Dispute resolution through arbitration is increasingly chosen by businesses due to its flexibility, confidentiality, and efficiency. However, not all disputes can be referred to arbitration. So, under Vietnamese law, what conditions must be satisfied for a dispute to be resolved by arbitration?
I. Core condition: The Parties must have an Arbitration Agreement
Pursuant to Article 5(1) of the Law on Commercial Arbitration 2010 ("LCA 2010"):
"A dispute shall be resolved by arbitration if the parties have an arbitration agreement. An arbitration agreement may be concluded before or after a dispute arises."
Accordingly, the foundation for arbitration as a method of dispute resolution rests upon the mutual consent of the parties. From a legal application perspective, however, a clear distinction must be drawn between the existence and the validity of such an agreement. The mere conclusion of an arbitration agreement satisfies only the formal threshold requirement. For an Arbitral Tribunal to possess substantive jurisdiction, the arbitration agreement must be both lawful and valid. Any agreement falling within the grounds for invalidity under Article 18 of the LCA 2010 is legally defective and cannot serve as a basis for an arbitral tribunal to accept and adjudicate a claim.
II. Conditions for the Arbitration Agreement to be valid
Article 18 of the LCA 2010 enumerates six grounds upon which an arbitration agreement shall be void. Conversely, for an arbitration agreement to have legal force and for a dispute to be capable of resolution by arbitration, the following six conditions must be satisfied concurrently:
•The dispute falls within the subject-matter jurisdiction of arbitration
•The person entering into the agreement has authority to do so
•The person entering into the agreement has legal capacity
•The form of the agreement complies with applicable requirements
•The agreement was not procured by fraud, threat, or duress
•The agreement does not violate any prohibition of law
1. Condition 1 — The Dispute Must Fall Within the Subject-Matter Jurisdiction of Arbitration
Commercial arbitration has jurisdiction over three categories of disputes:
Category
Description
Examples
Pure commercial disputes
Arising directly from commercial activities between the parties: sale of goods, provision of services, investment, finance, banking, carriage of goods, commercial insurance, etc.
Disputes over payment under international contracts for the sale of goods; disputes over logistics service fees
Disputes related to commerce
At least one party is engaged in commercial activities, even where the other party is not a trader
Disputes between a service provider and an individual business household
Disputes permitted by law
Disputes outside the realm of pure commerce where sector-specific legislation permits resolution by arbitration
Certain disputes arising from securities activities
Legal consequences and practical considerations
Where an arbitration agreement is concluded in relation to a dispute that does not fall within any of the above categories, the agreement shall be void. The courts shall have jurisdiction to resolve the dispute under ordinary procedural rules.
A particular scenario warrants attention: where an arbitration clause purports to cover both disputes within and outside arbitral jurisdiction, the clause may be void in part (as regards the categories outside jurisdiction) but will not necessarily be entirely void.
The following disputes fall outside the jurisdiction of commercial arbitration, regardless of any arbitration clause purporting to encompass them:
Matrimonial, family, adoption, and inheritance disputes
Land disputes (save for disputes concerning land-use rights arising from commercial transactions between traders)
Administrative disputes and administrative penalty matters
Matters involving criminal liability
2. Condition 2 — The Person Entering into the Arbitration Agreement Must Have Authority to Do So
Scenario
Description
Not a legal representative
The signatory has not been registered or designated as the organisation's legal representative under its charter or constitutive documents
No valid authorisation
The signatory has no valid power of attorney: the power of attorney is formally defective, has expired, or was granted by a person lacking the authority to delegate
Authorised but acting beyond scope
The signatory holds a power of attorney, but its terms do not extend to entering into an arbitration agreement — for example, authority to execute a commercial contract does not automatically include the right to conclude a separate (post-dispute) arbitration agreement
Exception: The Principle of Subsequent Ratification
Article 3(2) of Resolution No. 01/2014/NQ-HĐTP ("Resolution 01/2014") provides an important exception designed to prevent a party from exploiting questions of authority to evade its arbitral obligations:
" Where an arbitration agreement has been entered into by a person without authority, but during the conclusion or performance of the arbitration agreement, or in the course of the arbitral proceedings, the person with authority has accepted or, having been aware of the situation, has raised no objection, the arbitration agreement shall not be void."
