In any organization or enterprise, conflicts and disputes are inevitable. Internal disputes may result in serious consequences, directly affecting business operations, reputation, and even the survival of the enterprise if they aren’t resolved in a timely and effective manner. So, what are the current legal regulations on the settlement of internal disputes? The below article by NPLaw shall provide an in-depth analysis of the relevant provisions, offering readers an overview and clearer understanding of the mechanisms for handling conflicts arising within organizations and enterprises.

I. Current status of the settlement of internal disputes

In Vietnamese enterprises, when conflicts arise between parties (shareholders, employees, managers, etc.), current law allows various methods of resolution such as negotiation, internal mediation, arbitration, or court proceedings. Negotiation and mediation are encouraged as the first approaches, aiming for prompt resolution, preservation of relationships, and cost savings. However, in practice, enterprises remain limited in establishing effective mediation mechanisms, such as a lack of professional mediators and the absence of standards or consistent incentives, resulting in a relatively low success rate.

In the post-COVID-19 context, internal disputes have been increasing strongly, particularly over wages, insurance, and contract termination, creating significant pressure on mediators. Statistics indicate that the success and failure rates of mediation are relatively balanced (around 60% – 40%), primarily due to a lack of goodwill from certain enterprises, or the absence of authorized representatives at mediation sessions. Current regulations have not clearly defined the role, responsibilities, or professional incentives for internal mediators, making the position less attractive to high-quality personnel.

Accordingly, enterprises must enhance internal capacity and adopt a comprehensive approach combining negotiation, mediation, arbitration, and court proceedings to ensure substantive, prompt, and sustainable dispute resolution.

II. Legal provisions on the settlement of internal disputes

1. Definition

The settlement of internal disputes refers to the process whereby parties in conflict (such as individuals, organizations, enterprises, or communities) settle disputes and reach agreements through methods such as negotiation, mediation, arbitration, or court proceedings (if any). The goal is to achieve voluntary, prompt, and cost-effective agreements while maintaining relationships, rather than resorting directly to legal enforcement or public trials.

2. Common types of internal disputes

In practice, internal disputes typically fall into three main categories:

  • Within Enterprises:
    + Between the company and shareholders, or among shareholders themselves: Arising when rights and obligations are not clearly defined, leading to disputes over profit distribution, shareholding ratios, or management rights.
    + Between managers and shareholders: Occurring when managerial decisions are deemed defected or detrimental to shareholder interests.
  • In Labor Relations:
    + Individual disputes: Arising from unilateral termination of labor contracts, wrongful dismissal, or delayed payment of wages and insurance.
    + Collective disputes: Typically taking the form of strikes or mass work stoppages, commonly caused by disagreements over Tet bonuses or 13th-month salary.

Overall, internal disputes are unavoidable in enterprise operations, labor relations, and even family or community life. Early identification of causes, adoption of effective mediation mechanisms, and compliance with legal provisions will help minimize risks, safeguard parties’ rights, and maintain organizational and social stability.

3. Who has authority to resolve internal disputes?

Given the inevitability of internal disputes in enterprises or labor relations, choosing the appropriate authority or body for resolution is crucial to protecting rights and avoiding unnecessary costs and delays.

3.1. Enterprise disputes (Business – Commercial – Corporate Internal Affairs):

  • Commercial arbitration: It is chosen by the parties if previously agreed in writing. Such a method usually applied to disputes arising from commercial activities (including disputes between enterprises and shareholders involving business activities).
  • People’s Courts: People’s Courts have jurisdiction to resolve matters such as requests to annul resolutions of the General Meeting of Shareholders, disputes over shares or management elections, or where no arbitration agreement exists.

3.2. Labor disputes:

  • Individual disputes: In most cases, mediation by a labor conciliator is mandatory, except for certain disputes such as wrongful dismissal, insurance, or compensation claims. If mediation fails, either party may request settlement by the Labor Arbitration Council or the People’s Court (pursuant to the Civil Procedure Code 2015).
  • Collective disputes:
    + On rights: They begin with mediation; if unsuccessful, such disputes proceed to labor arbitration or court.
    + On interests: They also begin with mediation; if unsuccessful, such disputes proceed to labor arbitration. If deadlock persists, workers are entitled to strike as prescribed by law.

