Is a unilateral option clause valid in Vietnam?

  1. Introduction

A “bilateral” or “symmetric” dispute clause gives each party equal rights in relation to the dispute resolution: both parties have the same rights to refer their disputes to courts or to arbitration. Conversely, a unilateral option clause (“UOC”) is one that grants only one party the right to choose between arbitration and litigation but leaving the other party with no such choice.

The UOCs are very common in finance transactions.[1] The rationale behind these types of clauses is that they will ensure better enforcement against assests of debtors which may be located in several jurisdictions.[2] For instance, in the situation where the debt for loan is obvious and there is no dispute in this regard, the lender (bank or financial institution) could bring a lawsuit against the borrower in the state court of location of his assets instead of referring it to arbitration. Because litigation provides an opportunity to recover the debt within a shorter period of time, whereas the commencement of arbitration may be too expensive and time consuming.

Moreover, the UOC may be found in other types of contracts, for instance in tenancy agreements, charter parties, employment contracts and other agreements.

The enforceability of UOCs has been upheld in many jurisdictions.[3] However, their vailidity has been brought into questions in others.[4] This article addresses the question whether or not the UOC is valid in Vietnam.

  1. Different types of the UOC

There are two types of UOC. The first one is the UOC that establishes the litigation as a main option while the arbitration is only available to one party. For instance:

Notwithstanding the submission to jurisdiction of English Courts clause, the Lender may, at any time before instituting any court proceedings, or otherwise submitting to the jurisdiction of a court, elect to have any dispute finally settled by arbitration. The arbitration shall be conducted in accordance with the Rules of the Singapore International Arbitration Centre in effect at the time of the arbitration (the “Rules”), except as they are modified by the provisions of this Agreement.”

The second one is the UOC that provides for arbitration as a mean of dispute resolution, while retaining the right of one party to refer to national court. We could take the following clause as an example:

All disputes, claims, controversies, and disagreements relating to or arising out of this Agreement, or the subject matter of this Agreement, shall be finally resolved by arbitration in accordance with [add institutional arbitration rules]. Notwithstanding the foregoing, [Party A] shall be free at its sole option to seek judicial relief..”

  1. Vietnam’s position towards the UOC

The Vietnamese courts have not examined the validity of UOC in the context of finance transactions. However, we could find an answer to such a question in the Resolution 01/2014/NQ-HĐTP (“Resolution 01”). In particular, Article 2.4 Resolution 01 lists two different situations and addresses them as follows:

(i)    If the claimant submits the dispute to arbitration before bringing it to the court, or submits the dispute to arbitration when the court has not yet accepted the case, the court shall apply Article 6 of the Law on Commercial Arbitration 2010 (“LCA”) or Article 192.1(i) of the Civil Procedure Code to refuse the jurisdiction to decide the case.

(ii)   If the claimant brings its dispute to the court, the court shall immediately determine whether or not one of the parties had submitted the disputes to arbitration. If the court determines that either party had already submitted the dispute to arbitration, the court shall refuse the jurisdiction. Otherwise, the court shall accept the jurisdiction over the dispute.

It could be found that the laws of Vietnam adopts a friendly approach to the validity of the UOC. To a certain extent, Vietnam could be considered as a pro-arbitration jurisdiction in that regard. Even if one party brings the dispute to the court in the first place, the court will always prioritize the arbitration option of the UOC. Before seizing the jurisdiction over the case, the court always makes sure that neither party had referred the dispute to arbitration.

Moreover, the courts will recognise the validity of UOC granting a consumer an option to choose between litigation and arbitration. In particular, Article 17 of the LCA provides that even if a goods or service provider has drafted and inserted an arbitration clause in its standard conditions on supply of such goods and services, a consumer shall still have the right to select arbitration or a court to resolve the dispute. A goods and/or service provider shall only have the right to institute arbitration proceedings if the consumer so consents. If the consumer does not consent to this arbitration, such arbitration agreement will be rendered unenforceable.[5]

  1. Jurisdictions upholding the validity of UOC

In many pro-arbitration jurisdictions such as England and Singapore, the UOC is consistently presumed to be valid.

