Choosing International Arbitration or Vietnamese Courts in International Commercial Disputes

Jun 19

Why is choosing the right dispute resolution method important?

International commercial disputes arise from cross-border transactions and require an approach aligned with international law and the parties' agreement. Choosing the wrong mechanism can lead to delays, increased costs, wasted effort, and reputational damage for the business.

1. International Arbitration – Pros and Cons

Advantages:

Respect for party autonomy: Parties can choose the governing law, arbitrators, language, venue, offering high flexibility and neutrality.
Confidentiality: Ideal for businesses needing to keep strategies and sensitive information private.
Global enforceability: Awards are readily recognized and enforced in over 170 countries under the New York Convention.
Streamlined procedures: Especially with reputable institutions like SIAC or VIAC, which have optimized rules in 2025, offering more cost-effective options.

Disadvantages:

Higher costs: Includes arbitrator fees, translation, hearing facilities, etc.
Enforcement in Vietnam still depends on local legal procedures, which can be complex at times.

2. Vietnamese Courts – Strengths and Limitations

Strengths:

Lower costs, with clear procedures governed by Vietnamese law.
Enforceability through the national enforcement system, though enforcement may be delayed or inconsistently executed.
Strong jurisdiction in disputes related to real estate or domestic assets.

Limitations:

Lengthy, public, and rigid procedures, potentially damaging business relationships.
Cannot apply foreign law, bound by the Lex Fori principle (law of the forum).

3. When to choose each method?

Prefer international arbitration when:

The contract includes an arbitration clause.
Confidentiality is a priority, and you want control over law and arbitrators.
The dispute is transnational and enforcement abroad is crucial.

Prefer Vietnamese courts when:

The dispute involves real estate or assets located in Vietnam.
There is no arbitration clause, or cost savings are a priority.
Enforcement through the domestic legal system is more feasible.

Consider mediation first:

Under the 2025 legal reforms, mediation is encouraged as a mandatory first step to reduce risks and expenses.

4. DEDICA’s Recommendations

Draft dispute resolution clauses from the start: clearly define applicable law, resolution method, and venue.
Always consider international arbitration for flexible and globalized contracts.
When opting for Vietnamese courts, ensure control over information and complete procedural readiness.
Have a mediation strategy in place to minimize losses, preserve relationships, and explore flexible out-of-court solutions.

Conclusion

When an international commercial dispute arises, choosing between arbitration and litigation greatly affects the outcome’s efficiency, cost, time, and the company's reputation. International arbitration suits global-facing businesses, while Vietnamese courts are better for domestic or asset-based disputes. However, mediation should always be the first option.

Contact DEDICA Law Firm today for expert legal advice!

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