Explaining viet nam bloom in business litigition

Explaining Vietnam’s Boom in Business Litigation Quach Thuy Quynh Sean McGinty ABSTRACT In recent years, Vietnamese courts have faced a caseload that is increasing at a rate of ten to twelve percent annually The Economic Courts, which handle business related cases, have been most affected by this trend, seeing the growth in their caseload outpace that in the regular civil court system This paper examines the explanatory power of three factors – cultural, institutional and economic – in determining this explosion in the number of business disputes litigated in the Economic Courts Using data from 2003 to 2012, the paper finds that institutional and economic factors rather than cultural ones offer the best explanations for this upward trend in the number of business cases in Vietnam The findings enrich the literature on institutions in transition economies, by identifying them as determinants of choice of enforcement devices This contributes to the debate on choice of enforcement device by providing evidence from both an Asian country and a transition economy The research findings may also inform current legal reform in countries which have been allured by the model of strong private enforcement in the United States Acknowledgment: The authors are grateful to Nguyen Duc Minh, Lecturer of Business Statistics at RMIT University Vietnam, for his assistance to analyze data and his comments for this paper Any errors, of course, are the authors’ sole responsibility 1|P age Electronic copy available at: https://ssrn.com/abstract=3418759 List of Abbreviations ADR CPV FIEs GSO LOE LOS MOJ PCI SOEs SPC VCCI VIAC Alternative dispute resolutions Vietnamese Communist Party Foreign investment enterprises General Statistic Office of Vietnam Law on Enterprise 2005 Law on Securities 2006 Ministry of Justice Provincial Competitiveness Index State owned enterprises Supreme People’s Court Vietnam Chamber of Commerce and Industry Vietnam International Arbitration Center 2|P age Electronic copy available at: https://ssrn.com/abstract=3418759 Table of Contents Introduction A Decade-long Upward trend in Business Cases Hypotheses and Indicators 3.1 Cultural Hypothesis 3.2 Institutional Hypothesis 3.3 Economic Hypothesis Findings 4.1 The Small Proportion of SOE and FIE Plaintiffs and Persistent Views about Litigation Held by Private Entrepreneurs 4.2 Various Impacts of Institutional Arrangements on Caseload 4.2.1 The quantity rather than the competency of judges is correlated with caseload 4.2.2 Variation in number of lawyers and professionalism of lawyers 4.2.3 Weak role of ADR 4.3 Not all Indicators of the Development of Enterprises is Correlated with the Number of Newly-Filed Cases Discussion 5.1 No Evidence for the Cultural Hypothesis 5.2 Moderate Evidence for the Institutional Hypothesis 5.3 Positive Evidence for Economic Hypothesis Conclusion 3|P age Electronic copy available at: https://ssrn.com/abstract=3418759 INTRODUCTION Since 1994 litigation related to business disputes in Vietnam has been handled separately from other civil cases in the country’s Economic Court system Earlier literature on the Economic Courts noted the relatively low number of business disputes being litigated in them Particularly Nicholson and Duong, drawing on an overview of the policy, legislation, case law and user statistics through 2006, concluded that it was premature to describe the courts as having “either widespread appeal or legitimacy.”2 More recently, however, there has been a marked increase in the number of business cases being litigated before the courts Between 2003 and 2012 the number of cases increased at a rapid rate While some of this was part of a broader trend in increased litigation not limited to business cases, the rate of increase in the Economic Courts is much higher than in the normal civil courts Business people in Vietnam, in short, are litigating their disputes at a much higher rate now than they were just a few years ago, which begs the question of what has caused this mini boom In approaching this question, we use data related to judges, lawyers and litigants to evaluate three different theories that might explain the recent surge in business litigation in Vietnam’s Economic Courts These theories are drawn largely from literature outside of Vietnam, particularly in Japan, which has been subject to what some might describe as an overly exhaustive debate on what determines its litigation rates, and from the fields of institutional economics and law and society The first of these, which we call the “cultural hypothesis” suggests that cultural norms dominant within a given country may discourage resort to litigation This line