Court or arbitration: choosing the dispute resolution mechanism in a commercial contract.

1. The dispute resolution clause decides what the contract is worth

The dispute resolution clause usually sits at the end of the contract and is negotiated fastest, yet it decides what every other clause is worth in practice. A right that is clearly stated but cannot be enforced is worth almost nothing.

There is no single answer to "court or arbitration?". It depends on three things in each relationship: where the other party's assets are, whether the dispute can be arbitrated, and which party is more likely to need to enforce.

2. The court system was reorganised from 1 July 2025

2.1. Courts now sit at three levels

From 1 July 2025, the courts have three levels: regional People's Courts, provincial People's Courts and the Supreme People's Court. 355 regional courts have been set up across 34 provinces and cities. High People's Courts have been abolished: cassation and reopening reviews have moved to the Supreme People's Court, and provincial courts hear appeals from regional courts.

2.2. Regional courts now hear disputes with a foreign element

Business and commercial disputes, including those with a foreign element, are now heard at first instance by the regional People's Court. Previously, cases with a party or assets abroad, or needing judicial assistance abroad, went to the provincial court. This reverses earlier practice, and enterprises should factor it into their assessment of litigation risk.

2.3. Arbitration-related jurisdiction is concentrated in three courts

Applications to set aside an arbitral award or register an ad hoc arbitral award do not go to the regional court. They go to three provincial-level courts: Hanoi for the north and north-central region, Da Nang for the central region and central highlands, and Ho Chi Minh City for the south.

Other court support for arbitration, such as appointing or replacing arbitrators, collecting evidence, granting interim measures and summoning witnesses, stays with the regional People's Court.

Concentrating set-aside applications in three courts is a change that favours investors. These courts handle more cases with a foreign element, so their decisions are expected to be more consistent than if many local courts shared the work.

3. Not every dispute can be arbitrated

The Law on Commercial Arbitration No. 54/2010/QH12 remains the main law on arbitration, as amended by Law No. 81/2025/QH15 and consolidated in Consolidated Document No. 60/VBHN-VPQH. Resolution No. 01/2014/NQ-HDTP, which implements it, remains in force.

3.1. Arbitration covers only three groups of disputes

Arbitration covers only three groups of disputes: disputes between parties arising from commercial activity; disputes where at least one party carries on commercial activity; and other disputes that the law allows to be arbitrated.

Disputes outside these groups must go to court. This matters beyond procedure: a Vietnamese court may refuse to recognise a foreign arbitral award if the dispute could not be arbitrated under Vietnamese law. An arbitration clause used for the wrong type of dispute may produce an award that cannot be enforced in Vietnam.

3.2. An invalid or unworkable arbitration agreement sends the dispute back to court

An arbitration agreement may be made before or after the dispute arises and must be in writing, which includes equivalents such as email and data messages. It is independent of the main contract, so if the contract is invalid, the arbitration agreement is not automatically invalid.

Court practice distinguishes an invalid arbitration agreement from one that cannot be performed (Resolution No. 01/2014/NQ-HDTP). The second covers cases such as the chosen centre closing with no successor, the named arbitrator being unable to act, or a consumer refusing arbitration under a standard-form clause. In both cases, the dispute goes back to the courts.

4. Courts and arbitration differ on several key points

4.1. Arbitral interim measures bind only the parties

The tribunal may order six interim measures: banning changes to disputed assets; banning or requiring conduct to protect the proceedings; seizing disputed assets; preserving, storing, selling or disposing of assets; ordering an interim payment between the parties; and banning the transfer of rights in disputed assets.

The key limit is that these measures apply only to the parties. To freeze assets held by a third party, such as a bank account, the applicant must go to court.

5. An arbitral award can be set aside only on five grounds

An award can be set aside only on the following five grounds:

1. there is no arbitration agreement, or it is invalid;
2. the tribunal or procedure did not follow the parties' agreement or the Law;
3. the dispute is outside the tribunal's jurisdiction, or the award goes beyond it;
4. the evidence relied on was falsified, or an arbitrator received a benefit that compromised the award's objectivity and fairness;
5. the award conflicts with the fundamental principles of Vietnamese law.

The application to set aside must be made within 30 days of receiving the award. The court may pause its review for up to 60 days so the tribunal can fix procedural defects.

In practice, the fifth ground is the biggest risk. "Fundamental principles of Vietnamese law" is broader than "public policy" in international practice, and in some cases courts have reviewed the merits rather than only the procedure. Concentrating jurisdiction in three courts from 1 July 2025 mainly targets this problem, but it is too early to judge how well it works.

6. Arbitral awards are widely enforceable abroad

By Presidential Decision No. 453/QD-CTN of 28 July 1995, Vietnam acceded to the New York Convention 1958 on recognising and enforcing foreign arbitral awards, with the following reservations and declaration:

• Reciprocity. Vietnam applies the Convention only to awards made in another member state; for non-member states, it applies the Convention on a reciprocal basis.
• Commercial. The Convention applies only to disputes arising from commercial relationships.
• Interpretation. Vietnamese courts must interpret the Convention consistently with Vietnam's Constitution and laws.

With about 170 member states, an award made in Vietnam can likely be enforced in most major markets. A Vietnamese court judgment has no equivalent mechanism.

