Commercial mediation is increasingly chosen by businesses as a dispute resolution mechanism due to its flexibility, confidentiality, and potential to preserve business relationships. However, alongside its notable advantages, commercial mediation also has certain limitations, particularly in terms of legal enforceability and binding effect. A thorough understanding of both the strengths and drawbacks of this method enables enterprises to make informed, cost-effective decisions when selecting a dispute resolution mechanism.
1. Is it possible to resolve disputes while maintaining business harmony?
In practice, when disputes arise during the performance of a contract, parties often opt to initiate litigation or arbitration if amicable resolution proves unsuccessful. Common perception of “dispute resolution” typically entails a win–lose outcome through coercive measures, thereby making it difficult to preserve ongoing cooperation between the disputing parties.
However, disputes should be viewed as a natural aspect of business relations. Conflicts may simply arise from differing interpretations of contractual provisions, despite the parties’ mutual inability to reach a consensus.
Commercial mediation — a method often overlooked — offers a more conciliatory approach than litigation or arbitration, serving as a “friendly” and effective means to avoid unnecessary damage to business relationships. Essentially, it resembles negotiation but involves the assistance of an independent third party. The mediator — acting as a neutral facilitator — guides the parties, proposes feasible solutions, and supports voluntary consensus-building.
This dispute resolution method is expressly provided under the 2005 Commercial Law of Vietnam:
Article 317. Forms of dispute resolution:
- Negotiation between the parties.
- Mediation between the parties by an agency, organization, or individual chosen by the parties as a mediator.
- Resolution through arbitration or court proceedings.
Under current law, commercial mediation (i.e., out-of-court mediation) may be employed to resolve disputes arising from commercial activities, or involving at least one party engaged in such activity, as well as other disputes permitted by law to be settled through mediation.
In an environment where business flexibility and long-term cooperation are highly valued, commercial mediation is increasingly regarded as an effective and low-conflict dispute resolution mechanism.
2. Advantages and limitations of commercial mediation
Voluntariness and equality are fundamental principles upheld throughout the commercial mediation process.
Vietnamese law allows disputing parties to adopt the mediation rules of a designated mediation institution or to mutually agree upon procedures. In the absence of such agreement, the mediator may propose an appropriate process. Other elements such as the mediator’s appointment, venue, and schedule shall also be determined by mutual consent, in accordance with the nature of the dispute. The parties retain full autonomy over the mediation content and may terminate the process at any time.
Compared with court or arbitral proceedings, commercial mediation is notably time-efficient (often resolved within days) and cost-effective (mainly limited to mediator fees and institutional charges). A significant benefit of mediation lies in its potential to preserve long-term business relations when consensus is reached. Furthermore, the mediation process is confidential — no official record is made — thereby mitigating concerns over reputational harm or trade secret exposure.
However, since mediation relies on voluntary participation, the enforceability of any resulting agreement depends on the goodwill and commitment of the parties involved. Without due diligence during mediation, subsequent litigation or arbitration may face procedural or evidentiary disadvantages.
3. Key considerations when opting for commercial mediation
A written agreement is a mandatory prerequisite for resolving disputes through commercial mediation. Such agreement may be incorporated as a dispute resolution clause in a contract or as a separate mediation agreement. Valid mediation agreements may be entered into prior to, during, or after a dispute arises and are recognized under the law.
It is advisable to draft mediation clauses with clarity and precision, as a risk mitigation measure. Key elements include the selected mediation center, number and qualifications of mediators, language of proceedings, etc. Parties may also consider setting a maximum timeframe for completion of the mediation process to avoid expiry of the statutory limitation period, in case mediation fails. For commercial disputes in Vietnam, the statute of limitations is generally two years.
The selection of a qualified mediator is also critical. While mediators do not render binding decisions, they must possess the requisite knowledge, competence, and experience to facilitate meaningful dialogue, clarify misunderstandings, and assist parties in reaching a practical and mutually acceptable resolution. Lists of certified mediators are publicly available through recognized mediation institutions or provincial-level Departments of Justice.
Should you have any further questions or require legal assistance, please do not hesitate to contact TLA Law Fiem Limited for timely advice and support.
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1. Lawyer Vu Thi Phuong Thanh, Manager of TLA Law LLC, Ha Noi Bar Association
Email: vtpthanh@tlalaw.vn
2. Lawyer Tran My Le, Chairman of the Members’ Council, Ha Noi Bar Association
Email: tmle@tlalaw.vn.
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