Thus, before initiating litigation or mediation, parties should carefully review applicable laws or seek legal advice to determine the most appropriate, cost-effective course of action.

III. Questions on the settlement of internal disputes

1. When must internal disputes be brought before arbitration or the Court?

Enterprises or organizations often face internal disputes that cannot be resolved through negotiation or mediation. Accordingly: 

  • Arbitration is applicable when:
    + The parties have a valid written arbitration agreement (made before or after the dispute arises), under Article 5 of the Law on Commercial Arbitration 2010. 
    + The dispute relates to commercial activities or involves at least one party being an enterprise or trader.

Note: If the arbitration agreement is invalid (e.g., signed by an unauthorized person or concerning matters outside arbitration’s jurisdiction), the arbitration cannot accept the case.

  • Courts are competent when:
    + No arbitration agreement exists.
    + The arbitration agreement is invalid or unenforceable.
    + The dispute falls outside arbitration’s jurisdiction, or the law mandates judicial resolution (e.g., land disputes, family law matters, or certain corporate disputes such as annulment of shareholder resolutions or protection of minority shareholders’ rights).
    + Where public, enforceable judgments with the possibility of appeal are required, the Court is the most suitable forum.

In short, enterprises should first check whether the arbitration agreement exists and is valid. If so, arbitration offers flexibility and efficiency. Otherwise, or where publicity and transparency are necessary, the Court provides the ultimate safeguard of lawful rights and interests.

2. How to identify the proper representative in the settlement of internal disputes?

In organizations such as enterprises, associations, or agencies, once a dispute arises (e.g., concerning shares, rights, or internal decisions), it is essential to determine the lawful representative:

  • Legal representative: As provided under the Civil Code 2015, if the disputing party is an organization, its legal representative (e.g., Director, Chairman of the Members’ Council, or Chairman of the Board of Directors, depending on legal form) has authority to negotiate, sign documents, file a petition, and undertake legal proceedings.
  • Authorized representative: An organization may issue a written authorization empowering a lawyer or another individual. The authorization must clearly state the scope, content, and term to be legally valid. The authorized representative then fully exercises rights and obligations within the scope.
  • Court-appointed representative: If the disputing party is an individual lacking legal capacity (e.g., minors, incapacitated persons), or when no representative can be identified (due to absence or disqualification), the Court shall appoint an appropriate representative to participate in proceedings.

Identifying the correct representative ensures that the process reflects the organization’s rights and obligations fully, maintaining legality, transparency, and effectiveness in negotiation or litigation.

3. What are the legal consequences of failing to settle internal disputes promptly?

Failure to settle disputes at an early stage may lead to significant legal repercussions:

  • Increased costs and time: Court or arbitration proceedings often involve substantial expenses (lawyer fees, court fees, evidentiary costs) and lengthy procedures. Particularly in arbitration, awards may sometimes be annulled, necessitating retrial or transfer to court, further prolonging resolution.
  • Loss of actual rights: In labor disputes or wrongful dismissals, untimely complaints or lawsuits may cause employees to lose claims due to expired limitation periods. Conversely, enterprises may face compulsory enforcement if final judgments are not voluntarily complied with.
  • Operational disruption and reputational damage: Prolonged disputes destabilize internal operations, reduce efficiency, and harm external reputation with partners and clients. For listed companies, negative publicity about disputes may affect share prices and lose investor confidence.

Accordingly, organizations, enterprises, and individuals should proactively monitor situations, pursue early negotiation or mediation, and seek legal counsel to resolve disputes effectively, minimizing unnecessary damages.

IV. Legal advisory services on the settlement of internal disputes

The above analysis provides an overview of legal issues concerning the settlement of internal disputes. Should you have any further concerns, please do not hesitate to contact NPLaw for tailored support.