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Author: TNTP LAW

Benefits of mediation or dialogue at Court

In the laws of society, disputes are always inevitable. Dispute settlement is of significance to social justice and stability but remains a complex matter. When a dispute takes place, there are many different methods of settlement. Each method has its advantages and disadvantages, and choosing the suitable method can significantly affect the resolution process and the outcome of the case. However, the method of reconciliation and dialogue has not been paid much attention compared to its potential. Therefore, TNTP is sending you an article “Benefits of mediation or dialogue at Court”.

1. Understanding mediation or dialogue in Court

• Mediation at court refers to mediation activity conducted by a Mediator before the court accepts a civil case in order to assist parties in mediation to settle the civil case.

• Dialogue at court means a dialogue conducted by a mediator before the court accepts an administrative case, in order to assist the parties in dialogue to settle the administrative lawsuit.

Thus, mediation or dialogue at Court is an activity carried out by mediators, selected and appointed by the competent Court from reputable experts and experts in the community, meeting the standards specified in Clause 1, Article 10 of the Law on Mediation or Dialogue at Court 2020. This process is intended to resolve cases in which the petitioner has filed an application to the Court, but which the Court has not yet accepted and disposed of according to the proceedings.

2. The benefits of mediation, dialogue in Court

a. Minimize time and effort

• Mediation or dialogue at Court shall be implemented based on the provisions of the Law on Mediation or Dialogue at Court 2020. The name “mediation, dialogue at Court” could be misunderstood as a process in court proceedings, however, in fact, this is a non-litigate mediation procedure.

Therefore, the time of mediation or dialogue will be applied in accordance with the provisions of the Law on Mediation or Dialogue at Court 2020. The average time to resolve a case is about 1.5 months. If the case is agreed by the parties, it will last no more than 02 months. Furthermore, in the process of mediation or dialogue, if the parties cannot find a common voice, they have the right to request the termination of the mediation or dialogue at any time.

• The parties can actively choose the time and place of the mediation session. Unlike court proceedings conducted during office hours, the parties choosing mediation, dialogue can choose the appropriate time, place and method of mediation. This means that mediation can take place inside or outside the Court’s premises, outside office hours, and also by meeting in person or through other means proposed and agreed upon by the parties.

b. Cost-efficient

• The fee for mediation or dialogue shall be guaranteed by the State budget, except in cases such as: major business or commercial disputes; selection of mediation venues outside the court building; review the status of out-of-province property; foreign language translator… Such provisions are intended to encourage the parties to carry out reconciliation and dialogue.

• When the parties choose to settle the dispute in court proceedings, the minimum fee to be incurred is VND 300,000 or more, depending on the type of dispute and the value of the dispute. the higher the value, the higher the court fee will be. Besides, the parties still have to bear other related costs incurred as the law prescribed.

c. High consensus in dispute resolution

• In mediation, the parties involved completely voluntarily reach an agreement on how to resolve the dispute. When mediation is successful, the dispute resolution memorandum reflects the will of all parties, and they are satisfied with the outcome. In other words, in the mediation process, there are no winners or losers, but every party gets what it wants. Therefore, the tension will be reduced and relationships and cooperation between the parties will be preserved.

• Because of the content of the agreement when mediation or dialogue is highly agreed by the parties. Therefore, after mediation, the parties implement the content of mediation voluntarily and quickly.

d. Confidentiality of information of parties

The privacy and self-determination of the parties are central to the process of mediation and dialogue. Information in mediation is strictly confidential, ensuring trust and respect between the parties. All discussions and decisions take place in private, and cannot be recorded or videotaped without the consent of the parties. Minutes are only made to record the final result of the process, and the contents of the record must also be kept confidential. These principles help facilitate the parties to feel comfortable and free to participate, thereby making it easier for the Mediator to effectively guide the parties to the final agreement.

In conclusion, the application of mediation or dialogue in court brings many benefits to the parties and the judicial system. We hope that through this article, readers will have a comprehensive and accurate perspective. From there, you can choose the suitable methods for your case.

Above is the article “Benefits of mediation or dialogue methods at Court” that TNTP sent to readers. In case there is content to discuss, please contact TNTP for support.
Best regards.

Steps to draft a contract

The drafter must not only fully represent the desires of the parties but also anticipate the practical execution of the contract. Then, the drafter will have grounds to review any potential risks to minimize these risks and maximize benefits for the client. In the previous article, we discussed the four steps drafters can apply: i) Find out the details to be drafted; ii) Identify the type of drafted contract; iii) Identify the object of the contract; iv) Analyze the legal regulations governing the contract. In this article, we will continue to outline the remaining steps to draft a contract that parties may refer to.

