ARB MED ARB MODEL INTERNATIONAL PRACTICE AND APPLICABILITY IN VIETNAM

The solutions which have been found in the study of thethree developed dispute settlement hubs of the world shall help to attract the interestof Vietnam enterprises on using multitieredc

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 withthe best devotion, endeavor and hard-working period given The author guaranteethat the master thesis have been carried out in conformity with the thesis writingregulation and process issued by the Foreign Trade University

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

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

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

My last appreciation is to the Faculty of Graduate Studies of Foreign TradeUniversity for organizing such a meaningful master course and all the support, myfamily 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

The thesis “Arb-Med-Arb model: international practice and applicability inVietnam” focuses on giving recommendation on how Vietnam can apply theexperiences of developed jurisdiction around the world, which in this study areHong Kong, US, especialy Singapore in order to improve the country’s commercialdispute resolution context In general, Vietnam’s alternative dispute resolutions oncommercial dispute in general is still limited In addition, the commercial mediationactivities is scattered between arbitration center national wide without a uniformMediation and Arbitration Act until the recent Decree No 22/ND-CP aboutcommercial mediation that have been issued in April 2018 and Law on commercialarbitration issued in June 2010 Despite a remarkable movement, Vietnamregulation still possessed many drawback regarding the code of conduct formediators and arbitrators The solutions which have been found in the study of thethree developed dispute settlement hubs of the world shall help to attract the interest

of Vietnam enterprises on using multitieredclause Arbitration Mediation Arbitration to sellte disputes, improving the standard and conduct of mediator andarbitrator, fortify the enforceability of the mediation settled agreement andarbitration award

1 Rationale

An era of connection and cooperation is the way people usually call the21st century An outburst of a smartphone or high-tech computer for instancewould imply that its parts are collected and produced in different countries Thesecomponents are then assembled into the final product and distributed over theworld That is international trade at its absolute finest

Powering such international trade are complex technologies which havereduced the obstacles for global advertising, near-instant global communication,prompt product and services delivery In conclusion, the term “globalism” has beenreconceptualized by technology

There are however features of globalism where technology cannot assist (atleast not yet) Since the characteristics of international businesses, the contractssigned between the sides are generally quite sophisticated, consisting of a expansiveheavily negotiated clauses regarding to each party’s commercial requirements Inaddition to trade terms, parties’ awareness of the need to have a well-written disputesettlement clause are increasing

Go along with the development of technology, the mechanisms for resolvingdispute have not stayed immovable and have gradual developed to dedicate toglobalism as much as achievable In this field, arbitration has been found an idealsubstitute to the traditional court procedures Generally, arbitrations are supposedmore efficient and flexible than courts, while the parties are offered confidentiality.The enforcement is another enormous advantage of arbitration In particular, anarbitration 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 theprogression for dispute settlement clauses? Can arbitration clauses (or anysubstitute 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 ofarbitration and mediation clauses, whose name is the Singapore Arb-Med-ArbProtocol (“ AMA Protocol”)

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

A multi-tiered clause is considered as a form of arbitration clause which combinesmediation and arbitration proceedings in order to increase the chance of settlingdisputes between the parties via goodwill and positive discussions and to inspireconstructive negotiations before a fully-completed arbitration procedure

In this thesis, the author would like to look into this new approach to settle disputesand see what advantages AMA could have for the parties Moreover, the author alsowant 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 studentmajoring in International Trade Policy and Law, for the desire to devote myknowledge 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 journeyall over the world, Vietnam’s mediation and arbitration is still inexperienced and theterm is new to some extent Especially, Arbitration - Mediation - Arbitration modelhas ever been researched thoroughly as well as applied in Viet Nam As a result, thestudy’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 toreview some experiential researches from both Vietnamese and foreign sources asfollows:

- 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 andpoint out some recommendations, composing mediation’s applying methods,

in the context of Viet Nam, combining the other ADR procedures so as torequire a multi-tiered dispute settlement mechanism, or in the unique form ofArb-Med-Arb innovated in Singapore, in order to promote the efficiency andenforceability of the dispute settlement way in construction conflict via theimprovements of commercial mediation, from the past to recent situation.The major acknowledgement of this paper is the information about the issuesrelating 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 disputesettlement within one dispute resolution procedure The result is amechanism that combines various dispute resolution methods, such asmediation and arbitration, in different ways In addition, the researcher alsostated 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 settlementmethods to commercial contracts.

