UNDERSTANDING CASES OF UNREALIZABLE ARBITRATION AGREEMENTS
Commercial arbitration is a method of dispute resolution in the business and commercial fields, chosen by mutual agreement of the parties. Currently, an increasing number of organizations and businesses are choosing arbitration as a dispute resolution method due to its privacy, confidentiality, flexibility, and speed compared to dispute resolution in Court.
However, the arbitrator’s jurisdiction to resolve disputes depends on whether the parties have established a valid and effective arbitration agreement. Therefore, to properly assess dispute resolution jurisdiction, this article will analyze the legal provisions related to cases ofarbitration agreements, helping businesses more accurately determine the appropriate dispute resolution method.
I. Definition of unrealizable arbitration agreements
According to Article 3.2 of the Law on Commercial Arbitration 2010, an arbitration agreement is defined as an agreement between the parties to settle by arbitration a dispute that may arise or have arisen.
The Law on Commercial Arbitration 2010 does not provide a specific definition of what constitutes an unrealizable arbitration agreement. However, it can be understood that when the parties have a valid arbitration agreement, but it falls into circumstances that make the arbitral proceedings or the establishment of the arbitral tribunal practically impossible, such an arbitration agreement is considered incapable of being performed.
II. Cases of unrealizable arbitration agreements
Article 4 of Resolution No. 01/2014/NQ-HDTP provides detailed regulations on cases of unrealizable arbitration agreements, including:
1. The Arbitration Center selected by the parties no longer exists, and cannot be replaced
If the parties have agreed to resolve the dispute at a specific arbitration center, but that arbitration center has ceased operations without a successor institution, and the parties cannot agree on another arbitration center to resolve the dispute, the arbitration agreement shall be deemed incapable of being performed.
2. The Arbitrator chosen by the parties is unable to participate in the dispute resolution.
An arbitration agreement unrealizable if the parties have agreed on the selection of an Arbitrator for a case-specific arbitration agreement. (“Arbitrator”), but due to force majeure or objective hurdles the Arbitrator is unable to participate in the case at the time of the dispute, or the Arbitration center or the Court cannot find the Arbitrator chosen by the parties, and the parties cannot agree on the selection of a replacement arbitrator.
3. The Arbitrator chosen by the parties declines to be appointed.
If the parties have specifically agreed on the selection of an Arbitrator for a case-specific arbitration agreement, but at the time of the dispute, the Arbitrator refuses to be appointed or the Arbitration Center declines to appoint an arbitrator, and the parties cannot agree on a replacement Arbitrator, the Arbitration agreement shall be deemed unrealizable in this case.
4. Cases where the agreement on arbitration procedural rules is inapplicable.
If the parties have agreed to resolve their dispute at a specific arbitration center but also agreed to apply the procedural rules of another Arbitration center and the charter of the chosen arbitration center does not permit the application of another arbitration center’s rules, if the parties cannot agree on the selection of alternative arbitration rules, the arbitration agreement shall be deemed unrealizable.
5. Disputes between suppliers and consumers
If the supplier of goods, services, and the consumer have an arbitration clause incorporated into the general conditions of supply prepared by the supplier, but when a dispute arises, the consumer does not agree to choose arbitration to resolve the dispute, the arbitration agreement shall be deemed unrealizable.
III. Legal consequences of an unrealizable arbitration agreement
Pursuant to Article 43.1 of the Law on Commercial Arbitration 2010, before considering the merits of the dispute, the Arbitral Tribunal must review the validity of the arbitration agreement. If the Arbitral Tribunal determines that the arbitration agreement is unenforceable, it shall terminate the proceedings and promptly notify the parties. Therefore, if the arbitration agreement falls within a case of unenforceability, the Arbitral Tribunal will issue a decision to terminate the case.
Accordingly, pursuant to Article 6 of the Law on Commercial Arbitration 2010, if the arbitration agreement is unenforceable, the Court shall have jurisdiction to accept and resolve the dispute in accordance with the civil procedural order and procedures, to ensure the legitimate rights and interests of the parties.
In practice, the arbitration agreement cannot be performed, which will affect the timeline for dispute resolution, prolonging the proceedings and incurring additional litigation costs for the business. Therefore, identifying cases in which an arbitration agreement is unenforceable helps the parties establish a legally valid arbitration agreement and mitigate risks when disputes arise.
The above is the article by TNTP regarding cases of unrealizable arbitration agreements. TNTP hopes that this article has provided useful legal information to Readers.
TNTP & Associates International Law Firm
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