Thorny Arbitration

At present, commercial disputes are increasingly common in commercial activities, especially international commerce. An enterprise has three ways to settle conflicts. First, concerned parties can negotiate each other, without the presence of a third party. In fact, these negotiations are usually unsuccessful because concerned parties want to protect their own benefits. Thus, they use the second method of reconciliation. Mediators give recommendations and solutions for both sides. If the conciliation is unsuccessful, they use arbitration. Then, arbitrators or courts will make binding decisions that both sides have to strictly follow. Currently, VIAC is present in the third option.

 

Unlike public judgements by courts, commercial arbitration has particular benefits. Commercial arbitration protects business secrets and the reputations of concerned parties (no other parties can join the hearing without the mutual consent of both parties). The arbitration procedure to settle conflicts is simple. Concerned parties have the right to determine the method, arbitrators, location and time for settlement of conflicts. Besides, commercial arbitration does not represent the power of the state, thus, the judgement by arbitrators are internationally mandatory.

 

At present, few Vietnamese enterprises pay attention to arbitration clauses when conflicts arise in commercial contracts. According to VIAC, up to 84 per cent of enterprises do not know about commercial arbitration. Each year, the commercial arbitration centre settles a dozen commercial conflicts (the figure in the US is 5,000 times higher). Historically, the Vietnamese economy was centrally planned. All disputes were settled by orders. Currently, while Vietnam is in a transitional period, the notion of commercial arbitration is not yet widely recognised. In addition, enterprises are unfamiliar with the settlement of business conflicts.

 

The first story centred on the specifications of commodities. A Vietnamese company imported laminated steel from a foreign company. The contract clearly regulated specifications on the thickness, length and breadth. However, it did not define the content of iron and impurities, which decided the steel quality. When the steel was imported, the steel was nearly scrapped steel and it needed reprocessing. In this case, arbitrators had to determine the obligations of the seller in the commodity specifications. This is a serious lesson. When the science develops, the commodity of the same name has different specifications. As a result, if companies do not have clear and detailed definitions, they will suffer losses.

 

The second story related to contract form. A foreign company sued a Vietnamese enterprise for not answering order facsimiles and violating clauses of time of delivery. While the Vietnamese company said it did not sign the contract, the foreigner showed the fax with the signature of the Vietnamese company. The problem is the status of the signature. When the internet develops, contracts can be legally signed in the form of electronic mails, faxes and others. These forms are time-saving and cost-effective. However, they are easily counterfeited by scan or photocopy. The enterprises face high risk.

 

The third story is the authority of signers. According to the Vietnamese law, only the president and general director of a company are legal representatives allowed to sign contracts. In fact, in many cases, deputy general directors sign the contracts, which are only legal when he has authorized certificates of an attorney. When conflicts arose, many contracts became void as signers were deputy general directors without legal authorisation.

 

At present, VIAC has 117 arbitrators with extensive knowledge in a wide range of fields such as banking, finance, insurance, trading and servicing. Currently, 150 arbitrators are working for VIAC, the Hanoi Commercial Arbitration Centre, the Ho Chi Minh City Commercial Arbitration Centre, the Can Tho Commercial Arbitration Centre and Asia Commercial Arbitration Centre. Through the sponsorship of the Danish government via Danida, VIAC has increased awareness and knowledge of the law in the Vietnamese business community. Currently, VIAC has carried out its project in 30 provinces and cities.

 

The Commercial Arbitration Decree was ratified by the National Assembly Standing Committee on February 25, 2003 and put into force on July 1, 2003. After three years, the decree exposed a host of shortcomings. For example, the Civil Prosecution Law and Commercial Arbitration Decree stipulate that the arbitration judgement is valid as a verdict, but the Verdict Execution Decree conflicts with the above laws in the implementation of arbitration verdict. Thus, verdict execution agencies can rely on this regulation to ignore the arbitration verdict. In my opinion, it is time to construct a Law on Commercial Arbitration to replace the Arbitration Decree.