Vietnam, an essential member of the Association of Southeast Asian Nations (ASEAN), has experienced rapid economic growth in recent decades. With its stable political system, social stability, golden demographic dividend, enormous economic openness, a number of free trade agreements, and massive opportunities in exporting duty-free goods to the world, Vietnam has gradually emerged from Southeast Asian countries.
In the boom of its development, China and Vietnam have aligned their development strategies, intensifying economic, trade and investment cooperation. The two countries signed the Five-Year Plan for the Development of China-Vietnam Economic and Trade Cooperation in 2011, re-signed the Five-Year Plan in 2017, and agreed to further strengthen the docking of development strategies and speed up cooperation under the Belt and Road Initiative (BRI) and the “Two Corridors and One Economic Circle” plan in 2022.
Milestones have been achieved based on national strategic structures. China has remained Vietnam’s largest trading partner for many consecutive years, and Vietnam is China’s biggest trading partner in ASEAN and the fourth largest globally. As shown in the chart below, the total volume of imports and exports between Vietnam and China is growing steadily in the recent decade. According to the Ministry of Planning and Investment of Vietnam, in addition to restaurants, hotels, and consumer goods investments, Chinese investors have expanded into electricity, electronics, tire production, textiles, and footwear industries recently.
Dispute Resolutions for Foreign Investors in Vietnam
While vigorously developing the economy, Vietnam has made strides in building a more internationally acceptable dispute resolution framework to better facilitate investment activities into Vietnam. The Law of Investment 2020 (“LOI 2020”) was approved by the National Assembly of Vietnam on 17 June 2020, and takes effect from 1 January 2021. Pursuant to Article 14 of LOI 2020, foreign investors or foreign business organizations have the choice of using the following means of dispute settlement:
- Vietnam’s court;
- Vietnam’s arbitration body;
- Foreign arbitration body;
- International arbitration body;
dd) An arbitral tribunal established by the parties in dispute.
Except for the above, every dispute between a foreign investor and a regulatory agency over business investment activities within Vietnam’s territory shall be settled by Vietnam’s arbitral tribunal or Vietnam’s court, unless otherwise agreed under a contract or treaty. As reviewed by World Bank Group, there is no codified law on administrative procedures in Vietnam for investors, administrative procedures are dispersed in laws and regulations of specific business sectors to ensure fair process.
International Arbitration in Vietnam
Although court litigation is the most basic form of dispute resolution in Vietnam, the efficiency, transparency, and independence of court process remain concerns for foreign investors.
The Law on Commercial Arbitration (LCA) 2010 is the main source of law in Vietnam for international arbitration. As Vietnam is a signatory to the New York Convention, the provisions of the New York Convention relating to the enforcement of both domestic and foreign arbitral awards have been incorporated into Vietnamese law. Even though Vietnam has not adopted the UNCITRAL Model Law, the LCA has been largely modelled according to the provisions of the UNCITRAL Model Law, with some adaptations to align with Vietnamese legal procedures.
Therefore, many foreign investors including Chinese parties prefer to seek arbitration instead of litigation because basic international arbitration framework in Vietnam is well established. Latest statistics from ICC International Court of Arbitration in 2022 can also shed light on the choice of investors. Chinese and Vietnamese parties in ICC arbitration cases have jointly accounted for 32% of South and East Asia parties.
Notably, ICC Vietnam was launched by the Vietnam Chamber of Commerce and Industry (VCCI) in 2021. The VCCI is endorsed by the International Chamber of Commerce (ICC) as its official representation in Vietnam with the aim of assisting Vietnamese enterprises to, inter alia, access ICC dispute resolution services. The establishment of ICC Vietnam demonstrates ICC’s strong commitment to international arbitration development in Vietnam and assists in making ICC dispute resolution services more accessible to Vietnam and its business partners.
For further information, please contact:
Vera He, Deputy Director of ICC Arbitration and ADR for North Asia, ICC Dispute Resolution Services.
vera.he@iccwbo.org
- The Association of Southeast Asian Nations was established on 8 August 1967 in Bangkok, Thailand, with the signing of the ASEAN Declaration (Bangkok Declaration) by the Founding Members of ASEAN: Indonesia, Malaysia, Philippines, Singapore, and Thailand. Vietnam joined on 28 July 1995. ASEAN is having ten member states now with its aim on accelerating the economic growth and promoting beneficial cooperation
- Shanghai Daily: China, Vietnam agree a 5-year cooperation plan.
- Statistics are from China State Statistics Bureau.
- Available at here.
- Article 23 of LOI 2020 clarifies the definition of foreign business organizations: In general, over 50% of the business organization’s charter capital or more is held by a foreign investor(s), or the majority of the general partners are foreigners if the business organization is a partnership.
- In the period from 1993 to 2022, Vietnam International Arbitration Centre (VIAC) handled a total of 2513 cases which domestic disputes accounted for 40% and disputes with foreign elements accounted for 60% (including disputes in which at least one party classified as foreign direct investment enterprise). China is the top one user accounted for 28% at VIAC in 2022 and has been remained as the top 5 foreign user at VIAC from 1933 to 2022. VIAC Annual Report 2022 is available at here.