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 betweenarbitration 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 alsomentioned in this research

My review will not explore all aspects of disputes resolution but focus on thewhich main points have been mentioned in the above articles or studies Most of theabove research define the Arb-Med-Arb model and show some main advantages butdoes 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 lawsand point out some recommendations, the definition, characteristics and importantadvantages of Arb-Med-Arb are not mentioned here

In short, up to now, there has not been any comprehensive study researched onall-sided Arb-Med-Arb model and the method that used to apply this multi-tiereddispute settlement mechanism in Viet Nam My contribution will highlight theadvantages of this dispute resolution method in general (not focus on any specificfield) 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 - Arbprotocol?”, “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 theanswers for such research questions, we need to focus on these sub questions:

Singapore?

4 Research’s objective

Arbitration and mediation are applied increasingly in the world to settle thedisputes 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 inthe near future Therefore, “Economic integration is central in which the integration

in other areas has to facilitate economic integration and contribute positively toeconomic 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 globalintegration strategy with a roadmap and steps in line with the actual conditions andcapabilities of the country" (Resolution No 22-NQ / TW dated 10 April 2013 oninternational integration) Up to 2018, Vietnam has negotiated and signed more thanten regional free trade agreements (FTA), including commitments on technicalbarriers to trade and will sign some next new FTAs such as: EVFTA, RCEP, … Theroadmap for tariff reductions in free trade agreements is committed for a period often years for each phase and is specified for each agreement That is the reason whythe amount of international trade transactions and import-export turnover areincreasing drammatically

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

- Systematize the basic principles of two alternation dispute resolutionmethod: arbitration and mediation and the key differences between theseapproaches

- Understanding how Arbitration - Mediation – Arbitration model works ;

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

- Forecasting the difficulties that Vietnam has to face with when applying thismodel, giving suggestion and proposal for Vietnam Government, arbitration andmediation service providers to facilitate the development of dispute settlementmechanism

5 Scope of study

There are a number of trade disputes cbalternative dispute settlement, such asnegotiation, arbitration, mediation, or med-arb can be used in various disputecategories ranging from civil, family, commerce From many studies, it is foundthat, alternative dispute settlement methods give the best answer regardingcommercial disputes where the key economic development of the nation rests Thisresearch 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 ofSingapore In fact, Arb-Med-Arb model has many advantages, however, this isreally new model in dispute resolution, so Singapore is the only country create andallow apply this model In addition, the thesis also analyzes Vietnam’s recentdevelopment 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 andintroduce some implications on how to how to apply Arb-Med-Arb model inVietnam according to international standard and experiences.

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

6 Methodologies

This thesis is completed based on the application of theory research methodand practical research method Theory research method includes analytical method,synthesis method and reference to the laws and regulations in order to achieve therequirements set for a research project Practical research method mostly includesinterview 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 Thedata is collected, quoted from reports, researches of experiential researchers andorganizations in the field of arbitration and mediation Primary data for such study

is hard to conduct since arbitration - mediation - arbitration model is quite new inVietnam 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 mediationand arbitration, in general and internal coordination related to arbitration -mediation - arbitration model, in particular are deeply analyzed in order to find outinternational 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 c-ases

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

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

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

7 Research disposition

Beside the table, chart lists, reference and appendix, the main content of thethesis 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 onarbitration and mediation before analyze the others deeper knowledge of the multi-tiered arbitration - mediation - arbitration clause and model

