ARBMEDARB MODEL: INTERNATIONAL PRACTICE AND APPLICABILITY IN VIETNAM

LIST OF ABBREVIATION ADR Alternative Dispute Resolution AMA Arbitration-Mediation-Arbitration ARB-MED-ARB Arbitration-Mediation-Arbitration FDI Foreign Direct Investment HKMAAL Hong Kong

ARB-MED-ARB MODEL: INTERNATIONAL PRACTICE AND

APPLICABILITY IN VIETNAM

Major: Economics Specialization: International Trade Policy and Law

Code: 8310106

Full Name: Le Hong Nhung Supervisor: Assoc Prof, Dr Nguyen Minh Hang,

Ha Noi, 2019

STATEMENT OF ORGINAL AUTHORSHIP

The master thesis “Arbitration-Med-Arb model: international practice and applicability in Viet Nam”, which was completed as a result of the course

named Master of International Trade policy and Law, is the author‘s sole work with the best devotion, endeavor and hard-working period given The author guarantee that the master thesis have been carried out in conformity with the thesis writing

regulation and process issued by the Foreign Trade University

ACKNOWLEDGEMENT

This thesis is the result of six months of researching It is an interesting and learning experience In completing this thesis, the author would like to give my special thanks to many people for their significant help, contribution, and recommendations during my writing process

Foremost, special mentions and the most sincere thanks should belong to Associate Prof Dr Nguyen Minh Hang, my supervisor at Foreign Trade University With her master knowledge and experiences, she helped me in writing this thesis I could not complete this thesis without her positive suggestions and guidance

Secondly, I would also like to give my thanks to the authors who provided me with valuable books for my thesis

My last appreciation is to the Faculty of Graduate Studies of Foreign Trade University for organizing such a meaningful master course and all the support, my family and my friends for their supports and encouragements

Hanoi, 15th January 2019

Le Hong Nhung

TABLE OF CONTENTS

STATEMENT OF ORGINAL AUTHORSHIP

ACKNOWLEDGEMENT

LIST OF FIGURES & TABLES

LIST OF ABBREVIATION

SUMMARY OF THESIS RESEARCH RESULT

INTRODUCTION 1

1 Rationale 1

2 Literature review 2

3 Research questions 4

4 Research’s objective 5

5 Scope of study 6

6 Methodologies 7

7 Research disposition 8

CHAPTER 1: THEORETICAL FRAMEWORK 9

1.1 Alternative dispute resolutions 9

1.1.1 Background 9

1.1.2 Definition 11

1.1.3 Methods and forms of ADR 13

1.1.4 ADR and litigation 13

1.2 Mediation 16

1.2.1 Rationale of mediation 17

1.2.2 Definition and process 18

1.2.3 Stages of commercial mediation 20

1.2.4 Types of commercial mediation 23

1.2.5 International organization’s activities for commercial mediation 24

1.2.6 Advantages and disadvantages of commercial mediation 27

1.3 Arbitration 28

1.3.1 Rationale of arbitration 28

1.3.2 Definition and process 29

1.3.3 Stages of commercial arbitration 31

1.3.4 Arbitration agreement 33

1.3.5 Forms of commercial arbitration 34

1.3.6 Benefits and drawbacks of commercial arbitration 35

1.4 The key differences between mediation and arbitration 36

1.5 The understanding of arb-med-arb model 39

CHAPTER 2: INTERNATIONAL EXPERIENCE ON APPLYING ARB-MED-ARB MODEL: STUDY OF SINGAPORE 42

2.1 Singapore’s development in mediation and arbitration 42

2.1.1 Singapore’s development in mediation 42

2.1.2 Singapore’s development in arbitration 45

2.2 Singapore's Arb-Med-Arb model 50

2.2.1 SIAC-SIMC Arb-Med-Arb Protocol 50

2.2.2 Procedure of Singapore’s Arb - Med - Arb model 52

2.2.3 Advantages of Arb - Med – Arb 55

CHAPTER 3: APPLICABILITY OF AMA MODEL IN VIET NAM AND RECOMMENDATIONS 60

3.1 Vietnam’s approach on applying Arb – Med - Arb model 60

3.1.1 Vietnam economy review 60

3.1.2 Vietnam development in commercial mediation and arbitration 63

3.1.3 Arb-Med-Arb applicability in Viet Nam and issues 74

3.2 Recommendations for Viet Nam 79

3.2.1 For Government 79

3.2.2 For associations and enterprises 89

CONCLUSION 91

1 Conclusions 91

2 Limitation of research 92

REFERENCES 93

LIST OF FIGURES & TABLES

Table 1.1: Comparing ADR and Court Procedure 16

Figure 1.1: Commercial mediation process 20

Table 2.1: Circumstances to use commercial mediation 27

Figure 2.1: Commercial arbitration process 31

Table 2.2: Comparison Between Arbitration & Mediation 38

Figure 3.1: Total Number of New Cases Handled by SIAC (2006-2016) 46

Firgue 3.2: Procedure of Singapore Arb-Med-Arb model 52

Table 3.1: Advantages of Mediation versus Arbitration 55

Figure 3.3: Advantages of Arb-Med-Arb 57

Figure 3.4: Newly established enterprises of May from 2014 – 2018 61

Figure 4.1: Viet Nam’s Arb-Med-Arb model (expected) 75

LIST OF ABBREVIATION

ADR Alternative Dispute Resolution

AMA Arbitration-Mediation-Arbitration

ARB-MED-ARB Arbitration-Mediation-Arbitration

FDI Foreign Direct Investment

HKMAAL Hong Kong Mediation Accreditation Association Limited

ICC International Chamber of Commerce

PD Practice Direction on Mediation

PDRC Primary Dispute Resolution Centre

SMC Singapore Mediation Center

SIAC Singapore International Arbitration Center

SICC Singapore International Commercial Court

SIMC Singapore International Mediation Center

SIMI Singapore International Mediation Institute

TRACENT Ho Chi Minh City Commercial Arbitration Center

UNCITRAL United Nations Commission on International Trade Law

VIAC Vietnam International Arbitration Center

VMC Vietnam Mediation Center

SUMMARY OF THESIS RESEARCH RESULT

The thesis ―Arb-Med-Arb model: international practice and applicability in Vietnam‖ focuses on giving recommendation on how Vietnam can apply the experiences of developed jurisdiction around the world, which in this study are Hong Kong, US, especialy Singapore in order to improve the country‘s commercial dispute resolution context In general, Vietnam‘s alternative dispute resolutions on commercial dispute in general is still limited In addition, the commercial mediation activities is scattered between arbitration center national wide without a uniform Mediation and Arbitration Act until the recent Decree No 22/ND-CP about commercial mediation that have been issued in April 2018 and Law on commercial arbitration issued in June 2010 Despite a remarkable movement, Vietnam regulation still possessed many drawback regarding the code of conduct for mediators and arbitrators The solutions which have been found in the study of the three developed dispute settlement hubs of the world shall help to attract the interest