of thinking has particularly colored Western views on the role of litigation in Asian countries such as Vietnam As Taylor and Pryles describe it: “One of the much-touted characteristics of ‘Asian culture’ is the reluctance to go to law – usually interpreted as an unwillingness to mobilize formal legal processes, except as a last resort, coupled with circumspection (or realism) about the limits of what a legal ‘solution’ can deliver.”3 In Japan a similar idea, that socio-cultural preferences deterred people from settling disputes, was famously used by Takeyoshi Kawashima in the 1960s4 to explain why litigation rates in that country were so low in comparison to the United States More recently arguments have been made that Asian people rely more on non-litigation devices such as compromise, mediation, conciliation, or arbitration , are bound by cultural values of harmony and face Pip Nicholson and Minh Duong, Legitimacy and the Vietnamese Economic Court, in NEW COURTS IN ASIA (Andrew Harding and Pip Nicholson eds, 2010) 31 Ibid, at 49 Taylor, Veronica L., Pryles M., The Culture of Dispute Resolution in Asia, in IS THERE AN ‘ASIAN’ STYLE OF DISPUTE RESOLUTION? (Michael Pryles ed.) (1997), at 13 Takeyoshi Kawashima, Dispute Resolution in Contemporary Japan, in LAW IN JAPAN, THE LEGAL ORDER IN A CHANGING SOCIETY (Arthur Taylor van Mehren Ed., 1963) 41 Fletcher, Louise, Mara Olekalns, and Helen De Cieri Cultural differences in conflict resolution: Individualism and collectivism in the Asia-Pacific Region (1998) (presenting data collected by a poll survey of 378 secondyear graduate students at Melbourne University, Australia in April 1997 The survey showed that generally, Asian students often choose compromising rather than collaborating and accommodating, while Australians 4|P age Electronic copy available at: https://ssrn.com/abstract=3418759 saving, and are “less adversarial and [less] litigious, less intent on demonstrating right and wrong, [and] more concerned with avoiding conflict.” Rationales for the existence of this cultural aversion across such a diverse range of countries differ, Kawashima citing hierarchical social structures and a preference for harmony in Japan, while others have noted the use of law primarily as a mechanism for state control and the effects of European colonial legal structures in other Asian countries.7 The cultural hypothesis is, however, by no means as widely accepted now as it once was Empirical studies illustrate that Asians are no less litigious than Westerners in resolving both domestic and cross-border trade disputes.8 It is also debatable whether a low rate of litigation in Asian countries, if it actually exists, is unique.9 While advocates of the cultural hypothesis may point to culture as a hurdle to the importation of Western legal devices, this argument seems to lack solid footing.10 As John Haley has noted “[t]o ask whether a culturally bound, Eurocentric definition of law existed in China is almost as silly as asking whether the Chinese emperor reigned in Rome” 11 Of perhaps more concern, the culture theory can sometimes provide a convenient excuse which legal reformers often rely on when an imported legal scheme does not function well 12 To challenge the cultural theory, scholars have supplied empirical data on increasing litigation rates, examined specific institutional arrangements in Asian countries, or employed rational behavior models to prove that factors other than culture are at work in forming the patterns of dispute resolution.13 prefer compromising to accommodating and competing This implies that Asian are led by their culture values in conflict situations to avoid competing); See also Michael Pryles, supra note reviewed by Gillian Triggs, 23 Melbourne U L.R 550, at 552 “[t]he contributors [of the book] confirm the widespread view that mediation and negotiation are the cornerstones of Asian systems of dispute resolution” Kahler, Miles, Legalisation as strategy: the Asia-Pacific case, 54.3 International Organisation 571 (2000), at 560 Taylor, Veronica L., Pryles M., The Culture of Dispute Resolution in Asia, in IS THERE AN ‘ASIAN’ STYLE OF DISPUTE RESOLUTION? (Michael Pryles ed.) (1997), at 13 Haley, John Owen, The Myth of Reluctant Litigant, Journal of Japanese Studies 359 (1978) (presenting data for a rising rate of cases during the postwar period in Japan); Hisashi Owada, The Rule of Law in a Globalising World – An Asian Perspective, Wash U Glob Stud L Rev 187 (2009) at 202 (showing that “…countries in the Asian Pacific region not appear any less likely to adhere to their WTO commitments than…countries in the EU …since 1995, East-Asia countries have participated in as many as ninety-one dispute