What are 3 conditions of a valid arbitration agreement under Vietnamese law?

Date: 30 August 2021

Writer: Linh Nguyen & Thu Tran

Nowadays, many disputes have been selected to settle at commercial arbitration due to the simple procedures (comparing to Court’s procedures) and time-saving. However, before bringing a case to an arbitration council, the parties must ensure that the arbitration agreement takes effect for the arbitration council to settle. So, what conditions must be met for the arbitration agreement clause in a commercial contract to take effect?

Through this article, BLawyers Vietnam would like to introduce the conditions for an arbitration agreement between the parties to take effect under Vietnamese law.

1. Conditions on subject

The first issue to consider when negotiating the arbitration agreement is the subject’s capacity. The arbitration agreement is valid only if signed by parties with full civil act capacity, and such parties must be competent, specifically:

(i) A person with full civil act capacity is at least 18 years old and does not lose or limit her/his civil act capacity or difficulties in perception, mastery of acts.

The representative of the entity making an arbitration agreement must be a person with full civil act capacity.

(ii) A person making an arbitration is a legal representative or a legally authorized person with the scope of authorization.

In addition, both parties shall adhere to voluntary principles when making arbitration agreements. If a party is deceived, intimidated, or coerced during the agreement period, such arbitration agreement is null and void.

2. Conditions on the competence of the arbitration

Commercial arbitration procedures are not used to settle any disputes. Accordingly, commercial arbitration can only resolve the following disputes:

(i) Disputes among parties arising from commercial activities;

(ii) Disputes among parties, at least one of whom engages in commercial activities; or

(iii) Other disputes among parties that are stipulated by law to be settled by arbitration.

3. Conditions on the form of arbitration agreements

The arbitration agreement is valid only when the following formal conditions are satisfied:

(i) Being expressed through arbitration clauses in contracts or through separate agreements;

(ii) Being formed in writing, including:

  • Through communication by telegram, fax, telex, email, and other means, or through information exchange in writing between the parties;
  • The agreement is recorded in writing by a lawyer, notary public or competent institution at the request of the parties;
  • In transactions, the parties refer to a document containing an arbitration agreement, such as a contract, document, company charter, or other similar documents; or
  • Through exchanging petitions and self-defense statements indicating the existence of an agreement proposed by one party and not denied by the other party.

In case an arbitration agreement is invalid, the competent Court shall accept a case based on a request for dispute resolution made by one of the parties.

In conclusion, for the terms of the arbitration agreement in the commercial contract to be legally valid and serve as a basis for settling disputes at the arbitration center, the parties should pay attention to the contents mentioned in this article as well as refer to the sample terms of the arbitration agencies.

Should you have any questions about the above contents, please revert to BLawyers Vietnam at consult@blawyersvn.com. We are more than happy to hear from you!

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