This principle is analogous to the doctrine of estoppel in common law: once the authorised person has been aware of the agreement and has failed to object within a reasonable time, that person loses the right to invoke lack of authority to challenge the validity of the agreement.
Practical considerations in cross-border transactions
In respect of foreign parties, Resolution 01/2014 requires examination of the legal representative authority under the law of the jurisdiction in which the entity was incorporated. A power of attorney executed abroad must be consularised or bear an Apostille (pursuant to the Hague Convention of 1961) before it may be used in Vietnam.
Lessons from arbitral practice:
Numerous arbitral awards have been set aside by Vietnamese courts under Article 68(2)(đ) of the LCA 2010 on the ground that the person who entered into the arbitration agreement lacked valid representative authority, particularly in the following situations:
The director of a Vietnamese branch of a foreign company signed an arbitration agreement, while the parent company's charter required Board of Directors approval — the court found that the signatory had exceeded the scope of delegated authority.
A power of attorney issued by the foreign party was not consularised — the court held that the representative lacked legal standing under Vietnamese law.
3. Condition 3 — The Person Entering into the Agreement Must Have Legal Capacity
Three categories of persons who lack full legal capacity:
Category
Legal Basis (Civil Code 2015)
Effect on the Arbitration Agreement
Minors (under 18 years of age)
Article 21, Civil Code 2015
Arbitration agreement is void. Where the transaction is entered into by a legal representative (parent, guardian), Condition 2 on authority must be separately assessed.
Persons declared to lack legal capacity
Article 22, Civil Code 2015 — requires a court declaration
Arbitration agreement is void. All transactions must be conducted through the court-appointed legal representative.
Persons declared to have limited legal capacity
Article 24, Civil Code 2015 — requires a court declaration
Arbitration agreement is void unless the consent of the legal representative is obtained as required by law.
Evidentiary requirements under Resolution 01/2014
Article 3(3) of Resolution 01/2014 specifies the evidentiary obligations in this context: when examining whether an arbitration agreement is void on grounds of the signatory's lack of legal capacity, the court must collect evidence to establish the relevant facts, specifically:
For minors: documents proving date of birth (birth certificate, national identity card, passport, etc.)
For persons declared to lack legal capacity: a conclusion from the competent authority on mental health status, or a court judgment declaring the loss of legal capacity
For persons declared to have limited legal capacity: a court judgment declaring the limitation of legal capacity
The burden of proof lies with the party seeking a declaration of invalidity of the arbitration agreement on this ground.
4. Condition 4 — The Form of the Arbitration Agreement Must Comply with Applicable Requirements
Article 16 of the LCA 2010 requires that an arbitration agreement be made in writing. The specific forms considered to satisfy the writing requirement:
Form
Description and Conditions
Clause within a contract
An arbitration clause embedded directly in the body of the principal contract — the most common form in practice
Separate written agreement
A standalone document signed by the parties, concluded after a dispute has arisen or supplementing a contract that contains no arbitration clause
Exchange by letter, telegram, telex, or facsimile
Traditional written communication means — the exchange must clearly manifest the mutual intention of both parties to submit disputes to arbitration
Electronic data messages (email)
Email and other electronic forms, provided they satisfy the requirements of the Law on Electronic Transactions: the information must be accessible and usable for future reference
An important point: an arbitration agreement may also be constituted through the mechanism of incorporation by reference. Where the principal contract refers to a separate document (rules of procedure of an arbitral institution, standard clauses, general terms and conditions) containing an arbitration clause, that clause is deemed to form part of the contract, provided the reference is sufficiently clear and specific.
Examples of agreements that are formally invalid:
Oral agreement: the parties verbally agree that all disputes shall be submitted to arbitration — even if witnessed, such an agreement is entirely void for want of form.
Insufficiently specific reference: "Disputes shall be resolved in accordance with the rules of the arbitral centre" without identifying which centre — insufficient to be enforceable.
Internal meeting minutes: a record of one party's intention to refer a dispute to arbitration, without written confirmation from the other party.
The separability (autonomy) of the arbitration agreement
Article 19 of the LCA 2010 provides that an arbitration agreement exists independently of the contract in which it is contained. If the principal contract is void for any reason, the arbitration agreement may nonetheless remain valid. Conversely, invalidity of the arbitration agreement does not render the principal contract void.
