Arbitration, as a method of dispute resolution, was first officially recognized in Vietnam in 1994 under Decree 116/CP of the Government dated 5 September 1994. Decree 116/CP was issued following the establishment of the Vietnam International Arbitration Centre ('VIAC')1 , which is adjacent to the Vietnam Chamber of Commerce and Industry in 1993. Arbitration has gained much popularity since then. Todate, most commercial contracts have arbitration clauses. However, notably, one of the subject matters that arbitration has not been utilized sucessfully in the local market in practice is to resolve intra-corporate disputes ('ICDs')2 - those between company owners or between company owners and the company they own. The problem is due in part to the uncertainty pertaining in the current and soon-to-be-replaced legislation--the Ordinance on Commercial Arbitration No. 08/2003/PL-UBTVQH11 dated 25 February 2003 ('OCA')--with different views regarding the arbitrability of ICDs.

Vietnamese law regarding arbitration, however, is now subject to sweeping changes following the enactment of the Law on Commercial Arbitration No. 54/2010/QH12 by the National Assembly on 17 June 2010 ('LCA'). The LCA comes into effect and replaces the OCA on 1st January 2011. The LCA shows considerable effort of the Vietnamese government to correct many of the shortcomings existed under the OCA. Basic matters relating to ICDs and arbitration from a local perspective will first be discussed to give readers a sense of context. The other part of this article will be devoted to discussing the legal obstacles that practitioners have been facing towards arbitration of ICDs under the OCA. Specific matters and issues that affect the arbitrability of ICDs in the OCA, which remains current, and in practice will also be discussed. The remainder of the article will focus on the LCA and how its relates to arbitration of ICDs.


1. The disputed matters

The term ICDs is broad. Almost any matter involving the operation of a company can be the subject of dispute. In the Organization for Economic Cooperation and Development ('OECD') Exploratory Meeting on Resolution of Corporate Governance Related Disputes on March 2006, disputed matters were classified into 15 categories3 . The six which were considered most important were: self-interested transactions, minority shareholder rights, take-over procedures, mismanagement, share valuation, and nomination of Board members.

Under Vietnamese law, there is neither a definition of, nor a term specifically dedicated to, ICDs. However, article 29.3 of the Civil Procedures Code No. 24/2004/QH11 dated 15 June 2004 ('CPC') and article 3.5 of Part I of the implementing Resolution No. 01/2005/NQ-HDTP of the Judges' Council of the Supreme People's Court dated 31 March 2005 ('Resolution 01') classifies an ICD as:

  • A dispute between a company and its members4 , such as those involving share valuations or the number of shares a JSC can issue, rights to dividends, or disposition of company's assets and outstanding contracts in case of dissolution; and
  • A dispute among company members, such as those relating to the transfer of contributed capital between company members or between company members and outsiders, transfer of bearer or non-bearer stocks, calculation of liabilities between company members in case of dissolution.

The types of disputes mentioned are illustrative and are non-exhaustive. Generally, as the CPC and Resolution 01 put it, an ICD can be any dispute that relates to the establishment, operation, dissolution, merger, consolidation, division, separation or change in the organizational structure of a company. This is sufficiently broad to cover almost any matter involving the operation or the existence of a company.

It seems that not all ICDs can be considered to be disputes regarding commercial/business activities. Article 3.5(c) of part I of Resolution 01 makes a distinction as to what should be considered disputes regarding business/commercial activities and what should not be. Those involing labour matters or civil matters (eg, disputes involving the borrowing and lending of assets) are not qualified to be disputes regarding business or commercial activities covered under Article 29.3 of the CPC. Again, the CPC and Resolution 01 are not the law directly governing the elements of arbitration. However, they can be a good source of reference.