of Vietnam enterprises on using multitiered-clause Arbitration - Mediation - Arbitration to sellte disputes, improving the standard and conduct of mediator and arbitrator, fortify the enforceability of the mediation settled agreement and arbitration award

INTRODUCTION

1 Rationale

An era of connection and cooperation is the way people usually call the 21st century An outburst of a smartphone or high-tech computer for instance would imply that its parts are collected and produced in different countries These components are then assembled into the final product and distributed over the world That is international trade at its absolute finest

Powering such international trade are complex technologies which have reduced the obstacles for global advertising, near-instant global communication, prompt product and services delivery In conclusion, the term ―globalism‖ has been reconceptualized by technology

There are however features of globalism where technology cannot assist (at least not yet) Since the characteristics of international businesses, the contracts signed between the sides are generally quite sophisticated, consisting of a expansive heavily negotiated clauses regarding to each party‘s commercial requirements In addition to trade terms, parties‘ awareness of the need to have a well-written dispute settlement clause are increasing

Go along with the development of technology, the mechanisms for resolving dispute have not stayed immovable and have gradual developed to dedicate to globalism as much as achievable In this field, arbitration has been found an ideal substitute to the traditional court procedures Generally, arbitrations are supposed more efficient and flexible than courts, while the parties are offered confidentiality The enforcement is another enormous advantage of arbitration In particular, an arbitration awards are more readily enforceable than judgment from foreign court

The question that people are finding the key is: are we on the top of the progression for dispute settlement clauses? Can arbitration clauses (or any substitute dispute resolution clauses) still be refined? The Singapore International Arbitration Centre (SIAC) and Singapore International Mediation Centre (SIMC) assuredly realize that fact Altogether, the SIAC and SIMC have requested to bring

up a nontraditional dispute settlement model compositing the advantages of arbitration and mediation clauses, whose name is the Singapore Arb-Med-Arb Protocol (― AMA Protocol‖)

The AMA Clause allows parties to choose to settle disputes by method of arbitration to deal with their differences or by mediation before reaching arbitration

A multi-tiered clause is considered as a form of arbitration clause which combines mediation and arbitration proceedings in order to increase the chance of settling disputes between the parties via goodwill and positive discussions and to inspire constructive negotiations before a fully-completed arbitration procedure

In this thesis, the author would like to look into this new approach to settle disputes and see what advantages AMA could have for the parties Moreover, the author also want to show the key points for question: ―Can Vietnam be able to apply this model

to resolve the disputes in the future?‖ Consequently, being a Master student majoring in International Trade Policy and Law, for the desire to devote my knowledge to the better Vietnam‘s dispute settlement, so as to keep pace with the

global standards, the author selected the topic: “Arb-Med-Arb model: international practice and applicability in Vietnam”

2 Literature review

Although commercial mediation and arbitration have long developing journey all over the world, Vietnam‘s mediation and arbitration is still inexperienced and the term is new to some extent Especially, Arbitration - Mediation - Arbitration model has ever been researched thoroughly as well as applied in Viet Nam As a result, the study‘s subject is quite new and there has not been any same or analogous topic up to the moment that the author has finished the paper The author would like to review some experiential researches from both Vietnamese and foreign sources as follows:

- Nguyen Trung Nam, Trinh Nguyen (2017) – “Mediation – arbitration in commercial and construction disputes” is a research about the issues in the

circumtances of construction dispute settlement under Viet Nam‘s laws and

point out some recommendations, composing mediation‘s applying methods,

in the context of Viet Nam, combining the other ADR procedures so as to require a multi-tiered dispute settlement mechanism, or in the unique form of Arb-Med-Arb innovated in Singapore, in order to promote the efficiency and enforceability of the dispute settlement way in construction conflict via the improvements of commercial mediation, from the past to recent situation The major acknowledgement of this paper is the information about the issues relating to construction disputes in Viet Nam

- Financier Worldwide Magazine (2018) – “Arb-med-arb in cross-border disputes”: in this study, the authors pointed out the simple idea behind

multi-tiered dispute resolution is to provide several possible avenues to dispute settlement within one dispute resolution procedure The result is a mechanism that combines various dispute resolution methods, such as mediation and arbitration, in different ways In addition, the researcher also

stated some advantages and limitations of the AMA Protocol

- Bryan Cave Leighton Paisner team (2015) – “Singapore’s new Med-Arb” protocol: a positive development?” is a sientific article that study

“Arb-how the SIMC - SIAC protocol works and consider the benefits and downsides of attaching one of Singapore‘s newest dispute settlement methods to commercial contracts

- Anindya Basarkod and Dr Markus Altenkirch (2018) – “Arb-Med-Arb: what is it and how can it help the parties to solve their disputes

efficiently?” is a paper looking into Arbitration - Mediation - Arbitration as

a new approach to resolve disputes and show what advantages Arbitration - Mediation - Arbitration could have for the conflict sides

- Daniel Chong, Sharon Lin, (2018) - “Arb-Med-Arb: Connecting the Dots between Arbitration and Mediation”: in this study, the authors

pointed out some key aspects of ―Arb-Med-Arb‖, the differences between arbitration and mediation In addition, the reason why people should use

Arb-Med-Arb to solve the dispute and a sample of Arb-Med-Arb clause are also mentioned in this research

My review will not explore all aspects of disputes resolution but focus on the which main points have been mentioned in the above articles or studies Most of the above research define the Arb-Med-Arb model and show some main advantages but does not mention the method used to apply AMA in Asian country such as Viet

