Mediation and Arbitration: The Differences

12/12/2017 16:15

Mediation and commercial arbitration are two alternate dispute resolutions (outside courts) recognized by Vietnamese Rules. According to the law, these methods are based on the voluntariness of the agreement between each party and are enforced by number of rules such as: Resolution No.22/2017/NĐ-CP about Mediation and Commercial Arbitration Rules 2010.

Some similarities

Mediation and commercial arbitration has many similarities. These are: the jurisdiction came from agreement between parties. There must be arbitration or mediation agreement between parties in the contract to apply these methods.

The agreement reflects the will of parties to use these methods to resolve disputes and can be set up before or after disputes arise.

The confidentiality is another similarity. Unlike court, confidentiality is one of the most important features of these methods. The confidentiality will help parties to protect the business prestige and secrets.

The dispute can only be known by mediators or arbitrators, parties and authorized personnel form the mediation or arbitration centers. Any third party will not be provided any documents or information about the dispute, unless required by the Law.

Each party has the right to choose a mediator or arbitrator to resolve the dispute. The selection must be made based on some general and specific criteria involving the dispute (experience, knowledge on the subject or language…). The choice that satisfies all the criteria is the best choice to resolve the dispute.

Fundamental differences

The fundamental difference between the two alternative dispute resolution is: The independence of the arbitration or mediation agreement with the contract. If there is an arbitration agreement in the contract, then this agreement is independent from the contract.

Therefore, if the contract violates the law, it becomes ineffective, but the arbitration agreement will not be affected. However, the same will not be applied to a mediation agreement as it will become ineffective with the contract.

Moreover, there is also difference in the role of the third party. Specifically, in the process of mediation, a mediator will only help parties to understand each other without clarifying who’s right and who’s wrong.

The result of the dispute will be decided by parties; the mediator does not have the right to force parties to make a decision. On the other hand, with arbitration, the final decision is made by arbitrators.

The arbitral tribunal will produce the award based on the rules and incidents leading to the disputes. Parties shall not know the result beforehand until the arbitral tribunal promulgate the Arbitral Award.

To create the mutual understanding between each party and help to create a mediation agreement, the mediator will make use of the information, documents provided by parties.

With arbitration, besides the documents, evidences and reasons from parties, the arbitral tribunal have the power to collect evidence, verify fact, summon witnesses to ensure the objectivity and fairness.

Moreover, the procedure and enforceability of the arbitration and mediation are also different. The mediation process is decided by parties or based mediation rules of the mediation centres which both party choose.

The process involves a lot of meeting between the mediator and each party, which is called mediation session. These session can be joined by both party or can be a closed session between the mediators with one of the parties.

The close session is a perfect environment for the mediator to find out what underneath the surface and get to the bottom of the misunderstanding. This is an important features to help parties approach the problem in another aspect and thus, produce a successful mediation decision.

On the contrary, in arbitral process, there will never be a close session for any party. The hearing must be attended by both parties. If any party is absence, the arbitral tribunal will make a decision depends on their roles and status. If the Claimant is absent, it can be considered the withdrawal of Request for Arbitration. If the Respondent is absent, the Arbitral Tribunal shall continue to resolve the dispute with the available evidences and documents.

If the mediation process become successful, the mediation agreement is the final decision. If one party rejects to follow, the other can request the Court to recognize and allow the mediation decision then they can take it to Legal Enforcement Bureau to enforce.

With arbitration, the arbitral award will be the final decision. If one party rejects to follow, the other can request the Legal Enforcement Bureau enforce the decision without the recognition procedure from the court.

Mr. Chau Viet Bac, Lawyer, VIAC Vice Secretary General 

Share Post
  • Message from the Secretary General 2019 13/02/2019 10:57

    It somehow is always one of the most special time of the year to me, at a very late afternoon in year-end days, I was sitting at my desk and flipping through the 2018 Report of Vietnam International Arbitration Centre (VIAC) 

  • Trade disputes on the rise in Vietnam 25/01/2019 10:28

    The Vietnam International Arbitration Center (VIAC), one of the 22 arbitration centers mediating disputes outside the courts, received 180 cases last year, with a combined dispute value of VND9.4 trillion, the highest in its 25-year history and higher than the previous year’s figure.

  • Cooperative agreement signing ceremony between VIAC and PCA 27/12/2018 10:27

    On the afternoon of December 17th 2018, Vietnam International Arbitration Centre (VIAC) has signed the Cooperative Agreement with the Permanent Court of Arbitration (PCA).

  • Transshipment risks for steel makers 16/11/2018 15:00

    The escalating trade dispute between the US and China is causing headaches for Vietnam when dealing with the re-routing of goods, and could lead to it becoming a “transshipment hub” for overseas products.

  • Hong Kong court refuses to enforce an arbitral award on the basis of violation of public policy 02/11/2018 09:30

    The Hong Kong Court of First Instance (“CFI”) refused to recognize and enforce an arbitral award (“Award”) of the China Guangzhou Arbitration Commission (“Commission”) on the basis that enforcement under section 95(3)(b) of the Hong Kong Arbitration Ordinance would be contrary to the public policy of Hong Kong

  • Signing of co-operation agreement with CIArb and ICDR/AAA 15/10/2018 11:21

    On October 12th 2018, Vietnam International Arbitration Centre (VIAC) has signed a Memorandum of Understanding (MoU) with the Chartered Institute of Arbitrators, London Branch and a Cooperation Agreement (CA) with the International Centre for Dispute Resolution (ICDR), a division of the American Arbitration Association (AAA) as part of the opening ceremony for the Introduction to International Arbitration Course, hosted by VIAC and CIArb, London and sponsored by ICDR at Deutsche Haus Building, Ho Chi Minh City.

  • Mitigating investment risk – treaty planning and damages claims against state entities 27/08/2018 10:27

    What do these three scenarios have in common? An investor is negotiating a contract with a state entity in a high-risk jurisdiction. An investor – an individual or a corporate entity – is considering how to structure its holdings in a tax efficient manner. An investor is facing potential asset nationalisation or breach by a state entity of its contractual obligations.

  • Firms suggested using mediation to resolve commercial disputes 23/08/2018 11:50

    Phan Trong Dat, Deputy Secretary General of the Vietnam International Arbitration Centre (VIAC) and Deputy Director of the VMC, said mediation is appropriate for Asian culture since Asians prefer to settle disputes in a peaceful way. According to Dat, mediation is simply a negotiation with the participation of an independent mediator who can help both parties discuss their matter and reach their own agreement.