2. The companies and ICDs

The ability to choose arbitration to resolve ICDs can be invaluable for business owners whether foreign or local, whether partners to a partnership, whether members of a multi-member limited liability company ('Ltd Co'), or whether shareholders of a joint stock company ('JSC'). It is also useful for institutional investors who make long-term equity investments in emerging markets in general, or Vietnam in specific, in a variety of local portfolio companies. A private equity investor in a privatized State-owned company, for obvious reasons, will prefer arbitration to court litigation, especially where the State retains substantial capital ownership in the privatized State-owned company.

Arbitration of ICDs is especially helpful where a Vietnamese company lists its shares overseas5 . There will inevitably be differences between foreign investors who hold overseas shares and the listed Vietnamese company, or between shareholders, especially between local and offshore shareholders. Arbitration in this case should emerge as an attractive method of dispute resolution as compared to court litigation.


This section will analysize the elements of arbitration that exist in the OCA to see how they inhibit the resolution of ICDs. VIAC has provided an interesting report on the use of arbitration to resolve ICDs under the OCA ('VIAC's Report)6 . We therefore also take the VIAC Report into account.

Under the OCA, in order to be arbitrable, a particular dispute must satisfy the following criteria:

1. The dispute must arise out of commercial activities

ICDs were expressly recognized among a very few arbitrable subject matters under the repealed Decree 116/CP. Arbitration of ICDs, however, is not expressly mentioned under the OCA. Article 2.3 of the OCA defines commercial activities to include 'the purchase or sale of goods; provision of services; distribution, commercial representation or agency; bailment; leasing out or leasing; hire-purchase; construction; consulting; engineering; licensing; investment; finance and banking; insurance; exploration and exploitation; transportation of goods and passengers by air, sea, rail or road; and other commercial acts as provided for under the law'. ICDs, then, are arbitrable only when they can be proved to arise out of a commercial activity. This is one of the major points with conflicting views in regard of the arbitrability of ICDs in Vietnam.

  • ICDs and its commercial nature

In the VIAC's Report, one of the reported views against the arbitrability of ICDs is the fact that they are not specifically mentioned to be disputes that arise out of a commercial activity as required under the OCA. This does not appear to be an accurate understanding.

ICDs generally are disputes arise out of investment activities. Investment activities are specifically identified in the OCA to be a commercial activitiy. As such, ICDs should qualify the 'commercial' test.

Article 12.1 of the Investment Law 59/2005/QH11 dated 29 November 2005 ('IL') also provides that disputes arise out of investment activities in Vietnam can be resolved through negotiation, reconciliation, arbitration or court litigation. Arbitration between local investors can be resolved through either arbitration or litigation at a Vietnamese court (article 12.2). Article 12.3 even allows disputes (i) between foreign investors, or (ii) where one party is a foreign investor or a foreign invested company, to be arbitrated through, among others:

  • local arbitration;
  • foreign arbitration;
  • international arbitration7 ;
  • ad-hoc arbitration.

Also one of the reported views against arbitration of ICDs is that ICDs can only be resolved through a court of law as it is expressly provided to be disputes that the court has jurisdiction over under article 29.3 of the CPC and article 3.5 of Part I of Resolution 01. This does not seem to be a correct understanding as the aforementioned provisions only provides for the general jurisdiction of court (ie, the scope of the cases that the court is competent to hear), not the court's exclusive jurisdiction. Nonethelss, the fact that article 29.3 of the CPC categorizes disputes between a company and its members, and between company members as disputes regarding commercial/business activities can serve as an example of how Vietnamese law treats ICDs (ie, that it is of commercial nature).

It seems that not all ICDs can be considered to be disputes regarding commercial/business activities. Article 3.5(c) of part I of Resolution 01 makes a distinction as to what should be considered disputes regarding business/commercial activities and what should not be. Those involing labour matters or civil matters (eg, disputes involving the borrowing and lending of assets) are not qualified to be disputes regarding business or commercial activities covered under Article 29.3 of the CPC. Again, the CPC and Resolution 01 are not the law directly governing the elements of arbitration. However, they can be a good source of reference.