1.1 Alternative dispute resolutions

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 comefrom traditional practices of many countries In other words, ADR has originatedfrom the history of many cultures, especially one in Asia where harmonization isalways 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, ADRwas first used to resolve civil rights by using mediation and considering actionagainst overworked and delayed courts Since then, ADR has developed rapidly, notonly practical but also institutional with the encouragement of the Government,legal organizations, academics For example, in 1990, all federal district courts wererequired to have a plan to reduce costs and delay in litigation process Therefore,each federal district court developed some form of ADR process Due toinnovations in ADR, mandatory ADR development in courts, states and federalsystems, 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 Statesbegan to increase because of the desire for a more effective alternative to litigation.Therefore, ADR models such as negotiation, mediation and litigation havedeveloped significantly The institutionalization of ADR has changed the rules andlegal practices US regulations, public consultation and administrative disputeresolution have been added to the use of ADR

The United States is always leading in many areas and ADR is not anexception Many countries copy US processes, others try to blend American stylewith their own dispute settlement traditions This process is being used to solvevarious problems not only commerce, social, civil, politics Developing countriesare involved in the implementation of ADR, including Vietnam.

China or Hong Kong in particular are also affected by ADR trend from theUnited States The fire spark of disappointment in litigation and arbitration hasspread from the United States to other jurisdictions followed by China (ZhengRungao, 2003) The dispute parties began to criticize the limitations of traditionaldispute resolution that subsequently gave rise to ADR Besides, China ADR’sdevelopment can be explained by its special cultural background The Chinese

reason is that in China, reservation of face and business relationship private is veryimportant 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’sone in general are powerful for Asia or Southeast Asia in particular

Singapore is also affected by ADR trends from the US and is considered apioneer 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 ofcase 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 theother hand, appeals take 2-3 years to be heard Latency can be calculated as part ofthe life expectancy of the person and the processing time of the judgment has notbeen mentioned Therefore, ADR was implemented by the Singapore judiciary toreduce 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

due to the limitation of litigation and court’s proceed Now the thesis will continueand define ADR.

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 manyempirical studies and even the author finds the words Dispute Settlement moreappropriate 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 conflictsthat help people and entrepreneurs keep relationships The Latin word refers to thisprocess for the sinner through the unimportant person of the social life andimportant to the social order Lack of dispute resolution will make it difficult forpeople 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: (Chief Justice Warren Burder, 1997)

In conclusion, ADR can be defined as a concept used to refer to differentmethods of resolving legal disputes It stems from court delays in handling casestimely and reasonably On the other hand, different regimes can help disputingparties resolve conflicts in a timely and cheap way However, in essence, ADR isstill complementary to the courts Nationally and internationally, ADR isincreasingly used in the field of law and commerce ADR can be used in differenttypes of disputes, from civil, family and commercial From many studies, it hasbeen found that ADR methods provide the best answer regarding trade disputes inwhich 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 ormediation systems and arbitration According to the USAID study in 1998, thethesis summarized the following categories:

The negotiation process creates a platform to facilitate the face of negotiationsbetween the disputing parties, without the presence of a third party On the otherhand, the mediation and reconciliation systems are similar in that they invite a thirdparty between the parties, or to reconcile a specific conflict or to reconcile theirrelationship Mediators and mediators can facilitate communication, or can helpdirect 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-bindingforms The negotiation, mediation and reconciliation systems belong to the non-binding group, they recognize the willingness of the disputing parties to reachconsensus The arbitration process can be binding or non-binding Binding onecreates a third-party decision that the parties will follow even if they disagree withthe conclusion, like a judicial decision Non-binding one creates a third partydecision 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 orarbitration before going to court The ADR method may also be required as part of aprevious contractual agreement between the parties For a voluntary one, using theADR process completely depends on the needs of the dispute parties

This section examines the advantages and disadvantages of the ADR processand compares with litigation The following knowledge is drawn from the DisputeResolution - 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 legalnature, rather a question of negotiation tactics and experience Inexpensive and

parties may try to include solutions that require cooperation and will not normally

be available in court proceedings However, negotiation has no coercive power, sothe 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 filedunder an agreement with a private third party chosen by the parties (arbitrators orarbitrators) to resolve it in a judicial manner (eg: a third party has the right to makebinding decisions Arbitration is an opportunity for parties to present evidence orsubmit to support their request This method has many advantages:

