Debt Recovery via Commercial Mediation

Risks of overdue payments or even unreturned debt are ever present in business activities, and while  increases in income, profit, and market expansion are matters of importance, another matter of great concern – that plagues many business managers – is debt recovery. Once debt recovery has been successfully completed, the financial health of the business shall be greatly improves.

Depending on the characteristics of the debt, and the debtors, there are various methods of debt recovery that the business has established.  Aside from traditional debt recovery methods, such as lawsuits and arbitration, commercial mediation is another worthwhile option of consideration. Despite its recent popularization, commercial mediation has many advantageous features that align with the benefits of businesses.

• How is commercial mediation regulated under the law?
• What are the merits of opting for commercial mediation for debt recovery?

Read further to discover the answers to these important questions.

Definition of Commercial Mediation

Article 3 of Decree No. 22/2017/ND-CP on commercial mediation specifies the following: “Commercial mediation is a method of dispute resolution via agreement of parties, with commercial mediators, who shall provide support on dispute resolution, act as the intermediary”

According to the above provision, commercial mediation has the following features:

Extent of dispute resolution via commercial mediation

According to Article 2 Decree No. 22/2017/ND-CP on commercial mediation, disputes that are likely to be resolved via commercial mediation are limited to the following types of disputes:

(i) Disputes between parties due to commercial activities

(ii) Disputes between parties, provided that one party participates in commercial activities

(iii) Other disputes between parties that could be resolved through commercial mediation in accordance with the law

Applicable disputes for commercial mediation

Accordingly, not all disputes are likely to be resolved via commercial mediation. The provision only allows commercial mediation to be applied to debt recovery for disputes arising from commercial activities. Put simply, those debts that evolve from commercial activities, sales of goods, provision of services, etc. whose purpose is to enrich the business.

Debts with civil elements, resolution via commercial mediation cannot be applied.

Mediation Agreements

For disputes to be resolved via commercial mediation, a mediation agreement between the involved parties is a prerequisite

According to Article 3 Decree No. 22/2017/ND-CP on commercial mediation, “mediation agreement” is defined as the agreement to select commercial mediation as the method of dispute resolution made by the parties.

The aforementioned agreement may be made before, after, or at any point throughout the dispute resolution process.

Principles of Commercial Mediation

In accordance with Article 4 Decree No. 22/2017/ND-CP, dispute resolution via commercial mediation must conform to the following principles:

• Based on the spirit of voluntary agreement and equality
• Confidentiality
• The Mediation agreement shall not violate the laws nor contradict the social norms, nor serve the purposes of nor affect the legal benefits of third parties

Pict

Types of Commercial Mediation

Decree No. 22/2017/ND-CP on commercial mediation catagorizes commercial mediation into two types:

(I) Conventional commercial mediation is a method of dispute resolution via commercial mediation organizations in accordance with this Decree or the Rules of the aforementioned organizations

(ii) Ad hoc commercial mediation is a method of dispute resolution via commercial mediators appointed by the parties in accordance with this Decree or the parties’ agreement

In practice, conventional commercial mediation is the more popular choice due to its professionalism and standardized procedures, which allow for ease of application.

Results of dispute resolution via commercial mediation

When commercial mediation is chosen as the method of dispute resolution, there are two results that shall ensure as follows:

Should an agreement on successful mediation fail to come to fruition, the disputes shall be resolved by another method such as through Arbitration or in a Court of Law.

Upon the Parties reaching an agreement of successful mediation, the agreement shall be made in written form and have a binding effect on both parties in accordance with civil laws.

Since a successful mediation depends on good faith, willingness, and a consensus of the parties, the same is also applied to the enforcement of the mediation result.

If either one of the parties refuses to cooperate or demonstrates a lack of good faith in their enforcement, the remaining party may request the Court to recognize the successful mediation, thereby possessing the basis with which to compel the aforementioned successful mediation to be enforced.

Merits of Dispute Resolution via Commercial Mediation

Preservation of the relationship between the parties: Since the creditor and debtor opt for commercial mediation as the method of debt recovery, a method where good faith, willingness, and productivity of both the creditor and debtor are highly valued, the dispute resolution process would ensure preservation of an amicable relationship between the creditor and debtor.

Expeditious Resolution: Thanks to the flexibility of the commercial mediation procedure, the creditor and debtor share the initiative to take action or reach an agreement based on the spirit of cooperation from both parties. As such, the debt is addressed swiftly and efficiently by and for both parties.

Private and Confidential: The entire process of debt recovery via commercial mediation shall be kept confidential and the result of successful mediation shall not be disclosed. Therefore, both the creditor and the debtor avoid potential risks of having their information disclosed.

Parties control the process and outcome: Due to the nature of commercial mediation, the creditor and debtor shall hold the central roles. Both parties shall proactively negotiate to resolve the debt and the result shall be determined by both parties.

Efficient: Compared to lawsuits and arbitration, commercial mediation does not have to follow   complicated procedures or require multiple trials, thus the cost and time spent for both debtors and creditors is significantly less.

Advantages of debt recovery via commercial mediation

Further support:

CNC Vietnam Law Firm Company Ltd. is one of the many law firms in Vietnam that possesses a wealth of experience in supporting businesses in Vietnam’s metropolises, such as Ho Chi Minh City, Hanoi, Da Nang, etc. on dispute resolution and debt recovery

With noteworthy experience, we are abundantly prepared to accompany and diligently support any  and all clients, please contact us via the information listed below:

Address: The Sun Avenue, 28 Mai Chi Tho, An Phu Ward, District 2, Ho Chi Minh City, Vietnam

Phone number: (84) 28-6276 9900

Email: contact@cnccounsel.com | Website: https://cnccounsel.com