How to Sue a Vietnamese Partner for Non-Payment Under an International Supply Contract

Suing a Vietnamese partner for non-payment under an international supply contract is entirely feasible, even when you are based abroad. But if you choose the wrong dispute resolution mechanism, you can win the case and still not recover a single dong. When the debt sits in a market whose laws you do not know well, one wrong decision at the outset is enough to render the entire collection effort meaningless.

Your partner has taken delivery and is now delaying payment, so can you really sue from abroad? Should you bring the matter before a court in your own country for convenience, or before a court or arbitral tribunal in Vietnam so that you can actually collect later? And once you hold a judgment or award, how do you compel a business in Vietnam to pay? These are the questions that leave many foreign suppliers hesitating, until they miss the limitation period or pour costs into a route that leads nowhere. This article analyses the current legal framework, the litigation sequence and the practical risks, so that you know what to do and in what order.

The legal framework governing debt recovery under supply contracts with a foreign element

The first question in any cross-border dispute is which country's law governs the contract. Vietnamese law respects the parties' freedom of choice: you and your partner may agree on the applicable law within the contract itself. Absent such an agreement, the law of the country most closely connected with the contract applies, and for a contract for the sale of goods that is usually the law of the seller's place of establishment.

For an international sale of goods, there is a further legal layer that many businesses overlook: the 1980 United Nations Convention on Contracts for the International Sale of Goods, known as the CISG. Vietnam has been a party to the CISG since 1 January 2017, so the Convention may govern your contract automatically, even where the two sides never mention it.

The CISG applies in two situations: when both parties' States are parties to the Convention, or when the rules of private international law point to the law of a Contracting State. One point to note is that Vietnam has made a reservation as to form, meaning that a contract of sale must still be made in writing under Vietnamese law. This is why a clear trail of emails, purchase orders and delivery records carries considerable weight in a dispute.

Where Vietnamese law applies, the Commercial Law 2005 gives you a range of tools to deal with late payment. Article 292 lists the available remedies, including specific performance of the contract, a contractual penalty and compensation for damages. A penalty applies only where the contract so provides and may not exceed 8% of the value of the breached obligation (Article 301), while compensation requires you to prove actual loss and the direct benefit you would otherwise have earned (Article 302). Importantly for a creditor, even where the contract contains no penalty clause, Article 306 still entitles you to claim interest on the overdue amount at the average overdue lending rate on the market. In other words, your right to recover principal, interest and damages rests on a clear legal basis; the challenge lies in proof and enforcement, not in the right itself.

The sequence for filing suit and recovering the debt while you are abroad

The path from an overdue invoice to money actually received follows fairly clear steps. Skipping a step or taking them out of order is precisely where most money is lost.

1. Review the contract to establish three things: the applicable law, whether the dispute resolution mechanism is litigation or arbitration, and the remaining limitation period. This step determines the entire strategy that follows.
2. Send a formal demand for payment stating the principal debt, the late-payment interest and a final deadline. This both opens the door to negotiation and creates evidence of your good faith before litigation.
3. Choose the forum. If the contract contains an arbitration agreement, the dispute will be resolved by arbitration, for example at the Vietnam International Arbitration Centre (VIAC) or a foreign arbitration centre. If there is no arbitration agreement, you file suit before the competent Vietnamese court.
4. Prepare the case file, including the contract and its appendices, shipping documents such as the bill of lading and acceptance records, a debt reconciliation statement and the email correspondence. The foreign company's corporate documents and the power of attorney granted to your lawyer must be consularly legalised and notarially translated in Vietnam.
5. File within the limitation period and consider applying for interim measures, such as freezing the debtor's accounts or assets, to preserve your ability to recover.
6. Once you have a judgment or award, proceed to enforcement, or to the recognition and enforcement procedure if it is a foreign court judgment or arbitral award.

On jurisdiction, one point in your favour is that the debtor is established in Vietnam, so the Vietnamese courts have jurisdiction over this civil matter involving a foreign element. Note that Vietnam's court system was reformed with effect from 1 July 2025: district-level courts have ceased operating, and regional people's courts now handle first-instance hearings for most commercial disputes, including those involving a foreign element, with specialised economic divisions located in the major cities.

As for the limitation period, this is the deadline that many foreign businesses lose while still deliberating internally.

Two years may sound generous, but for a cross-border dispute that requires time to assemble documents, legalise papers and correspond across time zones, this period passes faster than you might expect.

Legal risks and common mistakes seen in practice

The most costly misconception is the belief that winning the case means getting paid. In reality, enforcement is a separate battle. If, by the time of enforcement, you discover that the partner has ceased operating, no longer holds assets or has moved them elsewhere, then even a favourable judgment or award is worth almost nothing. This is precisely why checking the debtor's asset position and applying for interim measures early matters so much.

The second common mistake is choosing the wrong dispute resolution forum. Many foreign suppliers instinctively prefer to sue in their home court for convenience. But a foreign court judgment must go through a recognition procedure before it can be enforced in Vietnam, and that procedure is only viable where there is an international treaty or on the basis of the reciprocity principle, which many countries do not have with Vietnam.

Conversely, awards of foreign arbitrators are recognised and enforced in Vietnam under the 1958 New York Convention, to which Vietnam is a party, or on the basis of reciprocity. In short, for a cross-border supply contract, a well-drafted arbitration clause usually gives you a far more enforceable outcome than pursuing a judgment before a foreign court. This is a decision to weigh when the contract is being drafted, not one to leave until a dispute arises.

Several other risks routinely cause a case to collapse: missing the two-year limitation period; a contract that lacks backbone provisions such as the applicable law, the dispute resolution mechanism or late-payment interest; or a contract signed by a person without authority, or even a partner that has already been dissolved before you can act. The belief that a contract is safe simply because it bears full signatures and a seal has led many businesses to let their guard down. Real safety lies in the substance of the clauses and in the partner being genuine and still in operation.

DEDICA's role in debt recovery and in preventing contract disputes

Once a dispute has arisen, DEDICA represents foreign clients throughout the entire recovery process: negotiating with the debtor, handling commercial and contract disputes and debt recovery, appearing before courts and arbitral tribunals, applying for interim measures to secure assets, carrying out the procedure for recognition and enforcement of foreign awards, and supporting the enforcement stage. The team works bilingually in English and Chinese, so that you can follow the matter closely without having to be physically present in Vietnam.

Yet the best protection always begins before signing. DEDICA reviews and drafts contracts with key protective provisions, including the applicable law, the dispute resolution mechanism, the payment schedule, contractual penalties and late-payment interest, while also carrying out basic checks on the counterparty's legal status and the signatory's authority. For businesses that do not yet have an in-house legal function in Vietnam, an ongoing legal advisory package acts as an outsourced legal department, helping you catch risks early rather than dealing with them once they have become disputes. The cost of prevention is almost always far lower than the cost of pursuing a cross-border lawsuit.

Every cross-border debt matter differs in its industry, the value of the debt, the supporting documents and the debtor's status. DEDICA Law Firm accompanies you from assessing the realistic prospects of recovery and selecting the appropriate forum, through to the moment the money reaches your account, even when you cannot be present in Vietnam. Contact DEDICA for a lawyer to assess your specific case and propose the next steps.

This article is for reference only, based on the legal provisions in force at the time of writing. Each case has its own particular facts as to the contract, the documents and the counterparty's status; please consult a DEDICA lawyer for advice tailored to your situation.