The arbitration agreement is the “entry ticket” to every arbitral proceeding: without a valid arbitration agreement, the arbitral tribunal has no jurisdiction, and any award issued may be set aside by the court. In practice, we have seen many businesses lose right at the “starting gate” — not because of weak legal arguments, but because the arbitration clause in their contract was invalid or unenforceable.
This article analyzes the validity conditions for arbitration agreements under the 2010 Law on Commercial Arbitration (Law No. 54/2010/QH12, amended and supplemented by Law No. 81/2025/QH15 effective from 01/7/2025), the invalidity cases, and drafting notes FDI businesses need to know.
The role of the arbitration agreement: the prerequisite for jurisdiction
Article 5 of the Law on Commercial Arbitration is clear: disputes are resolved by arbitration if the parties have an arbitration agreement, and this agreement may be made before or after the dispute arises. In other words, arbitral jurisdiction derives entirely from the parties’ will — unlike courts, where jurisdiction is fixed by law.
The consequence of this principle shows at both ends of the proceedings. At the entry, Article 6 obliges courts to decline jurisdiction where the parties have a valid arbitration agreement. At the exit, point a, Clause 2 of Article 68 lists “no arbitration agreement or an invalid arbitration agreement” as the first ground for courts to set aside an award. The arbitration agreement is therefore not only the condition to begin, but also the condition for the entire process’s outcome to be protected by law.
Clause 2 of Article 3 defines: an arbitration agreement is an agreement between the parties to resolve by arbitration disputes that may arise or have arisen — including arbitration clauses in contracts (for future disputes) and separate agreements signed after a dispute has occurred.
Form of the arbitration agreement: mandatory written form
Article 16 provides that arbitration agreements may be established in two forms: an arbitration clause in a contract or a separate agreement. In both cases, the agreement must be established in written form.
The law understands “written” broadly. Clause 2 of Article 16 lists forms also deemed written, including: agreements established through exchanges by telegram, fax, telex, email, and other forms under the law; agreements through written information exchanges between the parties; agreements recorded in writing by lawyers, notaries, or competent organizations at the parties’ request; cases where the parties refer to a document evidencing the arbitration agreement such as a contract, voucher, or company charter; and cases through exchanges of the statement of claim and defense where one party raises the existence of the agreement and the other does not deny it.
The important practical point: in modern commercial transactions, an email chain in which the parties agree to bring disputes to arbitration may satisfy the written-form requirement — but proving the existence and exact content of an agreement through fragmented emails is always riskier than a clearly drafted clause in the contract. Businesses should not rely on this broad interpretation.
The arbitration agreement’s independence from the main contract
Article 19 establishes the separability principle: the arbitration agreement is entirely independent of the contract; changes, extensions, or cancellation of the contract, or the contract being invalid or unenforceable, does not invalidate the arbitration agreement.
This principle has profound practical significance. Suppose one party claims the main contract is invalid because it was deceived at signing — it is the arbitral tribunal, not the court, that has jurisdiction to consider that argument, because the arbitration clause survives independently to confer jurisdiction on the tribunal. Without this principle, any party wanting to escape arbitration need only declare the contract invalid.
A distinction is needed, however: independence protects the arbitration agreement from the main contract’s fate, but does not “cure” the agreement’s own internal defects — e.g., an agreement signed by an unauthorized person, or in improper form, remains invalid under Article 18.
Six cases of invalid arbitration agreements
Article 18 fully lists the cases where arbitration agreements are invalid:
- Disputes outside arbitral jurisdiction (Clause 1): disputes beyond Article 2’s scope — arbitration resolves only disputes arising from commercial activities, disputes where at least one party has commercial activities, or other disputes the law provides may be resolved by arbitration.
- The person establishing the agreement lacks authority under the law (Clause 2): e.g., the person signing the arbitration clause on the company’s behalf exceeds the authorization scope, or signs after the authorization has expired.
- The person establishing the agreement lacks civil act capacity under the Civil Code (Clause 3): minors, persons who have lost or have restricted civil act capacity.
- Form inconsistent with Article 16 (Clause 4): oral agreements, or agreements through conduct not evidenced in any written form within Article 16’s broad meaning.
- One party was deceived, threatened, or coerced during the agreement’s establishment and requests a declaration of invalidity (Clause 5): note the “upon request” condition — not automatically invalid.
- Violation of legal prohibitions (Clause 6): a catch-all clause covering all cases where the agreement’s content or purpose contravenes legal prohibitions.
In practice, the two most common “traps” for businesses are Clause 2 (the signatory’s authority) and Clause 4 (form). Many contracts are signed by business personnel without valid written authorization; many arbitration agreements exist only as verbal promises during negotiations. Both can collapse the entire dispute resolution mechanism exactly when it is most needed.
“Unenforceable” arbitration agreements
Beyond invalidity, the law also provides for unenforceable arbitration agreements. Article 6 provides that courts decline jurisdiction only where the arbitration agreement is valid and enforceable; Article 43 obliges the arbitral tribunal, before examining the dispute’s merits, to consider whether the arbitration agreement is enforceable, and to suspend proceedings if clearly determined unenforceable.
