In the course of executing a construction contract, disputes may arise when one or both parties have not complied with the contractual requirements. Common disputes result from project cost overruns, failure to meet construction schedules, design changes, late payments, and non-compliance with safety content during the contract execution. After negotiation and mediation efforts fail, parties can opt for one of two methods to resolve disputes: Court or Arbitration. This article by TNTP will analyse the advantages and disadvantages of both methods, helping parties determine the most suitable method for resolving construction contract disputes.

1. Efficiency

For resolving disputes through Commercial Arbitration, parties can freely choose arbitrators to resolve disputes. Arbitrators can be experts in the construction field without necessarily being legal professionals. With a deep understanding of construction, these experts can accurately and thoroughly resolve disputes.

Additionally, courts in Vietnam may face difficulties in resolving contract disputes involving foreign elements. These difficulties stem from language barriers, the application of non-Vietnamese laws to interpret the contract, differences in business customs, contract interpretation, and expertise in the construction field. Meanwhile, choosing arbitrators in Commercial Arbitration can lead to more accurate and swift dispute resolution.

2. Procedural convenience

Arbitration proceedings are simpler and more flexible than court proceedings, such as scheduling hearings at convenient times for all parties. This flexibility allows for quicker dispute resolution, minimizing business disruption and related costs due to prolonged litigation.

3. Costs

Arbitration costs are higher than court costs. Arbitration fees include the expenses for remuneration of Arbitrators and the expenses for travelling, accommodation and other relevant expenses of the Arbitrators, etc, which are not required in court proceedings. Conversely, dispute resolution in courts requires parties to pay court fees and other legal costs, typically lower than the costs of arbitration. However, because arbitration tends to resolve disputes faster than courts, parties can save time, effort, and money that would otherwise be spent on court litigation.

4. Confidentiality and private dispute resolution

The dispute resolution mechanism by Commercial Arbitration is more confidential and private than the Court. In Vietnam, court trials are mostly public, and court judgments/decisions can be published on the Supreme People’s Court’s electronic portal. In contrast, all information and documents related to the dispute and Arbitral Award remain confidential unless otherwise agreed by the parties. In the construction sector, protecting trade secrets safeguards competitive advantages and maintains relationships with clients, reducing reputational risks.

5. Finality of arbitral award

Parties can appeal against a court’s first-instance judgments/decisions, seeking a review in the appellate court. If they disagree with the appellate court’s judgments/decisions, they can request a higher court for retrial or cassation.

In contrast, the arbitral award shall be final, binding on the parties and take effect from the day of issuance. Like court judgments/decisions, parties can request the competent civil enforcement authority to enforce the arbitration award. However, an arbitration award can be annulled by a competent court if it falls under certain conditions specified in the 2010 Commercial Arbitration Law, such as lack of an arbitration agreement or if the agreement is invalid, non-compliance with the agreed arbitration procedure, etc. If an arbitration award is annulled, parties must resolve the dispute from scratch through negotiation, mediation, courts, or arbitration, depending on their agreement.

Thus, depending on the circumstances of the dispute and the resolution goals, etc, parties can choose the most appropriate method. This article discusses “Court or commercial arbitration – which method is optimal in resolving construction contract disputes?” hoping to provide valuable insights to individuals and organizations involved in construction contracts.