WHY CHOOSE THE ARBITRATION METHOD IN THE SETTLEMENT OF CURRENT COMMERCIAL DISPUTES
Arbitration is an alternative dispute resolution method, operating in Vietnam and over 170 countries and territories around the world under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention 1958). In recent years, arbitration centers in Vietnam have resolved thousands of domestic and international disputes in all areas, such as trade, insurance, finance, banking, investment, etc.
1. Concept of arbitration
Definition: Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute.
Its principal characteristics are:
- First, arbitration can only take place if both parties have agreed to it and dispute issues must fall under the arbitration's jurisdiction.
The parties consent to dispute settlement is recognized by a valid arbitration agreement, which can be made either before or after a dispute arises. Disputes falling under the arbitration’s jurisdiction are provided in Article 2 of the Law on Commercial Arbitration. However, in some cases, the dispute cannot be resolved through arbitration procedures.
- Second, the parties choose the arbitrator(s)
The parties can select a sole arbitrator together. If they choose to have a three-member arbitral tribunal, each party appoints one of the arbitrators; those two persons then agree on the presiding arbitrator. Alternatively, the Center can suggest potential arbitrators with relevant expertise or directly appoint members of the arbitral tribunal.
- Third, arbitration ensures the combination of two factors: agreement and award.
Choosing arbitration to settle disputes will ensure the highest self-determination of the parties. They have the right to agree and choose an arbitration center, arbitrator, place for settlement, or applicable law.
An arbitral award means a decision of the arbitration council settling the entire dispute and terminating the arbitral proceedings. [1]. Different from a court's judgment, which is issued by state authority, the arbitral award is decided on behalf of the benefit of the disputing parties. The arbitral award is final and takes effect from the date of its signing[2], and is not subject to appeal or protest.
- Fourth, arbitration is a confidential procedure
According to Clause 4, Article 4 of the Law on Commercial Arbitration 2010, the dispute settlement by arbitration shall be conducted in private, unless otherwise agreed by the parties.
2. Types of arbitration
Arbitration exists in two forms, namely ad hoc arbitration and institutional arbitration.
a) Ad hoc arbitration
Ad hoc arbitration is the earliest form of arbitration, widely recognized and used around the world. However, the laws of different countries on this form of arbitration are different. In Vietnam, Law on Commercial Arbitration 2010 provides for arbitration.
Features of the ad hoc arbitrator
- First, ad hoc arbitration is established only when a dispute arises and terminates when the dispute is resolved.
- Second, ad hoc arbitration has no permanent headquarters, no executive apparatus (because it is only established to resolve disputes by agreement of the parties), and does not have a separate list of arbitrators.
- Third, ad hoc arbitration does not have its own procedural rules.
The order and procedures agreed upon by the parties. However, the disputing parties may agree to choose any popular rule of procedure.
Ad hoc arbitration has many advantages such as quick, low-cost settlement or unlimited right to choose an Arbitrator of the parties. In addition, ad hoc arbitration has the advantage of determining procedural rules for dispute resolution.
b) Institutional arbitration
According to Vietnamese law, institutional arbitration is organized in the form of arbitration centers, complying with the provisions of the Law on Commercial Arbitration 2010 and the procedural rules of that arbitration center. The arbitration center is a non-governmental organization with legal entity status and its own seal and bank account.
Features of institutional arbitration:
- First, institutional arbitration is organized in the form of arbitration centers.
Arbitration centers are established at the request of arbitrators after being permitted by a competent state agency. The arbitration center operates for non-profit purposes. The sole arbitrator or the Arbitration Council does not make decisions in the name of state power but as an independent third person.
Despite being a non-governmental organization, arbitration centers are always under the management and support of the State. The State control arbitration centers through the promulgation of legal documents, creating a legal basis for the organization and operation of arbitration centers. In addition, state agencies are competent in granting, changing, supplementing, or withdrawing establishment licenses and operation registration papers of arbitration centers.
During their operation, arbitration centers also need the support of the State in many aspects such as: appointing and changing arbitrators; reviewing the decision of the arbitral tribunal; deciding to apply interim urgent measures; canceling or not an arbitral award; coercive enforcement of the arbitral award...
- Second, arbitration centers have legal entity status and their own seals and bank accounts [3] and exist independently of each other.
