What is commercial arbitration?

1. What is arbitration

Arbitration, and typically commercial arbitration, is an Alternative Dispute Resolution (ADR) which is agreed by parties of the dispute. Arbitration can be used to replace the traditional way of litigation in court.

With such pros like simple procedure and flexibility as agreed by parties help parties to settle their dispute faster. Moreover, all stages of arbitration are confidential; hence, by using arbitration, entrepreneurs’ reputation are remained save.

2. Arbitration agreement

To submit the dispute for settlement before the arbitral tribunal, there should be an arbitration agreement entered into by disputing parties. Arbitration agreement represents the will of the parties that they agree to bring any legal claims arising out of a business relationship to be settled by arbitration. Arbitration agreement is usually found in the form of a clause/term in the contracts concluded by the parties, or it can be a separate agreement (an agreement to arbitrate). Arbitration agreement may be formed before or after the dispute arises.

In legal science, the arbitration was studied under many different levels and there are many definitions of arbitration:

According to the American Arbitration Association/ICDR (AAA): "Arbitration is a dispute resolution method by submitting the dispute to a number of objective consideration and settlement and they will make the final decision, valuable required the claimants to enforce ".

In Vietnam, according to Article 3 (1) of the Law on Commercial Arbitration 2010: "Commercial arbitration means a dispute resolution method agreed by the parties and conducted in accordance with the provisions of this Law.”

In the UNCITRAL Model Law, Article 7 (1) provides the meaning as follows:

“Arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.”

According to the New York Convention 1958, the arbitration agreement will be treated as an independent agreement, even if the arbitration agreement was expressed as a clause in the contract of the parties.

Arbitration agreement plays a fundamental role in determining the jurisdiction of the arbitral tribunal, while reflecting the freedom of the parties' agreement to arbitration.

The arbitration agreement may exclude the jurisdiction of the Court over the case.

3. Forms of arbitration

Commercial arbitration exists in two basic forms is ad hoc arbitration and administered arbitration.

(i) Ad-hoc arbitration:

Ad-hoc arbitration is a type of arbitration that is agreed by parties to establish in order to solve the case and will cease to exist when the incident is resolved. The nature of ad-hoc arbitration express through the following basic features:

- Established when disputes arise and terminated when the dispute is resolved.

- There is no arbitration institution, no permanent system, no list of arbitrators. Arbitrators selected by the parties or appointed by other arbitrators may be the person named in or outside the list of arbitrators from any arbitration centers.

- Rules of the arbitration proceedings to resolve the dispute may be agreed by the parties to build or choose from any of the procedural rules of any arbitration centers.

Although arbitration is prescribed in the Vietnamese Commercial Arbitration Act 2010, it is not developed in practice of Vietnam.

The reasons, among others, are ad-hoc arbitration requires the parties themselves to be proactive and skillful in participating in the arbitration proceedings without having any support from a professional arbitration secretariat; and not only the arbitral tribunal but the parties would need to have considerable good experience in arbitration procedure for an efficent outcome of the proceeding.

(ii) Administered arbitration / Insitutional arbitration

Administered/Insitutional arbitration is a type of arbitration which is well-formed, with arbitration institution, and also list of arbitrators.

Arbitrators within the list will operate under the institution’s charter and procedural rules. Most of the major arbitration institutions reputed worldwide are established under such models named arbitration centre, arbitration panel, arbitration institute, national and international arbitral tribunal ... but most arbitration institution is established in the form of arbitration centers.

VIAC is an institutional arbitration centre, having its operations and functions similar to other arbitration institutions in the world such as International Court of Arbitration ICC, Singapore International Arbitration Centre (SIAC), Hong Kong International Arbitration Centre (HKIAC), ....

Features:

- Structure of an arbitration institution will includes an executive board, secretariat board and arbitrators of the institution. Co-operation and management of the arbitration institution are generally simple. The Executive Board, normally, are composed of the president, one or more vice presidents and secretary-general. Besides Executive Board, there will be a list of arbitrators who are likely to be available to be appointed to serve as arbitrators resolving cases. Normally, this list has a feature of a recommendations.

Arbitration institution decide their own activities and procedural rules. Within its operating, the institution also has the right to expand and narrow the scope of operation, but must register with the state authority. This feature allows the arbitration institution to hold and operate with specialized arbitration nature (only solve these kinds of certain commercial disputes).

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Mediation and arbitration

Mediation and arbitration features are quite similar to each other such as confidentiality, neutrality, freedom of parties and many more. However, those features still extremely different based on magnitude. Such as freedom of choice, for instance, both arbitration and mediation give parties the right to choose mediator – arbitrator, the main differences is that parties are free to participate or not to participate in the mediation while in arbitration, parties are bound to arbitration agreement and therefore, cannot choose to withdraw from any arbitral procedure.

Binding might be the biggest differences between mediation and arbitration. As mentioned above, parties do not have the right to choose to withdraw from arbitration while they can choose in mediation. On the other hand, arbitral award is final and binding both parties to implement. In the case of mediation, its minute doesn’t bind parties to implement, its enforcement mostly depends on parties’ willingness.

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