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

The New Law on Organization of People’s Court

Effective from 1 June 2015, the new Law on Organization of People’s Court (LOPC) was adopted by Vietnam‘s National Assembly on November 24, 2014. By the time the law becomes effective, its implementing Decrees and/or Circulars will also be ready.

This law aims to provide a detailed explanation for the functions, duties and powers of the people’s court. This review highlights the important changes in the hierarchical structure, duties and power of the Supreme people’s court.

1. Modification in structure of people’s court

In the past, there have been three levels of people’s court: the people’s court of rural and urban districts; capital city courts and the people’s court of the provinces and centrally run cities; and the supreme people’s court. Under the new LOPC, the structure of people’s court is divided into four adjudicating levels (LOPC: Art. 3):

  • The Supreme people’s court;
  • Superior people’s court;
  • Court of provinces and centrally-run cities; and
  • Court of rural districts, urban districts, town, provincial, cities and the equivalent.

The new LOPC has introduced a superior people’s court into the structure, which further leads to reforms to the duties and powers of other people’s court.

2. Modification in powers and duties of the Supreme people’s court and the Superior people’s court

Under the new LOPC, the Supreme people’s court consists only of the Judicial council (from 13 to 17 members including the Chief Justice, Deputy Chief Justices and other judges), assisting apparatus and training institutions. By removing the specialized and appellate court from the structure of people’s court, it is clear that the Supreme people’s court will reduce its powers over appellate trials.

There are four significant powers that have been entrusted to the Supreme people’s court (Art 20 of the new LOPC):

  • To supervise the adjudicating work of other courts;.
  • To make overall assessment of the adjudicating practices of the other courts, ensuring the uniform application of law is enforced in the conduct of trials;
  • To manage people’s courts organizationally and ensure independence of the courts from one another; and
  • To submit to the National Assembly laws and resolutions; to submit to the National Assembly Standing Committee ordinances and resolutions in accordance with the law.

Reflecting on the allocated powers of the Supreme people’s court, the cassation and reopening trial decisions of its Judicial council are of the greatest significance and importance, and come into enforcement immediately.

Furthermore, as for the appearance of the new Superior people’s court, its duties will be as follows:

  • To conduct appellate trials of cases in which the first-instance judgments, or decisions of people’s courts of provinces or centrally run cities within their territorial jurisdiction which have not yet taken legal effect, are appealed or protested against in accordance with the procedural law.
  • To conduct the trial according to cassation or reopening procedure of cases in which judgments or decisions of people’s courts of provinces, centrally run cities, rural districts, urban districts, towns, provincial cities, or the equivalent authority within their territorial jurisdiction which have taken legal effect are protested against in accordance with the procedural law.

The Court of provinces and centrally-run cities no longer have the right to conduct a trial according to cassation or reopening of a case anymore, as those duties have now been allocated to the Superior people’s court. The remaining court does not change its duties.

  • Plan to apply the new LOPC

To implement the new LOPC, the National Assembly Standing Committee (NASC) issued Resolution No.81/2014/QH13 (Resolution No.81) on implementation of LOPC on November 24, 2014. Resolution No. 81 provided further clarification for adopting the new adjudicating levels as regulated in Resolution No.81.

Until the effective date of the new LOPC, the Chief Justice of the Supreme people’s court shall prepare the organization structure, personnel and other necessary conditions for the new adjudicating levels (Art 1.1 of Resolution No.81). The Judicial council of the Supreme people’s court has to transfer its duties and power to that which is newly established, in accordance with the new LOPC (Art 2.1 of Resolution No.81).

In the Meeting on May 14, 2015, NASC decided to establish three (03) main Supreme people’s courts (in Ha Noi, Da Nang and Ho Chi Minh City) based on the current appellate courts of the Supreme people’s court. This will ensure the adaptability related to the structural organization, facilities and personnel of the new Supreme people’s court established under the new LOPC.

By Vietnam Law Insight.

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

Securing the Right to File a Lawsuit in Administrative Cases

During the implementation and application of Administrative Procedure Law, many issues have arisen about securing the statute of limitation for initiating a lawsuit. To overcome these limitations, The Council of Judges of the Supreme People’s Court has issued Resolution 01/2015/HĐTP-TANDTC, amending Resolution 02/2011/HĐTP-TANDTC with regard to the guidelines for the implementation of the Administrative Procedure Law.

