Dr. Oliver Massmann – Experienced Arbitrator with International Expertise
Dr. Oliver Massmann is a qualified international arbitrator and holds the German title of judge. He has served as an arbitrator at leading international arbitration and mediation institutions in Asia and Europe for over 25 years.
During his long career, Dr. Massmann has provided legal advice to numerous international companies from all over the world and advised many well-known international and Vietnamese investors, particularly in arbitration and mediation proceedings. His most important mandates include:
- Representing a Vietnamese company in arbitration proceedings in Vietnam relating to a share purchase agreement.
- Legal representation of an international construction company in arbitration proceedings against a Vietnamese company before a tribunal in Singapore in the context of Vietnam’s first oil refinery.
- Accompanying a regional lubricant distributor in dispute resolution with a supplier through mediation and arbitration.
- Legal advice on issues related to a subway project in Vietnam.
- Representing a foreign client in arbitration proceedings in Singapore.
- Assisting a German company in legal matters concerning a contract for the foundation of bored piles for a Vietnamese cement plant.
- Representing a railway services provider in a dispute concerning the disbursement of a loan.
- Advising a leading Japanese Automotive company on issues related to dealership contracts.
- Supporting a Japanese investor in a dispute with a Vietnamese partner related to the development of an international port.
- Advising a Malaysian company regarding a potential legal issue with a Vietnamese contractor.
- Supporting an Indian company in a legal dispute with a Vietnamese company.
- Legal advice to a Dutch company in connection with a dispute with a Vietnamese business partner.
- Advising a leading Vietnamese seafood exporter in a dispute with a major Japanese trading company.
- Supporting a renowned European bank in assessing a potential involvement in a legal dispute between a European construction company and a Vietnamese contractor.
- Advising a Polish company on contracts with Vietnamese partners.
- Why international arbitration is a sensible option
This summary is intended to explain to foreign companies why they should not forego an effective dispute resolution clause in contracts with Vietnamese partners. It also presents practical alternatives to the domestic Vietnamese court system.
- Weaknesses of the Vietnamese judicial system
While contract enforcement is generally considered secure in North America and Europe, contracts with Vietnamese partners raise key questions: Which court should decide in the event of a dispute? In which language? Under which law?
If there is no explicit arbitration clause, a Vietnamese court generally has jurisdiction. However, this poses considerable uncertainties from the perspective of foreign investors: According to Transparency International, there remains a significant risk of corrupt decisions – almost 20% of Vietnamese surveyed stated that judges are involved in corruption (Global Corruption Barometer 2017). The Vietnam Provincial Competitiveness Index (USAID, 2021) also confirms that many companies avoid state courts.
In addition, structural problems exist: Many judges lack solid legal training and owe their positions to political loyalties or personal networks. Short terms of office and low salaries promote the judiciary’s dependence on party interests. The separation of powers is de facto suspended – the term “rule of law” in Vietnam is understood more in the sense of “rule by the state,” i.e., by the communist (one-)party. This makes an independent judiciary considerably more difficult.
Furthermore, arbitration proceedings – as in other countries with functioning judiciaries – offer the advantage of being confidential and conducted in camera. This is a crucial criterion, especially in sensitive commercial disputes.
- Advantages of Arbitration
Arbitration proceedings enable independent dispute resolution. The parties can appoint qualified arbitrators with expertise in their respective business areas, which increases both trust in the proceedings and acceptance of the outcome. International arbitration institutions also offer professional standards, transparent procedures, and a high degree of competence.
- Selecting the Appropriate Arbitration Tribunal
The choice of arbitration institution is crucial for the effectiveness of a dispute resolution clause. Examples of available arbitration institutions include:
– the Vietnam International Arbitration Centre (VIAC),
– or international institutions such as the Singapore International Arbitration Centre (SIAC).
Which institution is suitable depends on various factors:
- Project volume
For larger investment projects (from approximately USD 5 million), an international arbitration tribunal such as the SIAC is generally recommended. In such cases, the desire for independent expertise outweighs the higher costs.
- Location of assets – Enforceability of arbitral awards
If judgments are to be enforced in Vietnam, it is important to note that although Vietnam is a party to the New York Convention, which regulates the recognition of foreign arbitral awards, delays often occur in practice – for example, due to additional reviews by the Ministry of Justice and subsequent court proceedings. Vietnamese courts often reject foreign arbitral awards if they violate national regulations or public policy (Article V NYC). The abandonment rate for domestic arbitral awards is more than 50%.
Example: In one well-known case, an arbitral award was rejected because a formal building permit was missing (Tyco Services Singapore Pte Ltd v. Leighton Contractors Vietnam).
- Procedural Costs
The costs of arbitration vary widely: For a value in dispute of USD 4 million, the VIAC fees amount to approximately USD 62,000 (one arbitrator), while the SIAC fees are approximately USD 117,000. In addition, travel, translation, and consulting costs are often added to international proceedings. This cost factor can be particularly decisive for smaller companies, making them more likely to enter into unfavorable settlements.
- Complexity of the Subject Matter
Although Vietnamese arbitration tribunals such as the VIAC have legal expertise, they do not (yet) have comparable international specialization. This is primarily due to the lower remuneration of Vietnamese arbitrators. For particularly industry-specific disputes, a specialized foreign tribunal is often the better choice.
