Contract Disputes with Foreign Partners
1. What is a contract dispute with a foreign partner?
A contract dispute with a foreign partner arises when a contract contains international elements—such as the partner being a foreign individual or organization, the contract being signed or executed abroad, or the contract’s subject matter relating to a foreign country. These factors complicate the determination of applicable law, jurisdiction, and enforcement of judgments.
2. Legal basis and determination of applicable law
Vietnam Civil Code 2015 (Articles 664 and 683): The law applicable is the one agreed upon by the parties; in the absence of such agreement, the court or tribunal will select the legal system most closely connected to the contract.
Commercial Arbitration Law 2010, Article 14: Arbitration will apply the law chosen by the parties; if no choice is made, the arbitral tribunal will decide on an appropriate legal system.
The first step in dispute resolution is clearly identifying the applicable law to avoid incorrect selection of dispute resolution forums and procedures.
3. Effective resolution methods and when to choose them
Negotiation – Mediation
These are easy to apply, cost-effective, and help preserve business relationships, though they lack binding enforceability. Mediation involving a neutral third party remains flexible but depends on voluntary cooperation.
International Commercial Arbitration
Suitable if the contract includes an arbitration clause. The process is specialized, confidential, and the resulting award is legally enforceable under the 1958 New York Convention. However, costs can be high and appeal options are limited.
Court Litigation
When arbitration is not available or ineffective, Vietnamese courts may assume jurisdiction if the conditions are met. The process must follow procedural law, may be lengthy and public, but judgments are enforceable through legal mechanisms.
4. Step-by-step process when a dispute arises
Review the contract clauses: Has the applicable law or arbitration forum been selected?
Prepare documents: Include the contract, evidence of breach, communication records, invoices, and a formal reservation of rights.
Negotiate or mediate: Choose a neutral resolution method if suitable.
Arbitration or litigation: Depending on the situation, initiate proceedings—arbitration may be faster and more private.
Enforce the judgment: Seek recognition and enforcement abroad if needed, based on applicable international conventions or treaties signed by Vietnam.
5. Statute of limitations
Commercial contracts: 2 years from the date the violated right is discovered (according to the 2005 Commercial Law).
Civil contracts: Typically 3 years under the 2015 Civil Code.
Properly identifying the type of contract is crucial to avoid losing the right to initiate legal action.
6. Role of lawyers in international disputes
Lawyers assist in identifying applicable law, jurisdiction, required evidence, appropriate language, and arbitration agreements. They represent clients in negotiation, mediation, litigation, and documentation, both in Vietnam and abroad. They also support the enforcement of foreign judgments when necessary.
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