Learn about civil contract disputes with foreign elements

1. How is a civil contract dispute with foreign elements understood?

A contract is a form of civil transaction, expressing the rights and obligations between the parties in the contract. Thus, a contract with foreign elements means a contract with a civil transaction with foreign elements. According to Clause 2, Article 663 of the 2015 Civil Code on civil transactions with foreign elements as follows:

- At least one of the parties to the contract is a foreign entity.

- The participating parties are all Vietnamese citizens or Vietnamese legal entities, but the establishment, change, implementation or termination of the relationship occurs abroad.

- The participating parties are all Vietnamese citizens and Vietnamese legal entities, but the subject of the civil relationship is abroad.

Thus, civil contract disputes with foreign elements are determined based on 3 factors: The participating subjects have foreign elements, the contract is established, changed, performed or terminated in a foreign country or the subject of the civil relationship is in a foreign country.

2. Which country's law will be applied to resolve civil contract disputes with foreign elements?

According to the provisions of Article 683 of the 2015 Civil Code:

Contract

1. The parties to a contractual relationship may agree to choose the law applicable to the contract, except for the cases specified in Clauses 4, 5 and 6 of this Article. In case the parties do not have an agreement on the applicable law, the law of the country with the closest connection to the contract shall apply.

2. The law of the following country shall be deemed to be the law of the country with which the contract is most closely connected:

a) The law of the country where the seller resides if an individual or where it is established if a legal entity for the contract of sale of goods;

b) The law of the country where the service provider resides if an individual or where it is established if a legal entity for the service contract;

c) The law of the country where the recipient resides if an individual or where it is established if a legal entity for contracts transferring the right to use or transferring intellectual property rights;

d) The law of the country where the employee regularly performs work for the employment contract. If the employee regularly performs work in many different countries or the place where the employee regularly performs work cannot be determined, the law of the country with the closest connection to the employment contract is the law of the country where the employer resides for individuals or is established for legal entities;

d) The law of the country where the consumer resides regarding consumer contracts.

3. In case it can be proven that the law of a country other than the law specified in Clause 2 of this Article has a closer connection with the contract, the applicable law shall be the law of that country.

4. In case the contract has real estate as its subject matter, the law applicable to the transfer of ownership rights, other rights to real estate, lease of real estate or use of real estate to secure the performance of obligations is the law of the country where the real estate is located.

5. In case the law chosen by the parties in a labor contract or consumer contract affects the minimum rights of employees or consumers as prescribed by Vietnamese law, Vietnamese law shall apply.

6. The parties may agree to change the law applicable to the contract, but such change must not affect the rights and legitimate interests of third parties enjoyed before the change of the applicable law, unless the third party agrees.

7. The form of the contract is determined according to the law applicable to that contract. In case the form of the contract is not consistent with the form of contract according to the law applicable to that contract, but is consistent with the form of contract according to the law of the country where the contract is concluded or the law of Vietnam, then that form of contract is recognized in Vietnam..

Accordingly, the law of the country applied to resolve civil contract disputes with foreign elements will be agreed upon by the parties, except for the cases in Clauses 4, 5 and 6, Article 683 of the 2015 Civil Code.

If the parties do not agree on the applicable law, the law of the country with which the contract is most closely connected shall apply.