COMMERCIAL MEDIATION, SETTLING DISPUTES WITHOUT DISRUPTING BUSINESS HARMONY?

Amid an evolving commercial landscape that prioritizes adaptability and sustainable partnerships, commercial mediation has gained recognition as an effective and comparatively non-adversarial mechanism for dispute resolution. Beyond its capacity to reduce time and litigation costs, this method offers a strategic advantage by mitigating potential damage to business relationships – an objective that conventional court proceedings often struggle to fulfill.

May disputes be resolved without disrupting business relationships?

In commercial practice, when a dispute arises during contract performance, the parties often resort to litigation or commercial arbitration – two of the most common methods—particularly when efforts to reach a mutual understanding have failed. The prevailing mindset regarding “dispute resolution” is frequently rooted in a win-lose framework, with coercive mechanisms employed to assert legal rights. Consequently, this often results in the breakdown of any ongoing or future business cooperation.

However, disputes should be viewed as a natural and, at times, inevitable aspect of business relationships. Divergences may stem from differing interpretations of contractual terms or expectations, rather than from any fundamental breach of trust or intention to default. In many cases, the parties simply lack the means or tools to reach consensus on their own.

Commercial mediation – a relatively underutilized method – offers a more flexible and collaborative alternative to arbitration or litigation. It is designed as a “less adversarial” process that can preserve valuable business relationships by avoiding unnecessary confrontation. While similar in spirit to negotiation, mediation introduces the involvement of a neutral third party – the mediator, who facilitates dialogue, proposes viable solutions, and helps the parties reach a mutually acceptable agreement on a purely voluntary basis.

This form of dispute resolution is regulated under the Commercial Law 2005 of Vietnam, which provides the following hierarchy of mechanisms:

“Article 317.- Forms of resolution of disputes

1. Negotiations between the parties.

2. Mediation between the parties by a body, organization or individual selected by the parties to act as the mediator.

3. Resolution by the Arbitration or the Court.”

Under current law, commercial mediation (out-of-court mediation) may be selected to resolve disputes arising from commercial activities or disputes involving at least one party engaged in commercial activity. It may also apply to other civil or business-related disputes, provided that the law allows such disputes to be resolved through commercial mediation.

Commercial mediation, advantages and limitations?

In the commercial mediation process, voluntariness and equality are priority principles that must be ensured.

Under current laws, the parties to a dispute are allowed to choose the mediation rules of a mediation organization or mutually agree on the procedure and steps. In the absence of an agreement, the mediator will propose an appropriate process. Other issues such as the selection of the commercial mediator, location, and timing are also decided based on mutual consent, aligning with the parties’ desires and the nature of the dispute. The parties have full authority to decide the content of the mediation or to terminate the process at any stage.

Compared to litigation in courts or arbitration, commercial mediation is highly regarded for its efficiency in terms of time (typically resolving the dispute within one or several days) and cost-effectiveness (only requiring payment for the mediator’s fees and center charges). The significant advantage of opting for mediation is the possibility of continuing a long-term business relationship if the parties can find common ground and reach mutual agreement. Moreover, all information and transactions related to the mediation process are kept strictly confidential, as no official record is created, alleviating concerns about damage to a company’s reputation or leakage of business secrets.

However, as disputes are resolved on a voluntary basis, the enforceability of the mediation results will depend on the goodwill of each party and their commitment to follow through. If caution is not exercised during the mediation phase, future dispute resolution through arbitration or court litigation may place the parties at a disadvantage.

Key considerations when opting for commercial mediation?

A written agreement is mandatory for a dispute to be resolved through commercial mediation. The parties may agree to establish this agreement either as a dispute resolution clause in the contract or as a separate, independent agreement. A mediation agreement made in accordance with the relevant regulations, whether concluded before or after the dispute arises, or at any stage during the dispute resolution process, will be legally recognized.

It is recommended that the content of the commercial mediation agreement be carefully and clearly drafted to minimize risks, including details such as the selection of a mediation center, the number and qualifications of mediators, and the language for dispute resolution. Additionally, it may be prudent to establish a relative deadline for the completion of the mediation process, to avoid exceeding the statute of limitations for filing a lawsuit, in the worst-case scenario where the mediation is unsuccessful. The statute of limitations for commercial disputes is typically two years.

The selection of the mediator is also a critical issue. Although mediators do not have the authority to render a binding decision, they must possess the appropriate expertise, knowledge, and experience to guide the parties in exchanging information, clarifying viewpoints, resolving misunderstandings, and facilitating further negotiation towards a feasible and practical solution. A list of qualified mediators can be obtained from the mediation organization or the Department of Justice of the relevant province or central city.

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