In England, some early national court decisions held that an arbitration agreement would only be valid if both parties were granted mutual rights to refer their disputes to arbitration. The Court of Appeal in Baron vs. Sunderland Corp (1966) stated that: “It is necessary in an arbitration clause that each party shall agree to refer disputes to arbitration; and it is an essential ingredient of an arbitration clause that either party may, in the event of a dispute arising, refer it, in the provided manner, to arbitration. In other words, the clause must give bilateral rights of reference”. This decision was followed in Tote Bookmakers Ltd vs. Development and Property Holding Co Ltd (1985).[6]

However, the English courts changed their approach to the validity of UOCs. In Pittalis vs. Sherefettin (1986), the Court of Appeal, referring to the consent of the parties in respect of unilateral arbitration clause, overruled early decisions. Lord Justice Fox reasoned that: “I can see no reason why, if an agreement between two parties confers on one of them alone the right to refer the matter to arbitration, the reference should not constitute an arbitration. There is a fully bilateral agreement which constitutes a contract to refer. The fact the option is exercisable by one of the party only seems to me to be irrelevant. The arrangement suits both parties.” Moreover, the court in Law Debenture Trust Corp v Elektrim Finance BV (2005) followed the approach of Pittalis case and declared that: “[..] a unilateral clause gives an additional advantage to one of the parties but this should be treated in the same vein as any other contractual clause giving advantage and not as a peculiarity on its own”.

In Dyna Jet case, the High Court found that UOC did constitute an arbitration agreement, and was therefore generally enforceable under the Singapore International Arbitration Act.[7]

  1. Jurisdictions refusing to enforce the UOC

In Sony Ericsson case[8], the Russian Court reversed consistent approach in Russia and refused to recognize the vailidity of such a clause. The Russian Court relied on the right to a fair trial stipulated in Article 6 of the European Convention on Human Rights to render its decision.

However, it should be noted the principle of equal treatment comes into being when a procedure has already begun.[9]  In Mauritius Commercial Bank Ltd. v. Hestia Holdings Ltd. & Sujana Universal Industries Ltd. (2013), the English Court confirmed that: “the public policy to which that was said to be inimical was ‘equal access to justice’ as reflected in Article 6 of the ECHR. But Article 6 is directed to access to justice within the forum chosen by the parties, not to choice of forum”. In other words, the UOC has no effect on the procedural equality between the parties. Such a clause only puts the parties in a unfavourable position in the pre-arbitration or pre-litigation stage. Therefore, it could not be argued that the UOC contradicts the principle of equal treatment.

In Rothschild case[10], the French Supreme Court determined that a dispute resolution clause referring all disputes to the courts of Luxembourg but granting one party the unilateral right to refer disputes to any other court of competent jurisdiction was not an agreement conferring jurisdiction within the meaning of Article 23 of the Brussels I regulation, but rather the imposition of terms by one party on the other. Such an imposition qualified as a “condition potestative” and rendered onesided jurisdiction clauses ineffective, thereby also casting doubt upon the French courts’ attitude to the UOCs.

  1. Conclusion

The UOC is an attractive tool for the commercial parties, especially in the context of finance transactions.

Internationally, the validity of UOCs remains uncertain. Some pro-arbitration jurisdictions such as England and Singapore have consistently upheld the validity of UOCs. Vietnam also adopts a friendly approach to the validity of UOCs. Although there has not been any case dealing with the validity of UOC so far, the Vietnamese courts will recognize the validity of this clause based on the Resolution 01. Meanwhile, some jurisdictions such as Russia and France have invalidated UOCs for a variety of concerns, especially the equality concerns.

Therefore, the parties to a loan agreement must keep that uncertainty in mind. The parties entering into a UOC should also ensure that the UOC: (i) is governed by the law of a UOC-friendly jurisdiction; and (ii) provides for UOC friendly jurisdictions and seats of arbitration. Besides, the parties should also consider where their potential arbitral awards may be enforced. In some jurisdictions, the principles of equality may rise to the level of public policy under Article V(2)(b) of the New York Convention. This may bar the enforcement of the award in that jurisdiction.

