Arbitration Clause in Vietnam: 7 Drafting Mistakes Foreign Companies Should Avoid

To most managers’ surprise, an arbitration clause in Vietnam is one short paragraph in your contract, but it is also a separate agreement, independent from the contract itself. When a transaction goes wrong, that short paragraph decides where you bring the dispute, how long it takes, and whether you can collect the money you win. A weak clause can take all of that away from you before the case even starts.

For foreign companies, the risk is simple. Many contracts are negotiated carefully on price, delivery, scope, and payment, but the dispute clause is added at the end, and many times no one pays attention until later. When the relationship breaks down, that short clause may decide whether you stay in arbitration, who appoints the arbitrator, whether the clause works at all. It may even decide whether enforcement of foreign arbitral awards in Vietnam is possible at the end.

In here, we go through some drafting mistakes that can weaken an arbitration clause in Vietnam. This is just one part of a bigger topic, participating in arbitration in Vietnam, which you would also need to understand.

Why an Arbitration Clause in Vietnam Carries Business Risk

A weak arbitration clause in Vietnam does not create only a legal problem but it creates a business problem. You can lose months arguing about forum, tribunal appointment, or enforceability. You can lose control of who chooses the institution. You can win on the facts and still face resistance at the enforcement stage because the clause was badly drafted from the start.

Under Vietnamese law, an arbitration agreement must meet specific validity requirements. It must be in writing. The dispute must be a type that arbitration is allowed to handle. The person making the agreement must have authority and legal capacity. No party may be deceived, threatened, or forced. And the agreement must not break any prohibition of law. Vietnam also recognises separability and competence-competence, but those rules do not rescue every badly drafted clause.

Arbitration Clause in Vietnam: 7 Drafting Mistakes

You Leave the Forum or Institution Unclear

The first business loss is loss of control. If your contract says the dispute will go to arbitration but does not clearly say what form of arbitration or what institution will run it, you may create a dispute before the real dispute case even starts.

Vietnamese law says that if the parties agree to arbitration but do not state the form or the specific institution, they must agree again once the dispute arises. If they cannot agree, the claimant may make the choice. In a real dispute, the claimant is often the other side. So a weak clause can hand more control to your opponent at the worst possible moment.

This is not a small drafting issue because it can change timing, cost, procedure, and the practical balance of the whole case. A manager who thought the contract had already solved the forum question may find that it did not.

How to avoid it: name the arbitration institution clearly, or state clearly that the arbitration is ad hoc. Do not leave the form of arbitration open for later argument.

You Mix One Arbitration Centre With Another Centre’s Rules

The second business loss is delay and possible procedural failure. Some contracts name one arbitration institution but then point to a different institution’s rules. This often happens when a clause is copied from an old template and edited without care.

If a clause names one centre but adopts another centre’s rules, and that arrangement is not allowed and no fix can be agreed, a Vietnamese court may treat the clause as incapable of being performed. In business terms, your arbitration clause may become the first dispute inside the dispute.

This is exactly the error that surprises foreign companies.  When the contract looks complete, the parties perform for years but when trouble starts, the clause itself becomes unstable.

How to avoid it: if you choose an institution, use that institution’s own rules unless you are certain another arrangement is allowed and workable. Do not create a hybrid clause without checking it carefully.

You Rely on a Loose or Unwritten Agreement

The third business loss is simple that you may not get into arbitration at all. The other side may argue that no valid arbitration agreement exists, which forces time and money into a threshold fight before anyone reaches the real issue.

Under Vietnamese law, the arbitration agreement must be in writing. The written form is read broadly, so certain electronic records and exchanges can also count, but a loose verbal understanding is not enough for a reliable clause. The agreement can cover future disputes, but it still has to meet the formal validity requirements.

This matters because many business relationships begin through emails, term sheets, purchase orders, or spoken approvals, with the formal contract following later. If the arbitration wording is never properly documented, you may believe you have a dispute mechanism when you do not.

How to avoid it: make sure the arbitration agreement is properly documented in a written contract or another written form recognised by law. Do not rely on assumptions or verbal comfort.

The Signer Did Not Have Authority or Legal Capacity

The fourth business loss is very serious. You may spend money on arbitration and then face an argument that the agreement itself is invalid, because the person who signed it lacked authority or legal capacity.

Vietnamese law requires that the person making the arbitration agreement has proper authority and legal capacity. A problem with capacity can also become a ground to refuse recognition and enforcement of a foreign award in Vietnam. In plain terms, a weakly authorised signer can damage both the clause and the award you win later.

For foreign companies, this is a common operating risk. The commercial team may negotiate with a senior-looking representative and assume the authority is enough. Later, the other side may argue that the signer was never properly empowered to bind the company to arbitration.

How to avoid it: check who is signing and whether that person can agree to arbitration. Do the same on your own side. Do not treat authority as a routine formality.

You Think a Broken Contract Cancels the Arbitration Clause

The fifth business loss is strategic confusion. Some companies stop relying on the arbitration clause because they believe the contract was terminated, cancelled, invalid, or impossible to perform. That belief can push them into the wrong forum or cause needless delay.