The new resolution has amended point B clause 1 Article 1 of Resolution 02/2011 as follows:

“b) Administrative decisions, issued after having complaints, which retain the old administrative decisions as the previous ones or modify, substitute, cancel parts or whole previous decisions as shown at point a clause 1 of this Article.”

In comparison to the former provision in Resolution 02/2011, the new provision adds the word “retain the old administrative decisions”; meaning that the administrative decisions issued after the settlement of complaints now becomes the additional lawsuit objects in administrative cases under this Resolution.

Compared to Resolution 02/2011, the new provision has strengthened the claimants’ right to complain and initiate a lawsuit. Under Resolution 02/2011, administrative decisions which are issued after the settlement of complaints and retain the old administrative decisions as, cannot be sued with the new statute of limitation starting from the day of issuance. Consequently, in reality, there may be circumstances in which the lawful rights and interests of the claimants may be violated.

In the first circumstance, if the person who has the authority to settle the complaints wants to retain the previous administrative decisions and prevent the complainants from filing a lawsuit, that person can delay the issuing of decisions until the statute of limitation for initiating a lawsuit expires. This will seriously affect the right to initiate a lawsuit by the complainants if they are not satisfied with the decision regarding the settlement of their complaints.

In the second circumstance, for subjective reasons, the complainants have received the decision regarding the settlement of the complaints when the statute of limitation for initiating the lawsuit has expired. In both circumstances, the complaints cannot file a lawsuit against such decisions, and can only make the complaints for the second time to the competent authority.

Based on the new provision, decisions regarding the settlement of the complaints which retain the previous decisions now become the lawsuit objects in administrative cases. Therefore, if the complainants are not satisfied with those decisions, they can initiate a new lawsuit against those decisions at administrative courts, with the new statute of limitation counting from the date receiving or knowing such decisions.

The new Resolution 01/2015/HĐTP-TANDTC issued by the Council of Judges of the Supreme People’s Court has fully secured the right to complain and initiate a lawsuit by the people in administrative cases. With this provision, the Administrative Procedures in the Courts will become clearer and more effective, contributing to the development of our national judicial system.

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

Is commerical mediation a face saver?

As the International Chamber of Commerce (ICC) gets set to hold its regional conferences in March to launch its new ICC Mediation Rules, it is now more pertinent than ever that Vietnam’s business community are aware that when it comes to resolving commercial disputes, there are far cheaper, quicker and more amicable options than simply going to court or arbitration, writes Logan Leung from LNT & Partners.

Companies doing business in Vietnam will benefit from thinking twice about how their commercial disputes should be resolved. Mediation has for many years maintained a position as a viable alternative to resolving disputes for both private and public bodies. In Vietnam, the process is, with the exception of certain labour disputes and administrative matters, compulsorily employed at the courts (court-annexed mediation) and it is also frequently used for small-scale local disputes (grassroots mediation). Yet, mediation has seemingly flown under the radar of businesses when it comes to resolving disputes involving foreign parties.

Private commercial mediation explained

The process of mediation involves the disputing parties attempting to reach an amicable resolution with the assistance of an independent third party (the mediator). As the key element of mediation is amicability, it is a voluntary process in that both parties must agree to use it. While there is no set path to how proceedings may be run, the mediator will often facilitate discussions between the disputants and talk through points of contention with a view to settle. Having a mediator to assist in negotiations can be far more productive than having the parties negotiate privately, as it will often help to navigate through discussion deadlocks.

The advantages of commercial mediation over litigation or arbitration are numerous, and parties can expect to benefit from:

– A much cheaper process because of lower or even no legal fees

– A much faster process, with proceedings seldom taking longer than a week

– The ability to maintain amicable relationships with one another (and save face)

– Full confidentiality in the process.

For disputes with an international element, resolution through the Vietnamese courts is not always approachable, particularly for foreign parties, and arbitration can be very costly. In these circumstances, commercial mediation may be considered, which involves the parties selecting their own mediator to facilitate settlement discussions. Many notable institutions, such as the Vietnam International Arbitration Centre (VIAC) and the International Chamber of Commerce (ICC), have dedicated mediation systems in place to assist parties through the process.

Global development of commercial mediation

The development of commercial mediation has taken strides around the world – particularly in Asia – at a time when businesses are becoming more cost-conscious and seeking to maintain client relationships. This trend is observed through several recent changes.