Nam Although the study named “Mediation – arbitration in commercial and construction disputes”by Nguyen Trung Nam, Trinh Nguyen (2017) showed the

issues in the circumtances of construction dispute settlement under Viet Nam‘s laws and point out some recommendations, the definition, characteristics and important advantages of Arb-Med-Arb are not mentioned here

In short, up to now, there has not been any comprehensive study researched on all-sided Arb-Med-Arb model and the method that used to apply this multi-tiered dispute settlement mechanism in Viet Nam My contribution will highlight the advantages of this dispute resolution method in general (not focus on any specific field) and answer the question: ―How can we apply Arb-Med-Arb in Viet Nam?‖

3 Research questions

There are some key questions of this study including: ―What is Arb – Med - Arb protocol?‖, ―What are the countries applied this clause in the world?‖ and ―What should Viet Nam act to apply this model in the future‖ In order to find out the answers for such research questions, we need to focus on these sub questions:

- What are the basic principles of arbitration and mediation?

- What are the differences between arbitration and mediation?

- How can Arb-Med-Arb help the parties to solve their disputes in Singapore?

- What are the benefits of Arb-Med-Arb model?

- How can Viet Nam apply Arb-Med-Arb model?

- What are implications for Viet Nam?

4 Research’s objective

Arbitration and mediation are applied increasingly in the world to settle the disputes instead of court That are very useful alternative dispute resolution, however, the combination of arbitration and mediation bring the surprising benefit

International economic integration is one of the main tasks of Viet Nam in the near future Therefore, ―Economic integration is central in which the integration

in other areas has to facilitate economic integration and contribute positively to economic development, defense consolidation, national security and preservation; and promote cultural identity and promote cultural and social development Integration in the different fields must be implemented in a coordinated global integration strategy with a roadmap and steps in line with the actual conditions and capabilities of the country" (Resolution No 22-NQ / TW dated 10 April 2013 on international integration) Up to 2018, Vietnam has negotiated and signed more than ten regional free trade agreements (FTA), including commitments on technical barriers to trade and will sign some next new FTAs such as: EVFTA, RCEP, … The roadmap for tariff reductions in free trade agreements is committed for a period

of ten years for each phase and is specified for each agreement That is the reason why the amount of international trade transactions and import-export turnover are increasing drammatically

It is clear that at this moment, clear that Viet Nam should act now for the unexpected disputes in businesses and to protect Vietnamese enterprises in international market Meanwhile there is not legal framework as well as any clause refer to Abitration – Mediation – Arbitration model Therefore, the content of the thesis will highlight the objectives:

- Systematize the basic principles of two alternation dispute resolution method: arbitration and mediation and the key differences between these approaches

- Understanding how Arbitration - Mediation – Arbitration model works ;

- Get deeper understanding on the way Singapore apply this protocol to resolve conflict in business and the advantages of this model

- Forecasting the difficulties that Vietnam has to face with when applying this model, giving suggestion and proposal for Vietnam Government, arbitration and mediation service providers to facilitate the development of dispute settlement mechanism

5 Scope of study

There are a number of trade disputes cbalternative dispute settlement, such as negotiation, arbitration, mediation, or med-arb can be used in various dispute categories ranging from civil, family, commerce From many studies, it is found that, alternative dispute settlement methods give the best answer regarding commercial disputes where the key economic development of the nation rests This research focuses on the use of arbitration and mediation, arbitration - mediation - arbitration model to resolve commercial disputes

The study specifies the research content on Arb-Med-Arb model of Singapore In fact, Arb-Med-Arb model has many advantages, however, this is really new model in dispute resolution, so Singapore is the only country create and allow apply this model In addition, the thesis also analyzes Vietnam‘s recent development on commercial mediation and arbitration such as: legislation, awareness In short, the study would do research on the current Vietnam‘s arbitration and commercial mediation situation, which can be enhanced and introduce some implications on how to how to apply Arb-Med-Arb model in Vietnam according to international standard and experiences

The research time shall cover the period in the early twenty centuries until now because Singapore and Viet Nam have a later phase of mediation in comparison with other developed countries in the world Moreover, several legal documents on commercial mediation and arbitration of international bodies from the late nineteen to early twenty centuries shall also be included

6 Methodologies

This thesis is completed based on the application of theory research method and practical research method Theory research method includes analytical method, synthesis method and reference to the laws and regulations in order to achieve the requirements set for a research project Practical research method mostly includes interview method with experts in the fields of international arbitration and

mediation (as described in the Appendix 1)

Data which is used in the analysis of the thesis is mostly secondary one The data is collected, quoted from reports, researches of experiential researchers and organizations in the field of arbitration and mediation Primary data for such study

is hard to conduct since arbitration - mediation - arbitration model is quite new in Vietnam going along with the limitation of capital and time of the author

Theory research method: About analytical and synthesis method, in Chapter 2 Theoretical framework, theoretic and fact, the legal framework related mediation and arbitration, in general and internal coordination related to arbitration - mediation - arbitration model, in particular are deeply analyzed in order to find out international and domestic practices and show the opportunities to apply arbitration

- mediation - arbitration clause in Viet Nam Some arbitration - mediation - arbitration applied cases to settle disputes in Singapore are introduced and analyzed

as experiences for Viet Nam to learn in future if Viet Nam involves in same cases

In Chapter 1 International experience on applying arbitration - mediation - arbitration model: study of Singapore, the author use synthesis method and reference to the laws and regulations to show the experiences and find the implications for Viet Nam

In Chapter 2 Applicability of arbitration - mediation - arbitration model in Viet Nam and recommendations, the method of reference to the laws and regulations is also used so as to figure out some unsuitable points regarding to laws and regulations of Viet Nam Synthesis method will be also used in this chapter to conclude the thesis and suggest opening the new issues

Interviews are carried out with some experts and associations to show the applying method and give recommendations for Chapter 3

7 Research disposition

Beside the table, chart lists, reference and appendix, the main content of the thesis includes the followings:

- Introduction

- Chapter 1: Theoretical framework

- Chapter 2: International experience on applying arb-med-arb model: study of Singapore