1. Identify primary interests

Each party entering a transaction or contract relationship aims for certain benefits. Depending on the parties’ positions within the contract relationship, their targeted benefits differ. From the initial step, in the information exchange process with the client, the drafter must compile the benefits the client aims for, and identify primary and secondary interests, and ways in which interests are met. The contract should protect the primary interests and, in some cases, may forgo one or some secondary interests to ensure a balance of interests in the negotiation and signing of the contract.

For example, in a sales contract, the buyer’s primary interest is that the goods must meet the quantity, type, and quality required by the buyer. To ensure this interest, the drafter should include the following in the contract: i) payment to be made after receiving the goods; ii) the exchange or return of goods if they do not meet the specified type or quality; iii) the delivery of additional goods if the quantity is not met; iv) warranty of the goods; v) penalties for the seller such as compensation for damages or fines if the goods do not meet the quantity, type, or quality.

2. Identify risks

During the drafting process, the drafter needs to identify potential risks that could arise during and after the execution of the contract and list possible risks to anticipate risk mitigation methods. Some risks include the contracting party not having sufficient authority; changes in the contract’s execution context, legal basis, and business environment; changes concerning the direct rights/obligations, related rights/obligations; one or more parties violating the contract, unilaterally terminating the contract; etc.

For each type of contract, risks often stem from different factors. For example, in a goods sales contract, risks might arise from goods being transported across regions/territories, changes in prices, goods preservation, maintenance, warranty, etc. In a joint venture or investment partnership contract, risks often arise from defining the scope of cooperation, the contributions of the parties, project stages, investment plans, cash flows, and structuring related transactions, the type of assets contributed, project outcomes, and sharing of profits and risks in the business, etc.

When anticipating risks, the drafter should specify content to reduce and prevent risks. For example, for risks related to the contracting entity, the drafter needs to thoroughly check the authority of the contracting parties. For risks associated with force majeure or fundamental change of circumstances, the drafter may draft these contents into the contract.

3. Draft the contract

After understanding the client’s requirements and determining the contract structure, the drafter begins to draft the detailed clauses of the contract. The drafter should group the clauses into i) main clauses – reflecting the main and specific content, ii) common clauses – content needed in most contracts, iii) other clauses – clauses typically included in some contracts to exclude certain misunderstandings that could lead to disputes.

4. Review the language and finalize the contract

After completing the contract drafting, the drafter should read through the contract at least twice. For the first read-through, the drafter needs to ensure the contract matches the client’s desires and legal regulations. For the second read-through, the drafter can check for formatting errors such as spelling, spacing, paragraph breaks, expression, etc. After finalizing the contract, the drafter sends it to the client and waits for their feedback. If the client requests adjustments, the drafter continues to revise and supplement the contract in accordance with the client’s requests and legal regulations.

This article, “Steps to draft a contract” aims to be useful to you.

Sincerely,

 

A practical guide to drafting a contract

A contract is an agreement between parties to establish, modify, or terminate civil rights and obligations. Contracts include various forms, such as purchase and sale agreements, loan agreements, cooperation agreements, service contracts, and franchise agreements. The content of a contract can vary depending on the parties’ desires, the actual information, and the type of concluded contract. However, when drafting any contract type, the drafter should follow a certain process to anticipate potential risks and ensure that necessary content is not omitted. This article will outline the basic content of the contract drafting process for parties to consider applying.

1. Find out the details to be drafted

A good contract can be implemented in practice. Therefore, before drafting a contract, the drafter must discuss and gather information from the proposer, the person requesting the drafting, or the person directly negotiating, signing, and executing the contract, who understands the drafted content (collectively referred to as “the client”). The information exchanged includes i) information about the client and the other party in the contract; ii) the client’s role in the contract (seller or buyer; service provider or service user, etc.); iii) the client’s overall desires and purposes for the contract and specific requirements in each clause; iv) information about the object of the contract; v) the process of implementing the contract in practice. This information exchange will start when the drafter begins working and ends only when the client agrees with all the content in the contract.

2. Identify the type of drafted contract

After exchanging information and understanding the client’s needs, the drafter will determine the type of contract to be drafted and its characteristics. It is crucial to accurately identify the contract type as each has unique features and specific clauses. Once the type of contract is identified, the drafter can determine the basic contract framework, mandatory clauses, recommended clauses, key clauses, and the overall impact of these clauses on the contract and potential risks.