Vietnamese law recognises separability. This means the arbitration clause in Vietnam stands on its own. It is treated as a separate agreement, even though it sits inside the main contract. So changing, ending, or even invalidating the main contract does not by itself remove the arbitration clause. A broken main contract does not automatically kill the arbitration clause in Vietnam.

This matters in real contract disputes in Vietnam because one side often argues that the contract failed and so the arbitration mechanism failed too. Under Vietnamese law, that is not the starting position. The arbitration agreement stands on its own.

How to avoid it: treat the arbitration clause in Vietnam as a separate risk-control tool, and do not let the other side bluff you out of the forum you chose.

You Ignore Multi-Party Realities

The sixth business loss is delay in setting up the tribunal, especially when more than two parties are involved. In a group contract, a shareholder structure, or a project dispute, a clause that works for two parties may work poorly for three or four.

Vietnamese law explains how to appoint arbitrators when there are several respondents, but it is silent on how to do this when there are several claimants. The VIAC Rules suggest that multiple claimants should jointly select one arbitrator or jointly ask VIAC to appoint one, and that approach is persuasive but not a fixed rule for every case. This is an area where the law is not fully settled, so treat it as a drafting risk, not a solved problem.

One more point foreign managers often get wrong is that Vietnam does not recognize the group of companies doctrine. A related company that did not sign the contract is generally not bound by the clause. You cannot assume an affiliate is covered just because it belongs to the same corporate group.

How to avoid it: if the deal may involve multiple claimants, multiple respondents, affiliates, or assignments, draft the appointment method and party structure carefully. Do not assume the law will close every procedural gap for you.

You Draft the Clause Without Thinking About Enforcement

The seventh business loss is the most expensive one. You may win the arbitration and still face refusal of recognition or enforcement in Vietnam, because the clause was weak from the beginning.

If Vietnam is where you will seek enforcement, the clause should not fall into a known refusal ground; for instance, a party that lacked capacity under the applicable law, an arbitration agreement that is invalid under the chosen law or the law of the place where the award was made, or a dispute that Vietnamese law does not allow arbitration to decide. Vietnam is part of the New York Convention, but it applies the Convention on a reciprocity basis and only to disputes it treats as commercial under Vietnamese law.

So a careful arbitration clause in Vietnam is not only about starting the case correctly. It is also about protecting the award for the day you need to collect it. This is where enforcement of arbitral awards in Vietnam becomes important, which you need to be aware of.

How to avoid it: draft with the enforcement forum in mind. Check capacity, arbitrability, governing-law logic, and the commercial nature of the dispute before you sign.

How To Test Your Arbitration Clause Before You Sign

Before signing any Vietnam related contract, walk through this short checklist.

1. Check that the arbitration agreement is in writing and tied to an arbitrable commercial relationship.
2. Confirm the signer on each side has authority and legal capacity.
3. State clearly whether the arbitration is institutional or ad hoc.
4. Name the institution correctly, and do not mix it with another centre’s rules.
5. Treat the arbitration agreement as a separate risk-management tool, not just one clause in a long contract.
6. If the deal may involve multiple parties, assignments, or restructurings, check that the clause still works in those situations.
7. Review the clause with enforcement in mind if Vietnam may be where the award is recognised or enforced.

Once your clause is sound, the next thing to understand is what actually happens after a dispute starts, the arbitration procedure in Vietnam.

Frequently Asked Questions

Q1: Is a verbal arbitration agreement valid in Vietnam?

No. An arbitration agreement must be in writing, although certain electronic records and exchanges can also count as writing.

Q2: Does an invalid or terminated main contract kill the arbitration clause in Vietnam?

No. Vietnamese law recognises separability. The arbitration agreement is independent of the main contract, so termination, invalidity, or non-performance of the contract does not by itself destroy the arbitration agreement.

Q3: Can we name a foreign arbitration institution in a Vietnam-related contract?

Yes. Parties can choose a foreign arbitration institution to administer a dispute. The practical point is accuracy: if you name an institution, name it correctly, and do not pair one institution with another institution’s rules unless that arrangement is clearly workable.

Q4: Can related group companies be pulled into arbitration automatically in Vietnam?

Do not assume that. Vietnam does not recognise the group of companies doctrine. Some successors, legal representatives, or assignees may be bound in specific situations, but that is different from automatically including a company just because it belongs to the same group.

Conclusion

A strong arbitration clause in Vietnam protects more than your choice of forum. It protects timing, cost, control, and your chance to enforce later. A weak clause can lose all of those advantages before the case even begins.

In local practice, Vietnamese courts generally support arbitration, but they support it within the framework of the law, and they will still look closely at validity, authority, and enforceability. That is why the safest time to fix an arbitration clause is before you sign, not after the dispute starts.

About the Authors

Written by Tuan Nguyen and Thuong Nguyen, lawyers at ANT Lawyers and contributors to the Vietnam chapter of GAR Know-How: Commercial Arbitration. Their work focuses on arbitration, enforcement, and cross-borded ispute strategy for foreign companies doing business in Vietnam.

About ANT Lawyers, a Law Firm in Vietnam

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest protection, risk mitigation and regulatory compliance. ANT Lawyers has lawyers in Ho Chi Minh city, Hanoi, and Danang, and will help customers in doing business in Vietnam.