settlement procedures before the WTO Settlement Body”) Haley, John Owen , Litigation in Japan: A New Look at Old Problems, 10 Willamette J Int'l L & Dis Res 121 (2002) 10 Taylor and Pryles, supra note at 4-7 (noting that it is hard to generalise Asian legal local culture due to intrinsic differences of each nation and economy) See also 11 John O Haley, Law and culture in China and Japan: A framework for analysis, 27 MICH J INT'L L 895 (2005) 12 Tim Lindsey, History Always Repeats? Corruption, Culture, and 'Asian Values', in CORRUPTION IN ASIA: RETHINKING THE GOVERNANCE PARADIGM 1-23 (Timothy Lindsey & Howard W Dick eds., 2002) 13 For a discussion of litigation rate in Japan, see John Owen Haley, The myth of the reluctant litigant, JOURNAL OF JAPANESE STUDIES 359 (1978) (presenting data to challenge preceding articles which claim that Japanese are nonligitious people because they incline to preserve social order and personal reputation rather than being wealth maximising litigants The view was challenged by arguments that low numbers of lawsuits in Japan caused by special institutional arrangements such as mandatory conciliation for some disputes, delay of cases due to paucity of judges and lawyers, limited available remedies can be found at court); J Mark Ramseyer, Reluctant litigant revisited: rationality and disputes in Japan, 14 JOURNAL OF JAPANESE STUDIES 111 (1988) (showing flaws of Haley’s arguments by a model which assumes that wealth maximising is not the sole cause, for Japanese often choose to settle instead of going to trial Stability and predictability of the court system enables the disputants to settle since they may end their dispute with a result rather identical with court decision, while adhere social norm and their reputation); Tom Ginsburg & Glenn Hoetker, The Unreluctant Litigant? An Empirical Analysis of Japan's Turn to Litigation, 35 JOURNAL OF LEGAL STUDIES 31 (2006) (using empirical data to test cultural theory, institutional theory and political 5|P age Electronic copy available at: https://ssrn.com/abstract=3418759 The second theory we examine is what we deem the “institutional hypothesis”, which suggests that institutional factors related to the courts which affect their accessibility play a significant role in determining litigation rates This theory evolved largely as a response to the cultural hypothesis, notably with John Haley’s work14 examining the relevance of factors such as the limited number of lawyers and judges in Japan as explanations for its low litigation rates The simple yet obvious point which this theory makes is that these types of factors may influence the time that courts take to resolve a dispute and the cost they impose, which in turn may make other means of dispute resolution more desirable The third theory we examine is the “economic hypothesis” which suggests that changes in litigation rates are connected to the development of a country’s overall economy Varying branches of this have been developed separately by institutional economists and law and society scholars The former15 have posited a strong relationship between the protection of property and contractual rights on the one hand and economic growth on the other Litigating to protect those rights is one (but by no means the only) way of protecting those rights and thus litigation may be part of a broader set of institutional changes that drives economic change The latter 16 , focused more specifically on litigation rather than broader questions of enforcement, find that economic growth impacts the rate at which people go to court Rising complexity, increases in the number of transactions and the replacement of social relationships favoring informality are among the factors associated with economic growth that may lead to greater reliance on formal court procedures to resolve disputes The main difference between these two views is that institutional economists tend to view the enforcement of legal rights as a prerequisite to economic growth, while law and society scholars tend to view causation as running the other way – changes in litigation being the result rather than the cause of economic growth For our purposes, we approach the economic hypothesis as a question of whether or not certain indicators, including the number of enterprises and rates of investment, are correlated with changes in the litigation rate (regardless of which direction causation flows) Though we approach these three theories separately there is in fact a great deal of interdependence between them which is difficult to parse out Cultural norms on when it is acceptable to sue for example may themselves be determined by the relative ease with which courts can be accessed or the