3. Identify the object of the contract

The object of the contract is what the parties aim to achieve through the contract. For example, in a sales contract, the object is the goods that the seller wishes to sell and the buyer wishes to purchase; in a service contract, the object is the services provided by the supplier to the user. If the object of the contract is not accurately and fully identified, the drafter cannot determine the rights and obligations of the parties involved. The drafter must specify the object of the contract to ensure the contract is executed in accordance with the agreement. The concerns of the parties in a sales contract, for instance, vary depending on the type of goods involved, leading to differences in the contract content. For example, in the case of food products, the buyer often cares about the origin and provenance of the goods; the hygiene and safety of the goods; the methods of preserving the goods; etc. For software products, the buyer typically concerns themselves with intellectual property elements, usage methods, information security, etc.

4. Analyze the legal regulations governing the contract

After determining the type of contract and its object, the drafter must review relevant legal regulations. Through analyzing these regulations, the drafter will recognize issues like the contract’s validity, the rights and obligations of the parties in the relationship, etc. Then, the drafter needs to compare the client’s requirements with legal regulations to determine if these requirements are legally compliant, thereby adjusting them to be in accordance with legal regulations. It is important to note that complying with legal regulations does not mean simply copying all the legal terms into the contract. The drafter must adjust the legal provisions to be in accordance with the actual signing situation of the parties.

We hope this article, “A practical guide to drafting a contract” will be useful to you.

Sincerely,

The legal basis for determining the Court’s jurisdiction to resolve business and commercial disputes

In commercial activities, the occurrence of conflicts and disputes is inevitable. One of the methods to resolve disputes is through litigation. Therefore, it is crucial to determine the Court’s jurisdiction to resolve disputes. Here are some important grounds for determining the Court’s jurisdiction to resolve commercial business disputes.

1. Determination of the Court’s Dispute Resolution Jurisdiction

• Jurisdiction is associated with the rights and duties prescribed by law for state agencies, leaders and managerial positions in those agencies to perform their functions and tasks. The jurisdiction of the Court is the power to consider the settlement of cases and the power to make decisions when considering the settlement of such cases according to the proceedings of the Court.

• Pursuant to Clause 1, Article 30 of the Civil Procedure Code 2015, business and commercial disputes fall under the jurisdiction of the Court.

• If the parties agree to settle the dispute at the Court if the contract, as well as the parties do not agree on the dispute settlement body, the dispute shall be settled at the competent Court. At that time, the jurisdiction of the Court to settle disputes is determined as follows:

– Determination of the Court’s jurisdiction according to the case: The jurisdiction of the Court is determined based on the specific case. Business and commercial disputes that fall under the jurisdiction of the Court are listed in Article 30 of the Civil Procedure Code 2015.

– Determination of the Court’s jurisdiction by trial level: The jurisdiction of the Court is also determined by trial level. Depending on the type of dispute and the place of registration of residence or headquarters of the parties concerned, the district or provincial People’s Court has jurisdiction to settle commercial disputes.

– Determination of the jurisdiction of the Court according to territory: The jurisdiction of the Court may be determined based on where the defendant resides, works, or the defendant’s headquarters. In the event that the respondent entity has more than one place of operation, then the court where the respondent resides, works or the final headquarters address shall have jurisdiction.

– Determination of the Court’s jurisdiction at the choice of the Plaintiff: The Plaintiff has the right to choose the Court to resolve a dispute based on certain specific conditions.

2. Determination of the jurisdiction of the Court in the event of an Arbitration agreement

When requesting the Court to settle a dispute over commercial business, the Court will determine whether the parties have an arbitration agreement or not. The court must examine and review the documents attached to the petition to determine that the dispute does not fall under the category of an arbitration agreement.

Normally, when the parties have an Arbitration agreement, the Arbitrator will be the settlement body in case a dispute arises. However, a dispute with an arbitration agreement but falling into one of the following cases shall fall under the jurisdiction of the Court, unless otherwise agreed by the parties or otherwise provided for by law:

• There is a decision of the Court to annul the arbitral award, annul the decision of the arbitral tribunal on recognizing the agreement of the parties.

• There is a decision on suspension of dispute settlement by the arbitral tribunal or arbitration center specified in Clause 1, Article 43, Points a, b, d and đ, Clause 1, Article 59 of the Law on Commercial Arbitration.

• The parties concerned have an agreement to resolve their disputes at a specific arbitration center which has now shut down without any arbitration center that inherits its cases, and the parties fail to reach an agreement on another arbitration center to resolve their disputes.