There are two types of UOC, one of which allows both parties to refer the case to arbitration while only one party is entitled to litigation. The other type grants both parties the right to bring dispute to litigation while the arbitration is available to only one party. During the drafting process, the parties should excersise caution to decide to insert the former or the latter in the contract. The parties are recommended to apply the former type in their arbitration clause to minimise the chance of the clause being held invalid. As both parties are entilted to arbitration, it is difficult for a party to challenge the jurisdiction of the arbitral tribunal regardless of the option for litigation by one party.


[1] Gary B. Born, International Commercial Arbitration, 3rd edition, Kluwer Law International 2021, p. 866

[2] Deyan Draguiev, Unilateral Jurisdiction Clause: The Case for Invalidity, Severability or Enforceability; Peter Ashford FCIARB, Is an Asymmetric Disputes Clause Valid and Enforceable

[3] NB Three Shipping Ltd vs. Harebell Shipping Ltd (2004); Dyna-Jet Pte Ltd v Wilson Taylor Asia Pacific Pte Ltd (2016)

[4] Mme X v. Rothschild [2012]

[5] Article 4.5 Resolution 01/2014

[6] Tote Bookmakers Ltd vs. Development and Property Holding Co Ltd,. 2 All E.R. 555, 1985.

[7] Dyna-Jet Pte Ltd v Wilson Taylor Asia Pacific Pte Ltd (2016)

[8] Russian Telephone Company v. Sony Ericsson Mobile Communication Rus (2012)

[9] Deyan Draguiev, Unilateral Jurisdiction Clause: The Case for Invalidity, Severability or Enforceability

[10] Mme X v. Rothschild [2012]

Ngan Tran

Costs and interests of arbitration: An English laws perspective with reference to Vietnam

Tony Nguyen – Sr Partner of EPLegal

This article provides a brief explanation of the principles of costs allocation in arbitration from English law and Vietnamese law perspective, which will help the tribunals and parties determine or submit their costs allocation in these respective jurisdictions. It also gives a brief introduction of interests in arbitration from a comparative perspective.

  1. What costs shall be allocated?

Under Section 59 of the Arbitration Act 1996 the costs include the following: (a) the arbitrators’ fees and expenses, (b) the fees and expenses of any arbitral institution concerned, and (c) the legal or other costs of the parties.

In practice, the following costs are well-established in international arbitration:[1]

(a) The fees of the arbitration tribunal (“Tribunal”) and, in institutional arbitration, the fee and disbursements payable to the institute which administrates the arbitral proceedings (normally be fixed and stated by the arbitral institute);

(b) The reasonable travel and other expenses incurred by the arbitrators;

(c) The reasonable costs of expert advice and other assistance (e.g. translation, court reporting) required by the arbitral tribunal;

(d) The reasonable travel and other expenses of witnesses to the extent such expenses are approved by the arbitral tribunal;

(e) The reasonable legal and other costs incurred by the parties in relation to the arbitration;

(f) Any fees and expenses of the appointing authority at the request of the parties.

There has been a discussion on whether the overhead costs of the parties (e.g. in-house counsels and witnesses) participating in the arbitration process should be counted as costs in arbitration, but rarely the parties submit these costs to the tribunal for allocation. The main focus is usually on the legal fees and other professional fees (such as fees for the delay, quantum and legal expert advice) spent by the parties, as in the majority of cases the parties are not in agreement on this when the quantum of the costs are inter-played with the allocation of costs principles.

The Vietnamese Law on Commercial Arbitration (the “LCA”) only provides a restrictive definition for arbitration fees (but not necessarily costs) which include the following:[2]

(a) Remuneration and travel and other expenses for arbitrators;

(b) Fees for expert consultation and other assistance at the request of the Tribunal;

(c) Administrative charges;

(d) Fees for appointment of the arbitrator (paid to the appointing authority) in ad-hoc arbitration at the request of the disputing parties;

(e) Charges for use of other services provided by the arbitral centre.

Legal fees and fees for other professional advice (such as technical/legal expert) engaged by the parties normally form the biggest portion in the costs of international arbitration. Unfortunately, the LCA provides no references to legal fees and other professional fees engaged by the parties (but not necessarily at the request of the Tribunal). This is a critical gap in the LCA that needs to be fulfilled in future developments.

