ADVANTAGES AND DISADVANTAGES OF THE DISPUTE SETTLEMENT OF COMMERCIAL ARBITRATION
Commercial Arbitration is a method of dispute settlement specified in the 2010 Law on Commercial Arbitration and applied to disputes arising in the commercial field. Nowadays, commercial activities are increasingly diverse and develop, which means that more and more disputes arise in such activities. Enterprises are always concerned about selecting Commercial Arbitration or Courts for the dispute settlement. In this article, we will analyze the advantages and disadvantages of Commercial Arbitration to help them select this method for dispute settlement accordingly.
1. Advantages of dispute settlement of Commercial Arbitration
1.1. The procedure is flexible, short, and time-saving
Dispute settlement of Commercial Arbitration allows the parties to negotiate and select an arbitral tribunal or arbitrators, locations, languages, applicable laws of dispute settlement, and respective arbitration procedure rules… Therefore, the proceedings of Commercial Arbitration are under the parties’ selection agreement and more flexible than the Court proceedings. This method of dispute settlement also does not go through many levels of trial as at the Court. Thus, it helps the parties save time and costs in the litigation process.
1.2. The Arbitrator’s Award is final and binding on the parties’ enforcement
On principle, an Arbitrator’s Award is final, which means that it has an effect at last and is not subject to appeal like a Court judgment, since the parties must accept the Arbitrator’s decision due to their trust and selection. Therefore, the parties normally voluntarily enforce the Arbitrator’s Award without the intervention of any competent state authority. In case one party does not voluntarily enforce without its request for cancellation of the Arbitrator’s Award, the other party has the right to request the civil competent civil judgment enforcement agency to apply enforcement measures or interim urgent measures to enforce the Arbitrator’s Award.
Under Article 68.2 of the 2010 Law on Commercial Arbitration, an Arbitrator’s Award is only canceled when there is a party’s request and one of the following grounds:
“a, There is no arbitration agreement or the arbitration agreement is invalid;
b, The arbitration council’s composition or procedures of arbitral proceedings is/are incompliant with the parties’ agreement or this Law;
c, The dispute falls beyond the arbitration council’s jurisdiction: when an arbitral award contains the details falling beyond the arbitration council’s jurisdiction, such details shall be canceled:
d, The evidence provided by the parties on which the arbitration council bases to issue the Arbitrator’s Award is counterfeit: an arbitrator receives money, assets or other material benefits from one disputing party, thus affecting the objectivity and impartiality of the award;
dd, The Arbitrator’s Award contravenes the fundamental principles of Vietnamese law.”
Thus, the majority of grounds for the cancellation of the Arbitrator’s Award are procedural defects. In content, the Arbitrator’s Award is only canceled when it is contrary to the basic principles of Vietnamese law. In fact, there are few cases where an Arbitrator’s Award is canceled since the Arbitral Tribunal and the Arbitrators are knowledgeable and experienced to conduct the proceedings and make an award under the basic principles of the law.
1.3. The process of dispute settlement is confidential
Unless otherwise agreed by the parties, the meetings of dispute settlement are held in a non-public manner by the Arbitral Tribunal. The Arbitral Tribunal can permit other persons to participate in the meetings with the parties’ consent. This is a remarkable advantage of this method of dispute settlement when the disputed content and the parties’ identities are kept confidential, especially in lawsuits related to trade secrets, inventions, or other important elements that the parties want to keep confidential. Therefore, the dispute settlement of Commercial Arbitration will meet the needs and trusts of enterprises and play an important role in current competitive conditions.
1.4. Suitable for commercial disputes involving foreign elements
With Commercial Arbitration, the parties have the right to agree and choose on the form of settlement (Institutional Arbitration or Ad-hoc Arbitration), Arbitrators, location, language, applicable law, procedural rules… This is a big advantage for disputes involving foreign elements. In addition, the Arbitrator’s Award is easier to be recognized and enforced internationally than the Court’s Judgment under international treaties, especially the 1958 New York Convention on the recognition and enforcement of foreign arbitrator’s awards.
2. Disadvantages of dispute settlement of Commercial Arbitration
2.1. The costs are high and depend on the disputed value
One of the main reasons why enterprises consider and refuse to choose commercial arbitration for dispute settlement is that the costs are quite high and higher than the costs of a similar case settled by the Court. If the disputing parties only must pay administrative fees and without Judge’s remuneration when choosing the Court, the parties must pay the Arbitrators’ remuneration and travel expenses when choosing Commercial Arbitration. In addition, arbitration costs depend on the number of selected arbitrators and the disputed value. The higher the disputed value, the more arbitrators, the costs of dispute settlement are higher.
2.2. The collection and verification of evidence and application of interim urgent measures are complicated and time-consuming
During the process of dispute settlement, the parties can request the Arbitral Tribunal to apply interim urgent measures. Under Article 49.2 of the 2010 Commercial Arbitration Law, the Arbitral Tribunal has the authority to apply interim urgent measures in the following cases: (a) Prohibiting any change in the status of assets under dispute; (b) Prohibiting or forcing any disputing party to commit one or more certain acts to prevent acts which adversely affect the process of arbitral proceedings; (c) Distraining assets under dispute; (d) Requesting preservation, storage, sale or disposal of any asset of one disputing party or all disputing parties; (e) Requesting temporary money payment between the parties; (f) Prohibiting the transfer of the rights to assets under dispute. The Court has the authority to apply other interim urgent measures under the Civil law, at that time, a request for a court to apply interim urgent measures is regarded as a rejection to the arbitration agreement or waiver of the right to dispute settlement by arbitration.
However, the Arbitral Tribunal cannot enforce the decision to apply interim urgent measures itself and must transfer it to the competent civil judgment enforcement agency for verification and enforcement. Therefore, this procedure is quite complicated and time-consuming, so the party subject to the enforcement of the Arbitrator’s Award can take advantage of this inadequacy to carry out the act of hiding assets, causing property losses.
Regarding the collection and verification of evidence, the Arbitral Tribunal is only entitled to request witnesses to provide information and documents related to the dispute settlement and to summon them to be present at arbitration meetings at the request of one or both of the parties. In case the Arbitral Tribunal fails to collect evidence or summon witnesses, the Arbitral Tribunal must send a written request to the Court to request agencies, organizations, and individuals to provide evidence and summon witnesses. At that time, the witness is obliged to strictly observe the court’s decision. The court’s decision is highly imperative and carries state power, so its enforcement and implementation are faster and more effective than those of the Arbitral Tribunal’s decision.
2.3. The party subject to the enforcement of the Arbitrator’s Award can request the Court to cancel the Arbitrator’s Award with the aim to prolong the proceedings
Under Article 69 of the 2010 Commercial Arbitration Law, a party has the right to request the Court to cancel the Arbitrator’s Award within 30 days from the date of receiving it. Accordingly, the party subject to the enforcement of Arbitrator’s Award can base on this regulation to carry out procedures to request the Court to cancel the Arbitrator’s Award with the aim to prolong the proceedings and delay its enforcement. It causes losses and damage to the party in favor of the Arbitrator’s Award.
In the light of the above, dispute settlement of Commercial Arbitration has advantages and disadvantages existing simultaneously. We hope this article will support enterprises in the process of considering and selecting Commercial Arbitration for dispute settlement under the disputed relationship and their conditions and capabilities.
TNTP & Associates International Law Firm