Arbitration centers must fully satisfy the conditions of legal entities specified in Article 74 of the Civil Code 2015. Among arbitration centers, there is no administrative dependency like superiors and subordinates. This is the difference in the organization of Arbitration (private jurisdiction) compared to that of the courts (public jurisdiction), which explains the application of the one-time trial rule in arbitration proceedings.
- Third, the organization and management of arbitration centers are simple and compact.
Each arbitration center has an Executive Board and a Secretariat. The structure of the arbitration center shall be prescribed by the center's charter. The arbitration center's Executive Board shall be composed of the Chairman, one or more Vice-Chairmen, possibly with a Secretary-General appointed by the President of the arbitration center.
- Fourthly, each arbitration center decides on its operation field and has its own procedural rules.
Each arbitration center determines the main areas of activities depending on the professional capabilities of the arbitrators and must be clearly stated in the Charter. In the course of operation, arbitration centers have the right to expand or narrow the scope of operation but must be approved by the competent state agency.
- Fifth, the trial is conducted by the arbitrators of the center.
Each arbitration center has a list of its arbitrators. The selection or appointment of an arbitrator to participate in the arbitration council or the sole arbitrator to resolve a dispute is limited to that list. Foreign arbitration institutions that have been established and are operating legally in foreign countries, comply with the Constitution and laws of the Socialist Republic of Vietnam and may operate there under the Law on Commercial Arbitration 2010.
3. Arbitrators
Definition: An arbitrator is a person selected by the parties or designated by an arbitration center or a court to settle a dispute under the Law on Commercial Arbitration 2010.
Conditions to become an arbitrator are stipulated in Article 20 of the Law on Commercial Arbitration 2010. Depending on their objectives, purposes, or structures, arbitration centers may require higher standards than the general standard for their arbitrators.
People may not act as arbitrators if fall into either of the following cases:
- Incumbent judges, procurators, investigators, enforcement officers or civil servants of peoples courts, peoples procuracies, investigative agencies, or judgment enforcement agencies:
- The accused, defendants, persons serving criminal sentences or having served the sentences but having their criminal records not yet remitted.
Rights and obligations of the arbitrator:
Arbitrators are entitled to fully exercise their rights and perform their obligations as prescribed by law and the operating regulation of the arbitration center, including:
- Accept or refuse to settle disputes;
- Be independent in dispute settlement;
- Refuse to provide dispute-related information;
- Enjoy remuneration.
- Keep secret the circumstances of disputes they settle, unless they have to provide information to competent state agencies under law.
- Ensure impartial, fast, and prompt settlement of disputes.
- Adhere to the rules of professional ethics.[4]
4. Recommendations to improve the law on arbitration
Firstly, suggestion on dispute settlement competence
The documents guiding the implementation of the current Law should be read to expand the scope of arbitration's jurisdiction and respect the party autonomy. In particular, the arbitrator's jurisdiction should be regulated by the exclusion method, expanding to include several disputes related to moral rights, marriage and family relations, and the right of inheritance according to provisions of civil law.
Second, relating to interim urgent measures, the making decisions to apply, change, supplement or cancel the measures shall be similar to those under the jurisdiction of the Court.
Third, supplement the provisions relating to the invalid arbitration agreement. The Law on Commercial Arbitration should be supplemented with provisions on the procedure for requesting the Court to consider the invalidity of the arbitration agreement.
Fourth, improve some regulations on arbitrators. It is necessary to improve the quality in parallel with the number of arbitrators. Professional standards on arbitrators should be removed from the Law on Commercial Arbitration, instead, to improve the professional quality of arbitrators, the State may prescribe other measures.
Fifth, perfecting regulations on ad hoc arbitration. The Law on Commercial Arbitration should stipulate the time for setting up the ad hoc arbitration council in case there is a complaint about the decision to appoint an arbitrator for the defendant. Furthermore, the Law should give the arbitration council the authority over the order and procedures. Besides, there should be specific guidance on the application of the provision that the arbitrator shall preserve dossiers of disputes settled for five years and provide copies of arbitral decisions at the request of disputing parties or competent state agencies.
[1] Clause 10, Article 3 of the Law on Commercial Arbitration 2010.
[2] Clause 5, Article 61 of the Law on Commercial Arbitration 2010.
[3] Clause 1, Article 27 of the Law on Commercial Arbitration 2010.
[4] Article 21 of the Law on Commercial Arbitration 2010.
Source: The Ministry of Justice
(https://htpldn.moj.gov.vn/Pages/chi-tiet-tin.aspx?ItemID=1911&l=Nghiencuutraodoi)