Resolving Disputes in Consulting Service Contracts with Foreign Partners in Vietnam

When a business enters into a consulting service contract with a foreign partner, disputes may arise at any time. Effective resolution depends not only on the applicable laws but also on how the contract is prepared, the spirit of cooperation, and the selection of an appropriate dispute resolution method. Below is the most updated summary of relevant legal provisions in Vietnam and practical steps that businesses can take to minimize risks and efficiently handle disputes involving international consulting service contracts.

1. Updated Legal Framework and Key Rights for Enterprises

1.1 Legal Provisions on Consulting Service Contracts Involving Foreign Elements

The Civil Code 2015 (regarding civil contracts with foreign elements) stipulates that the breaching party must bear liability as committed in the contract. Parties are allowed to choose foreign laws as applicable, provided these do not violate the fundamental principles of Vietnamese law.

The Commercial Arbitration Law 2010 provides clear guidelines for commercial arbitration involving foreign elements: parties can agree to settle disputes via arbitration, select the arbitration institution, applicable law, and place of arbitration. The law also states that if there is a valid arbitration agreement, courts must decline jurisdiction (unless the agreement is void or unenforceable).

Under the Civil Code 2015, civil relations with foreign elements allow the parties to choose the applicable law. This principle also applies to consulting service contract disputes with foreign elements. In the absence of such agreement, Vietnamese law or international treaties to which Vietnam is a signatory will apply.

1.2 Methods of Resolving International Consulting Service Contract Disputes

Businesses may choose one or a combination of the following methods:

Negotiation and Mediation

• Timing: Can be done as soon as the dispute arises or as stipulated in a contractual mediation clause.

• Advantages: Cost-effective, time-saving, maintains cooperation and business reputation.

• Limitations: If the other party is uncooperative, reaching a resolution may be difficult. There is no binding enforcement.

International Commercial Arbitration

• If the contract includes a clear arbitration clause (including rules, institution, applicable law, location), Vietnam recognizes foreign arbitration under the Commercial Arbitration Law.

• Advantages: Faster than litigation, confidential, flexible in procedures, specialized.

• Note: Usually costlier than negotiation/mediation; ambiguity in the arbitration clause can lead to disputes over its validity.

Litigation in Vietnamese Courts

• Applies when there is no arbitration agreement or if the arbitration agreement is invalid or unenforceable.

• Jurisdiction is determined under the civil or commercial procedure laws. For contracts with foreign elements, jurisdiction is based on the location of the defendant, contract performance, or the foreign partner’s headquarters.

E-Arbitration / Online Dispute Resolution (Emerging Trend)

• Vietnam is gradually improving the legal framework to support e-arbitration and online dispute resolution—especially useful for remote consulting services using digital technology.

• Key considerations: Legal validity of electronic evidence, e-signatures, jurisdiction, and enforcement of decisions.

2. Practical Steps to Resolve Consulting Contract Disputes with Foreign Partners

2.1 Before Signing the Contract

• Draft a detailed contract:

  • Scope of services, timelines, deliverables, payment method, language, and force majeure provisions.

  • Clearly define the dispute resolution clause: arbitration or court, applicable law, jurisdiction, costs, and language of proceedings.

• Verify applicable law: Ensure clauses do not violate Vietnamese legal principles to avoid rejection by courts or arbitral tribunals.

• Identify relevant international treaties: For example, if Vietnam is a signatory to an agreement concerning dispute resolution or recognition of foreign awards (e.g., New York Convention 1958), such treaties are highly relevant.

2.2 When a Dispute Arises

Review the Dispute Clause in the Contract

• Check whether there is an arbitration clause and whether it is comprehensive (including applicable law, arbitration body, location, language, and cost).

• Assess its enforceability under Vietnamese law and social ethics.

Negotiate – Mediate Before Arbitration or Litigation

• Send an official notice to the partner requesting contract performance or payment within a specified timeframe.

• If mediation is stipulated, initiate commercial mediation or involve a neutral third party.

Choose the Dispute Resolution Method (Arbitration or Court)

• If arbitration is agreed: prepare to file a case at the chosen arbitration center; gather evidence and legal arguments.

• If opting for court litigation: determine jurisdiction and comply with relevant civil/commercial procedure laws for foreign elements.

Prepare Dossiers and Evidence

• Include contracts, appendices, emails, international messages, notarized translations if needed.

• Secure documentation showing service performance, payments made, and breach of obligations.

Enforce Award / Judgment

• For foreign arbitration awards: apply for recognition and enforcement in Vietnam (if necessary).

• For domestic decisions: follow the civil enforcement law or arbitration enforcement procedures.

3. Key Tips to Minimize Dispute Risks

• Always specify the applicable law in the contract and ensure it is acceptable. Avoid choosing the law of countries with unrecognized or unreliable legal systems.

• Ensure the arbitration clause is clear and unambiguous—define the arbitration body, location, language, and fees.

• Verify the identity and capacity of foreign partners—legally, financially, and by reviewing past contracts.

• Plan for force majeure events, delays, legal changes, or currency fluctuations.

• Prepare backup strategies in case arbitration or litigation becomes impossible or the foreign award is difficult to enforce.

4. Conclusion

Handling disputes in consulting service contracts with foreign partners requires businesses to be well-versed in both Vietnamese law and relevant international regulations or treaties. Particular attention must be paid during the contract drafting phase to ensure dispute resolution clauses are enforceable and practical. When disputes arise, arbitration is often the preferable method—provided that the contract is well-prepared. However, courts remain a viable option in the absence of valid arbitration agreements. Careful evidence collection and a proactive approach to negotiation can help minimize costs and preserve business relationships.

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