- Chapter 3: Recommendations

- Conclustion

CHAPTER 1: THEORETICAL FRAMEWORK

In this chapter, it is supposed to be helpful to briefly set out the principles on arbitration and mediation before analyze the others deeper knowledge of the multi-tiered arbitration - mediation - arbitration clause and model

1.1 Alternative dispute resolutions

1.1.1 Background

According to the report of the World Bank Group, the idea of using ADR

as a method of resolving disputes by consensus rather than confrontation has come from traditional practices of many countries In other words, ADR has originated from the history of many cultures, especially one in Asia where harmonization is always a major criteria (World Bank Group, 2011)

However, the origin of modern ADR is often accepted is the United States

by many studies, the thesis recounts the ADR platform of the USA Earlier, ADR was first used to resolve civil rights by using mediation and considering action against overworked and delayed courts Since then, ADR has developed rapidly, not only practical but also institutional with the encouragement of the Government, legal organizations, academics For example, in 1990, all federal district courts were required to have a plan to reduce costs and delay in litigation process Therefore, each federal district court developed some form of ADR process Due to innovations in ADR, mandatory ADR development in courts, states and federal systems, the growing interest in ADR has made the United States the largest source

of knowledge in the court connected ADR (USAID, 1998)

Later in the 1980s, the demand for commercial ADR in the United States began to increase because of the desire for a more effective alternative to litigation Therefore, ADR models such as negotiation, mediation and litigation have developed significantly The institutionalization of ADR has changed the rules and legal practices US regulations, public consultation and administrative dispute resolution have been added to the use of ADR

The United States is always leading in many areas and ADR is not an exception Many countries copy US processes, others try to blend American style

with their own dispute settlement traditions This process is being used to solve various problems not only commerce, social, civil, politics Developing countries are involved in the implementation of ADR, including Vietnam

China or Hong Kong in particular are also affected by ADR trend from the United States The fire spark of disappointment in litigation and arbitration has spread from the United States to other jurisdictions followed by China (Zheng Rungao, 2003) The dispute parties began to criticize the limitations of traditional dispute resolution that subsequently gave rise to ADR Besides, China ADR‘s development can be explained by its special cultural background The Chinese prefer a consensus, non-adversarial ways of dispute settlement follow philosophies suchas ―better bend than break‖, ―willows are weak yet they bind others wood‖ The reason is that in China, reservation of face and business relationship private is very important Such platform has contributed to promote the growth of ADR, especially in the field of trade While the USA model affects most of the world, the China‘s one in general are powerful for Asia or Southeast Asia in particular

Singapore is also affected by ADR trends from the US and is considered a pioneer in Southeast Asia's ADR The reason for the need of ADR here is also due

to the limitation of the litigation In the early 1990s, Singapore courts were full of case files More than 2000 cases are awaiting resolution in the Supreme Court More than 10000 cases are inactive, many of which have been more than 10 years The process of starting treatment takes 5-10 years for about 44% of cases On the other hand, appeals take 2-3 years to be heard Latency can be calculated as part of the life expectancy of the person and the processing time of the judgment has not been mentioned Therefore, ADR was implemented by the Singapore judiciary to reduce the burden of the court and help desperate claimants (Judith Prakash, 2009)

The thesis summarized the background of ADR, from the country of origin - the United States, to countries in the same region and has much influence on Vietnam such as China and Singapore have the same reasons for developing ADR due to the limitation of litigation and court‘s proceed Now the thesis will continue and define ADR

1.1.2 Definition

According to Yona Shamir, ADR is defined as:

“Alternative Dispute Resolution (ADR, sometimes also called

“Appropriate Dispute Resolution”) is a general term, used to define a set of approaches and techniques aimed at resolving disputes in a non-confrontational way It covers a broad spectrum of approaches, from party-to-party engagement in negotiations as the most direct way to reach a mutually accepted resolution, to arbitration and adjudication at the other end, where an external party imposes a solution Somewhere along the axis of ADR approaches between these two extremes lies “mediation,” a process by which a third party aids the disputants to reach a mutually agreed solution.”

Source: (Yona Shamir, 2003)

Alternative dispute resolution is a more common term, however many empirical studies and even the author finds the words Dispute Settlement more appropriate to nature The purpose of dispute resolution is to make social life better (Park and Burger, 2009) That process will attempt to resolve and consider conflicts that help people and entrepreneurs keep relationships The Latin word refers to this process for the sinner through the unimportant person of the social life and important to the social order Lack of dispute resolution will make it difficult for people to go together

Or even the Great Gandhi once said:

“I realized that the true function of a lawyer was to unite parties The lesson was so indelibly burnt into me that a large part of my time during the twenty years of my practice as a lawyer was occupied in bringing about private compromise of hundreds of cases I lost nothing thereby not even money; certainly not my soul”

Source: (Azquotes, 2018)

What the thesis tries to say, all are in the words of the former US Chief Justice, Warren Burger:

“The obligation of our profession is… to serve as healers of human conflict To fulfill our traditional obligation means that we should provide mechanisms that can produce an acceptable result in the shortest possible time, with the least possible expense and with minimum of stress on the participants This is what justice all about.”

Source: (Chief Justice Warren Burder, 1997)

In conclusion, ADR can be defined as a concept used to refer to different methods of resolving legal disputes It stems from court delays in handling cases timely and reasonably On the other hand, different regimes can help disputing parties resolve conflicts in a timely and cheap way However, in essence, ADR is still complementary to the courts Nationally and internationally, ADR is increasingly used in the field of law and commerce ADR can be used in different types of disputes, from civil, family and commercial From many studies, it has been found that ADR methods provide the best answer regarding trade disputes in which the important economic development of the country lies (Shodhganga, 2018) Obviously, ADR is not a new concept, but novelty lies in the proliferation of its model:

“Dispute resolution outside of courts is not new; societies world-over have long used non-judicial, indigenous methods to resolve conflicts What is new is the extensive promotion and proliferation of ADR models, wider use of court-connected ADR, and the increasing use of ADR as a tool to realize goals broader than the settlement of specific disputes.”

