Solutions for Resolving Real Estate Lease Contract Disputes with Foreign Tenants in Vietnam
Vietnam’s real estate leasing market is increasingly attractive to foreign individuals, companies, and representative offices. Along with this growth, disputes over lease contracts for houses, commercial premises, and factories have also risen and often involve a foreign element. Vietnam’s current legal system has recently introduced important updates on contract contents, jurisdiction for dispute resolution, and recognition of foreign arbitral awards — all of which directly impact the dispute-handling strategies of landlords/investors and tenants.
One significant update is that the 2023 Law on Real Estate Business (LREB 2023) has had its effective date brought forward, together with the 2024 Land Law. According to government announcements, these laws have been in effect since August 1, 2024 (instead of January 1, 2025). This means that lease agreements signed from that date must comply with the prescribed mandatory contents, including a clause specifying the “method of dispute resolution.”
1. Understanding “Foreign Elements” and Applicable Law
When one party is a foreigner, Vietnamese civil law allows the parties to choose the governing law for the contract, provided it does not contravene the fundamental principles of Vietnamese law and international treaties to which Vietnam is a party. These principles are outlined in Part Five of the 2015 Civil Code, with Article 683 specifically addressing the applicable law for contracts with a foreign element. It is also important to note that international treaties (such as the 1958 New York Convention) take precedence if there is a conflict.
Practical tip for Vietnam:
For commercial real estate leases (offices, retail, logistics), parties may consider selecting Vietnamese law to reduce enforcement risks in Vietnam. Alternatively, they may choose a foreign law familiar to the parent company but should carefully assess whether Vietnamese courts/arbitrators will respect that choice when adjudicating/enforcing the contract in Vietnam.
2. Determining the Correct Jurisdiction
The 2015 Civil Procedure Code (CPC) provides rules on Vietnamese court jurisdiction over disputes involving a foreign element. Notably, for disputes “related to rights over real estate in Vietnam,” Vietnamese courts have exclusive jurisdiction. Case law shows that courts often interpret this concept broadly — covering not only ownership disputes but also other “rights related” to real estate in Vietnam. This directly affects the enforceability of clauses selecting foreign courts or arbitration in lease contracts.
Strategic implication: If your dispute could be classified as “related to rights over real estate in Vietnam,” any agreement to submit the matter to a foreign court/arbitration may not be recognized. When drafting, review the scope of the dispute and include a “severability clause” to avoid the entire dispute resolution provision being invalidated.
3. Three “Tracks” for Dispute Resolution: Negotiation – Mediation – Arbitration/Court
3.1. Negotiation
This is always the first step, saving time and costs, especially for long-term leases or multi-site arrangements. Activate tiered escalation mechanisms (escalating to higher management levels) and set clear response timelines (e.g., 10–15 business days) to avoid unnecessary delays. Legal basis: freedom of contract and good faith principles under the Civil Code.
3.2. Commercial Mediation under Decree 22/2017/ND-CP
Commercial mediation in Vietnam allows parties to agree to mediate before, during, or after a dispute arises. A successful mediation agreement can be recognized by the court through a simplified procedure. For contracts with a foreign element, mediation provides a flexible “buffer zone” before formal litigation/arbitration. Consider including a mandatory mediation clause to increase the likelihood of early settlement.
3.3. Commercial Arbitration and/or Courts
Arbitration in Vietnam: The 2010 Law on Commercial Arbitration allows parties to refer commercial disputes to arbitration. Arbitral awards are final and binding, and grounds for annulment are very limited. For business-related lease contracts, choosing arbitration in Vietnam often ensures confidentiality and faster resolution. However, if the dispute is classified as falling within the court’s exclusive jurisdiction over rights to real estate, the arbitration agreement may be challenged.
Foreign arbitration/foreign seat: Awards must be recognized and enforced in Vietnam under the New York Convention and the CPC. Recent Vietnamese court decisions have provided detailed reasoning on what qualifies as a “foreign arbitral award” (including awards rendered in Vietnam but administered by foreign institutions) and grounds for refusal of recognition. Thus, enforcement risks in Vietnam should be evaluated at the outset.
