KEY INNOVATIONS IN THE DRAFT AMENDMENTS TO THE LAW ON COMMERCIAL ARBITRATION

After 14 years of implementation, the Law on Commercial Arbitration 2010 (the “LCA 2010”) has affirmed its significant role in shaping and developing the arbitration-based dispute resolution framework in Viet Nam. The LCA 2010 has contributed to safeguarding the parties’ freedom of agreement and fostering a stable and reliable business and commercial environment.

However, in light of the profound changes in socio-economic conditions, the increasing demands of deep international integration, as well as the growing diversity and complexity of commercial dispute resolution practice, several provisions of the current LCA have revealed certain limitations and shortcomings, and have not fully met the practical requirements of application.

Against this background, the Ministry of Justice has published the Draft Amended Law on Commercial Arbitration (the “Draft Law”)[1], with a view to reviewing, refining, and amending a number of provisions in order to address existing challenges, enhance the effectiveness of arbitral proceedings, and ensure greater alignment with international standards and best practices. The proposed amendments are not merely technical in nature, but also reflect the State’s consistent policy orientation toward promoting alternative dispute resolution mechanisms outside Court proceedings.

Accordingly, this article examines and analyses several key innovations introduced in the Draft Law on Commercial Arbitration, thereby elucidating the notable changes and their implications for future arbitration practice.

1. Amendments and Supplements to the Jurisdiction of Arbitration

Under LCA 2010, the jurisdiction of arbitration to resolve disputes is primarily determined based on the “commercial” nature of the dispute, including: (i) disputes arising from commercial activities; (ii) disputes arising between parties where at least one party engages in commercial activities; and (iii) other disputes that are provided by law to be resolved by arbitration. While this approach has provided a legal basis for arbitral activities over an extended period, in practice it remains largely enumerative in nature and has not fully reflected the trend toward expanding the scope of disputes resolvable by arbitration in the context of international integration.

The Draft Law introduces adjustments in the direction of expanding arbitral jurisdiction by supplementing provisions that allow arbitration to resolve: (i) disputes arising between parties in fields where the law does not prohibit dispute resolution by arbitration; and (ii) disputes arising between parties in the course of implementing international trade agreements, where such agreements permit the parties to choose arbitration as the dispute resolution mechanism.

From a legislative perspective, the Draft Law represents a significant move from an “enumerative authorization” approach toward the principle of general arbitrability, whereby disputes are deemed arbitrable unless expressly prohibited by law. Accordingly, the Draft Law no longer confines commercial arbitration to specific fields but instead extends its scope to all areas where the parties have reached an agreement and where the law does not prohibit arbitration. In addition, this provision not only substantially broadens the jurisdiction of arbitration but also establishes a flexible legal framework that aligns with international standards and practical demands of modern economic and commercial relations, particularly in the context of Viet Nam’s increasing participation in new-generation free trade agreements.

2. Amendments and Supplements to Certain Definitions under the Law on Commercial Arbitration

One of the notable features of the Draft Law is the refinement of key concepts forming the foundation of commercial arbitration. In this regard, the concept of commercial arbitration is reformulated to emphasize that arbitration is a dispute resolution mechanism conducted either through institutional arbitration or ad hoc arbitration, as agreed by the parties, and established and administered in accordance with the provisions of the Law. This clarification enhances legal certainty and promotes a consistent understanding and application of arbitration in practice.

In addition, the Draft Law expands the scope of participants in arbitral proceedings by expressly recognizing the participation of third parties as persons having related rights and obligations, in addition to the claimant and the respondent. This approach aligns more closely with modern procedural standards and international arbitration practice, and is intended to facilitate a more comprehensive resolution of disputes, thereby reducing the risk of parallel proceedings or enforcement-related complications.

The Draft Law also introduces a definition of arbitration costs, thereby clarifying the categories of expenses that may arise in arbitral proceedings. This development contributes to greater transparency and predictability for parties in assessing the financial implications of arbitration. While arbitral institutions currently maintain their own schedules of fees and costs, such arrangements remain institution-specific and may lack uniformity. The establishment of a general statutory framework on arbitration costs is therefore expected to provide guidance, enhance consistency, and limit unforeseen or unnecessary expenses during arbitral proceedings.

