Dispute Resolution in Vietnam: Negotiation, Mediation, Arbitration, and Litigation — Options and Practical Considerations
NEXORA LAWFIRM provides practical support to numerous foreign companies, including Japanese-affiliated firms, at every stage of resolving contractual, labor, and commercial disputes in Vietnam — from negotiation through mediation, arbitration, and litigation. This article organizes the characteristics of each dispute resolution method, the criteria for choosing between them, and points to watch for in real-world use, in an accessible format. For readers interested in topics such as "comparing dispute resolution methods in Vietnam," "the legal effect of negotiation and mediation," "the legal framework for commercial arbitration in Vietnam," "filing suit and court procedure," and "practical dispute handling for foreign-invested companies," this article explains the advantages and disadvantages of each dispute resolution method available in Vietnam and provides the decision-making criteria a company needs to choose the appropriate response.
When a dispute or problem arises in Vietnam, several resolution methods are available, as set out below.
Negotiation (discussion and bargaining)
Mediation (conciliation)
Arbitration
Litigation
01 - Negotiation (Discussion and Bargaining)
(1) About negotiation (discussion and bargaining)
This is a method by which the parties resolve the dispute between themselves. There are two patterns: the parties discuss and respond to each other directly without third-party assistance, or they retain a lawyer or other professional to act as their representative. When a lawyer is retained, the process generally proceeds as follows.
① The lawyer sends a formal demand letter (registered mail with proof of content)
② The lawyers coordinate with one another, or the lawyer coordinates, discusses, and negotiates directly with the other side, attending the relevant meetings
③ Depending on the outcome of ②, the dispute may or may not be resolved (i.e., the negotiation may succeed or fail). If the dispute cannot be resolved through negotiation, it becomes necessary to pursue a different dispute resolution method.
(2) Points to note when negotiating with the Vietnamese side
① Most disputes and problems arise from a breakdown in communication. In many such cases, the underlying problem can be resolved simply by ensuring thorough communication between the parties, with the help of a professional who understands both parties' — and both countries' — backgrounds and can skillfully manage the communication. For this reason, when a dispute arises, rather than immediately choosing an aggressive resolution method, the parties should first carefully examine the cause and attempt to resolve the matter through negotiation.
② Vietnamese people — particularly business owners and executives — tend to have very strong pride. Accordingly, during the negotiation stage, extreme care must be taken not to say or do anything that wounds the other side's pride.
③ When resolving a dispute through negotiation, it is important to prepare constructive proposals in advance and present them to the other party. In addition, one must never speak ill of anyone on the other side, or raise sensitive personal matters concerning any individual.
④ Vietnamese businesspeople place great importance on relationships with senior or respected figures (in the case of an individual, this means family). Accordingly, as one negotiating tool, having a respected figure whom the other side values reach out to them directly can significantly increase the likelihood of success.
02 - Mediation (Conciliation)
Mediation is a method of dispute resolution in which, in addition to the parties themselves, a trusted, neutral third party — an individual, institution, or organization with knowledge and experience in dispute resolution — mediates and facilitates discussion between the parties to resolve the dispute. That said, as with negotiation, whether mediation succeeds and whether its outcome is actually carried out ultimately depends on the will of the disputing parties. Accordingly, how constructively the parties engage with resolving the problem affects whether mediation succeeds. However, because a professional third party is involved, the parties' emotions can be managed to some degree, and an efficient negotiation process can be expected.
Mediation includes both court-annexed mediation and out-of-court mediation. Court-annexed mediation is conducted as part of formal court proceedings before the institution (the court) charged with resolving the dispute. Out-of-court mediation, by contrast, is conducted by an institution, organization, or individual other than a court, and does not need to follow court procedure.
03 - Arbitration
Arbitration is a method in which an independent third party — an arbitration institution or arbitrator — renders a binding decision resolving the dispute, which the parties are obliged to carry out. Arbitration allows flexibility in choosing procedure and is a party-driven process, which means the overall duration of the dispute can also be shortened. A further advantage is that, because arbitral awards are not made public, confidentiality can be maintained.
In arbitration proceedings, the arbitration institution renders its decision based on the parties' agreement, and unless an application is made to set aside the award, the decision is final and is not subject to appeal.
04 - Litigation
Litigation is a method of dispute resolution before an adjudicating body (the court) exercising state power, following a strict order and procedure, and is naturally recognized as binding. On the other hand, court proceedings are complex, lack flexibility, and take time to resolve a dispute; in addition, because of the principle of open trials, one must be careful that trade secrets cannot be protected.
Among the four dispute resolution methods above, the methods most commonly chosen by Japanese companies are as follows.
TOP 1
Negotiation → if unresolved, give up.
TOP 2
Negotiation → if unresolved, commence arbitration.
TOP 3
Negotiation → if unresolved, commence litigation.
TOP 4
Skip negotiation entirely and go straight to arbitration or litigation.