Types of service contracts subject to arbitration agreement
1. Arbitration Agreement in Service Contracts
1.2. Arbitration Agreement in Service Contracts
The arbitration agreement in service contracts represents the mutual consent of the parties to refer any disputes arising from the service contract to commercial arbitration as the chosen dispute resolution mechanism, instead of the court. According to Article 16 of the Law on Commercial Arbitration 2010, an arbitration agreement may take the form of a clause within the main contract or a separate agreement independent from it.
In the context of service contracts which are characterized by flexibility and depend heavily on the capacity, reputation, and professional skills of the service provider—there is a significant risk of disputes arising over service quality, performance deadlines, costs, or confidentiality obligations.
The arbitration agreement in such contracts plays an important role, as it enables the parties to clearly define their dispute resolution mechanism from the outset, thereby avoiding jurisdictional conflicts later on. Arbitration proceedings are flexible and expeditious, allowing the parties to choose arbitrators, language, and procedural rules, which helps save both time and costs. Moreover, arbitral awards are final and binding, not subject to appeal, and can be recognized and enforced internationally, thus ensuring legal stability. Overall, the inclusion of an arbitration agreement in service contracts reflects the proactive, professional approach and legal risk management capacity of the parties.
1.2. Validity Conditions and Scope of Application
For an arbitration agreement in a service contract to be legally valid, it must be made in writing and must clearly express the parties’ intention to choose arbitration as their dispute resolution method. The signatories must possess full legal capacity and civil act capacity, and the content of the agreement must not violate prohibitions of law or social ethics.
The subject matter of the dispute must fall within the legally permissible scope, specifically disputes arising from commercial activities or at least those in which one of the parties engages in commercial activities, as stipulated under the Law on Commercial Arbitration 2010.
In terms of scope of application, arbitration agreements are commonly found in commercial service contracts such as logistics, transportation, insurance, finance and banking, consulting, auditing, information technology, intellectual property, and franchising. These are sectors where complex disputes are likely to arise, requiring a swift, confidential, and effective dispute resolution mechanism — one that arbitration can provide more efficiently than courts.
Parties often opt for institutional arbitration administered by reputable arbitration centers. In Vietnam, the BigBoss International Arbitration Center (BBIAC) operates under the Law on Commercial Arbitration 2010, offering transparent procedural rules, a panel of experienced arbitrators, and a commitment to fairness and efficiency in dispute resolution.
Including BBIAC in the arbitration clause of a service contract not only provides assurance to the parties but also facilitates the recognition and enforcement of arbitral awards both domestically and internationally.
1.3. Types of Commercial Service Contracts
Logistics, transportation, and international freight forwarding service contracts often give rise to disputes concerning delivery obligations, warehousing, and cargo damage or loss.
Financial, banking, and insurance service contracts are often related to investment advisory, asset management, brokerage, and cargo insurance services.
Consulting service contracts including technical, construction, legal, auditing, and tax consulting are often associated with large-scale or international projects, where a swift and confidential dispute resolution mechanism is essential.
Information technology, software, and intellectual property service contracts include, for example, software development outsourcing, system maintenance, and franchising agreements.
International commercial service contracts cover activities such as trade brokerage, agency, and distribution services.
2. Issues Giving Rise to Disputes in Service Contracts
2.1. Quality, Scope, and Duration of Service Performance
This is the most common group of issues, typically arising when the services provided fail to meet the required quality standards, fall outside the agreed scope of work, or are delayed beyond the contractual timeline. Due to the inherent nature of service contracts, it is often difficult to establish clear performance standards, leading to different interpretations between the parties. As a result, disputes frequently arise regarding the performance of obligations and liability for damages.
2.2. Payment and Contract Termination
Disputes often revolve around delayed, refused, or incomplete payments by the service recipient, while the service provider insists on full and timely payment as agreed. In addition, unilateral termination of the contract by one party is also a common source of conflict, especially when it is done without clear legal grounds, leading to claims for damages from the affected party.