degree to which they are trustworthy Likewise, governments may find it easier to pursue policies which put institutional limits on such access (such as by capping the number of lawyers) in societies where cultural norms favor other means of resolving disputes anyway And changes in economic wealth and the material well-being of a society may obviously instigate changes to cultural norms and the ability to provide judicial explanation for low litigation rates in Japan Their findings find no support for cultural theory, and strongly support for institutional theory), and Giorgio Fabio Colombo and Hiroshi Shimizu, Litigation or Litigiousness? Explaining Japan’s “Litigation Bubble” (2006-2010), OXFORD U COMPARATIVE L FORUM (2016), noting the role of changes in substantive law with respect to interest rates on loans which prompted a short term flood of litigation in Japan 14 Haley, supra note 13 15 Notably DOUGLASS C NORTH, INSTITUTIONS, INSTITUTIONAL CHANGE AND ECONOMIC PERFORMANCE (Cambridge university press 1990) 16 See for example Christian Wollschläger, Civil litigation and modernization: The work of the municipal courts of Bremen, Germany, in five centuries, 1549-1984, 24 LAW AND SOCIETY REVIEW 261 (1990 ); Joel B Grossman & Austin Sarat, Litigation in the federal courts: A comparative perspective, LAW & SOCIETY REVIEW 321 (1975 ); Theodore Eisenberg, et al., Litigation as a measure of well-being, 62 DEPAUL L REV 247 (2012) 6|P age Electronic copy available at: https://ssrn.com/abstract=3418759 institutions that run well and are accessible For this reason most proponents of each theory have avoided taking exclusivist positions and approached it as a question of which factors have greater explanatory power rather than seeking to exclude competing explanations entirely.17 We limit ourselves in this paper to addressing the roles these various factors played in determining the specific increase in litigation before the Economic Courts over the decade to 2012 rather than to explaining the entirety of Vietnamese litigation as a whole In doing so we attempt to create an explanation of this trend which accounts for the relevant role played by each – cultural, institutional and economic Among the questions we ask are whether a reduced cultural aversion to litigation may play a role? Or is the increase in litigation the result of improvements to judicial institutions, through law reforms or other changes, which have made litigation more attractive? Or is it more the mere by-product of broader economic development which has expanded the number of firms and transactions taking place, thus increasing the number of potential litigants and disputes? Business disputes like those subject to the jurisdiction of the Economic Courts are one of the most dynamic areas to manifest the effectiveness of law reform 18 Different from previous studies on the behavior of businesspeople in Vietnam such as McMillan & Woodruft (1998)19, McMillan & Woodruft (1999) 20 or Steer & Sen (2010) 21 , the article does not focus on examining how firms enforce their contracts (through public or private enforcement devices) Rather, the aim is to explain what has caused the recent turn to litigation We find that the evidence provides stronger support for the economic hypothesis as an explanation than the other two we examine, particularly the cultural explanation Our findings may extend the conclusions made by Ginsburg & Hoetker22 about litigation in Japan by providing evidence from another Asian country The paper consists of five sections Section two describes the upward trend of litigation in Vietnam from 2003 to 2012 The next section presents our hypotheses for explaining the trend and the indicators chosen to examine the hypotheses Section four presents the findings and is followed by section five discussing the empirical findings Conclusions follow A DECADE-LONG UPWARD TREND IN BUSINESS CASES Previous research found that the number of civil cases filed in Vietnam’s courts gradually increased at an annual rate of around 3.3% from 2000 to 2005 23 A sudden jump in 1999 (compared with the previous year) was implicitly explained as a result of the introduction of Vietnam’s Civil Code 1997 and its guiding rules which removed obstacles to the filing of civil See Colombo and Shimizu supra note 13: “Unsurprisingly, the long debate sparked by this line of research eventually lead to the opinion, shared by the vast majority of scholars, that each position has some elements of truth and it is very difficult nowadays to find somebody exclusively relying on one or the other theory.” 