International

Trade Law - I
Dr Duy Dinh – School of Law, UEH
 Module 5:

DISPUTE RESOLUTION
MATERIALS

• Textbooks and reading materials as specified in the syllabus;

• The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New
York Convention 1958);
• United Nations Commission on International Trade Law (UNCITRAL) Model Law on International
Commercial Arbitration (1985), with amendments as adopted in 2006;
• Vietnamese Civil Procedure Code 2015;
• Vietnamese Law on Commercial Arbitration 2010;
• Decree 22/2017/NĐ-CP on Commercial Mediation;
• Other relevant materials.
OBJECTIVES

This module helps students understand:

• The complex nature of international commercial contract disputes;

• Methods of settling international commercial contract disputes;

• Advantages and disadvantages of each method and grounds for selecting the appropriate one;

• Difference between dispute resolution through arbitration and litigation.

• Legal issues related to the choice of law and the choice of forum in dispute resolution.
STRUCTURE

• Overview on resolving international commercial contract disputes.

• Methods for resolving international commercial contract disputes:
✓ Negotiation
✓ Mediation
✓ Arbitration
✓ Litigation
• Arbitration vs. litigation in resolving international commercial contract disputes.
• Choice of law and forum for resolving international commercial contract disputes.
 OVERVIEW ON RESOLVING INTERNATIONAL
COMMERCIAL CONTRACT DISPUTES

• The possibility of a dispute always exists as and it tends to increase when traders perform more
and more international trade transactions.
✓ Distinction from dispute settlement of trade dispute among states.

• Disputes can arise due to subjective and objective reasons.

• Disputes under international commercial contracts are often of great value and complexity.

• Resolving disputes under the international commercial contracts is more complex than domestic
ones: the body that has jurisdiction to resolve disputes, the law selected to resolve disputes, the
enforcement of judgments.

• There are various dispute resolution methods for the parties to choose from.
 OVERVIEW ON RESOLVING INTERNATIONAL
COMMERCIAL CONTRACT DISPUTES

• Negotiation: The back-and-forth communication between the disputing parties with a view to reaching a
solution without the involvement of a third party.

• Mediation: A voluntary process in which an impartial person (the mediator) helps with the communication
between the disputing parties and facilitates their reconciliation with a view to enabling them to reach a
mutually acceptable solution.

• Commercial arbitration: 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.

• Litigation: The dispute resolution method in which Court as a judicial body in the name of the State makes
a binding judgement on the dispute.
 NEGOTIATION

• Negotiation is the process of interactions between disputing parties to reach consensus on issues of
conflict or disagreement.
• Negotiation is an optional method for resolving disputes unless provided for in the contract.
• The resolution of disputes through negotiation, where possible, may benefit disputing parties (shorter
time, lower cost, preservation of reputation and business relationship).
• Though it is often difficult to definitively resolve disputes via negotiation, the process helps disputing
parties clarify the disputed matters and comprehend the other party’s viewpoint.
• Disputing parties may resume negotiation at any stage deemed suitable even when another method
of dispute resolution is underway.
 MEDIATION

• Mediation is a non-judicial method of dispute resolution (the mediator does not conduct a trial
and does not have the power to make a binding decision).
• Dispute resolution by mediation involves the presence of a third party, but the role of the third
party differs from that in arbitration.
• Mediator may liaise with each disputing party individually or collectively with all parties in order
to understand the dispute, thereby analyzing and untangling its complexities with the aim of
helping the parties find a solution to the end the dispute.
• Mediation is not mandatory, thus the parties may skip the stage and bring the dispute to court
or commercial arbitration for resolution.
✓ If the contract stipulates that the dispute must first be resolved by negotiation and mediation?
 MEDIATION