- Less intrusions by state courts

- Special expertise of arbitration can be selected by the parties

- Faster and cheaper than court

- Almost globally recognized arbitration awards through the United NationsConvention on the Recognition and Enforcement of Foreign Arbitral Rulings (NewYork, June 10, 1958)

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

giving any binding decision but using a variety of different procedures, techniquesand skills to help the parties resolve their disputes by negotiation agreement without

supported by a neutral third party, sometimes mediators have knowledge ofpsychology (business psychology) Mediation has the same advantages asnegotiation, plus it looks at “interests”, not merely “rights” In addition, mediation

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

it will be a waste of time

The results of the empirical survey indicate that litigation is preferred by

resolution process, privacy, keep relationships, neutral views and precedents setting.Litigation or adjudication only has a greater advantage than other ADRs is settingprecedent Arbitration is favored by many people of their ability to get neutralopinions The strength of Mediation lies in reasonable prices, the ability to connectissues, keep business relationships between parties to cooperate in the future andrelate to constituencies in the process In this table, number 3 means highly likely to

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

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

- Confidentiality: mediation is a confidential process where what wasdiscussed or agreed in private is not disclosed to others without everyone’sagreement 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 privatesession, the mediator, throug hhis/her neutral questions may assist a party inassessing its situation based on which the party may come up with more realisticproposal that will bring the parties closer to the agreed settlement

- Voluntary: prior to the mediation process, the parties must reach amediation agreement in writing which shall be used as the legal basis for mediationprocess During the process, the mediator does not have the authority to imposeupon the parties a solution to the dispute And if the mediation does not result in anagreement, 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 settlinginternational commercial dispute (GaryB.Born, 2009) Although internationalcommunity has begun to detach from such process because of the questionsregarding the time, cost and procedure of arbitration (William W Park, 2012).Therefore, disputants are looking for another proper commercial dispute resolutionmechanism and mediation is currently a more favorable substitution (JacquelineNolan-Haley, 2012)

Recent development may make international commercial mediation soundslike a new term, however, the mechanism of using such process in resolving crossborder commercial dispute is rather familiar (Harold I Abramson, 1998) It hasbeen proved that commercial mediation was widely used before arbitration, onlyafter the WWII, commercial arbitration has come in as a new player in the field ofsettling transnational trade disputes (Eric A Schwartz, 1995)

For Asia region, China in particular possess a long history of mediation (WangWenying, 2005) Back to the time of the Qing dynasty, the judge often orderedparties to mediate to resolve a dispute before resorting to litigation In addition, theConfucius philosophy also has had a remarkable influence over the South East Asia,including Vietnam, Singapore and Thailand The philosophy highly valued theharmony and yielding to others, and avoid conflict and argument The idea of usingconsensus-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 tothe fact that arbitration and litigation aim to identify the loser and winner of thedispute, this could cause the loss of business relationships

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

1.2.2. Definition and process

Having gone through the background, reasons to use and general mediationdefinition, the thesis shall define commercial mediation According to the Decree22/2018/ND-CP of Vietnam government, the definition of commercial mediation isvery 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 evendisputants might feel very confused and do not know what will be consideredcommercial disputes in this case The answer can be found in another regulationwhich is the Commercial Act 2005, Commercial Arbitration Act 2010

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

“…commercial disputes … include banking, construction, healthcare, employment, information technology, insurance, partnership, shipping and tenancy disagreements…”

Source: (SMC, 2018)