18 In Vietnam, business cases are named economic cases and are heard by a specific court differing from the court which hears civil cases In the context of this paper, for the ease of understanding of Anglo-American readers, business cases is used as an alternative term for economic cases 19 John McMillan & Christopher Woodruff, Interfirm relationships and informal credit in Vietnam, 114 THE QUARTERLY JOURNAL OF ECONOMICS 1285 (1999) 20 John McMillan & Christopher Woodruff, Dispute prevention without courts in Vietnam, 15 JOURNAL OF LAW, ECONOMICS, AND ORGANIZATION 637 (1999) 21 Liesbet Steer & Kunal Sen, Formal and informal institutions in a transition economy: The case of Vietnam, 38 WORLD DEVELOPMENT 1603 (2010) 22 Ginsburg & hoetker, supra note 13 23 PENELOPE NICHOLSON, BORROWING COURT SYSTEMS: THE EXPERIENCE OF SOCIALIST VIETNAM (Martinus Nijhoff Publishers 2007), at 260-265 17 7|P age Electronic copy available at: https://ssrn.com/abstract=3418759 disputes, especially land disputes.24 Cases filed by businesses, however, followed a U-shape pattern in the period, dropping from 1,514 cases in 1999 to 884 cases in 2001 and then recovering to 1,495 cases at the end of the period 25 Given that the Economic Court was established in Vietnam in 1994, this fluctuation in the number of business cases was explained as a consequence of “forum testing” 26 Unlike civil cases, labour cases and administrative cases, business cases in this period did not show much growth This demonstrated “the Economic Court’s unpopularity, more than ten years after its introduction, [and] supports the arguments that there are strong informal institutional network substituting for the law in Vietnam.”27 Our data shows that the trend reversed itself in the period from 2003 to 2012.28 During that decade, both civil cases and business cases increased significantly However the growth rate of the latter far exceeded that of the former The number of new civil cases filed each year fluctuated significantly during the period with the highest increase of 21% coming in 2012 and the lowest of -5% in 2004 29 From 2007 to 2012 the number of new business cases being filed at courts increased around 300% from 5,198 to 14,103 cases (Figure 1) The rapid growth of business cases can be seen more clearly when the ratio of civil cases per 1,000 citizens and business cases per 1,000 enterprises are compared During that period, the ratio of civil cases remained stable at less than three cases per 1,000 citizens while the ratio of business cases vastly increased from 10 to 33 cases per 1,000 enterprises The second ratio rose year by year from 2003 to 2006 with a trough in 2004 and reached its highest point in 2007 In the second period from 2009 to 2012, the ratio varied less and maintained a level of around 20 to 24 cases per 1,000 firms (Figure 2) 24 Id.,at 261 Id at 262-3 26 In Vietnam, business disputes are treated differently from civil cases Even though both types of cases are regulated by procedures under Civil Procedure Code 2004, the business cases are heard by Economic Courts The separation is to specialise function of each court for effective adjudication 27 NICHOLSON, supra note 11, at 263 28 Source: Toa an nhan dan toi cao, 28/BC-TA, Bao cao tong ket cong tac nam 2003 va nhiem vu tam nam 2004 (The Annual Reports 2003 of the Vietnamese People’s Supreme Court (SPC dated 25 December 2003; Toa an nhan dan toi cao, 35/2004/BC-TA, Bao cao tong ket cong tac nam 2004 va nhiem vu tam nam 2005 (The Annual Reports 2004 of the SPC dated 30 December 2004; Toa an nhan dan toi cao, 42/BC-TA, Bao cao tong ket cong tac nam 2005 va nhiem vu tam nam 2006 (The Annual Reports 2005 of the SPC) dated 28 December 2005; Toa an nhan dan toi cao, 01/BC-TA, Bao cao tong ket cong tac nam 2006 va nhiem vu tam nam 2007 (The Annual Reports 2006 of the SPC) dated 05 January 2006; Toa an nhan dan toi cao, 05/BCTA, Bao cao tong ket cong tac nam 2007 va nhiem vu tam nam 2008 (The Annual Reports 2007 of the SPC) dated 17 January 2008; Toa an nhan dan toi cao, 05/BC-TA, Bao cao tong ket cong tac nam 2012 va nhiem vu tam nam 2013 (The Annual Reports 2012 of the SPC) dated 18 January 2013; Vietnam Chamber of Commerce and Industry & USAid, Policy Paper #14, PCI 2009: The Vietnam Provincial Competitiveness Index 2009 (2009); Vietnam Chamber of Commerce and Industry & USAid, Policy Paper #15 PCI 2010: The Vietnam Provincial Competitiveness Index 2010 (2010); Vietnam Chamber of Commerce and Industry & USAid, Policy Paper #16, PCI 2011: The Vietnam Provincial Competitiveness Index 2011 (2011) 29 Statistic numbers of the year 2008 and 2013 cannot be collected since in the year 2008, the SPC’s statistics did not include breakdown of business cases This lack of data represented by gap or zero value in the figure exaggerates the difference between civil cases and