Source: (USAID, 1998)

1.1.3 Methods and forms of ADR

ADR systems can often be categorized into negotiation, mediation or mediation systems and arbitration According to the USAID study in 1998, the thesis summarized the following categories:

The negotiation process creates a platform to facilitate the face of negotiations between the disputing parties, without the presence of a third party On the other hand, the mediation and reconciliation systems are similar in that they invite a third party between the parties, or to reconcile a specific conflict or to reconcile their relationship Mediators and mediators can facilitate communication, or can help direct and structure a settlement, but they do not have the right to resolve Finally, the arbitrator authorizes a third party to decide how to resolve the dispute

In addition, it is important to differ between ADR binding and non-binding forms The negotiation, mediation and reconciliation systems belong to the non-binding group, they recognize the willingness of the disputing parties to reach consensus The arbitration process can be binding or non-binding Binding one creates a third-party decision that the parties will follow even if they disagree with the conclusion, like a judicial decision Non-binding one creates a third party decision that the disputant may not follow

Mandatory processes and voluntary processes also need to be distinguished Many legal systems order parties to make negotiations, mediation, mediation or arbitration before going to court The ADR method may also be required as part of a previous contractual agreement between the parties For a voluntary one, using the ADR process completely depends on the needs of the dispute parties

1.1.4 ADR and litigation

This section examines the advantages and disadvantages of the ADR process and compares with litigation The following knowledge is drawn from the Dispute Resolution - Master of Policy and International Trade Law course of Prof Dr Wolfgang Wurmnest, LL.M (Berkeley)

By negotiation, this process means that the parties try to resolve their dispute

by mutual agreement without trial The skills needed are at a lower level of legal nature, rather a question of negotiation tactics and experience Inexpensive and amicable agreement allows the parties to continue their business relationships, the parties may try to include solutions that require cooperation and will not normally

be available in court proceedings However, negotiation has no coercive power, so the parties must both agree to negotiate and resolve their dispute, no agreement has

no results

On the other hand, arbitration means that a dispute between the parties is filed under an agreement with a private third party chosen by the parties (arbitrators or arbitrators) to resolve it in a judicial manner (eg: a third party has the right to make binding decisions Arbitration is an opportunity for parties to present evidence or submit to support their request This method has many advantages:

- Permitting party autonomy

- Less intrusions by state courts

- Special expertise of arbitration can be selected by the parties

- Confidentiality proceedings are not open to the public

- Faster and cheaper than court

- Almost globally recognized arbitration awards through the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Rulings (New York, June 10, 1958)

On the contrary, there are some disadvantages such as the weak enforcement power of the arbitral tribunal over the parties In some cases, the support of the courts may be necessary to obtain evidence for temporary or constitutional measures of a court Moreover, there is uncertainty about procedural issues plus the application of legal rules and issues with third party involvement unless contracted Last but not least, mediation is the process by which the parties engage a neutral third party support to act as a mediator - a facilitating intermediary - without

giving any binding decision but using a variety of different procedures, techniques and skills to help the parties resolve their disputes by negotiation agreement without adjudication Some notable characteristics are that negotiations are basically supported by a neutral third party, sometimes mediators have knowledge of psychology (business psychology) Mediation has the same advantages as negotiation, plus it looks at ―interests‖, not merely ―rights‖ In addition, mediation

is a bit more expensive than negotiation without mediators, but there may be a better chance of success The disadvantage of mediation is the advance agreement

on such amicable dispute settlement and the need of good will during mediation or

it will be a waste of time

The results of the empirical survey indicate that litigation is preferred by disputant on not many criteria The criteria are to minimize costs, speed of the resolution process, privacy, keep relationships, neutral views and precedents setting Litigation or adjudication only has a greater advantage than other ADRs is setting precedent Arbitration is favored by many people of their ability to get neutral opinions The strength of Mediation lies in reasonable prices, the ability to connect issues, keep business relationships between parties to cooperate in the future and relate to constituencies in the process In this table, number 3 means highly likely to satisfy goal, number 2 means being likely to satisfy the goal, number 1 means being unable to satisfy the goal and zero equals to highly unlikely to satisfy goals Now

we can see that for what reason ADR is favored by disputant rather than adjudication at the courts

Table 1.1: Comparing ADR and Court Procedure How are they likely to achieve disputants’ goals?

- Confidentiality: mediation is a confidential process where what was discussed or agreed in private is not disclosed to others without everyone‘s agreement In addition, what is discussed in private session with each party shall not

be disclosed to the other party without its prior agreement However, in such private session, the mediator, throug hhis/her neutral questions may assist a party in assessing its situation based on which the party may come up with more realistic proposal that will bring the parties closer to the agreed settlement

- Voluntary: prior to the mediation process, the parties must reach a mediation agreement in writing which shall be used as the legal basis for mediation process During the process, the mediator does not have the authority to impose upon the parties a solution to the dispute And if the mediation does not result in an agreement, either party can still submit the dispute to the court or arbitration (whichever applicable) In such case, details of the mediation will not be disclosed

or used at the court/arbitration hearing

1.2.1 Rationale of mediation

Among ADRs‘ methods, arbitration has long been the favored one in settling international commercial dispute (GaryB.Born, 2009) Although international community has begun to detach from such process because of the questions regarding the time, cost and procedure of arbitration (William W Park, 2012) Therefore, disputants are looking for another proper commercial dispute resolution mechanism and mediation is currently a more favorable substitution (Jacqueline Nolan-Haley, 2012)

Recent development may make international commercial mediation sounds like a new term, however, the mechanism of using such process in resolving cross border commercial dispute is rather familiar (Harold I Abramson, 1998) It has been proved that commercial mediation was widely used before arbitration, only after the WWII, commercial arbitration has come in as a new player in the field of settling transnational trade disputes (Eric A Schwartz, 1995)

For Asia region, China in particular possess a long history of mediation (Wang Wenying, 2005) Back to the time of the Qing dynasty, the judge often ordered parties to mediate to resolve a dispute before resorting to litigation In addition, the Confucius philosophy also has had a remarkable influence over the South East Asia,

including Vietnam, Singapore and Thailand The philosophy highly valued the harmony and yielding to others, and avoid conflict and argument The idea of using consensus-based dispute resolution mechanism in China is still popular until today (Danny McFadden, 2011) Actually, it is popular throughout the South East Asia, as

a study has stated that lower use of arbitration to mediation in this region is due to the fact that arbitration and litigation aim to identify the loser and winner of the dispute, this could cause the loss of business relationships