• Both parties have an agreement on the appointment of a specific arbitrator to resolve disputes, but when the dispute arises, due to force majeure events or objective difficulties, such arbitrator cannot resolve the case, or the arbitration center or court cannot find a substitute arbitrator as agreed by the parties concerned, and the parties concerned also fail to reach an agreement to select a substitute arbitrator.

• Both parties have an agreement on the appointment of a specific arbitrator to resolve disputes, but when the dispute arises, such arbitrator refuses the appointment or the arbitration center refuses the appointment of the arbitrator, and the parties also fail to reach an agreement to select a substitute arbitrator

• The parties have an agreement to resolve their disputes at a specific arbitration center but choose the arbitration rules of another arbitration center, which is different from the agreed arbitration center, and the charter of the arbitration selected by both parties does not allow the application of arbitration rules of other arbitration centers, and the parties fail to reach an agreement on substitute set of arbitration rules.

• The goods seller/service provider and consumers have a general term on the provision of goods/services that contain arbitration terms drafted by the seller as prescribed in Article 17 of Law on Commercial Arbitration, but the consumers refuse to have the dispute that arises resolved by an arbitral tribunal.

However, determining whether the arbitration agreement is null and void or the arbitration agreement is unenforceable is the jurisdiction of the arbitrator. In particular, before deciding the case on merit, the arbitral tribunal must consider the validity of the arbitration agreement; whether the arbitration agreement is enforceable and consider its jurisdiction. If the case falls within its jurisdiction to settle, the arbitral tribunal shall settle the dispute in accordance with the provisions of the law. In case it does not fall within its jurisdiction, the arbitration agreement is invalid, or the arbitration agreement cannot be enforced, the arbitral tribunal shall decide to suspend the settlement and notify the parties.

Above are the contents and legal sharing of TNTP on the legal basis for determining the Court’s jurisdiction to resolve business and commercial disputes. We hope this article will be useful for our readers.

Sincerely.

Important considerations when conducting arbitral proceeding

The utilization of arbitration for dispute resolution is progressively becoming the preferred choice for numerous businesses, owing to its manifold benefits, particularly when administered through arbitration centers. The arbitral proceedings process at these centers entails notable disparities compared to litigation within conventional court systems. Within this article, we shall examine the pivotal factors businesses should consider when engaging in arbitration proceedings at arbitration centers.

1. Request for arbitration

In the event of an agreed arbitration agreement specifying the arbitration center to resolve the dispute, the claimant shall submit the request for arbitration and related documents to that arbitration center. If the parties do not specifically agree on the arbitration center with jurisdiction to resolve the dispute, they need to agree on which arbitration center the dispute is resolved. If an agreement cannot be reached, the selection of the arbitral institution to settle the dispute shall be made at the claimant’s request.

The request for arbitration includes contents as follows:

• Date of request for arbitration.

• Information about the parties involved in the dispute (plaintiff, defendant, rights holders, relevant obligations). For businesses, the necessary information includes the address, legal representative, or authorized representative (in which case information about the Power of Attorney or Authorization Contract must be provided), tax identification number, phone number, email, etc.

• Summary of the disputed content.

• Grounds for the claims (Clearly indicate the content of arbitration agreements).

• The plaintiff’s request and monetary value of the dispute.

• Other issues such as the name, and contact address of the arbitrator chosen by the plaintiff or the request for the arbitration center to appoint an arbitrator; contact information of the plaintiff;…

In addition to the request for arbitration, the plaintiff needs to prepare the following documents: Arbitration agreement; the original or certified copies of documents related to the dispute such as contracts, agreements,… These are important documents for the Arbitration Center to consider the plaintiff’s lawsuit request.

2. Statute of limitations for initiating a lawsuit for dispute settlement by arbitration

Similar to the litigation process in court, parties need to be aware of the statute of limitations for filing a lawsuit. According to Article 33 of the 2010 Commercial Arbitration Law, unless otherwise provided by specialized laws, the statute of limitations for filing a lawsuit under arbitration procedures is 02 years, starting from the time when the legitimate rights and interests were infringed.

Businesses should pay attention to the statute of limitations to ensure their rights, as in the event a business submits the request for arbitration outside the legally specified deadline, the Arbitration Center may refuse to process the lawsuit petition.

3. Costs of arbitration

An equally important consideration when proceeding with arbitration litigation is the arbitration fee. After receiving the plaintiff’s request for arbitration files, the Arbitration Center will issue a Notice on the payment of arbitration fees and send it to the plaintiff. The amount of the arbitration fee and the deadline for its payment will be determined by the Arbitration Center. If the plaintiff does not pay the full arbitration fee within the deadline set by the Center, it will be considered as a withdrawal of the request for arbitration.