Despite the above doctrinal gap, practices in Vietnam Arbitration Centre (“VIAC”), the largest arbitral institution in Vietnam, indicate that VIAC arbitrators generally accept that principles applicable for arbitration fees as defined by the LCA can also apply to the legal fees and fees for experts appointed by the parties.

  1. General principles of costs allocation

From the English law perspective, the Tribunal has full discretionary power to decide on costs as they see fit. Unless otherwise stated, the costs shall be determined on a standard basis. The Civil Procedural Rules (the equivalence to Vietnam’s Civil Procedural Code) interpreted the term “standard basis” as follows:

  • The Tribunal only allow costs that are proportionate with the reported issues. Any costs that are disproportionate with the amount claimed shall be waived or reduced even if such costs are reasonable or necessary; and
  • If there are doubts regarding whether the costs incurred are reasonably and adequately or even whether such claims are reasonable and proportionate with the matter or not, the Tribunal shall consider in favour of the paying party.
  1. Exceptions

The following matters will allow the Tribunal to depart from applying the general principles and instead exercise its discretionary power to allocate costs on an indemnity basis:

  • The Claimant overinflates the amount claimed;
  • Unacceptable conduct by either party;
  • The successful party has lost on a distinct issue that is time-consuming;
  • Sealed envelope offers or otherwise referred to as the Part 36 offer. This means that if the successful party refused an offer that is equal to or more than the monies awarded to him, any costs incurred from the time the offer is put forth onwards shall be borne by the Claimant.

Where the fees are assessed on an indemnity basis, the Tribunal would only consider the reasonableness instead of proportionality. Besides, where there are doubts on whether the costs have reasonably incurred or not, the Tribunal will consider in favour of the payee.

In both above-mentioned scenarios, the Tribunal shall not allow any costs that are deemed unreasonable.

  1. What if the parties had prior agreements on costs?

Normally, the Tribunal will follow the parties’ agreement on costs allocation, but the Tribunal will also consider any compulsory provisions that may limit the parties’ freedom to enter into such agreement. For example, under English laws, the parties are only able to agree on who will bear their costs after a dispute has arisen. Hence, if the arbitration clause in the substantive contract provides that each party are to be responsible for their expenses, this agreement will not be valid.[3]

An important question in this regard is whether the matter of costs allocation in arbitration is a procedural issue (as opposed to a substantive one) and shall be governed by the laws of the seat of arbitration. If it is a matter of substance, then the governing law of the substantive contract shall apply to determine the costs issues. In recent SIAC cases involving Vietnamese parties, though the Vietnamese law may be regarded as the laws governing the substantive contract, the Tribunals tend to apply general principles of costs allocation in international arbitration.

In a recent ICC matter seated in Vietnam, the sole arbitrator accepted reference to foreign precedents to allocate the costs following a party’s proposal, even though the seat of arbitration in Vietnam. The LCA provides that the Tribunal has the wide power to allocate costs, thus, the Tribunal would base their reasoning on any reasonable principles, unless the law of the seat of arbitration has a mandatory provision to obstruct it.

  1. Interests

The consideration concerning whether the calculation of the interest falls within either the procedural or substantive law. In principle, once the interests clause is clearly stated in the contract, it would become the rights and obligation of both parties to act, thus, such clause shall be governed by the substantive law of the contract and mandatory restrictions may apply to the determination of interest.

Under English law, the parties are free to agree on the powers of the Tribunal as regards the award of interest, including whether simple or compound interest is applicable.[4]

Under Vietnamese laws, interests may be capped by the law.[5] Consider a SIAC case where the contract provides that the violating party shall be obligated to pay the late payment interests of 21%, and the governing law of the substantive contract is Vietnamese. The Tribunal found this agreement was not in line with the Civil Code (the law of the seat), which does not allow penalty interest to go beyond 20% and adjusted the late payment interest to 20% accordingly.

  1. Conclusion

The principles of costs in international arbitration are rather straightforward and logical ones. Since there will be costs incurred throughout the arbitration proceedings, such fees are to be allocated amongst the parties and are recoverable on a reasonable basis. In general, the unsuccessful party shall bear the costs of the arbitration and legal (and other associated) costs to the successful party. However, the Tribunal have broad power, albeit on justifiable grounds, to depart from this principle of costs and to allocate costs as a tool to reflect the parties conduct in the arbitration proceedings. Concerning the interests, it is a matter of substantive law and though the parties are free to agree on interests, there may be restrictions under the substantive law that will limit the parties autonomy.