business cases 25 8|P age Electronic copy available at: https://ssrn.com/abstract=3418759 Percentage 100% 80% 60% 40% 20% 0% -20% 200 200 200 200 200 200 200 201 201 201 Civil cases growth 1% -5% 18% 7% 17% 2% 11% 1% 4% 21% rate Business cases growth rate 1% 2% 69% 92% 81% 29% 9% 29% 49% Figure 1: Annual growth rate of civil cases and business cases from 2003-2012 40 35 30 Civil cases/1000 citizens 25 20 Business cases/1000 firms 15 10 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Figure 2: Newly-filed civil cases per 1000 citizens v Newly-filed business cases per 1000 firms from 2003-2012 The above analysis seems paradoxical in light of the conventional view that Vietnamese businesspeople not want to use the court system It also refutes any assumption that an increase in the number of business cases is the consequence of a growth of litigation in general Businesspeople tend to be leaders rather than followers on the litigation bandwagon, having become more litigious than disputants in any other type of civil dispute This is made all the more puzzling by the fact that Vietnamese businesspeople have persistently held skeptical views about the capacity of the legal system to protect their legal rights.30 These doubtful views held by businesspeople are difficult to reconcile with the sharp increase in their use of the Economic Courts in Vietnam since 2003 In the next section we set out three hypotheses that might explain this puzzling divergence 30 See more about the skeptical views of Vietnamese businesspeople about the capacity of the legal system in part 4.1 9|P age Electronic copy available at: https://ssrn.com/abstract=3418759 HYPOTHESES AND INDICATORS 3.1 Cultural Hypothesis With regards to the cultural hypothesis it must be noted from the start that on its face it seems unlikely to provide a convincing explanation for Vietnamese entrepreneurs’ turn to litigation In Japan, another Asian country where a cultural aversion to suing was once said to explain its comparatively low litigation rates, the theory has long since fallen out of favor 31 We however consider the cultural hypothesis for a couple of reasons First is the fact that even critics of it acknowledge that culture likely plays some role in explaining recourse to litigation, albeit perhaps not as a leading determinant.32 The second, and perhaps related, reason is that “culture” is, especially in the early literature on Japan, sometimes portrayed as a fixed endowment of society – something received from past generations which is slow to change such as the suggested Asian cultural aversion to litigation In fact however cultural norms can be contingent on the institutional and economic factors we also examine Vietnamese business people are perhaps unlikely to find their decisions to sue influenced by an immutable set of traditional Asian values, but may be guided by a more malleable set of cultural norms that are molded by the efficacy of the judicial system they must use In order to explore these issues, we use the cultural hypothesis to check two assumptions: First, if a common cultural value against litigation does act as a hurdle, it would suggest that the upward trend in litigation in Vietnam may be caused by businesspeople who not adhere to that cultural value Accordingly, one would anticipate that plaintiffs in business cases in Vietnam would be mostly foreign businesspeople or representatives of state-owned enterprises (SOEs) who act collectively and are thus less likely to be influenced by traditional cultural values To examine this hypothesis, we first aimed to find who constituted the majority of plaintiffs in newly filed business cases in the country: Are they mostly foreign entrepreneurs, SOEs’ representatives or owners of private domestic enterprises? Data of 2009, 2010, 2011, and 2012 was used as proxies for the whole period as the statistics are not available for the years from 2003 to 2008 Second, if Asian culture is no longer (or never was) a hurdle to litigation due to changes in norms held by business people, we may expect to see not only a rise of newly-filed business cases but also more and more Vietnamese business people expressing confidence in the effectiveness of the court system In other words, we need to answer the question: Has there been any gradual change of Vietnamese businesspeople’ attitude towards litigation? To examine this, the Provincial Competitiveness Index (PCI)’s soft data on how businesspeople assess the effectiveness of the courts was examined PCI measured the ratio of businesspeople who agree with statement that their “firm is confident that the legal system will uphold [the firm’s] property rights and contracts.” This reflects the preference of