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Commercial arbitration in international purchase and sale contract

Arbitration agreement means an agreement between contracting parties to settle by arbitration a dispute which may arise or has arisen, which often exists in commercial contract. This agreement allows the contracting parties to settle the dispute without any interference from the court. The following article shall detail the legal regulations about arbitration agreement in international purchase and sale contract.

Advantages and disadvantages of using arbitration agreement:

Advantages:

  • The procedure is simplier, faster, more cost-effective and convenient compared to procedures at the court. The contracting parties can decide the time, place and the arbitrator or institutional arbitrator who will settle the dispute, without going through trial stages such as court.
  • Dispute settlement by arbitration shall be conducted in private, unless otherwise agreed by the parties. Therefore, arbitration may help to keep ensure the
  • In accordance with the settlement of disputes involving foreign entities, the dispute resolution arbitration based on the will of the parties is not a state agency.

Disavantages:

  • As the arbitrator is not a state agancy, the arbitrator’s execution depends only on the willingness of the parties.
  • If there are any requirements to apply interim urgent measures, the decision of the arbitrator is not compulsory. This decision of the arbitrator is only enforceable after being recognized by the court.

The purposes of using arbitration aggreement in the international purchase and sale contract:

  • Express the binding of the contracting parties in choosing the method of dispute settlement by arbitration. This is a evidence that allows the exclusion of interference from the court, unless the arbitration agreement is invalid or violated the law.
  • Give the arbitrator the authorization to settle the dispute, which lead to the enforcement of arbitral awards.

The form of arbitration aggreement in the international purchase and sale contract contract: An arbitration agreement must be in writing or equivalent form, including fax, telegram, e-mail, data messenger…

The contents of arbitration aggreement: Provisions on the application of arbitration to settle disputes and concurrently stipulate arbitration centers or appoint arbitrators to settle disputes. It is also possible to specify the number of arbitrators, language, etc.

Some notices when drafting arbitration agreements:

  • The form and contents of arbitration agreement must be lawful;
  • An arbitration agreement may allows the exclusion of court interference, however, it does not apply in case the disputes do not belong to the jurisdiction of arbitrator or the arbitration agreement is violated the law.
  • An arbitration agreement is entirely independent from the contract. Any modification, extension, cancellation, invalidation or nonperformance of the contract will not invalidate the arbitration agreement..

For further details on how to draft commercial arbitration on an international purchase and sale contract, please contact Viet An Law Firm via email or phone numer below.

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