• Advantages
✓ Promotes communication and cooperation.
✓ Provides a basis for the parties to resolve disputes on their own.
✓ Voluntary, informal and flexible.
✓ Private and confidential, avoiding public disclosure of personal or business problems.
✓ Can reduce hostility and preserve ongoing relationships.
✓ Allow the parties to avoid the uncertainty, time, cost and stress of going to trial.
✓ Allow the parties to make mutually acceptable agreements tailored to meet their needs.
✓ Can result in a win-win solution.
• Disadvantages
✓ Ineffective when the dispute is primarily about legal issues rather than facts.
✓ Successful mediation and implementation of the mediation results depend on the goodwill of the parties.
✓ Lengthy mediation process may affect the interests of the parties (e.g., expiration of statutes of limitations).
 MEDIATION

• Mediators shall be selected by agreement by the parties from the list of commercial mediators of the mediation
organization or from the list of ad hoc commercial mediators (Article 12, Decree 22/2017/ND-CP).
• The procedure for resolving disputes by mediation is generally not regulated by law, but rather agreed upon by the
parties (Article 14 of Decree 22/2017/ND-CP).
• The result of successful mediation is enforced depending on the voluntariness of the disputing parties. However,
the result may be considered for recognition by courts in line with the provisions of civil procedure law (Article 16,
Decree 22/2017/ND-CP).
✓ The result of successful mediation that is recognized has the same effect as a court’s judgment (Clause 9, Article 419 of the Civil
Procedure Code 2015).
✓ Failure to recognize the successful mediation results does not affect the content and value of the dispute settlement agreement and
it remains enforceable as a contract (Clause 6, Article 419 of the Civil Procedure Code 2015).
• In case no successful solution is reached, the parties have the right to continue the mediation process or submit
the dispute to arbitrators/courts to resolve the dispute (Article 15 of Decree 22/2017/ND-CP).
 COMMERCIAL ARBITRATION

• Commercial arbitration is a form of alternative dispute resolution (ADR) selected by the disputing
parties to resolve disputes outside judiciary courts.
✓ Arbitration is a combination of the elements of mediation and litigation.
✓ The necessity and the form & content of and arbitration agreement.

• An arbitrator is an independent person/body officially appointed by the disputing parties to make

binding decision on the dispute between them while ensuring their right to self-determination.
✓ In mediation, the mediator assumes a supportive role, helping disputing parties to come to a solution to end
the dispute. Whereas, in commercial arbitration, after considering facts and the applicable law, the arbitrator
shall make a decision binding the disputing parties, unless otherwise indicated.

• Many countries, including Vietnam, recognize the role of courts in arbitration process.
 COMMERCIAL ARBITRATION

• Ad hoc arbitration is a form of commercial arbitration established by agreement between the

disputing parties to resolve a certain case which will self-dissolve after the case is settled.
✓ Established when a dispute arises and ceases to operate after the dispute is resolved.
✓ Rules of procedure and the selection of arbitrators are mutually agreed upon by the parties.
✓ There is no permanent headquarters, no executive apparatus and no fixed list of arbitrators.

• Institutional arbitration is a form of permanent commercial arbitration organization with its own
headquarters, operating under its own charter and procedural rules, adjudicating many disputes.
✓ Established and terminated in accordance with the provisions of the law on commercial arbitration.
✓ The arbitration tribunal is established according to the arbitration center's rules.
✓ There are established procedural rules and a fixed list of arbitrators.
 COMMERCIAL ARBITRATION

Advantages

• The dispute resolution process is customizable subject to the requests of the disputing parties.

• Arbitrators are experts with in-depth knowledge of the dispute.

• Arbitration proceedings are simpler, thus the process is usually quicker than litigation at courts.
• The arbitral award is final, which helps to end the dispute faster.

• Commitment to keep the dispute resolution process and results confidential.

✓ Traders do not want to disclose information about the business and its business activities.

✓ Traders do not want to publicize an adverse judgment in a dispute.

