Businesses lack legal knowledge

What is your evaluation of legal awareness among Vietnamese businesses?

Disputes between local and foreign companies have arisen as a result of increasing integration. Through these conflicts, Vietnamese firms have exposed many of their weaknesses.

The Viet Nam International Arbitration Centre, VIAC, has found that local firms had the most difficulty drafting commercial contracts. Many large contracts were done without much care. The worst ones were contracts that had one or two pages explained the conditions of payment without ever touching upon the terms of implementation, inevitably leading to conflicts.

Vietnamese companies’ limited understanding about domestic and foreign laws is the main cause of this problem.

They are especially unknowledgeable about international commitments that the Government had made with foreign countries through bilateral and multilateral trade agreements.

Facts show that a significant number of firms incur losses after inking contracts without relying on any legal basis.

A common weakness among Vietnamese partners lies in drawing up contracts, which leaves them short of options when conflicts occur.

Does the problem contradict with VIAC’s figure, which says that 70 per cent of disputed cases are posed by Vietnamese partners against their foreign counterparts?

The figure tells us two things. The first, and also a positive point, is that they are taking the initiative to protect their rights when disputes occur.

But it also means that local companies either don’t understand the law, or just don’t take the time to study it, when they are at negotiating tables.

No attention is being given to contract terms. Afterwards, conflicts take place out of ignorance, putting Vietnamese partners at a disadvantage, with their only option to sue their foreign partners.

Another issue is that up to 95 per cent of contracts VIAC receives do not mention which law should be applied in case of conflict.

Some firms included in their contracts that arbitrators would settle disputes, but they did not indicate which arbitration centre would handle these cases. The problem rarely occurs with foreign companies.

Why do local firms prefer to settle disputes in court rather than through arbitration centres?

It is because they do not fully understand recent regulations. An ordinance on trade arbitration issued in 2003 regulates the effects of arbitrators’ verdicts.

Companies should recognise that it’s faster to solve disputes through the help of arbitrators than in court. The former can also help local firms save money.

Only a small number of companies have chosen to solve disputes through VIAC. Does it mean the centre is not good enough?

Probably. Some arbitrators are good at specialised knowledge, but do not have a thorough grasp on procedures. Others are legal specialists but they are short of specialist knowledge. There are still a small number of arbitrators who can settle disputes in foreign languages. These problems are being addressed.

But the centre is fully capable of settling a high number of disputes. Last year, the centre settled 26 cases. The figure increased to 42 in the first ten months of this year.

Pham Quoc Anh, President of the Viet Nam Lawyers Association: The Trade Arbitration Law is an important step in increasing the role of arbitrators.

What is the role of arbitrators in the context of Viet Nam’s economic integration into the global economy?

The more the national economy integrates, the more important the role of arbitrators becomes. The advantages of arbitration services include convenience, less time and money, and secrecy.

Why are a limited number of disputes settled in Viet Nam?

Arbitration Ordinance, the legal foundation for the operation of arbitration centres, has exposed many shortcomings after five years of implementation.

The Viet Nam Lawyers’ Association was asked to compile a draft Law on Trade Arbitration. It should be presented to the National Assembly next year.

What are the main points of the draft?

It should conform with international regulations and help raise the position of arbitrators when settling disputes in civil relations.

The draft law will also regulate conditions and standards of arbitrators, paving the way to improve staff qualifications.

Does it mean the role of arbitrators will increase after the law comes into effect?

I believe so. Foreign firms in developed countries are using arbitrators to settle disputes as an effective trend. This will be the case in Viet Nam, too.