This principle carries particular significance: a party cannot invoke the invalidity of the principal contract to escape its arbitration obligations where the arbitration agreement itself continues to satisfy all conditions for validity.
5. Condition 5 — The Arbitration Agreement Must Not Have Been Procured by Fraud, Threat, or Duress
Concept
Definition (Article 127, Civil Code 2015)
Elements to Be Established
Fraud
An intentional act by one party or a third party causing the other party to form a mistaken understanding of the subject, nature, or content of the civil transaction, thereby inducing that party to enter into it
Intentional conduct creating a false impression; causal link between the fraudulent conduct and the conclusion of the agreement
Threat or duress
An intentional act by one party or a third party compelling the other party to enter into a civil transaction in order to avoid harm to the life, health, honour, reputation, dignity, or property of that party or their close relatives
Threatening conduct capable of causing serious harm; immediacy and reality of the threat; causal link; use of unlawful force or pressure; genuinely non-consensual intent; etc.
Two distinctive features of this condition:
First, invalidity under Article 18(5) is not automatic — it depends upon the will of the aggrieved party: the arbitration agreement is void only upon the request of the party who was defrauded, threatened, or subjected to duress. This distinguishes this ground from certain other grounds for invalidity under Article 18, which may be invoked by any party or raised by the court of its own motion.
Second, the burden of proof lies with the party seeking the declaration of invalidity — that party must provide reliable evidence of the fraudulent, threatening, or coercive conduct, meeting the standard prescribed by the Civil Code 2015.
6. Condition 6 — The Arbitration Agreement Must Not Violate Any Prohibition of Law
Article 123 of the Civil Code 2015 provides: "A civil transaction whose purpose or content violates a prohibition of law or contravenes social ethics shall be void. A prohibition of law refers to provisions of law that do not permit subjects to perform certain acts."
In the context of arbitration agreements, this condition is assessed at two levels:
Level
Substance
Examples
Purpose in violation of a prohibition
The arbitration agreement is concluded to create a façade concealing or facilitating a transaction that is prohibited by law
An arbitration clause in a contract for the sale of prohibited goods; a contract of a fraudulent nature
Content in violation of a prohibition
The substance of the arbitration clause itself contains a violation — for instance, a clause purporting to exclude the right to challenge or set aside an award in a manner inconsistent with mandatory provisions of Vietnamese law
A clause stating "the parties irrevocably waive their right to seek setting aside of the award in all circumstances" — contrary to non-derogable statutory rights
This ground arises less frequently in practice than the others, but is increasingly invoked by parties in complex disputes involving contracts with foreign elements or multi-tiered transaction structures.
III. Timing of the Arbitration Agreement
Having established that an arbitration agreement does not fall within any ground for invalidity under Article 18, a further matter to consider is the timing of its conclusion. Article 5(1) of the LCA 2010 provides:
"An arbitration agreement may be concluded before or after a dispute arises."
Form
Characteristics
Advantages
Limitations
Arbitration clause (pre-dispute)
Incorporated into the contract before any dispute arises; constitutes a clause of the principal contract but operates independently pursuant to Article 19 LCA 2010
Agreed upon while the relationship remains cooperative and in good faith — consensus is readily achievable; typically drafted with precision, specifying the institution, rules, and governing law
If drafted carelessly or in ambiguous language, the risk of invalidity or of creating a "pathological clause" is high
Separate arbitration agreement (post-dispute)
Concluded after the dispute has arisen; a standalone document, not a clause of the principal contract
Allows the parties to voluntarily agree on a dispute resolution mechanism after the nature of the dispute has become clear — flexibility in selecting arbitrators, language, and seat
Achieving consensus may be difficult once the conflict has erupted and the parties' positions have hardened
Both forms are fully recognised by law and carry equivalent legal force, provided they satisfy the six conditions analysed in Section II above. The choice between them depends upon the specific circumstances of the parties and the nature of the dispute.
IV. Succession to the Arbitration Agreement
Articles 5(2) and 5(3) of the LCA 2010 establish the principle of succession: an arbitration agreement is not terminated upon a change in the identity of a party. This provision aims to preserve the stability of the arbitration agreement and to prevent a party from exploiting changes in organisational structure or personnel to evade previously assumed arbitration obligations.
