Governing Law and Jurisdiction over Disputes Involving Foreign Parties

As a general principle, for all contracts that are executed between and among local individuals and Vietnam - based entities, the application of the local law is required.

A foreign law may be chosen by the parties to a contract in one of the following circumstances:

1. At least one of the parties to the contract is a foreign individual or legal entity; 

2. The parties are Vietnamese citizens or legal entities but the establishment, modification, implementation or termination of the contract happened in a foreign country; or 

3. The parties to the contract are Vietnamese citizens or legal entities but the subject matter of such contract is located in a foreign country.

Despite the above, the law of Vietnam shall be applied if:

1. The consequences of application of the foreign law are inconsistent with the fundamental principles of the law of Vietnam; 

2. It is impossible to determine the contents of the foreign law although necessary measures have been applied in accordance with the law on civil proceedings; and

3. Where the foreign law chosen by the parties to a labor contract or a consumption contract adversely affects minimum benefits of the employee or consumer as provided in the law of Vietnam.

Pursuant to the laws of Vietnam, disputes arising out from all types of the contracts listed above fall into the jurisdiction of Vietnamese courts if they are executed between and among local individuals and Vietnam - based entities.

For the following disputes, the parties may opt for court or arbitration provided that they have to agree their choice on jurisdiction in the relevant agreement: 

(i) Disputes arising from commercial activities;

(ii) Disputes in which at least one party conducts commercial activities; or

1. Disputes which by law are settled by arbitration.

Exemptions to the above cases include labor disputes and land disputes arising between individuals without engaging in commercial activities, which belong to the exclusive jurisdiction of Vietnamese courts.

We note that by law, Vietnamese courts shall have exclusive jurisdiction over the following disputes (despite the disputes involving a foreign element):

(a) Disputes involving rights to properties being immovable in the Vietnamese territory; 

(b) Divorce case between a Vietnamese citizen and a foreign citizen or a stateless person if both spouses reside, work or live permanently in Vietnam; or

(c) Other civil lawsuits where parties are allowed to choose Vietnamese Courts to settle according to Vietnamese law or international treaties to which the Socialist Republic of Vietnam is a signatory and parties agreed to choose Vietnamese Courts.

Since court proceedings are very time-consuming, many foreign-invested companies choose arbitration as a dispute resolution unless the disputes fall into the exclusive jurisdiction of the courts.   

For contracts involving a foreign party, the parties may agree on the forum and venue of the dispute settlement.

We note that in order to enforce foreign court judgment or arbitration award the court judgment or arbitration award must be subject to recognition procedures by Vietnamese courts which are very time – consuming and complicated.