To sum up, it can be understood that commercial mediation is a disputesettlement process that help parties to settle conflict or dispute relating tocommercial matter, which might include but not limited to banking, construction,healthcare, employment, information technology, insurance, partnership, shippingand tenancy disagreements…, without refereeing to court’s action Commercialmediation facilitate the communication between parties and assist them in creatingtheir resolution considering the later phases, together with the support of a fair-minded mediator In addition, commercial mediation is a mechanism withcharacteristics such as exclusive and secrecy This ADR also makes disputants feelcomplacent and free to speak about the critical of the disputes and its impact onthem With commercial mediation, the parties have the chance to pass on theirviewpoints relating to the circumstance which has happened, plus the knowledgethat they think is related and the other parties need to know Further, the disputantcan raise question at will concerning their cases and receive the comments andthinking of the other party on the situation Commercial mediation is a uniqueprocess 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 ofcommercial mediation is also astonishing high Studies have shown that more thantwo third of the parties that mediate come to a conclusion (Bilal Farooq, 2010).Despite commercial mediation’s uncertainty in guarantee a 100% agreement, theprocess still open the door for parties in later negotiations with a much bettercircumstance and chances of success In summary, the thesis draws the mediationprocess as follow

Parties do not reach agreement

Arbitration or Court Referred

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 doingmediation (Lewicki, Barry and Saunders, 2009) USA mediator will focus more onwin-lose scenario, term, going straight to closing and implementing and less focus

on relationship building On the contrary, Asian mediator will try to build theconnection 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

- Informed negotiation

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 ofcommercial dispute, the disputant has always been warned to not speak on the own

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

When the stream of information between parties is canalized, each side canunderstand the objectives and real needs of the other which shall be the ground todevelop a proper solution to meet the desire of the parties Indeed, study has provedthat failure to connect information to find suitable solution links directly to thefailure 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 withthe 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 toreach there requires factors such as trust and honesty Each person under themediator's support must share details information about themselves, what they needand what they want However, not every situation has perfect conditions for allideas to happen In some cases, the feeling may be so negative that thecommunication 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 oneside is overpowered by the other or we can call it the "the big fish and the smallfish" 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 toknow that if they can exploit the chance to get to know the other party, there arebetter chances for them to reach an effective negotiation and it is also better for themediator in helping parties getting mutual agreement

The hinge for the bridge of understanding to stand on is trust In normalcontext, this term required time to be developed In commercial dispute suchelement 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 twosides and also the mediator.

Let imagine if there is no trust, the most two prominent question shall lingerall the time in the head of the parties: how much should a party reveal to the otherand how much should a party believe in the other Can a negotiation be succeedwith 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 mindshall tend to act defensively, doubtful which shall lead to bargaining, even threatsand 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 formedbetween the parties and the mediator, the next step is to determine the negotiationwith the support of the mediation (Street, 2005)

However, the parties needs to address the situation, whether it is a win-loseone where one party shall prevail or a win-win one where both parties can have thetarget and requirements satisfied (Lewicki, Barry and Saunders, 2009) In order toaddress such situation, the interdependence of parties’ target shall need to beanalyzed If the strategy of the parties is win-lose, the goals of the mediation isvalue claiming, frankly saying is to achieve the result no matter what On the otherhand, if the strategy of the parties is win – win, the target of the mediation is valuecreating In reality, it has been proved that most of the cases required the mutualconduct of both types However, parties need to actively look at whether one ormore process is needed For instance, claiming value is suitable if the conditions arelimited 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 thewasting of creating value chance

Based on the reality that commercial mediation does not possess a unifiedprocess, several forms have been given birth In commercial cases, there are twopopular forms of mediation: facilitative or evaluative, however, nowadays moreforms have been developed in general (Boulle, 2005) The next section willconsider the appropriateness and applicability of each of these types of mediation tothe 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 appearedsince the later part of the 19th century The main idea of facilitative commercialmediation is to form a favorable environment for the dispute parties This wouldrequire questions making, viewpoint corroboration and ensure the bridge ofunderstanding 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 thedecision, but the mediators shall not give their owns resolution, suggestions andforecast the possible decision of the court Facilitative one is solely about making amutual meeting of mind resulting in the exchange of knowledge and information.Having such characteristic, this type of commercial mediation is pretty fit forsettling 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 possibledecision of the court to the case With such features, evaluative mediation is oftencompared to settlement meeting by the judges The target of such process is thelegal rights of the disputants, as a result, the mediator also has his eyes on what’sright 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 ofthe lawyers in this type of commercial mediation is more significant than thefacilitative one as they can represent the parties’ presence if needed The reason lies

in the origin of evaluative commercial mediation which comes from the mandatoryprinciple or reference of the court Such characteristics make evaluative commercialmediation widely used in big, complex international commercial transaction sincethe parties here concern more about the legal result rather than keeping the businessrelationship between each other In addition, the mediators in this case are oftenlawyers who possess profound knowledge of commercial matters and internationaltrade law (Alexandra, 2016)

