Disputes over Credit Contract Resolved by Commercial Arbitration

October 22, 2025

1. Understanding the Nature of Credit Contracts

In civil and specialized legal instruments, the concept of a credit contract is not explicitly defined. Based on the relevant provisions governing credit activities, as well as the inherent nature, role, and conditions of credit operations within the finance – banking sector, such activities essentially constitute the lending of capital or assets on the basis of trust and the principle of repayment within a specified term. Accordingly, a credit contract may be defined as a written agreement established between a credit institution (the lender) and an organization or individual (the borrower) that has satisfied all statutory conditions. Under this agreement, the credit institution undertakes to advance a sum of money to the borrower for use within a specific period, while the borrower is obligated to fully repay both the principal and the interest to the lender in accordance with the terms of trust and legal compliance.

Accordingly, a credit contract embodies the essential characteristics of a loan-for-property agreement as prescribed in Article 463 of the 2015 Civil Code:

“A loan contract is an agreement between the parties whereby the lender delivers assets to the borrower; upon maturity the borrower must return to the lender assets of the same kind, in the same quantity and of equivalent quality, and is obliged to pay interest only where so agreed or where the law so provides.”

2. Disputes over Credit Contracts and Their Classifications

Based on the concept clarified in Subsection 1, a credit contract dispute may be understood as a conflict or disagreement between the lender, being a credit institution, and the borrower, being an individual or an organization, arising in the course of performing the rights and obligations established in the written agreement. Such disputes typically concern matters relating to the repayment of principal, interest rates, disbursement of funds, or the enforcement of secured assets. In essence, these disputes represent a conflict of economic interests, occurring when one of the parties – most commonly the borrower – fails or deliberately refuses to perform its contractual commitments, thereby infringing upon the lawful rights and interests of the other party.

Common types of credit contract disputes include those arising from breaches of contractual obligations by either party during the performance of the agreement; disputes arising from the enforcement or disposition of collateral securing a credit contract; and disputes concerning interest rates, among others. Specifically:

+ Disputes Arising from Breach of Contractual Obligations: This is the most common type of dispute, occurring when one or both parties breach their obligations during the performance of the credit contract.

Breach by the Credit Institution: This occurs when the lender fails to perform, or inadequately performs, its obligation to disburse funds to the borrower. Delays in disbursement or disbursing an amount lower than that contractually committed may severely affect the borrower’s business plan and legitimate interests, and may even impair their repayment capacity, thereby giving rise to disputes.
Breach by the Borrower: This occurs when the borrower fails to fulfill their obligation to repay the principal and interest in accordance with the agreed schedule and amount.

+ Disputes over Interest Rates: This category of disputes is particularly complex and often stems from divergent interpretations and applications of legal provisions by the parties.

Disputes over the Applicable Lending Interest Rate: Credit institutions frequently contend that lending interest rates must be governed by the specialized regulations issued by the State Bank of Vietnam, whereas borrowers—both individuals and organizations—tend to rely on the Civil Code. The latter argument is premised on the notion that a credit contract constitutes a form of loan-for-property agreement; hence, the applicable interest rate must not exceed 150% of the basic interest rate announced by the State Bank of Vietnam from time to time (pursuant to the 2015 Civil Code).
Disputes over the Default Interest Rate: Disagreements also arise regarding whether the applicable default interest rate should be determined in accordance with the specialized regulations of the State Bank of Vietnam or the general provisions on overdue interest rates stipulated in the Civil Code.

+ Disputes Arising from the Enforcement of Secured Assets: This category of disputes occurs only in credit contracts secured by assets such as mortgages or pledges and primarily concerns the process of asset recovery and disposition.

Such disputes often originate from the initial appraisal conducted by credit officers. If the assessment or valuation of the collateral is inaccurate from the outset, or if the subsequent process of handling and auctioning the asset lacks transparency, disputes are likely to arise. In such cases, the recovered capital may not correspond to the asset’s market value, thereby giving rise to complaints and conflicts among the lender, the borrower, and other interested parties.

3. Resolution of Credit Contract Disputes through Commercial Arbitration

A credit contract embodies the nature of a loan-for-property agreement; therefore, whether the Civil Code or specialized legislation is applied to settle a credit contract dispute – be it under civil or commercial proceedings – does not alter its substantive legal character. Accordingly, such disputes may be resolved through several mechanisms, namely negotiation, mediation, arbitration, and court litigation.

Given the current context, disputes arising from credit contracts have been increasing in both frequency and complexity. Among the available mechanisms, commercial arbitration has become the preferred method for resolving disputes in business and commercial activities. The conduct of arbitral proceedings and the procedural rules governing dispute resolution are carried out in accordance with the provisions of the law on commercial arbitration.

