Laws Applicable in International Commercial Contract Dispute. Why Important?

As Vietnam further integrates into the global economy, the demand for trading with Vietnam from traders from many countries around the world has been increasing proportionately. Naturally, the number of international trade disputes between parties of the contracts would also increase. It has been witnessed by commercial contract dispute lawyers in Vietnam that many foreign traders have not paid enough attention to contract issues, specifically the dispute clauses and the law that applies when there is a contract dispute with the thought that disputes rarely happen and parties trust each other while doing business.

Why It Is Important To Have Dispute Mechanism In Place?

In fact, contract disputes are risks that needs to be taken into account. Although trust of doing business between parties are important but events that cause disputes can come from unexpected and unpredictable factors. For example, price changes, product volume changes, product quality issues, personnel, transportation, weather, and seasonal matters can also be factors that affect contract performance.

To ensure their best interests in the event of a dispute, when doing business in Vietnam foreign traders should  consult with commercial contract dispute lawyers in Vietnam to learn about the applicable law agreement at the time of contract conclusion and have mechanism in place to resold potential disputes.

1.What is an International Trade Contract?

An international commercial contract is a legal form of international commercial acts, an agreement between traders to establish, change, and terminate the rights and obligations of the parties in carrying out commercial activities. international.

2.Sources of Law Applicable in International Commercial Contract Disputes?

The parties can choose:

International Treaty

An international treaty is an international agreement signed in writing between countries and subjects of international law and governed by international law. The regulated content of international trade law includes: goods, services, intellectual property and investment with foreigners.

For example: When signing an international goods sale contract, the parties can choose the applicable law as the 1980 Vienna Convention on the Sale of Goods (CISG).

National Law

National law is a system of written or unwritten legal norms established or recognized by the state to regulate legal relations between subjects of law arising within the territory or jurisdiction of a state. that family.

When entering into an international commercial contract, the parties can choose national law as the law applicable to the contract (it can be the national law of one of the parties or the country where the contract is executed). 

International Trade Practices

International trade practices are common principles of behavior that have been established for a long time in the practice of international trade activities.

Some international trade practices are widely used today such as: UCP (used in L/C payments), INCOTERMS (used in international goods sales),…

3.Principles of Choice of Law to Apply in International Commercial Contract Disputes

Principle of Respecting the Agreements of the Parties – “Lex Voluntatis”

The parties to the contract have the freedom to choose the applicable law in contract disputes. In case a dispute arises, the dispute resolution body must respect this decision of the parties. The dispute resolution body can only request the parties to use other sources of law in cases where the law chosen by the parties cannot or is not sufficient to resolve the arising dispute.

Applicable Law Can Be International Treaties, National Laws, And International Trade Practices

The principle of respecting the agreements of the parties will only be limited in cases where the contract subject is real estate, labor contracts, or consumer contracts that affect the minimum rights of workers and consumers or the court’s choice of law affects public policy.

The Principle Of Choice Of Law Has The Closest Relationship With Contracts

This principle will only be applied in cases where the two parties do not have an agreement on applicable law or the applicable law is insufficient to resolve contractual disputes.

In international treaties as well as national laws, there are provisions regulating how to determine the source of law that has the closest relationship with the contract. Vietnamese law has regulations on how to determine the applicable law in some specific contracts as follows:

-Disputes over sales contracts: The law has the closest relationship to where the seller resides if it is an individual or where it is headquartered if it is a legal entity.

-Service supply contract disputes: The closely related law is the law of the country where the service provider resides if it is an individual or the place of establishment if it is a legal entity. This regulation is similar to a contract for the sale of goods.

-Disputes on contracts for transfer of use rights or transfer of intellectual property rights: The applicable law must be the law of the country where the recipient resides if it is an individual or the place of establishment if it is a legal entity.

Although in the field of intellectual property rights protection there seems to be no conflict of laws.  However, in contracts for transfer of rights to use or transfer of intellectual property rights, conflicts of law may occur.

