When drafting land and factory leases, the dispute-resolution clause is often an afterthought — until a dispute erupts and the parties discover that the wrong forum choice means refusal of jurisdiction and starting over. For FDI investors, the “court or arbitration” call should be made upfront, based on each dispute type’s nature.
Which disputes arbitration may hear
Under the Law on Commercial Arbitration 2010 (54/2010/QH12), effective 1 January 2011, arbitration has jurisdiction over commercial disputes where at least one party engages in commercial activity (Article 5), provided the parties have a written arbitration agreement (Article 16) — an arbitration clause in the lease or a separate agreement. Disputes over lease contractual duties — rent payment, penalties, damages, termination — may all go to arbitration if a clause exists.
The key limit: land-use-right disputes
Arbitration cannot resolve disputes over land use rights — i.e. “who holds the rights to the plot”. Under the Land Law 2024 (68/2024/QH15), land disputes concerning use rights are settled by the People’s Courts under litigation procedures. An arbitration clause in a lease therefore covers only contractual disputes (duties, breaches, damages); if the dispute escalates into a land-use-right dispute, it must still go to court. Drafting should separate these two layers clearly to avoid partial invalidation of the arbitration agreement.
Comparing the options
Arbitration (e.g. VIAC under the VIAC 2026 Arbitration Rules, effective 1 July 2026; or international institutions like SIAC or ICC for foreign-element disputes): final awards, confidentiality, flexibility on language and governing law — suited to high-value disputes where business relations matter. Courts: lower cost, an appeals system, and the only option for land-use-right disputes. For FDI land leases, the common formula is: contractual disputes → arbitration; land-use-right disputes → courts; with the institution, number of arbitrators, language and seat stated in the clause.
Frequently asked questions
1. Court or arbitration for land lease disputes?
It depends on nature: contractual-duty disputes (rent, penalties, damages, termination) may go to arbitration if agreed; land-use-right disputes must go to court.
2. What must a lease arbitration clause contain?
Consent to arbitrate, the institution’s name, number of arbitrators, seat and language of proceedings, and governing law. Missing elements can render the clause unenforceable.
3. Domestic or international arbitration for foreign-investor disputes?
Domestic arbitration (VIAC) is convenient on cost and enforcement in Vietnam; international arbitration suits parties wanting neutrality of seat and governing law, especially for high-value, multi-jurisdiction disputes.
4. How do arbitration costs compare with courts?
Arbitration usually costs more (arbitrator and institutional fees) but is faster and final; courts cost less but may run through multiple appeal levels. Weigh dispute value and confidentiality needs when choosing.
This article has been quality-reviewed by the FLAW AI Legal Council. Content is for legal reference only and does not replace lawyer advice for specific cases.