[1] See for example UNCITRAL Rules (2013) Article 40.
[2] Article 34 LCA.
[3] Section 60 Arbitration Act 1996.
[4] Section 49 Arbitration Act 1996.
[5] Article 357.2 and Article 468 Civil Code 2015.


Please click the link below to read our legal analysis: English version | Vietnamese version

Vietnam Chapter | International Arbitration 2020 (Sixth Edition) | Global Legal Insights

Fueled by Vietnam’s rapid integration into the global economy and being a top destination for cross-border investment, international arbitration has blossomed in Vietnam in recent years. The year 2019 witnessed the growing trend of non-state dispute resolution when the number of disputes settled by both foreign arbitration and domestic arbitration increased significantly.

EPLegal is honored to have contributed to the Vietnam chapter of Global Legal Insights: International Arbitration 2020 (Sixth Edition).

This Chapter presents EPLegal’s insights into various “hot” legal topics in arbitration practice in Vietnam, such as: the difference between concepts of domestic and foreign arbitration; the cases of nullified arbitral awards; the recognition and enforcement of arbitral decisions and awards; and introduction of ISDS in Vietnam.

The chapter is free to access at:

For any enquiry, please contact us at following persons in charge: EPLegal Limited


Nguyen Trung Nam (Tony)
Senior Partner

Bui Dai Huynh (Harry)
Senior Associate



The expedited arbitration under 72nd session of the working group II – The solution to the efficiency of arbitration

The solution to the efficiency of arbitration

From 21 September 2020 until 25 September 2020, the 72nd Session of the Working Group II (“WG II”) is taking place to discuss a Revised Draft of the expedited arbitration provisions (“Revised Draft”).

The UNCITRAL at its 51st Session gave the WG II the mandate to develop proposals that can enhance the efficiency of arbitration and ensure the quality of the proceedings. This mandate reflects the reality that arbitration is increasingly criticised for, among other things, being too lengthy and time-consuming. Moreover, the legitimacy of arbitration is more frequently questioned. Therefore, the UNCITRAL directed the WG II to take up issues relating to expedited arbitration to respond to this criticism.

In general, expedited arbitration is considered to be particularly appropriate for small disputes. It is a simplified form of proceedings and already introduced by a number of arbitral institutions. There is a variety of features permitting to expedite the arbitral proceedings – for example, providing for sole arbitrator instead of a panel of three, reducing the time limits for the various actions related to the proceedings, reducing the number of submissions, etc.

According to the Revised Draft, the express consent of the parties is the only triggering factor for the expedited arbitration to be applied (draft provision 1), however, the WG II is discussing if and where guidance could be offered to parties on when to refer a dispute to expedited arbitration. At the same time, The WG II is currently taking into account the following issues: (i) the complexity of the transactions and the number of parties involved; (ii) the need to hold hearings; (iii) the possibility of joinder or consolidation; and (iv) the likelihood of an award being rendered with the provided time frames.

Individuals who are interested in the expedited arbitration could refer to the Revised Draft of the WG II and Comments on the Revised Draft of expedited arbitration made by Mr. Tony Nguyen – Founding Partner of EPLegal.

Further information can be found here:

Revised Draft of Expedited Arbitration

Comments on the Revised Draft of Expedited Arbitration

VIAC’s webinar on Arbitration and Mediation of Vietnam in the context of Covid-19

On 26 May 2020, Mr. Tony Nguyen – Founding Partner of EPLegal – will speak at a VIAC’s webinar on topic of “Arbitration and Mediation of Vietnam in the context of COVID-19: Practical guidelines to minimize damage arising from the COVID-19 pandemic to business activities”.

The webinar is the second event (after the first one on 13 May 2020) of a series of activities towards Vietnam Arbitration Week and Vietnam Trade Mediation 2020 held by Vietnam International Arbitration Center (VIAC) and Vietnam Mediation Center (VMC).

This webinar will take place from 2.30 pm on 26 May 2020, using the Zoom platform. To register your participation, please learn more here.