DISTINGUISHING COMMERCIAL MEDIATION AND COMMERCIAL ARBITRATIO

12/12/2025

1. General Overview

In the context of increasingly diverse and complex commercial activities, the need for dispute resolution mechanisms that offer flexibility and efficiency has become more prominent than ever. Apart from the judicial system, Vietnamese law recognizes and allows parties to adopt various forms of Alternative Dispute Resolution (ADR), among which commercial mediation and commercial arbitration are the two most widely utilized mechanisms. Both methods operate on the basis of voluntariness and party autonomy, and the relevant procedures are conducted in accordance with the provisions of applicable laws. As consensual dispute resolution mechanisms, they enable parties to tailor the process to their specific needs while ensuring compliance with statutory requirements and procedural safeguards.

These two mechanisms share several fundamental similarities:

Basis of establishment: Both mechanisms arise from the parties’ written agreement, which may be incorporated as a mediation or arbitration clause within the contract or established as a separate agreement.

Confidentiality: Proceedings and all information related to the dispute are kept confidential, thereby safeguarding the parties’ business reputation and commercial secrets.

Party autonomy in selecting neutrals: The parties may select mediators or arbitrators based on their expertise, experience, professional qualifications, and language competence.

These features make both mechanisms flexible and business-friendly alternatives capable of addressing certain limitations of court litigation.

2. Distinctions Between Commercial Mediation and Commercial Arbitration

Criteria	Commercial Mediation	Commercial Arbitration
Legal Basis	Decree No. 22/2017/ND-CP dated 24 February 2017 on Commercial Mediation, as amended and supplemented.	The Law on Commercial Arbitration 2010 and its implementing instruments.
Definition	A dispute resolution mechanism agreed upon by the parties, in which a commercial mediator acts as a neutral intermediary to assist the parties in resolving the dispute in accordance with applicable regulations.	A dispute resolution mechanism agreed upon by the parties and conducted in accordance with the provisions of the Law on Commercial Arbitration 2010.
Role	The mediator facilitates communication, supports negotiations, and persuades the parties toward settlement but has no authority to impose an outcome.	The arbitral tribunal adjudicates the dispute and issues a final and binding award. The parties cannot know the outcome in advance until the award is rendered.
Procedural Framework	The parties may agree on the mediation procedures or choose to apply the Mediation Rules of a commercial mediation institution. If the parties do not reach an agreement on the mediation procedures, the commercial mediator shall conduct the mediation in a manner that he or she considers appropriate to the circumstances of the case and the parties’ wishes, provided that such manner is accepted by the parties. Mediation commences on the date the Center receives the Request for Mediation together with the registration fee. If the invited party does not agree to mediate or fails to submit a Response to the Center, the mediation process shall terminate. The mediation process typically consists of multiple sessions, which may involve joint meetings or private caucuses between the mediator and each party.	The procedure follows formal rules under the Law on Commercial Arbitration and the procedural rules of the chosen arbitral institution. Arbitral proceedings commence on the date the institution receives the claimant’s Statement of Claim. Hearings require the participation of both parties. If the claimant is absent, the claim is deemed withdrawn; if the respondent is absent, the arbitral tribunal proceeds based on existing documents and evidence. In addition to institutional arbitration, the parties may adopt ad hoc arbitration, creating their own procedural rules for the resolution of the dispute. Mediation may be conducted as part of the arbitral proceedings.
Legal effect	If the parties reach a settlement, the process concludes with a written record of the successful mediation. This record is not final and binding on its own; its enforceability depends on the parties’ voluntary compliance. If a party fails to comply, the other party may request the competent court to recognize the settlement reached outside of court, which serves as the basis for enforcement by the civil judgment enforcement authority.	The arbitral award is final and binding and is not subject to appeal or protest. If a party does not voluntarily comply, the other party may request the civil judgment enforcement authority to enforce the award without needing court recognition (in institutional arbitration cases).

Commercial Mediation: A persuasive and voluntary mechanism that facilitates the preservation of cooperative relationships between the parties. However, a successful mediation settlement does not have direct enforceability unless it is recognized by a competent court.
Commercial Arbitration: An adjudicatory mechanism that ensures finality, binding effect, and enforceability equivalent to a court judgment. Notably, an arbitration agreement is legally independent from the underlying contract; therefore, any modification, extension, termination, invalidity, or impossibility of performance of the principal contract does not affect the validity of the arbitration agreement.

3. Conclusion

The foregoing analysis demonstrates that, despite their differences in nature and function, commercial mediation and commercial arbitration share a fundamental foundation: the parties’ mutual agreement. The parties’ voluntary decision to entrust a mediator or an arbitrator with the resolution of their dispute reflects the principles of party autonomy and freedom of contract that underpin modern commercial law.

Accordingly, the choice of an appropriate mechanism depends on the parties’ practical needs and the level of legal binding effect they require. Commercial mediation is the optimal option when the parties prioritize flexibility and wish to maintain long-term cooperative relationships, whereas commercial arbitration is preferred when an adjudicatory mechanism with finality, flexible procedures, confidentiality, and enforceability of the arbitral award is required.

See more: How shall the appointment of arbitrators be handled when the parties cannot reach an agreement?

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