Not only in the Eastern area, commercial mediation is also a rising trend in the Western region as well The potential increasing in the commits of commercial businessmen in using consensus-based dispute resolution mechanism is signaling worth noting changes (John Lande, 2000) The process is happening in every areas: spreading from private, public to international Regarding international bodies, The World Bank and International Finance Corporation has united in trying to facilitate international commercial mediation For countries, there are many jurisdiction nowadays require dispute parties to mediate before going to court Representing the group of private area, infamous international corporations such as General Electric and Siemens have encouraged advance mediation as a dispute settlement process (S.I.Strong, 2014) As a result, the empirical studies have concluded that commercial mediation are becoming increasingly institutionalized

1.2.2 Definition and process

Having gone through the background, reasons to use and general mediation definition, the thesis shall define commercial mediation According to the Decree 22/2018/ND-CP of Vietnam government, the definition of commercial mediation is very general:

“Commercial mediation is a commercial dispute settlement method which is agreed by parties and supported by the neutral third party, the commercial mediator who according to the regulation of such Decree.”

Source: (Chinh Phu, 2018)

Problems with such definition is that it is not specific, viewers and even disputants might feel very confused and do not know what will be considered commercial disputes in this case The answer can be found in another regulation which is the Commercial Act 2005, Commercial Arbitration Act 2010

While looking at the definition of a country in the region – Singapore, the dispute parties can know right away what type of dispute is considered having commercial characteristic:

“…commercial disputes … include banking, construction, healthcare,

shipping and tenancy disagreements…”

Source: (SMC, 2018)

To sum up, it can be understood that commercial mediation is a dispute settlement process that help parties to settle conflict or dispute relating to commercial matter, which might include but not limited to banking, construction, healthcare, employment, information technology, insurance, partnership, shipping and tenancy disagreements…, without refereeing to court‘s action Commercial mediation facilitate the communication between parties and assist them in creating their resolution considering the later phases, together with the support of a fair-minded mediator In addition, commercial mediation is a mechanism with characteristics such as exclusive and secrecy This ADR also makes disputants feel complacent and free to speak about the critical of the disputes and its impact on them With commercial mediation, the parties have the chance to pass on their viewpoints relating to the circumstance which has happened, plus the knowledge that they think is related and the other parties need to know Further, the disputant can raise question at will concerning their cases and receive the comments and thinking of the other party on the situation Commercial mediation is a unique process that offers parties the opportunity to communicate face to face and explain

to the other in detail how the dispute should be done The success chance of commercial mediation is also astonishing high Studies have shown that more than

two third of the parties that mediate come to a conclusion (Bilal Farooq, 2010) Despite commercial mediation‘s uncertainty in guarantee a 100% agreement, the process still open the door for parties in later negotiations with a much better circumstance and chances of success In summary, the thesis draws the mediation process as follow

Figure 1.1: Commercial mediation process

1.2.3 Stages of commercial mediation

Mediation is a flexible process, and each nation has its own culture of doing mediation (Lewicki, Barry and Saunders, 2009) USA mediator will focus more on win-lose scenario, term, going straight to closing and implementing and less focus

on relationship building On the contrary, Asian mediator will try to build the connection between parties more than focus on others process (Feehilly, 2008) However despite the differences, there are three major stages of a mediation session (Street, 2005):

- Canalizing the communication channel

- Building the understanding connection

Court Referred

2.2.3.1 Canalizing the communication channel

In general disputes, the communication between parties is often detained Because the lawyers shall be the representative spokesman, especially in case of commercial dispute, the disputant has always been warned to not speak on the own

in order to avoid any disadvantages caused by slippery words However, a successful mediation shall partly be achieved by an indispensable element which is opening up the channel of communication (Street, 2005)

When the stream of information between parties is canalized, each side can understand the objectives and real needs of the other which shall be the ground to develop a proper solution to meet the desire of the parties Indeed, study has proved that failure to connect information to find suitable solution links directly to the failure of the negotiation process For the process to reach its goal, mediators ought

to facilitate the communication, make parties to open up, discover their needs with the ultimate goals of creating a free, productive and positive discussion atmosphere (J Butler, 1999)

In addition, although a clear flow of information is very important, the path to reach there requires factors such as trust and honesty Each person under the mediator's support must share details information about themselves, what they need and what they want However, not every situation has perfect conditions for all ideas to happen In some cases, the feeling may be so negative that the communication flow is stuck or even blocked That is when the mediator will return

in a messenger, a communication channel between the parties Other events that one side is overpowered by the other or we can call it the "the big fish and the small fish" scenario In such cases, the mediator will have to play the role of the equalizer

to ensure that they have the opportunity to speak up (Street, 2005)

2.2.3.2 Building the understanding connection

Having opened up the flow of communication, the dispute parties also need to know that if they can exploit the chance to get to know the other party, there are better chances for them to reach an effective negotiation and it is also better for the

mediator in helping parties getting mutual agreement

The hinge for the bridge of understanding to stand on is trust In normal context, this term required time to be developed In commercial dispute such element shall be harder to acquire, therefore a great effort from both parties and even the mediator are needed Trust is established once it happens between the two sides and also the mediator

Let imagine if there is no trust, the most two prominent question shall linger all the time in the head of the parties: how much should a party reveal to the other and how much should a party believe in the other Can a negotiation be succeed with such lack of trust, the thesis doubt that

Despite the fact that no guarantee of a successful negotiation with trust, mistrust even more harmful to the negotiation Lack of trust, normal human mind shall tend to act defensively, doubtful which shall lead to bargaining, even threats and finally the jeopardy of the mediation process

2.2.3.3 Informed negotiation

After the stream of information has been canalized and trust has been formed between the parties and the mediator, the next step is to determine the negotiation with the support of the mediation (Street, 2005)

