1. Overview of Commercial Arbitration
Commercial arbitration is a dispute resolution method agreed upon by the parties and conducted in accordance with the procedures set out in the Law on Commercial Arbitration 2010. This mechanism is mainly applied to disputes arising from commercial activities between individuals and organizations.
2. Overview of Employment Contracts
An employment contract is an agreement between an employee and an employer regarding the work to be performed, wages, working conditions, and the rights and obligations of each party.
3. The Possibility of Applying Commercial Arbitrationin Employment Contract Disputes
According to the Law on Commercial Arbitration 2010, commercial arbitration primarily resolves disputes arising from commercial activities. Meanwhile, labor relations have specific characteristics and are governed by labor law. Therefore, ordinary labor disputes generally do not fall under the jurisdiction of commercial arbitration.
However, in business practice, there are certain disputes involving employees that are closely connected with the commercial interests of enterprises, particularly disputes related to trade secrets and non-competition clauses. In such cases, the disputes may fall under the jurisdiction of commercial arbitration if there is a valid arbitration agreement.
First, disputes arising from commercially related agreements involving employees. For example, training contracts with significant costs between enterprises and employees, management consulting contracts with experts, or independent collaborator agreements. In these cases, the relationship between the parties may be considered a civil or commercial relationship rather than a purely labor relationship.
Second, disputes related to confidentiality and non-competition agreements. In many enterprises, especially technology companies or enterprises with foreign investment, employees are often required to sign agreements on confidentiality or post-employment non-competition. These agreements are sometimes separated from the employment contract and may have a civil or commercial nature. If the agreement contains an arbitration clause, disputes may be resolved through commercial arbitration.
Third, disputes between enterprises and senior executives. In some cases, chief executive officers, experts, or senior managers may sign management contracts or service agreements instead of standard employment contracts. These contracts often include arbitration clauses to ensure confidentiality and flexibility in dispute resolution.
The exclusion of commercial arbitration from ordinary labor disputes stems from several legal and practical reasons.
First, labor relations involve a relatively unequal relationship between employees and employers. If commercial arbitration were allowed, employers might compel employees to accept arbitration clauses that are unfavorable to them.
Second, labor law establishes a separate dispute resolution mechanism, including labor mediators and labor arbitration councils. This mechanism ensures that labor disputes are resolved by individuals and institutions with expertise in labor matters.
Finally, many labor disputes concern fundamental rights of employees such as wages, social insurance, working conditions, or termination of employment contracts. These matters often require the involvement of state authorities and the court system to ensure fairness and the protection of employees’ rights.
4. Confidentiality and Non-Compete Clauses in Employment Relationships
Confidentiality and non-competition clauses are commonly used by enterprises to protect their interests, especially in sectors such as technology, finance, or research and development. In these industries, employees often have access to important corporate information; therefore, employers require employees to sign agreements concerning confidentiality and non-competition.
There are two common types of clauses:
- Non-Disclosure Agreement (NDA)
- Non-Compete Agreement (NCA)
4.1 Non-Disclosure Agreements
A Non-Disclosure Agreement (NDA) is an agreement between an employee and an employer in which the employee commits not to disclose the company’s confidential information during the course of employment or after the termination of the employment contract.
According to the Labor Code 2019, employees may agree with employers on the protection of business secrets and technological secrets. Such agreements usually include the following elements:
- Scope of confidential information: including customer data, business strategies, production technologies, internal documents, marketing plans, etc.
- Employee obligations: not to disclose, copy, or use the information for personal purposes or for third parties.
- Confidentiality period: which may extend during employment and after the termination of the employment contract.
- Sanctions for violation: compensation for damages or other legal liabilities according to the agreement.
Confidentiality clauses help enterprises protect their core assets, especially in industries such as technology, finance, and research and development.
4.2 Non-Compete Clauses
A Non-Compete Clause is an agreement requiring employees not to work for competing enterprises or engage in competing businesses within a certain period after the termination of the employment contract.
The purpose of this clause is to prevent employees from using knowledge, trade secrets, or the customer network of their former employer to benefit competing enterprises.
In practice, non-competition clauses usually specify:
- Restricted activities: business sectors or industries that employees are not allowed to participate in.
- Duration of restriction: usually ranging from several months to a few years after the termination of employment.
- Geographical scope: the area where the employee is not allowed to work for competitors.
- Compensation or financial support mechanisms: some enterprises provide financial compensation to offset restrictions on the employee’s right to work.
However, Vietnamese law currently does not provide detailed regulations on non-competition clauses. Therefore, the legality of such clauses is usually assessed based on the principle of freedom of agreement, provided that they do not violate legal provisions or social ethics.
The application of confidentiality and non-competition clauses in employment relationships raises several important legal issues.
First, it is necessary to balance the interests of enterprises and employees. If the restrictions are too strict or last too long, they may be considered an infringement on employees’ freedom to choose employment.
Second, proving violations in practice can be difficult. Enterprises must demonstrate that the employee disclosed information or used trade secrets in a way that caused damage to the enterprise.
Third, the enforcement of such agreements largely depends on the dispute resolution mechanism. When disputes arise, parties may choose court proceedings or other dispute resolution methods depending on the nature of the agreement.
In business practice, especially in technology companies, financial institutions, or enterprises with foreign investment, confidentiality and non-competition clauses play a very important role.