• Help the disputing parties preserve business relationship after the dispute.
 COMMERCIAL ARBITRATION

Disadvantages
• In disputes involving multiple parties, the arbitral tribunal may not have the power to summon all the
parties involved.
✓ The authority of arbitrators derives only from the agreement between the parties.
• The arbitral tribunal lacks the power to coerce and punish.
✓ When necessary, the arbitration tribunal may seek court assistance.
• That arbitral award is not subject to appeal may affect the interests of a disputing party.
✓ Is it possible to submit the award to a court for an “appeal” trial?
• Not suitable for disputes that require investigation, verification or in-depth access to documents kept
under the control of the parties.
• The relatively high arbitration fees may become a barrier for traders to utilize this method.
 COMMERCIAL ARBITRATION

Some important provisions in the Law on Commercial Arbitration 2010:

Article 2: Arbitration’s jurisdiction to settle disputes.
Article 5: Conditions for dispute settlement by arbitration.
Article 6: Courts’ refusal to hear cases in which there is an arbitration agreement.
Article 14: Applicable laws for dispute settlement.
Article 16-19: Arbitration agreement.
Chapters V-VIII: Arbitration proceedings.
Article 61: Content, form and effect of arbitral awards.
Articles 65-67: Enforcement of arbitral awards.
Article 68: Vacation (cancellation) of arbitral awards.
 COMMERCIAL ARBITRATION

The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards

• Parties to the Convention recognize the validity of written arbitration agreements and ensure that their
courts refuse to hear a case in which the disputing parties have already reached an arbitration agreement.

• Parties to the Convention ensure the recognition and enforcement in the territory of their respective States
of an arbitral award which has been rendered in the territory of another Contracting State.

• Parties to the Convention ensure that there shall be no discrimination between foreign arbitral awards and
domestic arbitral awards.

• The Convention does not exclude the right of any Party to apply more favorable provisions with respect to
the recognition and enforcement of foreign arbitral awards provided for in other international treaties or in
its national law.
 COMMERCIAL ARBITRATION

UNCITRAL Model Law on International Commercial Arbitration (1985), as amended in 2006:

• The UNCITRAL Model Law is prepared for adoption by states or for their reference in the drafting of
their arbitration laws.
• Though Vietnam has not been recognized as a country that adopts the Model Law, most fundamental
principles contained in the Model Law are recognized in the 2010 Commercial Arbitration Law.
✓ See also: [Link]
• Model arbitration clause:
‘Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or
invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at
present in force.’
 LITIGATION

• Litigation in court is a traditional method for resolving disputes, with high formality and organization,
in strict compliance with the provisions of the law on civil procedure.
• The parties have the right but are not required to agree in advance to resolve the dispute in court.
✓ It should be distinguished from the question of jurisdiction of the court.

• Disputes can be resolved through multiple levels of court (first instance, appellate).
• Court proceedings are different according to the law of each country.
• The court hears publicly in the national language.
• Court judgments and decisions that have taken legal effect must be respected and complied with by
agencies, organizations and individuals.
 LITIGATION

Advantages
• The court has the right to decide on important matters in the proceedings, such as requesting a third
party to participate in the proceedings or requiring parties to provide evidence or disclose information.
• That the involved parties have the right to appeal ensures the accuracy, fairness and objectivity of the
court’s ruling.
• As the judicial organ of the State, the court's judgment is highly coercive.
✓ Judgment enforcement in the country where the court is located is often facilitated by the coordination of the
enforcement agency.
• Public trial has the effect of educating the law as well as warning traders about legal risk in business
and commerce.
• Prescribed court fees are much lower than commercial arbitration fees.
 LITIGATION

Disadvantages
• Court proceedings are not flexible due to the need to comply with procedural laws.
• Open trial may not be appropriate for commercial activities.
✓ May discredit parties in the marketplace, expose trade secrets, and affect the relationship of the parties.
✓ The proceedings are often lengthy and may be delayed, affecting production and business activities.
• Various disadvantages when dealing with commercial disputes with foreign elements:
✓ Limitations to the court’s application of foreign law in adjudication.
✓ Courts are normally required to use the language and procedural law of the country where they are located
(which may create bias if it is the country of one of the disputing parties).
✓ Court decisions are recognized in another country only when strict criteria are met.
 LITIGATION