7. Recognition of foreign awards in Vietnam still carries risk

7.1. Applications for recognition must be filed within 3 years

An application for recognition must be filed within 3 years of the award taking effect, not counting any period of force majeure or objective obstacle. It goes to the provincial People's Court where the party against whom enforcement is sought lives, works, has its head office or has assets.

Main time limits: 5 working days for the judge's initial review; 7 days to amend or supplement the application; 3 days to notify acceptance; 2 months to prepare, extendable by up to 2 more months; the hearing within 20 days of the decision to hold it; and the file sent to the Procuracy 15 days before the hearing.

7.2. The grounds for refusing recognition fall into two groups

The grounds for refusing recognition fall into two groups. The first group is for the party against whom enforcement is sought to prove, and comprises: the parties signing the arbitration agreement lacked capacity to enter into it; the arbitration agreement has no legal effect under the law chosen by the parties or under the law of the country where the award was made; the party against whom enforcement is sought was not given timely notice of the appointment of the arbitrator or of the procedure for resolution, or was unable to exercise its procedural rights; the award resolves a matter that was not requested or goes beyond the scope of what was requested; the composition of the arbitral tribunal or the procedure for resolution was not in accordance with the agreement of the parties or with the law of the place where the award was made; the award is not yet binding; and the award has been set aside or its enforcement has been suspended in the country where it was made.

The court raises the second group of grounds on its own initiative: the dispute could not be arbitrated under Vietnamese law, or recognising and enforcing the award would conflict with the fundamental principles of Vietnamese law.

7.3. In practice, the recognition rate remains modest

Ministry of Justice figures for January 2012 to September 2019 show that, of 84 applications to recognise and enforce foreign arbitral awards, 39 were recognised, 33 were refused and 12 were suspended. A further 33 applications were not accepted. Most cases were in Hanoi, Ho Chi Minh City, Binh Duong and Long An.

The recognition rate was about 46% of applications decided in that period. Treat this as an indicator of risk, not a forecast for any case, and note that the data runs only to 2019.

7.4. Foreign court judgments are very hard to enforce in Vietnam

A foreign court judgment is recognised in Vietnam only under a treaty between the two countries or on a reciprocal basis. Vietnam has few civil judicial assistance treaties with its major investment partners, so in practice foreign judgments are very hard to enforce here. This is the strongest argument for arbitration when the other party's assets are mainly in Vietnam.

8. Institutional arbitration, ad hoc arbitration and mediation differ in enforceability

Institutional arbitration takes place at an arbitration centre under its rules. The Vietnam International Arbitration Centre's new Rules of Arbitration apply from 1 July 2026 to cases started from that date, unless the parties agree otherwise. The 45-article rules add consolidation of disputes and joinder of parties, which suits multi-party, multi-contract disputes such as construction projects, and expressly allow online hearings and electronic filing.

Ad hoc arbitration has no centre to support it, and the award must be registered with the court before it can be enforced. Registration is now done at one of the three courts in section 2.3.

Commercial mediation under Decree No. 22/2017/ND-CP has a feature that parties should understand. A successful mediation record binds the parties under civil law: it is an agreement, not yet enforceable by coercion. The record can be submitted for court recognition under civil procedure law, and only after the court recognises it can the parties ask the civil judgment enforcement authority to enforce it.

9. Arbitration fees are usually higher than court fees

Under Resolution No. 326/2016/UBTVQH14, some notable levels of court fees and charges are as follows: the first instance court fee for a business and commercial case not on an ad valorem basis is VND 3,000,000; the court fee on an ad valorem basis is calculated progressively by reference to the value of the dispute; the charge for an application for recognition and enforcement of a foreign judgment or award is VND 3,000,000; the charge for the resolution of a request relating to arbitration is from VND 300,000 to VND 800,000; and a case resolved under the summary procedure attracts a 50% reduction in the court fee. The general principle is that the losing party bears the court fee.

10. Dispute resolution clauses are often drafted wrongly on a few points

Common mistakes that make a dispute resolution clause invalid or unworkable:

• Providing for both court and arbitration without a clear order of priority or choice mechanism. This is the most common mistake, often caused by merging two contract templates.
• Naming the arbitration centre wrongly, or naming a centre that has closed with no successor.
• Naming a specific arbitrator without covering what happens if that person cannot act.
• A signatory without authority to agree to arbitration.
• Sending to arbitration a dispute that arbitration cannot hear under the Law on Commercial Arbitration.
• Not agreeing the language and governing law, especially for disputes with no foreign element, where the default language is Vietnamese.

The safest course is to use the chosen centre's model clause word for word and add only what it leaves open, such as the number of arbitrators, the seat and the language.

11. The right forum depends on where the other party and its assets are

Arbitration usually suits best when: the party against whom enforcement is sought has its assets mainly in Vietnam but the claimant is abroad; the dispute is technical and needs an expert decision-maker; confidentiality matters; or the parties need a final result rather than lengthy appeals.

The courts usually suit best when: the claim is small and arbitration costs would be disproportionate; an interim measure against a third party is needed; the dispute cannot be arbitrated; or the other party has clearly identifiable assets in Vietnam and there is no need to enforce abroad.

Whichever you choose, the clause should state five things: the specific body that will decide the dispute, the procedural rules, the number of decision-makers, the language, and the law governing the contract. Missing any of these causes most early jurisdiction disputes.