However, the parties needs to address the situation, whether it is a win-lose one where one party shall prevail or a win-win one where both parties can have the target and requirements satisfied (Lewicki, Barry and Saunders, 2009) In order to address such situation, the interdependence of parties‘ target shall need to be analyzed If the strategy of the parties is win-lose, the goals of the mediation is value claiming, frankly saying is to achieve the result no matter what On the other hand, if the strategy of the parties is win – win, the target of the mediation is value creating In reality, it has been proved that most of the cases required the mutual conduct of both types However, parties need to actively look at whether one or more process is needed For instance, claiming value is suitable if the conditions are limited and there are no promise of a cooperation between parties In addition,

parties tend to think of the problem toward the claiming value situation, therefore it

is critical to recognize the interdependence of the parties‘ goal in order to avoid the wasting of creating value chance

Based on the reality that commercial mediation does not possess a unified process, several forms have been given birth In commercial cases, there are two popular forms of mediation: facilitative or evaluative, however, nowadays more forms have been developed in general (Boulle, 2005) The next section will consider the appropriateness and applicability of each of these types of mediation to the specific issue of dispute in commercial transactions

1.2.4 Types of commercial mediation

1.2.4.1 Facilitative commercial mediation

This type is known as the first form of mediation which has been appeared since the later part of the 19th century The main idea of facilitative commercial mediation is to form a favorable environment for the dispute parties This would require questions making, viewpoint corroboration and ensure the bridge of understanding between parties of the mediators In addition, the mediators shall try

to discover the right meaning of the dispute and support parties in order to find the decision, but the mediators shall not give their owns resolution, suggestions and forecast the possible decision of the court Facilitative one is solely about making a mutual meeting of mind resulting in the exchange of knowledge and information Having such characteristic, this type of commercial mediation is pretty fit for settling cross border commercial conflict, particularly the medium and small cases Despite focusing on the ending, the process aims for the preservation of the parties‘ business relationship (Alexandra, 2016)

1.2.4.2 Evaluative commercial mediation

On the contrary of facilitative mediation, evaluative one support the disputants

by stating the pros and cons of the conflict, making prediction about the possible decision of the court to the case With such features, evaluative mediation is often compared to settlement meeting by the judges The target of such process is the

legal rights of the disputants, as a result, the mediator also has his eyes on what‘s right and what‘s wrong rather than the real desires of the dispute parties In addition, this type of mediation is conducted one party at a time, with the support of the legal representatives of the parties to assess the pros and cons of the situation The role of the lawyers in this type of commercial mediation is more significant than the facilitative one as they can represent the parties‘ presence if needed The reason lies in the origin of evaluative commercial mediation which comes from the mandatory principle or reference of the court Such characteristics make evaluative commercial mediation widely used in big, complex international commercial transaction since the parties here concern more about the legal result rather than keeping the business relationship between each other In addition, the mediators in this case are often lawyers who possess profound knowledge of commercial matters and international trade law (Alexandra, 2016)

1.2.4.3 Transformative commercial mediation

Empirical study has stated that the newest kind of commercial mediation is transformative one (Boulle, 2005) The idea of this type is providing almost full authority to the hands of the parties Consequently, the process shall force parties to look closely and realize the other party‘s needs, desire, viewpoints The name has said it all, transformative mediation facilitates the transform of the connection between the parties Such mechanism shall give the party the power to lead the way that mediation goes and focus on the business relationship The role of the mediation in this type is not much regarding the time during and at the end of the mediation as the role of the mediator here is to follow the direction made by dispute parties Despite being new to the international commercial dispute community, transformative mediation still have much room to develop and may be soon it shall join the line with the other two methods

1.2.5 International organization’s activities for commercial mediation

Despite the arguments on mediation, as stated earlier, there is an undeniable support for the use of mediation on an international level

2.2.5.1 UNCITRAL

The United Nations Commission on International Trade Law (UNCITRAL) can be consider one of the leading organizations that is facilitating international commercial mediation Established in 12/1966, the basic function of UNCITRAL is promoting the harmonization and consensus of the international commercial law (Europa, 2007) It all began in the year 2014, resulting from a cross borders commercial mediation case, UNCITRAL found the need to consider a possible resolution agreement with enforceability (UN, 2015) From that point forward, UNCITRAL has continuously promoted the use of mediation and agreed that such type of conflict settlement shall result in circumstances which most of the cases can save the business relationships, support the management of world commercial activities and worth noting saving of expenses (UN, 2003) In the effort of ensuring the promotion of using commercial mediation and forming a harmonization method

of resolving global disputes, The Conciliation Rules (1980) and Model Law on International Commercial Conciliation (2002) has been issued with the idea of promoting a quick and accessible application of resolution agreements (UNCITRAL, 2002) In recent years, UNCITRAL has some quite bold moves on the matter The Convention on Enforcement of Settlement Agreements Resulting from International Commercial Mediation has been held in 2014 The convention can be seen as an additional efforts that UNCITRAL has made for the widely use of international commercial mediation The key points that has been stated in the convention about the advantages of commercial are: decreasing the disputes that resulted in trade relationships destroyed; better governance of international business; reducing expenses for governments

2.2.5.2 Others organizations

Another organization that also shows support and aids to the use of international commercial mediation is The International Chamber of Commerce (ICC) The ICC‘s actions are quite comprehensive for dispute parties, for the consolidation of the right model of using commercial mediation, ICC has issued a head to toe instruction including how to draft a mediation clause in contract writing

(ICC, 2018), a throughout list of principals and advantages of commercial mediation Lately, The National Committee of ICC in the Czech Republic has a new idea This organization desire to create a mediation facility where dispute parties in commercial business can connect for knowledge and suggestions concerning mediation As the plan, the organization will support parties in Europe then expand to other parts of the world if it is success (Martin Svatos, 2015)

Another worth noting international bodies is the United Nations (UN), UN mostly uses mediation in dispute between countries as they praised the use of mediation as the rightful settlement which capable of resolving disputes, protect the next generations from the brink of war (Lars Kirchhoff, 2008) The promotion of mediation at a world level can be considered as a foundation for the UN to facilitate the use of international commercial mediation As a result, in 2012, UN has issued a guidelines that stated the UN‘s aids to the use of international commercial mediation

Speaking of the support for international commercial mediation, it will be a mistake not mentioning the World Bank In 2011, the World Bank has released the ADR Centre Manual: A guide for Practitioners on Establishing and Managing Centres that provide instruction on making correct mediation and promoting the advantages of commercial mediation (WB, 2011) On a recent move, The World Bank and International Finance Corporation have also united in trying to facilitate international commercial mediation