1.2.4.3. Transformative commercial mediation

Empirical study has stated that the newest kind of commercial mediation istransformative one (Boulle, 2005) The idea of this type is providing almost fullauthority to the hands of the parties Consequently, the process shall force parties tolook closely and realize the other party’s needs, desire, viewpoints The name hassaid it all, transformative mediation facilitates the transform of the connectionbetween the parties Such mechanism shall give the party the power to lead the waythat mediation goes and focus on the business relationship The role of themediation in this type is not much regarding the time during and at the end of themediation as the role of the mediator here is to follow the direction made by disputeparties Despite being new to the international commercial dispute community,transformative mediation still have much room to develop and may be soon it shalljoin 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 undeniablesupport 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 ispromoting the harmonization and consensus of the international commercial law(Europa, 2007) It all began in the year 2014, resulting from a cross borderscommercial mediation case, UNCITRAL found the need to consider a possibleresolution agreement with enforceability (UN, 2015) From that point forward,UNCITRAL has continuously promoted the use of mediation and agreed that suchtype of conflict settlement shall result in circumstances which most of the cases cansave the business relationships, support the management of world commercialactivities and worth noting saving of expenses (UN, 2003) In the effort of ensuringthe promotion of using commercial mediation and forming a harmonization method

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

2.2.5.2 Others organizations

Another organization that also shows support and aids to the use ofinternational commercial mediation is The International Chamber of Commerce(ICC) The ICC’s actions are quite comprehensive for dispute parties, for theconsolidation of the right model of using commercial mediation, ICC has issued ahead to toe instruction including how to draft a mediation clause in contract writing(ICC, 2018), a throughout list of principals and advantages of commercialmediation Lately, The National Committee of ICC in the Czech Republic has a newidea This organization desire to create a mediation facility where dispute parties in

commercial business can connect for knowledge and suggestions concerningmediation 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), UNmostly uses mediation in dispute between countries as they praised the use ofmediation as the rightful settlement which capable of resolving disputes, protect thenext generations from the brink of war (Lars Kirchhoff, 2008) The promotion ofmediation at a world level can be considered as a foundation for the UN to facilitatethe use of international commercial mediation As a result, in 2012, UN has issued aguidelines that stated the UN’s aids to the use of international commercialmediation

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

Last but not least, the World Trade Organization (WTO) also possess asignificant place in the proliferation of commercial mediation on an internationallevel WTO strongly trust that the main target of a multilateral commercial processought to be the dispute resolution, without such system there is high probability thatthe relationships shall not be well Consequently, WTO is also a supporter for thepromotion 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 whethercommercial 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 tocollect 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 optionregarding the ability to adjust the outcome to the demands of the parties while thejurisdiction shall not change follow the need of the parties In addition, mediation isheld in an intimate place where the privacy of the parties can be ensured The list ofadvantages is quite long, however, there are statements that the advantages ofcommercial mediation only available if the parties reach the agreement (LordNeuberger, 2015)

The arguments depend on the viewpoint Some believes that variousadvantages follow a fail mediations such as more expenses and time, jeopardy ofbusiness relationship In addition, mediation might be unfair in a circumstancebetween big and medium, small enterprises The big size can use their comparativeadvantages in order to put pressure on the others side and get a favorable outcomesfor them In addition, there is worries about a weak jurisdiction if parties use toomuch mediation This comes from the strength of mediation which often resulted in