1. In the case of individuals — Article 5(2) LCA 2010
"Where one party to an arbitration agreement is an individual who dies or loses legal capacity, the arbitration agreement remains valid in respect of the heir or legal representative of that person, unless otherwise agreed by the parties."
Event
Successor to the Arbitration Agreement
Exception
An individual who is a party to the arbitration agreement dies
Heir under the will or by operation of law (pursuant to Article 649, Civil Code 2015)
The parties have agreed otherwise in the arbitration agreement or the will; or the dispute is so personal in nature that it cannot be transferred
An individual who is a party is declared to lack legal capacity (Article 22, Civil Code)
The legal representative appointed by the court
The parties have agreed otherwise
2. In the case of legal entities — Article 5(3) LCA 2010
"Where one party to an arbitration agreement is an organisation that is required to cease operations or is subject to bankruptcy, dissolution, consolidation, merger, division, separation, or conversion of organisational form, the arbitration agreement remains valid in respect of the organisation that succeeds to the rights and obligations of that organisation, unless otherwise agreed by the parties."
This provision covers the principal legal events in the lifecycle of an organisation:
Event
Successor to the Arbitration Agreement
Merger (one organisation absorbed into another)
The absorbing organisation — succeeds to all rights and obligations of the absorbed entity, including the arbitration agreement
Consolidation (multiple organisations forming a new entity)
The newly formed entity — inherits all arbitration agreements of the predecessor organisations
Division (one organisation divided into multiple new entities)
The new entity that succeeds to the rights and obligations relevant to the dispute — as determined by the approved plan for allocation of assets, rights, and obligations
Separation (part of an organisation separated)
The separated entity or the original organisation, depending upon the approved plan for allocation of rights and obligations
Bankruptcy or dissolution
The administrator or liquidator may continue to rely upon the arbitration agreement to resolve disputes concerning assets in the course of bankruptcy or dissolution proceedings
Conversion of organisational form
The organisation following conversion — succeeds to all rights and obligations, including the arbitration agreement
Important note on succession:
The principle of succession does not preclude the successor organisation from renegotiating the arbitration clause with its counterparty. The LCA 2010 provides that succession applies only "unless otherwise agreed by the parties," which means:
The successor organisation and the counterparty may agree to terminate or replace the existing arbitration agreement with a new one.
In M&A transactions, reviewing arbitration agreements as part of contract due diligence is essential in order to assess associated risks and to consider renegotiation where appropriate.
Best practice recommendation: following a restructuring, proactively confirm in writing with the counterparty that the existing arbitration agreement continues in force (or conclude a replacement agreement if necessary).
V. Practical recommendations
Recommendation
Detailed guidance
Condition protected
1. Use model arbitration clauses from reputable institutions
Adopt the model clause from VIAC, VNAS, or an equivalent reputable body as a starting point; adapt as required for the specific transaction. Avoid drafting language that is ambiguous as to the dispute resolution method (e.g., "disputes may be resolved by arbitration or by court").
Condition 4 (form); avoidance of pathological clauses
2. Rigorously verify the signatory's authority to act
Confirm the legal representative's standing or the scope of a delegated power of attorney before signing. For foreign counterparties: require copies of the charter, certificate of incorporation, and power of attorney duly consularised.
Condition 2 (authority of the signatory)
3. Review the entire chain of contractual documents
Ensure consistency of the arbitration clause across the principal contract, annexes, and amending instruments. A conflicting clause in an annex may invalidate the agreement.
Condition 4 (form); Condition 6 (no violation of prohibition)
4. Update the arbitration agreement following corporate restructuring
After a merger, division, or conversion: proactively confirm in writing with the counterparty that the existing arbitration agreement remains in force, or execute a new agreement if required.
Article 5(3) — principle of succession
5. Preserve complete electronic evidence
For agreements concluded by email or digital platforms: retain the full email chain and metadata confirming the time and identity of the parties. This constitutes essential evidence where a party subsequently disputes the existence or content of the agreement.
Condition 4 (electronic written form)z
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The article is written by experts from Asia Legal – a law firm with many years of experience in mergers and acquisitions (M&A), capital markets, foreign investment, mining and energy, real estate, labor, personal data protection, and dispute resolution.
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