Last but not least, the World Trade Organization (WTO) also possess a significant place in the proliferation of commercial mediation on an international level WTO strongly trust that the main target of a multilateral commercial process ought to be the dispute resolution, without such system there is high probability that the relationships shall not be well Consequently, WTO is also a supporter for the promotion of commercial mediation (WTO, 2018)

1.2.6 Advantages and disadvantages of commercial mediation

Mediation is not almighty and it is important for the parties to decide whether commercial mediation is fit for their circumstances or not

Table 1.2: Circumstances to use commercial mediation Appropriate to use mediation Not appropriate to use mediation

End the dispute quickly Not willing to join mediation

Save legal costs Mediation‘s intention is not good For

example, party solely uses mediation to collect more information for later court

Preserve or maintain business

relationship

Drawn public attention to the case

Avoid publicity or to maintain secrecy

The law does not provide a suitable

solution for the parties‘ needs

Source: Mediation (State Courts of Singapore, 2014)

A clear advantages can be seen in the use of commercial mediation are speed, reasonable expenses, easy and time saving In general, mediation is a better option regarding the ability to adjust the outcome to the demands of the parties while the jurisdiction shall not change follow the need of the parties In addition, mediation is held in an intimate place where the privacy of the parties can be ensured The list of advantages is quite long, however, there are statements that the advantages of commercial mediation only available if the parties reach the agreement (Lord Neuberger, 2015)

The arguments depend on the viewpoint Some believes that various advantages follow a fail mediations such as more expenses and time, jeopardy of

business relationship In addition, mediation might be unfair in a circumstance between big and medium, small enterprises The big size can use their comparative advantages in order to put pressure on the others side and get a favorable outcomes for them In addition, there is worries about a weak jurisdiction if parties use too much mediation This comes from the strength of mediation which often resulted in

a successful agreement between parties Especially in the common law countries or general speaking judge made law The less cases the less legal aspect to be developed This disadvantages result from the fail thinking of many people that mediation is a better option that litigation In fact, mediation should be considered a critical step before litigation If mediation is good, the parties are happy and courts save time for others case; if mediation is not good, the parties might have to go to court It is crucial to separate the ideas between these two concepts (Alexandra, 2016)

Lastly, one of the major problem is the lack of information which litigation can ensure, or we can call it the problem regarding human characteristics (Paul Randolph, 2010) Sometimes, parties just do not want to mediate, it is the matter of credibility Maybe because they do not want a win-win situation when they feel that they have a better grounds Or maybe it is a situation which the party does not trust that the other parties will act in a good manner Such subjective thoughts could result in a lot of time and money

1.3 Arbitration

1.3.1 Rationale of arbitration

Arbitration is the most formal alternative to litigation In this process, the disputing parties present their case to a neutral third party, who renders a decision Arbitration is widely used to resolve disputes in both the private and public sector

Moreover, arbitration is generally considered a more efficient process than litigation because it is quicker, less expensive, and provides greater flexibility of process and procedure The parties often select the arbitrator and exercise control over certain aspects of the arbitration procedure Arbitrators typically have more

expertise in the specific subject matter of the dispute than do judges They may also have greater flexibility in decision-making (―Using Arbitration to Resolve Legal Disputes‖)

Arbitration is the process of bringing a business dispute before a disinterested third party for resolution The third party, an arbitrator, hears the evidence brought by both sides and makes a decision Sometimes that decision is binding on the parties To arbitrate a matter is to bring it before an arbitrator An arbitrator is a spectator, witness, or hearer

Arbitration is a form of alternative dispute resolution (ADR), used in place

of litigationin the hope of settling a dispute without the cost and time of going to court Litigation is a court-based process that involves a decision that is binding on both parties and a process of appealing the decision The differences between arbitration and litigation involve the processes themselves and the result of decisions on the disputes

Arbitration is often confused with mediation, which is an informal process of bringing in a third party who goes between the disputing parties to help them settle

a dispute The mediation process is not binding on the parties, and the mediator does not hear evidence The mediator meets with the parties for discussion The mediator tries to bring the parties together by discussion and caucusing (a separate discussion) Litigation, arbitration, and mediation are all involved in settling business disputes (Jean Murray, 2019)

1.3.2 Definition and process

In legal science, the arbitration was studied under many different levels and there are many definitions of arbitration:

According to the American Arbitration Association/ICDR (AAA):

"Arbitration is a dispute resolution method by submitting the dispute to a number of objective consideration and settlement and they will make the final decision, valuable required the claimants to enforce "

In Vietnam, according to Article 3 (1) of the Law on Commercial Arbitration 2010: "Commercial arbitration means a dispute resolution method agreed by the parties and conducted in accordance with the provisions of this Law.‖

Besides, according to Martin Domke, commercial arbitration is defined as:

―…a means of settling disputes by referring them to a neutral person,

an arbitrator, selected by the parties for a decision based on the evidence and arguments presented to the arbitration tribunal The parties agree in advance that the decision will be accepted as final and binding.‖

Source: (Britanica, 2003)

In short, commercial arbitration can be understood as a form of alternative dispute resolution (ADR) and is a way to resolve commercial disputes outside the courts The dispute will be decided by one or more persons (the "arbitrators",

"arbiters" or "arbitral tribunal"), which renders the "arbitration award" An arbitration award is legally binding on both sides and enforceable in the courts (O'Sullivan, Arthur; Sheffrin, Steven M., 2003)

According to the American Arbitration Association (AAA), here is the general process for arbitration

Figure 1.2: Commercial arbitration process

1.3.3 Stages of commercial arbitration

While each case is different and may have unique circumstances that can change the usual procedures, according to American arbitration association arbitrations, arbitrations usually proceed through the following general stages:

1.3.3.1 The Case Initiation

The arbitration center/asscociation sends out a letter or email notifying the parties that the case has been filed This communication will also provide information regarding the arbitration process Dates for when the respondent should file an answer to the claimant‘s Demand for Arbitration and for all parties to provide any other needed information will be set at this time as well Further, if there are any fees required from any party at this time, the AAA will also request said fees

Arbitrator is selected

Discovery conducted

Position Statements submitted to arbitrator Hearing

enforcement