2. The disputed parties to arbitration must be individuals/entities conducting business

Article 2.3 of the OCA and Article 2 of Decree 25 further provide that arbitrators only have jurisdiction over disputes arise out of commercial activities between 'individuals/entities conducting business'. There is, however, no elaboration of the term.

This requirement is rather controversial. It has created a lot of confusion in practice. Arbitration centers have been sceptical and rather conservative towards this requirement. VIAC, too, acknowledges in its analysis that arbitration centers have had to refuse many cases where either one or all of the disputed parties were considered to not qualify as 'individuals/entities conducting business'. The reasoning, however, was not mentioned. This view does appear to be too conservative. Based on this understanding, the Vietnamese Government, even though is competent to be a party to arbitration of investment disputes under the IL8 , is also not qualified as obviously it is not an entity that does business.

There is also a different view. That is, the provisions of the IL should override those of the OCA and Decree 25 in terms of the hierachical priority in applying legal documents. The provisions of the OCA and Decree 25 appear to be in conflict with the provisions of the IL, which generally permits arbitration of investment disputes between investors or between investors and the Vietnamese Government. Under Vietnamese Law, where there are legal documents that provide differently in respect of the same matter, the provisions of the legal document of higher level of effect shall prevail9 . The IL, therefore, should prevail over the OCA and Decree 25 because a law promulgated by the National Assembly has higher legal effect than an Ordinance promulgated by the Standing Committee of the National Assembly and a Decree issued by the Government10 . Article 12.2, 12.3 and 12.4 of the IL, therefore, will prevail over article 2.3 of the OCA and Article 2 of Decree 25. Based on this undertanding, arbitrators are capable of resolving disputes where the parties are investors, regardless of whether or not they qualify as 'individuals/entities conducting business'.

3. A written arbitration agreement exists.

Arbitration of ICDs is not uncommon in an international context. Instead of making the arbitration agreement in a separate document, the usual method is to put an arbitration clause in the charter of the company. As the charter binds not just the company but also all its owners and the constituent corporate bodies thereof, the embeded arbitration clause therefore will have binding effect on all of them11 . This also helps ease the documentation process as the parties don't have to sign another set of document being the arbitration agrement.

The general rule for arbitration to take place is that there be an arbitration agreement in place between the parties. Article 9 of the OCA requires that an arbitration agreement be made in writing. Article 22.16 of the LE allows company owners to stipulate in the charter matters agreed between themselves that are not contrary to the provisions of the law. Article 23.15 of the EL also requires that the charter contains names and signatures of company members and the legal representative of the company - who has the authority to act on behalf of the company. An arbitration clause embeded in the company charter, therefore, will qualify as an arbitration agreement and binds company owners together with the company itself (except the case of a JSC, which is discussed in the relevant section below).

For certain industries, especially the banking industry which is subject to strict regulation by the Government, the use of arbitration as a method of dispute resolution for ICDs will subject to the industry-specific rules. For example: the Charter of a joint stock commercial bank has to be approved by the State Bank of Vietnam in order to be valid. Banking regulators are known to be fairly conservative. There is no guaranty that arbitration will be accepted in the first place. Nonetheless, there is normally no specific restriction in regard of using arbitration in the context of ICDs.

Although there are different views regarding the arbitrability of ICDs, the views against arbitration reported under VIAC's analysis are widely adopted and have been major obstacles to the use of arbitration to resolve ICDs. This problem exists and perhaps will continue to exist pending the promulgation of the New Law, which is due to be passed by the National Assembly in June 2010.

In addition to the legal uncertainty discussed above, using arbitration to resolve ICDs in JSCs (especially public ones) may not be as appealing as it is in private companies thanks to the liquidity of the stock market that shareholders in a public JSC enjoy. Non-sophisticated and small individual shareholders may prefer court litigation over arbitration while institutional shareholders or offshore shareholders may prefer arbitration. It is also practically impossible for all shareholders of a public JSC to reach a 100% consensus on using arbitration as the exclusive method of dispute resolution for ICDs within the JSC for the arbitration clause in the charter to take effect.