Vietnamese courts: If the contract does not have a valid arbitration clause or falls within exclusive jurisdiction, the dispute will be resolved by Vietnamese courts under the CPC. Prepare bilingual dossiers, legalized foreign documents (if any), and electronic evidence (emails, handover logs, breach notices) in compliance with court evidentiary rules.
4. Key Contract Clauses to “Lock In” from the Start
LREB 2023 requires lease contracts to include certain mandatory contents, such as: description of the property, price/payment schedule, handover timeline, security, breach liability, dispute resolution method, effective date, etc. Failure to include these “core elements” can weaken your position in case of a dispute. The law also requires payments to be made via bank accounts in Vietnam for real estate transactions, helping control cash flow and prove performance.
Practical checklist for Vietnam:
Governing law & language: Clearly specify governing law (Vietnamese or other) and the controlling language in case of translations; refer to Article 683 of the Civil Code to strengthen enforceability.
Jurisdiction: If choosing foreign arbitration/court, assess the risk of “exclusive jurisdiction” under the CPC for disputes relating to real estate rights in Vietnam.
Mandatory mediation: Insert a “cooling-off/mandatory mediation” clause under Decree 22/2017 before filing arbitration/litigation.
Evidence: Clearly stipulate handover minutes, operation logs, maintenance standards, and cure periods for breaches; require unified electronic record-keeping for easy submission to courts/arbitrators in Vietnam.
5. Fast-Track Response When Disputes Arise
Trigger notice and cure provisions: Send breach notices strictly following the contractual form/address; if the tenant is a foreign party, use both email and international courier to prove proper “service.” Legal basis: respect for contractual commitments under the Civil Code.
Initiate early mediation: Propose a mediation center/mediator under Decree 22/2017 and set a session within 10–15 days; a successful mediation record can fully resolve or narrow the dispute.
Choose binding mechanisms:
If the contract has a valid arbitration clause, file for arbitration and request interim relief (if allowed) — e.g., compel continued payment/handover. After the award is issued, prepare an application for recognition and enforcement in Vietnam if the losing party does not comply voluntarily.
If the matter falls under exclusive court jurisdiction or the arbitration clause is invalid, file a lawsuit with a Vietnamese court, ensuring compliance with power of attorney, consular legalization of foreign documents, and judicial assistance procedures for service abroad.
6. Common Risks and How to Mitigate Them
Foreign court/arbitration clause invalid due to exclusive jurisdiction: Mitigate with a fallback clause designating Vietnamese courts/arbitration if the original forum cannot be enforced in Vietnam.
Unclear governing law: Specify the applicable law and scope (form – validity – interpretation – damages) with a binding translation mechanism (e.g., “Vietnamese version shall prevail” when litigated in Vietnam).
Difficulty enforcing foreign arbitral awards: Pre-assess possible “grounds for refusal” under the CPC/New York Convention (e.g., public policy violations, invalid arbitration agreement, excess of jurisdiction). Choose an arbitration seat/rules with high enforceability in Vietnam.
7. Recommendations for Landlords and Foreign Tenants
Draft a layered dispute resolution clause: Negotiation → Commercial Mediation (Decree 22/2017) → Arbitration in Vietnam or fallback to Vietnamese courts, depending on whether the dispute relates to real estate rights. This approach aligns with LREB 2023 requirements and Vietnamese litigation practice.
Assess enforcement risks “in Vietnam” at signing: If a foreign company wants foreign law/forum, prepare an enforcement risk memo and fallback plan; consider security mechanisms (escrow, bank guarantee in Vietnam, rent withholding) to minimize losses if enforcement becomes difficult.
Manage evidence to international standards but suitable for Vietnamese procedures: Keep originals, notarized translations, email logs, condition reports, CCTV footage, and accounting records proving payments via bank accounts in Vietnam — these pieces of evidence often decide the outcome in arbitration/court.
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