2.3. Confidentiality and Jurisdiction over Dispute Resolution
In services involving trade secrets, technology, or finance, a breach of confidentiality obligations may cause serious losses to the affected party. Moreover, if the contract does not clearly stipulate the dispute resolution mechanism, the parties may easily disagree over whether to submit the case to court or arbitration. In cases where the arbitration clause is invalid or ambiguously drafted, the dispute resolution process may become prolonged, costly, and procedurally complex.
3. Settlement of Disputes through Commercial Arbitration and Mediation
3.1. Settlement through Commercial Arbitration
For disputes concerning the quality, scope, and duration of service performance, arbitration offers a distinct advantage due to its flexible procedures and the expertise of arbitrators, who are capable of assessing the technical aspects of the service and delivering an award consistent with the standards agreed upon by the parties. The arbitral award is final and binding, ensuring a definitive resolution of the dispute and providing an immediate basis for enforcement.
In disputes relating to payment and contract termination, commercial arbitration provides an efficient and decisive mechanism, compelling the breaching party to make payment or compensate for damages in accordance with the contract. This represents a significant advantage over negotiation or mediation, particularly when the parties fail to reach mutual agreement.
With respect to confidentiality and jurisdictional matters, arbitration ensures both the confidentiality of proceedings and the exclusion of parallel jurisdiction by courts. In addition, arbitral awards can be recognized and enforced internationally, making arbitration particularly suitable for cross-border commercial service contracts.
3.2. Settlement through Commercial Mediation
In disputes concerning the quality, scope, and duration of service performance, mediation enables the parties to engage in direct discussion, clarify work standards, and identify appropriate remedial measures, thereby maintaining their cooperative relationship.
In disputes involving payment and contract termination, mediation offers an opportunity for flexible adjustment, such as renegotiating payment terms or methods, thereby avoiding confrontation, reducing costs, and preserving the parties’ reputations.
In matters concerning confidentiality and jurisdiction, mediation takes place in a private and discreet setting, minimizing the risk of disclosing sensitive information. If a settlement is successfully reached, the resulting agreement may be recognized by the court under the Law on Mediation and Dialogue at Court 2020, thereby granting it enforceability and safeguarding the parties’ rights and interests.
4. Conclusion
It can be seen that service contracts are a common contractual form yet inherently prone to disputes, as their subject matter — the “work” to be performed — is often difficult to quantify and evaluate. Incorporating an arbitration agreement into such contracts allows the parties to proactively choose a professional, confidential, and efficient dispute resolution mechanism, particularly suitable for commercial and cross-border services.
At the same time, commercial mediation plays a vital role in preserving business relationships and providing an opportunity for mutual understanding before arbitration proceedings commence. The combined approach of “mediation first – arbitration later” represents an optimal solution that both safeguards legal rights and contributes to building a transparent, secure, and sustainable service contracting environment.
5. How to Resolve Disputes through the BigBoss International Arbitration Center (BBIAC)
To resolve disputes through arbitration at BBIAC, parties may include one of the following sample clauses in their contracts:
5.1. Standard Arbitration Clause
“All disputes arising out of or in connection with this contract shall be settled by arbitration at the BigBoss International Arbitration Center (BBIAC) in accordance with its Arbitration Rules.”
Optional additions:
(a) Number of arbitrators: [one or three];
(b) Seat of arbitration: [city and/or country];
(c) Governing law: [ ];*
(d) Language of arbitration: [ ].***Note: (a) and (b) apply where foreign elements are involved;
*(c) applies where at least one party is a foreign-invested enterprise.
5.2. Expedited Procedure Clause
“All disputes arising out of or in connection with this contract shall be settled by arbitration at the BigBoss International Arbitration Center (BBIAC) in accordance with its Arbitration Rules. The parties agree that the arbitration shall be conducted under the Expedited Procedure set forth in Article 37 of the BBIAC Arbitration Rules.”
Optional additions:
(a) Seat of arbitration: [city and/or country];
(b) Governing law: [ ];*
(c) Language of arbitration: [ ].**Notes as above apply.
Contact: +84 979 133 955 for consultation.