businesspeople who may choose litigation over informal means of solving their disputes 3.2 Institutional Hypothesis Institutional theory has been dominant in the search for explanations for the effectiveness of legal transplants in Asian countries and transition economies 33 According to institutional 31 Haley, supra note 8; Ramseyer, supra note 13; Colombo and Shimizu, supra not 13 See for example Ramseyer, supra note 13 33 For a general view, see JOHN L CAMPBELL & OVE KAJ PEDERSEN, THE RISE OF NEOLIBERALISM 32 10 | P a g e Electronic copy available at: https://ssrn.com/abstract=3418759 Ranking Top 10 by # of lawyers Top 10 by # professionalism of lawyers Top 10 by # of new filed cases Ho Chi Minh city Ho Chi Minh city Ho Chi Minh city Ha Noi city Ha Noi city Ha Noi city Can Tho city Ba Ria Vung Tau Dong Nai Dong Nai Dong Nai Can Tho city Ba Ria Vung Tau Hai Phong city Binh Duong Da Nang city Can Tho city Da Nang city Hai Phong city Da Nang city Ba Ria Vung Tau Binh Phuoc Binh Duong An Giang Lam Dong Hai Duong Long An Binh Duong Quang Ninh Gia Lai 10 Table 3: Ranking of provinces by number of lawyers, professionalism of lawyers and by number of filed cases in 2012 4.2.3 Weak role of ADR A tiny proportion of cases are resolved by arbitration From 2003 to 2012, the number of cases resolved by VIAC – the biggest and most frequently used arbitration centre in Vietnam – quadrupled from 18 to 64 cases However, during that decade the number of arbitration cases was tiny in proportion to the number of business cases filed at court At its peak in 2004 the ratio only reached as high as 3% The number of arbitration cases only exceeded 1% of the number of cases filed at court in three other years, falling below that mark in all other years during that time period It is hard to find any correlation between the number of court cases and the number of arbitration cases year by year For example, from 2003 to 2004 the number of court cases slightly decreased, but the number of arbitration cases doubled In contrast, from 2006 to 2007, the number of court cases increased approximately two times while the number of arbitration cases went down by around 20% (See more at Table 4) Business cases filed at courts Cases resolved by arbitration % 2003 868 16 1.84 2004 885 32 3.62 2005 1495 27 1.81 2006 2866 36 1.26 2007 5198 30 0.58 2008 4810* 58 1.21 2009 6689 48 0.72 2010 7281 63 0.87 2011 9421 83 0.88 2012 14013 64 0.46 Table 4: Business cases filed at courts v Cases resolved by arbitration 2003-2012 Low enforceability of arbitration awards A survey conducted by VIAC shows that, from 2003-2013, 12% of arbitral awards were challenged in the courts of which 34% were set aside In particular, from 2011 to 2013, when 21 | P a g e Electronic copy available at: https://ssrn.com/abstract=3418759 the Law on Commercial Arbitration came into force, 36% of arbitral awards were set aside by courts.46 4.3 Not all Indicators of the Development of Enterprises is Correlated with the Number of Newly-Filed Cases Data shows that from 2003 to 2011 the number of enterprises grew more than fivefold from less than enterprise per 1000 citizens to 5.2 enterprises per 1000 citizens Capital that firms invested also proliferated from around 24 billion VND per enterprise in the first three years to around 30-35 billion VND during the next two years and 41 billion VND per firm in 2011 However, the profit of enterprises did not change accordingly This variable remained almost constant at around 1.2 billion VND per enterprise from 2003 to 2011 Therefore, the increase of the economic indicator, i.e the development of enterprises, was mostly caused by growth in the number of enterprises and capital rather than by growth of the profits that firms gained (See more at Annex 1) Correlations Enterprise per 1,000 citizens 890** 001 Profit per firm (log) 490 180 Investment capital per firm (log) 905** 001 N Pearson Correlation Sig (2-tailed) 890** 001 9 315 409 935** 000 N Pearson Correlation Sig (2-tailed) 490 180 315 409 9 372 324 N Pearson Correlation 905** 935** 372 001 000 324 9 Pearson Correlation Sig (2-tailed) New filed case (log) Enterprise per 1,000** citizens Profit per firm (log) New Filed Cases (log)* Investment capital per firm Sig (2-tailed) (log)*** N ** Correlation is significant at the 0.01 level (2-tailed) Table 5: Correlation matrix between the development of enterprises and newly-filed cases Examining the relationships between the development of enterprises and the number of cases filed at court using a correlation matrix, we found that the number of newly-filed cases is strongly and positively correlated with the number of enterprises and the investment capital per firm (Pearson Correlation > 8, p