There is yet a solution to this problem under the OCA or the draft of the New Law. However, interestingly, Decision 15/2007/QD-BTC of the Ministry of Finance dated 19 March 2007, which provides a standard charter for listed JSCs to adapt, does. The standard charter includes a dispute resolution clause, which generally allows the use of arbitration to resolve internal disputes. Non-listed JSCs can adapt their charter based on the standard charter as well. In practice, most listed JSCs adopt the standard dispute resolution clause with little or no amendment:

'Article 54. Resolution of Internal disputes
  1. Where a dispute or a complaint relating to the operation of the Company or to the rights of shareholders arises out of this Charter or out of any rights or obligations stipulated in the Law on Enterprises, in other laws or administrative regulations between:
  1. A shareholder and the Company; or
  2. A shareholder and the Board of Management, the Inspection Committee, the managing director or chief executive officer or a senior manager.

The relevant parties shall attempt to resolve such dispute by way of negotiation and conciliation. [...]

  1. If a decision on reconciliation is not made within six (6) weeks from the beginning of the reconciliation process or if the decision of the reconciling medium is not accepted by the parties, then any party may take such dispute to economic arbitration or to the economic court.


The above provisions have cetain shortcomings in regard of arbitration that practically and legally make arbitration inoperable. For example: the charter does not resolve the consensus issues, fails to refer to a method of arbitration (eg, ad-hoc arbitration or a specific institutional arbitration center) or does not make a definite choice between court litigation and arbitration. It seems that, in the case of a public JSC, although many outstanding issues have not been solved, legislators appear to recognize the right to arbitration of ICDs to some extent. Maybe, in order for arbitration to be utilized as an exclusive method of resolution of ICDs in a JSC (especially listed ones), the consensual principle may need to be sacrificed to a certain extent. This problem, in order to be resolved fully, will require legislators' involvement. This has not been addressed in the drafts of the New Law.

One of the main concerns towards arbitration in general is of juridical repudiation. That is, there is a risk that the arbitral award can later be revoked by a decision of court. Even though an arbitral award is effective from the date it is issued, the OCA gives the parties 30 calendar days from the date they receive the award to ask a competent court to revoke such award. The losing party is usually tempted to exercise this right. However, in considering a revocation request, the court can only look at a number of limited statutory grounds12 . A violation that meets one of such statutory grounds could harm the overall validity of the arbitral award. However, in many cases, local courts seem to be reluctant to retry the merits of the case, but to look whether the grounds for revocation of an arbitral award have been met. Many superfluous attempts to get a valid arbitral award annuled were dismissed by the court. A decision to revoke or not to revoke the arbitral award can be subject to appeals by the parties as well. The lengthy process of judicial review, therefore, can significantly increase the overall time of arbitration as a result.

Significant changes to the current arbitration legislation are under way. There are a lot of things to be expected from the new Commercial Arbitration Law, which was scheduled to be passed by the National Assembly in June 2010. This new law is expected to bring a more refined set of rules to bolster the application of arbitration in Vietnam. In the latest draft, the drafters show a willingness to broaden not just the range of arbitrable matters but also the subjects that can be a party to an arbitration agreement. The shortcomings existed under the current OCA are expected to be corrected as well.

Finally, following the success of Vincom's international listing of its convertiable bonds on the Singapore Stock Exchange, Vietnam is likely to witness a wave of local JSCs seeking to list their shares on offshore bourses. This should bring about many interesting issues and chanlenges, and dispute resolution would certainly be one of them.