These clauses help:
- Protect business secrets and technologies
- Prevent unfair competition
- Provide a legal basis to address the disclosure of confidential information
- Enhance professionalism in human resource management
5. The Significance of Commercial Arbitration
In the current context, information and knowledge have become extremely valuable assets for enterprises, particularly those dealing with intellectual property, customer lists, and customer personal information. As a result, disputes in this area are often sensitive and complex.
Therefore, choosing an appropriate dispute resolution mechanism is crucial. In many cases, commercial arbitration is considered an effective and suitable mechanism, particularly for disputes requiring confidentiality.
According to the Law on Commercial Arbitration 2010, parties in a legal relationship have the right to agree to resolve disputes through arbitration. When confidentiality or non-competition agreements contain arbitration clauses, disputes arising from these agreements may be resolved at arbitration centers such as the Bigboss International Commercial Arbitration Center.
5.1 Ensuring Confidentiality of Dispute Information
One notable characteristic of disputes related to confidentiality and non-competition clauses is that they often involve business or technological secrets of enterprises. If disputes are resolved in court, proceedings are generally public, which may expose sensitive corporate information.
In contrast, arbitration proceedings are usually conducted privately, with only the parties and the arbitral tribunal participating. This helps enterprises avoid the risk of disclosing important information such as:
- Customer data
- Business strategies
- Proprietary technologies
- Production processes
Therefore, many enterprises—especially technology companies and foreign-invested enterprises—prefer commercial arbitration to resolve disputes related to confidential information.
5.2 High Level of Expertise of Arbitrators
Disputes involving confidentiality or non-competition often have complex and highly specialized characteristics, particularly in fields such as:
- Information technology
- Finance and banking
- Pharmaceuticals
- Research and development
Within the court system, judges must handle many different types of cases and may not always possess specialized expertise in specific industries.
In contrast, when choosing commercial arbitration, parties have the right to select arbitrators who are experts in the relevant field.
For example, in a dispute involving the disclosure of software source code, the parties may appoint an arbitrator with experience in information technology. This enables the arbitral tribunal to better understand the nature of the dispute and issue decisions that are more consistent with business realities.
5.3 Flexible and Efficient Dispute Resolution Procedures
Another major advantage of commercial arbitration is its flexible and often faster dispute resolution procedure compared to courts.
In disputes involving trade secrets, time is a critical factor. For example, if an employee violates a non-competition agreement and immediately joins a competing enterprise, a quick dispute resolution process can help enterprises:
- Limit economic losses
- Prevent further disclosure of confidential information
- Protect their competitive advantage in the market
Arbitration proceedings usually involve fewer levels of review than the court system. Arbitral awards are final and binding, which significantly shortens the dispute resolution process.
5.4 Suitability for Business Disputes
Disputes involving confidentiality and non-competition clauses usually arise in highly competitive business environments.
In such environments, enterprises often seek to:
- Resolve disputes quickly
- Minimize legal costs
- Limit negative impacts on business operations
Commercial arbitration meets these requirements because its procedures are more flexible and less formal than court litigation. In addition, arbitration allows parties to agree on the place, language, and procedural rules of the arbitration, which is particularly advantageous for disputes involving foreign elements.
5.5 Reducing Conflicts in Employment Relationships
In many cases, disputes between enterprises and employees regarding confidentiality or non-competition clauses may affect employment relationships and the reputation of the parties.
Resolving disputes through commercial arbitration is often more cooperative and less confrontational than court litigation, thereby helping reduce tensions between the parties.
Furthermore, commercial arbitration allows parties to flexibly negotiate dispute resolution solutions, such as compensation for damages or cessation of the violating act without undergoing lengthy legal procedures.
6. How to Resolve Disputes through the Bigboss International Commercial Arbitration Center
To resolve disputes through commercial arbitration at BBIAC, parties may include one of the following clauses in their contracts.
6.1 Standard Arbitration Clause
“All disputes arising out of or in connection with this contract shall be resolved by arbitration at the BIGBOSS International Commercial Arbitration Center (BBIAC) in accordance with the Arbitration Rules of this Center.”
The parties may additionally specify:
(a) The number of arbitrators shall be [one or three].
(b) The place of arbitration shall be [city and/or country].
(c) The governing law of the contract shall be [ ]*.
(d) The language of arbitration shall be [ ].
Note:
- Applicable only to disputes involving foreign elements.
- Applicable to disputes involving foreign elements or disputes where at least one party is a foreign-invested enterprise.
6.2 Expedited Arbitration Clause
“All disputes arising out of or in connection with this contract shall be resolved by arbitration at the BIGBOSS International Commercial Arbitration Center (BBIAC) in accordance with the Arbitration Rules of this Center. The parties agree that the arbitration proceedings shall be conducted under the Expedited Procedure as provided in Article 37 of the BBIAC Arbitration Rules.”
The parties may additionally specify:
(a) The place of arbitration shall be [city and/or country].
(b) The governing law of the contract shall be [ ]*.
(c) The language of arbitration shall be [ ].
Note:
- Applicable only to disputes involving foreign elements.
- Applicable to disputes involving foreign elements or disputes where at least one party is a foreign-invested enterprise.
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Conclusion
Commercial arbitration is an effective dispute resolution mechanism in business activities. However, ordinary employment contract disputes generally do not fall under the jurisdiction of commercial arbitration under Vietnamese law.
Nevertheless, in certain special circumstances—such as disputes related to confidentiality agreements or non-competition clauses—parties may still choose commercial arbitration if there is a valid arbitration agreement.
Drafting these clauses clearly and reasonably not only helps enterprises protect their trade secrets but also provides a legal basis for resolving disputes effectively when conflicts arise between the parties.
