Negotiation Strategies in International Contract Disputes in Vietnam

Legal Framework & Key Factors to Consider

Before entering into negotiations over international disputes, Vietnamese businesses need to clearly understand both international and domestic legal regulations that significantly influence the negotiation process and its success.

CISG (United Nations Convention on Contracts for the International Sale of Goods – 1980): Vietnam officially joined CISG on January 1, 2017. This is a crucial international law governing international sales contracts, providing a unified legal framework in cases where parties have not agreed on applicable laws.

Commercial Arbitration Law and Arbitration Rules in Vietnam: When negotiation fails, international arbitration or domestic arbitration (e.g., via VIAC) is often chosen. VIAC operates under its own rules but must comply with the 2010 Law on Commercial Arbitration.

Provisions under current Free Trade Agreements (FTAs): Vietnam’s FTAs often contain mandatory or preferential provisions for consultation, mediation, or arbitration before escalating to enforcement measures. Understanding these mechanisms is vital.

Domestic laws and relevant international treaties: The 2005 Commercial Law and 2015 Civil Code address contractual obligations, breaches, and compensation. Additionally, international treaties that Vietnam is a party to may impact the recognition and enforcement of foreign judgments or arbitral awards.

These legal pillars form a solid foundation for businesses to craft reasonable negotiation strategies, fully understand their rights, and anticipate potential risks should negotiations fail.

Practical Steps for International Negotiation Strategy

When a dispute arises from an international contract, negotiation is an effective tool to reduce costs, protect reputation, and potentially preserve long-term business relationships. Below are practical steps for applying negotiation strategies in Vietnam:

1. Preparation Stage – Foundation for Successful Negotiation

Clearly Define the Scope of Dispute

• Identify the breaching party and the nature of the breach: delivery, quality, payment, document handover, shipping conditions, packaging, etc.

• Classify the breach as fundamental or minor to determine its impact and appropriate negotiation tactics.

Gather Evidence and Legal Documents

• Contract, appendices, invoices, delivery documents, breach notices, emails, and related correspondence.

• If the contract has a clear choice of law clause (e.g., CISG or another national law), verify its legal validity. If absent, consider adding a supplemental clause during negotiation. For instance, in one VIAC case, the parties initially had no clause on CISG, later agreed to apply it, and the tribunal accepted this.

Evaluate Rights – Costs – Risks

• Estimate damages from continuing or terminating the contract, interest on late payments, incurred costs (shipping, warehousing, preservation), and negotiation expenses.

• Factor in legal fees, arbitration costs (if applicable), and enforcement costs for foreign judgments or arbitral awards.

• Determine time limits for asserting rights or filing arbitration/lawsuits to avoid losing them due to statutory limitations.

Develop Negotiation Strategy & Contingency Plans

• Define your optimal goals and minimum acceptable outcomes.

• Prepare leverage points or concessions (small issues that can be traded for more critical ones).

• Plan for next steps if negotiation fails: mediation, arbitration, or litigation; ensure legal documentation is ready.

2. Negotiation Techniques & Implementation Methods

Start with Goodwill & Clear Communication

• Initiate with an official letter requesting clarification or remedial action, signaling a willingness to resolve the issue before escalating to legal measures.

• Use conciliatory language and avoid excessive pressure at the outset to prevent defensive reactions.

Negotiation – Apply Give and Take

• Propose amendments or adjustments to contract terms to reflect current realities (e.g., shipping delays, increased freight costs, new taxes/fees, or unforeseen delays).

• If you are the aggrieved party, you may claim damages but can accept partial compensation if the other party commits to fulfilling the remaining obligations.

Use Mediation/Neutral Intermediaries When Appropriate

• If the contract or relevant FTA mandates or prefers mediation, initiate the process early. Mediation helps de-escalate tensions, reduce costs, and preserve relationships.

• Select neutral intermediaries with international legal expertise if the dispute involves large values or multiple cross-border elements (language, foreign law, international shipping, etc.).

Be Flexible Yet Set Clear Boundaries

• Flexibility can include adjusting performance timelines, accepting installment payments, or tolerating partial breaches in exchange for other remedies.

• However, establish firm boundaries: if the opposing party fails to meet minimum terms, be ready to escalate to arbitration or legal enforcement.

3. When Negotiation Fails – What to Do Next

Review Dispute Resolution Clauses in the Contract

• Does the contract contain arbitration or court jurisdiction clauses? Is the applicable law specified? Are the venue, number of arbitrators, language, and arbitration rules clearly defined?

• If not, consider negotiating supplementary provisions before proceeding with stronger measures.

Initiate Arbitration or Litigation

• Prepare a complete dossier, evidence, and legal arguments.

• Take note of deadlines, arbitration or court procedures, and requirements for enforcement of foreign awards or judgments.

Assess Enforceability Abroad

• If the other party must comply with a foreign arbitral award or court judgment, check whether the 1958 New York Convention (on the Recognition and Enforcement of Foreign Arbitral Awards) applies. Vietnam is a member of this convention.

• Study enforcement laws in the other party’s country if they have assets abroad – this is crucial for realistic recovery.

Practical Advice

• Ensure clear applicable law clauses from the outset: Choosing the applicable law (e.g., CISG, foreign law, or Vietnamese law) greatly influences how international disputes are resolved. If unclear, you may be at a disadvantage when disputes arise.

• Always document invoices, breach notices, and communications in writing: Evidence is essential during negotiations and for arbitration or court proceedings.

• Respect the counterpart’s culture and negotiation style: Differences in language, behavior, and response times matter. Understanding them can turn them into negotiation advantages.

• Don’t overlook international enforcement before reaching a deal: A favorable agreement is meaningless if it cannot be enforced.

• Prepare psychologically and financially for prolonged negotiations or legal action: Costs may include legal consultancy, interpretation, international document handling, etc.

Conclusion

Negotiating international contract disputes is a critical process Vietnamese businesses should not underestimate. With proper preparation, understanding of international laws like CISG, clarity on dispute resolution clauses, and knowledge of enforcement mechanisms, businesses can safeguard their interests, uphold credibility, and minimize financial risks.

If you’re currently facing an international dispute, start by reviewing your contract, identifying the applicable law, gathering evidence, and defining clear negotiation goals. Today’s proactive actions can prevent tomorrow’s consequences.

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