Choosing the applicable law of the recipient’s country of residence is appropriate to Vietnam’s circumstances, because at present and in the future, Vietnam will probably still be the country receiving the right to transfer more intellectual property objects.

Labor Contract Disputes: The law that has a close relationship is the law could be where the employer registers. 

-Consumer Contract Disputes: The law with the closest relationship is the law where the consumer resides. The purpose of this is to protect consumers and avoid unfairness in the legal status of the parties if a dispute arises.

-Contract disputes involving real estate: The applicable law will be the law of the place where the real estate is located. Vietnam has such regulations for the purpose of protecting national security.

How Commercial Contract Dispute Lawyers in Vietnam Could Help?

Commercial contract dispute lawyers in Vietnam play a crucial role in assisting foreign traders when it comes to choosing the applicable law in international commercial contracts. Here’s how they can help:

1. Legal Expertise

Commercial contract dispute attorneys in Vietnam possess a deep understanding of international contract law, including the relevant treaties, conventions, and legal frameworks. They can provide expert advice on which laws might be applicable to a specific international commercial contract.

2. Assessment of Contractual Terms

Commercial contract dispute lawyers in Vietnam carefully review and assess the terms of the commercial contract to determine if there are any provisions related to the choice of law. If the contract includes a choice-of-law clause, lawyers help interpret and enforce it appropriately.

3. Conflict of Laws Analysis

In the absence of a choice-of-law provision, commercial contract dispute attorneys in Vietnam conduct a conflict of laws analysis to determine which jurisdiction’s laws should apply. They consider factors such as the location of the contracting parties, performance of the contract, and the subject matter of the agreement.

4. International Conventions and Treaties

Commercial contract dispute lawyers in Vietnam are well-versed in international conventions and treaties related to commercial contracts. They guide foreign traders on the applicability and advantages of conventions such as the United Nations Convention on Contracts for the International Sale of Goods (CISG) or regional agreements that may impact the choice of law.

5. Customization to Business Needs

Commercial contract dispute lawyers in Vietnam work closely with foreign traders to understand their business objectives, the nature of the transaction, and any industry-specific considerations. This allows them to tailor the choice-of-law provision to align with the unique needs of the business.

6. Drafting and Reviewing Contracts

Commercial contract dispute lawyers in Vietnam assist in drafting and reviewing commercial contracts to ensure that choice-of-law clauses are clear, specific, and in compliance with relevant legal standards. A well-drafted clause can help prevent disputes related to the applicable law.

7. Dispute Resolution Considerations

Commercial contract dispute attorneys in Vietnam consider not only the choice of law but also the implications for dispute resolution mechanisms. They may advise on whether to include arbitration clauses and, if so, which international arbitration rules or institutions are most suitable for the specific contract.

8. Enforcement of Foreign Judgments

In the event of a dispute, commercial contract dispute lawyers in Vietnam assist in navigating the process of enforcing foreign judgments in Vietnam or vice versa. They guide foreign traders on the legal procedures and requirements for recognition and enforcement.

9. Alternative Dispute Resolution (ADR)

Commercial contract dispute lawyers in Vietnam may encourage the use of alternative dispute resolution methods such as mediation or arbitration. They can help parties agree on a neutral jurisdiction for arbitration and navigate the complexities of international arbitration proceedings.

10. Updates on Legal Developments

Commercial contract dispute lawyers in Vietnam stay informed about changes in international trade laws and regulations. They provide foreign traders with updates on any legal developments that may impact the choice of law in their contracts.

In summary, commercial contract dispute lawyers in Vietnam serve as invaluable partners for foreign traders by offering legal expertise, ensuring compliance with international laws, and helping navigate the complexities of choosing the applicable law in international commercial contracts.

About ANT Lawyers, a Law Firm in Vietnam

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers has lawyers in Ho Chi Minh city, Hanoi,  and Danang, and will help customers in doing business in Vietnam.