Application practice (guided by Resolution 01/2014/NQ-HDTP of the Council of Justices of the Supreme People’s Court) records typical situations: the parties agreed to bring disputes to a specific arbitration center but that center has ceased operations with no successor; the parties designated a named ad hoc arbitrator but that person refuses or cannot participate due to force majeure without agreement on a replacement; or the parties agreed to resolve at one arbitration center but apply another center’s procedural rules without agreeing on substitute rules.
The key point: “unenforceable” is a matter of feasibility, not legality. A vague arbitration clause — “disputes shall be resolved by arbitration in Vietnam” without specifying which center or form — is fertile ground for disputes over enforceability. Clause 5 of Article 43 handles this: where no specific arbitration institution can be identified, the parties must re-agree; failing agreement, the choice is made at the claimant’s request.
Who may examine the arbitration agreement’s validity
Vietnamese law grants the arbitral tribunal the power to examine its own jurisdiction (competence-competence to a certain extent). Article 43 requires the tribunal, before examining the dispute’s merits, to consider the arbitration agreement’s validity and its own jurisdiction; if outside jurisdiction, the agreement is invalid, or clearly unenforceable, it issues a suspension decision.
This decision is not “final” on jurisdiction: Article 44 allows a disagreeing party to request the competent court to review within 05 working days from receiving the tribunal’s decision. The court must resolve within tight time limits (05 working days to assign a judge, 10 working days to decide), and the court’s decision is final. Notably, while the court handles the complaint, the tribunal may continue resolving the dispute (Clause 5 of Article 44) — a mechanism preventing jurisdictional complaints from being abused to delay proceedings.
Drafting notes for arbitration clauses for FDI businesses
From the above provisions, a “healthy” arbitration clause should include at minimum:
- Clearly identify the form of arbitration: institutional arbitration at a specific center (stating the center’s exact name) or ad hoc arbitration. Avoid vague phrases like “arbitration in Vietnam”.
- Number of arbitrators: one or three. Absent agreement, the default is a three-member tribunal (Clause 2 of Article 39) — significantly costlier than a sole arbitrator.
- Language of proceedings: particularly important for FDI businesses; absent agreement, for disputes without foreign elements, the default language is Vietnamese (Article 10).
- Venue and governing law: absent agreement, the tribunal decides (Articles 11 and 14).
- The signatory’s authority: ensure the person signing the arbitration clause has valid representative authority, avoiding Clause 2 of Article 18.
- Scope of disputes: should cover “all disputes arising from or relating to this contract”, avoiding narrow wording that leaves part of the dispute outside arbitral jurisdiction.
A legal update to record: Law No. 81/2025/QH15 (effective from 01/7/2025) amended Clause 3 of Article 7 of the Law on Commercial Arbitration on the court competent for arbitration-related activities — most arbitration-support requests fall within regional People’s Courts’ jurisdiction. Note the distinction from Resolution No. 81/2025/UBTVQH15 — an entirely different instrument concerning court system organization, not an amendment to the Law on Commercial Arbitration.
Frequently asked questions
Is a verbal arbitration agreement valid?
No. Article 16 requires arbitration agreements to be established in written form (broadly understood, including email, fax, and other recorded exchanges). A purely verbal agreement fails the form requirement and is invalid under Clause 4 of Article 18.
If the main contract is declared invalid, does the arbitration clause survive?
Yes. Article 19 provides that the arbitration agreement is entirely independent of the contract — the contract’s invalidity does not invalidate the arbitration agreement. The arbitral tribunal itself will be the body examining arguments about the main contract’s invalidity.
What if the clause says “disputes resolved at an arbitration center” without naming a specific center?
This is a defective but not necessarily invalid clause. Under Clause 5 of Article 43, where no specific arbitration institution can be identified, the parties must re-agree; failing agreement, the choice of form and institution is made at the claimant’s request. The best practice, however, is to state the center’s name from the outset to avoid disputes.
The other side files suit in court despite an arbitration agreement — what to do?
Under Article 6, the court must decline jurisdiction if the arbitration agreement is valid and enforceable. The sued party should invoke the arbitration agreement from the earliest stage so the court declines jurisdiction. If the agreement is invalid or unenforceable, the court will accept the case.
Is a consumer bound by a pre-drafted arbitration clause in a contract?
Article 17 provides a consumer-protection exception: even where the arbitration clause is in standard terms pre-drafted by the supplier, the consumer retains the right to choose arbitration or court; the supplier may sue in arbitration only with the consumer’s consent.
Contact FLAT LAW FIRM
FLAT LAW FIRM is a boutique business law firm specializing in foreign investment (FDI), cross-border transactions, and commercial dispute resolution in Vietnam. We review and draft arbitration clauses in commercial contracts, EPC contracts, joint venture and M&A contracts; and represent clients in disputes over arbitration agreement validity before arbitral tribunals and courts.
For the arbitration clause in your business’s contracts to truly “work” when disputes arise, contact us for review and advice.
Disclaimer
This article is for general information on Vietnamese commercial arbitration law at the time of publication only and does not constitute legal advice for any specific case. The validity of an arbitration agreement depends on each case’s specific circumstances; businesses should consult a lawyer before deciding.
Useful links
- Arbitration dispute resolution — FLAT’s overview page on commercial arbitration.
- Choosing arbitration or court for commercial disputes — a comparison framework for choosing a dispute resolution mechanism.
- Setting aside arbitral awards in Vietnam — an invalid arbitration agreement is a ground for setting aside.
- Choosing arbitrators in disputes — standards and strategies for choosing arbitrators.