3. Refinement of Provisions on the Conditions for Dispute Resolution by Arbitration

With respect to the conditions for resolving disputes by arbitration, the Draft Law focuses on clarifying the legal validity and effect of arbitration agreements in situations commonly arising in practice. The fundamental principle concerning the existence of an arbitration agreement is maintained, under which disputes may only be resolved by arbitration where the parties have entered into an arbitration agreement, whether concluded before or after the dispute has arisen. This approach reaffirms the principles of party autonomy and freedom of contract.

On this basis, the Draft Law further specifies circumstances in which the arbitration agreement continues to bind successor parties. In the case of individuals, the arbitration agreement remains binding upon heirs or lawful representatives upon the death of, or loss of legal capacity by, an individual, unless the arbitration agreement expressly excludes succession or the parties have agreed otherwise. Similarly, where an organization ceases operations, enters into bankruptcy, dissolution, merger, consolidation, division, separation, or undergoes a change in legal form, the arbitration agreement is transferred to and binding upon the successor entity assuming the relevant rights and obligations, unless otherwise agreed.

Notably, the Draft Law, for the first time, expressly recognizes the transferability of arbitration agreements in cases involving the assignment or transfer of rights and obligations arising from transactions or contracts. This development addresses a legal gap under the current law and enhances the stability and continuity of arbitration as a dispute resolution mechanism in commercial practice.

These matters are reflected in the Draft Law through the following provisions:

“An arbitration agreement must be concluded before or after a dispute arises.

An arbitration agreement shall be inherited from a deceased individual or an individual who has lost legal capacity, unless the arbitration agreement excludes succession or the parties have agreed otherwise.

An arbitration agreement shall be succeeded to by an organization that terminates its operations, enters bankruptcy, undergoes merger, division, separation, or conversion into another organizational form, unless the arbitration agreement excludes succession or the parties have agreed otherwise.

An arbitration agreement shall be transferred to the transferee in the event of an assignment or transfer of rights and obligations arising from a transaction or contract, unless the arbitration agreement excludes such transfer or the parties have agreed otherwise.”

4. Enhancement of Provisions on the Service and Procedure for Giving Notices in Arbitral Proceedings

In arbitral proceedings, a party’s change of domicile or registered office may directly affect the service and receipt of procedural documents, as well as the parties’ ability to participate effectively in the proceedings. However, the LCA 2010 does not provide a specific legal mechanism to address such situations, resulting in practical difficulties and creating potential opportunities for abuse aimed at delaying or obstructing the arbitral process.

To address these issues, the Draft Law introduces detailed provisions governing the service of notices and the determination of the time at which a notice is deemed to have been received. Unless otherwise agreed by the parties, a written communication is deemed to have been received if it is delivered directly to the addressee or sent to the addressee’s place of business in the case of an organization, or to the habitual residence or mailing address in the case of an individual. Where none of these locations can be ascertained after reasonable efforts have been made, a notice shall nevertheless be deemed to have been received if it is sent to the addressee’s last known address by registered mail or by any other means that provides a record of transmission. In such cases, the date of receipt is deemed to be the date on which the communication is delivered to that address.

In addition, the Draft Law recognizes a mechanism to address situations where a respondent deliberately evades service or fails to attend the hearing. In such circumstances, the arbitral tribunal may proceed with the resolution of the dispute in the respondent’s absence, in a manner analogous to cases of unjustified non-appearance. This provision serves to deter obstructive conduct, safeguard the continuity of arbitral proceedings, and enhance the overall efficiency and effectiveness of commercial arbitration.

5. Adjustment of the Limitation Period for Commencing Arbitral Proceedings

One of the notable amendments introduced in the Draft Law concerns the adjustment of the limitation period for initiating arbitral proceedings. Specifically, Article 33 of the Draft Law extends the limitation period from two (02) years to three (03) years, calculated from the date on which the claimant knew or ought reasonably to have known that its lawful rights or interests had been infringed. This approach to determining the commencement of the limitation period is intended to ensure consistency with the relevant provisions of the Civil Code 2015.