Moreover, arbitration fees are usually significantly higher than court fees. Therefore, businesses must consider the arbitration fees before deciding to file a lawsuit. They may request the Arbitration Center chosen by the parties to provide an estimated arbitration fee for consideration and review.

4. Constitution of an Arbitral Tribunal

Unlike the litigation process in court, where the appointment of a judge to resolve a case is the responsibility of the president of the court, in arbitration proceedings, both the plaintiff and the defendant have the right to choose an arbitrator to resolve the dispute according to their wishes or request the arbitration center to appoint an arbitrator. If the defendant does not choose an arbitrator or does not request the arbitration center to appoint one, then within the specified deadline, the arbitration center will appoint an arbitrator for the defendant.

Additionally, the parties can agree on the number of arbitrators (ensuring an odd number). In cases where the parties do not agree on the number of arbitrators, the Arbitral Tribunal will consist of three arbitrators.

5. Validity of an arbitral award and enforcement of arbitral awards

According to Clause 10, Article 3 of the 2010 Commercial Arbitration Law, an arbitration award is a decision made by the Arbitral Tribunal that resolves the entire content of the dispute and concludes the arbitration proceedings. Furthermore, the arbitration award is final and takes effect from the date of issuance, meaning that disputes resolved by the arbitration center cannot be reconsidered by the courts, except in cases where the arbitration award is annulled according to legal provisions.

No later than thirty (30) days from the date of the final session, the arbitration center will issue the arbitration award and send it to the parties immediately after the date of issuance. The arbitration award is final and effective from the date of issuance. If the deadline for enforcing the arbitration award passes and the party obligated to enforce the award does not voluntarily comply and also does not request the annulment of the arbitration award, the party entitled to enforcement of the arbitration award has the right to submit a request to the competent civil enforcement authority to enforce the arbitration award.

The above is an article by TNTP on the topic “Important considerations when conducting arbitral proceeding”. We hope that the article brings value to readers in the process of dispute resolution.

Best regards,

Commercial disputes and typical dispute resolution methods

Commercial dispute is a common and frequent phenomenon that takes place in the market economy. Due to its regular nature as well as its consequences for the parties to the dispute in particular and to the economy in general, Vietnamese law soon had certain concerns about this activity expressed through specific regulations about the dispute settlement methods for this kind of dispute. In the following article, TNTP will give an overview of commercial disputes and typical dispute resolution methods.

I. Overview of Commercial Disputes

Commercial disputes are conflicts (disagreements or conflicts) of rights and obligations between parties in the process of performing commercial contracts. Derived from the above definition, trade disputes are characterized by:

● First, commercial disputes are conflicts (disagreements or conflicts) about rights and obligations between parties in a particular relationship.
● Second, conflicts (disagreements or conflicts) of rights and obligations between the parties must arise from commercial activities.
● Third, trade disputes are mainly disputes between traders.

II. Commercial dispute settlement methods

Currently, commercial disputes are resolved by the following methods: negotiation, mediation, court and commercial arbitration. Each method has differences in legal nature, procedure, and order of conduct. The parties have the right to choose the appropriate method, depending on the advantages that each method can bring, the degree of suitability of the method compared to the content, nature of the dispute and the goodwill of the parties.

● Negotiation

✔ Negotiation is understood as a method of dispute settlement through the parties voluntarily discussing, agreeing, self-mediating, and resolving disagreements to settle disputes without the assistance or judgment of any third party.
✔ The negotiation process between the parties is not bound by the law on the order and procedures for settlement.
✔ The result of negotiation completely depends on the voluntariness of each party to the dispute without any legal mechanism to ensure the enforcement of the agreement of the parties during the negotiation process.

● Mediation

✔ Commercial mediation is a method of settling commercial disputes agreed upon by the parties and supported by a commercial mediator to assist in settling disputes according to regulations.
✔ According to the provisions of Article 6 of Decree 22/2017/ND-CP, disputes shall be settled by commercial mediation if the parties have a mediation agreement. The parties may agree to settle the dispute by mediation before, after the dispute arises or at any time during the dispute settlement process.

● Court

✔ Settlement of commercial disputes at the Court is a method of settling commercial disputes at the adjudicating agency in the name of state power implemented by the court according to strict order and procedures. The effective judgments of the Court are enforced by the power of the State.
✔ The Court can only accept business and commercial disputes under the jurisdiction of the Court, specified in Article 30 of the Civil Procedure Code 2015.
✔ Settlement of commercial disputes by the Court is carried out through a two-level trial model: first instance and appellate level. The judgment of the Court may be appealed or reivewed according to regulations.