3.1. Advantages of Commercial Arbitration in Resolving Credit Contract Disputes

The commercial arbitration mechanism possesses several notable advantages over court litigation, particularly for enterprises. The most prominent advantage lies in its confidentiality. Since court proceedings are conducted publicly, dispute resolution through judicial means may inadvertently expose sensitive business information – such as trade secrets, production processes, or confidential financial data – thereby negatively affecting a company’s reputation and competitive position in the market. In contrast, arbitration proceedings are strictly confidential; all documents and procedural activities are protected from disclosure, fully satisfying the enterprise’s need for information security.

Arbitration also provides a significant advantage in the international enforceability of awards. Whereas judgments rendered by Vietnamese courts are enforceable only within national territory, arbitral awards are recognized and enforceable in more than 150 countries under international instruments such as the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This global enforceability renders arbitration an optimal and internationalized choice for credit institutions and enterprises engaged in cross-border financing and commercial transactions.

Another strategic advantage of arbitration is its flexibility and high degree of party autonomy. Pursuant to the principle of contractual agreement, the parties are free to determine nearly all procedural aspects – such as the timing and venue of hearings, the selection of arbitrators with relevant expertise, the language of proceedings, and even the applicable law governing the dispute. This flexibility not only reduces time and costs but also creates a more business-oriented and efficient dispute resolution environment.

Moreover, arbitration offers finality and immediate enforceability, as it operates under a single-tier adjudication system. According to Clause 5, Article 4 of the 2010 Law on Commercial Arbitration, “An arbitral award is final and binding.” This means that an arbitral award takes effect immediately upon issuance, and the parties have no right to appeal to a higher arbitral body or to a court for a re-trial on the merits. Nevertheless, to preserve fundamental fairness, the parties retain a limited right to petition the court for annulment of the award, but solely on procedural grounds rather than on substantive reconsideration. This finality ensures swift resolution, facilitates debt recovery, and promotes business stability.

3.2. Conditions for Resolving Credit Contract Disputes through Arbitration

For a dispute arising from a credit contract to be resolved by means of commercial arbitration, the parties must concurrently satisfy two fundamental conditions as prescribed by the 2010 Law on Commercial Arbitration (legal bases in Articles 2 and 5 of the Law)

First, the dispute must fall within the jurisdiction of arbitration. Under the law, disputes arising from commercial activities fall within the scope of arbitral resolution. Since the credit-granting and lending activities of credit institutions are inherently considered profit-oriented commercial transactions, disputes arising from credit contracts are, by their legal nature, deemed to satisfy the jurisdictional requirement for resolution by an arbitral tribunal.

Second, a valid arbitration agreement between the lender and the borrower constitutes the decisive condition. As arbitration is founded upon the principle of party autonomy and consent, a dispute may only be resolved by this mechanism if both parties have expressly agreed to submit it to arbitration. Such agreement must be made in writing – either as an arbitration clause incorporated directly into the credit contract from the outset or as a separate agreement concluded after the dispute has arisen. In summary, to fully benefit from the advantages of arbitration namely confidentiality, procedural efficiency, and finality the parties to a credit relationship must ensure that a clear and legally valid arbitration agreement is incorporated into their contract.

4. Mechanisms for Resolving Disputes through the Bigboss International Arbitration Center (BBIAC)

To resolve a dispute through commercial arbitration at BBIAC, clients may insert one of the following two clauses into their contracts:

4.1. Model Arbitration Clause

Additionally, the parties may supplement the clause with:

(a) The number of arbitrators shall be [one or three].

(b) The seat of arbitration shall be [city and/or country].

(c) The governing law of the contract shall be [ ].*

(d) The language of the arbitration shall be [ ].**

Notes:

* Applicable only to disputes involving a foreign element.

** Applicable only to disputes involving a foreign element or disputes where at least one party is an enterprise with foreign invested capital.

4.2. Model Arbitration Clause Applicable to Expedited Procedure

“Any dispute arising out of or in connection with this contract shall be settled by arbitration at the BIGBOSS International Commercial Arbitration Center (BBIAC) in accordance with the Arbitration Rules of Procedure of this Center. The Parties agree that the arbitration proceedings shall be conducted under the Expedited Procedure stipulated in Article 37 of the BBIAC Arbitration Rules of Procedure.”

Additionally, the parties may supplement the clause with:

(a) The seat of arbitration shall be [city and/or country].

(b) The governing law of the contract shall be [ ].*

(c) The language of the arbitration shall be [ ].**

Notes:

* Applicable only to disputes involving a foreign element.

** Applicable only to disputes involving a foreign element or disputes where at least one party is an enterprise with foreign invested capital.

Contact 0979 133 955 for consultation!