Learning about the resolution of international commercial disputes is essential to reduce risks and costs and quickly choose the method of disputes settlement arising out of the international commercial relationship to protect the rights and obligations of the parties in disputes.
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International commercial disputes
International trade could be understood commercial activities containing foreign elements. The foreign element is determined based on three criterias as following: (i) The subject in commercial relationship is the parties having different nationalities or commercial headquarters is located in different countries; (ii) The event that causing to or modifying or terminating commercial relationship occurrs in a foreign country, and (iii) The object of commercial relationship is in the foreign country[1].
International commercial disputes are understood disagreements or conflicts to rights and obligations between the parties in the process of conduct international commercial activities.
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The resolution of international commercial disputes
According to Law on Commercial 2005[2], there are three methods of the resolution of commercial disputes including:
- Negotiation between the parties;
- Mediation between the parties by a body, organization or individual selected by the parties to act as the mediator and conciliator;
- The resolution in arbitration or court.
In the practice, the resolution of international commercial disputes is also made through three above methods.
2.1. The resolution of international commercial disputes through the method of negotiation by the parties
The resolution of international commercial disputes through negotiation is a method of dispute resolution in which the parties shall meet, communicate and deal with disagreements or conflicts between the parties. Among aforesaid disputes resolution methods, negotiation is often chosen in advance immediately after arising a dispute because the parties always find a resolution for themselves firstly, which is consistent with the principle of decision freedom, voluntarily commitment to an agreement.
Negotiation is the simple method of disputes resolution, and not bound by complicated legal proceedings. The method of the resolution of international commercial disputes has less capacity to business relationship as well as keeps business secrets and reputation of the parties in the dispute. However, a lot of international commercial disputes are not easy to make negotiation or or are even possible, in the light of fact, but still cannot reach a mutual agreement in resolving conflicts between the parties because this method requires a high goodwill, honesty, and voluntary cooperation between the parties. Therefore, if the party is not willing and does not cooperate, it is not possible to resolve disputes by negotiation.
2.2. The resolution of international commercial disputes through the method of mediation between the parties by a body, organization or individual selected by the parties to act as the mediator and conciliator
The resolution of international commercial disputes through mediation is a process in which a neutral and impartial third party, the mediator, appointed by the disputing parties shall assist to settle international commercial disputes between the parties. Mediation objectively provides a reasonable and acceptable solution as the mediator is a neutral party having no interests and obligations related to the dispute. The appointed mediator only plays the role of assisting the parties to seek the optimal solution for resolving the dispute.
The United Nations’s Commercial Law Commission issued the UNICITRAL rules of conciliation in 1980[3] and the Model Law on International Commercial Mediation in 2002, as revised and amended in 2008[4] to encourage United Nation’s members to apply this dispute settlement method as well as create a unified regulatory foundation for the parties participating in mediation. Nowadays, most of the conciliation centers (International Center for Dispute Resolution (ICDR), Singapore International Mediation Center (SIMC), etc.) or commercial arbitration centers (Vietnam International Arbitration Center (VIAC), Hong Kong International Arbitration Center (HKIAC), etc.), also have their own mediation rules and conduct mediation for assisting the parties resolve disputes quickly and effectively.
2.3. The resolution of international commercial disputes in arbitration or in court
2.3.1. The resolution of international commercial disputes in arbitration
Arbitration is a form of dispute settlement that combines the elements of agreement and jurisdiction. The resolution of international commercial disputes in arbitration only arises out of an arbitration agreement and this agreement must be legally valid[5]. The arbitration agreement could be made before or after arising dispute. In addition, the parties have the right to choose the form of arbitration (Ad-hoc arbitration or Institutional arbitration), the arbitration center, the rules of arbitration proceedings, the applicable law of arbitration agreement, the number of arbitrators, the language of the arbitration as well as the location of the dispute settlement. The method of the resolution of international commercial disputes in arbitration is concluded by an arbitration award that is a final and mandantory decision on the disputing partying and has the same value as a judicial judgment unless this decision contains errors causing to its invalid.
2.3.2. The resolution of international commercial disputes in court
Different from arbitration, court has power to the resolution of international commercial disputes under law when arising disputes without agreement of disputing parties to choose court to resolve dispute. This is the dispute settlement method having high formality and organizaion. Until now, there is no international court which is in charge to settle international commercial disputes. Therefore, in case of arising disputes that the parties do not have agreement or fail to reach an agreement on the dispute settlement procedure, the party whose interests are breached may initiate a lawsuit to a competent court in the defendant’s country, the plaintiff’s country or a third country based on specific case.
The above is an overview of the resolution of international commercial disputes. If you have trouble with legal issues regarding the resolution of international commercial disputes, please contact us: Phuoc & Partners is a professional consulting firm established in Vietnam which currently has nearly 100 members working in three offices in Ho Chi Minh City, Hanoi, and Danang. Phuoc & Partners. It is rated as one of the leading consulting firms specializing in civil litigation in Vietnam that has leading practice areas in the legal market such as Labour and Employment, Taxation, Merger and acquisition, Litigation. We are confident in providing customers with optimal and effective service.
[1] Textbook on International Commercial Law (12th edition with amendments) – Hanoi University of Law, The Public Ssecurity Pulishing House – 2017, Page 16;
[2] Article 317 Law on commercial 2005;
[3] https://uncitral.un.org/en/texts/mediation/contractualtexts/conciliation;
[4] https://uncitral.un.org/en/texts/mediation/modellaw/commercial_conciliation;
[5] This principle set forth in Article 5, Article 6 Law on Commercial Arbitration in 2010 and Article 2 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention 1958”).
