Hnlaw would like to introduce key aspects of dispute resolution mechanisms in Vietnam for businesses.

Currently, disputes arising in business operations can generally be classified into the following categories:

• Internal disputes: typically related to capital structure, management and governance rights, distribution of profits among shareholders or members, and disputes between employers and employees.
• External disputes: including disputes with partners, customers, competitors, or other parties having related rights and obligations in contractual, investment, or commercial relationships.

In Vietnam, there are three common mechanisms for resolving business disputes, each with its own advantages and limitations:

1. Negotiation and Mediation
   This is the most encouraged method to apply immediately upon the occurrence of a dispute. The parties are expected to meet and rebalance their interests to reach a mutually acceptable solution.
   With the involvement of a professional legal advisor such as Hnlaw, the process tends to be more effective, as the legal consultant can provide a comprehensive assessment of the factual and legal context, identify the strengths and weaknesses of each party, and facilitate negotiations on a lawful and objective basis.
   In some cases, legal counsel may also assist in liaising with relevant competent authorities to support the conciliation process, thereby helping the parties achieve a stable and cost-effective resolution.
2. Arbitration
   Arbitration is considered a swift, flexible, and confidential method, suitable for businesses dealing with complex disputes that require discretion and efficiency.
   Although arbitration proceedings may involve higher costs than court litigation, Hnlaw assesses that this mechanism is particularly effective for disputes with foreign elements or those requiring a high degree of technical or commercial expertise, such as investment contracts, EPC agreements, or financial services.
3. Court Litigation
   This is the traditional and most common method of dispute resolution in Vietnam. Its greatest strength lies in the binding and enforceable nature of court judgments and decisions.
   However, court proceedings are often time-consuming and procedurally complex. The public nature of trials may also affect a company’s reputation. Therefore, businesses should be well-prepared with proper documentation and strategic legal planning before initiating litigation.

Assessment of the effectiveness of dispute resolution mechanisms:

• Negotiation and mediation: highly effective where interests can be reconciled, preserving long-term business relationships.
• Arbitration: suitable for large or complex disputes requiring confidentiality and prompt resolution.
• Court litigation: effective when legal enforceability and compliance are the top priorities.

Hnlaw recommends that businesses carefully consider and incorporate an appropriate dispute resolution mechanism at the contracting stage, while also preparing contingency legal strategies for potential conflicts. Selecting the right mechanism not only safeguards the company’s legal rights and interests but also helps maintain its reputation and ensure sustainable business operations.