Vietnam is currently considered one of the fastest-growing dynamic economies in the region and in the world as well. The rapid and stable development has attracted a lot of foreign investors coming to do business and make substantial investment in this country leading to huge increase in commercial transactions in both domestic and international market, simultaneously followed by inevitably increasing disputes or conflicts in business/ commercial sectors.
Following is an overview of business/ commercial dispute in Vietnam
I. Business/ commercial dispute
According to the Article 3.1 of the Law, commercial activities mean those with the purpose of generating profits, including: sale and purchase of goods, provision of services, investment, commercial promotion and others for profit purpose.
Business/ commercial disputes are conflicts or disagreements over rights and obligations between parties in the course of doing business/commercial activities or any related to them. Under the Commercial Law 2005 of Vietnam, a business dispute may arise out of non-performance or failure to perform rights and obligations specified in contracts in relation to commercial activities.
II. Characteristics of business/ commercial dispute in Vietnam
- The disputes commonly arise out of commercial contractual relationship between the parties;
- The parties to a business dispute may be all businessmen or at least one of whom is a businessman.
- The business/ commercial disputes arise when one of the parties is in breach of regulations of a commercial relationship or commit violations of laws, leading to conflicts or disagreement over the rights, obligations and interests of the involved parties in business/ commercial transactions, directly or indirectly affecting their economic aspects, reputation or prestige. Followings are some typical disputes under the Code of Civil Procedure 2015 of Vietnam:
- Disputes arising from business or trade activities among individuals and/or organizations with business registration, which are all for the purpose of profits.
- Disputes over intellectual property rights or technology transfers among individuals or organizations, which are all for the purposes of profits.
- Disputes between persons who are not members of a company but involve in transaction in transfer of capital holding and the company and/or its members.
- Disputes between a company and its members; business disputes between a limited liability company and its manager or between a joint-stock company and members of its Board of Directors, its Director or its General Director, or among members of a company regarding the establishment, operation, dissolution, merge, consolidation, total division, partial division, property transfer and/or organizational transformation of the company.
- Other disputes relating to business or commercial activities, etc.
III. Methods of dispute resolution in Vietnam
Currently in Vietnam, there are four commonly used methods to settle business disputes: negotiation, mediation, court or arbitration.
Read more: Methods of dispute resolution in Vietnam
IV. Advice on prevention of business/ commercial disputes
To avoid legal risks leading to disputes in commercial activities, it is necessary to pay attention to the following points:
- Before decision on doing business with any party, be sure to have some basic information of its like: physical headquarters, legal representative, charter capital, shareholders or in big transaction, better to have a due diligence of that company like business partners, transactions in reality, any dispute with a third party, revenue, tax duties, etc. This process is very helpful to identify and prevent any problem from that party before making transaction. A business law firm can be hired to assist in this step.
- Parties to commercial contracts should pay particular attention to the contract negotiation stage.
- Carefully studying the legal provisions, terms and conditions related to the commercial transactions before entering into contracts. This is extremely important because it ensures the legality and value of the contract, mitigating the risks of dispute afterwards caused by illegal or incomplete contracts.
- The body and place of dispute settlement is one of the issues that should be carefully considered. The parties involved in commercial transactions can come from many different countries. Therefore, in case the contract does not specifically stipulate, the determination of the competent body to settle disputes is always a controversial issue because it is difficult for the parties to understand the law of a country in order to defend their own rights and interests before the opposing party.
- Choosing the appropriate method of dispute settlement before signing commercial contracts is also an important process for the parties in case business disputes occur.
The foregoing is an overview of business/commercial dispute in Vietnam. For further information on this subject, feel free to contract ALB & Partners, a professional law firm specializing in dealing with disputes for foreign investors and traders. With a team of experienced lawyers, we are pleased to assist Clients in preventing disputes or matters in the process of business activities as well as helping solve any dispute arising in a quick and effective manner.
To find out more about our law firm’s services, please contact us via email: [email protected].