● Commercial Arbitration

✔ Commercial arbitration is a non-governmental jurisdictional method of resolution through the activities of an arbitrator as an independent third party to settle conflicts by issuing an arbitral award that the parties must implement.
✔ The parties’ request for dispute settlement must be recognized by an arbitration agreement, an arbitration agreement may be drawn up before or after the dispute has arisen.
✔ The disputing parties may agree on choosing the Arbitration Center, the Arbitrator, the place of settlement or the applicable law,…
✔ The arbitral award is final and takes effect from the date of issuance without appeal.
✔ Arbitration is a separate dispute resolution mechanism. Confidentiality is evident in the fact that the content of the dispute and the identity of the parties are kept private, meeting the need for trust in commercial relations.

Above is TNTP’s article on “Commercial disputes and typical dispute resolution methods”. We hope this article was useful to you.

Respect.

Third-party funding in arbitration

Arbitration has become one of the most popular dispute resolution methods in the commercial field. However, the cost and fee of participating in arbitration proceedings is a significant barrier that prevents parties from choosing this dispute resolution method. In this article, TNTP will introduce to readers the concept of third-party funding in arbitration, a method that is becoming increasingly popular worldwide but is still relatively new in Vietnam.

1. The concept and characteristics of third-party funding

Third-party funding refers to the involvement of a third entity, which is neither a disputing party nor has any legal relationship to the parties or the dispute itself, typically financial organizations. The funding entities will support one of the disputing parties in arbitration by covering legal expenses such as attorney fees, expert witnesses, consultants, and any other related or necessary costs throughout the dispute resolution process, usually under a funding agreement. The funding party receives a percentage of the award or a predetermined amount if the arbitration award is economically favourable to the funded party or if a beneficial settlement is reached. However, if the funded party loses the case, depending on the agreement, the funding party is responsible for paying the amounts related to economic obligations imposed on the funded party by the arbitration award, such as liabilities to the winning party, attorney fees, and other costs.

Third-party funding is characterized by the following points:

• The service users: The users of the service are typically claimants in a dispute. Defendants can also utilize funding services in situations where they face financial difficulties or when filing a counterclaim.

• The funding organizations: Insurance companies, institutional financiers, and other financial institutions such as corporations, banks, and hedge funds are the most common funders. They act as financial providers and do not intervene in the dispute resolution process of the funded party.

• The costs covered include legal expenses of one party such as attorney fees, expert witnesses, consultants, and any other related or necessary costs incurred during the dispute resolution process.

• Third-party funding is popularly used in high-value commercial disputes, especially in investment disputes between states and investors resolved through the mechanism of the International Centre for Settlement of Investment Disputes (ICSID) or through arbitration under investment protection agreements.

2. The role of third-party funding in arbitration proceedings

Third-party funding can be an effective method for parties in the dispute resolution process due to its benefits, specifically:

• Third-party funding allows parties with weaker financial resources to defend their rights and interests in arbitration proceedings. Financially weaker parties can be dominated by those with stronger financial resources, and, in some cases, they may be forced to accept a lower compensation amount than the actual damages due to the costs of arbitration exceeding their financial capacity. Through the financial support of a third party, the funded party can remove the domination of the stronger party, leading to a more objective resolution process.

• Third-party funding also helps to stabilize the financial situation of the parties involved in arbitration, avoiding bankruptcy due to pursuing arbitration. Moreover, under the funding agreement, if the arbitration tribunal’s award is not economically favourable to the funded party, depending on the agreement, the funder will pay the costs and economic obligations in the award, thereby reducing the financial burden on the funded party.

• Third-party funding can also serve as a means of assessing before proceeding with further strategies. Upon receiving a funding request, the third party will usually conduct an assessment and analysis of the case, the possibility of winning the case, and the chance for recovery in the event of a favourable decision for the funded party. Since this assessment is carried out by an objective third party, it can serve as valuable information for the parties before deciding whether to follow the case, use the funding, or withdraw the lawsuit.

3. Considerations for third-party funding in arbitration

Following the positive aspects that third-party funding may bring to the arbitration process, this method also carries certain risks as follows:

• In terms of the economic aspects of the arbitration award, funders will receive a significant portion of the money awarded to the funded party. However, funders always have strategies to mitigate risks to their investment in cases where the arbitration award is not in the favor of the funded party. Therefore, if the arbitration award is not economically favourable to the funded party, certain agreements might impose additional payments to compensate the funder, increasing the financial obligations of the funded party.

