Commercial Arbitration in Resolving Land Disputes in Vietnam: A Flexible and Modern Dispute Solution

Authors: Hung Ngo, Ngan Ho, and Chau Nguyen

Jurisdiction of Commercial Arbitration in Resolving Land Disputes under the 2024 Land Law

The 2024 Land Law (Law No. 31/2024/QH15), effective from August 1, 2024 (“2024 Land Law”), has officially replaced the 2013 Land Law, marking a significant advancement in land management and the resolution of land-related disputes in Vietnam. A key highlight of the new law is the formal recognition of Vietnamese Commercial Arbitration as an effective mechanism for addressing disputes arising from commercial activities related to land in Vietnam. 

Under Clause 5 of Article 236 of the 2024 Land Law (“Article 236.5”), disputes arising from “commercial activities related to land” may be resolved either by the People’s Court or through Vietnamese Commercial Arbitration Centers. Furthermore, Clause 6 of Article 236 of the 2024 Land Law stipulates that People’s Committees are obliged to provide relevant documents and information when requested by courts or arbitration bodies. This represents a notable improvement, offering flexibility and transparency to the parties involved, particularly businesses and investors, including foreign investors.

The 2024 Land Law does not provide a specific definition or the scope of those “commercial activities related to land” from which disputes may be referred to commercial arbitration for resolution. However, its application may be interpreted with reference to the 2005 Commercial Law, which defines “commercial activities” as transactions conducted for profit-making purposes.

The recognition of commercial arbitration as an effective method for resolving land-related disputes in commercial activities in Vietnam has opened up opportunities to apply arbitration to a wide range of common commercial disputes.

Mediation before the Litigation: Mandatory for Courts, an Exception for Arbitration

Clause 2 of Article 235 of the 2024 Land Law mandates that disputing parties must undergo mediation at the local People’s Committee before submitting their dispute to a court or other competent state authority for resolution. However, Vietnamese Commercial Arbitration Centers are not state bodies within the governmental system, and there are no specific provisions requiring land disputes to undergo mediation at a local People’s Committee as a mandatory prerequisite prior to initiating proceedings at Vietnamese Commercial Arbitration.

We believe that this provision aligns with the nature of commercial activities while also saving time and enhancing efficiency for parties opting for arbitration.

Limitations on Arbitration Jurisdiction: When Does It Not Apply?

Although commercial arbitration has been officially recognized as one of the methods for resolving land disputes within Vietnam’s legal framework, not all land disputes fall under its jurisdiction.

Reports and submissions from the Government and the Standing Committee of the National Assembly during the drafting process of the 2024 Land Law (including the Report on Receiving and Explaining Public Opinions on the Draft Amended Land Law and Opinions of National Assembly Delegates at the 4^th Session of the 15^th National Assembly on April 26, 2023; Report No. 139/BC-CP dated April 26, 2023, Summarizing Public Opinions on the Draft Amended Land Law; and the Report on Receiving, Explaining, and Revising the Draft Amended Land Law for Submission to National Assembly Delegations) indicate that:

• The drafting committee determined that “The resolution of land disputes by courts shall comply with the Civil Procedure Code. The resolution by commercial arbitration must adhere to the provisions of the [Ordinance on] Commercial Arbitration.”
• Consideration was given to the relationship between the provisions of the Land Law, the Commercial Arbitration Law, and the Civil Procedure Code, particularly with respect to land disputes within Vietnam’s territory.
• The amendment from “commercial arbitration” in the draft law to “Vietnamese Commercial Arbitration” in Article 236.5 reflects the lawmakers’ intent to limit the jurisdiction of international arbitration over land disputes in Vietnam, aiming to protect the sensitive nature of land issues related to national sovereignty (the lawmakers adopted the provisions on the exclusive jurisdiction of Vietnamese courts under Article 470 of the current Civil Procedure Code, restricting jurisdiction to “Vietnamese Commercial Arbitration” and excluding the authority of foreign arbitration bodies over disputes related to land and real estate, irrespective of whether the parties select Vietnam as the seat of arbitration).
• According to Article 236 of the 2024 Land Law, the law does not establish an absolute boundary between the jurisdiction of the People’s Courts and state administrative agencies (under Clauses 1, 2, 3, and 4) and that of Vietnamese Commercial Arbitration (under Clause 5). For disputes concerning land use rights – whether or not a land use certificate has been issued – courts have jurisdiction to adjudicate in accordance with the Civil Procedure Code. However, where such disputes arise from commercial activities related to land, the parties are fully entitled to opt for Vietnamese Commercial Arbitration for resolution under the legal provisions governing arbitration. In our view, this interpretation is reasonable, and this provision fosters flexibility, enabling the resolution of civil-commercial disputes involving land elements in a manner more aligned with practical realities.

Based on the lawmakers’ intent as outlined above, although not explicitly listed in Article 236 of the 2024 Land Law, we could tentatively conclude several circumstances in which Vietnamese Commercial Arbitration lacks jurisdiction:

• Disputes not arising from commercial activities: Disputes arising purely from civil relationships between households or individuals that do not constitute commercial activities as defined under the 2010 Commercial Arbitration Law and the 2005 Commercial Law of Vietnam.
• Disputes arising from administrative land-related relationships: Disputes between land users and competent state authorities concerning administrative decisions or actions, such as land recovery, compensation for site clearance, issuance of land use right certificates, etc.

Determining Factors: Jurisdiction of Arbitration

To determine whether commercial arbitration has jurisdiction to resolve a land dispute, we consider that the following fundamental conditions must be satisfied:

• Arising from commercial activities: The dispute must relate to a commercial contract or transaction between economic organizations or at least involve one party being an economic organization pursuing profit-making objectives (Clause 1, Article 3 of the 2005 Commercial Law and Article 2 of the 2010 Commercial Arbitration Law).
• Written arbitration agreement: The parties must have an explicit agreement, typically recorded in a contract, demonstrating their voluntary and mutual intent to select arbitration as the dispute resolution method (Articles 4, 5, and 16 of the 2010 Commercial Arbitration Law).
• Not excluded: The dispute must not fall within categories of administrative land disputes that are barred from arbitration.

Opportunities for Businesses

The 2024 Land Law not only modernizes Vietnam’s land management system but also establishes a flexible dispute resolution mechanism that meets the practical needs of both domestic and international businesses. The formal recognition of the jurisdiction of Vietnamese Commercial Arbitration represents a strategic step forward, alleviating the burden on the court system while providing swift, professional resolution for commercial land-related disputes.

We will continue to monitor and update our clients on the latest developments regarding the 2024 Land Law, assisting them in fully leveraging these significant legal changes. For detailed advice, please contact our team.