Business partnerships between foreign companies and Vietnamese entities are common in trade, manufacturing, services, and investment. However, when one party fails to meet contractual obligations — whether related to delivery, payment, quality, or performance — disputes can quickly arise. Knowing how to navigate a contract dispute in Vietnam is critical for protecting your legal rights and business interests.
In Vietnam, dispute resolution is not limited to court litigation. There are several structured approaches under Vietnamese law that businesses can consider depending on the situation, the contract’s terms, and strategic business objectives.
A contract dispute happens when one party believes the other has breached the contract — either by failing to perform obligations or by providing inadequate performance. Disputes can involve disagreements over interpretation, quality, payment, delivery timelines, and other commercial commitments.
The key for foreign investors or companies is to understand that the legal framework in Vietnam recognizes commercial disputes and provides mechanisms to settle them. The process and complexity will vary based on how the contract was drafted and what dispute resolution mechanisms (like arbitration clauses) are included.
The first step in resolving any dispute should always be negotiation between the parties involved. Often, misunderstandings can be clarified or small contractual breaches remedied simply through clear communication and negotiation. Negotiation has the advantages of being quick, low-cost, confidential, and potentially preserving long-term commercial relationships.
However, if negotiations stall or become unproductive, it’s important to involve legal counsel early. Informal, unstructured communication can unintentionally weaken your legal position — especially when it later becomes evidence in a binding process. Strategically framed legal notices and communication can protect your rights without escalating conflict unnecessarily.
If negotiation fails, Parties may consider mediation, either through mutual agreement with a third-party mediator or via institutional mediation services recognized in Vietnam. Commercial mediation is designed to help conflicting parties engage in structured dialogue with neutral guidance towards a solution. The process can preserve business relationships and often reduce time and cost compared to formal litigation or arbitration.
Mediation does not generally produce binding decisions unless both parties agree, but it does help clarify legal positions and set the stage for more structured dispute resolution if needed.
If negotiation and mediation are not effective, many contracts provide for commercial arbitration as the chosen method of resolving disputes. Arbitration is increasingly popular among foreign investors because it allows disputes to be resolved in a neutral setting, with confidential proceedings, and often faster than going through the courts.
Commercial arbitration in Vietnam is governed by the Law on Commercial Arbitration. It allows parties to agree on arbitration procedures, choose arbitrators with relevant expertise, and locate the seat of arbitration in or outside Vietnam.
However, it is crucial that arbitration clauses are drafted properly — poorly written clauses can lead to jurisdictional challenges or even be deemed unenforceable.
If negotiation, mediation, and arbitration do not resolve the issue — or if the contract lacks a valid arbitration clause — the dispute can be brought before Vietnamese courts.
Vietnamese courts have jurisdiction to hear commercial disputes between domestic and foreign parties. However, court litigation in Vietnam tends to be more formal and can take longer due to procedural requirements and caseloads. Courts interpret contracts under Vietnamese law and apply procedural rules to reach a judgment.
In some cases, even if an arbitration clause exists, parties might still go to court where arbitration is impractical or enforcement of a tribunal award is likely to be simpler in specific contexts.
Whether pursuing arbitration or court litigation, evidence quality matters. Vietnamese tribunals and courts rely heavily on clear, verifiable documentation to interpret obligations and breaches. Contracts, delivery records, communications, warranties, acceptance documentation, and related proof must be organized logically and translated into Vietnamese where required.
Foreign companies often underestimate the importance of proper evidence structure. Poor evidence management can delay resolution or weaken legal arguments, regardless of the strength of the underlying claim.
Under Vietnamese law, a non-breaching party may seek:
Specific performance (compelling the other party to perform duties)
Compensation for losses and damages
Termination of the contract
Recovery of costs and interest on late payment
Damages are typically calculated based on actual loss, as outlined in civil and commercial legislation. Understanding how remedies are applied in Vietnam is key to setting realistic expectations for outcomes.
Winning a dispute is only part of the process. Enforcing judgments or arbitral awards — especially when the counterparty resists compliance — is another challenge. Foreign companies should consider enforcement planning early, identifying assets in Vietnam and analyzing how enforceable remedies can be executed through courts if necessary.
One of the biggest strategic mistakes foreign companies make is delaying legal involvement until the dispute escalates. Early legal input helps you:
Assess legal rights and risks before escalation
Draft effective legal notices and communication strategy
Preserve key evidence properly
Choose the right dispute resolution path (negotiation, mediation, arbitration, or court)
Companies with ongoing legal support tend to resolve disputes more efficiently and at lower overall cost, compared to reacting only after a dispute becomes formal.
DEDICA provides ongoing legal consultancy services tailored to foreign companies facing contract disputes with Vietnamese partners. Our services include:
Reviewing and drafting contracts for enforceability
Advising on dispute prevention and early warning signs
Crafting legal communication and negotiation strategy
Representing clients in arbitration and court
Supporting enforcement strategy for judgments and awards
With deep knowledge of Vietnam’s dispute resolution system and commercial law, DEDICA helps clients manage risk and achieve practical outcomes — not just legal victories.
Resolving a contract dispute with a Vietnamese company involves more than choosing between negotiation, arbitration, and court. It requires legal strategy, evidence planning, and understanding of local systems. Foreign companies that act early, preserve rights effectively, and engage legal counsel sooner are far better positioned to resolve disputes with minimal disruption and cost.
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