Service Contract Disputes with International Clients in Vietnam – Key Considerations
1. What is an international service contract dispute and why should it matter?
Q: What is an international service contract dispute?
A: It refers to a situation where one or both parties — usually the service provider in Vietnam and the client abroad — fail to perform, or improperly perform, the obligations agreed upon in terms of quality, quantity, timeline, or outcomes. These disputes often arise due to unclear contract terms, legal differences, force majeure events, or misinterpretation of commitments.
Q: Why should businesses in Vietnam pay close attention to this issue?
A: Because international disputes not only cause financial losses but also consume significant time, effort, and damage the business’s reputation. Without careful preparation for the dispute resolution mechanism, such as selecting the authority, applicable law, or arbitration body, companies may face substantial risks — especially when the dispute is handled overseas.
How to handle and what legal issues to watch for in service contract disputes with international clients
2. Clearly define the applicable law and dispute resolution authority
Q: Which law will apply in international disputes?
A: According to the 2015 Civil Code of Vietnam, if the parties have a prior agreement, the chosen law will apply. If not, the law of the country with the closest connection to the dispute will be used. There is a notable difference between court proceedings and arbitration:
Vietnamese courts apply the Lex Fori principle — meaning they use Vietnamese law — and have limited flexibility in applying foreign law.
On the other hand, international commercial arbitration is more flexible. Arbitrators can apply the agreed-upon law or, in the absence of such an agreement, choose a law they deem appropriate.
Q: Should you choose court or arbitration for dispute resolution?
A:
Arbitration: Neutral, fast, confidential, and flexible regarding the applicable law and procedures. Ideal when both parties want to maintain professionalism and confidentiality.
Court: Strong enforcement power backed by the State, but bound by local law and more rigid procedures. Suitable when arbitration is not feasible, or the legal issues are relatively simple.
3. Key legal strategies to keep in mind
3.1. Clearly agree on the dispute resolution mechanism
– In international service contracts in Vietnam, clearly specify the dispute resolution method (arbitration or court), name the exact organization (e.g., VIAC), and the applicable law (e.g., Vietnamese law, Singapore law, or international treaties such as the Vienna Convention). If the contract vaguely states "to be resolved by arbitration," the clause may be considered invalid.
3.2. Define the parties, applicable law, and jurisdiction from the beginning
– For court disputes, it is necessary to determine the competent court (district/provincial level), location, and applicable local law.
– For arbitration, clearly establish the procedural rules, substantive law, and governing regulations of the chosen arbitration body.
3.3. Statute of limitations: don’t miss your chance to sue
– According to the 2005 Commercial Law, the statute of limitations for filing a lawsuit related to commercial contract disputes is 2 years from the date the rights were infringed. The aggrieved party must act promptly to avoid losing the right to initiate legal proceedings.
3.4. Collaborate closely with legal counsel – gather evidence and monitor case progress
– When a dispute arises, the client should work closely with their legal counsel: provide relevant evidence (contracts, emails, meeting minutes), engage in negotiations, mediation, or litigation, and maintain communication to stay informed about the case progress.
4. Conclusion
Before signing an international service contract:
Agree on a clear dispute resolution method (arbitration/court) and specify the exact authority.
Agree on the applicable law (specific country or international treaty).
Ensure that the contract is detailed and clear regarding service quality, deadlines, obligations, force majeure clauses, and penalties for breach.
When a dispute arises:
Act quickly and monitor the statute of limitations.
Seek negotiation or mediation where possible.
If formal resolution is necessary, promptly select the appropriate forum and work closely with your legal counsel, gather complete evidence, and track progress.
Final Note
Are you facing a dispute over an international service contract in Vietnam and seeking a practical, flexible solution that fully protects your rights? Don’t let legal risks catch you off guard — let the expert legal team at DEDICA Law Firm guide you from risk prevention to effective dispute resolution, empowering your business to move forward with confidence.
Contact DEDICA Law Firm for expert legal consultation!
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