The range of arbitrable matters can involve claims involving the legality/validity of the disputed matter as well. For example: article 107 of the Enterprise Law 60/2005/QH11 dated 29 November 2005 ('EL') allows a shareholder, a board member, the general director or the Supervisors' Committee to ask either the court or the arbitrators to consider annulling the decision of the General Council of Shareholders where certain conditions are met. Interestingly and legally, to some extent, Vietnamese law appears to be fairly 'arbitration-friendly' towards ICDs.


According to Statement No. 10/TTr-HLGVN dated 1 September 2009 of the Vietnam Lawyers Association, the organization responsible for the drafting of the New Law, VIAC - the largest arbitration center in Vietnam - only handled 30 cases in 2007 and 58 cases in 2008. In comparision with VIAC, the People's Court of Ho Chi Minh City handles an avarage of 1000 economic cases each year. It is clear that arbitration, although encouraged to be used by the Government, has not been employed as much as it should be. Also, with an estimated number of 83,000 companies established in 2009 alone as recently reported by the Ministry of Planning and Investment, the demand for arbitration should be even larger. Arbitration, with its own strengths and weaknesses, should not be regarded as a threat to the jurisdiction or power of local courts, but rather as a reliable method of dispute resolution that company owners can trust with their disputes and helps fill in what local courts don't have. The more options foreign investors have to protect themselves and their investment (especially those made together with a local party) will no doubt help to boost the attractiveness of Vietnam as an emerging market for foreign investors. The mistakes seen in the current OCA will no doubt the lessons learned when drafting the New Law. 2010 should be an exciting year.


1 VIAC was established under Decision No. 204/TTg of the Prime Minister dated 28 April 1993. It was founded as a result of the merger between the Foreign Trade Arbitration Committee (established in 1963) and the Maritime Arbitration Committee (established in 1964) and has been the most popular arbitration center in Vietnam since its establishment. More information can be found at http://www.viac.org.vn/en-US/Home/default.aspx.
2 Many terms can be used instead of the term 'ICDs' such as 'Corporate Governance Related Disputes', 'Company Law Disputes', etc. However, for the sake of consistency, the term ICDs will be used through out this article.
3See http://www.oecd.org/dataoecd/48/22/37188704.pdf.
4The term 'members' is not specifically defined. However, it is clear from the wording that the term refers to owners of a company (members in a limited liability company, partners in a partnership, and shareholders in a JSC).
5Up to date, there have been two cases of Vietnamese companies seeking an overseas listing, one being Covico with its listing of common stocks on the US' Nasdaq on September 2009, and (ii) Vincom with its successful listing of convertible bonds in Singapore's SGX on November 2009. Both cases are the first and rather unique cases of Vietnamese companies seeking a listing overseas. Soon, more are expected to follow their footsteps and soon the various issues pertaining to an overseas listing such as dispute resolution will have to be dealt with.
6See http://www.viac.org.vn/vi-VN/Home/baivietlienquan/2009/02/264.aspx. The report, however, is only available in Vietnamese.
7There is, however, no elaboration of the difference between the term 'foreign arbitration' and 'international arbitration'.
8Article 12.4 of the IL allows disputes between the Vietnamese Government and foreign investors regarding investment activities in Vietnam to be resolved through either arbitration or a Vietnamese court.
9Article 83.2 of the Law on Promulgation of Legal Documents 17/2008/QH12 of the National Assembly dated 3 June 2008.
10Based on the hierachy of legal documents under Article 2 of Law 17/2008/QH12.
11This may not always be true, especially in the context of a public JSC.
12Under article 54 of the OCA, an arbitral award can be revoked on the grounds that (i) an arbitration agreement does not exist, (ii) the arbitration agreement is invalid, (iii), the composition of the arbitral tribunal or the arbitration proceedings was not consistent with the agreement between the parties, (iv) the dispute is not within the jurisdiction of arbitration, (v) an arbitrator proved to have violated his/her statutory obligations, or (vi) the arbitral award is in conflict with the public interest of the Socialist Republic of Vietnam.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.