Disputes Over Asset Lease Agreements Between Vietnamese Enterprises and Foreign Investors
In Vietnam, asset lease relationships between local businesses and foreign investors are becoming increasingly common, especially in areas such as real estate, machinery, equipment, and commercial premises. When disputes arise, understanding the mechanisms for resolution is critical to maintaining business reputations and minimizing legal risks.
1. How are disputes resolved under current regulations when the parties are a Vietnamese enterprise and a foreign investor?
According to the 2020 Law on Investment, disputes between Vietnamese enterprises and foreign investors can be resolved through:
Mediation and negotiation: Encouraged as the first step to maintain goodwill and avoid legal complications.
If mediation fails, the parties may choose:
Arbitration: Either domestic or international.
Vietnamese courts, if agreed upon or if the dispute involves a state authority.
This mechanism offers flexibility and alignment with the legal environment in Vietnam.
2. Common disputes in asset lease agreements between the two parties
Some common scenarios observed in practice in Vietnam include:
2.1 Delayed delivery or poor quality of assets
If the lessor delivers assets that do not meet the agreed quality, they may be required to repair them, reduce the rental fee, or terminate the contract and compensate for damages.
2.2 Asset value depreciation
If the asset deteriorates without fault from the lessee, they have the right to request repairs, a reduction in rental price, or unilaterally terminate the contract and claim compensation.
2.3 Improper use of the asset
If the lessee uses the asset for an unintended purpose, the lessor has the right to terminate the contract and seek compensation.
2.4 Ambiguous rental price, payment, or deposit terms
Disputes often arise when rental terms, deposits, return of deposits, or changing circumstances are not clearly agreed upon.
3. A real-life case in Vietnam
Preliminary trial example – Asset lease contract dispute in Hanoi
Parties involved: Investment Joint Stock Company C (a Vietnamese enterprise) sued Mr. Pham Thanh B (an individual lessor).
Cause: Mr. B failed to return the deposit and rental payment as per the termination minutes, despite Company C having paid a total of VND 480 million. The company demanded both the principal and late interest (10% annual interest starting from the filing date).
Court ruling: The court accepted the claims and ordered Mr. B to pay the principal and interest, totaling over VND 548 million, along with the first-instance court fees.
4. Key steps for Vietnamese enterprises to respond effectively
1. Draft a clear contract: Specify rights and obligations, asset quality, payment terms, rental price, deposits, termination conditions, and dispute resolution clauses.
2. Prioritize mediation/negotiation: Maintain goodwill and avoid legal costs. If unsuccessful, proceed to arbitration or court based on the 2020 Law on Investment.
3. Choose the appropriate resolution method: Arbitration (domestic or international if agreed) helps maintain confidentiality, while Vietnamese courts are suitable if involving internal parties or state agencies.
4. Prepare comprehensive documentation: Include handover minutes, termination records, official contracts, and payment evidence to ensure clarity in court.
5. Conclusion
Compliant with Vietnamese law: According to the 2020 Law on Investment, both arbitration and court proceedings are lawful avenues for resolving disputes with foreign investors.
Prevent disputes from the outset by drafting clear contracts and anticipating potential risks.
Be well-prepared when disputes arise, including gathering evidence and selecting the appropriate dispute resolution body.
Real-world examples in Vietnam, such as the case involving Investment Company C, demonstrate the legal enforceability of asset lease agreements when properly handled.
Contact DEDICA Law Firm for expert legal consultation!
📞 Hotline: (+84) 39 969 0012 (Available on WhatsApp, WeChat, and Zalo)
🏢 Head Office: 144 Vo Van Tan Street, Xuan Hoa Ward, Ho Chi Minh City (144 Vo Van Tan Street, Vo Thi Sau Ward, District 3, Ho Chi Minh City)
🕒 Business Hours: Monday – Friday (8:30 AM – 6:00 PM)
Reach out today for a free initial consultation with our team of professional lawyers!
