Vietnam’s Law on Bankruptcy and Rehabilitation No. 142/2025/QH15, passed by the National Assembly on December 11, 2025, does something many regional counterparts do not yet attempt: it instructs parties and arbitral tribunals on exactly what happens to an arbitration once a debtor becomes insolvent. Together with the Law on Commercial Arbitration No. 54/2010/QH12, the new law improves upon what used to be an uncertain area of practice, now providing an explicit, mandatory sequence of procedures.

Suspension and Termination of Arbitration Proceedings

Under article 40(2) of the law, once a Vietnamese court accepts a bankruptcy petition, any arbitration that concerns the debtor’s financial obligations must be temporarily suspended as soon as the tribunal receives the court’s notification. If the court subsequently issues a decision commencing bankruptcy proceedings, article 59(2) takes a further step: the suspended arbitration is terminated outright, and the underlying case file is transferred to the court handling the insolvency for resolution. The two provisions work as a sequence: first suspension, then termination and transfer, rather than as independent triggers. Meanwhile, article 60(4) reinforces this effect by vesting the bankruptcy court with exclusive jurisdiction over all claims against the debtor from the date the petition is accepted.

Notably, this mechanism operates automatically, without the need for the insolvency court to issue a separate anti-arbitration order. The tribunal simply suspends or terminates the proceeding by operation of law once notified; however, Vietnamese law currently provides no procedure by which a party can apply to the insolvency court for permission to continue the arbitration despite the statutory effect. Practitioners with a Vietnamese counterparty in arbitration should treat notification of a bankruptcy filing as something to flag to the tribunal immediately since continuing to arbitrate a claim that has become subject to article 40(2) or 59(2) risks producing an award vulnerable to annulment for want of jurisdiction.

Scope of the Suspension: Bankruptcy, Not Rehabilitation

This mechanism only targets disputes concerning a debtor’s financial obligations, not every proceeding in which the debtor is a party. However, Vietnamese law does not precisely define what is classified as a “financial obligation” for this purpose, leaving room for case-by-case argument on the margins. It also applies only within bankruptcy or liquidation proceedings, not to Vietnam’s separate rehabilitation process. Because rehabilitation is a phase subject to creditor votes only after a court has accepted a bankruptcy petition, an arbitration that was suspended before rehabilitation was proposed will typically remain suspended through rehabilitation. Rehabilitation itself does not independently trigger this statutory effect. The law also draws no distinction between an arbitration already pending when a petition is accepted and one commenced later. Further, it makes no difference whether the debtor is a claimant or respondent.

Effect on the Underlying Arbitration Agreement

Under article 51, the insolvency court has the power to suspend or terminate the performance of a contract signed before the bankruptcy filing, where continuing would harm the debtor, regardless of whether that contract contains an arbitration clause. This raises an important question: does terminating a contract terminate the arbitration agreement within that contract? Vietnamese law answers no. The principle of separability under article 19 of the Law on Commercial Arbitration keeps the arbitration agreement independent of the underlying contract, and termination of that contract is not among the grounds on which an arbitration agreement can be invalidated under article 18. Nor can the insolvency administrator or insolvency court suspend or terminate the arbitration agreement itself, but only the contract’s performance. In short, a suspended or terminated contract does not by itself void the parties’ agreement to arbitrate future or related disputes, even though any arbitration already in progress may still be swept up by articles 40(2) and 59(2) if it concerns financial obligations.

Foreign-Seated Arbitration and Enforcement

The new law does not address whether articles 40(2) and 59(2) apply only to Vietnam-seated arbitrations or also reach foreign-seated arbitrations. In principle, a tribunal seated abroad is governed by the law of its own seat, not by Vietnamese insolvency legislation. However, that does not settle the issue. If a foreign award is rendered against a Vietnamese entity while that entity is undergoing a court-supervised bankruptcy process, Vietnamese courts may refuse to recognize or enforce the award on public policy grounds or as inconsistent with the mandatory principles of the Law on Bankruptcy and Rehabilitation. The practical effect is that a foreign-seated tribunal can proceed with the arbitration, but the resulting award may have questionable value in Vietnam. In addition, Vietnam has not adopted the UNCITRAL Model Law on Cross-Border Insolvency, so there is no formal channel for a foreign insolvency representative to seek recognition or relief in Vietnam.

Practical Considerations

A handful of related points round out the picture. Interim measures remain available in principle under article 49 of the Law on Commercial Arbitration even after a bankruptcy filing, but that power is overridden in practice once article 40(2) or 59(2) requires suspension or termination. The debtor’s legal name and its capacity to participate are unaffected by a bankruptcy filing, and Vietnamese law does not clearly allocate authority between the debtor and the insolvency administrator to settle a dispute or to represent the debtor in arbitration. Confidentiality is likewise unaffected since bankruptcy proceedings create no exception to the ordinarily private nature of arbitral hearings under the Law on Commercial Arbitration.

Because the statutory mechanism is still new, having taken effect only in the past year, there is no body of case law yet interpreting how broadly “disputes concerning financial obligations” will be read. Parties currently in arbitration with a Vietnamese counterparty, or drafting arbitration clauses for contracts likely to be performed in Vietnam, should treat this as an evolving rather than a settled area of legal interpretation.