- State-owned or quasi-state-owned contracting parties
If state-owned or indirectly state-controlled companies are parties to the contract, a foreign arbitration clause should be agreed upon. This protects against possible state influence on the proceedings. While enforcement risks still exist in Vietnam, a favorable arbitral award significantly improves the negotiating position.
- Note special case: Protection of intellectual property
When intellectual property rights are involved, the arbitration clause should be supplemented by an opening clause that continues to permit administrative measures—for example, by the Vietnamese Market Management Bureau. While arbitration tribunals can also order interim measures, in practice, administrative intervention is often more effective.
Choice of Jurisdiction
| Decisions on Jurisdiction/Choice of Jurisdiction | ||
| Vietnamese Jurisdiction | Onshore Proceedings at the Vietnam International Arbitration Centre (VIAC) | Offshore Arbitration |
| Generally Not Recommended | Projects under US$5M | Project > US$5M |
| Special cases: Intellectual property – in this case, an opening clause can be invoked, which is converted into a dispute resolution clause (provisional measures/coercive measures by authorities) | The contracting partner’s assets that can be seized are located in Vietnam | The contracting partner’s assets that can be seized are located abroad |
| Less complex circumstances | More complex legal matters. Questions/Facts | |
| The contract primarily concerns general areas of law (purchase law, etc.) | Areas of law that can only be handled by experienced, specialized lawyers | |
| No (hidden) state-owned enterprise | Contracting partner is a state-owned enterprise | |
| Lower financial strength, greater cost pressure | Less cost pressure due to greater financial strength | |
| Dispute settlement clause not necessary | Dispute settlement clause (+) | Dispute settlement clause (+) |
- Implementation
(Arbitration Agreements under Vietnamese Law)
Vietnamese law expressly permits arbitration agreements in commercial contracts. The basis for this is Law No. 54/2010/QH12 on Commercial Arbitration (LCA). A validly agreed arbitration clause means that state courts no longer have jurisdiction; instead, the contractually agreed arbitration tribunal decides. The LCA is based on the UNCITRAL Model Law and is thus aligned with international standards. Vietnamese legislation is generally considered “arbitration-friendly.”
Once it has been determined whether and which arbitral tribunal should have jurisdiction for potential disputes, the following aspects in particular should be regulated:
- Applicable law: In cross-border contracts, the substantive law can generally be freely chosen (Article 14 (2) LCA). The decision regarding the applicable law should be taken into account when selecting arbitrators to ensure that they are familiar with the respective legal system.
- Language of proceedings: According to Article 10 (2) LCA, the language of the arbitration proceedings can be freely determined by contract.
- Number of arbitrators: The appointment of several arbitrators enables collegial decision-making, which can contribute to balance. However, it should be noted that this also increases procedural costs.
Appointment of a specific arbitrator: In particularly complex or technically demanding cases, it may be advisable to seek a suitable arbitrator in advance.
An arbitration agreement is valid if it meets the requirements set out in Articles 16, 18, and 19 of the LCA – in particular, it must be in writing.
Dispute settlement under international investment protection agreements
Under the Investment Protection Agreement between the European Union and Vietnam (EVIPA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), it is possible to submit investment-related disputes between investors and states to a special dispute settlement mechanism.
In the event of disputes, for example, in connection with expropriation without compensation or discriminatory treatment, an investor can sue the government of the other contracting state before an investment court. If a party disagrees with the decision, it has the option of appealing to an appeal court. Although this procedure differs from traditional arbitration proceedings, its structure is similar to the two-tier dispute settlement system of the World Trade Organization (WTO).
One advantage of this mechanism is the potential time and cost savings. The arbitral award is binding and immediately enforceable without the need for confirmation by local courts. Vietnam has committed to fully implementing the system within five years of the EVIPA’s entry into force. However, as of February 2023, only 11 of the 27 EU member states had ratified the agreement – so it remains to be seen when it will actually enter into force and Vietnam’s implementation obligations will begin.
The CPTPP also provides for a similar dispute settlement mechanism. Unlike the EVIPA, however, there is no transition period – the arbitral awards would be immediately enforceable under the New York Convention. It is expected that Vietnam will adapt its domestic arbitration regulations to the standards provided for in the EVIPA in the foreseeable future. Investors relying on the CPTPP could also benefit from these legal changes.
Under both the EVIPA and the CPTPP, the inclusion of an investor-state dispute settlement (ISDS) mechanism can significantly improve the enforceability and investment security of contracts – provided the clauses are carefully drafted.
Conclusion:
The inclusion of dispute settlement clauses in Vietnamese contracts is generally recommended. However, selecting the appropriate dispute resolution forum is a complex decision that should be carefully prepared – particularly with regard to choice of law, costs, language, enforceability, and procedural certainty.
Investors do not have to wait for the EVIPA to enter into force or for national arbitration laws to be amended. ISDS clauses can already be included in contracts to ensure a high degree of legal certainty and investment protection. We would be happy to assist you in drafting and incorporating such clauses into your contracts.
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Dr. Oliver Massmann is a partner at the international law firm Duane Morris LLP, headquartered in the United States. He also heads the Vietnamese branch of Duane Morris Vietnam LLC as General Manager. His practice focuses on international tax law and legal support for energy and infrastructure projects. He also advises multinational companies on investment law issues, particularly in the oil and gas, telecommunications, privatization, corporate investments, mergers and acquisitions, and general commercial law issues related to business activities in Vietnam.
For questions and further details, please contact Dr. Oliver Massmann at [email protected].