Compared with the current provisions of the LCA 2010, this amendment reflects the practical realities of modern commercial relationships, where the identification of a breach and the determination of the scope of the affected rights and obligations often involve complex factual circumstances and may only become apparent over an extended period of time.

By extending the limitation period, the Draft Law seeks to enhance the reasonableness and fairness of time limits applicable to arbitral proceedings, while affording parties greater flexibility and certainty in exercising their right to commence arbitration in accordance with the arbitration agreement they have entered into.

6. Refinement of the Arbitral Tribunal’s Jurisdiction

For the first time, the Draft Law expressly recognizes the authority of the arbitral tribunal to examine and rule on its own jurisdiction. Under this approach, issues relating to jurisdiction are to be determined by the arbitral tribunal itself, and such determination is final and binding. This provision aligns with comparative legislative practice in many jurisdictions and ensures consistency with the competence-competence principle enshrined in the UNCITRAL Model Law on International Commercial Arbitration.

In addition, the Draft Law introduces a procedural framework governing the reconsideration of jurisdictional determinations by the arbitral tribunal. Priority is accorded to party autonomy, allowing the parties to agree on the procedures to be applied by the arbitral tribunal when reconsidering jurisdictional issues. In the absence of such agreement, the arbitral tribunal is vested with the discretion to determine the appropriate manner, sequence, and procedural rules, having regard to the specific circumstances of the dispute.

By conferring broad procedural discretion upon the arbitral tribunal in conducting jurisdictional review - including the authority to admit or exclude evidence and to assess its relevance, materiality, and probative value - the Draft Law enhances the flexibility and efficiency of arbitral proceedings. This approach strengthens arbitration as an autonomous and effective dispute resolution mechanism, aligns domestic arbitration practice more closely with international standards, and limits unnecessary judicial intervention, thereby safeguarding the independence and self-governing nature of the arbitral tribunal.

7. Refinement of the Rules Governing the Constitution of Arbitral Tribunals in Institutional and Ad Hoc Arbitration

Under the existing arbitration framework, the law primarily imposes an obligation on the respondent to appoint an arbitrator within a prescribed time limit, without expressly addressing situations in which the arbitrator appointed by the respondent declines to act. This regulatory gap has, in practice, created the risk of undue delay in the constitution of the arbitral tribunal, thereby undermining procedural efficiency.

To address this shortcoming, the Draft Law introduces specific mechanisms governing cases where an arbitrator appointed by the respondent refuses to accept the appointment, as set out in Articles 40 and 41. Accordingly, within 30 days from the date of such refusal, the respondent is required to appoint another arbitrator or to request the competent authority or appointing body, as prescribed by law, to make the appointment.

This supplemental mechanism is intended to ensure continuity in the constitution of the arbitral tribunal, to prevent procedural obstruction or tactical delay, and to enhance the overall effectiveness and predictability of arbitration proceedings, both in institutional and ad hoc contexts.

8. Recognition of the Emergency Arbitrator Mechanism

In arbitral practice, many disputes give rise to an urgent need for the application of interim measures at a very early stage, when the arbitral tribunal has not yet been constituted. However, the current arbitration legislation does not provide a legal framework to address such situations, thereby requiring the parties to wait until the arbitral tribunal is formally established before requesting interim measures. This limitation may adversely affect the timely protection of the parties’ legitimate rights and interests and diminish the overall effectiveness of arbitration as a dispute resolution mechanism.

Against this backdrop and to address the existing legal lacuna, the Draft Law introduces provisions on the Emergency Arbitrator mechanism. Under this framework, an emergency arbitrator may be appointed immediately upon receipt of a request for interim measures, ensuring that the lawful interests of the parties are protected in a timely and effective manner. The emergency arbitrator is vested with the authority to consider and decide on the application of interim measures during the period prior to the constitution of the arbitral tribunal.

