entity is an organization (a legal subject) with independent legal status and can participate in economic, political, and social activities… according to the provisions of law. This is a concept in jurisprudence used to distinguish it from natural persons (individuals) and other organizations.
• If an organization has “legal status”, that organization has full rights and obligations of a legal entity as prescribed by law.

Conditions to have legal status in Vietnam

Under Article 74 of the Civil Code 2015, an organization is recognized as having legal status when it meets four conditions:

• Established according to the provisions of this Code and other relevant laws;
• Have an organizational structure as prescribed in Article 83 of this Code;
• Have assets independent of other individuals or legal entities and be responsible for your assets;
• Participate in legal relations independently on your behalf.

Legal status of foreign legal entities

Clause 5, Article 3 of Decree 138/2006/ND-CP stipulates that a “foreign legal entity” is a legal entity established under foreign law. According to the provisions of Clause 1, Article 676 of the Civil Code 2015 regarding legal entities, the nationality of a legal entity is determined according to the law of the country where the legal entity is established.

Under the provisions of Article 10 of Decree 138/2006/ND-CP and the Civil Code: The civil legal capacity of a foreign legal entity is the ability prescribed by law of a foreign legal entity to have the right to and civil obligations appropriate to the purpose of its activities. The civil legal capacity of a foreign legal entity is determined according to the law of the state of which that legal entity has a nationality.

Legal status of foreign partners in arbitration dispute resolution

Comparing with the above legal bases, it is possible to determine the conditions for foreign partners to have legal status in resolving disputes by arbitration as follows:

• The foreign partner participating in the arbitration dispute must be an organization, established or allowed to be established by a competent state agency in the host country. Therefore, that organization is recognized as having legal status from the date it is granted an establishment certificate.
• The foreign partner’s organization must have a strict organizational structure corresponding to the provisions of Article 83 of the Civil Code 2015.
• A legal entity is an independent organization to establishes rights and obligations in its operations, so it is required to have independent assets. Therefore, the foreign partner needs to have independent assets so that it can be responsible with its assets for the transactions, rights, and obligations it establishes.
• This foreign partner needs to have the right to participate in legal relations on its behalf through its legal representative.

If you need advice or learn more about the legal status of foreigners in arbitration in Vietnam and determining legal status in general, please contact Viet An Law Firm for the best support.