Viet Nam strongly attracts FDI capital, leading to many disputes over contracts, technology, capital contribution, and M&A. Commercial arbitration is increasingly prioritized by FDI enterprises because it is suitable for the international investment environment. DNP Viet Nam Law Firm will analyze why arbitration is an currently effective and reliable dispute resolution method for foreign investors.
1. Current status of dispute resolution related to FDI enterprises:
In recent years, along with the strong increase in foreign direct investment capital flows, the number of disputes related to FDI enterprises in Viet Nam has also tended to increase, both in quantity and complexity. Disputes often arise in the fields of construction, real estate, goods purchase and sale contracts, technology transfer and joint venture capital contributions.
Statistics compiled by VIAC on “The number of disputes resolved at VIAC:
- By the end of 2023, the center had handled a total of 2,940 disputes. Of these, 31.45% had at least one party being an FDI enterprise, and 22.43% had foreign elements.
- In 2023 alone, MORE received 424 disputes, an increase of 46.2% compared to 2022, marking the highest number of cases since its establishment. Of these, 73 cases involved FDI enterprises, accounting for 17.2% of the total number of cases.
Popular areas of dispute include goods trading (32%), construction (24%) and financial leasing (20%). (Statistics compiled by the Finance Magazine on “Common areas of dispute”)
Notably, about 40% of FDI enterprises in Viet Nam choose commercial arbitration to resolve disputes, instead of suing in court. The main reason is that arbitration provides flexible procedures, information security and the ability to enforce international judgments more effectively. (Statistics compiled by the Securities Investment Newspaper on “The number of FDI enterprises choosing commercial arbitration”).
2. Limitations of the Court in resolving FDI disputes:
2.1. The proceedings are long and complicated
Dispute resolution by court usually lasts from 8 months to several years, must go through many levels of trial such as first instance, appeal, cassation and does not meet the requirements of quickly and effectively in the international business environment.
2.2. Limitations on the Judge’s expertise
Courts often lack professional experience in specific fields such as international investment, intellectual property, and international commercial contracts, leading to a negative impact on the quality and reliability of judgments.
2.3. Language and legal barriers
The court only accepts Vietnamese, all documents in foreign languages must be translated and notarized, wasting time and money, while the application of foreign laws and international treaties is still inflexible and inconsistent.
2.4. Concerns about independence and transparency
Some investors are concerned about the risk of intervention when disputes involve state agencies, while the predictability of judgments is often low, making it difficult for businesses to assess legal risks in advance.
2.5. Difficulty in executing the judgment
Job Judgment execution in Viet Nam is still slow and ineffective, while the recognition and enforcement of foreign court judgments is still limited by international treaties or the principle of “reciprocity”.
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3. Advantages of commercial arbitration for FDI enterprises:
3.1. Flexible and time-saving procedures
In resolving disputes by arbitration, the parties are free to agree on the location, language, applicable law and number of arbitrators, not bound by strict proceedings like in Court, and the resolution time is often significantly faster than in Court.
3.2. Highly professional and suitable for international nature
Arbitrators are often experienced experts in specific fields such as international investment, construction, finance and international trade, helping to improve the quality, expertise and accuracy of the award.
3.3. Ensure security and reputation for businesses
According to Article 4 of the 2010 Commercial Arbitration Law, arbitration is conducted privately, helping to ensure business confidentiality and protecting business reputation and is suitable for sensitive commercial disputes.
3.4. Widely enforceable globally
Arbitral awards can be recognized and enforced in more than 170 countries under the 1958 New York Convention, surpassing judgments of Vietnamese courts which are limited in their effectiveness abroad due to dependence on international treaties or the principle of “reciprocity”.
3.5. Preferred choice by FDI enterprises
With outstanding advantages of flexible procedures, deep expertise, confidentiality and wide international enforcement capabilities, arbitration is gradually becoming the dispute resolution method chosen by FDI enterprises in the context of global economic integration.
4. Conclude:
Commercial arbitration is an effective tool to help FDI enterprises resolve disputes quickly, confidentially and with high expertise. With advantages such as flexible procedures, wide enforcement and neutrality, arbitration brings peace of mind and protects the interests of enterprises in a complex international environment. However, to make the most of this advantage, enterprises need to prepare carefully from signing contracts to choosing a reputable arbitration center.
The information above is for reference only. If you require further details, please contact us using the information below.
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