Resolving International Commercial Disputes Through Arbitration: Advantages and Disadvantages Compared to Court Litigation

When Vietnamese enterprises engage in international transactions, choosing an appropriate dispute resolution mechanism — whether international commercial arbitration or court litigation — becomes especially crucial. This article analyzes the key advantages and disadvantages of arbitration compared to court proceedings, helping readers — particularly business owners — understand the most suitable option and minimize legal risks.
Keywords: international commercial dispute, international commercial arbitration, court in Vietnam.

1. Concepts, Context, and Legal Framework

1.1. Definition of International Commercial Dispute and Arbitration

When a Vietnamese company participates in transactions involving foreign elements — such as import–export, investment cooperation, or service contracts with foreign partners — international commercial disputes may arise.
According to legal experts, international commercial arbitration is a method of resolving disputes arising from relationships involving foreign elements, based on the parties’ agreement to submit the dispute to arbitration.
A dispute is considered international if at least one party has its head office abroad, the seat of arbitration is outside Vietnam, or the dispute relates to multiple jurisdictions.

1.2. Legal Basis in Vietnam

In Vietnam, arbitration proceedings are primarily governed by the Law on Commercial Arbitration 2010, the Civil Procedure Code 2015, and guiding resolutions such as Resolution No. 01/2014/NQ-HĐTP.
An arbitration agreement is a prerequisite for the use of arbitration. For instance, Article 5 of the Law on Commercial Arbitration stipulates that disputes may only be settled by arbitration if the parties have entered into an arbitration agreement.
In cases involving foreign elements, the parties may also freely agree on the seat of arbitration, language, governing law, and procedural rules — offering significant flexibility.

2. Advantages of International Commercial Arbitration Compared to Courts

2.1. Procedural Flexibility and Party Autonomy

One of the main strengths of arbitration in international disputes is its flexibility — parties can agree on procedural rules, appoint arbitrators, select the venue, language, and applicable law.
This flexibility is particularly important in cross-border business contexts where the parties come from different legal systems.
Compared with litigation in Vietnamese courts — where procedures are rigid, time-consuming, and often subject to appeal and public hearings — arbitration allows parties to act more proactively and resolve disputes more efficiently.

2.2. Confidentiality and Sector-Specific Expertise

In international business disputes, confidentiality of business information, trade secrets, and reputation is crucial.
Arbitral hearings are generally private, and awards are not publicly disclosed — ensuring greater confidentiality than court litigation.
Furthermore, the parties may appoint arbitrators with specialized expertise in specific sectors (e.g., international trade, investment, or construction), which is rarely possible in the court system.

2.3. Finality of Awards and International Enforceability

Arbitral awards are final and binding, and international arbitration awards are generally enforceable in numerous countries under international treaties such as the 1958 New York Convention.
In Vietnam, recognition and enforcement of arbitral awards are supported by a clear legal framework.
Unlike court judgments, arbitral awards cannot be appealed through ordinary procedures — offering a higher degree of certainty and finality for the parties.

3. Disadvantages and Risks to Consider When Choosing Arbitration

3.1. Higher Costs and Dependence on Party Cooperation

While arbitration offers convenience and flexibility, it often involves higher costs compared to court litigation.
For instance, arbitration fees charged by international or domestic arbitral centers in Vietnam may be significantly higher than court filing fees.
Moreover, arbitration heavily depends on the parties’ cooperation — if one party refuses to participate in appointing arbitrators, providing evidence, or complying with the award, enforcement may face considerable practical obstacles.

3.2. Limited Interim Relief and Restricted Ability to Appeal

Unlike courts, which possess state authority to impose interim measures such as asset freezing, evidence collection, or injunctions, arbitral tribunals in Vietnam have limited coercive power.
This means that if an arbitral award contains an error, the losing party’s ability to appeal is extremely limited. The award is final and binding, which may cause significant consequences if the parties fail to anticipate certain legal or factual risks.

3.3. Enforcement Challenges and Cross-Border Complications

Although Vietnam is a signatory to the New York Convention, practical challenges remain in the recognition and enforcement of arbitral awards — particularly when assets or entities subject to enforcement are located overseas.
Furthermore, if the arbitration agreement is ambiguous or a dispute arises regarding jurisdiction, Vietnamese courts may intervene to determine competence or even set aside the arbitral award.

4. Conclusion

For Vietnamese companies involved in international business, deciding between arbitration and court litigation is a strategic and potentially decisive choice.
If an enterprise values speed, confidentiality, specialized expertise, and can afford the costs, arbitration is an excellent option.
Conversely, if a company prioritizes state-backed enforcement power, lower costs, or the right to appeal, court proceedings may be more suitable.

However, businesses should never overlook the importance of drafting a clear arbitration clause at the contract stage.
Agreements on the seat of arbitration, language, applicable law, arbitral institution, and cost-sharing can decisively affect the effectiveness and efficiency of dispute resolution when conflicts arise.

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