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May 13, 2021

Case Study: The Enforceability of Asymmetric Dispute Resolution Clauses in Vietnam

An asymmetric dispute resolution clause is one that is constructed to limit the right to dispute resolution of one party to, for example, a particular jurisdiction or dispute resolution method, while giving the other party or parties the right to flexibly choose between different options. Although this type of clause would clearly favor the party with the right to choose between options, by providing an effective risk management mechanism, the favor will only apply in countries which recognize the validity and enforceability of asymmetric clauses.

In Vietnam, the validity and enforceability of such clauses has been an open question due to a lack of statutory guidance. To shed some light on this matter, we can assess an ongoing case where a Vietnamese court has considered the enforceability of an asymmetric dispute resolution clause.

The dispute in question arose between a Thai company and a Vietnamese company in relation to a distribution contract. The Thai company filed a civil suit with a Vietnamese court to seek remedies for a breach of contract committed by the Vietnamese party. While the dispute clause of the contract provides that the Vietnamese party must submit to the jurisdiction of the courts of Hong Kong to settle all relevant disputes, there is no similar requirement for the Thai company. Moreover, the laws of Hong Kong are the governing law of the contract.

Initially, the Vietnamese court decided not to accept the suit, with its view supported by the peer procuracy’s opinion that the dispute clause implied that the Thai company had chosen the courts of Hong Kong to handle any relevant disputes that might arise. Consequently, the clause excluded the jurisdiction of Vietnamese courts.

Disagreeing with the above legal perspective, the Thai company filed a complaint against the Vietnamese court’s decision. In particular, the Thai company reasoned that the clause does not expressly indicate a choice of court, but only expresses that the Thai company would not challenge the jurisdiction of the courts of Hong Kong if any legal proceedings are commenced there under the Vietnamese party’s request. In other words, when any disputes arise, the Vietnamese party can only pursue legal proceedings before the courts of Hong Kong while the Thai party could choose to pursue legal proceedings before any other competent courts, such as courts in Thailand or Vietnam, and is not required to choose the courts of Hong Kong.

Given this, the dispute resolution clause in the contract of this case could be deemed an asymmetric dispute resolution clause where the favored party (the Thai company) can flexibly initiate legal proceedings before any competent courts that may be determined under private international law to have jurisdiction over disputes arising from or out of this commercial contract.

In consideration of the significant potential risk of non-enforcement of a Thai judgment in Vietnam, where the defendant is based, the Thai company wished to instead settle the dispute in a Vietnamese court in hopes that the enforcement steps would be much easier if they win the case. Further, based on certain facts of the case, the Thai company successfully proved that it had no intention to choose Hong Kong courts as the dispute resolution forum during the establishment and implementation of the contract.

Finally, the tribunal handling the complaint upheld the Thai company’s arguments and further concluded that the legal perspectives of both the first-instance court and the procuracy were inappropriate and groundless.

Although there is still not sufficient supporting practice to definitively conclude that Vietnamese courts recognize the validity and enforceability of asymmetric jurisdiction clauses, and there is still no statutory guidance, the fact that a Vietnamese court accepted the dispute above for settlement suggests that there is certainly a chance for an asymmetric dispute resolution clause in a commercial agreement to be valid and enforced in Vietnam.

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