For businesses, the ICC has become a household name in international arbitration. However, perhaps less well-known and employed are the ICC’s mediation offerings. On 1 January 2014, the ICC Mediation Rules came into effect to replace the 13-year old ICC ADR Rules. These rules guide the parties in initiating mediation (including selecting the mediator) and set out the proceedings’ administrative rules. As the actual mediation follows no fixed approach unlike litigation or arbitration, the rules provide a helpful foundation for parties contemplating using the ICC’s procedures.

Also recently in 2013, the Kuala Lumpur Regional Centre for Arbitration (KLRCA) introduced its new KLRCA Mediation Rules with a view to streamline the commercial mediation process and promote its use among parties. Its provisions are, in many parts, similar to the ICC Mediation Rules and offer a viable and affordable alternative for resolving disputes in South East Asia.

The arbitration powerhouse, Singapore, has also made significant developments. The country boasts an International Commercial Mediation Working Group which has pushed numerous recommendations to the Ministry of Law in December 2013 towards also transforming Singapore into a mediation hub. These recommendations include passing a dedicated mediation law and bolstering judicial support.

The commercial mediation regime in Vietnam

Despite the expanding demand in Asia in shifting from traditional adversarial proceedings to amicable and party-focused mediation, Vietnam has been less active. This is despite the government’s strong embrace of mediation, having even entrenched it in Article 11 of the Civil Code.

While a dedicated Law on Grassroots Mediation will come into effect later this year, commercial mediation has yet to see development. The promotion is currently helped by VIAC, which hosts its own set of modern mediation procedures. The rules, which were developed in 2007, open a gate for businesses to have their disputes resolved amicably within the country. However, other institutions such as the ICC or KLRCA may be used.

Vietnam is also home to numerous legally and/or commercially trained mediators – both Vietnamese and foreign – with the professional capacity to facilitate proceedings. Parties also always have the option to engage specialised mediators from overseas for larger or more complex disputes.

One notable concern that businesses often raise as a reason for avoiding mediation is the binding nature and court recognition of the ensuing settlements. While the settlement agreements will naturally give rise to contractual rights, the agreements are not recognised in the same way as a court judgment or arbitral award. This stance is not very different to the legal position of many other developed Asian countries such as Singapore, and simply enforces the amicable nature of the process.

It is worth noting that enforceability is a concern that is seldom raised. Even in other jurisdictions, court proceedings to enforce mediation settlement agreements are rarely pursued because a mediation settlement’s aim is to encapsulate the parties’ amicable resolution. As parties do not enter into it with an adversarial mindset, it would be highly unusual for a party to renege on its commitments (and risk severing the relationships that they have attempted to preserve).

Nevertheless, for those who seek certainty, Article 58 of the Law on Commercial Arbitration is unique in that it provides for formal recognition of a “decision” concluded through mediation in the same way an arbitral award is enforced. While helpful, the law makes it expressly clear that this will only apply to mediations conducted under the umbrella of arbitration and facilitated by the same arbitrator(s) – i.e., through a costlier and longer arbitration-mediation hybrid process.

Therefore, the only basis for enforcing pure mediation settlements under the current legal framework of Vietnam – for those settled at both the VIAC other foreign institutions – is contract-based. Accordingly, any disputes will be resolved largely against on how the settlement agreement is devised and potential claims will be made for a breach of contract.

Still out of favour

Despite the overwhelming advantages of mediation, to date, fewer than 10 cases have been adjudicated under VIAC’s dedicated rules. The response is particularly surprising, as mediation can often mean the difference between several billion VND and several million VND in legal fees. It can also mean the difference between several months (or years!) in contentious proceedings and several days of negotiations.

The success rate of mediation has been well documented. For businesses who have mutually agreed to commercial mediation, the ICC has cited an impressive settlement rate of over 75 per cent for cases remitted to their procedures.

In light of these advantages, it is no surprise that the use of commercial mediation has expanded globally. Given Vietnam’s pro-mediation stance for domestic disputes, we hope the country will eventually follow suit with a more rigorous legal framework and institutional support to promote it.

Nevertheless, albeit uncommon, mediation presently remains an attractive and viable option in Vietnam, while the process is gaining traction in other countries. Therefore, companies doing business in Vietnam will benefit from thinking twice about how their commercial disputes should be resolved – perhaps even including a detailed mediation clause as part of their business agreements (often as a pre-arbitration stage).

After all, when the alternative is an expensive drawn-out litigation or arbitration, it is clear that there is much to gain and little to lose from trying commercial mediation.

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