The issue of jurisdiction of the court in settling international commercial contract disputes
• The jurisdiction of a country's courts is determined in accordance with the international treaties to which the
country is a party or the rules on conflict of laws of that country.
• For example, EU Law No. 44/2001 of 22/12/2000 applies to cases where the respondent resides in the EU, or to
cases brought in EU member states.
• See more: [Link]
• Within the territory of a country, the specific court that has jurisdiction over a particular dispute should be
determined in accordance with the provisions of the country’s procedural law.
✓ Specialized courts only have jurisdiction to hear cases in prescribed fields.
✓ Business and commercial disputes with foreign elements fall under the first-instance trial jurisdiction of provincial
People's Courts (Clause 3, Article 35, Civil Procedure Code 2015).
 ADVANTAGES OF COMMERCIAL ARBITRATION OVER LITIGATION IN
SETTLING INTERNATIONAL COMMERCIAL CONTRACT DISPUTES

• Commercial arbitration is considered more neutral.

• The place and language used in the arbitration proceedings may be selected by the disputing parties.
• Commercial arbitration is less bound on the application of foreign law, therefore, the disputing parties'
choice of law is more likely implemented.
• Commercial arbitration tends to be more flexible in applying international sources of law.
• The enforcement of foreign arbitral awards is facilitated by the 1958 New York Convention, while the
2005 Hague Convention on the choice of court agreement has not yet come into force.
✓ About 170 countries have ratified and acceded to the 1958 New York Convention.
✓ New York Convention 1958: [Link]
✓ Hague Convention 2005: [Link]
 CONSIDERATIONS IN SELECTING THE APPROPRIATE METHOD

• Private and confidential or in a public court setting.

• Informal setting and a more flexible process or one that is more formal and has specific rules to follow.
• Personal control or decision made by a judge or arbitrator.
• Time.
• Costs.
• Maintaining relationships.
• Dispute decided on questions of law, resolved with business principles or a solution found through other
fair, yet practical means.
• Binding and easily enforceable.
 CHOICE OF LAW AND CHOICE OF FORUM FOR SETTLING
INTERNATIONAL COMMERCIAL CONTRACT DISPUTES

Resolution of disputes by arbitration

• Choice of place of arbitration
✓ May bring advantage to one party to the dispute.
✓ May affect the validity of the arbitration agreement and applicable
• Choice of law
✓ Law governing the arbitration agreement: the law applied to determine the validity and content of the arbitration
agreement.
✓ Law governing arbitration proceedings (procedural law): the law applied to determine the jurisdiction of commercial
arbitration as well as the jurisdiction of the court over arbitration proceedings.
✓ Law governing the substantive content of the dispute (substantive law): the law applied by the arbitral tribunal to
settle disputes between the parties.
▪ When the parties choose the applicable law.
▪ When the parties do not choose the applicable law.
 CHOICE OF LAW AND CHOICE OF FORUM FOR SETTLING
INTERNATIONAL COMMERCIAL CONTRACT DISPUTES

Resolution of disputes by litigation

• Choice of court:
✓ The plaintiff has the right to bring a lawsuit in the court of the country that the plaintiff believes has jurisdiction
(whether agreed in the contract or not).
✓ The respondent has the right to challenge the jurisdiction of the court chosen by the plaintiff.
✓ Even if there is an agreement between parties, the court seized will make a decision on its jurisdiction.

• Choice of law:
✓ Law governing court proceedings (procedural law): usually the law of the country where the court is located.
✓ The law governing the substantive content of the dispute (substantive law):
▪ When the parties choose the applicable law.
▪ When the parties do not choose the applicable law.
REVISION QUESTIONS

1. Why are disputes and dispute resolution in international

trade more complicated than those in domestic trade?
2. What are the features that distinguish dispute resolution
by arbitration from mediation, and from litigation?
3. What are the pros and cons of an arbitral award being
deemed final in comparison to a court’s judgement?
4. Why does arbitration have more advantages when
resolving disputes related to the international contracts?
5. The significance of the recognition and enforcement of
foreign arbitral awards?