• Although funders are not allowed to interfere in the dispute resolution process, they can request the funded party to seek higher compensation as they are more interested in their profit than the outcome of the case. Such an approach can sometimes conflict with the interests of the funded party, leading to the parties cannot resolve the dispute through negotiation or mediation.

Third-party funding in arbitration presents a model with many growth opportunities, especially as more and more disputes are being resolved through arbitration mechanisms. However, this method is still relatively new in Vietnam, with no specific regulations governing it. When a party wants to use this method, besides the benefits it offers, they should also consider other factors as well as the potential risks involved.

This is the article “Third-Party Funding in Arbitration” by TNTP. Should you have anything that needs to be discussed, please feel free to contact TNTP for assistance.

Best regards,

Does the bank have the right to seize security assets without the consent of the security asset owner?

In the activities of credit institutions in general and banks in particular, to ensure the borrower’s payment obligations to the loan, banks often take measures to ensure the fulfillment of the borrower’s obligations. One of the most common methods is mortgaging assets. However, does the bank have the right to seize the secured asset without the consent of the mortgagor? In the following article, TNTP’s lawyer will give his opinion on this issue.

1. What is a mortgage?

According to Article 317 of the Civil Code 2015, Mortgage of property is the use of property owned by one party (hereinafter referred to as the mortgagor) to ensure their performance of obligations and not handing over the property to the other party (hereinafter referred to as the mortgagee). In addition, the parties can agree to hand over the mortgaged property to a third person for keeping.

Therefore, mortgaging assets for bank lending activities is to ensure the borrower’s payment obligations. At that time, the borrower still has the right to own their property and use the mortgaged property if the parties agree so. However, this property must be registered as a security interest and cannot be transferred to any other party while it is still mortgaged.

2. Register mortgaged assets

• According to the provisions of Article 292 of the 2015 Civil Code on measures to ensure the performance of obligations, a mortgage of asset is a type of security to ensure the performance of obligations in civil relations between the parties.

• With Article 298 of the Civil Code on registration of security, the mortgage must be registered under the provisions of law at competent agencies.

Thus, the mortgage in bank lending activities will also have to be registered with competent authorities to ensure validity.

3. The Bank’s right to seize the security assets

• Because the secured assets are still owned by the securing party, the seizure of these assets must comply with the conditions agreed upon by the parties, as well as the provisions of law.

According to the provisions of Article 299 of the Civil Code 2015, cases where collateral is entitled to be seized include:

– When the secured obligation is due to be performed, the obligor fails to perform or perform the obligation incorrectly.

– The obligor must perform the secured obligation before the deadline due to a breach of obligation according to the agreement or according to the provisions of law.

– Other cases agreed upon by the parties or prescribed by law.

Thus, in case the borrower fails to fulfill its payment obligations, or there is an agreement between the borrower and the bank on other cases in which collateral is allowed to be seized, the borrower’s secured assets will be seized according to the provisions of law.

• At the same time, the provisions in Article 303 of the Civil Code 2015 are also applied, according to which the securing party and the secured party have the right to agree on one of the following methods which pledged and mortgaged assets will be handled:

a) Auction of assets;
b) The secured party sells the property itself;
c) The secured party receives the property itself as a substitute for the performance of the securing party’s obligations;
d) Other methods.

In case there is no agreement on the method of disposing of secured assets according to the provisions herein, the assets will be auctioned, unless otherwise prescribed by law.

From those provisions, it appears that one of the methods of handling pledged and mortgaged assets is that the secured party receives the assets itself as a substitute for the performance of the securing party’s obligations. In other words, the bank has the right to repossess security assets to replace the performance of the mortgagor’s obligations.

4. Does the bank have the right to seize the asset without the consent of the Mortgagor?

• Applying the provisions in Clause 2, Article 7 of Resolution 42/2017/QH14 on pilot handling of bad debts of credit institutions, the credit institutions can seize the secured asset without consent of the mortgagor when the following 5 conditions are met:

– Occurrence of any case in terms of seizure of security asset prescribed in Article 299 of the Civil Code;

– The security agreement indicates the grantor’s consent to the credit institution’s right to seize the security asset upon the occurrence of the case of treating collateral as per the law;

– The secured transaction or security interest has been registered as prescribed by law;

– The security asset is not in dispute in a case that has been accepted but remained unsolved or has been resolving at an authorized court; the security asset is not put under temporary emergency measures; and the security asset is not distrained or under judgment enforcement as prescribed by law;

– The credit institution or bad debt purchaser/manager has fulfilled the obligation to publish information as prescribed by law.

