Notes When A Commercial Dispute Has Foreign Elements
In the context of Vietnam’s move towards international integration, trade activities with foreign elements are growing, making Vietnam’s economy more and more flourishing. However, there are also more trade disputes with foreign elements. In this article, Lac Duy & Associates will give some notes for readers to have a better overview of the above issue.
What is a foreign-factor trade dispute:
First, a trade dispute with a foreign element is a trade dispute
According to Article 30 of the Civil Procedure Code No. 92/2015/QH13 (the “Civil Procedure Code”), commercial disputes are understood to be:
“Article 30. Business and commercial disputes falling under the jurisdiction of the Court
1. Disputes arising in business and commercial activities between individuals and organizations that have business registration with each other and all have profit purposes.
…
5. Other disputes on business and trade, except for cases under the jurisdiction of other agencies and organizations as prescribed by law.”
Thus, it can be understood that commercial disputes are conflicts (disagreements or conflicts) of interest over rights and obligations between the subjects involved in the process of commercial business activities and fall under the cases prescribed in Article 30 of the Civil Procedure Code mentioned above. A trade dispute must meet the following factors:
- Such dispute arises from commercial activities for profit purposes[1];
Such disputes arise between traders who are individuals and organizations with business registration.[2]
Second, that trade dispute has a foreign element:
According to Clause 2, Article 663 of the Civil Code No. 91/2015/QH13 (“Civil Code 2015”), civil relations with foreign elements are civil relations in one of the following cases:
- Foreign factors on the subject: At least one of the parties involved is a foreign individual or legal entity;
- Foreign factors on legal facts: The parties are all Vietnamese citizens and Vietnamese legal entities but the establishment, change, implementation or termination of such relations occurs abroad;
- Foreign factors in terms of objects: the parties involved are all Vietnamese citizens, Vietnamese legal entities but the subjects of such civil relations are abroad.
Thus, a trade dispute with a foreign element is a qualifying trade dispute of Section 1 (i) (ii) mentioned above.
Some notes when trade disputes arise with foreign elements:
Methods of resolving trade disputes with foreign elements:
Currently, there are 03 (three) methods of resolving trade disputes with foreign elements as follows:
- Negotiation, mediation
“Vo phuc dao tung dinh”, when any dispute arises, the parties often prioritize the choice of self-negotiation and reconciliation with each other to resolve the dispute peacefully and quickly.
In the process of resolving trade disputes in general and trade disputes by means of negotiation and conciliation, the parties will discuss and agree to provide the most beneficial direction and minimize damage to the parties. That is, in order for both sides to benefit and voluntarily implement the agreed-upon reconciliation plan.
In case the two parties cannot mediate, another method of resolving the dispute arises.
- Proceedings at the Competent People’s Court:
This is a common method of resolving trade disputes in Vietnam today when the parties cannot negotiate and mediate. In trade disputes with foreign elements, the parties’ right to choose the court of settlement is respected. This is consistent with the content of the court law system in the field of international justice and international trade practices. According to Clause 1, Article 470 and Article 469 of the Civil Procedure Code, Vietnamese courts have separate and general jurisdiction when resolving trade disputes with foreign elements as follows:
“Article 470. Separate jurisdiction of the Court of Vietnam
1. The following civil cases with foreign elements fall under the separate jurisdiction of The Courts of Vietnam:
a) Such civil case is related to the right to property that is real estate in the territory of Vietnam;
…
c) Other civil cases in which the parties are selected by the Vietnamese Courts for settlement in accordance with Vietnamese law or international treaties to which the Socialist Republic of Vietnam is a member and the parties agree to choose the Vietnamese Courts.”
“Article 469. General competence of Vietnamese courts in resolving civil cases with foreign elements
1. Vietnamese courts have the authority to settle civil cases with foreign elements in the following cases:
a) The defendants are individuals residing, doing business or living permanently in Vietnam;
b) The defendant is an agency or organization based in Vietnam or the defendant is an agency or organization with a branch or representative office in Vietnam for cases related to the activities of such branches or representative offices in Vietnam;
c) Defendants with assets in the territory of Vietnam;
…
dd) The case of civil relations in which the establishment, change or termination of such relations occurs in Vietnam, the subject of which is property in the territory of Vietnam or work performed on the territory of Vietnam;
e) Civil relations cases in which the establishment, change or termination of such relations occur outside the territory of Vietnam but are related to the rights and obligations of Vietnamese agencies, organizations and individuals or have their headquarters and places of residence in Vietnam.”
- Proceedings at commercial arbitration:
This is a method of resolving disputes with many advantages but is not currently commonly used in Vietnam. The method of settling disputes by commercial arbitration in Vietnam can only apply to disputes under the jurisdiction of commercial arbitration as prescribed in Article 2 of the Law on Commercial Arbitration No. 54/2010/QH12 (“Commercial Arbitration Law”) as follows:
“Article 2. Jurisdiction to resolve disputes of Arbitration
- Disputes between parties arising from commercial activities.
- Disputes arising between parties in which at least one party has commercial activities.
- Other disputes between the parties prescribed by law shall be settled by arbitration.”
When the parties wish to resolve the dispute at the Commercial Arbitration, the parties must satisfy the condition that there is an agreement on the selection of arbitration for the settlement of the dispute. At the same time, when selecting commercial arbitration to settle, the parties can choose the arbitration center, arbitrator, and applicable law. The arbitral judgment is equivalent to the court’s judgment or decision, so when there is a ruling, the parties must fulfill their obligations.
Commercial arbitration shall be settled according to the principle of one-time trial and the arbitral award is final and cannot be appealed or protested in accordance with the provisions of the Civil Procedure Code.
The law applies to resolve disputes
In Vietnam, Article 664 of the Civil Code 2015 provides for how to define the applicable law to civil relations with foreign elements as follows:
Article 664. Determining the law applicable to civil relations with foreign elements
1. The law applicable to civil relations with foreign elements defined under the international treaty to which the Socialist Republic of Vietnam is a member or Vietnamese law.
2. Where an international treaty to which the Socialist Republic of Vietnam is a member or the Law of Vietnam provides for the parties to choose, the law applicable to civil relations with foreign elements shall be determined by the choice of the parties.
3. In case the applicable law is not defined as prescribed in Clauses 1 and 2 of this Article, the applicable law is the law of the country with the closest connection to civil relations with such foreign elements.
Above are some notes on commercial disputeswith foreign elements under the new provisions of Vietnamese Law in 2021. In case there are any questions left or further advice is needed on issues related to foreign trade disputes, you can contact Lac Duy & Associates for assistance at:
- Phone: + 84 (28) 3622 1603
- Email: info@lacduy-associates.com or lacduy@lacduy-associates.com
Best regards.
[1] Clause 1, Article 3 of the Commercial Law 2005: “Commercial activities are activities for profit purposes, including the sale and sale of goods, provision of services, investment, trade promotion and other activities for profit purposes.”
[2] Article 6 of the Commercial Law 2005:
“Article 6. Traders
1. Traders include legally established economic organizations and individuals operating commercially independently, regularly and with business registration.
2. Traders have the right to trade in industries, in localities, in forms and in methods that are not prohibited by law.
3. The right of legal trade of traders is protected by the State.
4. The State shall monopolize the State for a period of time on commercial activities for certain goods and services or in some areas to ensure national interests. The Government shall specify the list of goods, services and exclusive areas of the State.”