The codification of the emergency arbitrator mechanism not only demonstrates the alignment of Vietnamese arbitration law with international standards and the rules of leading arbitral institutions such as SIAC, HKIAC, and the ICC, but also enhances the flexibility and responsiveness of commercial arbitration. Under this mechanism, the emergency arbitrator exercises independent authority and does not participate in the adjudication of the merits of the dispute, thereby safeguarding the impartiality of the subsequent arbitral proceedings. This reform constitutes a practical and substantive step toward improving the enforceability and effectiveness of arbitration, while strengthening the confidence of businesses and investors in Vietnam’s arbitral justice system in the context of deepening international integration.

9. Introduction of the Parties’ Right to Waive the Application for Setting Aside an Arbitral Award

Under the current arbitration legislation, the right to apply to a court for the setting aside of an arbitral award is recognised solely on the grounds specified in Article 68(2) of the LCA 2010. However, the law remains silent on whether the parties may, on the basis of party autonomy, agree in advance to waive this right. To address this limitation, the Draft Law introduces a new provision in Article 69(3), expressly allowing the parties to agree on the waiver of the right to request the setting aside of an arbitral award. This amendment represents a significant development in further concretising party autonomy in arbitration, while ensuring the compatibility of Vietnamese arbitration law with the UNCITRAL Model Law and the legal practice of jurisdictions with well-established arbitration regimes, such as France, Belgium, and Switzerland.

The recognition of such waiver agreements not only reinforces the finality and stability of arbitral awards, but also serves to limit excessive judicial intervention in arbitral proceedings. In the context of deepening international integration, this provision is expected to foster a more flexible and efficient dispute resolution environment, thereby enhancing the competitiveness and international standing of commercial arbitration in Vietnam.

10. Introduction of a Mechanism for the Review of Court Decisions on the Setting Aside or Non-Setting Aside of Arbitral Awards (New Provision)

For the first time, the Draft amended Law proposes the introduction of a dedicated mechanism aimed at strengthening judicial control over court decisions relating to the setting aside or non-setting aside of arbitral awards. In this respect, the Draft sets out two alternative approaches, namely:

Option 1: The review of court decisions on the setting aside or non-setting aside of arbitral awards shall be conducted through cassation review proceedings, in accordance with the general procedures and rules of civil procedural law.

Option 2: Where a People’s Court at the provincial level or of a centrally governed city decides not to set aside an arbitral award, it shall issue a decision rejecting the application for setting aside, and such decision shall be final and not subject to appeal or cassation review. Where the court decides to set aside an arbitral award, such decision must be reported to and may only be implemented upon approval by the Supreme People’s Court.

When considered in conjunction with other new provisions of the Draft—particularly the recognition of the parties’ right to agree on waiving the right to request the setting aside of an arbitral award—the author is of the view that Option 2 represents the more appropriate and preferable approach. This option better safeguards the principle of finality of arbitral awards, limits the prolongation of proceedings through multiple layers of judicial review, and addresses concerns regarding excessive judicial intervention in arbitral proceedings.

Furthermore, the requirement that any decision to set aside an arbitral award be subject to approval by the Supreme People’s Court establishes a centralized and rigorous control mechanism over setting-aside decisions. This approach helps prevent arbitrary or inconsistent annulment of arbitral awards in practice and ensures greater coherence in the application of the law. Such a mechanism is fully consistent with the spirit of the UNCITRAL Model Law and international practice in jurisdictions with well-developed arbitration regimes, including England, Switzerland, and Singapore, thereby reinforcing the confidence of the business community in the enforceability and effectiveness of commercial arbitration in Vietnam.

Conclusion:

It is hoped that, in the time ahead, the Draft Amended Law on Commercial Arbitration will continue to benefit from constructive dialogue and expert input, leading to its refinement and enactment as a legal framework that ensures commercial arbitration operates as an effective, transparent, and fair dispute resolution mechanism. Such a framework should adequately respond to the practical needs of commercial dispute resolution, while remaining aligned with Vietnam’s socio-economic conditions, the UNCITRAL Model Law, and prevailing international arbitration standards.

The above article has provided an in-depth analysis of the "Key innovations in the Draft Amendment to the Law on Commercial Arbitration." For further information or legal assistance, please contact the MCAC Secretariat:

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• Read more: 100 questions and answers on commercial arbitration.