a successful agreement between parties Especially in the common law countries orgeneral speaking judge made law The less cases the less legal aspect to bedeveloped This disadvantages result from the fail thinking of many people thatmediation 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 courtssave time for others case; if mediation is not good, the parties might have to go tocourt 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 litigationcan ensure, or we can call it the problem regarding human characteristics (PaulRandolph, 2010) Sometimes, parties just do not want to mediate, it is the matter ofcredibility Maybe because they do not want a win-win situation when they feel thatthey have a better grounds Or maybe it is a situation which the party does not trustthat the other parties will act in a good manner Such subjective thoughts couldresult 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, thedisputing 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 thanlitigation because it is quicker, less expensive, and provides greater flexibility ofprocess and procedure The parties often select the arbitrator and exercise controlover certain aspects of the arbitration procedure Arbitrators typically have moreexpertise in the specific subject matter of the dispute than do judges They may alsohave greater flexibility in decision-making (“Using Arbitration to Resolve LegalDisputes”)

Arbitration is the process of bringing a business dispute before adisinterested third party for resolution The third party, an arbitrator, hears theevidence brought by both sides and makes a decision Sometimes that decision isbinding on the parties To arbitrate a matter is to bring it before an arbitrator Anarbitrator 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 tocourt Litigation is a court-based process that involves a decision that is binding onboth parties and a process of appealing the decision The differencesbetween arbitration and litigation involve the processes themselves and the result ofdecisions on the disputes

Arbitration is often confused with mediation, which is an informal process ofbringing 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 mediatordoes not hear evidence The mediator meets with the parties for discussion Themediator tries to bring the parties together by discussion and caucusing (a separatediscussion) Litigation, arbitration, and mediation are all involved in settlingbusiness disputes (Jean Murray, 2019)

1.3.2. Definition and process

In legal science, the arbitration was studied under many different levels andthere 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 ofobjective 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 Arbitration2010: "Commercial arbitration means a dispute resolution method agreed by theparties 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 thedecision will be accepted as final and binding.”

Source: (Britanica, 2003)

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

"arbiters" or "arbitral tribunal"), which renders the "arbitration award" Anarbitration 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 generalprocess for arbitration

Dispute occurs Arbitration agreement is invoked Arbitrator is selected

Discovery conducted Position Statements submitted to

arbitrator Hearing

Decision Award and enforcement

Figure 1.2: Commercial arbitration process

1.3.3. Stages of commercial arbitration

While each case is different and may have unique circumstances that canchange the usual procedures, according to American arbitration associationarbitrations, 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 theparties that the case has been filed This communication will also provideinformation regarding the arbitration process Dates for when the respondent shouldfile an answer to the claimant’s Demand for Arbitration and for all parties to provideany other needed information will be set at this time as well Further, if there areany fees required from any party at this time, the AAA will also request said fees

1.3.3.2. Arbitrator Invitation

Depending on what process is set forth in the Rules that govern yourarbitration, the arbitration center/asscociation invites an arbitrator or arbitrators toserve on the case As part of this process, the arbitrator reviews case information,checks for conflicts and returns a signed oath document, along with any relevantdisclosures, if applicable.

1.3.3.3. Arbitrator Appointment

Parties are notified of the appointed arbitrator and provided the opportunity

to object to this arbitrator serving on the case A due date for any objections is setand if any objections are received, the arbitration center/asscociation will conduct aprocess to decide if the arbitrator should be kept on or removed from the case If theAAA decides to remove the arbitrator, the case returns to the arbitrator invitationstage, as previously described If the Arbitrator is kept on the case, the casecontinues to the next stage

1.3.3.4. Preliminary Hearing and Information Exchange

After appointment and confirmation of the Arbitrator, the preliminaryhearing conference call with the parties and the arbitrator will be scheduled andheld During this call, preliminary issues are addressed, the exchange of informationbetween the parties is scheduled and a hearing date is set After the call is held, theArbitrator will issue a written document called a “scheduling order”, whichconfirms all important dates and specifics discussed on the call

1.3.3.5. Hearing Stage

During this stage, the parties present their case to the arbitrator This processcan take place in person, over the telephone, or by the parties submitting writtendocuments The parties’ arbitration agreement and the applicable Rules that governthe case will dictate the process Sometimes, parties will also submit writtenarguments after the hearing at the direction of the arbitrator