New Proposals for Commercial Mediation (ADR)

As a matter of implementing Resolution No. 49-NQ/TQ of the Politburo dated 2 June 2005, as well as implementing Vietnam’s commitments on acceding to the WTO, the State has been developing the new Decree to govern the alternative dispute resolution (ADR) for commercial disputes, called commercial mediation.

According to the draft composer, the Decree shall adopt relevant principals of UNCITRAL’s Model Law, these principals are:

  • The mediation process must always have the presence of a neutral third party to assist the parties in the dispute to settle.
  • Mediation is a voluntary solution, except unless otherwise required by laws or the type of dispute.
  • The parties in dispute participate in the process of mediation to build and to reach a mutual agreement themselves.
  • Mediation creates a safe, friendly communication environment for the parties in the dispute.
  • Mediation could be an independent procedure or part of court or arbitral procedure.
  • Mediation is confidential.
  • Mediation does not affect or prevent the parties from using other dispute resolution methods.

For a summary of the above principals, it is concluded that if mediation is successful, the parties would have another agreement to settle the dispute, called the settlement agreement. In case either party does not honor the settlement agreement, the remaining party could request that the court or arbitration make a request for honoring the settlement agreement.

Within the content of this article, we will discuss the binding effect of a settlement agreement under the draft Decree on Commercial Mediation dated 17 June 2015.

According to Articles 25 and 26 the draft Decree, it is written that a settlement agreement would have the effect of binding the obligations of the involved parties. Also, either party has the right to request the Court to recognize the settlement agreement. The procedure and process make the request to the Court must follow the regulations of Civil Procedure Code.

Speaking of this, we are of the opinion that when drafting the Decree with the above contents, there are two issues to be discussed:

  • First, it is contrary to the principals of the UNCITRAL’s Model Laws that mediation result is some form of a new agreement, or a new contract between the parties in dispute. The point is that, in other countries, in the event that one party breaches the settlement agreement, the remaining party can bring the settlement agreement to court or arbitration. At this stage, the court or arbitration shall not re-adjudicate the whole relationship or issues before the time the parties enter into the settlement agreement, but only review the settlement agreement as a new contract between the parties that replaces any other previous issues.
  • Secondly, there is currently no specific provision in both the Law on Commercial Arbitration or the Civil Procedure Code. Therefore, the Law on Commercial Arbitration and the Civil Procedure Code must be amended to be suitable for this Decree, however this solution is not possible. Moreover, there are some opinions that currently, the procedure for recognizing a foreign award or judgment is very complicated and risky, therefore, to add this issue may result in more complexity to the system.

We are of the opinions that Articles 25 and 26 of the draft Decree should be amended in the approach that the settlement agreement is a new contract that replaces all other previous issues relating to the parties, in case where one party dishonors the settlement agreement, the other party can request the court or arbitration to instigate a new case for its enforcement.

By Vietnam Law Insight (LNT & Partners)

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com

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