Therefore, it appears that many credit institutions have applied the above regulations to seize the security asset when all five conditions in Resolution 42/2017 are met without the consent of the mortgagor. However, Resolution 42/2017 has expired on January 1, 2024. At the moment, credit institutions cannot seize secured assets without the consent of the mortgagor according to the law.

• However, applying the provisions in Article 301 of the Civil Code 2015, which state that in case the person holding the security asset does not hand over the asset, the secured party is entitled to request the Court to resolve, except when the relevant law provides other.

Thus, in case the party mortgagor does not hand over the asset, the bank has the right to request a competent Court to resolve it. They must go through a legal process to be able to proceed with foreclosure activities. This ensures the borrower’s rights and ensures that the bank does not have too much power to unilaterally conduct asset seizure activities.

Due to the nature of the security asset, although it has been mortgaged at the bank, the ownership still belongs to the mortgagor. The bank’s ability to arbitrarily seize the mortgaged asset without the mortgagor’s consent may violate the rights of the mortgagor while they still own the property. Therefore, TNTP believes that according to the current law, although the Bank has the right to seize assets, it does not have the right to enforce the right to seize assets without the consent of the Mortgagor. The seizure of assets will be resolved according to legal proceedings to ensure the rights of the parties in the security transaction.

Above is an article by TNTP’s lawyer on the topic: “Does the bank have the right to seize security assets without the consent of the security asset owner?”. We hope this article brings value to our readers.

Best regards,

The form and content of the arbitration agreement

Resolving disputes through commercial arbitration has become increasingly popular among businesses because of the advantages of this method. One of the critical conditions for a dispute to be resolved by arbitration is the existence of an arbitration agreement between the parties. So, what should parties consider regarding the form and content of the arbitration agreement to ensure its validity? In this article, we will analyze the key points businesses need to pay attention to when drafting an arbitration agreement.

1. Conditions for dispute resolution by arbitration

According to Clause 2 of Article 3 of the 2010 Commercial Arbitration Law, an arbitration agreement is an agreement between the parties regarding the resolution of disputes that may arise or have arisen by arbitration.

As stipulated in Article 5 of the 2010 Commercial Arbitration Law, a dispute shall be resolved by arbitration if there is an arbitration agreement between the parties. The arbitration agreement may be made before or after the dispute arises. If one of the parties to the arbitration agreement is an individual who dies or loses the capacity to perform civil acts, the arbitration agreement remains effective for the heirs or legal representatives of that person, unless otherwise agreed by the parties. In the case where one of the parties to the arbitration agreement is an organization that must cease operations, is bankrupt, dissolved, merged, consolidated, divided, split up or reorganized, the arbitration agreement remains effective for the organization that receives the rights and obligations of that organization unless otherwise agreed by the parties.

2. The form of the arbitration agreement

As per Article 16 of the 2010 Commercial Arbitration Law, a legal arbitration agreement must be established in written form, which can be as a commercial arbitration clause within a contract or as a separate agreement. The following forms of agreement are also considered to be established in writing:

• An agreement established through exchanges between parties by telegram, fax, telex, email, and other forms as prescribed by law;

• An agreement established through written communication exchanges between the parties;

• An agreement recorded in writing by a lawyer, notary public, or an authorized organization upon the request of the parties;

• In transactions where parties refer to a document that contains an arbitration agreement, such as a contract, document, company charter, and other similar documents;

• Through exchanges of petitions and self-defense statements which reflects the existence of an agreement proposed by one party and not denied by the other.

3. The content of the arbitration agreement

Parties can agree to resolve disputes through ad hoc arbitration or an arbitration center. In the case of dispute resolution through ad hoc arbitration, the parties need to specifically agree on the procedures and processes for dispute resolution. If the parties do not agree or the agreement is unclear, legal provisions will be applied to resolve the dispute.

If choosing to resolve disputes at an arbitration centre, parties may refer to the following clause: “Any dispute arising out of or in relation with this contract shall be resolved by arbitration at … in accordance with its Rules of Arbitration.”

Parties may stipulate the following contents in the arbitration agreement:

• The number of arbitrators is one or more (the number of arbitrators must be odd);

• The place of the arbitration shall be (city and/or country);

• The governing law of the contract shall be the substantive law of (for disputes which involve a foreign element);

• The language of arbitration (for disputes which involve a foreign element or disputes in which at least one party is an enterprise with foreign investment capital).

This article by TNTP discusses “The form and content of the arbitration agreement”. It is hoped that this article provides value to businesses and organizations in complying with the law and resolving disputes.

Best regard,

TNTP & ASSOCIATES INTERNATIONAL LAW FIRM

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