Can we bypass the Commercial Arbitration Agreement and initiate a lawsuit in court?

Legal situation: My company, Transport Company X, has entered into a contract with Company C. The signed contract includes a provision for dispute resolution through an "arbitration agreement." However, due to a dispute arising among the parties, we prefer not to resort to commercial arbitration but instead file a lawsuit directly in a competent court. Is this permissible? Thank you.

FDVN Opinion:

It is regulated in Article 6 of Commercial Arbitration Law 2010 about the instances where the court declines jurisdiction in the presence of a specific arbitration agreement: In case the disputing parties have reached an arbitration agreement but one party initiates a lawsuit at a court, the court shall refuse to accept the case, unless the arbitration agreement is invalid or unrealizable.

The invalidation of arbitration agreements is stipulated in Article 18 of Commercial Arbitration Law 2010, which includes the following cases: 1. Disputes arise in the domains falling beyond the arbitrator's jurisdiction defined in Article 2 of this Law. 2. The arbitration agreement maker has no competence defined by law. 3. The arbitration agreement maker has no civil act capacity under the Civil Code. 4. The form of the arbitration agreement is incompliant with Article 16 of this Law. 5. A party is deceived, intimidated or compelled in the course of making the arbitration agreement and requests a declaration that such arbitration agreement is invalid. 6. The arbitration agreement breaches prohibitions specified by law.

Meanwhile, the unenforceable arbitration agreements are governed by the provisions in Article 4 of Resolution No. 01/2014/NQ-HĐTP, which stipulates:

Article 4. The arbitration agreement is not viable as prescribed in Article 6 of LCA as follows:

“The arbitration agreement is not viable” as prescribed in Clause 6 Article 18 of LCA means any arbitration agreement in the cases below:

1. The parties concerned have an agreement to resolve their disputes at a specific arbitration center which has now shut down without any arbitration center that inherits its cases, and the parties concerned fail to reach an agreement on another arbitration center to resolve their disputes.

2. Both parties have an agreement on appointment of a specific arbitrator to resolve disputes, but when the dispute arises, because of force majeure events or objective difficulties, such arbitrator cannot resolve the case, or the arbitration center or court cannot find a substitute arbitrator as agreed by the parties concerned, and the parties concerned also fail to reach an agreement to select a substitute arbitrator.

3. Both parties have an agreement on appointment of a specific arbitrator to resolve disputes, but when the dispute arises, such arbitrator refuses the appointment or the arbitration center refuses the arbitrator appointment, and the parties concerned also fail to reach an agreement to select a substitute arbitrator.

4. The parties concerned have an agreement to resolve their disputes at a specific arbitration center but a set of arbitration rules of another arbitration center, which is different from the arbitration rules of the agreed arbitration center, is applied, the charter of the arbitration selected by both party does not allow the application of arbitration rules of other arbitration centers, and the parties concerned fail to reach an agreement on substitute set of arbitration rules.

5. The goods/service seller and consumers have an overall agreement on provision of goods/services that contain arbitration terms drafted by the seller as prescribed in Article 17 of LCA, but the consumers refuse to have the dispute that arises resolved by an arbitral tribunal.

Furthermore, as stipulated in Clause 1, Article 43 of the Commercial Arbitration Law concerning the consideration of invalid arbitration agreements, unenforceable arbitration agreements, the authority of the Arbitration Council is: Before considering the circumstances of a dispute, the arbitration council shall consider the validity of the arbitration agreement and whether such agreement can be realized, and consider its jurisdiction. If the dispute falls within its jurisdiction, the arbitration council shall settle it under this Law. If the dispute falls beyond its jurisdiction or the arbitration agreement is invalid or unrealizable, the arbitration council shall decide to terminate the dispute settlement and immediately notify the parties thereof.

According to the information provided, the Contract signed between the two companies includes an agreement for dispute resolution through arbitration. Therefore, if both parties do not mutually agree to litigate in court instead of using the agreed arbitration body, and your company submits a lawsuit directly to the court without involving the Arbitration Center, the court will dismiss the lawsuit on the grounds that the parties have previously agreed to arbitration, except in cases where the arbitration agreement is invalid or unenforceable.

Nguyen Thi Hai Nhi - FDVN law firm

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